AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1997
REGISTRATION NO. 333-18897
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE PROVIDENT BANK
(Exact name of registrant as specified in its charter)
Ohio 31-0412725
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
----------------------
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
(513) 579-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
MARK E. MAGEE, ESQ.
THE PROVIDENT BANK
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
(513) 579-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
----------------------
WITH A COPY TO:
JAMES R. WHITAKER, ESQ. MICHAEL P. BRAUN, ESQ.
KEATING, MUETHING & KLEKAMP, P.L.L. BROWN & WOOD LLP
1800 PROVIDENT TOWER ONE WORLD TRADE CENTER
ONE EAST FOURTH STREET NEW YORK, NEW YORK 10048-0557
CINCINNATI, OHIO 45202
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time on or after the effective date of the registration
statement, as determined by market conditions.
---------------------------
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE
FOLLOWING BOX. / /
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED
ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES
ACT OF 1933, PLEASE CHECK THE FOLLOWING BOX. /X/
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING./ /____________
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING./ /____________
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE
434, PLEASE CHECK THE FOLLOWING BOX./ /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION> Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to Be Registered Registered Per Unit/(1)/ Offering Fee
Price/(1)/
<S> <C> <C> <C> <C>
Asset Backed Notes and Asset Backed
Certificates/(2)/ . . . . . . . . . $500,000,000 100% $500,000,000 $151,515.15*
</TABLE>
/(1)/ Estimated for the purpose of calculating the registration fee.
/(2)/ Not specified as to each class of Asset Backed Securities to be
registered pursuant to General Instruction II.D of Form S-3.
* The Registration Fee was previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED MAY 15, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation, or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PROSPECTUS SUPPLEMENT
(To Prospectus dated ______________, 199__)
$___________________
(APPROXIMATE)
HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199_-_
THE PROVIDENT BANK
TRANSFEROR AND MASTER SERVICER
Each Home Equity Loan Asset Backed Certificate, Series 199_-_
(collectively, the "Certificates") will represent an undivided interest in
the Provident Home Equity Loan Trust 199_-_ (the "Trust Fund") to be formed
pursuant to a Pooling and Servicing Agreement between The Provident Bank
("Provident"), as Transferor and Master Servicer and ( ), as
Trustee. The property of the Trust Fund will include a pool of (adjustable
rate) home equity revolving credit line loans made or to be made in the
future (the "Mortgage Loans") under certain home equity revolving credit line
loan agreements. The Mortgage Loans are secured by either first and second
deeds of trust or mortgages on one- to four-family residential properties.
See "Index of Defined Terms" on Page (S-56) of this Prospectus Supplement and
on Page (85) of the Prospectus for the location of the definitions of certain
capitalized terms.
The aggregate undivided interest in the Trust Fund represented by the
Certificates will, as of ____________, 199_ (the "Cut-Off Date"), represent
approximately __% of the outstanding principal balances of the Mortgage
Loans. The remaining undivided interest in the Trust Fund not represented by
the Certificates (the "Transferor Interest") will initially be equal to
$_________________, which as of the Cut-Off Date is _% of the outstanding
principal balances of the Mortgage Loans. Only the Certificates are offered
hereby.
Distributions of principal and interest on the Certificates will be made
on the __________th day of each month or, if such date is not a Business Day,
then on the succeeding Business Day (each, a "Distribution Date"), commencing
___________, 199_. On each Distribution Date, holders of the Certificates
will be entitled to receive, from and to the limited extent of funds
available in the Collection Account (as defined herein under "Summary--
Collections"), distributions with respect to interest and principal
calculated as set forth under "Summary--Interest," "Summary--Principal
Payments from Principal Collections" and "Description of the Certificates--
Distributions on the Certificates" herein. The Certificates are not
guaranteed by Provident or any affiliate thereof. (However, the Certificates
will be unconditionally and irrevocably guaranteed as to the payment of the
Guaranteed Distributions (as defined herein under "Summary--The Policy") on
each Distribution Date pursuant to the terms of a financial guaranty
insurance policy (the "Policy") to be issued by
(INSURER)
There is currently no market for the Certificates offered hereby and
there can be no assurance that such a market will develop or if it does
develop that it will continue. See "Risk Factors" herein and in the
Prospectus.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER
"RISK FACTORS" ON PAGE S-16 HEREIN AND ON PAGE (12) IN THE
ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST FUND ONLY AND DO
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF PROVIDENT, THE
TRUSTEE OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
PROVIDED HEREIN. NEITHER THE CERTIFICATES NOR THE
MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION> Price to Underwriting Proceeds to
Public (1) Discount(2) Provident (3)
<S> <C> <C> <C>
Per Certificate . . . . . . . . . . . . . . . . . . . . . % % %
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $
</TABLE>
(1) Plus accrued interest, if any, from _______________, 199_.
(2) Provident has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting expenses, estimated to be $_______________.
The Certificates are offered subject to prior sale and subject to the
Underwriter's right to reject orders in whole or in part. It is
expected that delivery of the Certificates will be made in
book-entry form only through the facilities of The Depository
Trust Company, CEDEL Bank, societe anonyme, and the Euroclear
System on or about ______________, 199_ (the "Closing Date").
The Certificates will be offered in Europe and the United
States of America.
---------------------
(UNDERWRITER)
_____________, 199_
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
ACTING AS UNDERWRITERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
The Certificates offered hereby constitute part of a separate series of
Home Equity Loan Asset Backed Certificates being offered by The Provident
Bank from time to time pursuant to its Prospectus dated _______________,
199__. This Prospectus Supplement does not contain complete information
about the offering of the Certificates. Additional information is contained
in the Prospectus and investors are urged to read both this Prospectus
Supplement and the Prospectus in full. Sales of the Certificates may not be
consummated unless the purchaser has received both this Prospectus Supplement
and the Prospectus.
The Trustee on behalf of any Trust Fund will provide without charge to
each person to whom this Prospectus Supplement is delivered, on the written
or oral request of such person, a copy of any or all of the documents
referred to in the Prospectus under "Incorporation of Certain Documents by
Reference" that have been or may be incorporated by reference in the
Prospectus (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference
into the information that the Prospectus incorporates). Such requests should
be directed to the Corporate Trust Office of the Trustee at _____________,
telephone:_________, facsimile number:_____________, attention:__________.
SUMMARY
The following summary of certain pertinent information is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the accompanying Prospectus. Certain
capitalized terms used in the Summary are defined elsewhere in the Prospectus
Supplement or in the Prospectus. See "Index of Defined Terms" on Page S-56
of this Prospectus Supplement and on Page 85 of the Prospectus for the
location of the definitions of certain capitalized terms.
Trust Fund Provident Home Equity Loan Trust 199_-_ (the "Trust
Fund") will be formed pursuant to a pooling and
servicing agreement (the "Agreement") to be dated as
of ______________, 199_ (the "Cut-Off Date") between
The Provident Bank ("Provident"), as transferor and
servicer (together with any successor in such
capacity, the "Transferor" and the "Master
Servicer", respectively) and ( ), as
trustee (the "Trustee"). The property of the Trust
Fund will include: a pool of (adjustable rate) home
equity revolving credit line loans made or to be
made in the future (the "Mortgage Loans"), under
certain home equity revolving credit line loan
agreements (the "Credit Line Agreements") and
secured by either first or second mortgages on
residential properties that are one- to four-family
properties (the "Mortgaged Properties"); the
collections in respect of the Mortgage Loans
received after the Cut-Off Date (exclusive of
payments in respect of accrued interest due on or
prior to the Cut-Off Date); property that secured a
Mortgage Loan which has been acquired by foreclosure
or deed in lieu of foreclosure; an irrevocable and
unconditional limited financial guaranty insurance
policy (the "Policy"); rights under certain hazard
insurance policies covering the Mortgaged
Properties; and certain other property, as described
more fully under "Description of the Certificates--
General" herein.
The Trust Fund property will include the unpaid
principal balance of each Mortgage Loan as of the
Cut-Off Date (the "Cut-Off Date Principal Balance")
plus any additions thereto as a result of new
advances made pursuant to the applicable Credit Line
Agreement (the "Additional Balances") during the
life of the Trust Fund. With respect to any date,
the "Pool Balance" will be equal to the aggregate of
the Principal Balances of all Mortgage Loans as of
such date. The aggregate Cut-Off Date Principal
Balance of the Mortgage Loans is
$____________________ (the "Cut-Off Date Pool
Balance"). The "Principal Balance" of a Mortgage
Loan (other than a Liquidated Mortgage Loan) on any
day is equal to its Cut-Off Date Principal Balance,
plus (i) any Additional Balances in respect of such
Mortgage Loan, minus (ii) all collections credited
against the Principal Balance of such Mortgage Loan
in accordance with the related Credit Line Agreement
prior to such day. The Principal Balance of a
Liquidated Mortgage Loan (as defined herein under
"Description of the Certificates-- Distributions on
the Certificates") after final recovery of related
Liquidation Proceeds (as defined herein under
"Description of the Certificates--Allocations and
Collections") shall be zero.
Securities Offered Each of the Home Equity Loan Asset Backed
Certificates, Series 199_-_ offered hereby (the
"Certificates") represents an undivided interest in
the Trust Fund. Each Certificate represents the
right to receive payments of interest at the
variable rate described below (the "Certificate
Rate"), payable monthly, and payments of principal
at such time and to the extent provided herein under
"Description of the Certificates--Distributions on
the Certificates". The aggregate undivided interest
in the Trust Fund represented by the Certificates as
of the Closing Date will equal $__________________
(the "Original Invested Amount"), which represents
__% of the Cut-Off Date Pool Balance. The "Original
Certificate Principal Balance" will equal
$__________________. Following the Closing Date,
the "Invested Amount" with respect to any date will
be an amount equal to the Original Invested Amount
minus (i) the amount of Investor Principal
Collections (as defined herein under "Summary--
Collections") previously distributed to
Certificateholders, and minus (ii) an amount equal
to the product of the Investor Floating Allocation
Percentage and the Liquidation Loss Amounts (each as
defined herein under "Summary--Collections"). The
Transferor will own the remaining undivided interest
(the "Transferor Interest") in the Mortgage Loans,
which is equal to the Pool Balance minus the
Invested Amount and will initially equal approxi-
mately __% of the Cut-Off Date Pool Balance. The
Transferor, as of any date is the owner of the
Transferor Interest which initially will be
Provident.
The Certificates will be issued pursuant to the
Agreement. The principal amount of the outstanding
Certificates (the "Certificate Principal Balance")
on any date is equal to the Original Certificate
Principal Balance minus the aggregate of amounts
actually distributed as principal to the
Certificateholders. See "Description of the
Certificates" herein.
Removal of Certain
Mortgage Loans;
Additional Balances In order to permit the Transferor to remove Mortgage
Loans from the Trust Fund at such times, if any, as
the overcollateralization exceeds the level required
to maintain the ratings on the Certificates, on any
Distribution Date the Transferor may, but shall not
be obligated to, remove from the Trust Fund certain
Mortgage Loans without notice to the
Certificateholders. The Transferor is permitted to
designate the Mortgage Loans to be removed.
Mortgage Loans so designated will only be removed
upon satisfaction of the following conditions (i)
the Rapid Amortization Period shall not have
commenced; (ii) the Transferor Interest as of the
Transfer Date (as defined herein under "Description
of the Certificates--Optional Transfers of Mortgage
Loans to the Transferor") (after giving effect to
such removal) exceeds the Minimum Transferor
Interest (as defined below); (iii) the transfer of
any Mortgage Loans on any Transfer Date during the
Managed Amortization Period (as defined herein under
"Summary--Principal Payments from Principal
Collections") shall not, in the reasonable belief of
the Transferor, cause a Rapid Amortization Event to
occur or an event which with notice or lapse of time
or both would constitute a Rapid Amortization Event;
(iv) the Transferor shall have delivered to the
Trustee a "Mortgage Loan Schedule" containing a list
of all Mortgage Loans remaining in the Trust Fund
after such removal; (v) the Transferor shall
represent and warrant that no selection procedures
which are adverse to the interests of the
Certificateholders or the Certificate Insurer were
used by the Transferor in selecting such Mortgage
Loans; (vi) in connection with the first such
retransfer of Mortgage Loans, the Rating Agencies
(as defined herein under "Summary--Certificate
Rating") shall have been notified of the proposed
transfer and prior to the Transfer Date shall not
have notified the Transferor in writing that such
transfer would result in a reduction or withdrawal
of the ratings assigned to the Certificates without
regard to the Policy; and (vii) the Transferor shall
have delivered to the Trustee and the Certificate
Insurer an officer's certificate confirming the
conditions set forth in clauses (i) through (vi)
above. See "Description of the Certificates--
Optional Transfers of Mortgage Loans to the
Transferor" herein.
The "Minimum Transferor Interest" as of any date is
an amount equal to the lesser of (a) __% of the Pool
Balance on such date and (b) the Transferor Interest
as of the Closing Date.
During the term of the Trust Fund, all Additional
Balances will be transferred to and become property
of the Trust Fund. The Pool Balance at any time
will generally fluctuate from day to day because the
amount of Additional Balances and the amount of
principal payments with respect to the Mortgage
Loans will usually differ from day to day. Because
the Transferor Interest is equal to the Pool Balance
minus the Invested Amount, the amount of the
Transferor Interest will fluctuate from day to day
as draws are made with respect to the Mortgage Loans
and as Principal Collections are received.
The Mortgage Loans The Mortgage Loans are secured by first and second
mortgages on Mortgaged Properties located in ___
states.
The percentage of the Cut-Off Date Principal Balance
of the Mortgage Loans secured by Mortgaged
Properties located in the states of __________,
________, __________, _______, ______ and ________
is approximately ____%, ____%, ____%, ____%, ____%
and ____%, respectively. The "Combined Loan-to-
Value Ratio" of each Mortgage Loan is the ratio of
(A) the sum of (i) the maximum amount the borrower
was permitted to draw down under the related Credit
Line Agreement (the "Credit Limit") and (ii) the
amounts of any related senior mortgage loans
(computed as of the date of origination of each such
Mortgage Loan) to (B) the lesser of (i) the
appraised value of the Mortgaged Property or (ii) in
the case of a Mortgaged Property purchased within
one year of the origination of the related Mortgage
Loan, the purchase price of such Mortgaged Property.
As of the Cut-Off Date the Combined Loan-to-Value
Ratios ranged from ____% to ______% and, as of the
Cut-Off Date, the weighted average Combined Loan-to-
Value Ratio of the Mortgage Loans was approximately
____%.
(Interest on each Mortgage Loan is payable monthly
and computed on the related daily outstanding
Principal Balance for each day in the billing cycle
at a variable rate per annum (the "Loan Rate") equal
at any time (subject to maximum rates, as described
herein under "Description of the Mortgage Loans--
Mortgage Loan Terms," and further subject to
applicable usury limitations) to the sum of (i) the
highest prime rate published in the "Money Rates"
section of The Wall Street Journal and (ii) a Margin
within the range of ____% to ____%). As of the Cut-
Off Date, the weighted average Margin was
approximately ____%. Loan Rates are adjusted
monthly on the first business day of the calendar
month preceding the Due Date. As to each Mortgage
Loan, the "Due Date" is the (fifteenth) day of each
month. The Cut-Off Date Principal Balances ranged
from zero to $__________ and averaged approximately
$__________. Credit Limits under the Mortgage Loans
as of the Cut-Off Date ranged from $__________ to
$__________ and averaged approximately $__________.
Each Mortgage Loan was originated in the period from
_______________, 199_ to ________________, 199_. As
of the Cut-Off Date, the maximum Credit Limit
Utilization Rate (as defined herein under
"Description of the Mortgage Loans--General") was
100% and the weighted average Credit Limit
Utilization Rate was approximately ____%. As of the
Cut-Off Date, approximately ____% of Cut-Off Date
Principal Balance of the Mortgage Loans represented
first liens on the related Mortgaged Properties,
while approximately ____% of the Mortgage Loans
represented second liens. As of the Cut-Off Date,
the Mortgage Loans had remaining terms to scheduled
maturity ranging from ___ months to ___ months and
had a weighted average of approximately ___ months.
See "Description of the Mortgage Loans" herein.
Denominations The Certificates will be offered for purchase in
denominations of $1,000 and multiples of $1 in
excess thereof. The interest in the Trust Fund
evidenced by a Certificate (the "Percentage
Interest") will be equal to the percentage derived
by dividing the denomination of such Certificate by
the Original Certificate Principal Balance.
Registration of
Certificates The Certificates will initially be issued in book-
entry form. Persons acquiring beneficial ownership
interests in the Certificates ("Certificate Owners")
may elect to hold their Certificate interests
through The Depository Trust Company ("DTC"), in the
United States, or Cedel Bank, soci t anonyme,
("CEDEL") or the Euroclear System ("Euroclear"), in
Europe. Transfers within DTC, CEDEL or Euroclear,
as the case may be, will be in accordance with the
usual rules and operating procedures of the relevant
system. So long as the Certificates are Book-Entry
Certificates (as defined herein under "Description
of the Certificates--Book-Entry Certificates"), such
Certificates will be evidenced by one or more
Certificates registered in the name of Cede & Co.
("Cede"), as the nominee of DTC or one of the
relevant depositaries (collectively, the "European
Depositaries"). Cross-market transfers between
persons holding directly or indirectly through DTC,
on the one hand, and counterparties holding directly
or indirectly through CEDEL or Euroclear, on the
other, will be effected in DTC through Citibank N.A.
("Citibank") or The Chase Manhattan Bank ("Chase"),
the relevant depositaries of CEDEL or Euroclear,
respectively, and each a participating member of
DTC. The Certificates will initially be registered
in the name of Cede. The interests of the
Certificateholders will be represented by book
entries on the records of DTC and participating
members thereof. No Certificate Owner will be
entitled to receive a definitive certificate
representing such person's interest, except in the
event that Definitive Certificates (as defined
herein under "Description of the Certificates--Book-
Entry Certificates") are issued under the limited
circumstances described under "Description of the
Certificates--Book-Entry Certificates" herein. All
references in this Prospectus Supplement to any
Certificates reflect the rights of Certificate
Owners only as such rights may be exercised through
DTC and its participating organizations for so long
as such Certificates are held by DTC. See "Risk
Factors--Book-Entry Certificates", "Description of
the Certificates--Book-Entry Certificates" herein
and "Annex I" hereto.
Provident The Provident Bank, an Ohio banking corporation
headquartered in Cincinnati, Ohio. The principal
executive offices of Provident are located at One
East Fourth Street, Cincinnati, Ohio 45202. See
"Provident" herein.
Collections All collections on the Mortgage Loans will generally
be allocated in accordance with the Credit Line
Agreements between amounts collected in respect of
interest and amounts collected in respect of
principal. As to any Distribution Date, "Interest
Collections" will be equal to the amounts collected
during the related Collection Period, including the
portion of Net Liquidation Proceeds (as defined
below) allocated to interest pursuant to the terms
of the Credit Line Agreements less Servicing Fees
for the related Collection Period.
As to any Distribution Date, "Principal Collections"
will be equal to the sum of (i) the amounts
collected during the related Collection Period,
including the portion of Net Liquidation Proceeds
allocated to principal pursuant to the terms of the
Credit Line Agreements and (ii) any Transfer Deposit
Amounts (as defined herein under "Description of the
Certificates--Book-Entry Certificates").
"Net Liquidation Proceeds" with respect to a
Mortgage Loan are the proceeds (excluding amounts
drawn on the Policy) received in connection with the
liquidation of any Mortgage Loan, whether through
trustee's sale, foreclosure sale or otherwise,
reduced by related expenses, but not including the
portion, if any, of such amount that exceeds the
Principal Balance of the Mortgage Loan plus any
accrued and unpaid interest thereon to the end of
the Collection Period during which such Mortgage
Loan became a Liquidated Mortgage Loan.
With respect to any Distribution Date, the portion
of Interest Collections allocable to the
Certificates ("Investor Interest Collections") will
equal the product of (a) Interest Collections for
such Distribution Date and (b) the Investor Floating
Allocation Percentage. With respect to any
Distribution Date, the "Investor Floating Allocation
Percentage" is the percentage equivalent of a
fraction determined by dividing the Invested Amount
at the close of business on the preceding
Distribution Date (or at the Closing Date in the
case of the first Distribution Date) by the Pool
Balance at the beginning of the related Collection
Period. The remaining amount of Interest
Collections will be allocated to the Transferor
Interest as more fully described under "Description
of the Certificates--Allocations and Collections"
herein.
On each Distribution Date, the Investor Interest
Collections will be applied in the following order
of priority: (i) as payment to the Trustee for its
fee for services rendered pursuant to the Agreement;
(ii) as payment for the premium for the Policy;
(iii) as payment for the accrued interest due and
any overdue accrued interest (with interest thereon)
on the Certificate Principal Balance of the
Certificates; (iv) to pay any Investor Loss Amount
(as defined herein under "Summary--Collections") for
such Distribution Date; (v) as payment for any
Investor Loss Amount for a previous Distribution
Date that was not previously (a) funded by Investor
Interest Collections allocable to the
Certificateholders, (b) absorbed by the
Overcollateralization Amount (as defined herein
under "Summary-Collection"), (c) funded by amounts
on deposit in the Spread Account or (d) funded by
draws on the Policy; (vi) to reimburse prior draws
made from the Policy (with interest thereon); (vii)
to pay principal on the Certificates until the
Invested Amount exceeds the Certificate Principal
Balance by the Required Overcollateralization
Amount, each as defined herein under "Description of
the Certificates--Distributions on the Certificates"
(such amount, if any, paid pursuant to this clause
(vii) being referred to herein as the "Accelerated
Principal Distribution Amount"); (viii) any other
amounts required to be deposited in an account for
the benefit of the Certificate Insurer and
Certificateholders pursuant to the Agreement or
amounts owed to the Certificate Insurer pursuant to
the Insurance Agreement; (ix) certain amounts that
may be required to be paid to the Master Servicer
pursuant to the Agreement; and (x) to the Transferor
to the extent permitted as described under
"Description of the Certificates--Distributions on
the Certificates" herein.
Investor Interest Collections available after the
payment of interest on the Certificates may be
insufficient to cover any Investor Loss Amount. If
such insufficiency results in the Certificate
Principal Balance exceeding the Invested Amount, a
draw in an amount equal to such difference will be
made on the Policy in accordance with the terms of
the Policy.
The "Overcollateralization Amount" on any date of
determination is the amount, if any, by which the
Invested Amount exceeds the Certificate Principal
Balance on such day. Payments to Certificateholders
pursuant to clause (iii) above will be interest pay-
ments on the Certificates. Payments to Certificate-
holders pursuant to clauses (iv), (v) and (vii) will
be principal payments on the Certificates and will
therefore reduce the Certificate Principal Balance,
however, payments pursuant to clause (vii) will not
reduce the Invested Amount. The Accelerated Principal
Distribution Amount is not guaranteed by the Policy.
"Liquidation Loss Amount" means with respect to any
Liquidated Mortgage Loan, the unrecovered Principal
Balance thereof at the end of the related Collection
Period in which such Mortgage Loan became a
Liquidated Mortgage Loan, after giving effect to the
Net Liquidation Proceeds in connection therewith.
The "Investor Loss Amount" shall be the product of
the Investor Floating Allocation Percentage and the
Liquidation Loss Amount for such Distribution Date.
See "Description of the Certificates--Distributions
on the Certificates" herein.
Principal Collections will be allocated between the
Certificateholders and the Transferor ("Investor
Principal Collections" and "Transferor Principal
Collections", respectively) in accordance with their
percentage interests in the Mortgage Loans of __%
and __%, respectively, as of the Cut-Off Date (the
"Fixed Allocation Percentage"), but a lesser amount
of Principal Collections may be distributed to
Certificateholders during the Managed Amortization
Period, as described below. The "Investor Fixed
Allocation Percentage" shall be __%.
The Master Servicer will deposit Interest
Collections and Principal Collections in respect of
the Mortgage Loans in an account established for
such purpose under the Agreement (the "Collection
Account"). See "Description of the Certificates--
Payments on Mortgage Loans; Deposits to Collection
Account" herein.
Collection Period As to any Distribution Date other than the first
Distribution Date, the "Collection Period" is the
calendar month preceding the month of such
Distribution Date. As to the first Distribution
Date, the "Collection Period" is the period
beginning after the Cut-Off Date and ending on the
last day of _____________, 199_.
Interest Interest on the Certificates will be distributed monthly
on the fifteenth day of each month or, if such day is not
a Business Day, then the next succeeding Business Day
(each, a "Distribution Date"), commencing on
______________, 199_, at the Certificate Rate for the
related Interest Period (as defined below). The
"Certificate Rate" for an Interest Period will generally
equal the sum of ((a) the London Interbank offered rate
for one-month United States dollar deposits ("LIBOR")
appearing on the Telerate Screen Page 3750, as of the
second LIBOR Business Day (as defined herein under
"Description of the Certificates--Distributions on the
Certificates") prior to the first day of such Interest
Period (or as of two LIBOR Business Days prior to the
Closing Date, in the case of the first Interest
Period) and (b) ____%.) Notwithstanding the foregoing,
in no event will the amount of interest required to be
distributed in respect of the Certificates on any
Distribution Date exceed an amount derived from a rate
equal to the weighted average of the Loan Rates (net of
the Servicing Fee Rate, the fee payable to the Trustee
and the rate at which the premium payable to the
Certificate Insurer is calculated) weighted on the basis
of the daily balance of each Mortgage Loan during the
related billing cycle prior to the Collection Period
relating to such Distribution Date. Interest on the
Certificates in respect of any Distribution Date will
accrue from the preceding Distribution Date (or in the
case of the first Distribution Date, from the date of the
initial issuance of the Certificates (the "Closing Date")
through the day preceding such Distribution Date (each
such period, an "Interest Period") on the basis of the
actual number of days in the Interest Period and a 360-
day year.
Interest payments on the Certificates will be funded from
Investor Interest Collections, any funds on deposit in
the Spread Account and from draws on the Policy. See
"Description of the Certificates" herein.
Principal Payments
from Principal
Collections For the period beginning on the first Distribution Date
and, unless a Rapid Amortization Event shall have earlier
occurred, ending on the Distribution Date in
_____________, 200_ (the "Managed Amortization Period"),
the amount of Principal Collections payable to
Certificateholders as of each Distribution Date during
the Managed Amortization Period will equal, to the extent
funds are available therefor, the Scheduled Principal
Collections Distribution Amount for such Distribution
Date. On any Distribution Date during the Managed
Amortization Period, the "Scheduled Principal Collections
Distribution Amount" shall equal the lesser of (i) the
Maximum Principal Payment (as defined below) and (ii) the
Alternative Principal Payment (as defined below). With
respect to any Distribution Date, the "Maximum Principal
Payment" will equal the product of the Investor Fixed
Allocation Percentage and Principal Collections for such
Distribution Date. With respect to any Distribution
Date, the "Alternative Principal Payment" will equal the
greater of (x) ____% of the Certificate Principal Balance
immediately prior to such Distribution Date and (y) the
amount, but not less than zero, of Principal Collections
for such Distribution Date less the aggregate of
Additional Balances created during the related Collection
Period.
Beginning with the first Distribution Date following the
end of the Managed Amortization Period, the amount of
Principal Collections payable to Certificateholders on
each Distribution Date will be equal to the Maximum
Principal Payment. See "Description of the Certificates-
-Distributions on the Certificates" herein.
In addition, to the extent funds are available therefor
(including funds available under the Policy), on the
Distribution Date in _____________, 20__,
Certificateholders will be entitled to receive as payment
of principal an amount equal to the outstanding
Certificate Principal Balance.
Distributions of Principal Collections based upon the
Investor Fixed Allocation Percentage may result in
distributions of principal to Certificateholders in
amounts that are greater relative to the declining Pool
Balance than would be the case if the Investor Floating
Allocation Percentage were used to determine the
percentage of Principal Collections distributed in
respect of the Invested Amount. The aggregate
distributions of principal to Certificateholders will not
exceed the Original Certificate Principal Balance.
The Certificate
Insurer (Insurer) (the "Certificate Insurer") is a
insurance company engaged exclusively in the business of
writing financial guaranty insurance, principally in
respect of securities offered in domestic and foreign
markets. The Certificate Insurer's claims-paying ability
is rated ______ by ______________________________________
and _____ by ____________________________________. See
"The Certificate Insurer" in this Prospectus Supplement.
Policy On or before the Closing Date, the Policy will be issued
by the Certificate Insurer pursuant to the provisions of
the Insurance and Indemnity Agreement (the "Insurance
Agreement") to be dated as of _____________, 199_, among
Provident(, the Trustee) and the Certificate Insurer.
The Policy will irrevocably and unconditionally guarantee
payment on each Distribution Date to the Trustee for the
benefit of the Certificateholders of (i) the Guaranteed
Principal Distribution Amount (as defined below) with
respect to the Certificates for such Distribution Date
and (ii) accrued and unpaid interest due on the
Certificates (together, the "Guaranteed Distributions"),
with such Guaranteed Distributions having been calculated
in accordance with the original terms of the Certificates
or the Agreement except for amendments or modifications
to which the Certificate Insurer has given its prior
written consent. The effect of the Policy is to
guarantee the timely payment of interest on, and the
ultimate payment of the principal amount of, all of the
Certificates.
The "Guaranteed Principal Distribution Amount" for any
Distribution Date shall be the amount by which the
Certificate Principal Balance (after giving effect to all
other amounts distributable and allocable to principal on
the Certificates on such Distribution Date) exceeds the
Invested Amount for such Distribution Date. In addition,
the Policy will guarantee the payment of the outstanding
Certificate Principal Balance on the Distribution Date in
____________, 20__ (after giving effect to all other
amounts distributable and allocable to principal on such
Distribution Date).
(In accordance with the Agreement, the Trustee will be
required to establish and maintain an account (the
"Spread Account") for the benefit of the Certificate
Insurer and the Certificateholders. As specified in the
Agreement, the Certificate Insurer will be entitled to
reimbursement from funds on deposit in the Spread Account
of certain amounts previously paid by it. Further, as
specified in the Agreement, the Trustee will use funds on
deposit in the Spread Account to make distributions to
the Certificateholders prior to making a claim on the
Policy. The Trustee shall deposit the amounts into the
Spread Account as required by the Agreement.)
In the absence of payments under the Policy,
Certificateholders will directly bear the credit and
other risks associated with their undivided interest in
the Trust Fund. See "Description of the Certificates--
The Policy" herein.
Overcollateralization
Amount The distribution of Accelerated Principal Distribution
Amounts, if any, to Certificateholders may result in the
Invested Amount being greater than the Certificate
Principal Balance, thereby creating the
Overcollateralization Amount. The Overcollateralization
Amount, if any, will be available to absorb any Investor
Loss Amount not covered by Investor Interest Collections.
Payments of Accelerated Principal Distribution Amounts
are not covered by the Policy. Any Investor Loss Amounts
not covered by such overcollateralization, amounts on
deposit in the Spread Account or Investor Interest
Collections will be covered by draws on the Policy to the
extent provided therein.
(Pre-Funding
Account On the Closing Date, $__________ (the "Pre-Funded
Amount") will be deposited in an account (the "Pre-
Funding Account"), which account shall be in the name of
and maintained by the Trustee and shall be part of the
Trust Fund and will be used to acquire Subsequent
Mortgage Loans. During the period beginning on the
Closing Date and terminating on ____________, 19__ (the
"Funding Period"), the Pre-Funded Amount will be
maintained in the Pre-Funding Account. The Pre-Funded
Amount will be reduced during the Funding Period by the
amount thereof used to purchase Subsequent Mortgage Loans
in accordance with the Agreement. Any Pre-Funded Amount
remaining at the end of the Funding Period will be
distributed to holders of the classes of Certificates
entitled to receive principal on the Distribution Date in
________ 19__ in reduction of the related Certificate
Principal Balances, thus resulting in a partial principal
prepayment of the related Certificates on such date.
Capitalized Interest
Account On the Closing Date there will be deposited in an account
(the "Capitalized Interest Account") maintained with and
in the name of the Trustee on behalf of the Trust Fund a
portion of the proceeds of the sale of the Certificates.
The amount deposited therein will be used by the Trustee
on the Distribution Dates in __________ 19__, __________,
19__ and __________ 19__ to cover shortfalls in interest
on the Certificates that may arise as a result of the
utilization of the Pre-Funding Account for the purchase
by the Trust Fund of Subsequent Mortgage Loans after the
Closing Date. Any amounts remaining in the Capitalized
Interest Account at the end of the Funding Period are
required to be paid directly to Provident.)
Record Date The last day preceding a Distribution Date or, if the
Certificates are no longer Book-Entry Certificates, the
last day of the month preceding a Distribution Date.
Servicing The Master Servicer will be responsible for servicing,
managing and making collections on the Mortgage Loans.
The Master Servicer will deposit all collections in
respect of the Mortgage Loans into the Collection Account
as described under "Description of the Certificates--
Payments on Mortgage Loans; Deposits to Collection
Account" herein. On the third Business Day prior to each
Distribution Date (the "Determination Date"), the Master
Servicer will calculate, and instruct the Trustee
regarding the amounts available to be paid, as described
under "Description of the Certificates--Payments on
Mortgage Loans; Deposits to Collection Account" herein,
to the Certificateholders on such Distribution Date. See
"Description of the Certificates--Distributions on the
Certificates" herein. With respect to each Collection
Period, the Master Servicer will receive from collections
in respect of interest on the Mortgage Loans, on behalf
of itself, a portion of such collections as a monthly
servicing fee (the "Servicing Fee") in the amount of
approximately ____% per annum (the "Servicing Fee Rate")
on the aggregate Principal Balances of the Mortgage Loans
as of the first day of each such Collection Period. See
"Description of the Certificates--Servicing Compensation
and Payment of Expenses" herein. In certain limited
circumstances, the Master Servicer may resign or be
removed, in which event either the Trustee or a third-
party servicer will be appointed as a successor Master
Servicer. See "Description of the Certificates--Certain
Matters Regarding the Master Servicer and the Transferor"
herein.
Final Payment of
Principal;
Termination The Trust Fund will terminate on the Distribution Date
following the later of (A) payment in full of all amounts
owing to the Certificate Insurer and (B) the earliest of
(i) the Distribution Date on which the Certificate
Principal Balance has been reduced to zero, (ii) the
final payment or other liquidation of the last Mortgage
Loan in the Trust Fund, (iii) the optional retransfer to
the Transferor of the Certificates, as described below
and (iv) the Distribution Date in ______________, 20__.
The Certificates will be subject to optional retransfer
to the Transferor on any Distribution Date after the
Certificate Principal Balance is reduced to an amount
less than or equal to $________________ (__% of the
Original Certificate Principal Balance) and all amounts
due and owing to the Certificate Insurer and unreimbursed
draws on the Policy, together with interest thereon, as
provided under the Insurance Agreement, have been paid.
The retransfer price will be equal to the sum of the
outstanding Certificate Principal Balance and accrued and
unpaid interest thereon at the Certificate Rate through
the day preceding the final Distribution Date. See
"Description of The Certificates--Termination; Retirement
of the Certificates" herein and "The Agreements--
Termination; Optional Termination" in the Prospectus.
In addition, the Trust Fund may be liquidated as a result
of certain events of bankruptcy, insolvency or
receivership relating to the Transferor. See
"Description of the Certificates--Rapid Amortization
Events" herein.
Trustee ( ), a ____________________________
(the "Trustee") will act as Trustee on behalf of the
Certificateholders.
Mandatory Retransfer of
Certain Mortgage
Loans Provident will make certain representations and
warranties in the Agreement with respect to the Mortgage
Loans. If Provident breaches certain of its
representations and warranties with respect to any
Mortgage Loan and such breach materially and adversely
affects the interests of the Certificateholders or the
Certificate Insurer and is not cured within the specified
period, the Mortgage Loan will be removed from the Trust
Fund upon the expiration of a specified period from the
date on which Provident becomes aware or receives notice
of such breach and will be reassigned to the Transferor.
For an explanation of the compensation paid in respect of
such retransferred Mortgage Loan, see "Description of the
Certificates--Assignment of Mortgage Loans" herein.
Federal Income Tax
Consequences Subject to the qualifications set forth in "Federal
Income Tax Consequences" herein, Brown & Wood LLP special
tax counsel to Provident is of the opinion that, under
existing law, a Certificate will be treated as a debt
instrument for federal income tax purposes as of the
Closing Date. Under the Agreement, the Transferor,
Provident and the Certificateholders will agree to treat
the Certificates as indebtedness for federal income tax
purposes. Furthermore, Brown & Wood LLP special tax
counsel to Provident is of the opinion that the Trust
Fund will not be treated as either an association or a
publicly traded partnership taxable as a corporation or
as a taxable mortgage pool. See "Federal Income Tax
Consequences" herein and in the Prospectus for additional
information concerning the application of federal income
tax laws.
ERISA
Considerations The acquisition of a Certificate by a pension or other
employee benefit plan (a "Plan") subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), could, in some instances, result in a
"prohibited transaction" or other violation of the
fiduciary responsibility provisions of ERISA and Code
Section 4975. Certain exemptions from the prohibited
transaction rules could be applicable to the acquisition
of the Certificates. Any Plan fiduciary considering
whether to purchase any Certificate on behalf of a Plan
should consult with its counsel regarding the
applicability of the provisions of ERISA and the Code.
See "ERISA Considerations" herein and in the Prospectus.
Legal Investment
Considerations The Certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"), because not all of the
Mortgages securing the Mortgage Loans are first
mortgages. Accordingly, many institutions with legal
authority to invest in comparably rated securities based
solely on first mortgages may not be legally authorized
to invest in the Certificates. See "Legal Investment
Considerations" herein and "Legal Investment" in the
Prospectus.
Certificate Rating It is a condition to the issuance of the Certificates
that they be rated "___" by _____ and "___" by _________
(each a "Rating Agency"). In general, ratings address
credit risk and do not address the likelihood of
prepayments. See "Ratings" herein and "Risk Factors--
Rating of the Securities" in the Prospectus.
Risk Factors For a discussion of certain risks associated with an
investment in the Certificates, see "Risk Factors" on
Page S-16 herein and on page 12 in the Prospectus.
RISK FACTORS
Investors should consider the following risks in connection with the
purchase of Certificates.
Risk of Reduced Liquidity Because of Owning Book-Entry Certificates.
Issuance of the Certificates in book-entry form may reduce the liquidity of
such Certificates in the secondary trading market since investors may be
unwilling to purchase Certificates for which they cannot obtain physical
certificates. See "Description of the Certificates--Book-Entry Certificates"
herein and "Risk Factors-Book-Entry Registration" in the Prospectus.
Since transactions in the Certificates can be effected only through DTC,
CEDEL, Euroclear, participating organizations, indirect participants and
certain banks, the ability of a Certificate Owner to pledge a Certificate to
persons or entities that do not participate in the DTC, CEDEL or Euroclear
system may be limited due to lack of a physical certificate representing the
Certificates. See "Description of the Certificates--Book-Entry Certificates"
herein and "Risk Factors-Book-Entry Registration" in the Prospectus.
Payment Delay as a Result of Owning Book-Entry Certificates.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit
such distributions to the accounts of its Participants (as defined herein
under "Description of the Certificates--Book-Entry Certificates") which will
thereafter credit them to the accounts of Certificate Owners either directly
or indirectly through indirect participants. Certificate Owners will not be
recognized as Certificateholders as such term is used in the Agreement, and
Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Participants. See
"Description of the Certificates--Book-Entry Certificates" herein and "Risk
Factors--Book-Entry Registration" in the Prospectus.
Cash Flow Considerations and Risks of Shortfalls. Minimum monthly
payments on the Mortgage Loans will at least equal and may exceed accrued
interest. Even assuming that the Mortgaged Properties provide adequate
security for the Mortgage Loans, substantial delays could be encountered in
connection with the liquidation of Mortgage Loans that are delinquent and
resulting shortfalls in distributions to Certificateholders could occur if
the Certificate Insurer were unable to perform on its obligations under the
Policy. Further, liquidation expenses (such as legal fees, real estate
taxes, and maintenance and preservation expenses) will reduce the proceeds
payable to Certificateholders and thereby reduce the security for the
Mortgage Loans. In the event any of the Mortgaged Properties fail to provide
adequate security for the related Mortgage Loans, Certificateholders could
experience a loss if the Certificate Insurer were unable to perform its
obligations under the Policy.
Prepayment Considerations and Effect on Yield to Maturity and Weighted
Average Life of Certificates. Substantially all of the Mortgage Loans may be
prepaid in whole or in part at any time without penalty. Home equity loans,
such as the Mortgage Loans, have been originated in significant volume only
during the past few years and Provident is not aware of any publicly
available studies or statistics on the rate of prepayment of such loans.
Generally, home equity loans are not viewed by borrowers as permanent
financing. Accordingly, the Mortgage Loans may experience a higher rate of
prepayment than traditional loans. The Trust Fund's prepayment experience
may be affected by a wide variety of factors, including general economic
conditions, interest rates, the availability of alternative financing and
homeowner mobility. In addition, substantially all of the Mortgage Loans
contain due-on-sale provisions and the Master Servicer intends to enforce
such provisions unless (i) such enforcement is not permitted by applicable
law or (ii) the Master Servicer, in a manner consistent with reasonable
commercial practice, permits the purchaser of the related Mortgaged Property
to assume the Mortgage Loan. To the extent permitted by applicable law, such
assumption will not release the original borrower from its obligation under
any such Mortgage Loan. See "Description of the Certificates" herein and
"Certain Legal Aspects of Loans--Due-on-Sale Clauses" in the Prospectus for a
description of certain provisions of the Credit Line Agreements that may
affect the prepayment experience on the Mortgage Loans. The yield to
maturity and weighted average life of the Certificates will be affected
primarily by the rate and timing of prepayments on the Mortgage Loans. Any
reinvestment risks resulting from a faster or slower incidence of prepayment
of Mortgage Loans will be borne entirely by the Certificateholders. See
"Maturity and Prepayment Considerations" herein and "Yield and Prepayment
Considerations" in the Prospectus.
Certificate Rating Based Primarily on Claims-Paying Ability of the
Certificate Insurer. The rating of the Certificates will depend primarily on
an assessment by the Rating Agencies of the Mortgage Loans and upon the
claims-paying ability of the Certificate Insurer. Any reduction in a rating
assigned to the claims-paying ability of
the Certificate Insurer below the rating initially given to the Certificates
may result in a reduction in the rating of the Certificates. The rating by
the Rating Agencies of the Certificates is not a recommendation to purchase,
hold or sell the Certificates, inasmuch as such rating does not comment as to
the market price or suitability for a particular investor. There is no
assurance that the ratings will remain in place for any given period of time
or that the ratings will not be lowered or withdrawn by the Rating Agencies.
In general, the ratings address credit risk and do not address the likelihood
of prepayments. The ratings of the Certificates do not address the
possibility of the imposition of United States withholding tax with respect
to non-U.S. persons.
Legal Considerations -- Lien Priority and Possible Delay in
Distributions or Losses. The Mortgage Loans are secured by mortgages (which
generally are second mortgages). With respect to Mortgage Loans that are
secured by first mortgages, the Master Servicer has the power under certain
circumstances to consent to a new mortgage lien on the Mortgaged Property
having priority over such Mortgage Loan. Therefore, there is generally no
limit on the principal amount of prior liens that can be placed ahead of the
Mortgage Loans. Mortgage Loans secured by second mortgages are entitled to
proceeds that remain from the sale of the related Mortgaged Property after
any related senior mortgage loan and prior statutory liens have been
satisfied. If such proceeds are insufficient to satisfy such loans and prior
liens in the aggregate and the Certificate Insurer is unable to perform its
obligations under the Policy, the Certificateholders will bear the risk of
delay in distributions while a deficiency judgment against the borrower is
obtained and the risk of loss if the deficiency judgment cannot be obtained
or is insufficient to satisfy the Mortgage Loan. See "Certain Legal Aspects
of the Loans" in the Prospectus.
Bankruptcy and Insolvency Risks. Provident and the Trust will treat the
transfer of the Mortgage Loans from Provident to the Trust as a sale for
accounting purposes. However, in the event of the insolvency of Provident,
it is possible that a receiver or conservator (or similar official) for
Provident, may attempt to recharacterize the sale of the Mortgage Loans as a
borrowing by Provident, secured by a pledge of the Mortgage Loans. Certain
provisions of the Federal Deposit Insurance Act (state law) may permit the
FDIC or state regulator to avoid such security interest. This position, if
argued or accepted by a court, could prevent timely payments of amounts due
on the Certificates and result in a reduction of payments due on the
Certificates. Provident will, however, mark its records to indicate that the
Mortgage Loans have been sold to the Trust Fund.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or
the Certificateholders from appointing a successor Master Servicer. In the
event of the insolvency of the Master Servicer and if cash collections are
commingled with the Master Servicer's own funds for at least ten days, the
Trust Fund will likely not have a perfected interest in such collections
since such collections would not have been deposited in a segregated account
within ten days after the collection thereof, and the inclusion thereof in
the bankruptcy estate of the Master Servicer may result in delays in payment
and failure to pay amounts due on the Certificates.
In addition, federal and state statutory provisions, including the
federal bankruptcy laws and state laws affording relief to debtors, may
interfere with or affect the ability of the secured mortgage lender to
realize upon its security. For example, in a proceeding under the federal
Bankruptcy Code, a lender may not foreclose on a mortgaged property without
the permission of the bankruptcy court. The rehabilitation plan proposed by
the debtor may provide, if the mortgaged property is not the debtor's
principal residence and the court determines that the value of the mortgaged
property is less than the principal balance of the mortgage loan, that the
secured indebtedness be reduced to the value of the mortgaged property as of
the date of the commencement of the bankruptcy, rendering the lender a
general unsecured creditor for the difference, and also may reduce the
monthly payments due under such mortgage loan, change the rate of interest
and alter the mortgage loan repayment schedule. The effect of any such
proceedings under the federal Bankruptcy Code, including but not limited to
any automatic stay, could result in delays in receiving payments on the
Mortgage Loans and reductions in the aggregate amount of such payments.
(Risk of Losses as a Result of Geographic Concentration. As of the Cut-
Off Date, approximately _____% (by Cut-Off Date Principal Balance) of the
Mortgaged Properties are located in the State of __________. An overall
decline in the __________ residential real estate market could adversely
affect the values of the Mortgaged Properties securing such Mortgage Loans
such that the Principal Balances of the related Mortgage Loans, together with
any primary financing on such Mortgaged Properties, could equal or exceed the
value of such Mortgaged Properties. As the residential real estate market is
influenced by many factors, including the general condition of the economy
and interest rates, no assurances may be given that the __________
residential real estate market will not weaken. If the __________
residential real estate market should experience an overall decline in
property values after the dates of origination of the Mortgage Loans, the
rates of losses on the Mortgage Loans would be expected to increase,
and could increase substantially.)
Master Servicer's Ability to Change the Terms of the Mortgage Loans.
The Master Servicer may agree to changes in the terms of a Credit Line
Agreement, provided that such changes (i) do not adversely affect the
interest of the Certificateholders or the Certificate Insurer, and (ii) are
consistent with prudent business practice. There can be no assurance that
changes in applicable law or the marketplace for home equity loans or prudent
business practice will not result in changes in the terms of the Mortgage
Loans. In addition, the Agreement permits the Master Servicer, within
certain limitations described therein, to increase the Credit Limit of the
related Mortgage Loan or reduce the Margin for such Mortgage Loan. Any such
increase in the Credit Line of a Mortgage Loan would increase the Loan-to-
Value Ratio of such Mortgage Loan and, accordingly, would increase the risk
of the Trust Fund's investment in such Mortgage Loan. In addition, any
reduction in the Margin of a Mortgage Loan would reduce the excess cash flow
available to absorb losses.
Delinquent Mortgage Loans. The Trust Fund will include Mortgage Loans
which are 89 or fewer days delinquent as of the Cut-Off Date. The Cut-Off
Date Principal Balance of Mortgage Loans which are between 30 days and 89
days delinquent as of the Cut-Off Date was $_________________. If there are
not sufficient funds from the Investor Interest Collections to cover the
Investor Loss Amounts for any Distribution Date, the Overcollateralization
Amount and the amount on deposit in the Spread Account have been reduced to
zero, and the Certificate Insurer fails to perform its obligations under the
Policy, the aggregate amount of principal returned to the Certificateholders
may be less than the Certificate Principal Balance on the day the
Certificates are issued.
(Risk of Prepayment Due to Subsequent Mortgage Loans. The ability of
the Trust to purchase mortgage loans after the date of this Prospectus
Supplement and on or prior to ____________, 19__ that meet the requirements
for transfer during the Funding Period under the Agreement is affected by a
variety of factors, including interest rates, unemployment levels, the rate
of inflation and consumer perception of economic conditions generally. On
the Distribution Date in ____________ 19__, a principal prepayment will be
made to the holders of the Certificates in the amount which represents the
excess of the original Pre-Funded Amount over the Principal Balance of all
Subsequent Mortgage Loans as of the related Cut-Off Date (i.e., the balance
on deposit in the Pre-Funding Account on such date (net of investment
earnings)). Although no assurances can be given, Provident intends that no
material principal prepayment will be required to be made to the holders of
the Certificates on the Distribution Date in ____________ 19__. Any
reinvestment risk resulting from such prepayment will be borne entirely by
the Certificateholders.)
For a discussion of additional risks pertaining to the Certificates, see
"Risk Factors" in the Prospectus.
THE CERTIFICATE INSURER
The following information set forth in this section has been provided by
the Certificate Insurer. Accordingly, neither Provident nor the Master
Servicer makes any representation as to the accuracy and completeness of such
information.
(Description of Certificate Insurer)
THE MASTER SERVICER
GENERAL
The Master Servicer will service the Mortgage Loans in accordance with
the terms set forth in the Agreement. The Master Servicer may perform any of
its obligations under the Agreement through one or more subservicers. Not-
withstanding any such subservicing arrangement, the Master Servicer will
remain liable for its servicing duties and obligations under the Agreement as
if the Master Servicer alone were servicing the Mortgage Loans.
THE MASTER SERVICER
Provident will be responsible for servicing the Mortgage Loans for the
Trust in accordance with the terms of the Agreement. (Beginning on
__________, _____________ (the "Subservicer") will service the Mortgage Loans
for Provident pursuant to a Subservicing Agreement, to be dated as of
(______________), between Provident and the Subservicer. The terms and
conditions of the Subservicing Agreement are consistent with and do not
violate the provisions of the Agreement. Such subservicing does not relieve
Provident from any of its obligations to service the Mortgage Loan in
accordance with the terms and conditions of the Agreement.)
Provident is the principal banking subsidiary of Provident Bancorp,
Inc., a Cincinnati-based bank holding company registered under the Bank
Holding Company Act. Provident Bancorp, Inc. operates throughout Ohio,
Northern Kentucky, Southeastern Indiana and Florida. As of ____________,
Provident Bancorp, Inc. had total assets of $____ billion, net loans of $___
billion, deposits of $____ billion and total shareholders' equity of $____
million. Provident Bancorp's tier 1 and total capital ratios were ____% and
_____%, respectively. For the (___) months ended ______________, Provident
Bancorp had net earnings of $____ million. As of _______________, Provident
Bancorp had total assets of $____ billion, net loans of $___ billion,
deposits of $___ billion and total shareholders' equity of $___ million.
Provident Bancorp's tier I and total capital ratios were ____% and ____%,
respectively. For the fiscal year ended __________________, Provident
Bancorp, Inc. had net earnings of $___ million. Provident represents
approximately 96% of Provident Bancorp, Inc.'s assets.
THE HOME EQUITY LOAN PROGRAM
CREDIT AND UNDERWRITING GUIDELINES
The following is a description of the underwriting guidelines
customarily employed by Provident with respect to Mortgage Loans which it
purchases or originates. Each Mortgage Loan was underwritten according to
these guidelines. Provident believes its standards are consistent with those
utilized by home equity lenders generally. The underwriting process is
intended to assess both the prospective borrower's ability to repay and the
adequacy of the real property security as collateral for the loan granted.
In certain cases, loans may be made outside of those guidelines with the
prior approval of an underwriting manager of Provident.
Provident generally originates or purchases loans which either fully
amortize over a period not to exceed 360 months or provide for amortization
over a 360 month schedule with a "balloon" payment required at the maturity
date, which will not be less than fifteen years after origination. The loan
amounts generally range from a minimum of $10,000 to a maximum of $500,000
unless a higher amount is specifically approved by a senior official of
Provident. Provident primarily originates or purchases non-purchase money
first or second mortgage loans although Provident also originates purchase
money first mortgage loans.
The homes used for collateral to secure the loans may be either primary
residential (which includes second and vacation homes) or investor owned one-
to four-family homes, condominiums, townhouses or manufactured housing.
Generally, each home must have a minimum appraised value as described below.
Mobile housing or agricultural land are not accepted as collateral. In some
cases, the loan may be secured by the owner-occupied residence plus
additional real estate collateral.
Each property proposed as security for a loan must be appraised not more
than six months prior to the date of such loan. The combined loan-to-value
ratio of the first and second mortgages generally may not exceed 85%. If a
prior mortgage exists, Provident first reviews the first mortgage history.
If it contains open-end, advance or negative amortization provisions, the
maximum potential first mortgage balance is used in calculating the combined
loan-to-value ratio which determines the maximum loan amount.
For Provident's full documentation process, each mortgage applicant must
provide, and Provident must verify, personal financial information. The
applicant's total monthly obligations (which includes principal and interest
on each mortgage, tax assessments, other loans, charge accounts and all other
scheduled indebtedness) generally cannot exceed 60% of the applicant's gross
monthly income. Applicants who are salaried employees must provide current
employment information in addition to two recent years of employment history
and Provident verifies this information. Verifications are based on written
confirmation from employers or a combination of the two most recent pay stubs,
the two most recent years' W-2 tax forms and telephone confirmation from
the employer. Self-employed applicants must be self-employed in the same
field for a minimum of two years. The self-employed applicant must
provide signed copies of complete federal income tax returns (including
schedules) filed for the most recent two years.
For Provident's non-income verifier program, proof of one year history
of employment plus proof of current self-employed status is required. The
applicant's debt-to-income ratio is calculated based on income as certified
by the borrower on the application and must be reasonable. The maximum
Combined Loan-to-Value ratio may not exceed 80% for the non-income verifier
program.
A credit report by an independent credit reporting agency is required
reflecting the applicant's complete credit history. The credit report should
reflect all delinquencies of 30 days or more, repossessions, judgments,
foreclosures, garnishments, bankruptcies, divorce actions and similar adverse
credit practices that can be discovered by a search of public records. If
the report is obtained more than 60 days prior to the loan closing, the
lender must determine that the reponed information has not changed. Written
verification is obtained of any first mortgage balance if not reported in the
credit bureau.
Generally, the applicant should have an acceptable credit history given
the amount of equity available, the strength of the applicant's employment
history and the level of the applicant's income to debt obligations. The
rescission period (generally, a period of three days) must have expired prior
to funding a loan. The rescission period may not be waived by the applicant
except as permitted by law. Either an ALTA title insurance policy or an
attorney's opinion of title is required for all loans.
The applicant is required to secure property insurance in an amount
sufficient to cover the new loan and any prior mortgage. If the sum of the
outstanding first mortgage, if any, and the home equity loan exceeds
replacement value, insurance equal to replacement value may be accepted.
Provident must ensure that its name and address is properly added to the
"Mortgage Clause" of the insurance policy. In the event Provident's name is
added to a "Loss Payee Clause" and the policy does not provide for written
notice of policy changes or cancellation, an endorsement adding such
provision is required.
Provident's credit underwriting guidelines require that any major
deferred maintenance on any property must bc cured from the proceeds of the
loan.
SERVICING OF THE MORTGAGE LOANS
The Master Servicer has established standard policies for the servicing
and collection of the home equity loans. Servicing includes, but is not
limited to, (i) the collection and aggregation of payments relating to the
Mortgage Loans; (ii) the supervision of delinquent Mortgage Loans, loss
mitigation efforts, foreclosure proceedings and, if applicable, the
disposition of Mortgaged Properties; and (iii) the preparation of tax related
information in connection with the Mortgage Loans.
Billing statements are mailed monthly by the Master Servicer. The
statement details all debits and credits and specifies the minimum payment
due and the available credit line. Notice of changes in the applicable loan
rate are provided by the Master Servicer to the Mortgagor with such
statements. All payments are due by the fifteenth day of the month.
With respect to Mortgage Loans, the general policy of the Master
Servicer is to initiate foreclosure in the underlying property (i) after such
loan is 75 days or more delinquent and satisfactory arrangements cannot be
made with the Mortgagor or (ii) if a notice of default on a senior lien is
received by the Master Servicer. Foreclosure proceedings may be terminated if
the delinquency is cured. Mortgage Loans to borrowers in bankruptcy
proceedings may be restructured in accordance with law and with a view to
maximizing recovery of such Mortgage Loans, including any deficiencies.
Once foreclosure is initiated by the Master Servicer, a foreclosure
tracking system is used to monitor the progress of the proceedings. The
system includes state specific parameters to monitor whether proceedings are
progressing within the time frame typical for the state in which the property
is located. During the foreclosure proceeding, the Master Servicer determines
the amount of the foreclosure bid and whether to liquidate the Mortgage Loan.
After foreclosure, if the home equity loan is secured by a first
mortgage lien, the Master Servicer may liquidate the Mortgaged Property and
charge off the home equity loan balance which was not recovered through
liquidation proceeds. If the Mortgaged Property was subject to a senior
lien, the Master Servicer will either directly manage the foreclosure sale of
the property and satisfy such lien at the time of sale or take other action
as deemed necessary to protect the interest in the Mortgaged Property. If in
the judgment of the Master Servicer, the cost of maintaining or purchasing
the senior lien position exceeds the economic benefit of such action, the
Master Servicer will generally charge off the entire home equity loan and may
seek a money judgment against the borrower.
Servicing and charge-off policies and collection practices may change
over time in accordance with, among other things, the Master Servicer's
business judgment, changes in the portfolio and applicable laws and
regulations.
DELINQUENCY EXPERIENCE
The following table sets forth Provident's delinquency experience on its
servicing portfolio of mortgage loans (including mortgage loans serviced for
others) similar to the Mortgage Loans for the periods indicated. There can
be no assurance that the delinquency experience on the Mortgage Loans will be
consistent with the historical information provided below. Accordingly, this
information should not be considered to reflect the credit quality of the
Mortgage Loans included in the Trust, or a basis of assessing the likelihood,
amount or severity of losses on the Mortgage Loans. The statistical data in
the table is based on all of the closed-end fixed and adjustable rate
mortgage loans in Provident's servicing portfolio.
The information in the tables below has not been adjusted to eliminate
the effect of the significant growth in the size of Provident's mortgage loan
portfolio during the periods shown. Accordingly, delinquency as a percentage
of aggregate principal balance of Mortgage Loans serviced for each period
would be higher than those shown if a group of mortgage loans were
artificially isolated at a point in time and the information showed the
activity only in that isolated group. However, since most of the mortgage
loans in Provident's mortgage loan portfolio are not fully seasoned, the
delinquency information for such an isolated group would also be distorted to
some degree. As of July 31, 1996, there have been no losses on Provident's
mortgage loan servicing portfolio.
The following table sets forth information relating to the delinquency
experience of mortgage loans similar to and including the Mortgage Loans for
the (three) quarters ended (December 31, 1995 and March 31, 1996).
<TABLE>
<CAPTION> Quarter Ended
March 31, 1996 December 31, 1995
Number of Number of
Loans Dollar Amount Loans Dollar Amount
<S> <C> <C> <C> <C>
Portfolio . . . . . . . . . . (765 $72,345,012 310 $31,214,760
Delinquency percentage(1) . .
30-59 days . . . . . . . . 0.26% 0.28% 0.00% 0.00%
60-89 days . . . . . . . . 0.39% 0.42% 0.00% 0.00%
90 days or more . . . . . . 0.13% 0.13% 0.00% 0.00%
Total . . . . . . . . . . . . 0.78% 0.83% 0.00% 0.00%)
</TABLE>
__________
(1) The period of delinquency is based on the number of days the
payment is contractually past due.
DESCRIPTION OF THE MORTGAGE LOANS
GENERAL
The Mortgage Loans were originated pursuant to loan agreements and
disclosure statements (the "Credit Line Agreements") and are secured by
mortgages or deeds of trust, which are either first or second mortgages or
deeds of trust, on Mortgaged Properties located in ____ states. The
Mortgaged Properties securing the Mortgage Loans consist of residential
properties that are one- to four-family properties. See "--Mortgage Loan
Terms" below.
The Cut-Off Date Pool Balance is $______________, which is equal to the
aggregate Principal Balances of the Mortgage Loans as of the Cut-Off Date.
As of the Cut-Off Date, the Mortgage Loans were not more than 89 days
delinquent. The average Cut-Off Date Principal Balance was approximately
$ , the minimum Cut-Off Date Principal Balance was zero, the maximum
Cut-Off Date Principal Balance was $ , the minimum Loan Rate and the
maximum Loan Rate as of the Cut-Off Date were % and % per annum,
respectively, and the weighted average Loan Rate as of the Cut-Off Date was
approximately % per annum. As of the Cut-Off Date, the weighted average
Credit Limit Utilization Rate was approximately %, the minimum Credit
Limit Utilization Rate was zero and the maximum Credit Limit Utilization Rate
was 100%. The "Credit Limit Utilization Rate" is determined by dividing the
Cut-Off Date Principal Balance of a Mortgage Loan by the Credit Limit of the
related Credit Line Agreement. The remaining term to scheduled maturity for
the Mortgage Loans as of the Cut-Off Date ranged from months to
months and the weighted average remaining term to scheduled maturity was
approximately months. As of the Cut-Off Date, the Combined Loan-to-Value
Ratio of the Mortgage Loans ranged from % to ______% and the weighted
average Combined Loan-to-Value Ratio was approximately %. The Combined
Loan-to-Value Ratio for a Mortgage Loan is the ratio (expressed as a
percentage) of (A) the sum of (i) the Credit Limit of the Mortgage Loan and
(ii) any outstanding principal balances of mortgage loans senior to such
Mortgage Loan (calculated at the date of origination of the Mortgage Loan) to
(B) the lesser of (i) the appraised value of the related Mortgaged Property
as set forth in the loan files at such date of origination or (ii) in the
case of a Mortgaged Property purchased within one year of the origination of
the related Mortgage Loan, the purchase price of such Mortgaged Property.
Credit Limits under the Mortgage Loans as of the Cut-Off Date ranged from $
to $ and averaged approximately $ . The weighted
average second mortgage ratio (which is the Credit Limit for the related
Mortgage Loan, provided such Mortgage Loan was in the second lien position,
divided by the sum of such Credit Limit and the outstanding principal balance
of any mortgage loan senior to the related Mortgage Loan) was approximately
%. As of the Cut-Off Date, approximately % by Cut-Off Date Principal
Balance of the Mortgage Loans represented first liens on the related
Mortgaged Properties, while approximately % of the Mortgage Loans
represented second liens. As of the Cut-Off Date, approximately % of
the Mortgage Loans are secured by Mortgaged Properties which are single-
family residences and ___% were owner-occupied. As of the Cut-Off Date,
approximately %, %, %, %, % and % by Cut-Off Date
Principal Balance are located in __________, ________, __________, _______,
______ and ________), respectively. In no event will more than 5% of the
Cut-Off Date Pool Principal Balance of the Mortgage Pool deviate from the
characteristics of the Mortgage Loans described herein.
MORTGAGE LOAN TERMS
(A borrower may access a Mortgage Loan by writing a check in a minimum
amount of $250. The Mortgage Loans bear interest at a variable rate which
changes monthly on the first business day of the related month with changes
in the applicable Index Rate. The Mortgage Loans are subject to a maximum
per annum interest rate (the "Maximum Rate") ranging from (_____% to _____%)
per annum and subject to applicable usury limitations. As of the Cut-Off
Date, the weighted average Maximum Rate was approximately %. See
"Certain Legal Aspects of the Loans--Applicability of Usury Laws" in the
Prospectus. The daily periodic rate on the Mortgage Loans (the "Loan Rate")
is the sum of the Index Rate plus the spread (the "Margin") which generally
ranges between ____% and ____% and had a weighted average, as of the Cut-Off
Date, of approximately %, divided by 365 days. The "Index Rate" is based
on the highest "prime rate" published in the 'Money Rates' table of The Wall
Street Journal as of the first business day of each calendar month.)
Set forth below is a description of certain characteristics of the
Mortgage Loans as of the Cut-Off Date:
PRINCIPAL BALANCES
<TABLE>
<CAPTION>
Percent of
Pool
Range of Principal Balances Number by Cut-Off
of Cut-Off Date Date
Mortgage Principal Principal
Loans Balance Balance
---------- ---------------- ---------
<S> <C> <C> <C>
$_______ to $_________ . . . . . . . . . . $ %
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ to $_________ . . . . . . . . . .
$_______ and over . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . $ 100.00%
---------- ---------------- ---------
---------- ---------------- ---------
</TABLE>
GEOGRAPHIC DISTRIBUTION(1)
<TABLE>
<CAPTION>
Percent of
Pool
State Number by Cut-Off
of Cut-Off Date Date
Mortgage Principal Principal
Loans Balance Balance
---------- ---------------- ---------
<S> <C> <C> <C>
$ %
---------- ---------------- ---------
Total . . . . . . . . . . . . . . . . $ 100.00%
---------- ---------------- ---------
---------- ---------------- ---------
</TABLE>
- --------------------
(1) Geographic location is determined by the address of the Mortgaged
Property securing the related Mortgage Loan.
COMBINED LOAN-TO-VALUE RATIOS(1)
<TABLE>
<CAPTION> Percent of
Range of Combined Pool
Loan-to-Value Ratios Number by Cut-Off
of Cut-Off Date Date
Mortgage Principal Principal
Loans Balance Balance
---------- ---------------- ---------
<S> <C> <C> <C>
_____% to ______% . . . . . . . . . . . . . $ %
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
______% to ______% . . . . . . . . . . . .
---------- ---------------- ---------
Total . . . . . . . . . . . . . . . . $ 100.00%
---------- ---------------- ---------
---------- ---------------- ---------
</TABLE>
- -----------
(1) The ratio (expressed as a percentage) of (A) the sum of (i) the Credit
Limit of the Mortgage Loans and (ii) any outstanding principal balances
of mortgage loans senior to the Mortgage Loans (calculated at the date
of origination of the Mortgage Loans) to (B) the lesser of (i) the
appraised value of the related Mortgaged Property as set forth in loan
files at such date of origination or (ii) in the case of a Mortgaged
Property purchased within one year of the origination of the related
Mortgage Loan, the purchase price of such Mortgaged Property.
PROPERTY TYPE
<TABLE>
<CAPTION> Percent of
Pool
Property Type Number by Cut-Off
of Cut-Off Date Date
Mortgage Principal Principal
Loans Balance Balance
---------- ---------------- ---------
<S> <C> <C> <C>
Single Family . . . . . . . . . . . . . . . $ %
Two- to Four-Family . . . . . . . . . . . .
Condominium . . . . . . . . . . . . . . . .
PUD . . . . . . . . . . . . . . . . . . . .
---------- ---------------- ---------
Total . . . . . . . . . . . . . . . . $ 100.00%
---------- ---------------- ---------
---------- ---------------- ---------
</TABLE>
LIEN PRIORITY
<TABLE>
<CAPTION> Percent of
Pool
Lien Priority Number by Cut-Off
of Cut-Off Date Date
Mortgage Principal Principal
---------- ---------------- ---------
<S> <C> <C> <C>
Loans Balance Balance
First Lien . . . . . . . . . . . . . . . . $ %
Second Lien . . . . . . . . . . . . . . . .
---------- ---------------- ---------
Total . . . . . . . . . . . . . . . . $ 100.00%
---------- ---------------- ---------
---------- ---------------- ---------
</TABLE>
LOAN RATES(1)
<TABLE>
<CAPTION>
Number Percent of Pool
of Cut-Off Date by Cut-Off Date
Range of Mortgage Principal Principal
Loan Rates Loans Balance Balance
___________________________________________ _________ _____________ _______________
<S> <C> <C> <C>
_____% to _____% . . . . . . . . . . . . . $ %
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_________ _____________ ______________
Total . . . . . . . . . . . . . . . . $ 100.00%
_________ _____________ ______________
_________ _____________ ______________
</TABLE>
- ---------
(1) Approximately % of the Mortgage Loans by Cut-Off Date Principal
Balance are subject to an introductory rate of _____% per annum.
MARGIN
<TABLE>
<CAPTION>
Number Percent of Pool
of Cut-Off Date by Cut-Off Date
Range of Mortgage Principal Principal
Margins Loans Balance Balance
- --------------------------------------------- ---------- ------------ ---------------
<S> <C> <C> <C>
_____% to _____% . . . . . . . . . . . . . $ %
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
---------- ------------ ---------------
Total . . . . . . . . . . . . . . . . $ 100.00%
---------- ------------ ---------------
---------- ------------ ---------------
</TABLE>
CREDIT LIMIT UTILIZATION RATES
<TABLE>
<CAPTION>
Number
of Cut-Off Date Percent of Pool
Range of Credit Limit Mortgage Principal by Cut-Off Date
Utilization Rates Loans Balance Principal Balance
---------- ------------ -----------------
<S> <C> <C> <C>
_____% to _____% . . . . . . . . . . . . . $ %
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
_____% to _____% . . . . . . . . . . . . .
---------- ------------ ---------------
Total . . . . . . . . . . . . . . . . $ 100.00%
---------- ------------ ---------------
---------- ------------ ---------------
</TABLE>
CREDIT LIMITS
<TABLE>
<CAPTION>
Number
of Cut-Off Date Percent of Pool
Mortgage Principal by Cut-Off Date
Range of Credit Limits Loans Balance Principal Balance
- ------------------------------------------- --------- ------------ -----------------
<S> <C> <C> <C>
$__________to $_________ . . . . . . . . . $ %
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ to $_________ . . . . . . . . .
$_________ and over . . . . . . . . . . . .
--------- ------------ -----------------
Total . . . . . . . . . . . . . . . . $ 100.00%
--------- ------------ -----------------
--------- ------------ -----------------
</TABLE>
MAXIMUM RATES
<TABLE>
<CAPTION>
Number
of Cut-Off Date Percent of Pool
Mortgage Principal by Cut-Off Date
Maximum Rates Loans Balance Principal Balance
- ------------------------------------------- --------- ------------- -----------------
<S> <C> <C> <C>
_____% . . . . . . . . . . . . . . . . . . $ %
_____% . . . . . . . . . . . . . . . . . .
_____% . . . . . . . . . . . . . . . . . .
_____% . . . . . . . . . . . . . . . . . .
--------- ------------ -----------------
Total . . . . . . . . . . . . . . . . $ 100.00%
--------- ------------ -----------------
--------- ------------ -----------------
</TABLE>
MONTHS REMAINING TO SCHEDULED MATURITY(1)
<TABLE>
<CAPTION>
Number
of Cut-Off Date Percent of Pool
Range of Months Mortgage Principal by Cut-Off Date
Remaining to Scheduled Maturity Loans Balance Principal Balance
- ------------------------------------------- --------- ------------ -----------------
<S> <C> <C> <C>
___ to ___ . . . . . . . . . . . . . . . . $ %
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
___ to ___ . . . . . . . . . . . . . . . .
--------- ------------ -----------------
Total . . . . . . . . . . . . . . . . $ 100.00%
--------- ------------ -----------------
--------- ------------ -----------------
</TABLE>
- ------------------
(1) Assumes that the Draw Period for Mortgage Loans with five year Draw
Periods will be extended for an additional five years.
ORIGINATION YEAR
<TABLE>
<CAPTION>
Number
of Cut-Off Date Percent of Pool
Mortgage Principal by Cut-Off Date
Origination Year Loans Balance Principal Balance
- ------------------------------------------- --------- ------------ -----------------
<S> <C> <C> <C>
____ . . . . . . . . . . . . . . . . . . . $ %
____ . . . . . . . . . . . . . . . . . . .
--------- ------------ -----------------
Total . . . . . . . . . . . . . . . . $ 100.00%
--------- ------------ -----------------
--------- ------------ -----------------
</TABLE>
DELINQUENCY STATUS
<TABLE>
<CAPTION>
Number
of Cut-Off Date Percent of Pool
Mortgage Principal by Cut-Off Date
Number of Days Delinquent Loans Balance Principal Balance
- ------------------------------------------- --------- ------------ -----------------
<S> <C> <C> <C>
0 to 29 . . . . . . . . . . . . . . . . . . $ %
30 to 59 . . . . . . . . . . . . . . . . .
60 to 89 . . . . . . . . . . . . . . . . .
--------- ------------ -----------------
Total . . . . . . . . . . . . . . . . $ 100.00%
--------- ------------ -----------------
--------- ------------ -----------------
</TABLE>
(CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS
The Agreement permits the Trust Fund to purchase from Provident,
subsequent to the date hereof and prior to _______, 19__, Subsequent Mortgage
Loans in an amount not to exceed approximately $________ in aggregate
principal balance for inclusion in the Trust Fund. Each Subsequent Mortgage
Loan will have been originated or purchased by Provident in accordance with
the underwriting guidelines set forth above under "The Home Equity Loan
Program--Credit and Underwriting Guidelines." Accordingly, the statistical
characteristics of the Mortgage Pool set forth above are based exclusively on
the Initial Mortgage Loans and the statistical characteristics of the
Mortgage Pool after giving effect to the acquisition of any Subsequent
Mortgage Loans will likely differ from the
information specified herein. The date on which Provident transfers a
Subsequent Mortgage Loan to the Trust Fund shall be referred to herein as the
"Subsequent Transfer Date".
In any event, each conveyance of Subsequent Mortgage Loans will be
subject to, among other things, the following conditions: (i) such
Subsequent Mortgage Loans must (a) satisfy the eligibility criteria set forth
in the Prospectus under "The Loan Program--Representations by Provident;
Repurchases" and (b) comply with each representation and warranty as to the
Mortgage Loans set forth in the Agreement; (ii) such Subsequent Mortgage Loan
must not have been selected by Provident in a manner that it believes is
adverse to the interests of the Certificateholders, (iii) no Subsequent
Mortgage Loan may be ___ or more days contractually delinquent as of the
applicable Cut-Off Date; (iv) no Subsequent Mortgage Loan may have a
remaining term to maturity in excess of ___ years; (v) no Subsequent Mortgage
Loan may have a Mortgage Rate less than ____%; (vi) following the purchase of
such Subsequent Mortgage Loans by the Trust Fund, the Mortgage Loans (a) will
have a weighted average Mortgage Rate of at least ____%; (b) will have a
weighted average Combined Loan-to-Value Ratio of not more than ____%; (c)
will not have a weighted average remaining term to stated maturity of more
than ____ months; and (d) will, in each case, have a principal balance in
excess of $_______ as of the Cut-Off Date; (vii) Provident (and the Trustee
shall not have been notified by either Rating Agency that the conveyance of
such Subsequent Mortgage Loans will result in a qualification, modification
or withdrawal of its then-current rating of any class of Certificates) (shall
have notified each Rating Agency of such conveyance as required by the
Agreement); and (viii) the Trustee shall have received certain opinions of
counsel as to, among other things, the enforceability and validity of the
transfer agreements relating to such conveyance of such Subsequent Mortgage
Loans.)
MATURITY AND PREPAYMENT CONSIDERATIONS
The Agreement, except as otherwise described herein, provides that the
Certificateholders will be entitled to receive on each Distribution Date
distributions of principal, in the amounts described under "Description of
the Certificates--Distributions on the Certificates" herein, until the
Certificate Principal Balance is reduced to zero. During the Managed
Amortization Period, Certificateholders will receive amounts from Principal
Collections based upon their Fixed Allocation Percentage subject to reduction
as described below. During the Rapid Amortization Period, Certificateholders
will receive amounts from Principal Collections based solely upon their Fixed
Allocation Percentage. Because prior distributions of Principal Collections
to Certificateholders serve to reduce the Investor Floating Allocation
Percentage but do not change their Fixed Allocation Percentage, allocations
of Principal Collections based on the Fixed Allocation Percentage may result
in distributions of principal to the Certificateholders in amounts that are,
in most cases, greater relative to the declining balance of the Mortgage
Loans than would be the case if the Investor Floating Allocation Percentage
were used to determine the percentage of Principal Collections distributed to
Certificateholders. This is especially true during the Rapid Amortization
Period when the Certificateholders are entitled to receive Investor Principal
Collections and not a lesser amount. In addition, Investor Interest
Collections may be distributed as principal to Certificateholders in
connection with the Accelerated Principal Distribution Amount, if any.
Moreover, to the extent of losses allocable to the Certificateholders,
Certificateholders may also receive as payment of principal the amount of
such losses either from Investor Interest Collections or, in some instances,
draws under the Policy. The level of losses may therefore affect the rate of
payment of principal on the Certificates.
To the extent obligors make more draws than principal payments, the
Transferor Interest may grow. Because during the Rapid Amortization Period
the Certificateholders share of Principal Collections is based upon its Fixed
Allocation Percentage (without reduction), an increase in the Transferor
Interest due to additional draws may also result in Certificateholders
receiving principal at a greater rate. The Agreement permits the Transferor,
at its option, but subject to the satisfaction of certain conditions
specified in the Agreement, including the conditions described below, to
remove certain Mortgage Loans from the Trust Fund at any time during the life
of the Trust Fund, so long as the Transferor Interest (after giving effect to
such removal) is not less than the Minimum Transferor Interest. Such
removals may affect the rate at which principal is distributed to
Certificateholders by reducing the overall Pool Balance and thus the amount
of Principal Collections. See "Description of the Certificates--Optional
Retransfers of Mortgage Loans to the Transferor" herein.
All of the Mortgage Loans may be prepaid in full or in part at any time.
The prepayment experience with respect to the Mortgage Loans will affect the
weighted average life of the Certificates.
The rate of prepayment on the Mortgage Loans cannot be predicted.
Provident is not aware of any publicly available studies or statistics on the
rate of prepayment of such Mortgage Loans. Generally, home equity revolving
credit lines are not viewed by borrowers as permanent financing.
Accordingly, the Mortgage Loans may experience a higher rate of prepayment
than traditional first mortgage loans. On the other hand, because the
Mortgage Loans amortize as described under "Description of the Mortgage
Loans--Mortgage Loan Terms" herein, rates of principal payment on the
Mortgage Loans will generally be slower than those of traditional fully-
amortizing first mortgages in the absence of prepayments on such Mortgage
Loans. The prepayment experience of the Trust Fund with respect to the
Mortgage Loans may be affected by a wide variety of factors, including
general economic conditions, prevailing interest rate levels, the
availability of alternative financing, homeowner mobility, the frequency and
amount of any future draws on the Credit Line Agreements and changes
affecting the deductibility for Federal income tax purposes of interest
payments on home equity credit lines. Substantially all of the Mortgage
Loans contain "due-on-sale" provisions, and, with respect to the Mortgage
Loans, the Master Servicer intends to enforce such provisions, unless such
enforcement is not permitted by applicable law. The enforcement of a "due-
on-sale" provision will have the same effect as a prepayment of the related
Mortgage Loan. See "Certain Legal Aspects of The Loans--Due-on-Sale Clauses"
in the Prospectus.
The yield to an investor who purchases the Certificates in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Mortgage Loans is actually different than the rate
anticipated by such investor at the time such Certificates were purchased.
Collections on the Mortgage Loans may vary because, among other things,
borrowers may make payments during any month as low as the minimum monthly
payment for such month or as high as the entire outstanding principal balance
plus accrued interest and the fees and charges thereon. It is possible that
borrowers may fail to make scheduled payments. Collections on the Mortgage
Loans may vary due to seasonal purchasing and payment habits of borrowers.
No assurance can be given as to the level of prepayments that will be
experienced by the Trust Fund and it can be expected that a portion of
borrowers will not prepay their Mortgage Loans to any significant degree.
See "Yield and Prepayment Considerations" in the Prospectus.
POOL FACTOR AND TRADING INFORMATION
The "Pool Factor" is a seven-digit decimal which the Master Servicer
will compute monthly expressing the Certificate Principal Balance of the
Certificates as of each Distribution Date (after giving effect to any
distribution of principal on such Distribution Date) as a proportion of the
Original Certificate Principal Balance. On the Closing Date, the Pool Factor
will be 1.0000000. See "Description of the Certificates--Distributions on
the Certificates" herein. Thereafter, the Pool Factor will decline to
reflect reductions in the related Certificate Principal Balance resulting
from distributions of principal to the Certificates and the Invested Amount
of any unreimbursed Liquidation Loss Amounts.
Pursuant to the Agreement, monthly reports concerning the Invested
Amount, the Pool Factor and various other items of information will be made
available to the Certificateholders. In addition, within 60 days after the
end of each calendar year, beginning with the 199_ calendar year, information
for tax reporting purposes will be made available to each person who has been
a Certificateholder of record at any time during the preceding calendar year.
See "Description of the Certificates--Book-Entry Certificates" and "--Reports
to Certificateholders" herein.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. The form of
the Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the Prospectus is a part. The following
is a description of the material provisions of the Agreement. Wherever
particular sections or defined terms of the Agreement are referred to, such
sections or defined terms are hereby incorporated herein by reference.
GENERAL
The Certificates will be issued in denominations of $1,000 and multiples
of $1 in excess thereof and will evidence specified undivided interests in
the Trust Fund. The property of the Trust Fund will consist of, to the
extent provided in the Agreement: (i) each of the Mortgage Loans that from
time to time are subject to the Agreement; (ii) collections on the Mortgage
Loans received after the Cut-Off Date (exclusive of payments in respect of
accrued interest due on or prior to the Cut-Off Date; (iii) Mortgaged
Properties relating to the Mortgage Loans that are acquired by foreclosure or
deed in lieu of foreclosure; (iv) the Collection Account and the Security
Account for the Certificates (excluding net earnings thereon); (v) the
Policy; and (vi) the Spread Account (for the benefit of the Certificate
Insurer and the Certificateholders). Definitive Certificates (as defined
below), if issued, will be transferable and exchangeable at the corporate
trust office of the Trustee, which will initially maintain the Security
Register for the Certificates. See "--Book-Entry Certificates" below. No
service charge will be made for any registration of exchange or transfer of
Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge.
The aggregate undivided interest in the Trust Fund represented by the
Certificates as of the Closing Date will equal $ (the "Original
Invested Amount"), which represents __% of the Cut-Off Date Pool Balance.
The "Original Certificate Principal Balance" will equal $ .
Following the Closing Date, the "Invested Amount" with respect to any
Distribution Date will be an amount equal to the Original Invested Amount
minus (i) the amount of Investor Principal Collections previously distributed
to Certificateholders, and minus (ii) an amount equal to the product of the
Investor Floating Allocation Percentage and the Liquidation Loss Amounts
(each as defined herein under "--Distributions on the Certificates"). The
principal amount of the outstanding Certificates (the "Certificate Principal
Balance") on any Distribution Date is equal to the Original Certificate
Principal Balance minus the aggregate of amounts actually distributed as
principal to the Certificateholders. See "--Distributions on the
Certificates" below. Each Certificate represents the right to receive
payments of interest at the Certificate Rate and payments of principal as
described below.
The Transferor will own the remaining undivided interest in the Mortgage
Loans (the "Transferor Interest"), which is equal to the Pool Balance less
the Invested Amount. The Transferor Interest will initially equal $ ,
which represents _% of the Cut-Off Date Pool Balance. The Transferor as of
any date is the owner of the Transferor Interest which initially will be the
Transferor. In general, the Pool Balance will vary each day as principal is
paid on the Mortgage Loans, liquidation losses are incurred, Additional
Balances are drawn down by borrowers and Mortgage Loans are transferred to
the Trust Fund.
The Transferor has the right to sell or pledge the Transferor Interest
at any time, provided (i) the Rating Agencies have notified the Transferor
and the Trustee in writing that such action will not result in the reduction
or withdrawal of the ratings assigned to the Certificates, and (ii) certain
other conditions specified in the Agreement are satisfied.
The Certificates will not be listed on any securities exchange.
BOOK-ENTRY CERTIFICATES
The Certificates will be book-entry Certificates (the "Book-Entry
Certificates"). Persons acquiring beneficial ownership interests in the
Certificates ("Certificate Owners") may elect to hold their Certificates
through the Depository Trust Company ("DTC") in the United States, or CEDEL
or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems. The
Book-Entry Certificates will be issued in one or more certificates which
equal the aggregate principal balance of the Certificates and will initially
be registered in the name of Cede & Co., the nominee of DTC. CEDEL and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in CEDEL's and Euroclear's names on the books
of their respective depositaries which in turn will hold such positions in
customers' securities accounts in the depositaries' names on the books of
DTC. Citibank will act as depositary for CEDEL and Chase will act as
depositary for Euroclear (in such capacities, individually the "Relevant
Depositary" and collectively the "European Depositaries"). Investors may
hold such beneficial interests in the Book-Entry Certificates in minimum
denominations representing Certificate Principal Balances of $1,000 and in
multiples of $1 in excess thereof. Except as described below, no person
acquiring a Book-Entry Certificate (each, a "beneficial owner") will be
entitled to receive a physical certificate representing such Certificate (a
"Definitive Certificate"). Unless and until Definitive Certificates are
issued, it is anticipated that the only "Certificateholder" of the
Certificates will be Cede & Co., as nominee of DTC. Certificate
Owners will not be Certificateholders as that term is used in the
Agreement. Certificate Owners are only permitted to exercise their
rights indirectly through the participating organizations that utilize
the services of DTC, including securities brokers and dealers, banks and
trust companies and clearing corporations and certain other organizations
("Participants") and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that
maintains the beneficial owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Book-Entry Certificate will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on
the records of DTC, if the beneficial owner's Financial Intermediary is not a
DTC participant and on the records of CEDEL or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Certificates from the Trustee through DTC and DTC
participants. While the Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to the Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Certificates.
Participants and organizations which have indirect access to the DTC system,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants") with whom Certificate Owners have
accounts with respect to Certificates are similarly required to make book-
entry transfers and receive and transmit such distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate
Owners will not possess certificates, the Rules provide a mechanism by which
Certificate Owners will receive distributions and will be able to transfer
their interest.
Certificate Owners will not receive or be entitled to receive
certificates representing their respective interests in the Certificates,
except under the limited circumstances described below. Unless and until
Definitive Certificates are issued, Certificate Owners who are not
Participants may transfer ownership of Certificates only through Participants
and Indirect Participants by instructing such Participants and Indirect
Participants to transfer Certificates, by book-entry transfer, through DTC
for the account of the purchasers of such Certificates, which account is
maintained with their respective Participants. Under the Rules and in
accordance with DTC's normal procedures, transfers of ownership of
Certificates will be executed through DTC and the accounts of the respective
Participants at DTC will be debited and credited. Similarly, the
Participants and Indirect Participants will make debits or credits, as the
case may be, on their records on behalf of the selling and purchasing
Certificate Owners.
Because of time zone differences, credits of securities received in
CEDEL, or Euroclear as a result of a transaction with a Participant will be
made during, subsequent securities settlement processing and dated the
business day following, the DTC settlement date. Such credits or any
transactions in such securities, settled during such processing will be
reported to the relevant Euroclear or, CEDEL Participants on such business
day. Cash received in CEDEL or Euroclear as, a result of sales of securities
by or through a CEDEL Participant (as defined, below) or Euroclear
Participant (as defined below) to a DTC Participant will be, received with
value on the DTC settlement date but will be available in the, relevant CEDEL
or Euroclear cash account only as of the business day following, settlement
in DTC. For information with respect to tax documentation procedures,
relating to the Certificates, see "Federal Income Tax Consequences--Foreign
Investors" and "--Backup Withholding" herein and "Global, Clearance,
Settlement And Tax Documentation Procedures--Certain U.S. Federal Income Tax
Documentation Requirements" in Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will,
if the transaction meets its settlement requirements, deliver instructions
to the Relevant Depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same day funds settlement
applicable to DTC. CEDEL Participants and Euroclear Participants may not
deliver instructions directly to the European Depositaries.
DTC which is a New York-chartered limited purpose trust company,
performs services for its participants, some of which (and/or their
representatives) own DTC. In accordance with its normal procedures, DTC is
expected to record the positions held by each DTC participant in the Book-
Entry Certificates, whether held for its own account or as a nominee for
another person. In general, beneficial ownership of Book-Entry Certificates
will be subject to the rules, regulations and procedures governing DTC and
DTC participants as in effect from time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations
("CEDEL Participants") and facilitates the clearance and settlement of
securities transactions between CEDEL Participants through electronic book-
entry changes in accounts of CEDEL Participants, thereby eliminating the need
for physical movement of certificates. Transactions may be settled in CEDEL
in any of 28 currencies, including United States dollars. CEDEL provides to
its CEDEL Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets
in several countries. As a professional depository, CEDEL is subject to
regulation by the Luxembourg Monetary Institute. CEDEL participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to CEDEL is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a CEDEL Participant, either
directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement
of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 32
currencies, including United States dollars. Euroclear includes various
other services, including securities lending and borrowing and interfaces
with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear
is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company
of New York (the "Euroclear Operator"), under contract with Euroclear
Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for Euroclear on behalf of Euroclear Participants.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments
with respect to securities in Euroclear. All securities in Euroclear are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under
the Terms and Conditions only on behalf of Euroclear Participants, and has no
record of or relationship with persons holding through Euroclear
Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for
crediting the amount of such payments to the accounts of the applicable DTC
participants in accordance with DTC's normal procedures. Each DTC
participant will be responsible for disbursing such payments to the
beneficial owners of the Book-Entry Certificates that it represents and to
each Financial Intermediary for which it acts as agent. Each such Financial
Intermediary will be responsible for disbursing funds to the beneficial
owners of the Book-Entry Certificates that it represents.
Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede & Co., as nominee for
DTC ("Cede"). Distributions with respect to Certificates held through CEDEL
or Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by the Relevant Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Federal Income Tax
Consequences--Foreign Investors" and "--Backup Withholding" herein. Because
DTC can only act on behalf of Financial Intermediaries, the ability of a
beneficial owner to pledge Book-Entry Certificates to persons or entities
that do not participate in the Depository system, or otherwise take actions
in respect of such Book-Entry Certificates, may be limited due to the lack of
physical certificates for such Book-Entry Certificates. In addition,
issuance of the Book-Entry Certificates in book-entry form may reduce the
liquidity of such Certificates in the secondary market since certain
potential investors may be unwilling to purchase Certificates for which they
cannot obtain physical certificates.
Monthly and annual reports on the Trust Fund provided by the Master
Servicer to Cede, as nominee of DTC, may be made available to beneficial
owners upon request, in accordance with the rules, regulations and procedures
creating and affecting the Depository, and to the Financial Intermediaries to
whose DTC accounts the Book-Entry Certificates of such beneficial owners are
credited.
DTC has advised the Transferor and the Trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by the holders of the Book-Entry Certificates under the Agreement only
at the direction of one or more Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates are credited, to the extent that such
actions are taken on behalf of Financial Intermediaries whose holdings
include such Book-Entry Certificates. CEDEL or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a
Certificateholder under the Agreement on behalf of a CEDEL Participant or
Euroclear Participant only in accordance with its relevant rules and
procedures and subject to the ability of the Relevant Depositary to effect
such actions on its behalf through DTC. DTC may take actions, at the
direction of the related Participants, with respect to some Certificates
which conflict with actions taken with respect to other Certificates.
Definitive Certificates will be issued to beneficial owners of the Book-
Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC or
the Transferor advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the Book-Entry Certificates and the Transferor or
the Trustee is unable to locate a qualified successor, (b) the Transferor, at
its sole option, elects to terminate a book-entry system through DTC or (c)
after the occurrence of an Event of Servicing Termination (as defined herein
under "--Events of Servicing Termination"), beneficial owners having
Percentage Interests aggregating not less than 51% of the Certificate
Principal Balance of the Book-Entry Certificates advise the Trustee and DTC
through the Financial Intermediaries and the DTC participants in writing that
the continuation of a book-entry system through DTC (or a successor thereto)
is no longer in the best interests of beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates, Provident will transfer to
the Trust Fund all of its right, title and interest in and to each Mortgage
Loan (including any Additional Balances arising in the future), related
Credit Line Agreements, mortgages and other related documents (collectively,
the "Related Documents"), including all collections received on or with
respect to each such Mortgage Loan after the Cut-Off Date (exclusive of
payments in respect of accrued interest due on or prior to the Cut-Off Date.
The Trustee, concurrently with such transfer, will deliver the Certificates
to Provident and the Transferor Certificate (as defined in the Agreement) to
the Transferor. Each Mortgage Loan transferred to the Trust Fund will be
identified on a schedule (the "Mortgage Loan Schedule") delivered to the
Trustee pursuant to the Agreement. Such schedule will include information as
to the Cut-Off Date Principal Balance of each Mortgage Loan, as well as
information with respect to the Loan Rate.
Within 90 days of the Closing Date, the Trustee will review the Mortgage
Loans and the Related Documents and if any Mortgage Loan or Related Document
is found to be defective in any material respect and such defect is not cured
within 90 days following notification thereof to Provident by the Trustee,
the Transferor will be obligated to accept the transfer of such Mortgage Loan
from the Trust Fund. Upon such transfer, the Principal Balance of such
Mortgage Loan will be deducted from the Pool Balance, thus reducing the
amount of the Transferor Interest. If the deduction would cause the
Transferor Interest to become less than the Minimum Transferor Interest at
such time (a "Transfer Deficiency"), Provident will be obligated to either
substitute an Eligible Substitute Mortgage Loan or make a deposit into the
Collection Account in the amount (the "Transfer Deposit Amount") equal to the
amount by which the Transferor Interest would be reduced to less than the
Minimum Transferor Interest at such time. Any such deduction, substitution
or deposit, will be considered a payment in full of such Mortgage Loan. Any
Transfer Deposit Amount will be treated as a Principal Collection.
Notwithstanding the foregoing, however, prior to all required deposits to the
Collection Account being made no such transfer shall be considered to have
occurred unless such deposit is actually made. The obligation of the
Transferor to accept a transfer of a Defective Mortgage Loan is the sole
remedy regarding any defects in the Mortgage Loans and Related Documents
available to the Trustee or the Certificateholders.
An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by
Provident for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not __% more or less than the Transfer
Deficiency relating to such Defective Mortgage Loan; (ii) have a Loan Rate
not less than the Loan Rate of the Defective Mortgage Loan and not more than
_% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a
Loan Rate based on the same Index with adjustments to such Loan Rate made on
the same Interest Rate Adjustment Date as that of the Defective Mortgage
Loan; (iv) have a Margin that is not less than the Margin of the Defective
Mortgage Loan and not more than ___ basis points higher than the Margin for
the Defective Mortgage Loan; (v) have a mortgage of the same or higher level
of priority as the mortgage relating to the Defective Mortgage Loan; (vi)
have a remaining term to maturity not more than ___ months earlier and not
more than __ months later than the remaining term to maturity of the
Defective Mortgage Loan; (vii) comply with each representation and warranty
as to the Mortgage Loans set forth in the Agreement (deemed to be made as of
the date of substitution); (viii) in general, have an original Combined Loan-
to-Value Ratio not greater than that of the Defective Mortgage Loan; and (ix)
satisfy certain other conditions specified in the Agreement. To the extent
the Principal Balance of an Eligible Substitute Mortgage Loan is less than
the Principal Balance of the related Defective Mortgage Loan and to the
extent that the Transferor Interest would be reduced below the Minimum
Transferor Interest, the Transferor will be required to make a deposit to the
Collection Account equal to such difference.
Provident will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Trustee with respect to each Mortgage Loan (e.g., Cut-Off Date Principal
Balance and the Loan Rate). In addition, Provident will represent and
warrant on the Closing Date that at the time of transfer to the Trust,
Provident has transferred or assigned all of its rights, title and interest
in each Mortgage Loan and the Related Documents, free of any lien (subject to
certain exceptions). Upon discovery of a breach of any such representation
and warranty which materially and adversely affects the interests of the
Certificateholders or the Certificate Insurer in the related Mortgage Loan
and Related Documents, Provident will have a period of 90 days after
discovery or notice of the breach to effect a cure. If the breach cannot be
cured within the 90-day period, the Transferor will be obligated to accept a
transfer of the Defective Mortgage Loan from the Trust Fund. The same
procedure and limitations that are set forth in the second preceding
paragraph for the transfer of Defective Mortgage Loans will apply to the
transfer of a Mortgage Loan that is required to be transferred because of
such breach of a representation or warranty in the Agreement that materially
and adversely affects the interests of the Certificateholders.
Mortgage Loans required to be transferred to Provident as described in
the preceding paragraphs are referred to as "Defective Mortgage Loans."
Pursuant to the Agreement, the Master Servicer will service and
administer the Mortgage Loans as more fully set forth above.
AMENDMENTS TO CREDIT LINE AGREEMENTS
Subject to applicable law, the Master Servicer may change the terms of
the Credit Line Agreements at any time provided that such changes (i) do not
adversely affect the interest of the Certificateholders or the Certificate
Insurer, and (ii) are consistent with prudent business practice. In addition,
the Agreement permits the Master Servicer, within certain limitations
described therein, to increase the Credit Limit of the related Mortgage Loan
or reduce the Margin for such Mortgage Loan.
OPTIONAL TRANSFERS OF MORTGAGE LOANS TO THE TRANSFEROR
In order to permit the Transferor to remove Mortgage Loans from the
Trust Fund at such times, if any, as the overcollateralization exceeds the
level required to maintain the ratings on the Certificates, on any
Distribution Date the Transferor may, but shall not be obligated to, remove
on such Distribution Date (the "Transfer Date") from the Trust Fund, certain
Mortgage Loans without notice to the Certificateholders. The Transferor is
permitted to designate the Mortgage Loans to be removed. Mortgage Loans so
designated will only be removed upon satisfaction of the following
conditions: (i) the Rapid Amortization Period shall not have commenced;
(ii) the Transferor Interest as of such Transfer Date (after giving effect to
such removal) exceeds the Minimum Transferor Interest; (iii) the transfer of
any Mortgage Loans on any Transfer Date during the Managed Amortization
Period shall not, in the reasonable belief of the Transferor, cause a Rapid
Amortization Event to occur or an event which with notice or lapse of time or
both would constitute a Rapid Amortization Event; (iv) the Transferor shall
have delivered to the Trustee a "Mortgage Loan Schedule" containing a list of
all Mortgage Loans remaining in the Trust Fund after such removal; (v) the
Transferor shall represent and warrant that no selection procedures which the
Transferor reasonably believes are adverse to the interests of the
Certificateholders or the Certificate Insurer were used by the Transferor in
selecting such Mortgage Loans; (vi) in connection with the first such
retransfer of Mortgage Loans, the Rating Agencies shall have been notified of
the proposed transfer and prior to the Transfer Date shall not have notified
the Transferor in writing that such transfer would result in a reduction or
withdrawal of the ratings assigned to the Certificates without regard to the
Policy; and (vii) the Transferor shall have delivered to the Trustee and the
Certificate Insurer an officer's certificate confirming the conditions set
forth in clauses (i) through (vi) above.
As of any date of determination, the "Minimum Transferor Interest" is an
amount equal to the lesser of (a) _% of the Pool Balance on such date and (b)
the Transferor Interest as of the Closing Date.
PAYMENTS ON MORTGAGE LOANS; DEPOSITS TO COLLECTION ACCOUNT
The Trustee shall establish and maintain on behalf of the Master
Servicer an account (the "Collection Account") for the benefit of the
Certificateholders and the Transferor, as their interests may appear. The
Collection Account will be an Eligible Account (as defined below). Subject
to the investment provision described in the following paragraphs, within two
days of receipt by the Master Servicer of amounts in respect of the Mortgage
Loans (excluding amounts representing administrative charges, annual fees,
taxes, assessments, credit insurance charges, insurance proceeds to be
applied to the restoration or repair of a Mortgaged Property or similar
items), the Master Servicer will deposit such amounts in the Collection
Account. Amounts so deposited may be invested in Eligible Investments (as
described below) maturing no later than one Business Day prior to the date on
which the amount on deposit therein is required to be deposited in the
Collection Account or on such Distribution Date if approved by the Rating
Agencies and the Certificate Insurer. Not later than the third Business Day
prior to each Distribution Date (the "Determination Date"), the Master
Servicer will notify the Trustee of the amount of such deposit to be included
in funds available for the related Distribution Date.
An "Eligible Account" is (i) an account that is maintained with a
depository institution whose debt obligations at the time of any deposit
therein have the highest short-term debt rating by the Rating Agencies, (ii)
one or more accounts with a depository institution having a minimum long-term
unsecured debt rating of "____" by _______ and "____" by ___, which accounts
are fully insured by either the Savings Association Insurance Fund ("SAIF")
or the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation established by such fund, (iii) a segregated trust account
maintained with the Trustee or an Affiliate of the Trustee in its fiduciary
capacity or (iv) otherwise acceptable to each Rating Agency and the
Certificate Insurer as evidenced by a letter from each Rating Agency and
the Certificate Insurer to the Trustee, without reduction or withdrawal of
their then current ratings of the Certificates.
"Eligible Investments" are specified in the Agreement and are limited to
(i) direct obligations of, or obligations fully guaranteed as to timely
payment of principal and interest by, the United States or any agency or
instrumentality thereof, provided that such obligations are backed by the
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full faith and credit of the United States; (ii) repurchase agreements on
obligations specified in clause (i) maturing not more than three months from
the date of acquisition thereof, provided that the short-term unsecured debt
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obligations of the party agreeing to repurchase such obligations are at the
time rated by each Rating Agency in its highest short-term rating category;
(iii) certificates of deposit, time deposits and bankers' acceptances (which,
if Moody's is a Rating Agency, shall each have an original maturity of not
more than 90 days and, in the case of bankers' acceptances, shall in no event
have an original maturity of more than 365 days) of any U.S. depository
institution or trust company incorporated under the laws of the United States
or any state thereof and subject to supervision and examination by federal
and/or state banking authorities, provided that the unsecured short-term debt
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obligations of such depository institution or trust company at the date of
acquisition thereof have been rated by each of the Rating Agencies in its
highest unsecured short-term debt rating category; (iv) commercial paper
(having original maturities of not more than 90 days) of any corporation
incorporated under the laws of the United States or any state thereof which
on the date of acquisition has been rated by the Rating Agencies in their
highest short-term rating categories; (v) short term investment funds
("STIFS") sponsored by any trust company or bank incorporated under the laws
of the United States or any state thereof which on the date of acquisition
has been rated by the Rating Agencies in their respective highest rating
category of long term unsecured debt; (vi) interests in any money market fund
which at the date of acquisition of the interests in such fund and throughout
the time as the interest is held in such fund has the rating specified by
each Rating Agency; and (vii) other obligations or securities that are
acceptable to each Rating Agency as an Eligible Investment hereunder and will
not result in a reduction in the then current rating of the Certificates, as
evidenced by a letter to such effect from such Rating Agency and with respect
to which the Master Servicer has received confirmation that, for tax
purposes, the investment complies with the last clause of this definition;
provided that no instrument described hereunder shall evidence either the
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right to receive (a) only interest with respect to the obligations underlying
such instrument or (b) both principal and interest payments derived from
obligations underlying such instrument and the interest and principal
payments with respect to such instrument provided a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obli-
gations; and provided, further, that no instrument described hereunder may
-------- -------
be purchased at a price greater than par if such instrument may be prepaid or
called at a price less than its purchase price prior to its stated maturity.
ALLOCATIONS AND COLLECTIONS
All collections on the Mortgage Loans will generally be allocated in
accordance with the Credit Line Agreements between amounts collected in
respect of interest and amounts collected in respect of principal. As to any
Distribution Date, "Interest Collections" will be equal to the amounts
collected during the related Collection Period, including such portion of Net
Liquidation Proceeds allocated to interest pursuant to the terms of the
Credit Line Agreements less Servicing Fees for the related Collection Period.
As to any Distribution Date, "Principal Collections" will be equal to
the sum of (i) the amounts collected during the related Collection Period,
including such portion of Net Liquidation Proceeds allocated to principal
pursuant to the terms of the Credit Line Agreements and (ii) any Transfer
Deposit Amounts. "Net Liquidation Proceeds" with respect to a Mortgage Loan
are equal to the Liquidation Proceeds, reduced by related expenses, but not
including the portion, if any, of such amount that exceeds the Principal
Balance of the Mortgage Loan plus accrued and unpaid interest thereon to the
end of the Collection Period during which such Mortgage Loan became a
Liquidated Mortgage Loan. "Liquidation Proceeds" are the proceeds (excluding
any amounts drawn on the Policy) received in connection with the liquidation
of any Mortgage Loan, whether through trustee's sale, foreclosure sale or
otherwise.
With respect to any Distribution Date, the portion of Interest
Collections allocable to the Certificates ("Investor Interest Collections")
will equal the product of (a) Interest Collections for such Distribution Date
and (b) the Investor Floating Allocation Percentage. With respect to any
Distribution Date, the "Investor Floating Allocation
Percentage" is the percentage equivalent of a fraction determined by dividing
the Invested Amount at the close of business on the preceding Distribution
Date (or the Closing Date in the case of the first Distribution Date) by the
Pool Balance at the beginning of the related Collection Period. The
remaining amount of Interest Collections will be allocated to the Transferor
Interest.
Principal Collections will be allocated between the Certificateholders
and the Transferor ("Investor Principal Collections" and "Transferor
Principal Collections", respectively) as described herein.
The Trustee will deposit any amounts drawn under the Policy into the
Collection Account.
With respect to any date, the "Pool Balance" will be equal to the
aggregate of the Principal Balances of all Mortgage Loans as of such date.
The Principal Balance of a Mortgage Loan (other than a Liquidated Mortgage
Loan) on any day is equal to the Cut-Off Date Principal Balance thereof, plus
(i) any Additional Balances in respect of such Mortgage Loan minus (ii) all
collections credited against the Principal Balance of such Mortgage Loan in
accordance with the related Credit Line Agreement prior to such day. The
Principal Balance of a Liquidated Mortgage Loan after final recovery of
related Liquidation Proceeds shall be zero.
DISTRIBUTIONS ON THE CERTIFICATES
Beginning with the first Distribution Date (which will occur on
__________, 199_), distributions on the Certificates will be made by the
Trustee or the Paying Agent on each Distribution Date to the persons in whose
names such Certificates are registered at the close of business on the day
prior to each Distribution Date or, if the Certificates are no longer Book-
Entry Certificates, at the close of business on the last day of the month
preceding such Distribution Date (the "Record Date"). The term "Distribution
Date" means the (fifteenth) day of each month or, if such day is not a
Business Day, then the next succeeding Business Day. Distributions will be
made by check or money order mailed (or upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $_________, by wire transfer or otherwise) to the address of the person
entitled thereto (which, in the case of Book-Entry Certificates, will be DTC
or its nominee) as it appears on the Certificate Register in amounts
calculated as described herein on the Determination Date. However, the final
distribution in respect of the Certificates will be made only upon
presentation and surrender thereof at the office or the agency of the Trustee
specified in the notice to Certificateholders of such final distribution.
For purposes of the Agreement, a "Business Day" is any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in the State
of California are required or authorized by law to be closed.
Application of Interest Collections. On each Distribution Date, the
Trustee or the Paying Agent will apply the Investor Interest Collections in
the following manner and order of priority:
(i) as payment to the Trustee for its fee for services rendered
pursuant to the Agreement;
(ii) as payment for the premium for the Policy;
(iii) as payment for the accrued interest due and any overdue
accrued interest (with interest thereon to the extent permitted by law)
on the Certificate Principal Balance of the Certificates;
(iv) to pay Certificateholders the Investor Loss Amount for such
Distribution Date;
(v) as payment for any Investor Loss Amount for a previous
Distribution Date that was not previously (a) funded by Investor
Interest Collections, (b) absorbed by the Overcollateralization Amount,
(c) funded by amounts on deposit in the Spread Account or (d) funded by
draws on the Policy;
(vi) to reimburse prior draws made from the Policy (with interest
thereon);
(vii) to pay principal on the Certificates until the Invested
Amount exceeds the Certificate Principal Balance by the Required
Overcollateralization Amount (such amount so paid, the "Accelerated
Principal Distribution Amount");
(viii) any other amounts required to be deposited in an account
for the benefit of the Certificate Insurer and the Certificateholders or
owed to the Certificate Insurer pursuant to the Insurance Agreement;
(ix) certain amounts that may be required to be paid to the Master
Servicer pursuant to the Agreement; and
(x) to the Transferor to the extent permitted as described herein.
Payments to Certificateholders pursuant to clause (iii) will be interest
payments on the Certificates. Payments to Certificateholders pursuant to
clauses (iv), (v) and (vii) will be principal payments on the Certificates
and will therefore reduce the Certificate Principal Balance, however,
payments pursuant to clause (vii) will not reduce the Invested Amount. The
Accelerated Principal Distribution Amount is not guaranteed by the Policy.
To the extent that Investor Interest Collections are applied to pay the
interest on the Certificates, Investor Interest Collections may be
insufficient to cover Investor Loss Amounts. If such insufficiency results
in the Certificate Principal Balance exceeding the Invested Amount, a draw
will be made on the Policy in accordance with the terms of the Policy.
The "Required Overcollateralization Amount" shall be an amount set forth
in the Agreement. "Liquidation Loss Amount" means with respect to any
Liquidated Mortgage Loan, the unrecovered Principal Balance thereof during
the Collection Period in which such Mortgage Loan became a Liquidated
Mortgage Loan, after giving effect to the Net Liquidation Proceeds in
connection therewith. The "Investor Loss Amount" shall be the product of the
Investor Floating Allocation Percentage and the Liquidation Loss Amount for
such Distribution Date.
A "Liquidated Mortgage Loan" means, as to any Distribution Date, any
Mortgage Loan in respect of which the Master Servicer has determined, based
on the servicing procedures specified in the Agreement, as of the end of the
preceding Collection Period that all Liquidation Proceeds which it expects to
recover with respect to the disposition of the related Mortgaged Property
have been recovered. The Investor Loss Amount will be allocated to the
Certificateholders.
As to any Distribution Date other than the first Distribution Date, the
"Collection Period" is the calendar month preceding each Distribution Date.
As to the first Distribution Date, the "Collection Period" is the period
beginning after the Cut-Off Date and ending on the last day of
_______________ 199_.
Interest will be distributed on each Distribution Date at the
Certificate Rate for the related Interest Period (as defined below). The
"Certificate Rate" for a Distribution Date will generally equal the sum of
((a) LIBOR, calculated as specified below, as of the second LIBOR Business
Day prior to the immediately preceding Distribution Date (or as of two LIBOR
Business Days prior to the Closing Date, in the case of the first
Distribution Date) plus (b) ____% per annum.) Notwithstanding the foregoing,
in no event will the amount of interest required to be distributed in respect
of the Certificates on any Distribution Date exceed a rate equal to the
weighted average of the Loan Rates (net of the Servicing Fee Rate, the fee
payable to the Trustee and the rate at which the premium payable to the
Certificate Insurer is calculated) weighted on the basis of the daily balance
of each Mortgage Loan during the related billing cycle prior to the
Collection Period relating to such Distribution Date.
Interest on the Certificates in respect of any Distribution Date will
accrue on the Certificate Principal Balance from the preceding Distribution
Date (or in the case of the first Distribution Date, from the date of the
initial issuance of the Certificates (the "Closing Date")) through the day
preceding such Distribution Date (each such period, an "Interest Period") on
the basis of the actual number of days in the Interest Period and a 360-day
year. Interest payments on the Certificates will be funded from Investor
Interest Collections and, if necessary, from draws on the Policy.
(Calculation of the LIBOR Rate. On each Distribution Date, LIBOR shall
be established by the Trustee and as to any Interest Period, LIBOR will equal
the rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. "Telerate
Screen Page 3750" means the display designated as page 3750 on the Telerate
Service (or such other page as may replace page 3750 on that service for the
purpose of displaying London interbank offered rates of major banks). If
such rate does not appear on such page (or such other page as may
replace that page on that service, or if such service is no longer offered,
such other service for displaying LIBOR or comparable rates as may be
selected by Provident after consultation with the Trustee), the rate will be
the Reference Bank Rate. The "Reference Bank Rate" will be determined on the
basis of the rates at which deposits in U.S. Dollars are offered by the
reference banks (which shall be three major banks that are engaged in
transactions in the London interbank market, selected by Provident after
consultation with the Trustee) as of 11:00 A.M., London time, on the day that
is two LIBOR Business Days prior to the immediately preceding Distribution
Date to prime banks in the London interbank market for a period of one month
in amounts approximately equal to the principal amount of the Certificates
then outstanding. The Trustee will request the principal London office of
each of the reference banks to provide a quotation of its rate. If at least
two such quotations are provided, the rate will be the arithmetic mean of the
quotations. If on such date fewer than two quotations are provided as
requested, the rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by Provident after consultation
with the Trustee, as of 11:00 A.M., New York City time, on such date for
loans in U.S. Dollars to leading European banks for a period of one month in
amounts approximately equal to the principal amount of the Certificates then
outstanding. If no such quotations can be obtained, the rate will be LIBOR
for the prior Distribution Date. "LIBOR Business Day" means any day other
than (i) a Saturday or a Sunday or (ii) a day on which banking institutions
in the State of New York or in the city of London, England are required or
authorized by law to be closed.)
Transferor Collections. Collections allocable to the Transferor
Interest that are not distributed to Certificateholders will be distributed
to the Transferor only to the extent that such distribution will not reduce
the amount of the Transferor Interest as of the related Distribution Date
below the Minimum Transferor Interest. Amounts not distributed to the
Transferor because of such limitations will be retained in the Collection
Account until the Transferor Interest exceeds the Minimum Transferor
Interest, at which time such excess shall be released to the Transferor. If
any such amounts are still retained in the Collection Account upon the
commencement of the Rapid Amortization Period, such amounts will be paid to
the Certificateholders as a reduction of the Certificate Principal Balance.
Overcollateralization. The distribution of the aggregate Accelerated
Principal Distribution Amount, if any, to Certificateholders may result in
the Invested Amount being greater than the Certificate Principal Balance,
thereby creating overcollateralization. The Overcollateralization Amount, if
any, will be available to absorb any Investor Loss Amount that is not covered
by Investor Interest Collections.
Distributions of Principal Collections. For the period beginning on the
first Distribution Date and, unless a Rapid Amortization Event shall have
earlier occurred, ending on the Distribution Date in ______________ 20__ (the
"Managed Amortization Period"), the amount of Principal Collections payable
to Certificateholders as of each Distribution Date during the Managed
Amortization Period will equal, to the extent funds are available therefor,
the Scheduled Principal Collections Distribution Amount for such Distribution
Date. On any Distribution Date during the Managed Amortization Period, the
"Scheduled Principal Collections Distribution Amount" shall equal the lesser
of (i) the Maximum Principal Payment (as defined below) and (ii) the
Alternative Principal Payment (as defined below). With respect to any
Distribution Date, the "Maximum Principal Payment" will equal the product of
the Investor Fixed Allocation Percentage and Principal Collections for such
Distribution Date. With respect to any Distribution Date, the "Alternative
Principal Payment" will equal the greater of (x) 0___% of the Certificate
Principal Balance immediately prior to such Distribution Date and (y) the
amount, but not less than zero, of Principal Collections for such
Distribution Date less the aggregate of Additional Balances created during
the related Collection Period.
Beginning with the first Distribution Date following the end of the
Managed Amortization Period, the amount of Principal Collections payable to
Certificateholders on each Distribution Date will be equal to the Maximum
Principal Payment.
The amount of Principal Collections to be distributed to
Certificateholders on the first Distribution Date will reflect Principal
Collections and Additional Balances during the first Collection Period which
is the period beginning after the Cut-Off Date through the last day of
__________ 199_.
Distributions of Principal Collections based upon the Investor Fixed
Allocation Percentage may result in distributions of principal to
Certificateholders in amounts that are greater relative to the declining Pool
Balance than would be the case if the Investor Floating Allocation Percentage
were used to determine the percentage of Principal
Collections distributed in respect of the Invested Amount. Principal
Collections not allocated to the Certificateholders will be allocated to the
Transferor Interest. The aggregate distributions of principal to the
Certificateholders will not exceed the Original Certificate Principal
Balance.
In addition, to the extent of funds available therefor (including funds
available under the Policy), on the Distribution Date in ____________ 20__,
Certificateholders will be entitled to receive as a payment of principal an
amount equal to the outstanding Certificate Principal Balance.
The Paying Agent. The Paying Agent shall initially be the Trustee,
together with any successor thereto in such capacity (the "Paying Agent").
The Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders.
RAPID AMORTIZATION EVENTS
As described above, the Managed Amortization Period will continue
through the Distribution Date in 20 , unless a Rapid Amortization
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Event occurs prior to such date in which case the Rapid Amortization Period
will commence prior to such date. "Rapid Amortization Event" refers to any
of the following events:
(a) failure on the part of the Transferor (i) to make a
payment or deposit required under the Agreement within three Business
Days after the date such payment or deposit is required to be made or
(ii) to observe or perform in any material respect any other covenants
or agreements of the Transferor set forth in the Agreement, which
failure continues unremedied for a period of 60 days after written
notice;
(b) any representation or warranty made by the Transferor in
the Agreement proves to have been incorrect in any material respect when
made and continues to be incorrect in any material respect for a period
of 60 days after written notice and as a result of which the interests
of the Certificateholders are materially and adversely affected;
provided, however, that a Rapid Amortization Event shall not be deemed
to occur if the Transferor has purchased or made a substitution for the
related Mortgage Loan or Mortgage Loans if applicable during such period
(or within an additional 60 days with the consent of the Trustee) in
accordance with the provisions of the Agreement;
(c) the occurrence of certain events of bankruptcy,
insolvency or receivership relating to the Transferor; or
(d) the Trust Fund becomes subject to regulation by the
Securities and Exchange Commission as an investment company within the
meaning of the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a) or (b), a Rapid
Amortization Event will be deemed to have occurred only if, after the
applicable grace period, if any, described in such clauses, either the
Trustee or Certificateholders holding Certificates evidencing more than 51%
of the Percentage Interests or the Certificate Insurer (so long as there is
no default by the Certificate Insurer in the performance of its obligations
under the Policy), by written notice to Provident and the Master Servicer
(and to the Trustee, if given by the Certificateholders) declare that a Rapid
Amortization Event has occurred as of the date of such notice. In the case
of any event described in clause (c) or (d), a Rapid Amortization Event will
be deemed to have occurred without any notice or other action on the part of
the Trustee or the Certificateholders immediately upon the occurrence of such
event.
In addition to the consequences of a Rapid Amortization Event discussed
above, if the Transferor voluntarily files a bankruptcy petition or goes into
liquidation or any person is appointed a receiver or bankruptcy trustee of
the Transferor, on the day of any such filing or appointment no further
Additional Balances will be transferred to the Trust Fund, the Transferor
will immediately cease to transfer Additional Balances to the Trust Fund and
the Transferor will promptly give notice to the Trustee of any such filing or
appointment. Within 15 days, the Trustee will publish a notice of the
liquidation or the filing or appointment stating that the Trustee intends to
sell, dispose of or otherwise liquidate the Mortgage Loans in a commercially
reasonable manner and to the best of its ability. Unless otherwise
instructed within a specified period by Certificateholders representing
undivided interests aggregating more than 51% of the aggregate principal
amount of the Certificates, the Trustee will sell, dispose of or otherwise
liquidate the Mortgage Loans in a commercially reasonable manner and on
commercially reasonable terms. Any proceeds will be treated as
collections allocable to the Certificateholders and the Investor Fixed
Allocation Percentage of such remaining proceeds and will be distributed to
the Certificateholders on the date such proceeds are received (the
"Dissolution Distribution Date"). (If the portion of such proceeds
allocable to the Certificateholders are not sufficient to pay in full the
remaining amount due on the Certificates, the Policy will cover such
shortfall.)
Notwithstanding the foregoing, if a conservator, receiver or trustee-in-
bankruptcy is appointed for the Transferor and no Rapid Amortization Event
exists other than such conservatorship, receivership or insolvency of the
Transferor, the conservator, receiver or trustee-in-bankruptcy may have the
power to prevent the commencement of the Rapid Amortization Period or the
sale of Mortgage Loans described above.
THE POLICY
(On or before the Closing Date, the Policy will be issued by the
Certificate Insurer pursuant to the provisions of the Agreement and the
Insurance and Indemnity Agreement (the "Insurance Agreement") to be dated as
of ____________, 199_, among Provident, (the Trustee) and the Certificate
Insurer.
The Policy will irrevocably and unconditionally guarantee payment on
each Distribution Date to the Trustee for the benefit of the
Certificateholders the full and complete payment of (i) the Guaranteed
Principal Distribution Amount (as defined below) with respect to the
Certificates for such Distribution Date and (ii) accrued and unpaid interest
due on the Certificates (together, the "Guaranteed Distributions"), with such
Guaranteed Distributions having been calculated in accordance with the
original terms of the Certificates or the Agreement except for amendments or
modifications to which the Certificate Insurer has given its prior written
consent. The effect of the Policy is to guarantee the timely payment of
interest on, and the ultimate payment of the principal amount of, all of the
Certificates.
The "Guaranteed Principal Distribution Amount" shall be the amount, if
any, by which the Certificate Principal Balance (after giving effect to all
other amounts distributable and allocable to principal on the Certificates)
exceeds the Invested Amount as of such Distribution Date (after giving effect
to all other amounts distributable and allocable to principal on the
Certificates for such Distribution Date). In addition, the Policy will
guarantee the payment of the outstanding Certificate Principal Balance on the
Distribution Date in ______________ 20__ (after giving effect to all other
amounts distributable and allocable to principal on such Distribution Date).
In accordance with the Agreement, the Trustee will be required to
establish and maintain an account (the "Spread Account") for the benefit of
the Certificate Insurer and the Certificateholders. The Trustee shall
deposit the amounts into the Spread Account as required by the Agreement.
Payment of claims on the Policy will be made by the Certificate Insurer
following Receipt by the Certificate Insurer of the appropriate notice for
payment on the later to occur of (i) 12:00 noon, New York City time, on the
second Business Day following Receipt of such notice for payment and (ii)
12:00 noon, New York City time, on the relevant Distribution Date.
If payment of any amount guaranteed by the Certificate Insurer pursuant
to the Policy is avoided as a preference payment under applicable bankruptcy,
insolvency, receivership or similar law, the Certificate Insurer will pay
such amount out of the funds of the Certificate Insurer on the later of (a)
the date when due to be paid pursuant to the Order referred to below or (b)
the first to occur of (i) the fourth Business Day following Receipt by the
Certificate Insurer from the Trustee of (A) a certified copy of the order
(the "Order") of the court or other governmental body which exercised
jurisdiction to the effect that the Certificateholder is required to return
the amount of any Guaranteed Distributions distributed with respect to the
Certificates during the term of the related Policy because such distributions
were avoidable preference payments under applicable bankruptcy law, (B) a
certificate of the Certificateholder that the Order has been entered and is
not subject to any stay and (C) an assignment duly executed and delivered by
the Certificateholder, in such form as is reasonably required by the
Certificate Insurer and provided to the Certificateholder by the Certificate
Insurer, irrevocably assigning to the Certificate Insurer all rights and
claims of the Certificateholder relating to or arising under the Certificates
against the debtor which made such preference payment or otherwise with
respect to such preference payment, or (ii) the date of Receipt by the
Certificate Insurer from the Trustee of the items referred to in clauses (A),
(B) and (C) above if, at least four Business Days prior to such date of
Receipt, the Certificate Insurer shall have Received written notice from the
Trustee that such items were to be delivered on such date and such date was
specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Trustee or any Certificateholder directly (unless a
Certificateholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
in which case such payment shall be disbursed to the Trustee for distribution
to such Certificateholder upon proof of such payment reasonably satisfactory
to the Certificate Insurer).
The terms "Receipt" and "Received", with respect to the Policy, mean
actual delivery to the Certificate Insurer and to its fiscal agent appointed
by the Certificate Insurer at its option, if any, prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day or after 12:00 noon, New York City time, shall be deemed to be
Receipt on the next succeeding Business Day. If any notice or certificate
given under the Policy by the Trustee is not in proper form or is not
properly completed, executed or delivered it shall be deemed not to have been
Received, and the Certificate Insurer or the fiscal agent shall promptly so
advise the Trustee and the Trustee may submit an amended notice.
Under the Policy, "Business Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banking institutions in The City of New
York, New York are authorized or obligated by law or executive order to be
closed.
The Certificate Insurer's obligations under the Policy in respect of
Guaranteed Distributions shall be discharged to the extent funds are
transferred to the Trustee as provided in the Policy, whether or not such
funds are properly applied by the Trustee.
The Certificate Insurer shall be subrogated to the rights of each
Certificateholder to receive payments of principal and interest, as
applicable, with respect to distributions on the Certificates to the extent
of any payment by the Certificate Insurer under the Policy. To the extent
the Certificate Insurer makes Guaranteed Distributions, either directly or
indirectly (as by paying through the Trustee), to the Certificateholders, the
Certificate Insurer will be subrogated to the rights of the
Certificateholders, as applicable, with respect to such Guaranteed
Distributions, shall be deemed to the extent of the payments so made to be a
registered Certificateholder for purposes of payment and shall receive all
future Guaranteed Distributions until all such Guaranteed Distributions by
the Certificate Insurer have been fully reimbursed, provided that the
Certificateholders have received the full amount of the Guaranteed
Distributions.
The terms of the Policy cannot be modified, altered or affected by any
other agreement or instrument, or by the merger, consolidation or dissolution
of the Transferor. The Policy by its terms may not be cancelled or revoked.
The Policy is governed by the laws of the State of ________.
The Policy is not covered by the Property/Casualty Insurance Security
fund specified in Article 76 of the New York Insurance Law. The Policy is
not covered by the Florida Insurance Guaranty Association created under Part
II of Chapter 631 of the Florida Insurance Code. In the event the
Certificate Insurer were to become insolvent, any claims arising under the
Policy are excluded from coverage by the California Insurance Guaranty
Association, established pursuant to Article 14.2 of Chapter 1 of part 2 of
Division 1 of the California Insurance Code.
Pursuant to the terms of the Agreement, unless a Certificate Insurer
default exists, the Certificate Insurer shall be deemed to be the Holder of
the Certificates for certain purposes (other than with respect to payment on
the Certificates), will be entitled to exercise all rights of the
Certificateholders thereunder, without the consent of such Holders and the
Holders of the Certificates may exercise such rights only with the prior
written consent of the Certificate Insurer. In addition, the Certificate
Insurer will have certain additional rights as third party beneficiary to the
Agreement.
In the absence of payments under the Policy, Certificateholders will
bear directly the credit and other risks associated with their undivided
interest in the Trust Fund.)
(PRE-FUNDING ACCOUNT
On the Closing Date, $___________ (the "Pre-Funded Amount") will be
deposited in an account (the "Pre-Funding Account"), which account shall be
in the name of and maintained by the Trustee and shall be part of the Trust
Fund and will be used to acquire Subsequent Mortgage Loans. During the
period beginning on the Closing Date and terminating on _____________, 19__
(the "Funding Period"), the Pre-Funded Amount will be reduced by the amount
thereof used to purchase Subsequent Mortgage Loans in accordance with the
Agreement. Any Pre-Funded Amount remaining at the end of the Funding Period
will be distributed to holders of the classes of Certificates entitled to
receive principal on the Distribution Date in ______________, 19__ in
reduction of the related Certificate Principal Balances (thus resulting in a
partial principal prepayment of the related Certificates on such date).
Amounts on deposit in the Pre-Funding Account will be invested in
Permitted Investments. All interest and any other investment earnings on
amounts on deposit in the Pre-Funding Account will be deposited in the
Capitalized Interest Account.
CAPITALIZED INTEREST ACCOUNT
On the Closing Date there will be deposited in an account (the
"Capitalized Interest Account") maintained with and in the name of the
Trustee on behalf of the Trust Fund a portion of the proceeds of the sale of
the Certificates. The amount deposited therein will be used by the Trustee
on the Distribution Dates in __________________ 19__, _____________ 19__ and
______________, 19__ to cover shortfalls in interest on the Certificates that
may arise as a result of the utilization of the Pre-Funding Account for the
purchase by the Trust Fund of Subsequent Mortgage Loans after the Closing
Date. Any amounts remaining in the Capitalized Interest Account at the end
of the Funding Period which are not needed to cover shortfalls on the
Distribution Date in ___________ 19__ are required to be paid directly to
Provident.)
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution to the Certificateholders, the
Master Servicer will forward to the Trustee for mailing to such
Certificateholder a statement setting forth among other items:
(i) the Investor Floating Allocation Percentage for the preceding
Collection Period;
(ii) the amount being distributed to Certificateholders;
(iii) the amount of interest included in such distribution and the
related Certificate Rate;
(iv) the amount, if any, of overdue accrued interest included in
such distribution (and the amount of interest thereon);
(v) the amount, if any, of the remaining overdue accrued interest
after giving effect to such distribution;
(vi) the amount, if any, of principal included in such
distribution;
(vii) the amount, if any, of the reimbursement of previous
Liquidation Loss Amounts included in such distribution;
(viii) the amount, if any, of the aggregate unreimbursed
Liquidation Loss Amounts after giving effect to such distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount and the Certificate Principal Balance,
each after giving effect to such distribution;
(xi) the Pool Balance as of the end of the preceding Collection
Period;
(xii) the number and aggregate Principal Balances of the Mortgage
Loans as to which the minimum monthly payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively, as of the end of the
preceding Collection Period;
(xiii) the book value of any real estate which is acquired by the
Trust Fund through foreclosure or grant of deed in lieu of foreclosure;
and
(xiv) the amount of any draws on the Policy.
In the case of information furnished pursuant to clauses (iii), (iv),
(v), (vi), (vii) and (viii) above, the amounts shall be expressed as a dollar
amount per Certificate with a $1,000 denomination.
Within 60 days after the end of each calendar year commencing in 1996,
the Master Servicer will be required to forward to the Trustee a statement
containing the information set forth in clauses (iii) and (vi) above
aggregated for such calendar year.
COLLECTION AND OTHER SERVICING PROCEDURES ON MORTGAGE LOANS
The Master Servicer will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will, consistent with the Agreement,
follow such collection procedures as it follows from time to time with
respect to the home equity loans in its servicing portfolio comparable to the
Mortgage Loans. Consistent with the above, the Master Servicer may in its
discretion waive any late payment charge or any assumption or other fee or
charge that may be collected in the ordinary course of servicing the Mortgage
Loans.
With respect to the Mortgage Loans, the Master Servicer may arrange with
a borrower a schedule for the payment of interest due and unpaid for a
period, provided that any such arrangement is consistent with the Master
Servicer's policies with respect to the home equity mortgage loans it owns or
services. In accordance with the terms of the Agreement, the Master Servicer
may consent under certain circumstances to the placing of a subsequent senior
lien in respect of a Mortgage Loan.
HAZARD INSURANCE
The Agreement provides that the Master Servicer maintain certain hazard
insurance on the Mortgaged Properties relating to the Mortgage Loans. While
the terms of the related Credit Line Agreements generally require borrowers
to maintain certain hazard insurance, the Master Servicer will not monitor
the maintenance of such insurance.
The Agreement requires the Master Servicer to maintain for any Mortgaged
Property relating to a Mortgage Loan acquired upon foreclosure of a Mortgage
Loan, or by deed in lieu of such foreclosure, hazard insurance with extended
coverage in an amount equal to the lesser of (a) the maximum insurable value
of such Mortgaged Property or (b) the outstanding balance of such Mortgage
Loan plus the outstanding balance on any mortgage loan senior to such
Mortgage Loan at the time of foreclosure or deed in lieu of foreclosure, plus
accrued interest and the Master Servicer's good faith estimate of the related
liquidation expenses to be incurred in connection therewith. The Agreement
provides that the Master Servicer may satisfy its obligation to cause hazard
policies to be maintained by maintaining a blanket policy insuring against
losses on such Mortgaged Properties. If such blanket policy contains a
deductible clause, the Master Servicer will be obligated to deposit in the
Collection Account the sums which would have been deposited therein but for
such clause. The Master Servicer will satisfy these requirements by
maintaining a blanket policy. As set forth above, all amounts collected by
the Master Servicer (net of any reimbursements to the Master Servicer) under
any hazard policy (except for amounts to be applied to the restoration or
repair of the Mortgaged Property) will ultimately be deposited in the
Collection Account.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property
by fire, lightning, explosion, smoke, windstorm and hail, and the like,
strike and civil commotion, subject to the conditions and exclusions
specified in each policy. Although the policies relating to the Mortgage
Loans will be underwritten by different insurers and therefore will not
contain identical terms and conditions, the basic terms thereof are dictated
by state laws and most of such policies typically do not cover any physical
damage resulting from the following: war, revolution, governmental actions,
floods and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), nuclear reactions, wet or dry rot, vermin, rodents,
insects or domestic animals, theft and, in certain cases vandalism. The
foregoing list is merely indicative of certain kinds of uninsured risks and
is not intended to be all-inclusive or an exact description of the insurance
policies relating to the Mortgaged Properties.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
The Master Servicer will foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into default when, in accordance with applicable servicing procedures under
the Agreement, no satisfactory arrangements can be made for the collection of
delinquent payments. In connection with such foreclosure or other
conversion, the Master Servicer will follow such practices as it deems
necessary or advisable and as are in keeping with its general subordinate
mortgage servicing activities, provided the Master Servicer will not be
required to expend its own funds in connection with foreclosure or other
conversion, correction of default on a related senior mortgage loan or
restoration of any property unless, in its sole judgment, such foreclosure,
correction or restoration will increase Net Liquidation Proceeds. The Master
Servicer will be reimbursed out of Liquidation Proceeds for advances of its
own funds as liquidation expenses before any Net Liquidation Proceeds are
distributed to Certificateholders or the Transferor.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each Collection Period, the Master Servicer will receive
from interest collections in respect of the Mortgage Loans a portion of such
interest collections as a monthly Servicing Fee in the amount equal to
approximately ____% per annum ("Servicing Fee Rate") on the aggregate
Principal Balances of the Mortgage Loans as of the first day of the related
Collection Period (or at the Cut-Off Date for the first Collection Period).
All assumption fees, late payment charges and other fees and charges, to the
extent collected from borrowers, will be retained by the Master Servicer as
additional servicing compensation.
The Master Servicer will pay certain ongoing expenses associated with
the Trust Fund and incurred by it in connection with its responsibilities
under the Agreement. In addition, the Master Servicer will be entitled to
reimbursement for certain expenses incurred by it in connection with
defaulted Mortgage Loans and in connection with the restoration of Mortgaged
Properties, such right of reimbursement being prior to the rights of
Certificateholders to receive any related Net Liquidation Proceeds.
EVIDENCE AS TO COMPLIANCE
The Agreement provides for delivery on or before ___________ in each
year, beginning in ___________, 199_, to the Trustee of an annual statement
signed by an officer of the Master Servicer to the effect that the Master
Servicer has fulfilled its material obligations under the Agreement
throughout the preceding fiscal year, except as specified in such statement.
On or before _____________ of each year, beginning ___________, 199_,
the Master Servicer will furnish a report prepared by a firm of nationally
recognized independent public accountants (who may also render other services
to the Master Servicer or the Transferor) to the Trustee, the Certificate
Insurer and the Rating Agencies to the effect that such firm has examined
certain documents and the records relating to servicing of the Mortgage Loans
under the Agreement and that, on the basis of such examination, such firm
believes that such servicing was conducted in compliance with the Agreement
except for (a) such exceptions as such firm believes to be immaterial and (b)
such other exceptions as shall be set forth in such report.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE TRANSFEROR
The Agreement provides that the Master Servicer may not resign from its
obligations and duties thereunder, except in connection with a permitted
transfer of servicing, unless (i) such duties and obligations are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities of a type and nature presently
carried on by it or its affiliate or (ii) upon the satisfaction of the
following conditions: (a) the Master Servicer has proposed a successor
servicer to the Trustee in writing and such proposed successor servicer is
reasonably acceptable to the Trustee; (b) the Rating Agencies have confirmed
to the Trustee that the appointment of such proposed successor servicer as
the Master Servicer will not result in the reduction or withdrawal of the
then current rating of the Certificates; and (c) such proposed successor
servicer is reasonably acceptable to the Certificate Insurer. No such
resignation will become effective until the Trustee or a successor servicer
has assumed the Master Servicer's obligations and duties under the Agreement.
The Master Servicer may perform any of its duties and obligations under
the Agreement through one or more subservicers or delegates, which may be
affiliates of the Master Servicer. Notwithstanding any such arrangement, the
Master Servicer will remain liable and obligated to the Trustee and the
Certificateholders for the Master Servicer's duties and obligations under the
Agreement, without any diminution of such duties and obligations and as if
the Master Servicer itself were performing such duties and obligations.
The Agreement provides that the Master Servicer will indemnify the Trust
Fund and the Trustee from and against any loss, liability, expense, damage or
injury suffered or sustained as a result of the Master Servicer's actions or
omissions in connection with the servicing and administration of the Mortgage
Loans which are not in accordance with the provisions of the Agreement.
Under the Agreement, the Transferor will indemnify an injured party for the
entire amount of any losses, claims, damages or liabilities arising out of or
based on the Agreement (other than losses resulting from defaults under the
Mortgage Loans). In the event of an Event of Servicing Termination (as
defined below) resulting in the assumption of servicing obligations by a
successor Master Servicer, the successor Master Servicer will indemnify the
Transferor for any losses, claims, damages and liabilities of the Transferor
as described in this paragraph arising from the successor Master Servicer's
actions or omissions. The Agreement provides that neither Provident, the
Transferor nor the Master Servicer nor their directors, officers, employees
or agents will be under any other liability to the Trust Fund, the Trustee,
the Certificateholders or any other person for any action taken or for
refraining from taking any action pursuant to the Agreement. However,
neither Provident, the Transferor nor the Master Servicer will be protected
against any liability which would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence of Provident, the Transferor or the
Master Servicer in the performance of its duties under the Agreement or by
reason of reckless disregard of its obligations thereunder. In addition, the
Agreement provides that the Master Servicer will not be under any obligation
to appear in, prosecute or defend any legal action which is not incidental to
its servicing responsibilities under the Agreement and which in its opinion
may expose it to any expense or liability. The Master Servicer may, in its
sole discretion, undertake any such legal action which it may deem necessary
or desirable with respect to the Agreement and the rights and duties of the
parties thereto and the interest of the Certificateholders thereunder.
Any corporation into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any
corporation succeeding to the business of the Master Servicer shall be the
successor of the Master Servicer hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything in the Agreement to the contrary notwithstanding.
EVENTS OF SERVICING TERMINATION
"Events of Servicing Termination" will consist of: (i) any failure by
the Master Servicer to deposit in the Collection Account any deposit required
to be made under the Agreement, which failure continues unremedied for five
business days after the giving of written notice of such failure to the
Master Servicer by the Trustee, or to the Master Servicer and the Trustee by
the Certificate Insurer or Certificateholders evidencing an aggregate,
undivided interest in the Trust Fund of at least 25% of the Certificate
Principal Balance; (ii) any failure by the Master Servicer duly to observe or
perform in any material respect any other of its covenants or agreements in
the Agreement which, in each case, materially and adversely affects the
interests of the Certificateholders or the Certificate Insurer and continues
unremedied for 60 days after the giving of written notice of such failure to
the Master Servicer by the Trustee, or to the Master Servicer and the Trustee
by the Certificate Insurer or Certificateholders evidencing an aggregate,
undivided interest in the Trust Fund of at least 25% of the Certificate
Principal Balance; or (iii) certain events of insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings relating
to the Master Servicer and certain actions by the Master Servicer indicating
insolvency, reorganization or inability to pay its obligations. Under
certain other circumstances, the Certificate Insurer with the consent of
holders of Investor Certificates evidencing an aggregate, undivided interest
in the Trust Fund of at least 51% of the Certificate Principal Balance may
deliver written notice to the Master Servicer terminating all the rights and
obligations of the Master Servicer under the Agreement.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of ten Business Days or
referred to under clause (ii) above for a period of 60 Business Days, shall
not constitute an Event of Servicing Termination if such delay or failure
could not be prevented by the exercise of reasonable diligence by the Master
Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event the Master
Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Agreement
and the Master Servicer shall provide the Trustee, Provident, the
Transferor, the Certificate Insurer and the Certificateholders prompt notice
of such failure or delay by it, together with a description of its efforts to
so perform its obligations.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
So long as an Event of Servicing Termination remains unremedied, either
the Trustee, or Certificateholders evidencing an aggregate, undivided
interest in the Trust Fund of at least 51% of the Certificate Principal
Balance or the Certificate Insurer, may terminate all of the rights and
obligations of the Master Servicer under the Agreement and in and to the
Mortgage Loans, whereupon the Trustee will succeed to all the
responsibilities, duties and liabilities of the Master Servicer under the
Agreement and will be entitled to similar compensation arrangements. In the
event that the Trustee would be obligated to succeed the Master Servicer but
is unwilling or unable so to act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a housing and home finance
institution or other mortgage loan or home equity loan servicer with all
licenses and permits required to perform its obligations under the Agreement
and having a net worth of at least $__________ and acceptable to the
Certificate Insurer to act as successor to the Master Servicer under the
Agreement. Pending such appointment, the Trustee will be obligated to act in
such capacity unless prohibited by law. Such successor will be entitled to
receive the same compensation that the Master Servicer would otherwise have
received (or such lesser compensation as the Trustee and such successor may
agree). A receiver or conservator for the Master Servicer may be empowered
to prevent the termination and replacement of the Master Servicer where the
only Event of Servicing Termination that has occurred is an Insolvency Event.
AMENDMENT
The Agreement may be amended from time to time by Provident, the Master
Servicer and the Trustee and with the consent of the Certificate Insurer, but
without the consent of the Certificateholders, to cure any ambiguity, to
correct or supplement any provisions therein which may be inconsistent with
any other provisions of the Agreement, to add to the duties of Provident, or
the Master Servicer or to add or amend any provisions of the Agreement as
required by the Rating Agencies in order to maintain or improve any rating of
the Certificates (it being understood that, after obtaining the ratings in
effect on the Closing Date, neither the Transferor, the Trustee nor the
Master Servicer is obligated to obtain, maintain, or improve any such rating)
or to add any other provisions with respect to matters or questions arising
under the Agreement which shall not be inconsistent with the provisions of
the Agreement, provided that such action will not, as evidenced by an opinion
of counsel, materially and adversely affect the interests of any
Certificateholder or the Certificate Insurer; provided, that any such
amendment will not be deemed to materially and adversely affect the
Certificateholders and no such opinion will be required to be delivered if
the person requesting such amendment obtains a letter from the Rating
Agencies stating that such amendment would not result in a downgrading of the
then current rating of the Certificates. The Agreement may also be amended
from time to time by Provident, the Master Servicer, and the Trustee, with
the consent of Certificateholders evidencing an aggregate, undivided interest
in the Trust Fund of at least 51% of the Certificate Principal Balance and
the Certificate Insurer for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement
or of modifying in any manner the rights of the Certificateholders, provided
that no such amendment will (i) reduce in any manner the amount of, or delay
the timing of, collections of payments on the Certificates or distributions
or payments under the Policy which are required to be made on any Certificate
without the consent of the holder of such Certificate or (ii) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of the holders of all Certificates then outstanding.
TERMINATION; RETIREMENT OF THE CERTIFICATES
The Trust Fund will terminate on the Distribution Date following the
later of (A) payment in full of all amounts owing to the Certificate Insurer
and (B) the earliest of (i) the Distribution Date on which the Certificate
Principal Balance has been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust Fund, (iii) the optional
transfer to the Transferor of the Certificates, as described below and (iv)
the Distribution Date in ____________ 20__.
The Certificates will be subject to optional transfer to the Transferor
on any Distribution Date after the Certificate Principal Balance is reduced
to an amount less than or equal to 5% of the Original Certificate Principal
Balance and all amounts due and owing to the Certificate Insurer and
unreimbursed draws on the Policy, together with interest thereon, as provided
under the Insurance Agreement, have been paid. The transfer price will be
equal to the sum of the outstanding Certificate Principal Balance and accrued
and unpaid interest thereon at the Certificate Rate through the day preceding
the final Distribution Date. In no event, however, will the Trust Fund
created by the Agreement continue for more than 21 years after the death of
certain individuals named in the Agreement. Written notice of termination of
the Agreement will be given to each Certificateholder, and the final
distribution will be made only upon surrender and cancellation of the
Certificates at an office or agency appointed by the Trustee which will be
specified in the notice of termination.
In addition, the Trust Fund may be liquidated as a result of certain
events of bankruptcy, insolvency or receivership relating to the Transferor.
See "--Rapid Amortization Events" herein.
THE TRUSTEE
( ), a ____________________________ with its principal
place of business in ________, has been named Trustee pursuant to the
Agreement.
The commercial bank or trust company serving as Trustee may own
Certificates and have normal banking relationships with Provident and the
Certificate Insurer and/or their affiliates.
The Trustee may resign at any time, in which event Provident will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. Provident may also remove the Trustee if the Trustee ceases to be
eligible to continue as such under the Agreement or if the Trustee becomes
insolvent. Upon becoming aware of such circumstances, Provident will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
No holder of a Certificate will have any right under the Agreement to
institute any proceeding with respect to the Agreement unless such holder
previously has given to the Trustee written notice of default and unless
Certificateholders evidencing an aggregate, undivided interest in the Trust
Fund of at least 51% of the Certificate Principal Balance have made written
requests upon the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity and
the Trustee for 60 days has neglected or refused to institute any such
proceeding. The Trustee will be under no obligation to exercise any of the
trusts or powers vested in it by the Agreement or to make any investigation
of matters arising thereunder or to institute, conduct or defend any
litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders, unless such Certificateholders
have offered to the Trustee reasonable security or indemnity against the
cost, expenses and liabilities which may be incurred therein or thereby.
CERTAIN ACTIVITIES
The Trust Fund will not: (i) borrow money; (ii) make loans; (iii)
invest in securities for the purpose of exercising control; (iv) underwrite
securities; (v) except as provided in the Agreement, engage in the purchase
and sale (or turnover) of investments; (vi) offer securities in exchange for
property (except Certificates for the Mortgage Loans); or (vii) repurchase or
otherwise reacquire its securities. See "--Evidence as to Compliance" above
for information regarding reports as to the compliance by the Master Servicer
with the terms of the Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will
be applied by Provident towards general corporate purposes.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, which summarizes the material U.S. federal
income tax aspects of the purchase, ownership and disposition of the
Certificates, is based on the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury Regulations thereunder, and
published rulings and court decisions in effect as of the date hereof, all of
which are subject to change, possibly retroactively. This discussion does
not address every aspect of the U.S. federal income tax laws which may be
relevant to Certificate Owners in light of their personal investment
circumstances or to certain types of Certificate Owners subject to special
treatment under the U.S. federal income tax laws (for example, banks and life
insurance companies). Accordingly, investors should consult their tax
advisors regarding U.S. federal, state, local, foreign and any other tax
consequences to them of investing in the Certificates.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Based on the application of existing law to the facts as set forth in
the Agreement and other relevant documents and assuming compliance with the
terms of the Agreement as in effect on the date of issuance of the
Certificates, Brown & Wood LLP, special tax counsel to Provident ("Tax
Counsel"), is of the opinion that the Certificates will be treated as debt
instruments for federal income tax purposes as of such date. Accordingly,
upon issuance, the Certificates will be treated as "Debt Securities" as
described in the Prospectus. See "Federal Income Tax Consequences" in the
Prospectus.
The Transferor and the Certificateholders express in the Agreement their
intent that, for all tax purposes, the Certificates will be indebtedness
secured by the Mortgage Loans. The Transferor, Provident and the
Certificateholders, by accepting the Certificates, and each Certificate Owner
by its acquisition of a beneficial interest in a Certificate, have agreed to
treat the Certificates as indebtedness for U.S. federal income tax purposes.
However, because different criteria are used to determine the non-tax
accounting characterization of the transaction, the Transferor intends to
treat this transaction as a sale of an interest in the Asset Balances of the
Mortgage Loans for financial accounting and certain regulatory purposes.
In general, whether for U.S. federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured
by property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the Internal Revenue Service (the "IRS") and the
courts have set forth several factors to be taken into account in determining
whether the substance of a transaction is a sale of property or a secured
loan, the primary factor in making this determination is whether the
transferee has assumed the risk of loss or other economic burdens relating to
the property and has obtained the benefits of ownership thereof. Tax Counsel
has analyzed and relied on several factors in reaching its opinion that the
weight of the benefits and burdens of ownership of the Mortgage Loans has
been retained by the Transferor and has not been transferred to the
Certificate Owners.
In some instances, courts have held that a taxpayer is bound by the
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Tax Counsel has advised that the
rationale of those cases will not apply to this transaction, because the form
of the transaction as reflected in the operative provisions of the documents
either accords with the characterization of the Certificates as debt or
otherwise makes the rationale of those cases inapplicable to this situation.
TAXATION OF INTEREST INCOME OF CERTIFICATE OWNERS
Assuming that the Certificate Owners are holders of debt obligations for
U.S. federal income tax purposes, the Certificates generally will be taxable
as Debt Securities. See "Federal Income Tax Consequences" in the Prospectus.
While it is not anticipated that the Certificates will be issued at a
greater than de minimis discount, under Treasury regulations (the "OID
Regulations") it is possible that the Certificates could nevertheless be
deemed to have been issued with original issue discount ("OID") if the
interest were not treated as "unconditionally payable" under the OID
Regulations. If such regulations were to apply, all of the taxable income to
be recognized with respect to the Certificates would be includible in income
of Certificate Owners as OID, but would not be includible again when the
interest is actually received. See "Federal Income Tax Consequences--
Taxation of Debt Securities; Interest and Acquisition Discount" in the
Prospectus for a discussion of the application of the OID rules if the
Certificates are in fact issued at a greater than de minimis discount or
are treated as having been issued with OID under the OID Regulations. For
purposes of calculating OID, it is likely that the Certificates will be
treated as Pay-Through Securities. POSSIBLE CLASSIFICATION OF THE
CERTIFICATES AS A PARTNERSHIP OR ASSOCIATION TAXABLE AS A CORPORATION
The opinion of Tax Counsel is not binding on the courts or the IRS. It
is possible that the IRS could assert that, for purposes of the Code, the
transaction contemplated by this Prospectus with respect to the Certificates
constitutes a sale of the Mortgage Loans (or an interest therein) to the
Certificate Owners and that the proper classification of the legal
relationship between the Transferor and the Certificate Owners resulting from
this transaction is that of a partnership or a publicly traded partnership
treated as a corporation. Since Tax Counsel has opined that the Certificates
will be treated as indebtedness in the hands of the Certificateholders for
U.S. federal income tax purposes, the Transferor will not attempt to comply
with U.S. federal income tax reporting requirements applicable to
partnerships or corporations.
If it were determined that this transaction created an entity classified
as a publicly traded partnership taxable as a corporation, the Trust Fund
would be subject to U.S. federal income tax at corporate income tax rates on
the income it derives from the Mortgage Loans, which would reduce the amounts
available for distribution to the Certificate Owners. Cash distributions to
the Certificate Owners generally would be treated as dividends for tax
purposes to the extent of such corporation's earnings and profits.
If the transaction were treated as creating a partnership between the
Certificate Owners and the Transferor, the partnership itself would not be
subject to U.S. federal income tax (unless it were to be characterized as a
publicly traded partnership taxable as a corporation); rather, the Transferor
and each Certificate Owner would be taxed individually on their respective
distributive shares of the partnership's income, gain, loss, deductions and
credits. The amount and timing of items of income and deductions of the
Certificate Owner could differ if the Certificates were held to constitute
partnership interests rather than indebtedness. Assuming that all of the
provisions of the Agreement, as in effect on the date of issuance, are
complied with, it is the opinion of Tax Counsel that the Trust Fund will not
be treated as either an association or a partnership taxable as a
corporation.
POSSIBLE CLASSIFICATION AS A TAXABLE MORTGAGE POOL
In relevant part, Section 7701(i) of the Code provides that any entity
(or a portion of an entity) that is a "taxable mortgage pool" will be
classified as a taxable corporation and will not be permitted to file a
consolidated U.S. federal income tax return with another corporation. Any
entity (or a portion of any entity) will be a taxable mortgage pool if (i)
substantially all of its assets consist of debt instruments, more than 50% of
which are real estate mortgages, (ii) the entity is the obligor under debt
obligations with two or more maturities, and (iii) under the terms of the
entity's debt obligations (or an underlying arrangement), payments on such
debt obligations bear a relationship to the debt instruments held by the
entity.
Assuming that all of the provisions of the Agreement, as in effect on
the date of issuance, are complied with, Tax Counsel is of the opinion that
the arrangement created by the Agreement will not be a taxable mortgage pool
under Section 7701(i) of the Code because only one class of indebtedness
secured by the Mortgage Loans is being issued.
The opinion of Tax Counsel is not binding on the IRS or the courts. If
the IRS were to contend successfully (or future regulations were to provide)
that the arrangement created by the Agreement is a taxable mortgage pool,
such arrangement would be subject to U.S. federal corporate income tax on its
taxable income generated by ownership of the Mortgage Loans. Such a tax
might reduce amounts available for distributions to Certificate Owners. The
amount of such a tax would depend upon whether distributions to Certificate
Owners would be deductible as interest expense in computing the taxable
income of such an arrangement as a taxable mortgage pool.
FOREIGN INVESTORS
In general, subject to certain exceptions, Tax Counsel is of the opinion
that interest (including OID) paid on a Certificate to a nonresident alien
individual, foreign corporation or other non-United States person is not
subject to U.S. federal income tax, provided that such interest is not
effectively connected with a trade or business of the recipient in the United
States and the Certificate Owner provides the required foreign person
information certification. See "Federal Income Tax Consequences--Tax
Treatment of Foreign Investors" in the Prospectus.
If the interests of the Certificate Owners were deemed to be partnership
interests, the partnership would be required, on a quarterly basis, to pay
withholding tax equal to the product, for each foreign partner, of such
foreign partner's distributive share of "effectively connected" income of the
partnership multiplied by the highest rate of tax applicable to that foreign
partner. In addition, such foreign partner would be subject to branch
profits tax. Each non-foreign partner would be required to certify to the
partnership that it is not a foreign person. The tax withheld from each
foreign partner would be credited against such foreign partner's U.S. income
tax liability.
If the Trust Fund were taxable as a corporation, distributions to
foreign persons, to the extent treated as dividends, would generally be
subject to withholding at the rate of 30%, unless such rate were reduced by
an applicable tax treaty.
BACKUP WITHHOLDING
Certain Certificate Owners may be subject to backup withholding at the
rate of 31% with respect to interest paid on the Certificates if the
Certificate Owners, upon issuance, fail to supply the Trustee or his broker
with his taxpayer identification number, furnish an incorrect taxpayer
identification number, fail to report interest, dividends, or other
"reportable payments" (as defined in the Code) properly, or, under certain
circumstances, fail to provide the Trustee or his broker with a certified
statement, under penalty of perjury, that he is not subject to backup
withholding.
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid (and OID accrued, if
any) on the Certificates (and the amount of interest withheld for U.S.
federal income taxes, if any) for each calendar year, except as to exempt
holders (generally, holders that are corporations, certain tax-exempt
organizations or nonresident aliens who provide certification as to their
status as nonresidents). As long as the only "Certificateholder" of record
is Cede, as nominee for DTC, Certificate Owners and the IRS will receive tax
and other information including the amount of interest paid on the
Certificates owned from Participants and Indirect Participants rather than
from the Trustee. (The Trustee, however, will respond to requests for
necessary information to enable Participants, Indirect Participants and
certain other persons to complete their reports.) Each non-exempt
Certificate Owner will be required to provide, under penalty of perjury, a
certificate on IRS Form W-9 containing his or her name, address, correct
federal taxpayer identification number and a statement that he or she is not
subject to backup withholding. Should a nonexempt Certificate Owner fail to
provide the required certification, the Participants or Indirect Participants
(or the Paying Agent) will be required to withhold 31% of the interest (and
principal) otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's federal income tax liability.
STATE TAXES
Provident makes no representations regarding the tax consequences of
purchase, ownership or disposition of the Certificates under the tax laws of
any state. Investors considering an investment in the Certificates should
consult their own tax advisors regarding such tax consequences.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL OR FOREIGN INCOME TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
ERISA CONSIDERATIONS
Any Plan fiduciary which proposes to cause a Plan to acquire any of the
Certificates should consult with its counsel with respect to the potential
consequences under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code, of the Plans acquisition and ownership of
such Certificates. See "ERISA Considerations" in the Prospectus.
The U.S. Department of Labor has granted to _________________
("Underwriter") Prohibited Transaction Exemption _____ (the "Exemption")
which exempts from the application of the prohibited transaction rules
transactions relating to (1) the acquisition, sale and holding by Plans of
certain certificates representing an undivided interest in certain asset-
backed pass-through trusts, with respect to which Underwriter or any of its
affiliates is the sole underwriter or the manager or co-manager of the
underwriting syndicate; and (2) the servicing, operation and management of
such asset-backed pass-through trusts, provided that the general conditions
and certain other conditions set forth in the Exemption are satisfied. The
Exemption will apply to the acquisition, holding and resale of the
Certificates by a Plan provided that certain conditions are met.
For a general description of the Exemption and the conditions that must
be satisfied for the Exemption to apply, see "ERISA Considerations" in the
Prospectus.
The Underwriter believes that the Exemption will apply to the
acquisition and holding of the Certificates by Plans and that all conditions
of the Exemption other than those within the control of the investors will be
met.
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of
ERISA and the Code to such investment. Among other things, before purchasing
any Certificates, a fiduciary of a Plan subject to the fiduciary
responsibility provisions of ERISA or an employee benefit plan subject to the
prohibited transaction provisions of the Code should make its own
determination as to the availability of the exemptive relief provided in the
Exemption, and also consider the availability of any other prohibited
transaction exemptions.
LEGAL INVESTMENT CONSIDERATIONS
Although, as a condition to their issuance, the Certificates will be
rated in the highest rating category of the Rating Agencies, the Certificates
will not constitute "mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA"), because not all
of the Mortgages securing the Mortgage Loans are first mortgages.
Accordingly, many institutions with legal authority to invest in comparably
rated securities based on first mortgage loans may not be legally authorized
to invest in the Certificates, which because they evidence interests in a
pool that includes junior mortgage loans are not "mortgage related
securities" under SMMEA. See "Legal Investment" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated ___________, 199_ (the "Underwriting Agreement"), between
Provident and (Underwriter) (the "Underwriter"), Provident has agreed to sell
to the Underwriter, and the Underwriter has agreed to purchase from Provident
all the Certificates.
In the Underwriting Agreement, the Underwriter has agreed, subject to
the terms and conditions set forth therein, to purchase all the Certificates
offered hereby if any of the Certificates are purchased.
Provident has been advised by the Underwriter that it proposes initially
to offer the Certificates to the public in Europe and the United States at
the offering price set forth on the cover page hereof and to certain dealers
at such price less a discount not in excess of ____% of the Certificate
denominations. The Underwriter may allow and such dealers may reallow a
discount not in excess of _____% of the Certificate denominations to certain
other dealers. After the initial public offering, the public offering price,
such concessions and such discounts may be changed.
The Underwriting Agreement provides that Provident will indemnify the
Underwriter against certain civil liabilities, including liabilities under
the Act.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed
upon for Provident by Brown & Wood LLP, New York, New York and Keating,
Muething & Klekamp, P.L.L., Cincinnati, Ohio and for the Underwriter by ( ).
EXPERTS
The consolidated balance sheets of (Insurer) and Subsidiaries as of
___________, 199_ and 199_ and the related consolidated statements of income,
changes in shareholder's equity, and cash flows for each of the three years
in the period ended ___________, 199_, incorporated by reference in this
Prospectus Supplement, have been incorporated herein in reliance on the
report of ________________________, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
RATINGS
It is a condition to issuance that the Certificates be rated "___" by
_____ and "___" by _________.
A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the Mortgage Loans. The rating takes
into consideration the characteristics of the Mortgage Loans and the
structural, legal and tax aspects associated with the Certificates. The
ratings on the Certificates do not, however, constitute statements regarding
the likelihood or frequency of prepayments on the Mortgage Loans or the
possibility that Certificateholders might realize a lower than anticipated
yield.
The ratings assigned to the Certificates will depend primarily upon the
creditworthiness of the Certificate Insurer. Any reduction in a rating
assigned to the claims-paying ability of the Certificate Insurer below the
ratings initially assigned to the Certificates may result in a reduction of
one or more of the ratings assigned to the Certificates.
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
Provident has not requested a rating of the Certificates by any rating
agency other than the Rating Agencies; there can be no assurance, however, as
to whether any other rating agency will rate the Certificates or, if it does,
what rating would be assigned by such other rating agency. The rating
assigned by such other rating agency to the Certificates could be lower than
the respective ratings assigned by the Rating Agencies.
INDEX OF DEFINED TERMS
Page
----
Accelerated Principal Distribution Amount . . . . . . . . . . . . . S-8, S-39
Additional Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Alternative Principal Payment . . . . . . . . . . . . . . . . . . S-11, S-41
Beneficial owner . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-32
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . S-39, S-44
Capitalized Interest Account . . . . . . . . . . . . . . . . . . S-13, S-45
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7, S-35
CEDEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Certificate Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-32
Certificate Principal Balance . . . . . . . . . . . . . . . . . . . S-4, S-32
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . S-4, S-10, S-40
Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . S-33, S-53
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-4
Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Citibank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-10, S-40
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . S-9, S-37
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . S-9, S-40
Combined Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . S-5
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Credit Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Credit Limit Utilization Rate . . . . . . . . . . . . . . . . . . . . . S-22
Credit Line Agreements . . . . . . . . . . . . . . . . . . . . . . S-3, S-22
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Cut-Off Date Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . S-3
Cut-Off Date Principal Balance . . . . . . . . . . . . . . . . . . . . . S-3
Defective Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . S-37
Definitive Certificate . . . . . . . . . . . . . . . . . . . . . . . . S-32
Determination Date . . . . . . . . . . . . . . . . . . . . . . . S-13, S-37
Dissolution Distribution Date . . . . . . . . . . . . . . . . . . . . . S-43
Distribution Date . . . . . . . . . . . . . . . . . . . . . . S-1, S-10, S-39
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-32
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Eligible Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . S-36
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15, S-54
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . S-34
European Depositaries . . . . . . . . . . . . . . . . . . . . . . . S-7, S-32
Events of Servicing Termination . . . . . . . . . . . . . . . . . . . . S-48
Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-54
Financial Intermediary . . . . . . . . . . . . . . . . . . . . . . . . S-33
Fixed Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . . S-9
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . S-12, S-45
Guaranteed Distributions . . . . . . . . . . . . . . . . . . . . S-11, S-43
Guaranteed Principal Distribution Amount . . . . . . . . . . . . S-12, S-43
Index Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
Indirect Participants . . . . . . . . . . . . . . . . . . . . . . . . . S-33
Insurance Agreement . . . . . . . . . . . . . . . . . . . . . . . S-11, S-43
Interest Collections . . . . . . . . . . . . . . . . . . . . . . . S-7, S-38
Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-40
Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-4, S-32
Investor Fixed Allocation Percentage . . . . . . . . . . . . . . . . . . S-9
Investor Floating Allocation Percentage . . . . . . . . . . . . . . S-8, S-38
Investor Interest Collections . . . . . . . . . . . . . . . . . . . S-8, S-38
Investor Loss Amount . . . . . . . . . . . . . . . . . . . . . . . S-9, S-40
Investor Principal Collections . . . . . . . . . . . . . . . . . . S-9, S-39
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
LIBOR Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . S-41
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . S-40
Liquidation Loss Amount . . . . . . . . . . . . . . . . . . . . . . S-9, S-40
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Loan Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-22
Managed Amortization Period . . . . . . . . . . . . . . . . . . . S-10, S-41
Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Maximum Principal Payment . . . . . . . . . . . . . . . . . . . . S-10, S-41
Maximum Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
Minimum Transferor Interest . . . . . . . . . . . . . . . . . . . . S-5, S-37
Mortgage Loan Schedule . . . . . . . . . . . . . . . . . . . S-5, S-36, S-37
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Net Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . S-8, S-38
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Original Certificate Principal Balance . . . . . . . . . . . . . . S-4, S-32
Original Invested Amount . . . . . . . . . . . . . . . . . . . . . S-4, S-32
Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . . . S-9
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15
Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3, S-39
Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . S-12, S-44
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . S-12, S-44
Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Principal Collections . . . . . . . . . . . . . . . . . . . . . . . S-7, S-38
Provident . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3, S-19
Rapid Amortization Event . . . . . . . . . . . . . . . . . . . . . . . S-42
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15
Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-39
Reference Bank Rate . . . . . . . . . . . . . . . . . . . . . . . . . . S-41
Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . S-35
Relevant Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
Required Overcollateralization Amount . . . . . . . . . . . . . . . . . S-40
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Scheduled Principal Collections Distribution Amount . . . . . . . S-10, S-41
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . S-13, S-47
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15, S-54
Spread Account . . . . . . . . . . . . . . . . . . . . . . . . . S-12, S-43
STIFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . S-30
Subservicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Telerate Screen Page 3750 . . . . . . . . . . . . . . . . . . . . . . . S-40
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Transfer Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Transfer Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . . S-36
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Transferor Interest . . . . . . . . . . . . . . . . . . . . . S-1, S-4, S-32
Transferor Principal Collections . . . . . . . . . . . . . . . . . S-9, S-39
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3, S-14
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-54
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . S-54
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Home
Equity Loan Asset Backed Certificates, Series 199_-_ (the "Global
Securities") will be available only in book-entry form. Investors in the
Global Securities may hold such Global Securities through any of The
Depository Trust Company ("DTC"), CEDEL or Euroclear. The Global Securities
will be tradeable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations and prior Home Equity Loan
Asset Backed Certificates issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of CEDEL and Euroclear (in
such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts
as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior Home Equity Loan Asset
Backed Certificates issues. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the
settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior Home
Equity Loan Asset Backed Certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
to the account of a CEDEL Participant or a Euroclear Participant, the
purchaser will send instructions to CEDEL or Euroclear through a CEDEL
Participant or Euroclear Participant at least one business day prior to
settlement. CEDEL or Euroclear will instruct the respective Depositary, as
the case may be, to receive the Global Securities against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date, on the basis
of the actual number of days in such accrual period and a year assumed to
consist of 360 days. For transactions settling on the 31st of the month,
payment will include interest accrued to and excluding the first day of the
following month. Payment will then be made by the respective Depositary of
the DTC Participant's account against delivery of the Global Securities.
After settlement has been completed, the Global Securities will be credited
to the respective clearing system and by the clearing system, in accordance
with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The securities credit will appear the next day
(European time) and the cash debt will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the CEDEL or
Euroclear cash debt will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
preposition funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within CEDEL or
Euroclear. Under this approach, they may take on credit exposure to CEDEL or
Euroclear until the Global Securities are credited to their accounts one day
later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities were
credited to their accounts. However, interest on the Global Securities would
accrue from the value date. Therefore, in many cases the investment income
on the Global Securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each CEDEL Participant's or Euroclear Participant's particular
cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of CEDEL Participants
or Euroclear Participants. The sale proceeds will be available to the DTC
seller on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. In
these cases CEDEL or Euroclear will instruct the respective Depositary, as
appropriate, to deliver the Global Securities to the DTC Participant's
account against payment. Payment will include interest accrued on the Global
Securities from and including the last coupon payment to and excluding the
settlement date on the basis of the actual number of days in such accrual
period and a year assumed to consist of 360 days. For transactions settling
on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. The payment will then be
reflected in the account of the CEDEL Participant or Euroclear Participant
the following day, and receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the CEDEL Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-
valuation will extinguish any overdraft incurred over that one-day period.
If settlement is not completed on the intended value date (i.e., the trade
fails), receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account would instead be valued as of the actual settlement
date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL
or Euroclear (or through DTC if the holder has an address outside the U.S.)
will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) such beneficial owner takes
one of the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status).
If the information shown on Form W-8 changes, a new Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing
in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed by
the Certificate Owners or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof or (iii) an estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more United States trustees have authority to control all
substantial decisions of the trust. This summary does not deal with all
aspects of U.S. federal income tax withholding that may be relevant to
foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors
for specific tax advice concerning their holding and disposing of the Global
Securities.
------------------------------------- ---------------------------------
No dealer, salesman or other
person has been authorized to give
any information or to make any
representation not contained in
this Prospectus Supplement or the PROVIDENT HOME
Prospectus and, if given or made, EQUITY LOAN TRUST 199__-__
such information or representation
must not be relied upon as having
been authorized by the Company or
(Underwriter). This Prospectus $___________
Supplement and the Prospectus do (Approximate)
not constitute an offer of any
securities other than those to
which they relate or an offer to
sell, or a solicitation of an
offer to buy, to any person in any Home Equity Loan
jurisdiction where such an offer Asset Backed Certificates
or solicitation would be unlawful. Series 199_-_
Neither the delivery of this
Prospectus Supplement and the
Prospectus nor any sale made
hereunder shall, under any THE PROVIDENT BANK
circumstances, create any Transferor and Master Servicer
implication that the information
contained herein is correct as of
any time subsequent to their
respective dates.
__________________________________
TABLE OF CONTENTS
Page
---- PROSPECTUS SUPPLEMENT
___________, 199_
PROSPECTUS SUPPLEMENT __________________________________
Summary . . . . . . . . . . . S-3
Risk Factors . . . . . . . . S-16
The Certificate Insurer . . . S-18
The Master Servicer . . . . . S-18
The Home Equity Loan Program S-19 (UNDERWRITER)
Description of the
Mortgage Loans . . . . . . . S-22
Maturity and Prepayment
Considerations . . . . . . . S-30
Pool Factor and Trading
Information . . . . . . . . . S-31
Description of the
Certificates . . . . . . . . S-31
Use of Proceeds . . . . . . . S-50
Federal Income Tax
Consequences . . . . . . . . S-51
State Taxes . . . . . . . . . S-53
ERISA Considerations . . . . S-54
Legal Investment
Considerations . . . . . . . S-54
Underwriting . . . . . . . . S-54
Legal Matters . . . . . . . . S-55
Experts . . . . . . . . . . . S-55
Ratings . . . . . . . . . . . S-55
Index of Defined Terms . . . S-56
Annex I . . . . . . . . . . . S-59
PROSPECTUS
Prospectus Supplement or Current
Report on Form 8K . . . . . . . 2
Available Information . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . 2
Reports to Securityholders . . 3
Summary of Terms . . . . . . . 4
Risk Factors . . . . . . . . . 11
The Trust Fund . . . . . . . . 17
Use of Proceeds . . . . . . . . 21
Loan Program . . . . . . . . . 22
The Provident Bank . . . . . . .
Description of the Securities . 24
Credit Enhancement . . . . . . 38
Yield and Prepayment
Considerations . . . . . . . . 43
The Agreements . . . . . . . . 45
Certain Legal Aspects of
the Loans . . . . . . . . . 57
Federal Income Tax
Consequences . . . . . . . .. 71
State Tax Considerations . . . 90
ERISA Considerations . . . . . 90
Legal Investment . . . . . . . 93
Method of Distribution . . . . 94
Legal Matters . . . . . . . . . 95
Financial Information . . . . . 95
Ratings . . . . . . . . . . . . 95
Index of Defined Terms . . . . 97
-------------------------------------- ---------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED MAY 15, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED (_____________)
$
(PROVIDENT MORTGAGE PASS-THROUGH TRUST 199___)
($ CLASS A-1 % CERTIFICATES
$ CLASS A-2 % CERTIFICATES
$ CLASS A-3 % CERTIFICATES
$ CLASS A-4 % CERTIFICATES
$ CLASS A-5 % CERTIFICATES)
$ CLASS A-6 VARIABLE RATE CERTIFICATES
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 199___
------------------
THE PROVIDENT BANK,
AS SELLER AND MASTER SERVICER
------------------
The Mortgage Pass-Through Certificates, Series _________ (the
"Certificates"), will consist of six Classes (each, a "Class") of senior
Certificates: the Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5
Certificates and Class A-6 Certificates (collectively, the "Class A
Certificates") and one Class of subordinated Certificates (the "Class R
Certificates"). Only the Class A Certificates (the "Offered Certificates")
are being offered hereby.
The Certificates will evidence in the aggregate the entire beneficial
interest in a pool (the "Mortgage Pool") of fixed- and adjustable-rate
mortgage loans (the "Mortgage Loans") consisting of two groups ("Loan Group
1" and "Loan Group 2", respectively, and each a "Loan Group") held by
(Provident Mortgage Pass-Through Trust 199___) (the "Trust") to be formed
pursuant to a Pooling and Servicing Agreement among The Provident Bank
("Provident"), as seller (the "Seller") and as master servicer (the "Master
Servicer"), and ________________________________________, as trustee (the
"Trustee"). The Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates (collectively, the "Group 1 Certificates") will represent
undivided ownership interests in Loan Group 1 which consists of Mortgage
Loans with fixed interest rates. The Class A-6 Certificates (the "Group 2
Certificates") will represent undivided ownership interests in Loan Group 2
which consists of Mortgage Loans with adjustable interest rates. The assets
of the Trust will also include certain other property. The Mortgage Loans
are secured by first deeds of trust or mortgages primarily on one- to
four-family residential properties.
(Cover continued on next page)
------------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH
UNDER "RISK FACTORS" ON PAGE S-14 HEREIN AND ON PAGE 12
IN THE ACCOMPANYING PROSPECTUS.
------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF PROVIDENT, THE TRUSTEE
OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT PROVIDED
HEREIN. NEITHER THE CERTIFICATES NOR THE MORTGAGE
LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Offered Certificates are being offered by the Underwriter from time
to time in negotiated transactions or otherwise at varying prices to be
determined, in each case, at the time of sale.
The aggregate proceeds to Provident from the sale of the Offered
Certificates will be approximately $ , plus accrued interest, before
deducting expenses payable by Provident, estimated to be $ in the
aggregate.
------------------
The Offered Certificates are offered subject to prior sale and subject
to the Underwriter's right to reject orders in whole or in part. It is
expected that delivery of the Offered Certificates will be made in book-entry
form only through the facilities of The Depository Trust Company, CEDEL Bank,
soci t anonyme, and the Euroclear System on or about (__________) (the
"Closing Date"). The Offered Certificates will be offered in Europe and the
United States of America.
------------------
(Underwriter)
(Date)
(Cover continued from previous page)
Distributions on the Class A Certificates will be made on the 25th day
of each month or, if such date is not a Business Day, then on the next
succeeding Business Day (each, a "Distribution Date"), commencing in
_____________. On each Distribution Date, holders of the Class A
Certificates will be entitled to receive, from and to the limited extent of
funds available in the Distribution Account (as defined herein under
"Description of the Certificates--Deposits to Collection Account and
Distribution Account"), distributions with respect to interest and principal
calculated as set forth herein. The Certificates are not guaranteed by
Provident, the Trustee or any affiliate of any thereof. However, the Class A
Certificates will have the benefit of an irrevocable and unconditional
certificate guaranty insurance policy (the "Policy") issued by (the
"Certificate Insurer") pursuant to which the Certificate Insurer will
guarantee payments to the related Certificateholders as described herein.
See "DESCRIPTION OF THE CERTIFICATES--The Policy" herein.
The effective yield to the Certificateholders of each Class of Group I
Certificates will be lower than the yield otherwise produced by the
Certificate Rate for each such Class and the purchase price of such
Certificates because distributions will not be payable to the
Certificateholders until the 25th day of the month following the month of
accrual (without any additional distribution of interest or earnings thereon
in respect of such delay). See "PREPAYMENT AND YIELD CONSIDERATIONS--Payment
Delay Feature of Group I Certificates."
There is currently no market for the Offered Certificates and there can
be no assurance that such a market will develop or if it does develop that it
will continue. See "RISK FACTORS" herein.
An election will be made to treat the assets of the Trust as a "real
estate mortgage investment conduit" (a "REMIC") for federal income tax
purposes. As described more fully herein and in the Prospectus, the Offered
Certificates will constitute "regular interests" in the REMIC. See "Certain
Federal Income Tax Consequences" in the Prospectus.
------------------------------------
Until ninety days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Offered Certificates, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and Prospectus. This is in addition to the obligation of dealers
acting as underwriters to deliver a Prospectus Supplement and Prospectus with
respect to their unsold allotments or subscriptions.
------------------------------------
The Offered Certificates constitute part of a separate series of
Mortgage Pass-Through Certificates being offered by The Provident Bank from
time to time pursuant to its Prospectus dated ____________. This Prospectus
Supplement does not contain complete information about the offering of the
Offered Certificates. Additional information is contained in the Prospectus
and investors are urged to read both this Prospectus Supplement and the
Prospectus in full. Sales of the Offered Certificates may not be consummated
unless the purchaser has received both this Prospectus Supplement and the
Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference all documents filed by
Provident with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the 1934 Act, on or subsequent to the date of this Prospectus and prior to
the termination of the offering of the Offered Certificates made by this
Prospectus Supplement. Provident will provide without charge to each person
to whom this Prospectus Supplement and Prospectus are delivered, on request
of such person, a copy of any or all of the documents incorporated herein by
reference other than the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests should
be directed to ______________________________________________________.
SUMMARY
The following summary of certain pertinent information is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the accompanying Prospectus. Certain
capitalized terms used in the Summary are defined elsewhere in this
Prospectus Supplement or in the Prospectus. Reference is made to the Index
of Defined Terms herein and the Glossary of Terms in the Prospectus for the
definitions of certain capitalized terms.
Trust (Provident Mortgage Pass-Through Trust 199___) (the "Trust")
will be formed pursuant to a pooling and servicing agreement
(the "Agreement") to be dated as of _________________ (the
"Cut-Off Date") among The Provident Bank, ("Provident"), as
seller (the "Seller") and as master servicer (together with
any successor in such capacity, the "Master Servicer"), and
________________________ ________________, as trustee (the
"Trustee"). The property of the Trust will include: a pool of
fixed- and adjustable-rate mortgage loans (the "Mortgage
Loans"), secured by first deeds of trust or mortgages on
residential properties that are primarily one- to four-family
properties (the "Mortgaged Properties"); payments in respect
of the Mortgage Loans received on and after the Cut-Off Date
(exclusive of payments in respect of interest on the Mortgage
Loans due prior to the Cut-Off Date and received thereafter);
property that secured a Mortgage Loan which has been acquired
by foreclosure or deed in lieu of foreclosure; rights under
certain hazard insurance policies covering the Mortgaged
Properties; and certain other property, as described more
fully herein. In addition, Provident has caused the
Certificate Insurer to issue an irrevocable and unconditional
financial guaranty insurance policy (the "Policy") for the
benefit of the holders of the Class A Certificates, pursuant
to which the Certificate Insurer will guarantee payments to
such Certificateholders as described herein.
The Trust property initially will include the unpaid principal
balance of each Mortgage Loan as of the Cut-Off Date. With
respect to any date, the "Pool Principal Balance" will be
equal to the aggregate of the Principal Balances of all
Mortgage Loans as of such date. The "Cut-Off Date Principal
Balance" with respect to each Mortgage Loan is the unpaid
principal balance thereof as of the Cut-Off Date. With
respect to any date, the "Loan Group 1 Principal Balance" and
the "Loan Group 2 Principal Balance" will be equal to the
aggregate of the Principal Balances of all Mortgage Loans in
Loan Group 1 and Loan Group 2, respectively, as of such date.
The Loan Group 1 Principal Balance and the Loan Group 2
Principal Balance are each sometimes referred to herein as a
"Loan Group Principal Balance." The "Principal Balance" of a
Mortgage Loan (other than a Liquidated Mortgage Loan) on any
day is equal to its Cut-Off Date Principal Balance minus all
collections applied in reduction of the Cut-Off Date Principal
Balance of such Mortgage Loan. The Principal Balance of a
Liquidated Mortgage Loan (as defined herein under "Description
of the Certificates--Principal") after the Due Period in which
such Mortgage Loan becomes a Liquidated Mortgage Loan shall be
zero.
Securities The Mortgage Pass-Through Certificates, Series 199___ (the
"Certificates") will consist of six Classes of senior
certificates: the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4
Certificates, the Class A-5 Certificates and the Class A-6
Certificates (collectively, the "Class A Certificates") and
one Class of subordinated certificates (the "Class R
Certificates"). Only the Class A Certificates (the "Offered
Certificates") are offered hereby. Each Class of Offered
Certificates represents the right to receive payments of
interest at the rates set forth on the cover hereof (with
respect to each such Class, the "Certificate Rate"), payable
monthly, and payments of principal to the extent provided
below. The Class A-1, Class A-2, Class A-3, Class A-4 and
Class A-5 Certificates (collectively, the "Group 1
Certificates") will represent undivided ownership interests in
Loan Group 1 which consists of Mortgage Loans with fixed
interest rates. The Class A-6 Certificates (the "Group 2
Certificates") will represent undivided ownership interests in
Loan Group 2 which consists of Mortgage Loans with adjustable
interest rates. The aggregate undivided interest in the Trust
represented by the Class A Certificates as of the Cut-Off Date
will equal $ of principal (the "Original Aggregate
Class A Principal Balance"). The aggregate undivided interest
in Loan Group 1 represented by the Group 1 Certificates as of
the Cut-Off Date will equal $ of principal. The
aggregate undivided interest in Loan Group 2 represented by
the Class A-3 Certificates as of the Cut-Off Date will equal
$ of principal. The principal amount of a Class of
Class A Certificates (each, a "Class A Principal Balance") on
any date is equal to the applicable Class A Principal Balance
on the Closing Date minus the aggregate of amounts actually
distributed as principal to the holders of such Class of Class
A Certificates. On any date, the "Aggregate Class A Principal
Balance" is, with respect to the Group 1 Certificates, the
aggregate of the Class A Principal Balances of the Group 1
Certificates and with respect to the Group 2 Certificates, the
Class A-6 Principal Balance on such date.
The Mortgage
Loans The Mortgage Loans are expected to consist of $ in
principal amount of fixed- and adjustable-rate mortgage loans
secured by first deeds of trust or mortgages on Mortgaged
Properties located in __ states and the District of Columbia.
The Loan-to-Value Ratio of each Mortgage Loan, computed on the
date such loan was originated (the "Loan-to-Value Ratio") did
not exceed % as of the Cut-Off Date. The weighted
average Loan-to-Value Ratio of the Mortgage Loans was %
as of the Cut-Off Date. See "DESCRIPTION OF THE MORTGAGE
LOANS" herein. Interest on each Mortgage Loan is payable
monthly on the outstanding Principal Balance thereof at a rate
per annum (the "Loan Rate") specified in the related Mortgage
Note. As of the Cut-Off Date, the Loan Rates ranged from
% to % per annum and the weighted average Loan Rate was
% per annum. The Cut-Off Date Principal Balances of the
Mortgage Loans ranged from $ to $ and
averaged $ . Each Mortgage Loan was originated in
the period from to .
Loan Group 1. All of the Mortgage Loans in Loan Group 1 have
Loan Rates which are fixed for the life of such Mortgage
Loans. As of the Cut-Off Date, there are ___ Mortgage Loans
in Loan Group 1. The aggregate Principal Balance of the
Mortgage Loans in Loan Group 1 was $_____________ (the
"Cut-Off Date Loan Group 1 Principal Balance"). As of the
Cut-Off Date with respect to the Mortgage Loans in Loan Group
1, the average Principal Balance was $_________; the Loan
Rates ranged from ____% to _____%; the weighted average Loan
Rate was ______%; the weighted average Loan-to-Value Ratio was
%; and the weighted average remaining term to stated
maturity was ___ months. The remaining terms to stated
maturity of the Mortgage Loans in Loan Group 1 ranged from ___
months to ___ months. The original term to stated maturity of
each Mortgage Loan in Loan Group 1 was ___ months. The
maximum Principal Balance of the Mortgage Loans in Loan Group
1 was $__________ and the minimum Principal Balance of the
Mortgage Loans in Loan Group 1 was $________.
Approximately % of the Mortgage Loans in Loan Group 1 are
Balloon Loans. All of the Balloon Loans amortize over ___
months. No Mortgage Loan in Loan Group 1 will mature later
than .
Loan Group 2. All of the Mortgage Loans in Loan Group 1 have
Loan Rates which are subject to adjustment based on changes in
(LIBOR), as further discussed under "DESCRIPTION OF THE
MORTGAGE LOANS" herein. As of the Cut-Off Date, there are
_____ Mortgage Loans in Loan Group 2. The aggregate Principal
Balance of the Mortgage Loans in Loan Group 2 was
$______________ (the "Cut-Off Date Loan Group 2 Principal
Balance"). As of the Cut-Off Date with respect to the
Mortgage Loans in Loan Group 2, the average Principal Balance
was $_________; the Loan Rates ranged from ____% to _____%;
the weighted average Loan Rate was _____%; the weighted
average Loan-to-Value Ratio was %; and the weighted
average remaining term to stated maturity was ___ months. The
remaining terms to stated maturity of the Mortgage Loans in
Loan Group 2 ranged from ___ months to ___ months. The
original term to stated maturity each Mortgage Loan in Loan
Group 2 was ___ months. The maximum Principal Balance of the
Mortgage Loans in Loan Group 2 was $__________ and the minimum
Principal Balance of the Mortgage Loans in Loan Group 2 was
$________. None of the Mortgage Loans in Loan Group 2 are
Balloon Loans. No Mortgage Loan in Loan Group 2 will mature
later than .
All of the Mortgage Loans in Loan Group 2 have minimum and
maximum Loan Rates. The weighted average minimum Loan Rate of
the Mortgage Loans in Loan Group 2 is approximately % per
annum, with minimum Loan Rates that range from approximately
% per annum to % per annum. The weighted average maximum
Loan Rate of the Mortgage Loans in Loan Group 2 is
approximately % per annum, with maximum Loan Rates that
range from approximately % per annum to % per annum.
The Mortgage Loans in Loan Group 2 have a weighted average
gross margin of approximately % per annum, with gross
margins that range from approximately % per annum to %
per annum. The Mortgage Loans in Loan Group 2 have a weighted
average periodic cap of approximately % per annum, with
periodic caps that range from approximately % per annum
to % per annum.
See "DESCRIPTION OF THE MORTGAGE LOANS" herein.
Denominations The Class A Certificates will be offered for purchase in
denominations of $1,000 and multiples of $1 in excess thereof.
Registration of
Class A
Certificates The Class A Certificates will initially be issued in
book-entry form. Persons acquiring beneficial ownership
interests in the Class A Certificates ("Certificate Owners")
will hold their Class A Certificate interests through The
Depository Trust Company ("DTC"), in the United States, or
Cedel Bank soci t anonyme ("CEDEL") or the Euroclear System
("Euroclear"), in Europe. Transfers within DTC, CEDEL or
Euroclear, as the case may be, will be in accordance with the
usual rules and operating procedures of the relevant system.
So long as the Class A Certificates are Book-Entry
Certificates (as defined herein under "Description of the
Certificates--Book-Entry Certificates"), such Certificates
will be evidenced by one or more Certificates registered in
the name of Cede & Co. ("Cede"), as the nominee of DTC or one
of the relevant depositaries (collectively, the "European
Depositaries"). Cross-market transfers between persons
holding directly or indirectly through DTC, on the one hand,
and counterparties holding directly or indirectly through
CEDEL or Euroclear, on the other, will be effected in DTC
through Citibank N.A. ("Citibank") or Chemical Bank
("Chemical"), the relevant depositaries of CEDEL and
Euroclear, respectively, and each a participating member of
DTC. The interests of such Certificateholders will be
represented by book-entries on the records of DTC and
participating members thereof. No Certificate Owner will be
entitled to receive a definitive certificate representing such
person's interest, except in the event that Definitive
Certificates (as defined herein under "Description of the
Certificates--Book-Entry Certificates") are issued under the
limited circumstances described herein. All references in
this Prospectus Supplement to any Class A Certificates reflect
the rights of Certificate Owners only as such rights may be
exercised through DTC and its participating organizations for
so long as such Class A Certificates are held by DTC. See
"RISK FACTORS--Book-Entry Certificates", "DESCRIPTION OF THE
CERTIFICATES--Book-Entry Certificates" herein and "ANNEX I"
hereto.
Provident The Provident Bank, an Ohio banking corporation (the "Seller"
or the "Master Servicer" as applicable). The principal
executive offices of the Seller and Master Servicer are
located at One East Fourth Street, Cincinnati, Ohio 45202
(Telephone: (513) 579-2000). See "THE PROVIDENT BANK" in the
Prospectus.
Certificate
Rate The "Certificate Rate" on any Distribution Date with respect
to the Class A-1 Certificates is % per annum; the Class A-2
Certificates is % per annum; the Class A-3 Certificates is
% per annum; the Class A-4 Certificates is % per annum;
and the Class A-5 Certificates is % per annum. The
"Certificate Rate" on any Distribution Date with respect to
the Class A-6 Certificates will equal the least of (A) the sum
of the LIBOR Rate (as defined herein under "DESCRIPTION OF THE
CERTIFICATES--The Certificate Rate") plus ____% (or ____% for
each Distribution Date occurring after the date on which the
Master Servicer has the right to terminate the Trust), (B) the
Net Funds Cap for such Distribution Date and (C) ____% per
annum. The "Net Funds Cap" for any Distribution Date shall
equal the difference between (A) the average of the Loan Rates
of the Mortgage Loans in Loan Group 2 as of the first day of
the month preceding the month of such Distribution Date,
weighted on the basis of the related Principal Balances as of
such date and (B) the sum of (i) the Master Servicing Fee Rate
and the rate at which the Trustee Fee and the premium payable
to the Certificate Insurer are calculated and (ii) commencing
with the thirteenth Distribution Date, 0.50%. Interest on the
Group 1 Certificates in respect of any Distribution Date will
accrue during each Interest Period on the basis of a 360-day
year consisting of twelve 30-day months. Interest on the
Group 2 Certificates in respect of any Distribution Date will
accrue during each Interest Period on the basis of a 360-day
year and the actual number of days elapsed.
"Interest Period" means, with respect to each Distribution
Date and the Group 1 Certificates, the period from the first
day of the calendar month preceding the month of such
Distribution Date through the last day of such calendar month.
"Interest Period" means, with respect to each Distribution
Date and the Group 2 Certificates, the period from the
Distribution Date in the month preceding the month of such
Distribution Date (or, in the case of the first Distribution
Date, from the Closing Date) through the day before such
Distribution Date.
Distributions: On the 25th day of each month, or if such a day is not a
Business Day, then the next succeeding Business Day,
commencing in ____________ (each such day, a "Distribution
Date"), the Trustee will be required to distribute from funds
available therefor in the Distribution Account (as described
herein) to the holders of the Offered Certificates of record
as of the applicable Record Date, in the priorities described
below, an aggregate amount equal to the sum of (a) the Class
Interest Distribution for each Class of Offered Certificates,
and (b) the Class A Principal Distribution for each
Certificate Group. So long as an Insurer Default has not
occurred and is continuing, the Class A Principal Distribution
relating to the Group 1 Certificates will be distributed,
sequentially, to the Class A-1, Class A-2, Class A-3, Class
A-4 and Class A-5 Certificates, in that order, such that no
Class of Group 1 Certificates having a higher numerical
designation is entitled to distributions of principal until
the Class A Principal Balance of each such Class of
Certificates having a lower numerical designation has been
reduced to zero. On any Distribution Date during the
continuance of an Insurer Default, the Class A Principal
Distribution relating to the Group 1 Certificates will be
distributed to the Group 1 Certificates outstanding on a pro
rata basis in accordance with the Class A Principal Balance of
each such Class. The Class A Principal Distribution relating
to the Group 2 Certificates will be distributed to the Class
A-6 Certificates. See "DESCRIPTION OF THE CERTIFICATES--
Distributions" herein.
Interest
On each Distribution Date, to the extent of funds available
therefor as described herein, interest will be distributed
with respect to each Class of Class A Certificates in an
amount (each, a "Class Interest Distribution") equal to the
sum of (a) one month's interest at the related Certificate
Rate on the related Class A Principal Balance immediately
prior to such Distribution Date (the "Class Monthly Interest
Distributable Amount") and (b) any Class Interest Carryover
Shortfall for such Class of Class A Certificates for such
Distribution Date. As to any Distribution Date and Class of
Class A Certificates, Class Interest Carryover Shortfall is
the sum of (i) the excess of the related Class Monthly
Interest Distributable Amount for the preceding Distribution
Rate and any outstanding Class Interest Carryover Shortfall
with respect to such Class on such preceding Distribution
Date, over the amount in respect of interest that is actually
distributed to such Class on such preceding Distribution Date
plus (ii) one month's interest on such excess, to the extent
permitted by law, at the related Certificate Rate.
On each Distribution Date, the Class Interest Distribution for
each Class of Class A Certificates in a particular Certificate
Group will be distributed on an equal priority and any
shortfall in the amount required to be distributed as interest
thereon to each such Class will be allocated between such
Classes pro rata based on the amount each such Class would
have been distributed in the absence of such shortfall.
Principal
On each Distribution Date, to the extent of funds available
therefor as described herein, principal will be distributed to
the holders of the Class A Certificates of a Certificate Group
then entitled to distributions of principal in an amount equal
to the lesser of (A) the related Aggregate Class A Principal
Balance and (B) the related Class A Principal Distribution for
such Distribution Date. "Class A Principal Distribution"
means, with respect to any Distribution Date and Certificate
Group, the sum of the related Class A Monthly Principal
Distributable Amount for such Distribution Date and any
outstanding Class A Principal Carryover Shortfall as of the
close of the preceding Distribution Date.
"Class A Monthly Principal Distributable Amount" means, with
respect to any Distribution Date and Certificate Group, to the
extent of funds available therefor as described herein, the
amount equal to the sum of the following amounts (without
duplication) with respect to the immediately preceding Due
Period (as defined below): (i) each payment of principal on a
Mortgage Loan in the related Loan Group received by the Master
Servicer during such Due Period, including all full and
partial principal prepayments, (ii) the Principal Balance as
of the end of the immediately preceding Due Period of each
Mortgage Loan in the related Loan Group that became a
Liquidated Mortgage Loan for the first time during the related
Due Period, (iii) the portion of the Purchase Price allocable
to principal of all repurchased Defective Mortgage Loans in
the related Loan Group with respect to such Due Period, (iv)
any Substitution Adjustment Amounts received on or prior to
the previous Determination Date and not yet distributed with
respect to the related Loan Group and (v) such portion (not
greater than 100%) of Excess Spread (as defined below), if
any, required to be distributed on such Distribution Date to
satisfy the required level of overcollateralization for the
related Loan Group for such Distribution Date (the
"Distributable Excess Spread").
If the required level of overcollateralization for a
Certificate Group is reduced below the then existing amount of
overcollateralization (described below) or if the required
level of overcollateralization for such Certificate Group is
satisfied, the amount of the related Class A Monthly Principal
Distributable Amount on the following Distribution Date will
be correspondingly reduced by the amount of such reduction or
by the amount necessary such that the overcollateralization
will not exceed the required level of overcollateralization
for a Certificate Group after giving effect to the
distribution in respect of principal with respect to such
Certificate Group to be made on such Distribution Date.
"Due Period" means, with respect to any Determination Date or
Distribution Date, the calendar month immediately preceding
such Determination Date or Distribution Date, as the case may
be.
For a description of a "Liquidated Mortgage Loan" see
"DESCRIPTION OF THE CERTIFICATES--Principal" herein.
"Excess Spread" means, with respect to any Distribution Date
and Loan Group, the positive excess, if any, of (x) Available
Funds (as defined herein under "Description of the
Certificates--Deposits to the Distribution Account") for the
related Certificate Group for such Distribution Date over (y)
the amount required to be distributed pursuant to subclause A
items (i) through (iv), with respect to the Group 1
Certificates and subclause B items (i) through (iv), with
respect to the Group 2 Certificates, in each case set forth
under the heading "DESCRIPTION OF CERTIFICATES--Priority of
Distributions" on such Distribution Date. Distributions of
Excess Spread relating to a Loan Group to the holders of Class
A Certificates of the related Certificate Group will result in
acceleration of principal payments to the holders of such
Class A Certificates creating overcollateralization to the
extent required by the Agreement. This feature will have the
effect of reducing the weighted average lives of the Class A
Certificates. See "DESCRIPTION OF CERTIFICATES--
Overcollateralization Provisions" and "PREPAYMENT AND YIELD
CONSIDERATIONS" herein.
The last scheduled Distribution Date for each Class of Offered
Certificates is as follows: Class A-1 Certificates, ;
Class A-2 Certificates, ; Class A-3
Certificates, ; Class A-4 Certificates,
; Class A-5 Certificates, ; and Class A-6
Certificates, . It is expected that the actual
last Distribution Date for each Class of Offered Certificates
will occur significantly earlier than such scheduled
Distribution Dates. See "PREPAYMENT AND YIELD
CONSIDERATIONS."
Over-
collateraliz-
ation The credit enhancement provisions of the Trust result in a
limited acceleration of the Class A Certificates of a
Certificate Group relative to the amortization of the Mortgage
Loans in the related Loan Group in the early months of the
transaction. The accelerated amortization is achieved by the
application of Excess Spread relating to a Loan Group to
principal distributions on the Class A Certificates of the
related Certificate Group. This acceleration feature creates,
with respect to each Certificate Group, overcollateralization
(i.e., the excess of the aggregate outstanding Principal
Balance of the Mortgage Loans in the related Loan Group over
the related Aggregate Class A Principal Balance). Once the
required level of overcollateralization is reached for a
Certificate Group, and subject to the provisions described in
the next paragraph, the acceleration feature for such
Certificate Group will cease, until necessary to maintain the
required level of overcollateralization for such Certificate
Group.
The Agreement will provide that, subject to certain floors,
caps and triggers, the required level of overcollateralization
with respect to a Certificate Group may increase or decrease
over time. An increase in the required level of
overcollateralization for a Certificate Group will result if
the delinquency or default experience on the Mortgage Loans in
the related Loan Group exceeds certain levels set forth in the
Agreement. In that event, amortization of the related Class A
Certificates would be accelerated relative to the Mortgage
Loans until the level of overcollateralization reaches its
required level. The required level of overcollateralization
may be decreased under certain circumstances, which will slow
the amortization of the Class A Certificates of the related
Certificate Group relative to the Mortgage Loans.
See "PREPAYMENT AND YIELD CONSIDERATIONS" and "DESCRIPTION OF
THE CERTIFICATES--Overcollateralization Provisions."
Cross-
collateraliz-
ation In addition to the foregoing, the Agreement provides for
crosscollateralization through the application of Excess
Spread generated by one Loan Group to fund shortfalls in
Available Funds in the other Loan Group, subject to certain
prior requirements of such Available Funds. See "DESCRIPTION
OF THE CERTIFICATES--Priority of Distributions" and
"PREPAYMENT AND YIELD CONSIDERATIONS."
The Policy The Policy will unconditionally and irrevocably guarantee
principal payments (as described in the next sentence) on the
Class A Certificates plus accrued and unpaid interest due on
the Class A Certificates. On each Distribution Date, a draw
will be made on the Policy equal to the sum of (a) the amount
by which interest accrued during the applicable Interest
Period at the applicable Certificate Rate for each Class of
Class A Certificates on the related outstanding Class A
Principal Balance exceeds the amount on deposit in the
Distribution Account available to be distributed therefor on
such Distribution Date and (b) with respect to each
Certificate Group, the amount (each, a "Guaranteed Principal
Amount"), if any, by which the Aggregate Class A Principal
Balance exceeds the related Loan Group Principal Balance at
the end of the previous month (after giving effect to all
amounts distributable and allocable to principal on the
related Class A Certificates on such Distribution Date). In
addition, the Policy will guarantee the payment in full of the
applicable Aggregate Class A Principal Balance to the Group 1
Certificates and the Group 2 Certificates on the Distribution
Date in and , respectively (after
giving effect to all other amounts distributable and allocable
to principal on such Classes on such Distribution Date).
In the absence of payments under the Policy, Class A
Certificateholders will directly bear the credit and other
risks associated with their undivided interest in the Trust.
See "DESCRIPTION OF THE CERTIFICATES--The Policy," herein.
The Certificate
Insurer (________________________________________________________)(the
"Certificate Insurer"). See "DESCRIPTION OF THE CERTIFICATES-
-The Policy" and "THE CERTIFICATE INSURER" herein.
(Pre-Funding
Account On the Closing Date, $__________ (the "Pre-Funded Amount")
will be deposited in an account (the "Pre-Funding Account"),
which account shall be in the name of and maintained by the
Trustee and shall be part of the Trust Fund and will be used
to acquire Subsequent Mortgage Loans. During the period
beginning on the Closing Date and terminating on ____________,
19__ (the "Funding Period"), the Pre-Funded Amount will be
maintained in the Pre-Funding Account. The Pre-Funded Amount
will be reduced during the Funding Period by the amount
thereof used to purchase Subsequent Mortgage Loans in
accordance with the Agreement. Any Pre-Funded Amount
remaining at the end of the Funding Period will be distributed
to holders of the classes of Certificates entitled to receive
principal on the Distribution Date in ________ 19__ in
reduction of the related Certificate Principal Balances, thus
resulting in a partial principal prepayment of the related
Certificates on such date. The Pre-Funding Account shall not
be an asset of the REMIC. All reinvestment earnings on the
Pre-Funding Account shall be owned by, and be taxable to, the
Seller.
Capitalized
Interest
Account On the Closing Date there will be deposited in an account (the
"Capitalized Interest Account") maintained with and in the
name of the Trustee on behalf of the Trust Fund a portion of
the proceeds of the sale of the Certificates. The amount
deposited therein will be used by the Trustee on the
Distribution Dates in __________ 19__, __________, 19__ and
__________ 19__ to cover shortfalls in interest on the
Certificates that may arise as a result of the utilization of
the Pre-Funding Account for the purchase by the Trust Fund of
Subsequent Mortgage Loans after the Closing Date. Any amounts
remaining in the Capitalized Interest Account at the end of
the Funding Period are required to be paid directly to
Provident.) The Capitalized Interest Account shall not be an
asset of the REMIC. All reinvestment earnings on the
Capitalized Interest Account shall be owned by, and be taxable
to, the Seller.
Servicing The Master Servicer will be responsible for servicing,
managing and making collections on the Mortgage Loans. The
Master Servicer will deposit all collections in respect of the
Mortgage Loans into the Collection Account as described
herein. On the eighteenth day of the month (each, a
"Determination Date"), the Trustee will calculate the amounts
to be paid, as described herein, to the Certificateholders on
the next Distribution Date. See "DESCRIPTION OF THE
CERTIFICATES--Priority of Distributions." With respect to
each Due Period, the Master Servicer will receive from
payments in respect of interest on the Mortgage Loans, on
behalf of itself, a portion of such payments as a monthly
servicing fee (the "Master Servicing Fee") in the amount of
% per annum (the "Master Servicing Fee Rate") on the Principal
Balance of each Mortgage Loan as of the first day of each such
Due Period. See "DESCRIPTION OF THE CERTIFICATES--Servicing
Compensation and Payment of Expenses." In certain limited
circumstances, the Master Servicer may resign or be removed,
in which event either the Trustee or a third-party servicer
will be appointed as successor master servicer. See
"DESCRIPTION OF THE CERTIFICATES--Certain Matters Regarding
the Master Servicer" herein.
Trustee (______________________________________), a _________________
(the "Trustee").
Monthly
Advances (The Master Servicer is required to remit to the Trustee no later
than two Business Days prior to each Distribution Date, for deposit
in the Distribution Account, an amount equal to the scheduled
installment of interest and principal due on each Mortgage Loan but
not received by the Master Servicer during the related Due Period
(a "Monthly Advance"). Such obligation of the Master Servicer
continues with respect to each Mortgage Loan until such Mortgage
Loan becomes a Liquidated Mortgage Loan. The Master Servicer is
not required to make any Monthly Advances which it determines would
be nonrecoverable. Monthly Advances are reimbursable to the Master
Servicer subject to certain conditions and restrictions, and are
intended to provide sufficient funds for the payment of interest on
the Class A Certificates.) See "DESCRIPTION OF THE CERTIFICATES--
ADVANCES" herein.
Prepayment Interest
Shortfalls Not later than the Determination Date, the Master Servicer is
required to remit to the Trustee, without any right of
reimbursement, an amount equal to, with respect to each
Mortgage Loan as to which a principal prepayment in full was
received during the related Due Period, the lesser of (a) the
excess, if any, of 30 days' interest on the Principal Balance
of such Mortgage Loan at the Loan Rate (or at such lower rate
as may be in effect for such Mortgage Loan because of
application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended (the "Civil Relief Act")), minus the Master
Servicing Fee for such Mortgage Loan over the amount of
interest actually paid by the related Mortgagor in connection
with such principal prepayment (with respect to all such
Mortgage Loans, the "Prepayment Interest Shortfall") and (b)
the sum of the aggregate Master Servicing Fee received by the
Master Servicer in the most recently ended Due Period.
Civil Relief Act Interest Shortfalls will not be covered by
the Policy, although Prepayment Interest Shortfalls, after
application of the Master Servicing Fee will be so covered.
The Master Servicer is not obligated to offset any of the
Master Servicing Fee against, or to provide any other funds to
cover, any shortfalls in interest collections on the Mortgage
Loans that are attributable to the application of the Civil
Relief Act ("Civil Relief Act Interest Shortfalls"). See
"RISK FACTORS--Payments on the Mortgage Loans" herein.
Optional Termination
by the Master
Servicer The Master Servicer may, at its option, terminate the
Agreement on any date on which the aggregate Principal Balance
of the Mortgage Loans is less than 5% of the Cut-Off Date Pool
Principal Balance at the price described herein under
"DESCRIPTION OF THE CERTIFICATES--Termination; Retirement of
the Certificates."
Certain Federal
Tax
Considerations For federal income tax purposes, the Trust created by the
Agreement will be treated as a "real estate mortgage
investment conduit" ("REMIC"). In the opinion of Brown & Wood
LLP, tax counsel to Provident ("Tax Counsel"), the Class A
Certificates will constitute "regular interests" in the REMIC
and will be treated as debt instruments of the REMIC for
federal income tax purposes with payment terms equivalent to
the terms of such Certificates. The Class R Certificates (the
"Residual Certificates") will constitute the sole class of
"residual interests" in the REMIC and will be the Class of
Residual Certificates, as described in the Prospectus.
The holders of the Offered Certificates will be required to
include in income interest on such Certificates in accordance
with the accrual method of accounting.
The Offered Certificates may, depending on their issue price,
be treated as having been issued with original issue discount
for federal income tax purposes. For further information
regarding the federal income tax consequences of investing in
the Offered Certificates, see "FEDERAL INCOME TAX
CONSEQUENCES" herein and "FEDERAL INCOME TAX CONSEQUENCES" in
the Prospectus.
ERISA
Considerations The acquisition of an Offered Certificate by a pension or
other employee benefit plan (a "Plan") subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
could, in some instances, result in a "prohibited transaction"
or other violation of the fiduciary responsibility provisions
of ERISA and Code Section 4975. Certain exemptions from the
prohibited transaction rules could be applicable to the
acquisition of such Offered Certificates. Any Plan fiduciary
considering whether to purchase any Offered Certificate on
behalf of a Plan should consult with its counsel regarding the
applicability of the provisions of ERISA and the Code.
Subject to the considerations and conditions described under
"ERISA CONSIDERATIONS" herein, it is expected that the Offered
Certificates may be purchased by a Plan.
Legal Investment
Considerations The Offered Certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA") so long as they are rated in
one of the two highest rating categories by at least one
nationally recognized statistical rating organization and, as
such, are legal investments for certain entities to the extent
provided in SMMEA.
Institutions whose investment activities are subject to review
by federal or state regulatory authorities should consult with
their counsel or the applicable authorities to determine
whether an investment in the Offered Certificates complies
with applicable guidelines, policy statements or restrictions.
See "LEGAL INVESTMENT CONSIDERATIONS" herein and "LEGAL
INVESTMENT" in the Prospectus.
Certificate
Rating It is a condition to the issuance of the Offered Certificates
that they receive ratings of "AAA" by
__________________________ and _____ by ____
_________________________________________________. In
general, ratings address credit risk and do not address the
likelihood of prepayments. See "RATINGS" herein and "RISK
FACTORS--Rating of the Securities" in the Prospectus.
RISK FACTORS
Consequences on Liquidity and Payment Delay Because of Owning Book-Entry
Certificates. Issuance of the Offered Certificates in book-entry form may
reduce the liquidity of such Certificates in the secondary trading market
since investors may be unwilling to purchase Offered Certificates for which
they cannot obtain physical certificates. Since transactions in the Offered
Certificates can be effected only through DTC, CEDEL, Euroclear,
participating organizations, indirect participants and certain banks, the
ability of a Certificate Owner to pledge an Offered Certificate to persons or
entities that do not participate in the DTC, CEDEL or Euroclear system or
otherwise to take actions in respect of such Certificates, may be limited due
to lack of a physical certificate representing the Offered Certificates.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Offered Certificates since
such distributions will be forwarded by the Trustee to DTC and DTC will
credit such distributions to the accounts of its Participants (as defined
herein under "DESCRIPTION OF THE CERTIFICATES--Book-Entry Certificates")
which will thereafter credit them to the accounts of Certificate Owners
either directly or indirectly through indirect participants. See
"DESCRIPTION OF THE CERTIFICATES--Book-Entry Certificates" herein.
Cash Flow Considerations and Risks of Shortfall. With respect to %
of the Mortgage Loans in Loan Group 1 (by Cut-Off Date Loan Group 1 Principal
Balance), collections on such Mortgage Loans may vary because, among other
things, borrowers are not required to make monthly payments of principal that
will be sufficient to amortize such Mortgage Loans by their maturity
(collectively, "Balloon Loans"). The ability of a borrower to make such a
payment may depend on the ability of the borrower to obtain refinancing of
the balance due on a Balloon Loan. An increase in interest rates over the
Loan Rate applicable at the time a Balloon Loan was originated may have an
adverse effect on the borrower's ability to obtain refinancing or to pay the
required monthly payment. Collections on the Mortgage Loans may also vary
due to seasonal purchasing and payment habits of borrowers.
With respect to certain Balloon Loans, general credit risk may also be
greater to holders of Group 1 Certificates than to holders of instruments
representing interests in level payment fully amortizing first mortgage
loans. Even assuming that the Mortgaged Properties provide adequate security
for the Mortgage Loans, substantial delays could be encountered in connection
with the liquidation of Mortgage Loans that are delinquent and resulting
shortfalls in distributions to Certificateholders could occur if the
Certificate Insurer were unable to perform its obligations under the Policy.
Further, liquidation expenses (such as legal fees, real estate taxes, and
maintenance and preservation expenses) will reduce the proceeds payable to
Certificateholders and thereby reduce the security for the Mortgage Loans.
In the event any of the Mortgaged Properties fail to provide adequate
security for the related Mortgage Loans, Certificateholders could experience
a loss if the Certificate Insurer were unable to perform its obligations
under the Policy.
Prepayment Considerations and Effect on Yield to Maturity and Weighted
Average Life of Certificates. All of the Mortgage Loans may be prepaid in
whole or in part at any time. However, approximately __% of the Mortgage
Loans are subject to prepayment penalties which vary from jurisdiction to
jurisdiction. The Trust's prepayment experience may be affected by a wide
variety of factors, including general economic conditions, interest rates,
the availability of alternative financing and homeowner mobility. In
addition, all of the Mortgage Loans contain due-on-sale provisions and the
Master Servicer will be required by the Agreement to enforce such provisions
unless (i) such enforcement is not permitted by applicable law or (ii) the
Master Servicer, in a manner consistent with reasonable commercial practice,
permits the purchaser of the related Mortgaged Property to assume the
Mortgage Loan. To the extent permitted by applicable law, such assumption
will not release the original borrower from its obligation under any such
Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF LOANS--Due-on-Sale Clauses in
Mortgage Loans" in the Prospectus.
Certificate Rating Based Primarily on Claims-Paying Ability of the
Certificate Insurer. The rating of the Offered Certificates will depend
primarily on an assessment by the Rating Agencies of the Mortgage Loans and
upon the claims-paying ability of the Certificate Insurer. Any reduction in
a rating assigned to the claims-paying ability of the Certificate Insurer
below the rating initially given to the Offered Certificates may result in a
reduction in the rating of the Offered Certificates. The rating by the
Rating Agencies of the Offered Certificates is not a recommendation to
purchase, hold or sell the Offered Certificates, inasmuch as such rating does
not comment as to the market price or suitability for a particular investor.
There is no assurance that the ratings will remain in place for any given
period of time or that the ratings will not be lowered or withdrawn by the
Rating Agencies. In general, the ratings address credit risk and do not
address the likelihood of prepayments. The ratings of the Offered
Certificates do not address the possibility of the imposition of United
States withholding tax with respect to non-U.S. persons.
Legal Considerations Resulting from Sale Treatment. The sale of the
Mortgage Loans from the Seller to the Trust will be treated by the Seller and
the Trust as a sale of the Mortgage Loans. The Seller will warrant that such
transfer is a sale of its interest in the Mortgage Loans. In the event of an
insolvency of the Seller, it is possible that a receiver or conservator for,
or a creditor of, the Seller, may argue that the transaction between the
Seller and the Trust, with respect to the Mortgage Loans was a pledge of such
Mortgage Loans in connection with a borrowing by the Seller rather than a
true sale. Such an attempt, even if unsuccessful, could result in delays in
distributions on the Offered Certificates.
(The terms of the Agreement provide that the Seller will maintain
possession of the documentation relating to each Mortgage Loan (the "Mortgage
File"), and no assignment of any Mortgage is required to be recorded in the
name of the Trustee, unless an Assignment Event occurs. Within 30 days of
any such occurrence, the Seller, at its expense, is required to deliver the
Mortgage File to the Trustee and to either cause proper assignments of each
Mortgage to be recorded, at its expense, or to deliver assignments of each
Mortgage, in recordable form, to the Trustee, together with an opinion of
counsel to the effect that recordation of such assignments in not necessary
in order to perfect the interests of the Trust in such Mortgages. Prior to
delivery and recording, the interest of the Trustee in the Mortgages, the
Mortgage Notes and the proceeds thereof may be subject to the claims of
creditors or to sale to a third party, as well as to a receiver or
conservator appointed in the event of the insolvency of the Seller.
An "Assignment Event" will occur on the 30th day following either (i)
the occurrence and continuance of an Event of Default, (ii) the reduction of
the Seller's long-term unsecured debt rating below "Baa2" by Moody's or "BBB"
by S&P or (iii) the suspension, termination or withdrawal of the Seller's
long-term unsecured debt rating by Moody's or S&P.
In an insolvency proceeding of the Seller, if the Mortgage Notes have
not been delivered to the Trustee and the Mortgages have not been assigned of
record in the real property recording office, the Trust may be a general
unsecured creditor of the Seller. If the Trust were determined to be a
general unsecured creditor of the Seller, the Mortgages, the Mortgage Notes
and the proceeds thereof would not be available to make payments on the
Offered Certificates.)
Payments on the Mortgage Loans and Effect of Reduced Payments of
Interest on the Mortgage Loans. When a principal prepayment in full is made
on a Mortgage Loan, the Mortgagor is charged interest only up to the date of
such prepayment, instead of for a full month which may result in a Prepayment
Interest Shortfall. The Master Servicer is obligated to pay, without any
right of reimbursement, those shortfalls in interest collections payable on
the Class A Certificates that are attributable to Prepayment Interest
Shortfalls, but only to the extent of the Master Servicing Fee for the
related Due Period (any such payment, "Compensating Interest"). The Master
Servicing Fee will not be available to cover any shortfalls in interest
collections on the Mortgage Loans that are attributable to Civil Relief Act
Interest Shortfalls. Civil Relief Act Interest Shortfalls will not be
covered by payments under the Policy, although Prepayment Interest
Shortfalls, after application of the Master Servicing Fee as described above,
will be so covered.
(Risk of Losses as a Result of Geographic Concentration. The Mortgaged
Properties relating to the Mortgage Loans are located in __ states and the
District of Columbia. However, most of the Mortgaged Properties are located
in (state or region). Certain regions of the country, including (state or
region), recently have experienced a severe decline in real estate values.
Approximately % and % (by aggregate principal balance as of the
Cut-Off Date) of the Mortgaged Properties relating to the Mortgage Loans are
located in and
, respectively. To the extent that (state or region) has experienced
or may experience in the future weaker economic conditions or greater rates
of decline in real estate values than the United States generally, such a
concentration of the Mortgage Loans may be expected to exacerbate the
foregoing risks. The Seller can neither quantify the impact of any recent
property value declines on the Mortgage Loans nor predict whether, to what
extent or for how long such declines may continue.)
(Risk of Prepayment Due to Subsequent Mortgage Loans. The ability of
the Seller to purchase mortgage loans subsequent to the date hereof and on or
prior to ____________, 19__ that meet the requirements for transfer during
the Funding Period under the Agreement is affected by a variety of factors,
including interest rates, unemployment levels, the rate of inflation and
consumer perception of economic conditions generally. On the Distribution
Date in ____________ 19__, a principal prepayment will be made to the holders
of the Certificates in the amount which represents the excess of the original
Pre-Funded Amount over the Principal Balance of all Subsequent Mortgage Loans
as of the related Cut-Off Date (i.e., the balance on deposit in the Pre-
Funding Account on such date (net of investment earnings)). All Subsequent
Mortgage Loans shall be added from a specified group of Mortgage Loans.
Although no assurances can be given, Provident intends that no material
principal prepayment will be required to be made to the holders of the
Certificates on the Distribution Date in ____________ 19__. Any reinvestment
risk resulting from such prepayment will be borne entirely by the
Certificateholders.)
THE CERTIFICATE INSURER
The information set forth in this section and in the financial
statements of the Certificate Insurer set forth in Appendix A and Appendix B
hereto have been provided by the Certificate Insurer. No representation is
made by the Underwriter, the Seller, the Master Servicer or any of their
affiliates as to the accuracy or completeness of any such information.
_____________ is not obligated to pay the debts of or claims against the
Certificate Insurer. The Certificate Insurer is domiciled in the State of
New York and licensed to do business in all (50 states, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the Territory of
Guam).
The tables below present selected financial information of the
Certificate Insurer determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities ("SAP")
and generally accepted accounting principles ("GAAP"):
SAP
December 31, 1996 Quarterly Report
(Audited) (Unaudited)
(in millions)
GAAP
December 31, 1996 Quarterly Report
(Audited) (Unaudited)
(in millions)
Audited financial statements of the Certificate Insurer as of December
31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 are included herein as Appendix A. Unaudited financial
statements of the Certificate Insurer for the ( )-month period ended
( ) are included herein as Appendix B. Such financial
statements have been prepared on the basis of generally accepted accounting
principles. Copies of the Certificate Insurer's 1996 year-end audited
financial statements prepared in accordance with statutory accounting
practices are available from the Certificate Insurer.
A copy of the Annual Report on Form 10-K is available from the
Certificate Insurer or the Securities and Exchange Commission. The address
of the Certificate Insurer is _______________________________________.
The Certificate Insurer does not accept any responsibility for the
accuracy or completeness of this Prospectus or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the
accuracy of the information regarding the Policy and the Certificate Insurer
set forth under the headings "DESCRIPTION OF THE CERTIFICATES--The Policy"
and in Appendices A and B.
Moody's Investors Service, Inc. rates the claims paying ability of the
Certificate Insurer "Aaa".
Standard & Poor's Rating Services rates the claims paying ability of the
Certificate Insurer "AAA".
Fitch Investors Service L.P. rates the claims paying ability of the
Certificate Insurer "AAA".
Each rating of the Certificate Insurer should be evaluated
independently. The ratings reflect the respective rating agency's current
assessment of the creditworthiness of the Certificate Insurer and its ability
to pay claims on its policies of insurance. Any further explanation as to
the significance of the above ratings may be obtained only from the
applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Certificates, and such ratings may be subject to revision or withdrawal at
any time by the rating agencies. Any downward revision or withdrawal of any
of the above ratings may have an adverse effect on the market price of the
Certificates. The Certificate Insurer does not guaranty the market price of
the Certificates nor does it guaranty that the ratings on the Certificates
will not be revised or withdrawn.
THE PROVIDENT BANK
Provident will be responsible for servicing the Mortgage Loans for the
Trust in accordance with the terms of the Agreement. Beginning on
_______________, __________________________ (the "Subservicer") will service
the Mortgage Loans for Provident pursuant to a Subservicing Agreement, dated
as of _____________, 199__, between Provident and the Subservicer. The terms
and conditions of the Subservicing Agreement are consistent with and do not
violate the provisions of the Agreement. Such subservicing does not relieve
Provident from any of its obligations to service the Mortgage Loan in
accordance with the terms and conditions of the Agreement. See "--Servicing
and Collection Procedures."
Provident is the principal banking subsidiary of Provident Bancorp,
Inc., a Cincinnati based bank holding company registered under the Bank
Holding Company Act. Provident Bancorp, Inc. operates throughout Ohio,
Northern Kentucky and Southeastern Indiana. As of ______________, Provident
Bancorp, Inc. had total assets of $____ billion, net loans of $_____ billion,
deposits of $_____ billion and total shareholders' equity of $____ million.
For the fiscal year ended ________________, Provident Bancorp, Inc. had net
earnings of $____ million. At _________________, Provident Bancorp, Inc.'s
tier 1 and total capital ratios were _____% and _____%, respectively.
Provident represents approximately 96% of Provident Bancorp, Inc.'s assets.
CREDIT AND UNDERWRITING GUIDELINES
The following is a description of the underwriting guidelines
customarily employed by Provident with respect to Mortgage Loans which it
purchases or originates. Each Mortgage Loan was underwritten according to
these guidelines. Provident believes its standards are consistent with those
utilized by similar lenders generally. The underwriting process is intended
to assess both the prospective borrower's ability to repay and the adequacy
of the real property security as collateral for the loan granted. In certain
cases, loans may be made outside of those guidelines with the prior approval
of an underwriting manager of Provident.
Provident generally originates or purchases loans which either fully
amortize over a period not to exceed 360 months or provide for amortization
over a 360 month schedule with a "balloon" payment required at the maturity
date, which will not be less than fifteen (15) years after origination. The
loan amounts generally range from a minimum of $10,000 to a maximum of
$500,000 unless a higher amount is specifically approved by a senior official
of Provident. Provident primarily originates or purchases non-purchase money
first or second mortgage loans although Provident also originates certain
purchase money first mortgages.
The homes used for collateral to secure the loans may be either primary
residential (which includes second and vacation homes) or investor owned one-
for four-family homes, condominiums, townhouses or manufactured housing.
Generally, each home must have a minimum appraised value as described below.
Mobile housing or agricultural land are not accepted as collateral. In some
cases, the loan may be secured by the owner-occupied residence plus
additional collateral.
Each property proposed as security for a loan must be appraised not more
than six months prior to the date of such loan. The combined loan-to-value
ratio of the first and second mortgages generally may not exceed 85%. If a
prior mortgage exists, Provident first reviews the first mortgage history.
If it contains open-end, advance or negative amortization provisions, the
maximum potential first mortgage balance is used in calculating the combined
loan-to-value ratio which determines the maximum loan amount.
For Provident's full documentation process, each mortgage applicant must
provide, and Provident must verify, personal financial information. The
applicant's total monthly obligations (which includes principal and interest
on each mortgage, tax assessments, other loans, charge accounts and all other
scheduled indebtedness) generally cannot exceed 60% of the applicant's gross
monthly income. Applicants who are salaried employees must provide current
employment information in addition to two recent years of employment history
and Provident verifies this information. Verifications are based on written
confirmation from employers or a combination of the two most recent pay
stubs, the two most recent years' W-2 tax forms and telephone confirmation
from the employer. Self-employed applicants must be self-employed in the
same field for a minimum of two years. The self-employed applicant must
provide signed copies of complete federal income tax returns (including
schedules) filed for the most recent two years.
For Provident's non-income verifier program, proof of one year history
of employment plus proof of current self-employed status is required. The
applicant's debt-to-income ratio is calculated based on income as certified
by the borrower on the application and must be reasonable. The maximum
combined loan-to-value ratio may not exceed 80% for the non-income verifier
program.
A credit report by an independent credit reporting agency is required
reflecting the applicant's complete credit history. The credit report should
reflect all delinquencies of 30 days or more, repossessions, judgments,
foreclosures, garnishments, bankruptcies, divorce actions and similar adverse
credit practices that can be discovered by a search of public records. If
the report is obtained more than 60 days prior to the loan closing, the
lender must determine that the reported information has not changed. Written
verification is obtained of any first mortgage balance if not reported in the
credit bureau.
Generally, the applicant should have an acceptable credit history given
the amount of equity available, the strength of the applicant's employment
history and the level of the applicant's income to debt obligations. The
rescission period (generally, a period of three days) must have expired prior
to funding a loan. The rescission period may not be waived by the applicant
except as permitted by law. Either an ALTA title insurance policy or an
attorney's opinion of title is required for all loans.
The applicant is required to secure property insurance in an amount
sufficient to cover the new loan and any prior mortgage. If the sum of the
outstanding first mortgage, if any, and the home equity loan exceeds
replacement value, insurance equal to replacement value may be accepted.
Provident must ensure that its name and address is properly added to the
"Mortgage Clause" of the insurance policy. In the event Provident's name is
added to a "Loss Payee Clause" and the policy does not provide for written
notice of policy changes or cancellation, an endorsement adding such
provision is required.
Provident's credit underwriting guidelines require that any major
deferred maintenance on any property must be cured from the proceeds of the
loan.
SERVICING AND COLLECTION PROCEDURES
The following is a description of the servicing and collection policies
and procedures customarily and currently employed by the Master Servicer with
respect to its mortgage loan and servicing portfolio. The Master Servicer
revises such policies and procedures from time to time in connection with
changing economic and market conditions and changing legal requirements.
Centralized controls and standards have been established by the Master
Servicer for the servicing and collection of mortgage loans in its portfolio.
Servicing of the Master Servicer's portfolio is conducted through its primary
office in San Diego, California. Servicing includes, but is not limited to,
post-origination loan processing, customer servicer, collections and
liquidations.
The Master Servicer's collection policy emphasizes working with
borrowers in default in an effort to bring payments current and avoid
foreclosures. Under the Master Servicer's current collection procedures
(which may change from time to time), collectors contact borrowers according
to the following schedule:
DAYS OF
DELINQUENCY
-----------
7 An initial contact is made to attempt to arrange a
definite payment arrangement.
10-20 On the tenth day of delinquency, if no promise to
pay has been established, a letter is sent, and at
least three calls are made within this period, after
which a late charge is assessed and a late charge
notice is mailed.
20-30 If the mortgagor has not been reached, skip tracing
begins. The credit application is consulted for
points of contact. A credit report is ordered and
other creditors are called.
31 A two month letter is mailed. Follow up calls are
made on all accounts lacking a promise to pay.
Property inspections are ordered on all loans
lacking a promise to pay.
45-50 Demand letters are mailed.
65-70 Foreclosure review is performed. A document file is
assembled for the attorney to prepare for
foreclosure. Brokers' price opinions are requested
in order to determine property value. If the
delinquent loan is a second lien, the first
lienholder is notified that the file is being
prepared for foreclosure.
75-80 The file is referred to an attorney to begin
foreclosure. All subsequent calls regarding the
loan are referred to the attorney. Foreclosure
proceedings are completed within the time limits
designated by the state.
DELINQUENCY AND LOSS EXPERIENCE
The following table sets forth Provident's delinquency and loss
experience on its total loan portfolio of mortgage loans similar to the
Mortgage Loans at the dates indicated. There can be no assurance that the
delinquency and loss experience on the Mortgage Loans will be consistent with
the historical information provided below. Accordingly, this information
should not be considered to reflect the credit quality of the Mortgage Loans
included in the Trust, or a basis of assessing the likelihood, amount or
severity of losses on the Mortgage Loans. The statistical data in the table
is based on all of the loans in Provident;s servicing portfolio. The
Mortgage Loans may, in general, be more recently originated than, and are
likely to have other characteristics which distinguish them from, the
majority of the loans in Provident's servicing portfolio.
The information in the tables below has not been adjusted to eliminate
the effect of the significant growth in the size of Provident's mortgage loan
portfolio during the periods shown. Accordingly, loss and delinquency as
shown if a group of mortgage loans were artificially isolated at a point in
time and the information showed the activity only in that isolated group.
However, since most of the mortgage loans in Provident's mortgage loan
portfolio are not fully seasoned, the delinquency and loss information for
such an isolated group would also be distorted to some degree.
The following table sets forth information relating to the delinquency
and loss experience of mortgage loans similar to and including the Mortgage
Loans for the three quarters ended (December 31, 1995) and (March 31, 1996).
<TABLE>
<CAPTION> Quarter Ended
March 31, 1996 December 31, 1995
Number of Dollar Number of
Loans Amount Loans Dollar Amount
<S> <C> <C> <C> <C>
Portfolio . . . . . . . . . . . . (765 $72,345,012 310 $31,214,760
Delinquency percentage(1)
30-59 days . . . . . . . . . . 0.26% 0.28% 0.00% 0.00%
60-89 days . . . . . . . . . . 0.39% 0.42% 0.00% 0.00%
90 days or more . . . . . . . . 0.13% 0.13% 0.00% 0.00%
Total . . . . . . . . . . . . . . 0.83% 0.83% 0.00% 0.00%
Percentage of Net Gains/
(Losses) on liquidated
loans . . . . . . . . . . . . . _____% _____% _____% _____%)
</TABLE>
- --------------
(1) The period of delinquency is based on the number of days the
payment is contractually past due.
DESCRIPTION OF THE MORTGAGE LOANS
GENERAL
The statistical information presented in this Prospectus Supplement is
only with respect to the Mortgage Loans and describes the Mortgage Loans in
Loan Group 1 and the Mortgage Loans in Loan Group 2 and is based on the
characteristics of such Loan Group as of the Cut-Off Date.
The Mortgage Loans are divided into two Loan Groups. Loan Group 1
consists of Mortgage Loans with fixed interest rates. Loan Group 2 consists
of Mortgage Loans with adjustable interest rates.
The Mortgage Loans to be purchased by the Trust will be originated or
purchased by Provident and sold by Provident to the Trust.
The Mortgage Pool consists of Mortgage Loans with an aggregate
Principal Balance as of the Cut-Off Date of $ (the "Cut-Off Date
Pool Principal Balance"). The Mortgage Pool consists of fixed and adjustable
rate mortgage loans with remaining terms to stated maturity of not more than
months (including both fully amortizing and Balloon Loans). Approximately
% of the Mortgage Loans (by Cut-Off Date Pool Principal Balance) were 30 to
59 days delinquent. No Mortgage Loan was more than 59 days delinquent as of
the Cut-Off Date. With respect to the Mortgage Loans, the average Cut-Off
Date Principal Balance was $ , the minimum Cut-Off Date Principal
Balance was $ , the maximum Cut-Off Date Principal Balance was
$ , the minimum Loan Rate and the maximum Loan Rate on the Cut-Off
Date were % and % per annum, respectively, and the weighted average
Loan Rate as of the Cut-Off Date was % per annum. The weighted average
Loan-to-Value Ratio of the Mortgage Loans was % as of the Cut-Off Date.
Approximately % of the Mortgage Loans (by Cut-Off Date Pool Principal
Balance) are Balloon Loans. Each Mortgage Loan was originated on or after
. The remaining terms to stated maturity as of the Cut-Off Date of
the Mortgage Loans range from months to months; the weighted average
remaining term to stated maturity of the Mortgage Loans as of the Cut-Off
Date is months. In no event will more than 5% of the Cut-Off Date Pool
Principal Balance of the Mortgage Pool deviate from the characteristics of
the Mortgage Loans described herein.
The Mortgage Loans provide that interest is charged to the borrowers
thereunder, and payments are due from such borrowers, as of a scheduled day
of each month which is fixed at the time of origination. Scheduled monthly
payments made by the borrowers on the Mortgage Loans either earlier or later
than the scheduled due dates thereof will not affect the amortization
schedule or the relative application of such payments to principal and
interest.
LOAN GROUP 1 STATISTICS
The sum of the columns below may not equal the total indicated due to
rounding. In addition, unless otherwise set forth herein, all percentages
set forth herein with respect to the Mortgage Loans in Loan Group 1 are
percentages of the Cut-Off Date Loan Group 1 Principal Balance.
The Mortgage Loans in Loan Group 1 consist of ___ loans, and the related
Mortgaged Properties are located in __ states and the District of Columbia.
As of the Cut-Off Date, the Mortgage Loans in Loan Group 1 had an aggregate
Principal Balance of $__________ (the "Cut-Off Date Loan Group 1 Principal
Balance"), the maximum Principal Balance of any of the Mortgage Loans in Loan
Group 1 was $__________, the minimum Principal Balance thereof was $________,
and the Principal Balance of such Mortgage Loans averaged $_________. As of
the Cut-Off Date, the Loan Rates on the Mortgage Loans in Loan Group 1 ranged
from ____% to _____% per annum, and the weighted average Loan Rate for
Mortgage Loans in Loan Group 1 was ______% per annum. As of the Cut-Off
Date, the original term to stated maturity of each Mortgage Loans in Loan
Group 1 was ___ months, the remaining term to stated maturity ranged from ___
months to ___ months, the weighted average remaining term to stated maturity
was ___ months and the Loan-to-Value Ratio (as defined below) ranged from
% to % with a weighted average Loan-to-Value Ratio of %. All of
the Mortgage Loans in Loan Group 1 are secured by first liens. % of the
Mortgage Loans in Loan Group 1 require monthly payments of principal that
will fully amortize such Mortgage Loans by their respective maturity dates,
and % of the Mortgage Loans in Loan Group 1 are Balloon Loans.
CUT-OFF DATE LOAN GROUP 1 PRINCIPAL BALANCES
Cut-Off Date % of Cut-OffDate
Range of Cut-Off Number of Loan Group 1 Loan Group 1
Date Principal Balances Mortgage Loans Principal Balance Principal Balance
- ----------------------- -------------- ----------------- -----------------
GEOGRAPHIC DISTRIBUTION BY STATE(1)
LOAN GROUP 1
Cut-Off Date % of Cut-Off Date
Number of Loan Group 1 Loan Group 1
State Mortgage Loans Principal Balance Principal Balance
- ----- -------------- ----------------- -----------------
LOAN-TO-VALUE RATIOS(1)
LOAN GROUP 1
Cut-Off Date % of Cut-Off Date
Number of Loan Group 1 Loan Group 1
Loan-to-Value Ratio Mortgage Loans Principal Balance Principal Balance
- ------------------- -------------- ----------------- -----------------
- -------------
(1) The Loan-to-Value Ratios ("Loan-to-Value Ratio") shown above are equal,
with respect to each Mortgage Loan, to (i) the original principal
balance of such Mortgage Loan at the date of origination divided by (ii)
the lesser of (a) the value of the related Mortgaged Property, based
upon the appraisal made at the time of origination of such Mortgage Loan
or (b) the purchase price of such Mortgaged Property if the Mortgage
Loan proceeds from such Mortgage Loan are used to purchase such
Mortgaged Property.
LOAN RATES
LOAN GROUP 1
Cut-Off Date % of Cut-Off Date
Number of Loan Group 1 Loan Group 1
Loan Rates Mortgage Loans Principal Balance Principal Balance
- ---------- -------------- ----------------- -----------------
ORIGINAL TERM TO STATED MATURITY
LOAN GROUP 1
Original to Cut-Off Date % of Cut-Off Date
Term stated Number of Loan Group 1 Loan Group 1
Maturity Mortgage Loans Principal Balance Principal Balance
- ----------- -------------- ----------------- -----------------
REMAINING MONTHS TO STATED MATURITY
LOAN GROUP 1
Remaining Term Cut-Off Date % of Cut-Off Date
to stated Number of Loan Group 1 Loan Group 1
Maturity Mortgage Loans Principal Balance Principal Balance
- -------------- -------------- ----------------- -----------------
MONTHS SINCE ORIGINATION
LOAN GROUP 1
Cut-Off Date % of Cut-Off Date
Months since Number of Loan Group 1 Loan Group 1
Origination Mortgage Loans Principal Balance Principal Balance
- ------------ -------------- ----------------- -----------------
PROPERTY TYPE
LOAN GROUP 1
Cut-Off Date % of Cut-Off Date
Number of Loan Group 1 Loan Group 1
Property Type Mortgage Loans Principal Balance Principal Balance
- ------------- -------------- ----------------- -----------------
OCCUPANCY TYPE
LOAN GROUP 1
Cut-Off Date % of Cut-Off Date
Number of Loan Group 1 Loan Group 1
Occupancy type Mortgage Loans Principal Balance Principal Balance
- -------------- -------------- ----------------- -----------------
(CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS
The Agreement permits the Trust Fund to purchase from Provident,
subsequent to the date hereof and prior to _______, 19__, Subsequent Mortgage
Loans in an amount not to exceed approximately $________ in aggregate
principal balance for inclusion in the Trust Fund. Each Subsequent Mortgage
Loan will have been originated or purchased by Provident in accordance with
the underwriting guidelines set forth above under "Underwriting and Credit
Guidelines." Accordingly, the statistical characteristics of the Mortgage
Pool set forth above are based exclusively on the Initial Mortgage Loans and
the statistical characteristics of the Mortgage Pool after giving effect to
the acquisition of any Subsequent Mortgage Loans will likely differ from the
information specified herein. The date on which Provident transfers a
Subsequent Mortgage Loan to the Trust Fund shall be referred to herein
as the "Subsequent Transfer Date".
In any event, each conveyance of Subsequent Mortgage Loans will be
subject to, among other things, the following conditions: (i) such
Subsequent Mortgage Loans must (a) satisfy the eligibility criteria set forth
in the Prospectus under "The Loan Program--Representations by Sellers;
Repurchases" and (b) comply with each representation and warranty as to the
Mortgage Loans set forth in the Agreement; (ii) such Subsequent Mortgage Loan
must not have been selected by either the Seller or Provident in a manner
that it believes is adverse to the interests of the Certificateholders,
(iii) no Subsequent Mortgage Loan may be ___ or more days contractually
delinquent as of the applicable Cut-Off Date; (iv) no Subsequent Mortgage
Loan may have a remaining term to maturity in excess of ___ years; (v) no
Subsequent Mortgage Loan may have a Mortgage Rate less than ____%; (vi)
following the purchase of such Subsequent Mortgage Loans by the Trust Fund,
the Mortgage Loans (a) will have a weighted average Mortgage Rate of at least
____%; (b) will have a weighted average Loan-to-Value Ratio of not more than
____%; (c) will not have a weighted average remaining term to stated maturity
of more than ____ months; and (d) will, in each case, have a principal
balance in excess of $_______ as of the Cut-Off Date; (vii) Provident (and
the Trustee shall not have been notified by either Rating Agency that the
conveyance of such Subsequent Mortgage Loans will result in a qualification,
modification or withdrawal of its then-current rating of any class of
Certificates) (shall have notified each Rating Agency of such conveyance as
required by the Agreement); and (viii) the Trustee shall have received
certain opinions of counsel as to, among other things, the enforceability and
validity of the transfer agreements relating to such conveyance of such
Subsequent Mortgage Loans.) All Subsequent Mortgage Loans shall be added
from a specified group of Mortgage Loans.
LOAN GROUP 2 STATISTICS
The sum of the columns below may not equal the total indicated due to
rounding. In addition, unless otherwise set forth herein, all percentages
set forth herein with respect to the Mortgage Loans in Loan Group 2 are
percentages of the Cut-Off Date Loan Group 2 Principal Balance.
The Mortgage Loans in Loan Group 2 bear interest rates that adjust based
on the London interbank offered rate for six-month United States dollar
deposits.
The Mortgage Loans in Loan Group 2 consist of _____ loans, and the
related Mortgaged Properties are located in 22 states and the District of
Columbia. As of the Cut-Off Date, the Mortgage Loans in Loan Group 2 had an
aggregate Principal Balance of $______________ (the "Cut-Off Date Loan Group
2 Principal Balance"), the maximum Principal Balance of any of the Mortgage
Loans in Loan Group 2 was $__________, the minimum Principal Balance thereof
was $________ and the Principal Balance of such Mortgage Loans averaged
$_________. As of the Cut-Off Date, the Loan Rates on the Mortgage Loans in
Loan Group 2 ranged from ____% to _____% per annum, and the weighted average
Loan Rate for Mortgage Loans in Loan Group 2 was _____% per annum. As of the
Cut-Off Date, the original term to stated maturity of the Mortgage Loans in
Loan Group 2 was ___ months, the remaining term to stated maturity ranged
from ___ months to ___ months, the weighted average remaining term to stated
maturity was ___ months and the Loan-to-Value Ratio (as defined below) ranged
from % to % with a weighted average Loan-to-Value Ratio of %.
The Mortgage Loans in Loan Group 2 had stated maturities ranging from
to . (All) of the Mortgage Loans in Loan Group 2 require
monthly payments of principal that will fully amortize such Mortgage Loans by
their respective maturity dates. All of the Mortgage Loans in Loan Group 2
have Loan Rates which adjust semi-annually. All of the Mortgage Loans in
Loan Group 2 have minimum and maximum Loan Rates. The weighted average
minimum Loan Rate of the Mortgage Loans in Loan Group 2 is approximately
% per annum, with minimum Loan Rates that range from approximately % per
annum to % per annum. The weighted average maximum Loan Rate of the
Mortgage Loans in Loan Group 2 is approximately % per annum, with
maximum Loan Rates that range from approximately % per annum to %
per annum. The Mortgage Loans in Loan Group 2 have a weighted average gross
margin of approximately % per annum, with gross margins that range from
approximately % per annum to % per annum. The Mortgage Loans in Loan
Group 2 have a weighted average periodic cap of approximately % per annum,
with periodic caps that range from approximately % per annum to % per
annum. % of the Mortgage Loans in Loan Group 2 adjust after (one) year;
% of the Mortgage Loans in Loan Group 2 adjust after (three) years; %
of the Mortgage Loans in Loan Group 2 adjust after (five) years. The
weighted average number of months to the next reset date of the Mortgage
Loans in Loan Group 2 is approximately , with a maximum number of months
of and a minimum number of months of .
CUT-OFF DATE LOAN GROUP 2 PRINCIPAL BALANCES
Range of Cut-Off Cut-Off Date % of Cut-Off Date
Date Principal Number of Loan Group 2 Loan Group 2
Balances Mortgage Loans Principal Balance Principal Balance
- --------------- -------------- ----------------- -----------------
GEOGRAPHIC DISTRIBUTION BY STATE(1)
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Number of Loan Group 2 Loan Group 2
State Mortgage Loans Principal Balance Principal Balance
- ----- -------------- ----------------- -----------------
- ------------------
(1) Determined by property address designated as such in the related
Mortgage.
LOAN-TO-VALUE RATIOS(1)
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Loan-to- Number of Loan Group 2 Loan Group 2
Value Ratio Mortgage Loans Principal Balance Principal Balance
- ----------- -------------- ----------------- -----------------
- ------------------
(1) The Loan-to-Value Ratios ("Loan-to-Value Ratio") shown above are equal,
with respect to each Mortgage Loan, to (i) the original principal
balance of such Mortgage Loan at the date of origination divided by (ii)
the lesser of (a) the value of the related Mortgaged Property, based
upon the appraisal made at the time of origination of such Mortgage Loan
or (b) the purchase price of such Mortgaged Property if the Mortgage
Loan proceeds from such Mortgage Loan are used to purchase such
Mortgaged Property.
LOAN RATES
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Number of Loan Group 2 Loan Group 2
Loan Rates Mortgage Loans Principal Balance Principal Balance
- ---------- -------------- ----------------- -----------------
ORIGINAL TERM TO STATED MATURITY
LOAN GROUP 2
Original Term Cut-Off Date % of Cut-Off Date
to Stated Number of Loan Group 2 Loan Group 2
Maturity Mortgage Loans Principal Balance Principal Balance
- ------------ -------------- ----------------- -----------------
REMAINING MONTHS TO STATED MATURITY
LOAN GROUP 2
Remaining Cut-Off Date % of Cut-Off Date
Term to Number of Loan Group 2 Loan Group 2
Stated Maturity Mortgage Loans Principal Balance Principal Balance
- --------------- -------------- ----------------- -----------------
MONTHS SINCE ORIGINATION
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Month since Number of Loan Group 2 Loan Group 2
Origination Mortgage Loans Principal Balance Principal Balance
- ----------- -------------- ----------------- -----------------
PROPERTY TYPE
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Number of Loan Group 2 Loan Group 2
Property Type Mortgage Loans Principal Balance Principal Balance
- ------------- -------------- ----------------- -----------------
OCCUPANCY TYPE
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Occupancy Number of Loan Group 2 Loan Group 2
Type Mortgage Loans Principal Balance Principal Balance
- --------- -------------- ----------------- -----------------
MARGIN
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Number of Loan Group 2 Loan Group 2
Margin Mortgage Loans Principal Balance Principal Balance
- ------ -------------- ----------------- -----------------
LIFETIME CAP
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Number of Loan Group 2 Loan Group 2
lifetime Cap Mortgage Loans Principal Balance Principal Balance
- ------------ -------------- ----------------- -----------------
FLOOR
LOAN GROUP 2
Cut-Off Date % of Cut-Off Date
Number of Loan Group 2 Loan Group 2
Floor Mortgage Loans Principal Balance Principal Balance
- ----- -------------- ----------------- -----------------
PREPAYMENT AND YIELD CONSIDERATIONS
GENERAL
The rate of principal payments on the Offered Certificates of each
Class, the aggregate amount of distributions on the Offered Certificates and
the yield to maturity of the Offered Certificates will be related to the rate
and timing of payments of principal on the Mortgage Loans in the related Loan
Group. The rate of principal payments on the Mortgage Loans will in turn be
affected by the amortization schedules of the Mortgage Loans and by the rate
of principal prepayments (including for this purpose prepayments resulting
from refinancing, liquidations of the Mortgage Loans due to defaults,
casualties, condemnations and repurchases by the Seller). The Mortgage Loans
may be prepaid by the Mortgagors at any time. However, approximately __% of
the Mortgage Loans are subject to prepayment penalties which vary from
jurisdiction to jurisdiction.
Prepayments, liquidations and purchases of the Mortgage Loans in a Loan
Group (including any optional purchase by the Master Servicer of the
remaining Mortgage Loans in connection with the termination of the Trust)
will result in distributions on the related Offered Certificates of principal
amounts which would otherwise be distributed over the remaining terms of such
Mortgage Loans. Since the rate of payment of principal of the Mortgage Loans
will depend on future events and a variety of factors, no assurance can be
given as to such rate or the rate of principal prepayments. The extent to
which the yield to maturity of an Offered Certificate may vary from the
anticipated yield will depend upon the degree to which a Certificate is
purchased at a discount or premium, and the degree to which the timing of
payments thereon is sensitive to prepayments, liquidations and purchases of
such Mortgage Loans.
The rate of prepayment on the Mortgage Loans cannot be predicted. The
prepayment experience of the Trust with respect to the Mortgage Loans may be
affected by a wide variety of factors, including economic conditions,
prevailing interest rate levels, the availability of alternative financing
and homeowner mobility and changes affecting the deductibility for Federal
income tax purposes of interest payments on loans. All of the Mortgage Loans
contain "due-on-sale" provisions, and, with respect to the Mortgage Loans,
the Master Servicer is required by the Agreement to enforce such provisions,
unless such enforcement is not permitted by applicable law. The enforcement
of a "due-on-sale" provision will have the same effect as a prepayment of the
related Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF LOANS--Due-on-Sale
Clauses in Mortgage Loans" in the Prospectus.
As with fixed rate obligations generally, the rate of prepayment on a
pool of mortgage loans with fixed rates such as the Mortgage Loans in the
Loan Group 1 is affected by prevailing market rates for mortgage loans of a
comparable term and risk level. When the market interest rate is below the
interest rate on a mortgage, mortgagors may have an increased incentive to
refinance their mortgage loans. Depending on prevailing market rates, the
future outlook for market rates and economic conditions generally, some
mortgagors may sell or refinance mortgaged properties in order to realize
their equity in the mortgaged properties, to meet cash flow needs or to make
other investments.
All of the Mortgage Loans in the Loan Group 2 are adjustable-rate
mortgage loans. As is the case with conventional fixed-rate mortgage loans,
adjustable-rate mortgage loans may be subject to a greater rate of principal
prepayments in a declining interest rate environment. For example, if
prevailing interest rates fall significantly, adjustable-rate mortgage loans
could be subject to higher prepayment rates than if prevailing interest rates
remain constant because the availability of fixed-rate mortgage loans at
competitive interest rates may encourage mortgagors to refinance their
adjustable-rate mortgage loans at competitive interest rates may encourage
mortgagors to refinance their adjustable-rate mortgage loans to "lock in" a
lower fixed interest rate. However, no assurance can be given as to the
level of prepayments that the Mortgage Loans will experience.
In addition to the foregoing factors affecting the weighted average life
of the Offered Certificates, the use of Distributable Excess Spread to pay
principal of the Offered Certificates of the related Certificate Group to the
extent required by the Agreement will result in the acceleration of the Class
A-1 and Class A-6 Certificates, as applicable, relative to the amortization
of the Mortgage Loans in the related Loan Group in early months of the
transaction as well as, with respect to Group 1 Certificates, accelerating
the first date on which each other Class of Group 1 Certificates will begin
to receive distributions of principal than would otherwise be the case.
This acceleration feature creates overcollateralization which results
from the excess of the aggregate Principal Balance of Mortgage Loans in a
Loan Group over the Aggregate Class A Principal Balance of the related
Certificate Group. Once the required level of overcollateralization for
a Certificate Group is reached, the acceleration feature for such
Certificate Group will cease, unless necessary to maintain the required
level of overcollateralization for such Certificate Group. See
"DESCRIPTION OF THE CERTIFICATES--Overcollateralization Provisions."
WEIGHTED AVERAGE LIVES
Generally, greater than anticipated prepayments of principal will
increase the yield on Offered Certificates purchased at a price less than par
and will decrease the yield on Offered Certificates purchased at a price
greater than par. The effect on an investor's yield due to principal
prepayments on the Mortgage Loans occurring at a rate that is faster (or
slower) than the rate anticipated by the investor in the period immediately
following the issuance of the Certificates will not be entirely offset by a
subsequent like reduction (or increase) in the rate of principal payments.
The weighted average life of the Offered Certificates will also be affected
by the amount and timing of delinquencies and defaults on the Mortgage Loans
and the recoveries, if any, on defaulted Mortgage Loans and foreclosed
properties.
The "weighted average life" of a Certificate refers to the average
amount of time that will elapse from the date of issuance to the date each
dollar in respect of principal of such Certificate is repaid. The weighted
average life of any Class of the Class A Certificates will be influenced by,
among other factors, the rate at which principal payments are made on the
Mortgage Loans, including, with respect to the Group 1 Certificates, final
payments made upon the maturity of Balloon Loans.
Prepayments on Mortgage Loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement
is the prepayment assumption (the "Prepayment Assumption"), which represents
an assumed rate of prepayment each month relative to the then outstanding
principal balance of the pool of mortgage loans for the life of such mortgage
loans. A 100% Prepayment Assumption assumes a conditional prepayment rate
("CPR") of 4% per annum of the outstanding principal balance of such mortgage
loans in the first month of the life of the mortgage loans and an additional
1.45% (precisely 16/11) (expressed as a percentage per annum) in each month
thereafter until the twelfth month; beginning in the twelfth month and in
each month thereafter during the life of the mortgage loans, a conditional
prepayment rate of 20% per annum each month is assumed. As used in the table
below, 0% Prepayment Assumption assumes a conditional prepayment rate equal
to 0% of the Prepayment Assumption, i.e., no prepayments. Correspondingly,
(200)% Prepayment Assumption assumes prepayment rates equal to (200)% of the
Prepayment Assumption, and so forth. The Prepayment Assumption does not
purport to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of mortgage
loans, including the Mortgage Loans. Provident believes that no existing
statistics of which it is aware provide a reliable basis for holders of
Offered Certificates to predict the amount or the timing of receipt of
prepayments on the Mortgage Loans.
Since the tables were prepared on the basis of the assumptions in the
following paragraph, there are discrepancies between characteristics of the
actual Mortgage Loans and the characteristics of the Mortgage Loans assumed
in preparing the tables. Any such discrepancy may have an effect upon the
percentages of the Principal Balances outstanding and weighted average lives
of the Offered Certificates set forth in the tables. In addition, since the
actual Mortgage Loans in the Trust have characteristics which differ from
those assumed in preparing the tables set forth below, the distributions of
principal on the Offered Certificates may be made earlier or later than as
indicated in the tables.
For the purpose of the tables below, it is assumed that: (i) the
Mortgage Loans consist of pools of loans with the level-pay and balloon
amortization characteristics set forth below, (ii) the Closing Date for the
Class A Certificates is ________________, (iii) distributions on the Class A
Certificates are made on the 25th day of each month regardless of the day on
which the Distribution Date actually occurs, commencing in _____________ and
are made in accordance with the priorities described herein, (iv) the
scheduled monthly payments of principal and interest on the Mortgage Loans
will be timely delivered on the first day of each month (with no defaults),
commencing in _______________, (v) the Mortgage Loans' prepayment rates are a
multiple of the Prepayment Assumption, (vi) all prepayments are prepayments
in full received on the last day of each month (commencing ______________)
and include 30 days' interest thereon, (vii) no optional termination is
exercised, (viii) the Class A Certificates of each Class have the respective
Certificate Rates and initial Class A Principal Balances as set forth herein,
(ix) the overcollateralization levels are set initially as specified in the
Agreement, and thereafter decrease in accordance with the provisions of the
Agreement, ((x) with respect to pools of loans with an assumed Cut-Off Date
of _________________, interest will be calculated at a rate of % per annum
for one month), (xi) six-month LIBOR for each Interest Period will be %
and (xii) one-month LIBOR for each Interest Period will be %.
<TABLE>
<CAPTION>
Original Original Remaining
Amortization Term to Term to
Amortization Principal Term Maturity Maturity
Methodology Balance Loan Rate (months) (months) (months)
____________ ________ _________ ____________ ________ _________
<S> <C> <C> <C> <C> <C>
GROUP 1
Balloon...... $
Level Pay.... $
Level Pay.... $
</TABLE>
Subject to the foregoing discussion and assumptions, the following table
indicates the weighted average life of each Class of Class A Certificates,
and sets forth the percentages of the initial Class A Principal Balance of
each such Class of Class A Certificates that would be outstanding after each
of the dates shown at various percentages of Prepayment Assumption.
<TABLE>
<CAPTION>
Months to Maximum
Amortization Princial Loan Rate Gross Interest
Methodology Balance Rate Change Margin Rate
____________ ________ _____ ________ ________ _______
<S> <C> <C> <C> <C> <C>
GROUP 2
Balloon...... $
Level Pay.... $
Level Pay.... $
(table continue)
</TABLE>
<TABLE>
<CAPTION>
Original Original Remaining
Minimum Amortization Term to Term to
Amortization Interest Term Maturity Maturity
Methodology Rate (months) (months) (months)
____________ ________ ____________ ________ ________
<S> <C> <C> <C> <C>
GROUP 2
Balloon...... $
Level Pay.... $
Level Pay.... $
</TABLE>
PERCENT OF INITIAL CLASS A PRINCIPAL BALANCE OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION
CLASS A-1 CLASS A-2
_________ _________
DISTRIBUTION DATE % % % % % % % %
_ _ _ _ _ _ _ _
Initial
Percentage........ 100 100 100 100 100 100 100 100
Weighted Average
Life (years)*.....
- ------------------
* The weighted average life of a Certificate of any class is determined by
(i) multiplying the amount of each distribution in reduction of the
related Class A Principal Balance by the number of years from the date
of issuance of the Certificate to the related Distribution Date, (ii)
adding the results, and (iii) dividing the sum by the highest related
Principal Balance of the Certificate.
CLASS A-3 CLASS A-4
_________ _________
DISTRIBUTION DATE % % % % % % % %
_ _ _ _ _ _ _ _
Initial
Percentage........ 100 100 100 100 100 100 100 100
Weighted Average
Life (years)*.....
- ------------------
* The weighted average life of a Certificate of any class is determined by
(i) multiplying the amount of each distribution in reduction of the
related Class A Principal Balance by the number of years from the date
of issuance of the Certificate to the related Distribution Date, (ii)
adding the results, and (iii) dividing the sum by the highest related
Principal Balance of the Certificate.
CLASS A-5 CLASS A-6
_________ _________
DISTRIBUTION DATE % % % % % % % %
_ _ _ _ _ _ _ _
Initial
Percentage........ 100 100 100 100 100 100 100 100
Weighted Average
Life (years)*.....
- ------------------
* The weighted average life of a Certificate of any class is determined by
(i) multiplying the amount of each distribution in reduction of the
related Class A Principal Balance by the number of years from the date
of issuance of the Certificate to the related Distribution Date, (ii)
adding the results, and (iii) dividing the sum by the highest related
Principal Balance of the Certificate.
These tables have been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of
the Mortgage Loans, which differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. The form of
the Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the Prospectus is a part. The following
summaries describe certain provisions of the Agreement. The summaries do not
purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Agreement. Wherever
particular sections or defined terms of the Agreement are referred to, such
sections or defined terms are hereby incorporated herein by reference.
GENERAL
The Offered Certificates will be issued in denominations of $1,000 and
multiples of $1 in excess thereof and will evidence specified undivided
interests in the Trust. The property of the Trust will consist of, to the
extent provided in the Agreement: (i) the Mortgage Loans; (ii) payments on
the Mortgage Loans received on and after the Cut-Off Date (exclusive of
payments in respect of interest on the Mortgage Loans due prior to the
Cut-Off Date and received thereafter); (iii) Mortgaged Properties relating to
the Mortgage Loans that are acquired by foreclosure or deed in lieu of
foreclosure; (iv) the Collection Account and the Distribution Account and
funds on deposit therein (excluding net earnings thereon); and (v) rights
under certain hazard insurance policies covering the Mortgaged Properties.
In addition, Provident has caused the Certificate Insurer to issue an
irrevocable and unconditional certificate guaranty insurance policy (the
"Policy") for the benefit of the holders of the Class A Certificates,
pursuant to which the Certificate Insurer will guarantee payments to such
Certificateholders as described herein. Definitive Certificates (as defined
below) will be transferable and exchangeable at the corporate trust office of
the Trustee, which will initially act as Certificate Registrar. See "--
Book-Entry Certificates" below. No service charge will be made for any
registration of exchange or transfer of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge.
Each Mortgage Loan in the Trust will be assigned to one of two mortgage
loan groups ("Loan Group 1" and "Loan Group 2", respectively, and each a
"Loan Group"). The Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates (collectively, the "Group 1 Certificates") will represent
undivided ownership interests in the Mortgage Loans assigned to Loan Group 1,
all collections thereon (exclusive of payments in respect of interest on such
Mortgage Loan due prior to the Cut-Off Date and received thereafter) and the
proceeds thereof. The Class A-6 Certificates (the "Group 2 Certificates")
will represent undivided ownership interests in the Mortgage Loans assigned
to Loan Group 2, all collections thereon (exclusive of payments in respect of
interest on such Mortgage Loans due prior to the Cut-Off Date and received
thereafter) and the proceeds thereof. The principal amount of a Class of
Class A Certificates (each, a "Class A Principal Balance") on any
Distribution Date is equal to the applicable Class A Principal Balance on the
Closing Date minus the aggregate of amounts actually distributed as principal
to the holders of such Class of Class A Certificates. On any date, the
"Aggregate Class A Principal Balance" is, with respect to the Group 1
Certificates, the aggregate of the Class A Principal Balances of the Class
A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates and with
respect to the Group 2 Certificates, the Class A Principal Balance of the
Class A-6 Certificates.
The Class A Certificates will be issued in six Classes, Class A-1 (the
"Class A-1 Certificates"), Class A-2 (the "Class A-2 Certificates"), Class
A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class A-4 Certificates"),
Class A-5 (the "Class A-5 Certificates") and Class A-6 (the "Class A-6
Certificates"). Only the Class A Certificates (the "Offered Certificates")
are being offered hereby. Each Class of Offered Certificates represents the
right to receive payments of interest at the Certificate Rate for such Class
and payments of principal as described below.
The Person in whose name a Certificate is registered as such in the
Certificate Register is referred to herein as a "Certificateholder."
The "Percentage Interest" of a Class A Certificate as of any date of
determination will be equal to the percentage obtained by dividing the
denomination of such Certificate by the Class A Principal Balance for the
related Class as of the Cut-Off Date.
The Certificates will not be listed on any securities exchange.
BOOK-ENTRY CERTIFICATES
The Offered Certificates will be book-entry Certificates (the
"Book-Entry Certificates"). Persons acquiring beneficial ownership interests
in the Offered Certificates ("Certificate Owners") will hold their Offered
Certificates through the Depository Trust Company ("DTC") in the United
States, or CEDEL or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations which are participants in such
systems. The Book-Entry Certificates will be issued in one or more
certificates which equal the aggregate principal balance of the Offered
Certificates and will initially be registered in the name of Cede, the
nominee of DTC. CEDEL and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank will act as depositary for
CEDEL and Chemical will act as depositary for Euroclear (in such capacities,
individually the "Relevant Depositary" and collectively the "European
Depositaries"). Investors may hold such beneficial interests in the
Book-Entry Certificates in minimum denominations representing Certificate
Principal Balances of $1,000 and in multiples of $1 in excess thereof.
Except as described below, no person acquiring a Book-Entry Certificate
(each, a "beneficial owner") will be entitled to receive a physical
certificate representing such Certificate (a "Definitive Certificate").
Unless and until Definitive Certificates are issued, it is anticipated that
the only "Certificateholder" of the Offered Certificates will be Cede, as
nominee of DTC. Certificate Owners will not be Certificateholders as that
term is used in the Agreement. Certificate Owners are only permitted to
exercise their rights indirectly through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that
maintains the beneficial owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Book-Entry Certificate will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on
the records of DTC, if the beneficial owner's Financial Intermediary is not a
DTC participant and on the records of CEDEL or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Offered Certificates from the Trustee through DTC and DTC
participants. While the Offered Certificates are outstanding (except under
the circumstances described below), under the rules, regulations and
procedures creating and affecting DTC and its operations (the "Rules"), DTC
is required to make book-entry transfers among Participants on whose behalf
it acts with respect to the Offered Certificates and is required to receive
and transmit distributions of principal of, and interest on, the Offered
Certificates. Participants and indirect participants with whom Certificate
Owners have accounts with respect to Offered Certificates are similarly
required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess certificates, the Rules provide
a mechanism by which Certificate Owners will receive distributions and will
be able to transfer their interest.
Certificate Owners will not receive or be entitled to receive
certificates representing their respective interests in the Offered
Certificates, except under the limited circumstances described below. Unless
and until Definitive Certificates are issued, Certificate Owners who are not
Participants may transfer ownership of Offered Certificates only through
Participants and indirect participants by instructing such Participants and
indirect participants to transfer Offered Certificates, by book-entry
transfer, through DTC for the account of the purchasers of such Offered
Certificates, which account is maintained with their respective Participants.
Under the Rules and in accordance with DTC's normal procedures, transfers of
ownership of Offered Certificates will be executed through DTC and the
accounts of the respective Participants at DTC will be debited and credited.
Similarly, the Participants and indirect participants will make debits or
credits, as the case may be, on their records on behalf of the selling and
purchasing Certificate Owners.
Because of time zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or CEDEL Participants on such business
day. Cash received in CEDEL or Euroclear as a result of sales of securities
by or through a CEDEL Participant (as defined below) or Euroclear Participant
(as defined below) to a DTC Participant will be received with value on the
DTC settlement date but will be available in the relevant CEDEL or Euroclear
cash account only as of the business day following settlement in DTC. For
information with respect to tax documentation procedures relating to the
Certificates, see "FEDERAL INCOME TAX CONSEQUENCES--Foreign Investors" and
"Backup Withholding" herein and "GLOBAL CLEARANCE, SETTLEMENT AND TAX
DOCUMENTATION PROCEDURES--Certain U.S. Federal Income Tax Documentation
Requirements" in Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will,
if the transaction meets its settlement requirements, deliver instructions to
the Relevant Depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same day funds settlement
applicable to DTC. CEDEL Participants and Euroclear Participants may not
deliver instructions directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company,
performs services for its participants, some of which (and/or their
representatives) own DTC. In accordance with its normal procedures, DTC is
expected to record the positions held by each DTC participant in the
Book-Entry Certificates, whether held for its own account or as a nominee for
another person. In general, beneficial ownership of Book-Entry Certificates
will be subject to the rules, regulations and procedures governing DTC and
DTC participants as in effect from time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations
("CEDEL Participants") and facilitates the clearance and settlement of
securities transactions between CEDEL Participants through electronic
book-entry changes in accounts of CEDEL Participants, thereby eliminating the
need for physical movement of certificates. Transactions may be settled in
CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. CEDEL interfaces
with domestic markets in several countries. As a professional depository,
CEDEL is subject to regulation by the Luxembourg Monetary Institute. CEDEL
participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Indirect
access to CEDEL is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities
and cash. Transactions may be settled in any of 32 currencies, including
United States dollars. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments
with respect to securities in Euroclear. All securities in Euroclear are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under
the Terms and Conditions only on behalf of Euroclear Participants, and has no
record of or relationship with persons holding through Euroclear
Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for
crediting the amount of such payments to the accounts of the applicable DTC
participants in accordance with DTC's normal procedures. Each DTC
participant will be responsible for disbursing such payments to the
beneficial owners of the Book-Entry Certificates that it represents and to
each Financial Intermediary for which it acts as agent. Each such Financial
Intermediary will be responsible for disbursing funds to the beneficial
owners of the Book-Entry Certificates that it represents.
Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede. Distributions with
respect to Certificates held through CEDEL or Euroclear will be credited to
the cash accounts of CEDEL Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by the Relevant Depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "FEDERAL INCOME TAX CONSEQUENCES--Foreign Investors" and
"Backup Withholding" herein. Because DTC can only act on behalf of Financial
Intermediaries, the ability of a beneficial owner to pledge Book-Entry
Certificates to persons or entities that do not participate in the Depository
system, or otherwise take actions in respect of such Book-Entry Certificates,
may be limited due to the lack of physical certificates for such Book-Entry
Certificates. In addition, issuance of the Book-Entry Certificates in
book-entry form may reduce the liquidity of such Certificates in the
secondary market since certain potential investors may be unwilling to
purchase Certificates for which they cannot obtain physical certificates.
Monthly and annual reports on the Trust will be provided to Cede, as
nominee of DTC, and may be made available by Cede to beneficial owners upon
request, in accordance with the rules, regulations and procedures creating
and affecting the Depository, and to the Financial Intermediaries to whose
DTC accounts the Book-Entry Certificates of such beneficial owners are
credited.
DTC has advised the Trustee that, unless and until Definitive
Certificates are issued, DTC will take any action permitted to be taken by
the holders of the Book-Entry Certificates under the Agreement only at the
direction of one or more Financial Intermediaries to whose DTC accounts the
Book-Entry Certificates are credited, to the extent that such actions are
taken on behalf of Financial Intermediaries whose holdings include such
Book-Entry Certificates. CEDEL or the Euroclear Operator, as the case may
be, will take any other action permitted to be taken by a Certificateholder
under the Agreement on behalf of a CEDEL Participant or Euroclear Participant
only in accordance with its relevant rules and procedures and subject to the
ability of the Relevant Depositary to effect such actions on its behalf
through DTC. DTC may take actions, at the direction of the related
Participants, with respect to some Class A Certificates which conflict with
actions taken with respect to other Class A Certificates.
Definitive Certificates will be issued to beneficial owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a)
DTC or Provident advises the Trustee in writing that DTC is no longer
willing, qualified or able to discharge properly its responsibilities as
nominee and depository with respect to the Book-Entry Certificates and
Provident or the Trustee is unable to locate a qualified successor, (b)
Provident, at its sole option, with the consent of the Trustee, elects to
terminate a book-entry system through DTC or (c) after the occurrence of an
Event of Servicing Termination (as defined under "--Events of Servicing
Termination), beneficial owners having Percentage Interests aggregating not
less than 51% of the aggregate Class A Principal Balance of the Book-Entry
Certificates advise the Trustee and DTC through the Financial Intermediaries
and the DTC participants in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in the best
interests of beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Class A Certificates among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Neither Provident, the Master Servicer nor the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held
by Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
ASSIGNMENT OF MORTGAGE LOANS
On the Closing Date Provident will transfer to the Trust all of its
right, title and interest in and to each Mortgage Loan, the related Mortgage
Notes, Mortgages and other related documents (collectively, the "Related
Documents"), including all payments received on or with respect to each such
Mortgage Loan on or after the applicable Cut-Off Date (exclusive of payments
in respect of interest on the Mortgage Loans due prior to the Cut-Off Date
and received thereafter). The Trustee, concurrently with such transfer, will
deliver the Certificates to Provident. Each Mortgage Loan transferred to the
Trust will be identified on a schedule (the "Mortgage Loan Schedule")
delivered to the Trustee pursuant to the Agreement. The Mortgage Loan
Schedule will include information as to the Principal Balance of each
Mortgage Loan as of the Cut-Off Date, its Loan Rate as well as other
information.
(Under the terms of the Agreement, Provident will maintain possession of
the documentation relating to each Mortgage Loan (the "Mortgage File") for so
long as an Assignment Event has not occurred. Within 60 days of an
Assignment Event, the Seller will cause as soon as practicable the Mortgage
Files pertaining to each Mortgage Loan to be delivered to the Trustee. In
the Agreement, the Trustee will acknowledge the assignment of the Mortgage
Loans to the Trust and Provident will agree to hold the Mortgage Files for
and on behalf of the Trustee.)
Within 60 days of an Assignment Event, the Trustee will review the
Mortgage Loans and the Related Documents pursuant to the Agreement and if any
Mortgage Loan or Related Document is found to be defective in any material
respect and such defect is not cured within 90 days following notification
thereof to the Seller, the Seller will be obligated to either (i) substitute
for such Mortgage Loan an Eligible Substitute Mortgage Loan; however, such
substitution is permitted only within two years of the Closing Date and may
not be made unless an opinion of counsel is provided to the effect that such
substitution will not disqualify the Trust as a REMIC or result in a
prohibited transaction tax under the Code or (ii) purchase such Mortgage Loan
at a price (the "Purchase Price") equal to the outstanding Principal Balance
of such Mortgage Loan as of the date of purchase, plus all accrued and unpaid
interest thereon, computed at the Loan Rate, net of the Master Servicing Fee
(if Provident is the Master Servicer), plus the amount of any unreimbursed
Servicing Advances made by the Master Servicer. The Purchase Price will
be deposited in the Collection Account on or prior to the next succeeding
Determination Date after such obligation arises. The obligation of the
Seller to repurchase or substitute for a Defective Mortgage Loan is the
sole remedy regarding any defects in the Mortgage Loans and Related
Documents available to the Trustee or the Certificateholders.
In connection with the substitution of an Eligible Substitute Mortgage
Loan, the Seller will be required to deposit in the Collection Account on or
prior to the next succeeding Determination Date after such obligation arises
an amount (the "Substitution Adjustment") equal to the excess of the
Principal Balance of the related Defective Mortgage Loan over the Principal
Balance of such Eligible Substitute Mortgage Loan.
An "Eligible Substitute Mortgage Loan" is a Mortgage Loan substituted by
the Seller for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not in excess of and not more than 5% less than
the Principal Balance of the Defective Mortgage Loan; (ii) have a Loan Rate
not less than the Loan Rate of the Defective Mortgage Loan and not more than
1% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) if such
Defective Mortgage Loan is in Loan Group 2, have a Loan Rate based on the
same Index with adjustments to such Loan Rate made on the same Interest Rate
Adjustment Date as that of the Defective Mortgage Loan and have a Margin that
is not less than the Margin of the Defective Mortgage Loan and not more than
100 basis points higher than the Margin for the Defective Mortgage Loan; or
(iv) have a Mortgage of the same or higher level of priority as the Mortgage
relating to the Defective Mortgage Loan at the time such Mortgage was trans-
ferred to the Trust; (v) have a remaining term to maturity not more than six
months earlier and not later than the remaining term to maturity of the
Defective Mortgage Loan; (vi) comply with each representation and warranty
set forth in Section 2.04 (deemed to be made as of the date of substitution);
(vii) have an original Loan-to-Value Ratio not greater than that of the
Defective Mortgage Loan; (viii) if such Defective Mortgage Loan is in Loan
Group 2, have a Lifetime Rate Cap and a Periodic Rate Cap no lower than the
Lifetime Rate Cap and Periodic Rate Cap, respectively, applicable to such
Defective Mortgage Loan; and (ix) be of the same type of Mortgaged Property
as the Defective Mortgage Loan or a detached single family residence. More
than one Eligible Substitute Mortgage Loan may be substituted for a Defective
Mortgage Loan if such Eligible Substitute Mortgage Loans meet the foregoing
attributes in the aggregate and such substitution is approved in writing in
advance by the Certificate Insurer.
The Seller will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Trustee with respect to each Mortgage Loan (e.g., Cut-Off Date Principal
Balance and the Loan Rate). In addition, the Seller will represent and
warrant, on the Closing Date, that, among other things: (i) at the time of
transfer to the Trust, the Seller has transferred or assigned all of its
right, title and interest in each Mortgage Loan and the Related Documents,
free of any lien; and (ii) each Mortgage Loan complied, at the time of
origination, in all material respects with applicable state and federal laws.
Upon discovery of a breach of any such representation and warranty which
materially and adversely affects the interests of the Trust, the
Certificateholders or the Certificate Insurer in the related Mortgage Loan
and Related Documents, the Seller will have a period of 60 days after
discovery or notice of the breach to effect a cure. If the breach cannot be
cured within the 60-day period, the Seller will be obligated to (i)
substitute for such Defective Mortgage Loan an Eligible Substitute Mortgage
Loan or (ii) purchase such Defective Mortgage Loan from the Trust. The same
procedure and limitations that are set forth above for the substitution or
purchase of Defective Mortgage Loans as a result of deficient documentation
relating thereto will apply to the substitution or purchase of a Defective
Mortgage Loan as a result of a breach of a representation or warranty in the
Agreement that materially and adversely affects the interests of the
Certificateholders or the Certificate Insurer.
Mortgage Loans required to be transferred to the Seller as described in
the preceding paragraphs are referred to as "Defective Mortgage Loans."
Pursuant to the Agreement, the Master Servicer will service and
administer the Mortgage Loans as more fully set forth above.
PAYMENTS ON MORTGAGE LOANS; DEPOSITS TO COLLECTION ACCOUNT AND DISTRIBUTION
ACCOUNT
The Master Servicer shall establish and maintain in the name of the
Trustee a separate trust account (the "Collection Account") for the benefit
of the holders of the Certificates. The Collection Account will be an
Eligible Account (as defined below). Subject to the investment provision
described in the following paragraphs, upon receipt by the Master Servicer of
amounts in respect of the Mortgage Loans (excluding amounts representing the
Master Servicing Fee), the Master Servicer will deposit such amounts in the
Collection Account. Amounts so deposited may be invested in Eligible
Investments (as described in the Agreement) maturing no later than two
Business Days prior to the next succeeding date on which amounts on deposit
therein are required to be deposited in the Distribution Account.
The Trustee will establish an account (the "Distribution Account") into
which will be deposited amounts withdrawn from the Collection Account for
distribution to Certificateholders on a Distribution Date. The Distribution
Account will be an Eligible Account. Amounts on deposit therein may be
invested in Eligible Investments maturing on or before the Business Day prior
to the related Distribution Date.
An "Eligible Account" is an account that is (i) maintained with a
depository institution whose debt obligations at the time of any deposit
therein have the highest short-term debt rating by the Rating Agencies, and
whose accounts are fully insured by either the Savings Association Insurance
Fund ("SAIF") or the Bank Insurance Fund ("BIF") of the Federal Deposit
Insurance Corporation established by such fund with a minimum long-term
unsecured debt rating of "A2" by Moody's and "A" by S&P, otherwise acceptable
to each Rating Agency and the Certificate Insurer as evidenced by a letter
from each Rating Agency and the Certificate Insurer to the Trustee, without
reduction or withdrawal of their then current ratings of the Certificates.
Eligible Investments are specified in the Agreement and are limited to
investments which meet the criteria of the Rating Agencies from time to time
as being consistent with their then current ratings of the Certificates.
"Eligible Investments" are limited to (i) direct obligations of, or
obligations fully guaranteed as to timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided that
--------
such obligations are backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i) maturing
not more than three months from the date of acquisition thereof, provided
________
that the short-term unsecured debt obligations of the party agreeing to
repurchase such obligations are at the time rated by each Rating Agency in
its highest short-term rating category; (iii) certificates of deposit,
time deposits and bankers' acceptances (which, if Moody's is a Rating Agency,
shall each have an original maturity of not more than 90 days and, in the case
of bankers' acceptances, shall in no event have an original maturity of more
than 365 days) of any U.S. depository institution or trust company
incorporated under the laws of the United States or any state thereof and
subject to supervision and examination by federal and/or state banking
authorities, provided that the unsecured short-term debt obligations of
________
such depository institution or trust company at the date of acquisition
thereof have been rated by each of the Rating Agencies in its highest
unsecured short-term debt rating category; (iv) commercial paper (having
original maturities of not more than 90 days) of any corporation incorporated
under the laws of the United States or any state thereof which on the date of
acquisition has been rated by the Rating Agencies in their highest short-term
rating categories; (v) short term investment funds ("STIFS") sponsored by any
trust company or bank incorporated under the laws of the United States or any
state thereof which on the date of acquisition has been rated by the Rating
Agencies in their respective highest rating category of long term unsecured
debt; (vi) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time as the
interest is held in such fund has the rating specified by each Rating Agency;
and (vii) other obligations or securities that are acceptable to each Rating
Agency as an Eligible Investment hereunder and will not result in a reduction
in the then current rating of the Certificates, as evidenced by a letter to
such effect from such Rating Agency and with respect to which the Master
Servicer has received confirmation that, for tax purposes, the investment
complies with the last clause of this definition; provided that no
________
instrument described hereunder shall evidence either the right to receive (a)
only interest with respect to the obligations underlying such instrument or
(b) both principal and interest payments derived from obligations underlying
such instrument and the interest and principal payments with respect to such
instrument provided a yield to maturity at par greater than 120% of the yield
to maturity at par of the underlying obligations; and provided, further, that
________ ______
no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.
ADVANCES
Not later than two Business Days prior to each Distribution Date, the
Master Servicer will remit to the Trustee for deposit in the Distribution
Account an amount, to be distributed on the related Distribution Date, equal
to the sum of the interest accrued and principal due on each Mortgage Loan
through the related Due Date but not received by the Master Servicer as of
the close of business on the last day of the related Due Period (net of the
Master Servicing Fee) (the "Monthly Advance"). Such obligation of the Master
Servicer continues with respect to each Mortgage Loan until such Mortgage
Loan becomes a Liquidated Mortgage Loan.
In the course of performing its servicing obligations, the Master
Servicer will pay all reasonable and customary "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations, including,
but not limited to, the cost of (i) the preservation, restoration and
protection of the Mortgaged Properties, (ii) any enforcement or judicial
proceedings, including foreclosures, and (iii) the management and liquidation
of Mortgaged Properties acquired in satisfaction of the related Mortgage.
Each such expenditure will constitute a "Servicing Advance".
The Master Servicer's right to reimbursement for Servicing Advances is
limited to late collections on the related Mortgage Loan, including
Liquidation Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Master Servicer from the related Mortgagor or otherwise
relating to the Mortgage Loan in respect of which such unreimbursed amounts
are owed. The Master Servicer's right to reimbursement for Monthly Advances
shall be limited to late collections of interest on any Mortgage Loan and to
Liquidation Proceeds and Insurance Proceeds on the related Mortgage Loan.
The Master Servicer's right to such reimbursements is prior to the rights of
Certificateholders.
Notwithstanding the foregoing, the Master Servicer is not required to
make any Monthly Advance or Servicing Advance if in the good faith judgment
and sole discretion of the Master Servicer, the Master Servicer determines
that such advance will not be ultimately recoverable from collections
received from the Mortgagor in respect of the related Mortgage Loan or other
recoveries in respect of such Mortgage Loan (a "Nonrecoverable Advance").
However, if any Servicing Advance or Monthly Advance is determined by the
Master Servicer to be nonrecoverable from such sources, the amount of such
Nonrecoverable Advance may be reimbursed to the Master Servicer from other
amounts on deposit in the Collection Account.
DISTRIBUTION DATES
On each Distribution Date, the Offered Certificateholders will be
entitled to receive, from amounts then on deposit in the Distribution
Account, to the extent of funds available therefor in accordance with the
priorities and in the amounts described below under "Priority of
Distributions," an aggregate amount equal to the sum of (a) the Class
Interest Distribution for each Class of Offered Certificates and (b) the
Class A Principal Distribution for each Certificate Group. Distributions
will be made (i) in immediately available funds to holders of Offered
Certificates holding Certificates, the aggregate principal balance of which
is at least $1,000,000, by wire transfer or otherwise, to the account of such
Certificateholder at a domestic bank or other entity having appropriate
facilities therefor, if such Certificateholder has so notified the Trustee in
accordance with the Agreement, or (ii) by check mailed to the address of the
person entitled thereto as it appears on the register (the "Certificate
Register") maintained by the Trustee as registrar (the "Certificate
Registrar").
DEPOSITS TO THE DISTRIBUTION ACCOUNT
No later than one Business Day prior to each Distribution Date, the
following amounts in respect of a Loan Group and the previous Due Period
shall be deposited into the Distribution Account and shall constitute the
"Available Funds" for the related Certificate Group for such Distribution
Date: (i) payments of principal and interest on the Mortgage Loans in such
Loan Group (net of amounts representing the Master Servicing Fee with respect
to each Mortgage Loan in the related Loan Group and reimbursement for related
Monthly Advances and Servicing Advances); (ii) Net Liquidation Proceeds and
Insurance Proceeds with respect to the Mortgage Loans in such Loan Group (net
of amounts applied to the restoration or repair of a Mortgaged Property);
(iii) the Purchase Price for repurchased Defective Mortgage Loans with
respect to the Mortgage Loans in such Loan Group and any related Substitution
Adjustment Amounts; (iv) payments from the Master Servicer in connection with
(a) Monthly Advances, (b) Prepayment Interest Shortfalls and (c) the
termination of the Trust with respect to the Mortgage Loans in such Loan
Group as provided in the Agreement; and (v) any amounts paid under the Policy
in respect of the related Certificate Group.
PRIORITY OF DISTRIBUTIONS
On each Distribution Date the Trustee shall withdraw from the
Distribution Account the sum of (a) the Available Funds with respect to the
Group 1 Certificates and (b) the Available Funds with respect to the Group 2
Certificates (such sum, the "Amount Available"), and make distributions
thereof as described below and to the extent of the Amount Available:
A. With respect to the Group 1 Certificates, the Available Funds
with respect to such Certificate Group in the following order of
priority:
(i) to the Trustee, the Trustee fee for such Loan Group for
such Distribution Date;
(ii) to holders of each Class of Group 1 Certificates, an
amount equal to the related Class Interest Distribution for such
Distribution Date;
(iii) sequentially, to the Class A-1, Class A-2, Class A-3,
Class A-4 and Class A-5 Certificateholders, in that order, until
the respective Class A Principal Balance of each such Class is
reduced to zero, the related Class A Principal Distribution (other
than the portion constituting the Distributable Excess Spread) for
such Distribution Date; provided, however, that after
-------- -------
the occurrence and continuance of an Insurer Default, such portion
of the Class A Principal Distribution for the Group 1 Certificates
will be distributed pro rata to the holders thereof based on the
respective Class A Principal Balances;
(iv) to the Certificate Insurer, the amount owing to the
Certificate Insurer under the Insurance Agreement for the premium
payable in respect of the Group 1 Certificates; and
(v) sequentially, to the Class A-1, Class A-2, Class A-3,
Class A-4 and Class A-5 Certificateholders, in that order, until
the respective Class A Principal Balance of each such Class is
reduced to zero, the related Distributable Excess Spread for such
Distribution Date; provided, however, that after the
________ _______
occurrence and continuance of an Insurer Default, such
Distributable Excess Spread for the Group 1 Certificates will be
distributed pro rata to the holders thereof based on the respective
Class A Principal Balances.
B. With respect to the Group 2 Certificates, the Available Funds
with respect to such Certificate Group in the following order of
priority:
(i) to the Trustee, the Trustee fee for such Loan Group for
such Distribution Date;
(ii) to the holders of the Class A-6 Certificates, an amount
equal to the Class Interest Distribution for the Class A-6
Certificates for such Distribution Date;
(iii) to the holders of the Class A-6 Certificates, the
Class A Principal Distribution for the Class A-6 Certificates
(other than the portion constituting the Distributable Excess
Spread);
(iv) to the Certificate Insurer, the amount owing to the
Certificate Insurer under the Insurance Agreement for the premium
payable in respect of the Group 2 Certificates; and
(v) to the holders of the Class A-6 Certificates until the
Class A-6 Principal Balance is reduced to zero, the related
Distributable Excess Spread for such Distribution Date.
C. On any Distribution Date, to the extent Available Funds for a
Certificate Group are insufficient to make the distributions specified
above pursuant to the applicable subclause, Available Funds for the
other Certificate Group remaining after making the distributions
required to be made pursuant to the applicable subclause for such other
Certificate Group shall be distributed to the extent of such
insufficiency in accordance with the priorities for distribution set
forth in the subclause above with respect to the Certificate Group
experiencing such insufficiency.
D. After making the distributions referred to in subclauses A, B
and C above, the Trustee shall make distributions in the following order
of priority, to the extent of the balance of the Amount Available:
(i) to the Master Servicer, the amount of any accrued and
unpaid Master Servicing Fee;
(ii) to the Certificate Insurer, amounts owing to the
Certificate Insurer for reimbursement for prior draws made on the
Policy;
(iii) to the Master Servicer, the amount of Nonrecoverable
Advances not previously reimbursed;
(iv) to the Certificate Insurer, any other amounts owing to
the Certificate Insurer under the Insurance Agreement;
(v) to the Class A-6 Certificateholders, the Class A-6
Interest Carryover; and
(vi) to the Class R Certificateholders, the balance.
"Class A-6 Interest Carryover" means, with respect to any Distribution
Date on which the Certificate Rate for the Class A-6 Certificates is based
upon the Net Funds Cap, the excess of (i) the amount of interest the Class A-
6 Certificates would be entitled to receive on such Distribution Date had
such rate been calculated pursuant to the lesser of clause (A) and clause (C)
of the definition of Certificate Rate over (ii) the amount of interest the
Class A-6 Certificates actually receives on such Distribution Date, plus
accrued interest thereon at the rate determined pursuant to clause (i) above
for such Distribution Date.
THE CERTIFICATE RATE
The "Certificate Rate" for any Interest Period with respect to: the
Class A-1 Certificates will be % per annum, the Class A-2 Certificates
will be % per annum, the Class A-3 Certificates will be % per annum,
the Class A-4 Certificates will be % per annum and the Class A-5
Certificates will be % per annum. Interest in respect of any
Distribution Date will accrue on the Group 1 Certificates during each
Interest Period on the basis of a 360-day year consisting of twelve 30-day
months.
The "Certificate Rate" with respect to the Class A-6 Certificates for an
Interest Period will equal the least of (A) the sum of the LIBOR Rate plus
____% (or ____% for each Distribution Date occurring after the date on which
the Master Servicer has the right to terminate the Trust), (B) the Net Funds
Cap for such Distribution Date and (C) ____% per annum. With respect to the
Class A-6 Certificates, interest in respect of any Distribution Date will
accrue during each Interest Period on the basis of a 360-day year and the
actual number of days elapsed.
The "LIBOR Rate" is the rate for United States dollar deposits for one
month which appear on the Telerate Screen LIBO Page 3750 as of 11:00 A.M.,
London time, on the second LIBOR Business Day prior to the first day of any
Interest Period relating to the Class A-6 Certificates (or the second LIBOR
Business Day prior to the Closing Date, in the case of the first Distribution
Date). If such rate does not appear on such page (or such other page as may
replace that page on that service, or if such service is no longer offered,
such other service for displaying the LIBOR Rate or comparable rates as may
be reasonably selected by Provident, after consultation with the Trustee),
the rate will be the Reference Bank Rate. If no such quotations can be
obtained and no Reference Bank Rate is available, the LIBOR Rate will be the
LIBOR Rate applicable to the preceding Distribution Date. On the second
LIBOR Business Day immediately preceding each Distribution Date, the Trustee
shall determine the LIBOR Rate for the Interest Period commencing on such
Distribution Date and inform the Master Servicer of such rate.
INTEREST
On each Distribution Date, to the extent of funds available therefor as
described herein, interest will be distributed with respect to each Class of
Class A Certificates in an amount (each, a "Class Interest Distribution")
equal to the sum of (a) one month's interest at the related Certificate Rate
on the related Class A Principal Balance immediately prior to such
Distribution Date (the "Class Monthly Interest Distributable Amount") and (b)
any Class Interest Carryover Shortfall for such Class of Class A Certificates
for such Distribution Date. As to any Distribution Date and Class of Class A
Certificates, Class Interest Carryover Shortfall is the sum of (i) the excess
of the related Class Monthly Interest Distributable Amount for the preceding
Distribution Rate and any outstanding Class Interest Carryover Shortfall with
respect to such Class on such preceding Distribution Date, over the amount in
respect of interest that is actually distributed to such Class on such
preceding Distribution Date plus (ii) one month's interest on such excess, to
the extent permitted by law, at the related Certificate Rate. The interest
entitlement described in (a) above will be reduced by such Class' pro rata
share of Civil Relief Act Interest Shortfalls, if any, for such Distribution
Date. Civil Relief Act Interest Shortfalls will not be covered by payments
under the Policy.
On each Distribution Date, the Class Interest Distribution for each
Class of Class A Certificates in a particular Certificate Group will be
distributed on an equal priority and any shortfall in the amount required to
be distributed as interest thereon to each such Class will be allocated
between such Classes pro rata based on the amount each such Class would have
been distributed in the absence of such shortfall. See "--
Crosscollateralization" below.
PRINCIPAL
On each Distribution Date, to the extent of funds available thereof, in
accordance with the priorities described above under "--Priorities of
Distributions," principal will be distributed to the holders of Class A
Certificates of each Certificate Group then entitled to distributions of
principal in an amount equal to the lesser of (A) the related Aggregate Class
A Principal Balance and (B) the related Class A Principal Distribution for
such Distribution Date. "Class A Principal Distribution" means, with respect
to any Distribution Date and Certificate Group, the sum of the related Class
A Monthly Principal Distributable Amount for such Distribution Date and any
outstanding Class A Principal Carryover Shortfall as of the close of business
on the preceding Distribution Date.
"Class A Monthly Principal Distributable Amount" means, with respect to
any Distribution Date and Certificate Group, to the extent of funds available
therefor as described herein the amount equal to the sum of the following
amounts (without duplication) with respect to the immediately preceding Due
Period (as defined below): (i) each payment of principal on a Mortgage Loan
in the related Loan Group received by the Master Servicer during such Due
Period, including all full and partial principal prepayments, (ii) the
Principal Balance as of the end of the immediately preceding Due Period of
each Mortgage Loan in the related Loan Group that became a Liquidated
Mortgage Loan for the first time during the related Due Period, (iii) the
portion of the Purchase Price allocable to principal of all repurchased
Defective Mortgage Loans in the related Loan Group with respect to such Due
Period, (iv) any Substitution Adjustment Amounts received on or prior to the
previous Determination Date and not yet distributed with respect to the
related Loan Group and (v) such portion (not greater than 100%) of Excess
Spread, if any, required to be distributed on such Distribution Date to
satisfy the required level of overcollateralization for the related Loan
Group for such Distribution Date (the "Distributable Excess Spread").
"Class A Principal Carryover Shortfall" means, with respect to any
Distribution Date and Certificate Group, the excess of the sum of the related
Class A Monthly Principal Distributable Amount for the preceding Distribution
Date and any outstanding Class A Principal Carryover Shortfall with respect
to such Certificate Group on such preceding Distribution Date over the amount
in respect of principal that is actually distributed to the Class A
Certificateholders of such Certificate Group on such preceding Distribution
Date.
If the required level of overcollateralization for a Certificate Group
is reduced below the then existing amount of overcollateralization (described
below) or if the required level of overcollateralization for such Certificate
Group is satisfied, the amount of the related Class A Monthly Principal
Distributable Amount on the following Distribution Date will be
correspondingly reduced by the amount of such reduction or by the amount
necessary such that the overcollateralization will not exceed the required
level of overcollateralization for a Certificate Group after giving effect to
the distribution in respect of principal with respect to such Certificate
Group to be made on such Distribution Date.
The application of Distributable Excess Spread in respect of a
Certificate Group is intended to create overcollateralization to provide a
source of additional cashflow to cover losses on the Mortgage Loans in the
related Loan Group. If the amount of losses in a particular Due Period for
such Loan Group exceeds the amount of the related Excess Spread for the
related Distribution Date, subject to the provisions described below under "-
- -Crosscollateralization," the amount distributed in respect of principal will
be reduced. A draw on the Policy in respect of principal will not be made
until the Class A Principal Balance of a Certificates Group exceeds the
aggregate Principal Balance of the Mortgage Loans in the related Loan Group.
See "--The Policy" herein. Accordingly, there may be Distribution Dates on
which Class A Certificateholders receive little or no distributions in
respect of principal.
So long as an Insurer Default has not occurred and is continuing,
distributions of the Class A Principal Distribution with respect to the Group
1 Certificates will be applied, sequentially, to the distribution of
principal to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates, in that order, such that no Class of Group 1 Certificates
having a higher numerical designation is entitled to distributions of
principal until the Class A Principal Balance of each such Class of
Certificates having a lower numerical designation has been reduced to zero.
On any Distribution Date if an Insurer Default has occurred and is
continuing, the Class A Principal Distribution with respect to the Group 1
Certificates will be applied to the distribution of principal of each such
Class outstanding on a pro rata basis in accordance with the Class A
Principal Balance of each such Class.
On each Distribution Date following an Insurer Default, net losses
realized in respect of Liquidated Mortgage Loans in a Loan Group (to the
extent such amount is not covered by Available Funds from the related Loan
Group or the crosscollateralization mechanics described herein) will reduce
the amount of overcollateralization, if any, with respect to the related
Certificate Group.
"Due Period" means, with respect to any Determination Date or
Distribution Date, the calendar month immediately preceding such
Determination Date or Distribution Date, as the case may be.
A "Liquidated Mortgage Loan", as to any Distribution Date, is a Mortgage
Loan with respect to which the Master Servicer has determined, in accordance
with the servicing procedures specified in the Agreement, as of the end of
the preceding Due Period, that all Liquidation Proceeds which it expects to
recover with respect to such Mortgage Loan (including disposition of the
related REO Property) have been recovered.
"Excess Spread" means, with respect to any Distribution Date and Loan
Group, the positive excess, if any, of (x) Available Funds for the related
Certificate Group for such Distribution Date over (y) the amount required to
be distributed pursuant to subclause A items (i) through (iv), with respect
to the Group 1 Certificates and subclause B items (i) through (iv), with
respect to the Group 2 Certificates, in each case set forth under the heading
"DESCRIPTION OF CERTIFICATES--Priority of Distributions" on such Distribution
Date.
An "Insurer Default" will occur in the event the Certificate Insurer
fails to make a payment required under the Policy or if certain events of
bankruptcy or insolvency occur with respect to the Certificate Insurer.
THE POLICY
The following information has been supplied by the Certificate Insurer
for inclusion in this Prospectus Supplement. Accordingly, neither Provident
nor the Master Servicer makes any representation as to the accuracy and
completeness of such information.
The Certificate Insurer, in consideration of the payment of the premium
and subject to the terms of the Policy, thereby unconditionally and
irrevocably guarantees to any Owner that an amount equal to each full and
complete Insured Payment will be received by __________________________, or
its successor, as trustee for the Owners (the "Trustee"), on behalf of the
Owners from the Certificate Insurer, for distribution by the Trustee to each
Owner of each Owner's proportionate share of the Insured Payment. The
Certificate Insurer's obligations under the Policy with respect to a
particular Insured Payment shall be discharged to the extent funds equal to
the applicable Insured Payment are received by the Trustee, whether or not
such funds are properly applied by the Trustee. Insured Payments shall be
made only at the time set forth in the Policy and no accelerated Insured
Payments shall be made regardless of any acceleration of the Class A
Certificates, unless such acceleration is at the sole option of the
Certificate Insurer.
Notwithstanding the foregoing paragraph, the Policy does not cover
shortfalls, if any, attributable to the liability of the Trust, the REMIC or
the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Certificate Insurer will pay any Insured Payment that is a
Preference Amount on the Business Day following receipt on a Business Day by
the Fiscal Agent (as described below) of (i) a certified copy of the order
requiring the return of a preference payment, (ii) an opinion of counsel
satisfactory to the Certificate Insurer that such order is final and not
subject to appeal, (iii) an assignment in such form as is reasonably required
by the Certificate Insurer, irrevocably assigning to the Certificate Insurer
all rights and claims of the Owner relating to or arising under the Class A
Certificates against the debtor that made such preference payment or
otherwise with respect to such Preference Amount and (iv) appropriate
instruments to effect the appointment of the Certificate Insurer as agent for
such Owner in any legal proceeding related to such Preference Amount, such
instruments being in a form satisfactory to the Certificate Insurer, provided
that if such documents are received after 12:00 noon New York City time on
such Business Day, they will be deemed to be received on the following
Business Day. Such payments shall be disbursed to the receiver or trustee in
bankruptcy named in the final order of the court exercising jurisdiction on
behalf of the Owners and not any Owner directly unless such Owner has
returned principal or interest paid on the Class A Certificates to such
receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Certificate Insurer will pay any other amount payable under the
Policy no later than 12:00 noon New York City time on the later of the
Distribution Date on which the Deficiency Amount is due or the Business Day
following receipt in New York, New York on a Business Day by State Street
Bank and Trust Company, N.A., as Fiscal Agent for the Certificate Insurer or
any successor fiscal agent appointed by the Certificate Insurer (the "Fiscal
Agent") of a Notice (as described below); provided that if
________
such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any
such Notice received by the Fiscal Agent is not in proper form or is
otherwise insufficient for the purpose of making claim under the Policy it
shall be deemed not to have been received by the Fiscal Agent for purposes of
this paragraph, and the Certificate Insurer or the Fiscal Agent, as the case
may be, shall promptly so advise the Trustee and the Trustee may submit an
amended Notice.
Insured Payments due under the Policy unless otherwise stated therein
will be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners
by wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts,
any amount held by the Trustee for the payment of such Insured Payment and
legally available therefor.
The Fiscal Agent is the agent of the Certificate Insurer only and the
Fiscal Agent shall in no event be liable to the Owners for any acts of the
Fiscal Agent or any failure of the Certificate Insurer to deposit or cause to
be deposited, sufficient funds to make payments due under the Policy.
As used in the Policy, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement, dated as of
_________________, between The Provident Bank, as Seller and Master
Servicer, and the Trustee, as trustee, without regard to any amendment
or supplement thereto unless such amendment or modification has been
approved in writing by the Certificate Insurer.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banking institutions in New York City or the city in which
the corporate trust office of the Trustee under the Agreement is located
are authorized or obligated by law or executive order to close.
"Deficiency Amount" means for any Distribution Date (A) the excess,
if any, of (i) Class Monthly Interest Distributable Amount (net of any
Civil Relief Act Interest Shortfalls) plus any Class Interest Carryover
Shortfall over (ii) funds on deposit in the Distribution Account (net of
the Trustee's Fee and the Insurance Premium for such Distribution Date)
and (B) the Guaranteed Principal Amount.
"Guaranteed Principal Amount" means for any Distribution Date (a)
the amount which is required to reduce the then outstanding Class A
Principal Balance after giving effect to the distributions, if any, to
the Holders in respect of principal on such Distribution Date to an
amount equal to the Aggregate Principal Balance of the Mortgage Loans as
of the last day of the immediately preceding Due Period and (b) on
__________, ____ after all distributions have been made including
distributions pursuant to clause (a) of this definition of "Guaranteed
Principal Amount," an amount equal to the then outstanding Class A
Principal Balance.
"Insured Payment" means (i) as of any Distribution Date, any
Deficiency Amount and (ii) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing (in the case of a telephonic notice) by telecopy,
substantially in the form of Exhibit A attached to the Policy, the
original of which is subsequently delivered by registered or certified
mail, from the Trustee specifying the Insured Payment which shall be due
and owing on the applicable Distribution Date.
"Owner" means each Holder (as defined in the Agreement) who, on the
applicable Distribution Date, is entitled under the terms of the
applicable Class A Certificates to payment under the Policy.
"Preference Amount" means any amount previously distributed to an
Owner on the Class A Certificates that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy pursuant
to the United States Bankruptcy Code (11 U.S.C.), as amended from time
to time in accordance with a final nonappealable order of a court having
competent jurisdiction.
Capitalized terms used in the Policy and not otherwise defined in the
Policy shall have the respective meanings set forth in the Agreement as of
the date of execution of the Policy, without giving effect to any subsequent
amendment or modification to the Agreement unless such amendment or
modification has been approved in writing by the Certificate Insurer.
Any notice under the Policy or service of process on the Fiscal Agent
may be made at the address listed below for the Fiscal Agent or such other
address as the Certificate Insurer shall specify to the Trustee in writing.
The notice address of the Fiscal Agent is
_________________________________ Attention: ________________, or such other
address as the Fiscal Agent shall specify to the Trustee in writing.
The Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the Policy
is not refundable for any reason including payment, or provision being made
for payment, prior to the maturity of the Class A Certificates.
OVERCOLLATERALIZATION
The credit enhancement provisions of the Trust result in a limited
acceleration of the Class A Certificates of a Certificate Group relative to
the amortization of the Mortgage Loans in the related Loan Group in the early
months of the transaction. The accelerated amortization is achieved by the
application of Distributable Excess Spread relating to a Loan Group to
principal distributions on the Class A Certificates of the related
Certificate Group. This acceleration feature creates, with respect to each
Certificate Group, overcollateralization (i.e., the excess of the aggregate
outstanding Principal Balance of the Mortgage Loans in the related Loan Group
over the related Aggregate Class A Principal Balance). Once the required
level of overcollateralization is reached for a Certificate Group, and
subject to the provisions described in the next paragraph, the acceleration
feature for such Certificate Group will cease, until necessary to maintain
the required level of overcollateralization for such Certificate Group.
The Agreement provides that, subject to certain floors, caps and
triggers, the required level of overcollateralization with respect to a
Certificate Group may increase or decrease over time. Any decrease in the
required level of overcollateralization for a Loan Group will occur only at
the sole discretion of the Certificate Insurer. Any such decrease will have
the effect of reducing the amortization of the Class A Certificates of the
related Certificate Group below what it otherwise would have been.
CROSSCOLLATERALIZATION
Excess Spread with respect to a Loan Group will be available to cover
certain shortfalls with respect to the Offered Certificates relating to the
other Loan Group as described above under the caption "--Priority of
Distributions".
(PRE-FUNDING ACCOUNT
On the Closing Date, $___________ (the "Pre-Funded Amount") will be
deposited in an account (the "Pre-Funding Account"), which account shall be
in the name of and maintained by the Trustee and shall be part of the Trust
Fund and will be used to acquire Subsequent Mortgage Loans. During the
period beginning on the Closing Date and terminating on _____________, 19__
(the "Funding Period"), the Pre-Funded Amount will be reduced by the amount
thereof used to purchase Subsequent Mortgage Loans in accordance with the
Agreement. Any Pre-Funded Amount remaining at the end of the Funding Period
will be distributed to holders of the classes of Certificates entitled to
receive principal on the Distribution Date in ______________, 19__ in
reduction of the related Certificate Principal Balances (thus resulting in a
partial principal prepayment of the related Certificates on such date).
Amounts on deposit in the Pre-Funding Account will be invested in
Permitted Investments. All interest and any other investment earnings on
amounts on deposit in the Pre-Funding Account will be deposited in the
Capitalized Interest Account. The Pre-Funding Account shall not be an asset
of the REMIC. All reinvestment earnings on the Pre-Funding Account shall be
owned by, and be taxable to, the Seller.
CAPITALIZED INTEREST ACCOUNT
On the Closing Date there will be deposited in an account (the
"Capitalized Interest Account") maintained with and in the name of the
Trustee on behalf of the Trust Fund a portion of the proceeds of the sale of
the Certificates. The amount deposited therein will be used by the Trustee
on the Distribution Dates in __________________ 19__, _____________ 19__ and
______________, 19__ to cover shortfalls in interest on the Certificates that
may arise as a result of the utilization of the Pre-Funding Account for the
purchase by the Trust Fund of Subsequent Mortgage Loans after the Closing
Date. Any amounts remaining in the Capitalized Interest Account at the end
of the Funding Period which are not needed to cover shortfalls on the
Distribution Date in ___________ 19__ are required to be paid directly to
Provident.) The Capitalized Interest Account shall not be an asset of the
REMIC. All reinvestment earnings on the Capitalized Interest Account shall
be owned by, and be taxable to, the Seller.)
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution to the Certificateholders, the
Trustee will forward to each Certificateholder a statement (based solely on
information received from the Master Servicer) setting forth among other
items with respect to each Distribution Date:
(i) the aggregate amount of the distribution to each Class of
Certificateholders on such Distribution Date;
(ii) the amount of distribution set forth in paragraph (i) above
in respect of interest and the amount thereof in respect of any Class
Interest Carryover Shortfall, and the amount of any Class Interest
Carryover Shortfall remaining;
(iii) the amount of distribution set forth in paragraph (i) above
in respect of principal and the amount thereof in respect of the Class A
Principal Carryover Shortfall, and any remaining Class A Principal
Carryover Shortfall;
(iv) the amount of Excess Spread for each Loan Group and the
amount applied as to a distribution on the Certificates;
(v) the Guaranteed Principal Amount with respect to each
Certificate Group, if any, for such Distribution Date;
(vi) the amount paid under the Policy for such Distribution Date
in respect of the Class Interest Distribution to each Class of
Certificates;
(vii) the Master Servicing Fee;
(viii) the Pool Principal Balance, the Loan Group 1 Principal
Balance and the Loan Group 2 Principal Balance, in each case as of the
close of business on the last day of the preceding Due Period;
(ix) the Aggregate Class A Principal Balance of each Certificate
Group after giving effect to payments allocated to principal above;
(x) the amount of overcollateralization relating to each Loan
Group as of the close of business on the Distribution Date, after giving
effect to distributions of principal on such Distribution Date;
(xi) the number and aggregate Principal Balances of the Mortgage
Loans as to which the minimum monthly payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively, as of the end of the
preceding Due Period;
(xii) the book value of any real estate which is acquired by
the Trust through foreclosure or grant of deed in lieu of foreclosure;
(xiii) the aggregate amount of prepayments received on the
Mortgage Loans during the previous Due Period and specifying such amount
for each Loan Group; and
(xiv) the weighted average Loan Rate on the Mortgage Loans and
specifying such weighted average Loan Rate for each Loan Group as of the
first day of the month prior to the Distribution Date.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed as a dollar amount per Certificate with
a $1,000 denomination.
Within 60 days after the end of each calendar year, the Trustee will
forward to each Person, if requested in writing by such Person, who was a
Certificateholder during the prior calendar year a statement containing the
information set forth in clauses (ii) and (iii) above aggregated for such
calendar year.
LAST SCHEDULED DISTRIBUTION DATE
The last scheduled Distribution Date for each Class of Offered
Certificates is as follows: Class A-1 Certificates, ; Class A-2
Certificates, ; Class A-3 Certificates, ; Class A-4
Certificates, ; Class A-5 Certificates, ; and Class
A-6 Certificates, . It is expected that the actual last
Distribution Date for each Class of Offered Certificates will occur
significantly earlier than such scheduled Distribution Dates. See
"PREPAYMENT AND YIELD CONSIDERATIONS".
Such last scheduled Distribution Dates are based on a 0% Prepayment
Assumption with no Distributable Excess Spread used to make accelerated
payments of principal to the holders of the related Offered Certificates and
the assumptions set forth above under "PREPAYMENT AND YIELD CONSIDERATIONS--
Weighted Average Lives"; provided that the last scheduled Distribution Dates
--------
for the Class A-5 Certificates and the Class A-6 Certificates have been
calculated assuming that the Mortgage Loan in the related Loan Group having
the latest maturity date allowed by the Agreement amortizes according to its
terms, plus one year.
COLLECTION AND OTHER SERVICING PROCEDURES ON MORTGAGE LOANS
The Master Servicer will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will, consistent with the Agreement,
follow such collection procedures as it follows from time to time with
respect to the loans in its servicing portfolio comparable to the Mortgage
Loans. Consistent with the above, the Master Servicer may in its discretion
waive any late payment charge or any assumption or other fee or charge that
may be collected in the ordinary course of servicing the Mortgage Loans.
With respect to the Mortgage Loans, the Maser Servicer may arrange with
a borrower a schedule for the payment of interest due and unpaid for a
period, provided that any such arrangement is consistent with the Master
Servicer's policies with respect to the mortgage loans it owns or services.
HAZARD INSURANCE
The Master Servicer will cause to be maintained fire and hazard
insurance with extended coverage customary in the area where the Mortgaged
Property is located, in an amount which is at least equal to the least of (i)
the outstanding Principal Balance on the Mortgage Loan and any related senior
lien(s), (ii) the full insurable
value of the premises securing the Mortgage Loan and (iii) the minimum amount
required to compensate for damage or loss on a replacement cost basis in each
case in an amount not less than such amount as is necessary to avoid the
application of any co-insurance clause contained in the related hazard
insurance policy. Generally, if the Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency
as FLOOD ZONE "A", such flood insurance has been made available and the
Master Servicer determines that such insurance is necessary in accordance
with accepted mortgage servicing practices of prudent lending institutions,
the Master Servicer will cause to be purchased a flood insurance policy with
a generally acceptable insurance carrier, in an amount representing coverage
not less than the least of (a) the outstanding Principal Balance of the
Mortgage Loan, (b) the full insurable value of the Mortgaged Property, or (c)
the maximum amount of insurance available under the National Flood Insurance
Act of 1968, as amended. The Master Servicer will also maintain on REO
Property, to the extent such insurance is available, fire and hazard
insurance in the applicable amounts described above, liability insurance and,
to the extent required and available under the National Flood Insurance Act
of 1968, as amended, and the Master Servicer determines that such insurance
is necessary in accordance with accepted mortgage servicing practices of
prudent lending institutions, flood insurance in an amount equal to that
required above. Any amounts collected by the Master Servicer under any such
policies (other than amounts to be applied to the restoration or repair of
the Mortgaged Property, or to be released to the Mortgagor in accordance with
customary mortgage servicing procedures) will be deposited in the Collection
Account, subject to retention by the Master Servicer to the extent such
amounts constitute servicing compensation or to withdrawal pursuant to the
Agreement.
In the event that the Master Servicer obtains and maintains a blanket
policy as provided in the Agreement insuring against fire and hazards of
extended coverage on all of the Mortgage Loans, then, to the extent such
policy names the Master Servicer as loss payee and provides coverage in an
amount equal to the aggregate unpaid principal balance of the Mortgage Loans
without coinsurance, and otherwise complies with the requirements of the
first paragraph of this subsection, the Master Servicer will be deemed
conclusively to have satisfied its obligations with respect to fire and
hazard insurance coverage.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
The Master Servicer will foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into default when, in accordance with applicable servicing procedures under
the Agreement, no satisfactory arrangements can be made for the collection of
delinquent payments. In connection with such foreclosure or other
conversion, the Master Servicer will follow such practices as it deems
necessary or advisable and as are in keeping with its general mortgage
servicing activities, provided that the Master Servicer will not be required
to expend its own funds in connection with foreclosure or other conversion,
correction of default on a related senior mortgage loan or restoration of any
property unless, in its sole judgment, such foreclosure, correction or
restoration will increase Net Liquidation Proceeds. The Master Servicer will
be reimbursed out of Liquidation Proceeds for advances of its own funds as
liquidation expenses before any Net Liquidation Proceeds are distributed to
Certificateholders.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each Due Period, the Master Servicer will receive from
interest payments in respect of the Mortgage Loans a portion of such interest
payments as a monthly Master Servicing Fee in the amount equal to 0.50% per
annum (the "Master Servicing Fee Rate") on the Principal Balance of each
Mortgage Loan as of the first day of each such Due Period. All assumption
fees, late payment charges and other fees and charges, to the extent
collected from borrowers, will be retained by the Master Servicer as
additional servicing compensation.
The Master Servicer's right to reimbursement for unreimbursed Servicing
Advances is limited to late collections on the related Mortgage Loan,
including Liquidation Proceeds, Insurance Proceeds and such other amounts as
may be collected by the Master Servicer from the related Mortgagor or
otherwise relating to the Mortgage Loan in respect of which such unreimbursed
amounts are owed. The Master Servicer's right to reimbursement for
unreimbursed Monthly Advances shall be limited to late collections of
interest on any Mortgage Loan and to liquidation proceeds and insurance
proceeds on the related Mortgage Loan. The Master Servicer's right to such
reimbursements is prior to the rights of Certificateholders. However, if any
Servicing Advance or Monthly Advance is determined by the Master Servicer to
be nonrecoverable from such sources, the amount of such nonrecoverable
advances may be reimbursed to the Master Servicer from other amounts on
deposit in the Collection Account.
Civil Relief Act Interest Shortfalls will not be covered by the Policy,
although Prepayment Interest Shortfalls, after application of the Master
Servicing Fee, will be so covered. The Master Servicer is not obligated to
offset any of the Master Servicing Fee against, or to provide any other funds
to cover, any shortfalls in interest collections on the Mortgage Loans that
are attributable to the application of the Civil Relief Act ("Civil Relief
Act Interest Shortfalls"). See "RISK FACTORS--Payments on the Mortgage
Loans" in this Prospectus Supplement.
EVIDENCE AS TO COMPLIANCE
The Agreement provides for delivery on or before the last day of the
fifth month following the end of the Master Servicer's fiscal year, beginning
in 1997, to the Trustee, Provident, the Certificate Insurer and the Rating
Agencies of an annual statement signed by an officer of the Master Servicer
to the effect that the Master Servicer has fulfilled its material obligations
under the Agreement throughout the preceding fiscal year, except as specified
in such statement.
On or before the last day of the fifth month following the end of the
Master Servicer's fiscal year, beginning in ____, the Master Servicer will
furnish a report prepared by a firm of nationally recognized independent
public accountants (who may also render other services to the Master Servicer
or Provident) to the Trustee, Provident, the Certificate Insurer and the
Rating Agencies to the effect that such firm has examined certain documents
and the records relating to servicing of the Mortgage Loans under the Uniform
Single Attestation Program for Mortgage Bankers and such firm's conclusion
with respect thereto.
The Master Servicer's fiscal year is the calendar year.
CERTAIN MATTERS REGARDING THE MASTER SERVICER
The Agreement provides that the Master Servicer may not resign from its
obligations and duties thereunder, except in connection with a permitted
transfer of servicing, unless (i) such duties and obligations are no longer
permissible under applicable law as evidenced by an opinion of counsel
delivered to the Certificate Insurer or (ii) upon the satisfaction of the
following conditions: (a) the Master Servicer has proposed a successor master
servicer to the Trustee in writing and such proposed successor master
servicer is reasonably acceptable to the Trustee; (b) the Rating Agencies
have confirmed to the Trustee that the appointment of such proposed successor
master servicer as the Master Servicer will not result in the reduction or
withdrawal of the then current rating of the Certificates; and (c) such
proposed successor master servicer is reasonably acceptable to the
Certificate Insurer. No such resignation will become effective until the
Trustee or a successor master servicer has assumed the Master Servicer's
obligations and duties under the Agreement.
The Master Servicer may perform any of its duties and obligations under
the Agreement through one or more subservicers or delegates, which may be
affiliates of the Master Servicer. Notwithstanding any such arrangement, the
Master Servicer will remain liable and obligated to the Trustee and the
Certificateholders for the Master Servicer's duties and obligations under the
Agreement, without any diminution of such duties and obligations and as if
the Master Servicer itself were performing such duties and obligations.
The Master Servicer may agree to changes in the terms of a Mortgage
Loan, provided, however, that such changes (i) will not cause the Trust to
fail to qualify as a REMIC and do not adversely affect the interests of the
Certificateholders or the Certificate Insurer, (ii) are consistent with
prudent business practices and (iii) do not change the Loan Rate of such
Mortgage Loan or extend the maturity date of such Mortgage Loan in excess of
one year. Any changes to the terms of a Mortgage Loan that would cause the
Trust to fail to qualify as a REMIC, however, may be agreed to by the Master
Servicer, provided that the Master Servicer has determined such changes are
necessary to avoid a prepayment of such Mortgage Loan, such changes are in
accordance with prudent business practices and the Master Servicer purchases
such Mortgage Loan in accordance with the terms of the Agreement.
The Agreement provides that the Master Servicer will indemnify the Trust
and the Trustee from and against any loss, liability, expense, damage or
injury suffered or sustained as a result of the Master Servicer's actions or
omissions in connection with the servicing and administration of the Mortgage
Loans which are not in accordance with the provisions of the Agreement. The
Agreement provides that neither Provident nor the Master Servicer nor their
directors, officers, employees or agents will be under any other liability to
the Trust, the Trustee, the Certificateholders or any other person for any
action taken or for refraining from taking any action pursuant to the
Agreement. However, neither Provident nor the Master Servicer will be
protected against any liability which would otherwise be imposed by reason of
willful misconduct, bad faith or gross negligence of Provident or the Master
Servicer, as the case may be, in the performance of its duties under the
Agreement or by reason of reckless disregard of its obligations thereunder.
In addition, the Agreement provides that the Master Servicer will not be
under any obligation to appear in, prosecute or defend any legal action which
is not incidental to its servicing responsibilities under the Agreement. The
Master Servicer may, in its sole discretion, undertake any such legal action
which it may deem necessary or desirable with respect to the Agreement and
the rights and duties of the parties thereto and the interest of the
Certificateholders thereunder.
Any corporation into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any
corporation succeeding to the business of the Master Servicer shall be the
successor of the Master Servicer under the Agreement, without the execution
or filing of any paper or any further act on the part of any of the parties
to the Agreement, anything in the Agreement to the contrary notwithstanding.
EVENTS OF DEFAULT
"Events of Default" will consist of: (i) (A) any failure of the Master
Servicer to make any required Monthly Advance or (B) any other failure of the
Master Servicer to deposit in the Collection Account or Distribution Account
any deposit required to be made under the Agreement, which failure continues
unremedied for two Business Days after the giving of written notice of such
failure to the Master Servicer by the Trustee, or to the Master Servicer and
the Trustee by the Certificate Insurer or any Certificateholder; (ii) any
failure by the Master Servicer duly to observe or perform in any material
respect any other of its covenants or agreements in the Agreement which, in
each case, materially and adversely affects the interests of the
Certificateholders or the Certificate Insurer and continues unremedied for 60
days after the giving of written notice of such failure to the Master
Servicer by the Trustee, or to the Master Servicer and the Trustee by the
Certificate Insurer or any Certificateholder; (iii) any failure by the Master
Servicer to make any required Servicing Advance, which failure continues
unremedied for a period of 30 days after the giving of written notice of such
failure to the Master Servicer by the Trustee, or to the Master Servicer and
the Trustee by the Certificate Insurer or any Certificateholder; or (iv)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings relating to the Master Servicer and
certain actions by the Master Servicer indicating insolvency, reorganization
or inability to pay its obligations (an "Insolvency Event").
Upon the occurrence and continuation beyond the applicable grace period
of the event described in clause (i) (A) above, if any Monthly Advance is not
made by 4:00 P.M., New York City time, on the second Business Day following
written notice to the Master Servicer of such event, the Trustee will make
such Monthly Advance and either the Trustee or a successor master servicer
will immediately assume the duties of the Master Servicer.
Upon removal or resignation of the Master Servicer, the Trustee will be
the successor master servicer (the "Successor Master Servicer"). The
Trustee, as Successor Master Servicer, will be obligated to make Monthly
Advances and Servicing Advances and certain other advances unless it
determines reasonably and in good faith that such advances would not be
recoverable.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of ten Business Days or
referred to under clause (ii) above for a period of 30 Business Days, shall
not constitute an Event of Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the Master Servicer and
such delay or failure was caused by an act of God or other similar
occurrence. Upon the occurrence of any such event the Master Servicer shall
not be relieved from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of the Agreement and the Master
Servicer shall provide the Trustee, the Certificate Insurer and the
Certificateholders prompt notice of such failure or delay by it, together
with a description of its efforts to so perform its obligations.
RIGHTS UPON AN EVENT OF DEFAULT
So long as an Event of Default remains unremedied, either the Trustee,
Certificateholders holding Certificates evidencing at least 51% of the
Percentage Interests in the Trust, with the consent of the Certificate
Insurer, or the Certificate Insurer may terminate all of the rights and
obligations of the Master Servicer under the Agreement and in and to the
Mortgage Loans, whereupon the Trustee will succeed to all the
responsibilities, duties and liabilities of the Master Servicer under the
Agreement and will be entitled to similar compensation arrangements. In the
event that the Trustee would be obligated to succeed to all the
responsibilities, duties and liabilities of the Master Servicer but is
unwilling or unable so to act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a housing and home finance
institution or other mortgage loan or home equity loan servicer with all
licenses and permits required to perform its obligations under the Agreement
and having a net worth of at least $50,000,000 and acceptable to the
Certificate Insurer to act as successor to the Master Servicer under the
Agreement. Pending such appointment, the Trustee will be obligated to act in
such capacity unless prohibited by law. Such successor will be entitled to
receive the same compensation that the Master Servicer would otherwise have
received (or such lesser compensation as the Trustee and such successor may
agree). A receiver or conservator for the Master Servicer may be empowered
to prevent the termination and replacement of the Master Servicer if the only
Event of Default that has occurred is an Insolvency Event.
AMENDMENT
The Agreement may be amended from time to time by the Seller, the Master
Servicer, and the Trustee and with the consent of the Certificate Insurer,
but without the consent of the Certificateholders, to cure any ambiguity, to
correct or supplement any provisions therein which may be inconsistent with
any other provisions of the Agreement, to add to the duties of the Seller or
the Master Servicer to comply with any requirements imposed by the Internal
Revenue Code or any regulation thereunder, or to add or amend any provisions
of the Agreement as required by the Rating Agencies in order to maintain or
improve any rating of the Offered Certificates (it being understood that,
after obtaining the ratings in effect on the Closing Date, neither the
Seller, the Trustee, the Certificate Insurer nor the Master Servicer is
obligated to obtain, maintain, or improve any such rating) or to add any
other provisions with respect to matters or questions arising under the
Agreement which shall not be inconsistent with the provisions of the
Agreement; provided that such action will not, as evidenced by an
________
opinion of counsel, materially and adversely affect the interests of
any Certificateholder or the Certificate Insurer; provided, further,
________ _______
that any such amendment will not be deemed to materially and adversely
affect the Certificateholders and no such opinion will be required to be
delivered if the person requesting such amendment obtains a letter from the
Rating Agencies stating that such amendment would not result in a downgrading
of the then current rating of the Offered Certificates. The Agreement may
also be amended from time to time by the Seller, the Master Servicer, and the
Trustee, with the consent of Certificateholders evidencing at least 51% of
the Percentage Interests of each Class affected thereby and the Certificate
Insurer for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Agreement or of modifying in any
manner the rights of the Certificateholders, provided that no such amendment
________
will (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on the Certificates or distributions or payments
under the Policy which are required to be made on any Certificate without the
consent of the Certificateholder or (ii) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the holders
of all Offered Certificates then outstanding.
TERMINATION; PURCHASE OF MORTGAGE LOANS
The Trust will terminate on the Distribution Date following the later of
(A) payment in full of all amounts owing to the Certificate Insurer unless
the Certificate Insurer shall otherwise consent and (B) the earliest of (i)
the Distribution Date on which the Aggregate Class A Principal Balance has
been reduced to zero, (ii) the final payment or other liquidation of the last
Mortgage Loan in the Trust, (iii) the optional purchase by the Master
Servicer of the Mortgage Loans, as described below and (iv) the Distribution
Date in ( ) on which date the Policy will be available to pay the
outstanding Aggregate Class A Principal Balance of the Class A Certificates.
Subject to provisions in the Agreement concerning adopting a plan of
complete liquidation, the Master Servicer may, at its option, terminate the
Agreement on any date on which the Pool Principal Balance is less than 5% of
the sum of the Cut-Off Date Pool Principal Balance by purchasing, on the next
succeeding Distribution Date, all of the outstanding Mortgage Loans at a
price equal to the sum of the outstanding Pool Principal Balance (subject to
reduction as provided in the Agreement if the purchase price is based in part
on the appraised value of any REO Property included in the Trust and such
appraised value is less than the Principal Balance of the related Mortgage
Loan) and accrued and unpaid interest thereon at the weighted average of the
Loan Rates through the end of the Due Period preceding the final Distribution
Date together with all amounts due and owing to the Certificate Insurer.
Any such purchase shall be accomplished by deposit into the Distribution
Account of the purchase price specified above.
THE TRUSTEE
________________________________________, has been named Trustee
pursuant to the Agreement.
The Trustee may have normal banking relationships with Provident and the
Master Servicer.
The Trustee may resign at any time, in which event Provident will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. Provident may also remove the Trustee if the Trustee ceases to be
eligible to continue as such under the Agreement or if the Trustee becomes
insolvent. Upon becoming aware of such circumstances, Provident will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
No holder of a Certificate will have any right under the Agreement to
institute any proceeding with respect to the Agreement unless such holder
previously has given to the Trustee written notice of default and unless
Certificateholders holding Certificates evidencing at least 51% of the
Percentage Interests in the Trust have made written requests upon the Trustee
to institute such proceeding in its own name as Trustee thereunder and have
offered to the Trustee reasonable indemnity and the Trustee for 60 days has
neglected or refused to institute any such proceeding. The Trustee will be
under no obligation to exercise any of the trusts or powers vested in it by
the Agreement or to make any investigation of matters arising thereunder or
to institute, conduct or defend any litigation thereunder or in relation
thereto at the request, order or direction of any of the Certificateholders,
unless such Certificateholders have offered to the Trustee reasonable
security or indemnity against the cost, expenses and liabilities which may be
incurred therein or thereby.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will
be applied by Provident towards general corporate purposes.
FEDERAL INCOME TAX CONSEQUENCES
An election will be made to treat the Trust as a "real estate mortgage
investment conduit" ("REMIC") for federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"). In the opinion of
Tax Counsel, the Class A Certificates will be designated as "regular
interests" in the REMIC and the Class R Certificates will be designated as
the sole class of residual interests in the REMIC. See "FEDERAL INCOME TAX
CONSEQUENCES--Taxation of the REMIC and its Holders" in the Prospectus.
The Offered Certificates generally will be treated as debt instruments
issued by the REMIC for Federal income tax purposes. Income on such
Certificates must be reported under an accrual method of accounting.
The Offered Certificates may, depending on their issue price, be issued
with original issue discount ("OID") for federal income tax purposes.
Holders of such Certificates issued with OID will be required to include OID
in income as it accrues under a constant yield method, in advance of the
receipt of cash attributable to such income. The OID Regulations do not
contain provisions specifically interpreting Code Section 1272(a)(6) which
applies to prepayable securities such as the Offered Certificates. Until the
Treasury issues guidance to the contrary, the Trustee intends to base its OID
computation on Code Section 1272(a)(6) and the OID Regulations as described
in the Prospectus. However, because no regulatory guidance currently exists
under Code Section 1272(a)(6), there can be no assurance that such
methodology represents the correct manner of calculating OID.
The yield used to calculate accruals of OID with respect to the Offered
Certificates with OID will be the original yield to maturity of such
Certificates, determined by assuming that the Mortgage Loans in Loan Group 1
will prepay in accordance with % of the Prepayment Assumption and that the
Mortgage Loans in Loan Group 2 will prepay in accordance with % of the
Prepayment Assumption. No representation is made as to the actual rate at
which the Mortgage Loans will prepay.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The Prepayment Assumption model used in this
Prospectus is based on a Constant Prepayment Rate ("CPR"). CPR represents a
constant rate of prepayment on the Mortgage Loans each month relative to the
aggregate outstanding principal balance of the Mortgage Loans. CPR does not
purport to be either an historical description of the prepayment experience
of any pool of mortgage loans or a prediction of the anticipated rate of
prepayment of any pool of mortgage loans, including the Mortgage Loans, and
there is no assurance that the Mortgage Loans will prepay at the specified
CPR. Provident does not make any representation about the appropriateness of
the CPR model.
In the opinion of Tax Counsel, the Offered Certificates will be treated
as regular interests in a REMIC under section 860G of the Code. Accordingly,
the Offered Certificates will be treated as (i) assets described in section
7701(a)(19)(C) of the Code, and (ii) "real estate assets" within the meaning
of section 856(c)(5) of the Code, in each case to the extent described in the
Prospectus. Interest on the Offered Certificates will be treated as interest
on obligations secured by mortgages on real property within the meaning of
section 856(c)(3)(B) of the Code to the same extent that the Offered
Certificates are treated as real estate assets. See "Federal Income Tax
Consequences" in the Prospectus.
BACKUP WITHHOLDING
Certain Certificate Owners may be subject to backup withholding at the
rate of 31% with respect to interest paid on the Offered Certificates if the
Certificate Owners, upon issuance, fail to supply the Trustee or their broker
with their taxpayer identification number, furnish an incorrect taxpayer
identification number, fails to report interest, dividends, or other
"reportable payments" (as defined in the Code) properly, or, under certain
circumstances, fails to provide the Trustee or their broker with a certified
statement, under penalty of perjury, that they are not subject to backup
withholding.
The Trustee will be required to report annually to the IRS, and to each
Offered Certificateholder of record, the amount of interest paid (and OID
accrued, if any) on the Offered Certificates (and the amount of interest
withheld for Federal income taxes, if any) for each calendar year, except as
to exempt holders (generally, holders that are corporations, certain
tax-exempt organizations or nonresident aliens who provide certification as
to their status as nonresidents). As long as the only "Class A
Certificateholder" of record is Cede, as nominee for DTC, Certificate Owners
and the IRS will receive tax and other information including the amount of
interest paid on such Certificates owned from Participants and Indirect
Participants rather than from the Trustee. (The Trustee, however, will
respond to requests for necessary information to enable Participants,
Indirect Participants and certain other persons to complete their reports.)
Each non-exempt Certificate Owner will be required to provide, under penalty
of perjury, a certificate on IRS Form W-9 containing his or her name,
address, correct Federal taxpayer identification number and a statement that
he or she is not subject to backup withholding. Should a nonexempt
Certificate Owner fail to provide the required certification, the
Participants or Indirect Participants (or the Paying Agent) will be required
to withhold 31% of the interest (and principal) otherwise payable to the
holder, and remit the withheld amount to the IRS as a credit against the
holder's Federal income tax liability.
Such amounts will be deemed distributed to the affected Certificate
owner for all purposes of the Certificates, the Agreement and the Policy.
FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN INVESTORS
The following information describes the United States federal income tax
treatment of holders that are not United States persons ("Foreign
Investors"). The term "Foreign Investor" means any person other than (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity organized in or under the laws of the United States or any state
or political subdivision thereof, (iii) an estate the income of which is
includible in gross income for United States federal income tax purposes,
regardless of its source, or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more United States trustees have authority to control all
substantial decisions of the trust.
The Code and Treasury regulations generally subject interest paid to a
Foreign Investor to a withholding tax at a rate of 30% (unless such rate were
changed by an applicable treaty). The withholding tax, however, is
eliminated with respect to certain "portfolio debt investments" issued to
Foreign Investors. Portfolio debt investments include debt instruments
issued in registered form for which the United States payor receives a
statement that the beneficial owner of the instrument is a Foreign Investor.
The Offered Certificates will be issued in registered form, therefore if the
information required by the Code is furnished (as described below) and no
other exceptions to the withholding tax exemption are applicable, no
withholding tax will apply to the Offered Certificates.
For the Offered Certificates to constitute portfolio debt investments
exempt from the United States withholding tax, the withholding agent must
receive from the Certificate Owner an executed IRS Form W-8 signed under
penalty of perjury by the Certificate Owner stating that the Certificate
Owner is a Foreign Investor and providing such Certificate Owner's name and
address. The statement must be received by the withholding agent in the
calendar year in which the interest payment is made, or in either of the two
preceding calendar years.
A Certificate Owner that is a nonresident alien or foreign corporation
will not be subject to United States federal income tax on gain realized on
the sale, exchange, or redemption of such Offered Certificate, provided that
(i) such gain is not effectively connected with a trade or business carried
on by the Certificate Owner in the United States, (ii) in the case of a
Certificate Owner that is an individual, such Certificate Owner is not
present in the United States for 183 days or more during the taxable year in
which such sale, exchange or redemption occurs and (iii) in the case of gain
representing accrued interest, the conditions described in the immediately
preceding paragraph are satisfied.
STATE TAXES
Provident makes no representations regarding the tax consequences of
purchase, ownership or disposition of the Offered Certificates under the tax
laws of any state. Investors considering an investment in the Certificates
should consult their own tax advisors regarding such tax consequences.
All investors should consult their own tax advisors regarding the
Federal, state, local or foreign income tax consequences of the purchase,
ownership and disposition of the Certificates.
ERISA CONSIDERATIONS
Any Plan fiduciary which proposes to cause a Plan to acquire any of the
Offered Certificates should consult with its counsel with respect to the
potential consequences under the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Code, of the Plans acquisition and
ownership of such Certificates. See "ERISA CONSIDERATIONS" in the
Prospectus.
The U.S. Department of Labor has granted to _________________________
(____________) Prohibited Transaction Exemption _____ (the "Exemption") which
exempts from the application of the prohibited transaction rules transactions
relating to (1) the acquisition, sale and holding by Plans of certain
certificates representing an undivided interest in certain asset-backed
pass-through trusts, with respect to which _____________ or any of its
affiliates is the sole underwriter or the manager or co-manager of the
underwriting syndicate; and (2) the servicing, operation and management of
such asset-backed pass-through trusts, provided that the general conditions
and certain other conditions set forth in the Exemption are satisfied. The
Exemption will apply to the acquisition, holding and resale of the Class A
Certificates by a Plan, provided that certain conditions (certain of which
are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply
are the following:
(1) The acquisition of the Class A Certificates by a Plan is on
terms (including the price for such Certificates) that are at least as
favorable to the investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Class A Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three
highest generic rating categories from either S&P, Moody's, or Duff &
Phelps Credit Rating Co.;
(4) The sum of all payments made to and retained by the
Underwriter in connection with the distribution of the Class A
Certificates represents not more than reasonable compensation for
underwriting such Certificates; the sum of all payments made to and
retained by the Seller pursuant to the sale of the Mortgage Loans to the
Trust represents not more than the fair market value of such Mortgage
Loans; the sum of all payments made to and retained by the Master
Servicer represent not more than reasonable compensation for the Master
Servicer's services under the Agreement and reimbursement of the Master
Servicer's reasonable expenses in connection therewith;
(5) The Trustee is not an affiliate of any Underwriter, the
Seller, the Master Servicer, the Certificate Insurer, any borrower whose
obligations under one or more Mortgage Loans constitute more than 5% of
the aggregate unamortized principal balance of the assets in the Trust,
or any of their respective affiliates (the "Restricted Group"); and
(6) The Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of
the Securities and Exchange Commission under the Securities Act of 1933,
as amended.
The Underwriter believes that the Exemption will apply to the
acquisition and holding of the Class A Certificates by Plans and that all
conditions of the Exemption other than those within the control of the
investors will be met. Any Plan fiduciary considering whether to purchase
any Class A Certificates on behalf of a Plan should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and the Code to such investment. Among other
things, before purchasing any Class A Certificates, a fiduciary of a Plan
subject to the fiduciary responsibility provisions of ERISA or an employee
benefit plan subject to the prohibited transaction provisions of the Code
should make its own determination as to the availability of the exemptive
relief provided in the Exemption, and also consider the availability of any
other prohibited transaction exemptions.
LEGAL INVESTMENT CONSIDERATIONS
The Offered Certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA")
so long as they are rated in one of the two highest rating categories by at
least one nationally recognized statistical rating organization and, as such,
are legal investments for certain entities to the extent provided in SMMEA.
Institutions whose investment activities are subject to review by
federal or state regulatory authorities should consult with their counsel or
the applicable authorities to determine whether an investment in the Offered
Certificates complies with applicable guidelines, policy statements or
restrictions. See "LEGAL INVESTMENT" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated ____________________ (the "Underwriting Agreement"), between
Provident and ______________________ (the "Underwriter"), Provident has
agreed to sell to the Underwriter and the Underwriter has agreed to purchase
from Provident the Class A Certificates.
Distributions of the Offered Certificates will be made from time to time
in negotiated transactions or otherwise at varying prices to be determined at
the time of sale. Proceeds to Provident from the sale of the Offered
Certificates will be approximately $ , plus accrued interest,
before deducting expenses payable by Provident, estimated to be $ in
the aggregate. In connection with the purchase and sale of the Offered
Certificates, the Underwriter may be deemed to have received compensation
from Provident in the form of underwriting discounts.
Provident has been advised by the Underwriter that it presently intends
to make a market in the Offered Certificates; however, it is not obligated to
do so, any market-making may be discontinued at any time, and there can be no
assurance that an active public market for the Offered Certificates will
develop.
The Underwriting Agreement provides that Provident will indemnify the
Underwriter against certain civil liabilities, including liabilities under
the Act.
EXPERTS
(__________)
LEGAL MATTERS
Certain legal matters with respect to the Class A Certificates will be
passed upon for Provident by Brown & Wood LLP, New York, New York, and
Keating, Muething & Klekamp, P.L.L. Cincinnati, Ohio, and for the Underwriter
by ____________________.
RATINGS
It is a condition to the issuance of the Class A Certificates that they
receive ratings of "AAA" by _______ and "Aaa" by ______.
A securities rating addresses the likelihood of the receipt by Class A
Certificateholders of distributions on the Mortgage Loans. The rating takes
into consideration the characteristics of the Mortgage Loans and the
structural, legal and tax aspects associated with the Class A Certificates.
The ratings on the Class A Certificates do not, however, constitute
statements regarding the likelihood or frequency of prepayments on the
Mortgage Loans or the possibility that Class A Certificateholders might
realize a lower than anticipated yield.
The ratings assigned to the Class A Certificates will depend primarily
upon the creditworthiness of the Certificate Insurer. Any reduction in a
rating assigned to the claims-paying ability of the Certificate Insurer below
the ratings initially assigned to the Class A Certificates may result in a
reduction of one or more of the ratings assigned to the Class A Certificates.
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
INDEX OF DEFINED TERMS
TERMS PAGE
Aggregate Class A Principal Balance . . . . . . . . . . . . . . . . S-4, S-39
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Amount Available . . . . . . . . . . . . . . . . . . . . . . . . . . . S-47
Assignment Event . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15
Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-46
Balloon Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14
Beneficial owner . . . . . . . . . . . . . . . . . . . . . . . . . . . S-40
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45
Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-40
Capitalized Interest Account . . . . . . . . . . . . . . . . . . S-11, S-54
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
CEDEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . S-41
Certificate Insurer . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-10
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . . . S-5, S-40
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . S-4, S-6, S-48
Certificate Register . . . . . . . . . . . . . . . . . . . . . . . . . S-46
Certificate Registrar . . . . . . . . . . . . . . . . . . . . . . . . . S-46
Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . S-39, S-40
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3
Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Citibank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Civil Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Civil Relief Act Interest Shortfalls . . . . . . . . . . . . . . S-12, S-57
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A Certificateholder . . . . . . . . . . . . . . . . . . . . . . . S-61
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3
Class A Monthly Principal Distributable Amount . . . . . . . . . . S-8, S-49
Class A Principal Balance . . . . . . . . . . . . . . . . . . . . . S-4, S-39
Class A Principal Carryover Shortfall . . . . . . . . . . . . . . . . . S-49
Class A Principal Distribution . . . . . . . . . . . . . . . . . . S-8, S-49
Class A-1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-39
Class A-2 Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-39
Class A-3 Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-39
Class A-4 Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-39
Class A-5 Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-39
Class A-6 Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-39
Class A-6 Interest Carryover . . . . . . . . . . . . . . . . . . . . . S-48
Class Interest Distribution . . . . . . . . . . . . . . . . . . . . S-7, S-49
Class Monthly Interest Distributable Amount . . . . . . . . . . . . S-7, S-49
Class R Certificates . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-60
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . S-45
Compensating Interest . . . . . . . . . . . . . . . . . . . . . . . . . S-15
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41
CPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36, S-61
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Cut-Off Date Loan Group 1 Principal Balance . . . . . . . . . . . . S-4, S-21
Cut-Off Date Loan Group 2 Principal Balance . . . . . . . . . . . . S-5, S-26
Cut-Off Date Pool Principal Balance . . . . . . . . . . . . . . . . . . S-21
Cut-Off Date Principal Balance . . . . . . . . . . . . . . . . . . . . . S-3
Defective Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . S-44
Definitive Certificate . . . . . . . . . . . . . . . . . . . . . . . . S-40
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Distributable Excess Spread . . . . . . . . . . . . . . . . . . . . S-8, S-49
Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . . S-45
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-7
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5, S-40
Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9, S-50
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45
Eligible Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . S-44
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13, S-63
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . S-41
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . S-41
European Depositaries . . . . . . . . . . . . . . . . . . . . . . . S-6, S-40
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . S-58
Excess Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9, S-50
Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-63
Financial Intermediary . . . . . . . . . . . . . . . . . . . . . . . . S-40
Fiscal Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Foreign Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . S-62
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . S-11, S-53
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Group 1 Certificates . . . . . . . . . . . . . . . . . . . . . 1, S-4, S-39
Group 2 Certificates . . . . . . . . . . . . . . . . . . . . . 1, S-4, S-39
Guaranteed Principal Amount . . . . . . . . . . . . . . . . . . . . . . S-10
Insolvency Event . . . . . . . . . . . . . . . . . . . . . . . . . . . S-58
Insurer Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-50
Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
LIBOR Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-48
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . . . S-9, S-50
Loan Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-39
Loan Group 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-39
Loan Group 1 Principal Balance . . . . . . . . . . . . . . . . . . . . . S-3
Loan Group 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-39
Loan Group 2 Principal Balance . . . . . . . . . . . . . . . . . . . . . S-3
Loan Group Principal Balance . . . . . . . . . . . . . . . . . . . . . . S-3
Loan Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . S-4, S-23, S-30
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3, S-6
Master Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Master Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . S-11, S-56
Monthly Advance . . . . . . . . . . . . . . . . . . . . . . . . . S-12, S-46
Mortgage File . . . . . . . . . . . . . . . . . . . . . . . . . . S-15, S-43
Mortgage Loan Schedule . . . . . . . . . . . . . . . . . . . . . . . . S-43
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3
Mortgage Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Net Funds Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . . S-46
Offered Certificates . . . . . . . . . . . . . . . . . . . . . 1, S-4, S-39
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-61
Original Aggregate Class A Principal Balance . . . . . . . . . . . . . . S-4
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . S-39
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-3, S-39
Pool Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-53
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . S-10, S-53
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Prepayment Interest Shortfall . . . . . . . . . . . . . . . . . . . . . S-12
Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Provident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Relevant Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . S-40
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-12, S-60
Residual Certificates . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . S-63
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-40
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45
SAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3, S-6
Servicing Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . S-46
STIFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . S-26
Subservicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-17
Substitution Adjustment . . . . . . . . . . . . . . . . . . . . . . . . S-44
Successor Master Servicer . . . . . . . . . . . . . . . . . . . . . . . S-58
Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . S-42
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 1, S-3, S-11, S-51
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-64
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . S-64
Weighted average life . . . . . . . . . . . . . . . . . . . . . . . . . S-36
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Provident
Mortgage Pass-Through Certificates, Series 199___ (the "Global Securities")
will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of DTC, CEDEL or
Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations and prior Mortgage Pass-Through
Certificates issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL
and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts
as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior Mortgage Pass-Through
Certificates issues. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
Mortgage Pass-Through Certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
to the account of a CEDEL Participant or a Euroclear Participant, the
purchaser will send instructions to CEDEL or Euroclear through a CEDEL
Participant or Euroclear Participant at least one business day prior to
settlement. CEDEL or Euroclear will instruct the respective Depositary, as
the case may be, to receive the Global Securities against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date, on the basis
of either the actual number of days in such accrual period and a year assumed
to consist of 360 days or a 360-day year of 12 30-day months as applicable to
the related class of Global Securities. For transactions settling on the
31st of the month, payment will include interest accrued to and excluding the
first day of the following month. Payment will then be made by the
respective Depositary of the DTC Participant's account against delivery of
the Global Securities. After settlement has been completed, the Global
Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the CEDEL
Participant's or Euroclear Participant's account. The securities credit will
appear the next day (European time) and the cash debt will be back-valued to,
and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade
fails), the CEDEL or Euroclear cash debt will be valued instead as of the
actual settlement date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
preposition funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within CEDEL or
Euroclear. Under this approach, they may take on credit exposure to CEDEL or
Euroclear until the Global Securities are credited to their accounts one day
later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities were
credited to their accounts. However, interest on the Global Securities would
accrue from the value date. Therefore, in many cases the investment income
on the Global Securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each CEDEL Participant's or Euroclear Participant's particular
cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of CEDEL Participants
or Euroclear Participants. The sale proceeds will be available to the DTC
seller on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. In
these cases CEDEL or Euroclear will instruct the respective Depositary, as
appropriate, to deliver the Global Securities to the DTC Participant's
account against payment. Payment will include interest accrued on the Global
Securities from and including the last coupon payment to and excluding the
settlement date on the basis of either the actual number of days in such
accrual period and a year assumed to consist of 360 days or a 360-day year of
12 30-day months as applicable to the related class of Global Securities.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the CEDEL Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the CEDEL Participant or Euroclear
Participant have a line of credit with its respective clearing system and
elect to be in debt in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft incurred over that
one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would instead be valued as
of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL
or Euroclear (or through DTC if the holder has an address outside the U.S.)
will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) such beneficial owner takes
one of the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status).
If the information shown on Form W-8 changes, a new Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing
in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed
by the Certificate Owners or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more United States trustees have authority to control all
substantial decisions of the trust. This summary does not deal with all
aspects of U.S. Federal income tax withholding that may be relevant to
foreign holders of the Global Securities. Investors are advised to consult
their own tax advisors for specific tax advice concerning their holding and
disposing of the Global Securities.
No dealer, salesman or other
person has been authorized to give
any information or to make any
representation not contained in
this Prospectus Supplement or the
Prospectus and, if given or made,
such information or representation
must not be relied upon as having
been authorized by Provident or
the Underwriter. This Prospectus
Supplement and the Prospectus do
not constitute an offer of any
securities other than those to
which they relate or an offer to
sell, or a solicitation of an
offer to buy, to any person in any
jurisdiction where such an offer
or solicitation would be unlawful.
Neither the delivery of this PROVIDENT MORTGAGE PASS-THROUGH
Prospectus Supplement and the TRUST 199___
Prospectus nor any sale made
hereunder shall, under any $
circumstances, create any
implication that the information $ CLASS A-1 %
contained herein is correct as of CERTIFICATES
any time subsequent to their $ CLASS A-2 %
respective dates. CERTIFICATES
$ CLASS A-3 %
-------------------- CERTIFICATES
$ CLASS A-4 %
TABLE OF CONTENTS CERTIFICATES
$ CLASS A-5 %
PAGE CERTIFICATES
---- $ CLASS A-6 %
VARIABLE RATE
PROSPECTUS SUPPLEMENT CERTIFICATES
Incorporation of Certain Documents
by Reference . . . . . . . . S-2
Summary . . . . . . . . . . . S-3
Risk Factors . . . . . . . . S-15 MORTGAGE PASS-THROUGH
The Certificate Insurer . . . S-18 CERTIFICATES
The Provident Bank. . . . . . S-18
Description of the Mortgage
Loans. . . . . . . . . . . . S-21
Prepayment and Yield
Considerations . . . . . . . S-28 SERIES 199___
Description of the
Certificates . . . . . . . . S-32
Description of the Purchase THE PROVIDENT BANK
Agreement . . . . . . . . . . S-50 AS SELLER AND
Use of Proceeds . . . . . . . S-51 MASTER SERVICER
Federal Income Tax
Consequences . . . . . . . . S-52
State Taxes . . . . . . . . . S-54
ERISA Considerations . . . . S-54
Legal Investment
Considerations . . . . . . . S-55
Underwriting . . . . . . . . S-55
Experts . . . . . . . . . . . S-56 ______________________________
Legal Matters . . . . . . . . S-56
Ratings . . . . . . . . . . . S-56 PROSPECTUS SUPPLEMENT
Index of Defined Terms . . . S-57 ______________________________
Annex I . . . . . . . . . . . S-60
PROSPECTUS
Prospectus Supplement . . . . . 2
Available Information . . . . . 2
Reports to Holders . . . . . . 2
Summary of Terms . . . . . . . 3
Risk Factors . . . . . . . . . 11 (UNDERWRITER)
Description of the Securities . 14
The Trust Funds . . . . . . . . 17
Enhancement . . . . . . . . . . 22
Servicing of Loans . . . . . . 24
The Agreements . . . . . . . . 30
Certain Legal Aspects of Loans 38
The Provident Bank . . . . . . 46
Use of Proceeds . . . . . . . . 46
Federal Income Tax Consequences 47
State Tax Considerations . . . 64
ERISA Considerations . . . . . 65
Legal Investment . . . . . . . 67
Plan of Distribution . . . . . 67
Legal Matters . . . . . . . . . 67
Experts . . . . . . . . . . . . 67
Additional Information . . . . 67
Glossary of Terms . . . . . . . 68
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED MAY 15, 1997
PROSPECTUS
ASSET BACKED SECURITIES
(ISSUABLE IN SERIES)
This Prospectus relates to the issuance of Asset Backed Certificates
(the "Certificates") and Asset Backed Notes (the "Notes" and, together with
the Certificates, the "Securities"), which may be issued from time to time in
one or more series (each, a "Series") by a Trust Fund created by The
Provident Bank ("Provident") on terms determined at the time of sale and
described in this Prospectus and the related Prospectus Supplement. The
Securities of a Series will consist of Certificates which evidence beneficial
ownership of a trust established by Provident (each, a "Trust Fund"), and
Notes secured by the assets of a Trust Fund. As specified in the related
Prospectus Supplement, the Trust Fund for a Series of Securities will include
certain assets (the "Trust Fund Assets") which will consist of the following
types of single family mortgage loans (the "Loans"): (i) mortgage loans
secured by first and/or subordinate liens on one- to four-family residential
properties (the "Mortgage Loans") and (ii) closed-end loans (the "Closed-End
Loans") and/or revolving home equity loans or certain balances thereof (the
"Revolving Credit Line Loans", together with the Closed-End Loans, the "Home
Equity Loans") secured by first or subordinate liens on one- to four-family
residential properties. The Trust Fund Assets will be originated or be
acquired by Provident and conveyed by Provident to the related Trust Fund. A
Trust Fund also may include insurance policies, surety bonds, cash accounts,
reinvestment income, guaranties or letters of credit to the extent described
in the related Prospectus Supplement. See "Index of Defined Terms" on Page
85 of this Prospectus for the location of the definitions of certain
capitalized terms.
Each Series of Securities will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on the related Trust Fund Assets. Each class of Notes of a Series
will be secured by the related Trust Fund Assets or, if so specified in the
related Prospectus Supplement, a portion thereof. A Series of Securities may
include one or more classes that are senior in right of payment to one or
more other classes of Securities of such Series. One or more classes of
Securities of a Series may be entitled to receive distributions of principal,
interest or any combination thereof prior to one or more other classes of
Securities of such Series on or after the occurrence of specified events, in
each case as specified in the related Prospectus Supplement.
Distributions to Securityholders will be made monthly, quarterly, semi-
annually or at such other intervals and on the dates specified in the related
Prospectus Supplement. Distributions on the Securities of a Series will be
made from the related Trust Fund Assets or proceeds thereof pledged for the
benefit of the Securityholders as specified in the related Prospectus
Supplement.
The related Prospectus Supplement will describe any insurance or
guarantee provided with respect to the related Series of Securities
including, without limitation, any insurance or guarantee provided by the
Department of Housing and Urban Development, the United States Department of
Veterans' Affairs or any private insurer or guarantor. The only obligations
of Provident with respect to a Series of Securities will be to make certain
representations and warranties to the Trustee for the related Series of
Securities. The principal obligations of the Master Servicer named in the
related Prospectus Supplement with respect to the related Series of
Securities will be limited to obligations pursuant to certain representations
and warranties and to its contractual servicing obligations, including any
obligation it may have to advance delinquent payments on the related Trust
Fund Assets.
The yield on each class of Securities of a Series will be affected by,
among other things, the rate of payments of principal (including prepayments)
on the related Trust Fund Assets and the timing of receipt of such payments
as described under "Risk Factors--Prepayment and Yield Considerations" and
"Yield and Prepayment Considerations" herein and in the related Prospectus
Supplement. A Trust Fund may be subject to early termination under the
circumstances described under "The Agreements--Termination; Optional
Termination" herein and in the related Prospectus Supplement.
If specified in the related Prospectus Supplement, one or more elections
may be made to treat a Trust Fund or specified portions thereof as a "real
estate mortgage investment conduit" ("REMIC") for federal income tax
purposes. See "Federal Income Tax Consequences."
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
SECURITIES, SEE THE INFORMATION UNDER "RISK FACTORS" ON PAGE 12.
THE CERTIFICATES OF A GIVEN SERIES WILL REPRESENT BENEFICIAL INTERESTS IN,
AND THE NOTES OF A GIVEN SERIES WILL REPRESENT OBLIGATIONS OF, THE RELATED
TRUST FUND ONLY AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF
PROVIDENT, THE MASTER SERVICER,
OR ANY AFFILIATES THEREOF, EXCEPT TO THE EXTENT DESCRIBED IN THE
RELATED PROSPECTUS SUPPLEMENT. THE SECURITIES AND THE LOANS WILL NOT BE
INSURED OR GUARANTEED BY THE FEDERAL INSURANCE DEPOSIT CORPORATION OR
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY PROVIDENT OR ANY
OTHER PERSON OR ENTITY, EXCEPT IN EACH CASE TO THE EXTENT DESCRIBED
IN THE RELATED PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prior to issuance there will have been no market for the Securities of
any Series and there can be no assurance that a secondary market for any
Securities will develop, or if it does develop, that it will continue or
provide Securityholders with a sufficient level of liquidity of investment.
This Prospectus may not be used to consummate sales of Securities of any
Series unless accompanied by a Prospectus Supplement. Offers of the
Securities may be made through one or more different methods, including
offerings through underwriters, as more fully described under "Method of
Distribution" herein and in the related Prospectus Supplement.
________________, 1997
UNTIL 90 DAYS AFTER THE DATE OF EACH PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES COVERED BY SUCH PROSPECTUS
SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION THEREOF, MAY BE
REQUIRED TO DELIVER SUCH PROSPECTUS SUPPLEMENT AND THIS PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS AND
PROSPECTUS SUPPLEMENT WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS SUPPLEMENT OR CURRENT REPORT ON FORM 8-K
The Prospectus Supplement or Current Report on Form 8-K relating to the
Securities of each Series to be offered hereunder will, among other things,
set forth with respect to such Securities, as appropriate: (i) the aggregate
principal amount, interest rate and authorized denominations of each class of
such Series of Securities; (ii) information as to the assets comprising the
Trust Fund, including the general characteristics of the related Trust Fund
Assets included therein and, if applicable, the insurance policies, surety
bonds, guaranties, letters of credit or other instruments or agreements
included in the Trust Fund or otherwise, and the amount and source of any
reserve account or other cash account; (iii) the circumstances, if any, under
which the Trust Fund may be subject to early termination; (iv) the
circumstances, if any, under which the Notes of such Series are subject to
redemption; (v) the method used to calculate the amount of principal to be
distributed or paid with respect to each class of Securities; (vi) the order
of application of distributions or payments to each of the classes within
such Series, whether sequential, pro rata, or otherwise; (vii) the
Distribution Dates with respect to such Series; (viii) additional information
with respect to the method of distribution of such Securities; (ix) whether
one or more REMIC elections will be made with respect to the Trust Fund and,
if so, the designation of the regular interests and the residual interests;
(x) the aggregate original percentage ownership interest in the Trust Fund to
be evidenced by each class of Certificates; (xi) the stated maturity of each
class of Notes of such Series; (xii) information as to the nature and extent
of subordination with respect to any class of Securities that is subordinate
in right of payment to any other class; and (xiii) information as to the
Master Servicer and the Trustee.
AVAILABLE INFORMATION
Provident has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities. This Prospectus, which forms a part
of the Registration Statement, and the Prospectus Supplement relating to each
Series of Securities contain descriptions of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the Rules and
Regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Midwest Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Northeast Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048. The
Commission also maintains a Web site at http://www.sec.gov from which such
Registration Statement and exhibits may be obtained.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and
any Prospectus Supplement with respect hereto do not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
Securities offered hereby and thereby nor an offer of the Securities to any
person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by or on behalf of the Trust Fund
referred to in the accompanying Prospectus Supplement with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), after the date of this Prospectus
and prior to the termination of any offering of the Securities issued by such
Trust Fund shall be deemed to be incorporated by reference in this Prospectus
and to be a part of this Prospectus from the date of the filing of such
documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for all purposes of this Prospectus to the extent that a statement
contained herein (or in the accompanying Prospectus Supplement) or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. Neither
Provident nor the Master Servicer for any Series intends to file with the
Commission periodic reports with respect to the related Trust Fund following
completion of the reporting period required by Rule 15d-1 or Regulation 15D
under the Exchange Act.
The Trustee or such other entity specified in the related Prospectus
Supplement on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request
of such person, a copy of any or all of the documents referred to above that
have been or may be incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates). Such requests should be
directed to the Corporate Trust Office of the Trustee or the address of such
other entity specified in the accompanying Prospectus Supplement. Included
in the accompanying Prospectus Supplement is the name, address, telephone
number, and, if available, facsimile number of the office or contact person
at the Corporate Trust Office of the Trustee or such other entity.
REPORTS TO SECURITYHOLDERS
Periodic and annual reports concerning the related Trust Fund for a
Series of Securities will be forwarded to Securityholders. However, such
reports will neither be examined nor reported on by an independent public
accountant. See "Description of the Securities--Reports to Securityholders".
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the related
Prospectus Supplement with respect to the Series of Securities offered
thereby and to the related Agreement (as such term is defined below) which
will be prepared in connection with each Series of Securities. Unless
otherwise specified, capitalized terms used and not defined in this Summary
of Terms have the meanings given to them in this Prospectus and in the
related Prospectus Supplement. See "Index of Defined Terms" on Page 85 of
this Prospectus for the location of the definitions of certain capitalized
terms.
Title of
Securities Asset Backed Certificates (the "Certificates") and
Asset Backed Notes (the "Notes" and, together with
the Certificates, the "Securities"), which are
issuable in Series.
Provident The Provident Bank ("Provident"), an Ohio banking corporation
in its capacity as transferor of the Loans to the Trust Fund.
Trustee The trustee(s) (the "Trustee") for each Series of Securities
will be specified in the related Prospectus Supplement. See
"The Agreements" herein for a description of the Trustee's
rights and obligations.
Master
Servicer The entity or entities named as Master Servicer (the
"Master Servicer") in the related Prospectus
Supplement, which may be Provident or an affiliate
thereof. See "The Agreements--Certain Matters
Regarding the Master Servicer and Provident".
Trust Fund
Assets Assets of the Trust Fund for a Series of Securities
will include certain assets (the "Trust Fund
Assets") which will consist of the Loans, together
with payments in respect of such Trust Fund Assets,
as specified in the related Prospectus Supplement.
At the time of issuance of the Securities of the
Series, Provident will assign the Loans comprising
the related Trust Fund to the Trustee, without
recourse. The Loans will be collected in a pool
(each, a "Pool") as of the first day of the month of
the issuance of the related Series of Securities or
such other date specified in the related Prospectus
Supplement (the "Cut-Off Date"). Trust Fund Assets
also may include insurance policies, surety bonds,
cash accounts, reinvestment income, guaranties or
letters of credit to the extent described in the
related Prospectus Supplement. See "Credit
Enhancement". In addition, if the related
Prospectus Supplement so provides, the related Trust
Fund Assets will include the funds on deposit in an
account (a "Pre-Funding Account") which will be used
to purchase additional Loans during the period
specified in such Prospectus Supplement. See "The
Agreements--Pre-Funding Account".
Loans The Loans will consist of (i) mortgage loans secured by first
and/or subordinate liens on one- to four-family residential
properties (each, a "Mortgage Loan") and (ii) closed-end loans
(the "Closed-End Loans") and/or revolving home equity loans or
certain balances thereof (the "Revolving Credit Line Loans",
together with the Closed-End Loans, the "Home Equity Loans").
All Loans will have been originated or purchased by Provident,
either directly or through an affiliate.
As specified in the related Prospectus Supplement, the Home
Equity Loans will be secured by mortgages or deeds of trust
or other similar security instruments creating a lien on a
Mortgaged Property, which may be subordinated to one or more
senior liens on the Mortgaged Property, as described in the
related Prospectus Supplement.
Description
of the
Securities Each Security will represent a beneficial ownership
interest in, or be secured by the assets of, a Trust
Fund created by Provident pursuant to an Agreement
among Provident, the Master Servicer and the Trustee
for the related Series. The Securities of any
Series may be issued in one or more classes as
specified in the related Prospectus Supplement. A
Series of Securities may include one or more classes
of senior Securities (collectively, the "Senior
Securities") and one or more classes of subordinate
Securities (collectively, the "Subordinated
Securities"). Certain Series or classes of
Securities may be covered by insurance policies or
other forms of credit enhancement, in each case as
described under "Credit Enhancement" herein and in
the related Prospectus Supplement.
One or more classes of Securities of each Series (i) may be
entitled to receive distributions allocable only to principal,
only to interest or to any combination thereof; (ii) may be
entitled to receive distributions only of prepayments of
principal throughout the lives of the Securities or during
specified periods; (iii) may be subordinated in the right to
receive distributions of scheduled payments of principal,
prepayments of principal, interest or any combination
thereof to one or more other classes of Securities of
such Series throughout the lives of the Securities or during
specified periods; (iv) may be entitled to receive such
distributions only after the occurrence of events specified in
the related Prospectus Supplement; (v) may be entitled to
receive distributions in accordance with a schedule or formula
or on the basis of collections from designated portions of the
related Trust Fund Assets; (vi) as to Securities entitled to
distributions allocable to interest, may be entitled to receive
interest at a fixed rate or a rate that is subject to change
from time to time; and (vii) as to Securities entitled to
distributions allocable to interest, may be entitled to
distributions allocable to interest only after the occurrence
of events specified in the related Prospectus Supplement and
may accrue interest until such events occur, in each case as
specified in the related Prospectus Supplement. The timing
and amounts of such distributions may vary among classes or
over time, as specified in the related Prospectus Supplement.
Distributions
on the
Securities Distributions on the Securities entitled thereto
will be made monthly, quarterly, semi-annually or at
such other intervals and on the dates specified in
the related Prospectus Supplement (each, a
"Distribution Date") out of the payments received in
respect of the assets of the related Trust Fund or
other assets pledged for the benefit of the
Securities as described under "Credit Enhancement"
herein to the extent specified in the related
Prospectus Supplement. The amount allocable to
payments of principal and interest on any
Distribution Date will be determined as specified in
the related Prospectus Supplement. The Prospectus
Supplement for a Series of Securities will describe
the method for allocating distributions among
Securities of different classes as well as the
method for allocating distributions among Securities
for any particular class.
The aggregate original principal balance of the Securities will
not exceed the aggregate distributions allocable to principal
that such Securities will be entitled to receive. If specified
in the related Prospectus Supplement, the Securities will have
an aggregate original principal balance equal to the aggregate
unpaid principal balance of the Trust Fund Assets as of the
related Cut-Off Date and will bear interest in the aggregate
at a rate equal to the interest rate borne by the underlying
Loans (the "Loan Rate") net of the aggregate servicing fees
and any other amounts specified in the related Prospectus
Supplement or at such other interest rate as may be specified
in such Prospectus Supplement.
The rate at which interest will be passed through or paid to
Securityholders (each, a "Pass-Through Rate") entitled thereto
may be a fixed rate or a rate that is subject to change from
time to time from the time and for the periods, in each case,
as specified in the related Prospectus Supplement. Any such
in the related Prospectus Supplement. Any such
rate may be calculated on a loan-by-loan or weighted average
basis or a notional amount in each case as described in the
related Prospectus Supplement.
Credit
Enhancement The Trust Fund Assets or the Securities of one or
may have the
benefit of one or more types of credit enhancement
as described in the related Prospectus Supplement.
The protection against losses afforded by any such
credit support may be limited. The type,
characteristics and amount of credit enhancement
will be determined based on the characteristics of
the Loans comprising the Trust Fund Assets and other
factors and will be established on the basis of
requirements of each Rating Agency rating the
Securities of such Series. See "Credit
Enhancement."
If specified in the related Prospectus Supplement, the coverage
provided by one or more of the forms of credit enhancement
described in this Prospectus may apply concurrently to two or
more separate Trust Funds. If applicable, the related
Prospectus Supplement will identify the Trust Funds to which
such credit enhancement relates and the manner of determining
the amount of coverage provided to such Trust Funds thereby
and of the application of such coverage to the identified
Trust Funds.
A. Subordination A Series of Securities may consist of one or more
classes of Senior Securities and one or more
classes of Subordinated Securities. The rights of
the holders of the Subordinated Securities of a
Series to receive distributions with respect to the
related Trust Fund Assets will be subordinated to
such rights of the holders of the Senior Securities
of the same Series to the extent described in the
related Prospectus Supplement. This subordination
is intended to enhance the likelihood of regular
receipt by holders of Senior Securities of such
Series of the full amount of monthly payments of
principal and interest due them. The protection
afforded to the holders of Senior Securities of a
Series by means of the subordination feature will be
accomplished by (i) the preferential right of such
holders to receive, prior to any distribution being
made in respect of the related Subordinated
Securities, the amounts of interest and/or principal
due them on each Distribution Date out of the funds
available for distribution on such date in the
related Security Account and, to the extent
described in the related Prospectus Supplement, by
the right of such holders to receive future
distributions on the related Trust Fund
Assets that would otherwise have been payable to
the holders of Subordinated Securities; (ii) reducing
the ownership interest (if applicable) of the related
Subordinated Securities; or (iii) a combination of
clauses (i) and (ii) above. If so specified in the
related Prospectus Supplement, subordination may
apply only in the event of certain types of losses
not covered by other forms of credit support, such
as hazard losses not covered by standard hazard
insurance policies or losses due to the bankruptcy
or fraud of the borrower. The related Prospectus
Supplement will set forth information concerning,
among other things, the amount of subordination
of a class or classes of Subordinated Securities in a
Series, the circumstances in which such subordination
will be applicable, and the manner, if any, in which
the amount of subordination will decrease over time.
B. Reserve Account One or more reserve accounts or other cash accounts
(each, a "Reserve Account") may be established and
maintained for each Series of Securities. The
related Prospectus Supplement will specify whether
or not such Reserve Accounts will be included in the
corpus of the Trust Fund for such Series and will
also specify the manner of funding such Reserve
Accounts and the conditions under which the amounts
in any such Reserve Accounts will be used to make
distributions to holders of Securities of a
particular class or released from such Reserve
Accounts.
C. Letter of Credit If so specified in the related Prospectus
Supplement, credit support for a Series may be
provided by one or more letters of credit. A letter
of credit may provide limited protection against
certain losses in addition to or in lieu of other
credit support, such as losses resulting from
delinquent payments on the Loans in the related
Trust Fund, losses from risks not covered by
standard hazard insurance policies, losses due to
bankruptcy of a borrower and application of certain
provisions of the federal Bankruptcy Code, and
losses due to denial of insurance coverage due to
misrepresentations made in connection with the
origination or sale of a Loan. The issuer of the
letter of credit (the "L/C Bank") will be obligated
to honor demands with respect to such letter of
credit, to the extent of the amount available
thereunder to provide funds under the circumstances
and subject to such conditions as are specified in
the related Prospectus Supplement. The liability of
the L/C Bank under its letter of credit will be
reduced by the amount of unreimbursed payments
thereunder.
The maximum liability of a L/C Bank under its letter
of credit will be an amount equal to a percentage
specified in the related Prospectus Supplement of
the initial aggregate outstanding principal balance
of the Loans in the related Trust Fund or one or
more Classes of Securities of the related Series.
The maximum amount available at any time to be
paid under a letter of credit will be determined
in the manner specified therein and in the
related Prospectus Supplement.
D. Insurance Policies;
Surety Bonds and
Guarantees If so specified in the related Prospectus Supplement,
credit support for a Series may be provided by an
insurance policy and/or a surety bond issued by one or
more insurance companies or sureties. Such certificate
guarantee insurance or surety bond will guarantee
timely distributions of interest and/or full
distributions of principal on the basis of a
schedule of principal distributions set forth in
or determined in the manner specified in the
related Prospectus Supplement. If specified in
the related Prospectus Supplement,
one or more bankruptcy bonds, special hazard
insurance policies, other insurance or third-party
guarantees may be used to provide coverage for the
risks of default or types of losses set forth in
such Prospectus Supplement.
E. Over-
Collateralization If so provided in the Prospectus
Supplement for a Series of Securities, a
portion of the interest payment on each
Loan may be applied as an additional
distribution in respect of principal to
reduce the principal balance of a certain
class or classes of such Series of
Securities and, thus, accelerate the rate
of payment of principal on such class or
classes of such Series of Securities.
F. Mortgage Pool
Insurance Policy A mortgage pool insurance policy or policies may be
obtained and maintained for Loans relating to any
Series of Securities, which shall be limited in
scope and shall cover defaults on the related Loans
in an initial amount equal to a specified percentage
of the aggregate principal balance of all Loans
included in the Pool as of the related Cut-Off Date.
G. Cross-
Collateralization If specified in the related Prospectus
Supplement, separate classes of a Series
of Securities may evidence the beneficial
ownership of, or be secured by, separate
groups of assets included in a Trust Fund.
In such case, credit support may be
provided by a cross-collateralization
feature which requires that distributions
be made to Securities evidencing a
beneficial ownership interest in, or
secured by, one or more asset groups prior
to distributions to Subordinated
Securities evidencing a beneficial
ownership interest in, or secured by,
other asset groups within the same Trust
Fund. See "Credit Enhancement--Cross-
Collateralization."
Advances The Master Servicer and, if applicable, each mortgage
servicing institution that services a Loan in a Pool on behalf
of the Master Servicer (each, a "Sub-Servicer") may be
obligated to advance amounts (each, an "Advance")
corresponding to delinquent interest and/or principal payments
on such Loan until the date, as specified in the related
Prospectus Supplement, on which the related Property is sold
at a foreclosure sale or the related Loan is otherwise
liquidated. Any obligation to make Advances may be subject to
limitations as specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, Advances
may be drawn from a cash account available for such purpose as
described in such Prospectus Supplement. Advances will be
reimbursable to the extent described under "Description of the
Securities--Advances" herein and in the related Prospectus
Supplement.
In the event the Master Servicer or Sub-Servicer fails to make a
required Advance, the Trustee may be obligated to advance such
amounts otherwise required to be advanced by the Master Servicer
or Sub-Servicer. See "Description of the Securities--Advances."
Optional
Termination The Master Servicer or the party specified in
the related Prospectus Supplement, including
the holder of the residual interest in a REMIC,
may have the option to effect early retirement
of a Series of Securities through the purchase
of the Trust Fund Assets. The Master Servicer
will deposit the proceeds of any such purchase
in the Security Account for each Trust Fund as described
under "The Agreements--Payments on Loans; Deposit to
Security Account." Any such purchase of Trust
Fund Assets and property acquired in respect of Trust Fund
Assets evidenced by a Series of Securities will be made at
the option of the Master Servicer, such other person or,
if applicable, such holder of the REMIC residual interest, at
a price specified in the related Prospectus Supplement. The
exercise of such right will effect early retirement of the
Securities of that Series, but the right of the Master
Servicer, such other person or, if applicable,
such holder of the REMIC residual interest, to so purchase is
subject to the principal balance of the related Trust Fund
Assets being less than the percentage specified in the related
Prospectus Supplement of the aggregate principal balance of
the Trust Fund Assets at the Cut-Off Date for the Series. The
foregoing is subject to the provision that if a REMIC election
is made with respect to a Trust Fund, any such purchase will
be made only in connection with a "qualified liquidation" of
the REMIC within the meaning of Section 860F(g)(4) of the
Internal Revenue Code of 1986, as amended (the "Code").
Legal Investment The Prospectus Supplement for each Series of
Securities will specify which, if any, of the
classes of Securities offered thereby constitute
"mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984
("SMMEA"). Classes of Securities that qualify as
"mortgage related securities" will be legal
investments for certain types of institutional
investors to the extent provided in SMMEA, subject,
in any case, to any other regulations which may
govern investments by such institutional investors.
Institutions whose investment activities are subject
to review by federal or state authorities should
consult with their counsel or the applicable
authorities to determine whether an investment in a
particular class of Securities (whether or not such
class constitutes a "mortgage related security")
complies with applicable guidelines, policy
statements or restrictions. See "Legal Investment."
Federal Income Tax
Consequences The federal income tax consequences to Securityholders
will vary depending on whether one or more elections are
made to treat the Trust Fund or specified portions
thereof as a REMIC under the provisions of the Code. The
Prospectus Supplement for each Series of Securities will
specify whether such an election will be made.
If a REMIC election is made, Securities representing
regular interests in a REMIC will generally be taxable to
holders in the same manner as evidences of indebtedness
issued by the REMIC. Stated interest on such regular
interests will be taxable as ordinary income and taken
into account using the accrual method of accounting,
regardless of the holder's normal accounting method.
If no REMIC election is made, interest (other than
original issue discount ("OID")) on Securities that
are characterized as indebtedness for federal income
tax purposes will be includible in income by holders
thereof in accordance with their usual method of
accounting.
Certain classes of Securities may be issued with OID. A
Securityholder should be aware that the Code and the
Treasury regulations promulgated thereunder do not
adequately address certain issues relevant to prepayable
securities, such as the Securities.
Securityholders that will be required to report income
with respect to the related Securities under the accrual
method of accounting will do so without giving effect
to delays and reductions in distributions attributable
to a default or delinquency on the Loans, except possibly
to the extent that it can be established
that such amounts are uncollectible. As a result,
the amount of income (including OID) reported by a
Securityholder in any period could significantly exceed
the amount of cash distributed to such Securityholder
in that period.
In the opinion of Brown & Wood LLP, if a REMIC election is
made with respect to a Series of Securities, then the
arrangement by which such Securities are issued will be
treated as a REMIC as long as all of the provisions of
the applicable Agreement are complied with and the
statutory and regulatory requirements are satisfied.
Securities will be designated as "regular interests"
or "residual interests" in a REMIC. A REMIC will
not be subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC will be
taken into account by the holders of residual interests.
Such holders will report their proportionate share of
the taxable income of the REMIC whether or not they
receive cash distributions from the REMIC attributable
to such income. The portion of the REMIC taxable income
consisting of "excess inclusions" may not be offset
against other deductions or losses of the holder,
including the net operating losses.
In the opinion of Brown & Wood LLP, if a REMIC or a
partnership election is not made with respect to a
Series of Securities, then the arrangement by which
such Securities are issued will be classified as a
grantor trust under Subpart E, Part I of Subchapter
J of the Code and not as an association taxable as a
corporation. If so provided in the Prospectus Supplement
for a Series, there will be no separation of the principal
and interest payments on the Loans. In such circumstances,
the Securityholder will be considered to have purchased a
pro rata undivided interest in each of the Loans. In
other cases, sale of the Securities will produce
a separation in the ownership of all or a portion of the
principal payments from all or a portion of the interest
payments on the Loans.
In the opinion of Brown & Wood LLP, if a partnership
election is made, the Trust Fund will not be treated as
an association or a publicly traded partnership taxable
as a corporation as long as all of the provisions of
the applicable Agreement are complied with and
the statutory and regulatory requirements are
satisfied. If Notes are issued by such Trust Fund,
such Notes will be treated as indebtedness for federal
income tax purposes. The holders of the Certificates
issued by such Trust Fund, if any, will agree to treat
the Certificates as equity interests in a partnership.
The Securities will be treated as assets described in
Section 7701(a)(19)(C) of the Code and as real estate
assets described in Section 856(c) of the Code.
Generally, gain or loss will be recognized on a sale of
Securities in the amount equal to the difference between
the amount realized and the seller's tax basis in the
Securities sold.
The material federal income tax consequences for
investors associated with the purchase, ownership
and disposition of the Securities are set forth herein
under "Federal Income Tax Consequences". The material
federal income tax consequences for investors associated
with the purchase, ownership and disposition of
Securities of any particular Series will be set forth
under the heading "Federal Income Tax Consequences"
in the related Prospectus Supplement. See "Federal
Income Tax Consequences".
ERISA
Considerations A fiduciary of any employee benefit plan or
other retirement plan or arrangement subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the Code should
carefully review with its legal advisors
whether the purchase or holding of Securities
could give rise to a transaction prohibited or
not otherwise permissible under ERISA or the
Code. See "ERISA Considerations". Certain
classes of Securities may not be transferred
unless the Trustee is furnished with a letter
of representation or an opinion of counsel to
the effect that such transfer will not result
in a violation of the prohibited transaction
provisions of ERISA and the Code and will not
subject the Trustee, Provident or the Master
Servicer to additional obligations. See
"Description of the Securities--General" and
" ERISA Considerations".
Risk Factors For a discussion of certain risks associated with an
investment in the Securities, see "Risk Factors" on Page
12 herein and in the related Prospectus Supplement.
RISK FACTORS
Investors should consider the following factors in connection with the
purchase of the Securities.
LIMITED LIQUIDITY
There will be no market for the Securities of any Series prior to the
issuance thereof, and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide Securityholders with
liquidity of investment or will continue for the life of the Securities of
such Series.
LIMITED SOURCE OF PAYMENTS--NO RECOURSE TO PROVIDENT OR MASTER SERVICER
As further described in the related Prospectus Supplement, the
Securities of a Series will be payable solely from the Trust Fund for such
Series and will not have any claim against or security interest in any trust
fund for any other Series. There will be no recourse to Provident or any
other person for any failure to receive distributions on the Securities.
Further, at the times set forth in the related Prospectus Supplement, certain
Trust Fund Assets and/or any balance remaining in the Security Account
immediately after making all payments due on the Securities of such Series,
after making adequate provision for future payments on certain classes of
Securities and after making any other payments specified in the related
Prospectus Supplement, may be promptly released or remitted to Provident, the
Master Servicer, any credit enhancement provider or any other person entitled
thereto and will no longer be available for making payments to
Securityholders. Consequently, holders of Securities of each Series must
rely solely upon payments with respect to the Trust Fund Assets and the other
assets constituting the Trust Fund for a Series of Securities, including, if
applicable, any amounts available pursuant to any credit enhancement for such
Series, for the payment of principal of and interest on the Securities of
such Series.
The Securities will not represent an interest in or obligation of
Provident, the Master Servicer or any of their respective affiliates. The
only obligation, if any, of Provident with respect to the Trust Fund Assets
or the Securities of any Series will be pursuant to certain representations
and warranties and certain document delivery requirements.
Provident may be required to repurchase or substitute for any Loan with
respect to which such representations and warranties or document delivery
requirements are breached. There is no assurance, however, that Provident
will have the financial ability to effect such repurchase or substitution.
CREDIT ENHANCEMENT AND POSSIBLE LIMITATIONS ON EFFECTIVENESS
Although credit enhancement is intended to reduce the risk of delinquent
payments or losses to holders of Securities entitled to the benefit thereof,
the amount of such credit enhancement will be limited, as set forth in the
related Prospectus Supplement, and may be subject to periodic reduction in
accordance with a schedule or formula or otherwise decline, and could be
depleted under certain circumstances prior to the payment in full of the
related Series of Securities, and as a result Securityholders of the related
Series may suffer losses. Moreover, such credit enhancement may not cover
all potential losses or risks. For example, credit enhancement may or may
not cover fraud or negligence by a loan originator or other parties. In
addition, the Trustee will generally be permitted to reduce, terminate or
substitute all or a portion of the credit enhancement for any Series of
Securities, provided the applicable Rating Agency indicates that the then-
current rating of the Securities of such Series will not be adversely
affected. See "Credit Enhancement".
PREPAYMENT AND YIELD CONSIDERATIONS
The timing of principal payments of the Securities of a Series will be
affected by a number of factors, including the following: (i) the extent of
prepayments (including for this purpose prepayments resulting from
refinancing or liquidations of the Loans due to defaults, casualties,
condemnations and repurchases by Provident or the Master Servicer) of the
Loans comprising the Trust Fund, which prepayments may be influenced by a
variety of factors including general economic conditions, prevailing interest
rate levels, the availability of alternative financing and homeowner
mobility, (ii) the manner of allocating principal and/or payments among the
classes of Securities of a Series as specified in the related Prospectus
Supplement, (iii) the exercise by the party entitled thereto of any right of
optional termination and (iv) the rate and timing of payment defaults and
losses incurred with respect to the Trust Fund Assets. The repurchase of
Loans by Provident or the Seller may result from repurchases of Trust Fund
Assets due to material breaches of Provident's or the Seller's representa-
tions and warranties, as applicable. The yields to maturity and weighted
average lives of the Securities will be affected primarily by the rate and
timing of prepayment of the Loans comprising the Trust Fund Assets. In
addition, the yields to maturity and weighted average lives of the Securities
will be affected by the distribution of amounts remaining in any Pre-Funding
Account following the end of the related Funding Period. Any reinvestment
risks resulting from a faster or slower incidence of prepayment of Loans held
by a Trust Fund will be borne entirely by the holders of one or more classes
of the related Series of Securities. See "Yield and Prepayment
Considerations" and "The Agreements--Pre-Funding Account."
Interest payable on the Securities of a Series on a Distribution Date
will include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending
two or more days prior to a Distribution Date, the effective yield to
Securityholders will be reduced from the yield that would otherwise be
obtainable if interest payable on the Securities were to accrue through the
day immediately preceding each Distribution Date, and the effective yield (at
par) to Securityholders will be less than the indicated coupon rate. See
"Description of the Securities--Distributions on Securities--Distributions of
Interest".
BALLOON PAYMENTS AND INCREASED RISK OF DEFAULT
Certain of the Loans as of the related Cut-Off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity. Loans
with balloon payments involve a greater degree of risk because the ability of
a borrower to make a balloon payment typically will depend upon its ability
either to timely refinance the loan or to timely sell the related Property.
The ability of a borrower to accomplish either of these goals will be
affected by a number of factors, including the level of available mortgage
rates at the time of sale or refinancing, the borrower's equity in the
related Property, the financial condition of the borrower and tax laws.
Losses on such Loans that are not otherwise covered by the credit enhancement
described in the applicable Prospectus Supplement will be borne by the
holders of one or more classes of Securities of the related Series.
NATURE OF MORTGAGES
Change in Property Values and Possible Increase in Losses. There are
several factors that could adversely affect the value of Properties such that
the outstanding balance of the related Loans, together with any senior
financing on the Properties, if applicable, would equal or exceed the value
of the Properties. Among the factors that could adversely affect the value
of the Properties are an overall decline in the residential real estate
market in the areas in which the Properties are located or a decline in the
general condition of the Properties as a result of failure of borrowers to
maintain adequately the Properties or of natural disasters that are not
necessarily covered by insurance, such as earthquakes and floods. In the
case of Home Equity Loans, such decline could extinguish the value of the
interest of a junior mortgagee in the Property before having any effect on
the interest of the related senior mortgagee. If such a decline occurs, the
actual rates of delinquencies, foreclosures and losses on all Loans could be
higher than those currently experienced in the mortgage lending industry in
general. Losses on such Loans that are not otherwise covered by the credit
enhancement described in the applicable Prospectus Supplement will be borne
by the holder of one or more classes of Securities of the related Series.
Delays Due to Liquidation. Even assuming that the Properties provide
adequate security for the Loans, substantial delays could be encountered in
connection with the liquidation of defaulted Loans and corresponding delays
in the receipt of related proceeds by Securityholders could occur. An action
to foreclose on a Property securing a Loan is regulated by state statutes and
rules and is subject to many of the delays and expenses of
other lawsuits if defenses or counterclaims are interposed, sometimes
requiring several years to complete. Furthermore, in some states an action
to obtain a deficiency judgment is not permitted following a nonjudicial sale
of a Property. In the event of a default by a borrower, these restrictions,
among other things, may impede the ability of the Master Servicer to
foreclose on or sell the Property or to obtain liquidation proceeds
sufficient to repay all amounts due on the related Loan. In addition, the
Master Servicer will be entitled to deduct from related liquidation proceeds
all expenses reasonably incurred in attempting to recover amounts due on
defaulted Loans and not yet repaid, including payments to senior lienholders,
legal fees and costs of legal action, real estate taxes and maintenance and
preservation expenses.
Disproportionate Effect of Liquidation Expenses. Liquidation expenses
with respect to defaulted Loans do not vary directly with the outstanding
principal balance of the Loan at the time of default. Therefore, assuming
that a servicer took the same steps in realizing upon a defaulted Loan having
a small remaining principal balance as it would in the case of a defaulted
Loan having a large remaining principal balance, the amount realized after
expenses of liquidation would be smaller as a percentage of the outstanding
principal balance of the small Loan than would be the case with the defaulted
Loan having a large remaining principal balance.
Home Equity Loans; Junior Liens and Effect on Recoveries. Since the
mortgages and deeds of trust securing the Home Equity Loans will be primarily
junior liens subordinate to the rights of the mortgagee under the related
senior mortgage(s) or deed(s) of trust, the proceeds from any liquidation,
insurance or condemnation proceeds will be available to satisfy the
outstanding balance of such junior lien only to the extent that the claims of
such senior mortgagees have been satisfied in full, including any related
foreclosure costs. In addition, a junior mortgagee may not foreclose on the
property securing a junior mortgage unless it forecloses subject to any
senior mortgage, in which case it must either pay the entire amount due on
any senior mortgage to the related senior mortgagee at or prior to the
foreclosure sale or undertake the obligation to make payments on any such
senior mortgage in the event the mortgagor is in default thereunder. The
Trust Fund will not have any source of funds to satisfy any senior mortgages
or make payments due to any senior mortgagees and may therefore be prevented
from foreclosing on the related property.
Consumer Protection Laws. Applicable state laws generally regulate
interest rates and other charges, require certain disclosures, and require
licensing of certain originators and servicers of Loans. In addition, most
states have other laws, public policy and general principles of equity
relating to the protection of consumers, unfair and deceptive practices and
practices which may apply to the origination, servicing and collection of the
Loans. Depending on the provisions of the applicable law and the specific
facts and circumstances involved, violations of these laws, policies and
principles may limit the ability of the Master Servicer to collect all or
part of the principal of or interest on the Loans, may entitle the borrower
to a refund of amounts previously paid and, in addition, could subject the
Master Servicer to damages and administrative sanctions. See "Certain Legal
Aspects of the Loans".
ENVIRONMENTAL RISKS TO TRUST FUND
Real property pledged as security to a lender may be subject to certain
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), a lender may be liable, as
an "owner" or "operator", for costs of addressing releases or threatened
releases of hazardous substances that require remedy at a property, if agents
or employees of the lender have become sufficiently involved in the
operations of the borrower, regardless of whether the environmental damage or
threat was caused by a prior owner. Such costs could result in a loss to the
holders of one or more classes of Securities of the related Series. A lender
also risks such liability on foreclosure of the related property. See
"Certain Legal Aspects of the Loans--Environmental Risks".
CERTAIN OTHER LEGAL ASPECTS OF THE LOANS
Consumer Protection Laws. The Loans may also be subject to federal
laws, including:
(i) the Federal Truth in Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding
the terms of the Loans;
(ii) the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit discrimination on the basis of age, race,
color, sex, religion, marital status, national origin, receipt of public
assistance or the exercise of any right under the Consumer Credit
Protection Act, in the extension of credit;
(iii) the Fair Credit Reporting Act, which regulates the use
and reporting of information related to the borrower's credit
experience; and
(iv) for Loans that were originated or closed after November 7,
1989, the Home Equity Loan Consumer Protection Act of 1988, which
requires additional application disclosures, limits changes that may be
made to the Loan documents without the borrower's consent and restricts
a lender's ability to declare a default or to suspend or reduce a
borrower's credit limit to certain enumerated events.
The Riegle Act. Certain Mortgage Loans may be subject to the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "Riegle
Act") which incorporates the Home Ownership and Equity Protection Act of
1994. These provisions impose additional disclosure and other requirements
on creditors with respect to non-purchase money mortgage loans with high
interest rates or high up-front fees and charges. The provisions of the
Riegle Act apply on a mandatory basis to all Mortgage Loans originated on or
after October 1, 1995. These provisions can impose specific statutory
liabilities upon creditors who fail to comply with their provisions and may
affect the enforceability of the related Loans. In addition, any assignee of
the creditor would generally be subject to all claims and defenses that the
consumer could assert against the creditor, including, without limitation,
the right to rescind the Mortgage Loan.
RATING OF THE SECURITIES
It will be a condition to the issuance of a class of Securities offered
hereby that they be rated in one of the four highest rating categories by the
Rating Agency identified in the related Prospectus Supplement. Any such
rating would be based on, among other things, the adequacy of the value of
the related Trust Fund Assets and any credit enhancement with respect to such
class and will represent such Rating Agency's assessment solely of the
likelihood that holders of such class of Securities will receive payments to
which such Securityholders are entitled under the related Agreement. Such
rating will not constitute an assessment of the likelihood that principal
prepayments on the related Loans will be made, the degree to which the rate
of such prepayments might differ from that originally anticipated or the
likelihood of early optional termination of the Series of Securities. Such
rating shall not be deemed a recommendation to purchase, hold or sell
Securities, inasmuch as it does not address market price or suitability for a
particular investor. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an
investor purchasing a Security at a significant premium might fail to recoup
its initial investment under certain prepayment scenarios.
There is also no assurance that any such rating will remain in effect
for any given period of time or that it may not be lowered or withdrawn
entirely by the Rating Agency in the future if in its judgment circumstances
in the future so warrant. In addition to being lowered or withdrawn due to
any erosion in the adequacy of the value of the Trust Fund Assets or any
credit enhancement with respect to a Series of Securities, such rating might
also be lowered or withdrawn because of, among other reasons, an adverse
change in the financial or other condition of a credit enhancement provider
or a change in the rating of such credit enhancement provider's long term
debt.
The amount, type and nature of credit enhancement, if any, established
with respect to a class of Securities will be determined on the basis of
criteria established by each Rating Agency rating classes of such Series.
Such criteria are sometimes based upon an actuarial analysis of the behavior
of similar loans in a larger group. Such analysis is often the basis upon
which each Rating Agency determines the amount of credit enhancement required
with respect to each such class. There can be no assurance that the
historical data supporting any such actuarial analysis will accurately
reflect future experience nor any assurance that the data derived from a
large pool of similar loans accurately predicts the delinquency, foreclosure
or loss experience of any particular pool of Loans. No assurance can be
given that the values of any Properties have remained or will remain at their
levels on the respective dates of origination of the related Loans. If the
residential real estate markets should experience an overall decline in
property values such that the outstanding principal balances of the Loans in
a particular Trust Fund and any other financing on the related Properties
become equal to or greater than the value of the Properties, the rates of
delinquencies, foreclosures and losses could be higher than those now
generally experienced in the mortgage lending industry. In addition, adverse
economic conditions (which may or may not affect real property values) may
affect the timely payment by mortgagors of scheduled payments of principal
and interest on the Loans and, accordingly, the rates of delinquencies,
foreclosures and losses with respect to any Trust Fund. To the extent that
such losses are not covered by credit enhancement, such losses will be borne,
at least in part, by the holders of one or more classes of Securities of the
related Series. See "Rating".
BOOK-ENTRY REGISTRATION AND REDUCTION OF LIQUIDITY OF SECURITIES
If issued in book-entry form, such registration may reduce the liquidity
of the Securities in the secondary trading market since investors may be
unwilling to purchase Securities for which they cannot obtain physical
certificates. Since transactions in Book-Entry Securities can be effected
only through the Depository Trust Company ("DTC"), participating
organizations, Financial Intermediaries and certain banks, the ability of a
Securityholder to pledge a Book-Entry Security to persons or entities that do
not participate in the DTC system may be limited due to lack of a physical
certificate representing such Securities. Security Owners will not be
recognized as Securityholders as such term is used in the related Agreement,
and Security Owners will be permitted to exercise the rights of
Securityholders only indirectly through DTC and its Participants.
In addition, Securityholders may experience some delay in their receipt
of distributions of interest and principal on Book-Entry Securities since
distributions are required to be forwarded by the Trustee to DTC and DTC will
then be required to credit such distributions to the accounts of Depository
participants which thereafter will be required to credit them to the accounts
of Securityholders either directly or indirectly through Financial
Intermediaries. See "Description of the Securities--Book-Entry Registration
of Securities".
PRE-FUNDING ACCOUNTS AND POSSIBLE PREPAYMENT RISK
If so provided in the related Prospectus Supplement, on the related
Closing Date Provident will deposit cash in an amount (the "Pre-Funded
Amount") specified in such Prospectus Supplement into an account (the "Pre-
Funding Account"). In no event shall the Pre-Funded Amount exceed 50% of the
initial aggregate principal amount of the Certificates and/or Notes of the
related Series of Securities. The Pre-Funded Amount will be used to purchase
Loans ("Subsequent Loans") in a period from the related Closing Date to a
date not more than one year after such Closing Date (such period, the
"Funding Period") from Provident. The Pre-Funding Account will be maintained
with the Trustee for the related Series of Securities and is designed solely
to hold funds to be applied by such Trustee during the Funding Period to pay
to Provident the purchase price for Subsequent Loans. Monies on deposit in
the Pre-Funding Account will not be available to cover losses on or in
respect of the related Loans. To the extent that the entire Pre-Funded
Amount has not been applied to the purchase of Subsequent Loans by the end of
the related Funding Period, any amounts remaining in the Pre-Funding Account
will be distributed as a prepayment of principal to the holders of the
related Securities on the Distribution Date immediately following the end of
the Funding Period, in the amounts and pursuant to the priorities set forth
in the related Prospectus Supplement. Any reinvestment risk resulting from
such prepayment will be borne entirely by the holders of one or more classes
of the related Series of Securities.
BANKRUPTCY AND INSOLVENCY RISKS
Provident and the Trust Fund will treat the transfer of Loans from
Provident to the Trust Fund as a sale for accounting purposes. However, in
the event of the insolvency of Provident, it is possible that a receiver or
conservator (or similar official) for Provident, may attempt to
recharacterize the sale of the Loans as a borrowing by Provident, secured by
a pledge of the Loans. Certain provisions of the Federal Deposit Insurance
Act may permit the FDIC to avoid such security interest. This position, if
argued before and/or accepted by a court, could prevent timely payments of
amounts due on the Securities and result in a reduction of payments due on
the Securities. Provident will, however, mark its records to indicate that
the Trust Fund Assets relating to each Series have been sold to a Trust Fund.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or
the Securityholders from appointing a successor Master Servicer. The time
period during which cash collections may be commingled with the Master
Servicer's own funds prior to each Distribution Date will be specified in the
related Prospectus Supplement. In the event of the insolvency of the Master
Servicer and if such cash collections are commingled with the Master
Servicer's own funds for at least ten days, the Trust Fund will likely not
have a perfected interest in such collections since such collections would
not have been deposited in a segregated account within ten days after the
collection thereof, and the inclusion thereof in the bankruptcy estate of the
Master Servicer may result in delays in payment and failure to pay amounts
due on the Securities of the related Series.
In addition, federal and state statutory provisions, including the
federal bankruptcy laws and state laws affording relief to debtors, may
interfere with or affect the ability of the secured mortgage lender to
realize upon its security. For example, in a proceeding under the federal
Bankruptcy Code, a lender may not foreclose on a mortgaged property without
the permission of the bankruptcy court. The rehabilitation plan proposed by
the debtor may provide, if the mortgaged property is not the debtor's
principal residence and the court determines that the value of the mortgaged
property is less than the principal balance of the mortgage loan, for the
reduction of the secured indebtedness to the value of the mortgaged property
as of the date of the commencement of the bankruptcy, rendering the lender a
general unsecured creditor for the difference, and also may reduce the
monthly payments due under such mortgage loan, change the rate of interest
and alter the mortgage loan repayment schedule. The effect of any such
proceedings under the federal Bankruptcy Code, including but not limited to
any automatic stay, could result in delays in receiving payments on the Loans
underlying a Series of Securities and possible reductions in the aggregate
amount of such payments.
VALUE OF TRUST FUND ASSETS
There is no assurance that the market value of the Trust Fund Assets or
any other assets relating to a Series of Securities described under "Credit
Enhancement" herein will at any time be equal to or greater than the
principal amount of the Securities of such Series then outstanding, plus
accrued interest thereon. Moreover, upon an event of default under the
Agreement for a Series of Securities and a sale of the related Trust Fund
Assets or upon a sale of the assets of a Trust Fund for a Series of
Securities, the Trustee, the Master Servicer, the credit enhancer, if any,
and any other service provider specified in the related Prospectus Supplement
generally will be entitled to receive the proceeds of any such sale to the
extent of unpaid fees and other amounts owing to such persons under the
related Agreement prior to distributions to Securityholders. Upon any such
sale, the proceeds thereof may be insufficient to pay in full the principal
of and interest on the Securities of such Series.
THE TRUST FUND
GENERAL
The Securities of each Series will represent interests in the assets of
the related Trust Fund, and the Notes of each Series will be secured by the
pledge of the assets of the related Trust Fund. The Trust Fund for
each Series will be held by the Trustee for the benefit of the related
Securityholders. Each Trust Fund will consist of certain assets (the "Trust
Fund Assets") consisting of a pool (each, a "Pool") comprised of Loans as
specified in the related Prospectus Supplement, together with payments in
respect of such Loans, as specified in the related Prospectus Supplement.
The Pool will be created on the first day of the month of the issuance of the
related Series of Securities or such other date specified in the related
Prospectus Supplement (the "Cut-Off Date"). The Securities will be entitled
to payment from the assets of the related Trust Fund or other assets pledged
for the benefit of the Securityholders as specified in the related Prospectus
Supplement and will not be entitled to payments in respect of the assets of
any other trust fund established by Provident.
Each Loan will have been originated or acquired by Provident in
accordance with the underwriting criteria specified below under "Loan
Program--Underwriting Standards" or as otherwise described in the related
Prospectus Supplement. See "Loan Program--Underwriting Standards". The
Trust Fund Assets will be conveyed without recourse by Provident to the
related Trust Fund.
Provident will assign the Trust Fund Assets to the Trustee named in the
related Prospectus Supplement for the benefit of the holders of the
Securities of the related Series. The Master Servicer named in the related
Prospectus Supplement will service the Trust Fund Assets, either directly or
through Sub-Servicers, pursuant to a Pooling and Servicing Agreement among
Provident, the Master Servicer and the Trustee with respect to a Series
consisting of Certificates, or a master servicing agreement (each, a "Master
Servicing Agreement") between the Trustee and the Master Servicer with
respect to a Series consisting of Certificates and Notes, and will receive a
fee for such services. See "Loan Program" and "The Agreements". With
respect to Loans serviced by the Master Servicer through a Sub-Servicer, the
Master Servicer will remain liable for its servicing obligations under the
related Agreement as if the Master Servicer alone were servicing such Loans.
As used herein, "Agreement" means, with respect to a Series consisting
of Certificates, the Pooling and Servicing Agreement, and with respect to a
Series consisting of Certificates and Notes, the Trust Agreement, the
Indenture and the Master Servicing Agreement, as the context requires.
If so specified in the related Prospectus Supplement, a Trust Fund
relating to a Series of Securities may be a business trust formed under the
laws of the state specified in the related Prospectus Supplement pursuant to
a trust agreement (each, a "Trust Agreement") between Provident and the
trustee of such Trust Fund.
With respect to each Trust Fund, prior to the initial offering of the
related Series of Securities, the Trust Fund will have no assets or
liabilities. No Trust Fund is expected to engage in any activities other
than acquiring, managing and holding the related Trust Fund Assets and other
assets contemplated herein specified and in the related Prospectus Supplement
and the proceeds thereof, issuing Securities and making payments and
distributions thereon and certain related activities. No Trust Fund is
expected to have any source of capital other than its assets and any related
credit enhancement.
The only obligations of Provident with respect to a Series of Securities
will be to make certain representations and warranties to the Trustee for
such Series of Securities. With respect to any breach of a representation or
warranty which materially and adversely affects the interests of a
Securityholder, Provident will be obligated to cure such breach or repurchase
or substitute for the affected Loan or Loans. See "The Agreements--
Assignment of the Trust Fund Assets". The obligations of the Master Servicer
with respect to the Loans will consist principally of its contractual
servicing obligations under the related Agreement (including its obligation
to enforce the obligations of the Sub-Servicers or Provident, or both, as
more fully described herein under "Loan Program--Representations by
Provident; Repurchases" and "The Agreements--Sub-Servicing" and
"--Assignment of the Trust Fund Assets") and its obligation, if any, to make
certain cash advances in the event of delinquencies in payments on or with
respect to the Loans in the amounts described herein under "Description of
the Securities--Advances". The obligations of the Master Servicer to make
advances may be subject to limitations to the extent provided herein and in
the related Prospectus Supplement.
The following is a brief description of the assets expected to be
included in the Trust Funds. If specific information respecting Trust Fund
Assets is not known at the time the related Series of Securities initially is
offered, more general information of the nature described below will be
provided in the related Prospectus Supplement, and specific information will
be set forth in a report on Form 8-K to be filed with the Securities and
Exchange Commission within fifteen days after the initial issuance of such
Securities (the "Detailed Description"). In no event, however, will more
than 5% (by principal balance at the Cut-Off Date) of the Mortgage Pool
deviate from the characteristics of the Loans set forth in the related
Prospectus Supplement. A copy of the Agreement with respect to each Series
of Securities will be available for inspection at the corporate trust office
of the Trustee specified in the related Prospectus Supplement. A schedule of
the Loans relating to such Series will be attached to the Agreement delivered
to the Trustee upon delivery of the Securities.
THE LOANS
General. Loans will consist of Mortgage Loans and Home Equity Loans.
As more fully described in the related Prospectus Supplement, the Loans will
be "conventional" loans.
The Loans in a Pool will have monthly payments due on the first day of
each month or on such other day of the month specified in the related
Prospectus Supplement. The payment terms of the Loans to be included in a
Trust Fund will be described in the related Prospectus Supplement and may
include any of the following features (or combination thereof), all as
described below or in the related Prospectus Supplement:
(a) Interest may be payable at a fixed rate, a rate adjustable
from time to time in relation to an index (which will be specified in
the related Prospectus Supplement), a rate that is fixed for a period of
time or under certain circumstances and is followed by an adjustable
rate, a rate that otherwise varies from time to time, or a rate that is
convertible from an adjustable rate to a fixed rate. Changes to an
adjustable rate may be subject to periodic limitations, maximum rates,
minimum rates or a combination of such limitations. Accrued interest
may be deferred and added to the principal of a Loan for such periods
and under such circumstances as may be specified in the related
Prospectus Supplement. Loans may provide for the payment of interest at
a rate lower than the specified interest rate borne by such Loan (the
"Loan Rate") for a period of time or for the life of the Loan, and the
amount of any difference may be contributed from funds supplied by the
seller of the Property or another source.
(b) Principal may be payable on a level debt service basis to
fully amortize the Loan over its term, may be calculated on the basis of
an assumed amortization schedule that is significantly longer than the
original term to maturity or on an interest rate that is different from
the Loan Rate or may not be amortized during all or a portion of the
original term. Payment of all or a substantial portion of the principal
may be due on maturity ("balloon payment"). Principal may include
interest that has been deferred and added to the principal balance of
the Loan.
(c) Monthly payments of principal and interest may be fixed for
the life of the Loan, may increase over a specified period of time or
may change from period to period. Loans may include limits on periodic
increases or decreases in the amount of monthly payments and may include
maximum or minimum amounts of monthly payments.
(d) Prepayments of principal may be subject to a prepayment fee,
which may be fixed for the life of the Loan or may decline over time,
and may be prohibited for the life of the Loan or for certain periods
("Lockout Periods"). Certain Loans may permit prepayments after
expiration of the
applicable Lockout Period and may require the payment of a prepayment
fee in connection with any such subsequent prepayment. Other Loans may
permit prepayments without payment of a fee unless the prepayment occurs
during specified time periods. The Loans may include "due-on-sale"
clauses which permit the mortgagee to demand payment of the entire Loan
in connection with the sale or certain transfers of the related
Property. Other Loans may be assumable by persons meeting the then
applicable standards set forth in the Agreement.
A Trust Fund may contain certain Loans ("Buydown Loans") that include
provisions whereby a third party partially subsidizes the monthly payments of
the borrowers on such Loans during the early years of such Loans, the
difference to be made up from a fund (a "Buydown Fund") contributed by such
third party at the time of origination of the Loan. A Buydown Fund will be
in an amount equal either to the discounted value or full aggregate amount of
future payment subsidies. The underlying assumption of buydown plans is that
the income of the borrower will increase during the buydown period as a
result of normal increases in compensation and inflation, so that the
borrower will be able to meet the full loan payments at the end of the
buydown period. To the extent that this assumption as to increased income is
not fulfilled, the possibility of defaults on Buydown Loans is increased.
The related Prospectus Supplement will contain information with respect to
any Buydown Loan concerning limitations on the interest rate paid by the
borrower initially, on annual increases in the interest rate and on the
length of the buydown period.
The real property which secures repayment of the Loans is referred to as
the "Mortgaged Properties". The Loans will be secured by mortgages or deeds
of trust or other similar security instruments creating a lien on a Mortgaged
Property. In the case of Home Equity Loans, such liens generally will be
subordinated to one or more senior liens on the related Mortgaged Properties
as described in the related Prospectus Supplement. The Mortgaged Properties
are referred to herein as the "Properties". The Properties relating to Loans
will consist of detached or semi-detached one- to four-family dwelling units,
townhouses, rowhouses, individual condominium units, individual units in
planned unit developments, manufactured homes and certain other dwelling
units ("Single Family Properties"). Such Properties may include vacation and
second homes, investment properties, and dwellings situated on leasehold
estates. In the case of leasehold interests, the term of the leasehold will
exceed the scheduled maturity of the Loan by at least five years, unless
otherwise specified in the related Prospectus Supplement. The Properties may
be located in any one of the fifty states, the District of Columbia, Guam,
Puerto Rico or any other territory of the United States.
Loans with certain Loan-to-Value Ratios and/or certain principal
balances may be covered wholly or partially by primary mortgage guaranty
insurance policies (each, a "Primary Mortgage Insurance Policy"). The
existence, extent and duration of any such coverage will be described in the
applicable Prospectus Supplement.
The aggregate principal balance of Loans secured by Properties that are
owner-occupied may be disclosed in the related Prospectus Supplement. The
basis for a representation that a given percentage of the Loans is secured by
Single Family Properties that are owner-occupied will be either (i) the
making of a representation by the borrower at origination of the Loan either
that the underlying Property will be used by the borrower for a period of at
least six months every year or that the borrower intends to use the Property
as a primary residence or (ii) a finding that the address of the underlying
Property is the borrower's mailing address.
Home Equity Loans. As more fully described in the related Prospectus
Supplement, interest on each Revolving Credit Line Loan, excluding
introduction rates offered from time to time during promotional periods, is
computed and payable monthly on the average daily outstanding principal
balance of such Loan. Principal amounts on a Revolving Credit Line Loan may
be drawn down (up to a maximum amount as set forth in the related Prospectus
Supplement) or repaid under each Revolving Credit Line Loan from time to
time, but may be subject to a minimum periodic payment. As specified in the
related Prospectus Supplement, the Trust Fund may include any amounts
borrowed under a Revolving Credit Line Loan after the Cut-Off Date. The full
amount of a Closed-End Loan is advanced at the inception of the Loan and
generally is repayable in equal (or substantially equal) installments of an
amount to fully amortize such Loan at its stated maturity or is a Balloon
Loan. As more fully described in the related Prospectus Supplement, interest
on each Closed-End Loan is calculated on the basis of the outstanding
principal balance of such Loan multiplied by the Loan Rate thereon and further
multiplied by either a fraction, the numerator of which is the number of
days in the period elapsed since the preceding payment of interest was made
and the denominator of which is the number of days in the annual period for
which interest accrues on such Loan, or a fraction which is 30 over 360.
Except to the extent provided in the related Prospectus Supplement, the
original terms to stated maturity of Closed-End Loans generally will not
exceed 360 months. Under certain circumstances, under either a Revolving
Credit Line Loan or a Closed-End Loan, a borrower may choose an interest
only payment option and is obligated to pay only the amount of interest
which accrues on the Loan during the billing cycle. An interest only
payment option may be available for a specified period before the borrower
must begin paying at least the minimum monthly payment of a specified
percentage of the average outstanding balance of the Loan.
Additional Information. Each Prospectus Supplement will contain
information, as of the date of such Prospectus Supplement and to the extent
then specifically known to Provident, with respect to the Loans contained in
the related Pool, including (i) the aggregate outstanding principal balance
and the average outstanding principal balance of the Loans as of the
applicable Cut-Off Date, (ii) the type of property securing the Loan (e.g.,
single family residences, individual units in condominium apartment
buildings, two- to four-family dwelling units, other real property or Home
Improvements), (iii) the original terms to maturity of the Loans, (iv) the
largest principal balance and the smallest principal balance of any of the
Loans, (v) the earliest origination date and latest maturity date of any of
the Loans, (vi) the Loan-to-Value Ratios or Combined Loan-to-Value Ratios, as
applicable, of the Loans, (vii) the Loan Rates or annual percentage rates
("APR") or range of Loan Rates or APR's borne by the Loans, (viii) the
maximum and minimum per annum Loan Rates, and (ix) the geographical location
of the Loans. If specific information respecting the Loans is not known to
Provident at the time the related Securities are initially offered, more
general information of the nature described above will be provided in the
related Prospectus Supplement, and specific information will be set forth in
the Detailed Description.
Generally, the "Loan-to-Value Ratio" of a Loan at any given time is the
fraction, expressed as a percentage, the numerator of which is the original
principal balance of the related Loan and the denominator of which is the
Collateral Value of the related Property. Generally, the "Combined Loan-to-
Value Ratio" of a Loan at any given time is the ratio, expressed as a
percentage, of (i) the sum of (a) the original principal balance of the Loan
(or, in the case of a Revolving Credit Line Loan, the maximum amount thereof
available) and (b) the outstanding principal balance at the date of
origination of the Loan of any senior mortgage loan(s) or, in the case of any
open-ended senior mortgage loan, the maximum available line of credit with
respect to such mortgage loan, regardless of any lesser amount actually
outstanding at the date of origination of the Loan, to (ii) the Collateral
Value of the related Property. The "Collateral Value" of the Property, other
than with respect to certain Loans the proceeds of which were used to
refinance an existing mortgage loan (each, a "Refinance Loan"), is the lesser
of (a) the appraised value determined in an appraisal obtained at origination
of such Loan and (b) the sales price for such Property. In the case of
Refinance Loans, the "Collateral Value" of the related Property is the
appraised value thereof determined in an appraisal obtained at the time of
refinancing.
No assurance can be given that values of the Properties have remained or
will remain at their levels on the dates of origination of the related Loans.
If the residential real estate market should experience an overall decline in
property values such that the sum of the outstanding principal balances of
the Loans and any primary or secondary financing on the Properties, as
applicable, in a particular Pool become equal to or greater than the value of
the Properties, the actual rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced in the mortgage lending
industry. In addition, adverse economic conditions and other factors (which
may or may not affect real property values) may affect the timely payment by
borrowers of scheduled payments of principal and interest on the Loans and,
accordingly, the actual rates of delinquencies, foreclosures and losses with
respect to any Pool. To the extent that such losses are not covered by
subordination provisions or alternative arrangements, such losses will be
borne, at least in part, by the holders of the Securities of the related
Series.
SUBSTITUTION OF TRUST FUND ASSETS
Substitution of Trust Fund Assets will be permitted in the event of
breaches of representations and warranties with respect to any original Trust
Fund Asset or in the event the documentation with respect to any Trust Fund
Asset is determined by the Trustee to be incomplete. The period during which
such substitution will be permitted generally will be indicated in the
related Prospectus Supplement.
USE OF PROCEEDS
The net proceeds to be received by Provident from the sale of the Trust
Fund Assets by Provident to Trust Funds will be applied by Provident to the
purchase of additional trust fund assets or will be used by Provident for
general corporate purposes. Provident expects to sell Securities in Series
issued by the related Trust Fund from time to time, but the timing and amount
of offerings of Securities will depend on a number of factors, including the
volume of Trust Fund Assets originated or acquired by Provident and sold to
the Trust Fund, prevailing interest rates, availability of funds and general
market conditions.
THE PROVIDENT BANK
Provident, an Ohio banking corporation, is the principal banking
subsidiary of Provident Bancorp, Inc., a Cincinnati-based bank holding
company registered under the Bank Holding Company Act. Provident Bancorp,
Inc. operates throughout Ohio, Northern Kentucky, Southeastern Indiana and
Florida. The principal executive offices of Provident are located at One
East Fourth Street, Cincinnati, Ohio 45202 (Telephone: (513) 579-2000).
Neither Provident nor any of Provident's affiliates will insure or
guarantee distributions on the Securities of any Series.
LOAN PROGRAM
The Loans will have been originated or purchased by Provident, either
directly or through affiliates. The Loans so originated or acquired by
Provident will have been originated in accordance with the underwriting
criteria specified below under "Underwriting Standards" and as further
described in the related Prospectus Supplement.
UNDERWRITING STANDARDS
Underwriting standards are applied by or on behalf of a lender to
evaluate the borrower's credit standing and repayment ability, and the value
and adequacy of the related Property as collateral. In general, a
prospective borrower applying for a Loan is required to fill out a detailed
application designed to provide to the underwriting officer pertinent credit
information, including the principal balance and payment history with respect
to any senior mortgage, if any, which will be verified by Provident. As part
of the description of the borrower's financial condition, the borrower
generally is required to provide a current list of assets and liabilities and
a statement of income and expenses, as well as an authorization to apply for
a credit report which summarizes the borrower's credit history with local
merchants and lenders and any record of bankruptcy. In most cases, an
employment verification is obtained from an independent source (typically the
borrower's employer) which verification reports, among other things, the
length of employment with that organization and the borrower's current
salary. If a prospective borrower is self-employed, the borrower may be
required to submit copies of signed tax returns. The borrower may also be
required to authorize verification of deposits at financial institutions
where the borrower has demand or savings accounts.
In determining the adequacy of the property to be used as collateral, an
appraisal will generally be made of each property considered for financing.
The appraiser is generally required to inspect the property, issue a report
on its condition and, if applicable, verify construction has been completed.
The appraisal is based on the market value of comparable homes, the estimated
rental income (if considered applicable by the appraiser) and the cost of
replacing the property. The value of the property being financed, as
indicated by the appraisal, must be such that it currently supports, and is
anticipated to support in the future, the outstanding loan balance.
The maximum loan amount will vary depending upon a borrower's credit
grade and loan program but will not generally exceed $750,000. Variations in
maximum loan amount limits will be permitted based on compensating factors.
Compensating factors may generally include, to the extent specified in the
related Prospectus Supplement, low loan-to-value ratio, low debt-to-income
ratio, stable employment, favorable credit history and the nature of the
underlying first mortgage loan, if applicable.
Provident's underwriting standards generally permit loans with loan-to-
value ratios at origination of up to 100% depending on the loan program, type
and use of the property, creditworthiness of the borrower and debt-to-income
ratio.
After obtaining all applicable employment, credit and property
information, Provident will use a debt-to-income ratio to assist in
determining whether the prospective borrower has sufficient monthly income
available to support the payments of principal and interest on the Mortgage
Loan in addition to other monthly credit obligations. The "debt-to-income
ratio" is the ratio of the borrower's total monthly obligations (which
includes principal and interest on each mortgage, tax assessments, other
loans, charge accounts and all other scheduled indebtedness) to the
borrower's gross monthly income. The maximum monthly debt-to-income ratio
will vary depending upon a borrower's credit grade and loan program but will
not generally exceed 60%. Variations in the monthly debt-to-income ratio
limit will be permitted based on compensating factors to the extent specified
in the related Prospectus Supplement.
If specified in the related Prospectus Supplement, a portion of the
Loans in a Trust Fund may have been originated under a limited documentation
program. Under a limited documentation program, more emphasis is placed on
the value and adequacy on the property as collateral and other assets of the
borrower than on credit underwriting. Under a limited documentation program,
certain credit underwriting documentation concerning income or income
verification and/or employment verification is waived.
In the case of a Loan secured by a leasehold interest in real property,
the title to which is held by a third party lessor, Provident will represent
and warrant, among other things, that the remaining term of the lease and any
sublease is at least five years longer than the remaining term on the Loan.
Certain of the types of Loans that may be included in a Trust Fund are
recently developed and may involve additional uncertainties not present in
traditional types of loans. For example, certain of such Loans may provide
for escalating or variable payments by the borrower. These types of Loans
are underwritten on the basis of a judgment that the borrowers have the
ability to make the monthly payments required initially. In some instances,
a borrower's income may not be sufficient to permit continued Loan payments
as such payments increase. These types of Loans may also be underwritten
primarily upon the basis of Loan-to-Value Ratios or other favorable credit
factors.
QUALIFICATIONS OF PROVIDENT
Provident will be required to satisfy the following qualifications.
Provident is, and each entity from which it acquires Loans must be, an
institution experienced in originating and servicing loans of the type
contained in the related Pool in accordance with accepted practices and
prudent guidelines, and must maintain satisfactory facilities to originate
and service those loans. Provident is a seller/servicer approved by the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). Provident is a mortgagee approved by the
Federal Housing Authority and is an institution the deposit accounts in which
are insured by the Federal Deposit Insurance Corporation ("FDIC").
REPRESENTATIONS BY PROVIDENT; REPURCHASES
Provident will have made representations and warranties in respect of
the Loans sold by Provident to the Trust Fund and evidenced by all, or a
part, of a Series of Securities. Such representations and warranties may
include, among other things: (i) that title insurance (or in the case of
Properties located in areas where such policies are generally not available,
an attorney's certificate of title) and any required hazard insurance policy
were effective at origination of each Loan and that each policy (or
certificate of title as applicable) remained in effect on the date of
purchase of the Loan from Provident; (ii) that Provident had good title to
each such Loan and such Loan was subject to no offsets, defenses,
counterclaims or rights of rescission except to the extent that any buydown
agreement may forgive certain indebtedness of a borrower; (iii) that each
Loan constituted a valid lien on, or a perfected security interest with
respect to, the Property (subject only to permissible liens disclosed, if
applicable, title insurance exceptions, if applicable, and certain other
exceptions described in the Agreement), (iv) the Property is undamaged by
waste, fire, earthquake, earth movement, windstorm, flood, tornado or other
casualty, so as to affect adversely the value of the Property; (v) that there
were no delinquent tax or assessment liens against the Property; (vi) that no
required payment on a Loan was delinquent more than the number of days
specified in the related Prospectus Supplement; and (vii) that each Loan was
made in compliance with, and is enforceable under, all applicable state and
federal laws and regulations in all material respects.
The Master Servicer or the Trustee will promptly notify Provident of any
breach of any representation or warranty made by it in respect of a Loan
which materially and adversely affects the interests of the Securityholders
in such Loan. If Provident cannot cure such breach within the number of days
specified in the related Prospectus Supplement following notice from the
Master Servicer or the Trustee, as the case may be, then Provident will be
obligated either (i) to repurchase such Loan from the Trust Fund at a price
(the "Purchase Price") equal to 100% of the unpaid principal balance thereof
as of the date of the repurchase plus unpaid accrued interest thereon to the
first day of the month following the month of repurchase at the Loan Rate
(less any Advances or amount payable as related servicing compensation if
Provident is the Master Servicer) or (ii) substitute for such Loan a
replacement loan that satisfies the criteria specified in the related
Prospectus Supplement. If a REMIC election is to be made with respect to a
Trust Fund, the Master Servicer or a holder of the related residual
certificate generally will be obligated to pay any prohibited transaction tax
which may arise in connection with any such repurchase or substitution and
the Trustee must have received a satisfactory opinion of counsel that such
repurchase or substitution will not cause the Trust Fund to lose its status
as a REMIC or otherwise subject the Trust Fund to a prohibited transaction
tax. This repurchase or substitution obligation will constitute the sole
remedy available to holders of Securities or the Trustee for a breach of
representation by Provident.
Neither the Trustee nor the Master Servicer (unless the Master Servicer
is Provident) will be obligated to purchase or substitute a Loan if Provident
defaults on its obligation to do so, and no assurance can be given that
Provident will carry out its respective repurchase or substitution
obligations with respect to Loans.
DESCRIPTION OF THE SECURITIES
Each Series of Certificates will be issued pursuant to separate
agreements (each, a "Pooling and Servicing Agreement" or a "Trust Agreement")
among Provident, the Master Servicer and the Trustee. A form of Pooling and
Servicing Agreement and Trust Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Each Series of
Notes will be issued pursuant to an indenture (the "Indenture") between the
related Trust Fund and the entity named in the related Prospectus Supplement
as trustee (the "Trustee") with respect to such Series, and the related Loans
will be serviced by the Master Servicer pursuant to a Master Servicing
Agreement. A form of Indenture and Master Servicing Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.
A Series of Securities may consist of both Notes and Certificates. Each
Agreement, dated as of the related Cut-Off Date, will be among Provident, the
Master Servicer and the Trustee for the benefit of the holders of the
Securities of such Series. The provisions of each Agreement will vary
depending upon the nature of the Securities to be issued thereunder
and the nature of the related Trust Fund. The following are descriptions of
the material provisions which may appear in each Agreement. The descriptions
are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Agreement for each Series of Securities and the
applicable Prospectus Supplement. Provident will provide a copy of the
Agreement (without exhibits) relating to any Series of Securities without
charge upon written request of a holder of record of a Security of such
Series addressed to The Provident Bank, One East Fourth Street, Cincinnati,
Ohio 45202, Attention: Secretary.
GENERAL
As described in the related Prospectus Supplement, the Securities of
each Series will be issued in book-entry or fully registered form, in the
authorized denominations specified in the related Prospectus Supplement,
will, in the case of Certificates, evidence specified beneficial ownership
interests in, and in the case of Notes, be secured by, the assets of the
related Trust Fund created pursuant to each Agreement and will not be
entitled to payments in respect of the assets included in any other Trust
Fund established by Provident. Unless otherwise specified in the related
Prospectus Supplement, the Securities will not represent obligations of
Provident or any affiliate of Provident. Certain of the Loans may be
guaranteed or insured as set forth in the related Prospectus Supplement.
Each Trust Fund will consist of, to the extent provided in the related
Agreement, (i) the Trust Fund Assets, as from time to time are subject to the
related Agreement (exclusive of any amounts specified in the related
Prospectus Supplement ("Retained Interest")), including all payments of
interest and principal received with respect to the Loans after the Cut-Off
Date (to the extent not applied in computing the principal balance of such
Loans as of the Cut-Off Date (the "Cut-Off Date Principal Balance")); (ii)
such assets as from time to time are required to be deposited in the related
Security Account, as described below under "The Agreements--Payments on
Loans; Deposits to Security Account"; (iii) property which secured a Loan and
which is acquired on behalf of the Securityholders by foreclosure or deed in
lieu of foreclosure and (iv) any insurance policies or other forms of credit
enhancement required to be maintained pursuant to the related Agreement. If
so specified in the related Prospectus Supplement, a Trust Fund may also
include one or more of the following: reinvestment income on payments
received on the Trust Fund Assets, a Reserve Account, a mortgage pool
insurance policy, a special hazard insurance policy, a bankruptcy bond, one
or more letters of credit, a surety bond, guaranties or similar instruments.
Each Series of Securities will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on, and each class of Notes of a Series will be secured by, the
related Trust Fund Assets. A Series of Securities may include one or more
classes that are senior in right to payment to one or more other classes of
Securities of such Series. Certain Series or classes of Securities may be
covered by insurance policies, surety bonds or other forms of credit
enhancement, in each case as described under "Credit Enhancement" herein and
in the related Prospectus Supplement. One or more classes of Securities of a
Series may be entitled to receive distributions of principal, interest or any
combination thereof. Distributions on one or more classes of a Series of
Securities may be made prior to one or more other classes, after the
occurrence of specified events, in accordance with a schedule or formula or
on the basis of collections from designated portions of the related Trust
Fund Assets, in each case as specified in the related Prospectus Supplement.
The timing and amounts of such distributions may vary among classes or over
time as specified in the related Prospectus Supplement.
Distributions of principal and interest (or, where applicable, of
principal only or interest only) on the related Securities will be made by
the Trustee on each Distribution Date (i.e., monthly, quarterly, semi-
annually or at such other intervals and on the dates as are specified in the
related Prospectus Supplement) in proportion to the percentages specified in
the related Prospectus Supplement. Distributions will be made to the persons
in whose names the Securities are registered at the close of business on the
dates specified in the related Prospectus Supplement (each, a "Record Date").
Distributions will be made in the manner specified in the related Prospectus
Supplement to the persons entitled thereto at the address appearing in the
register maintained for
Securityholders (the "Security Register"); provided, however, that the
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final distribution in retirement of the Securities will be made only upon
presentation and surrender of the Securities at the office or agency of the
Trustee or other person specified in the notice to Securityholders of such
final distribution.
The Securities will be freely transferable and exchangeable at the
Corporate Trust Office of the Trustee as set forth in the related Prospectus
Supplement. No service charge will be made for any registration of exchange
or transfer of Securities of any Series, but the Trustee may require payment
of a sum sufficient to cover any related tax or other governmental charge.
As to each Series, an election may be made to treat the related Trust
Fund or designated portions thereof as a "real estate mortgage investment
conduit" or "REMIC" as defined in the Code. The related Prospectus Supple-
ment will specify whether a REMIC election is to be made. Alternatively, the
Agreement for a Series of Securities may provide that a REMIC election may be
made at the discretion of Provident or the Master Servicer and may only be
made if certain conditions are satisfied. As to any such Series, the terms
and provisions applicable to the making of a REMIC election will be set forth
in the related Prospectus Supplement. If such an election is made with
respect to a Series of Securities, one of the classes will be designated as
evidencing the sole class of "residual interests" in the related REMIC, as
defined in the Code. All other classes of Securities in such a Series will
constitute "regular interests" in the related REMIC, as defined in the Code.
As to each Series of Securities with respect to which a REMIC election is to
be made, the Master Servicer, the Trustee or a holder of the related residual
certificate will be obligated to take all actions required in order to comply
with applicable laws and regulations.
DISTRIBUTIONS ON SECURITIES
General. In general, the method of determining the amount of
distributions on a particular Series of Securities will depend on the type of
credit support, if any, that is used with respect to such Series. See
"Credit Enhancement". Set forth below are descriptions of various methods
that may be used to determine the amount of distributions on the Securities
of a particular Series. The Prospectus Supplement for each Series of
Securities will describe the method to be used in determining the amount of
distributions on the Securities of such Series.
Distributions allocable to principal and interest on the Securities will
be made by the Trustee out of, and only to the extent of, funds in the
related Security Account, including any funds transferred from any Reserve
Account. As between Securities of different classes and as between
distributions of principal (and, if applicable, between distributions of
Principal Prepayments, as defined below, and scheduled payments of principal)
and interest, distributions made on any Distribution Date will be applied as
specified in the related Prospectus Supplement. The Prospectus Supplement
will also describe the method for allocating distributions among Securities
of a particular class.
Available Funds. All distributions on the Securities of each Series on
each Distribution Date will be made from the Available Funds described below,
in accordance with the terms described in the related Prospectus Supplement
and specified in the Agreement. "Available Funds" for each Distribution Date
will generally equal the amount on deposit in the related Security Account on
such Distribution Date (net of related fees and expenses payable by the
related Trust Fund) other than amounts to be held therein for distribution on
future Distribution Dates.
Distributions of Interest. Interest will accrue on the aggregate
principal balance of the Securities (or, in the case of Securities entitled
only to distributions allocable to interest, the aggregate notional amount)
of each class of Securities (the "Class Security Balance") entitled to
interest from the date, at the Pass-Through Rate or interest rate, as
applicable (which in either case may be a fixed rate or rate adjustable as
specified in such Prospectus Supplement), and for the periods specified in
such Prospectus Supplement. To the extent funds are available therefor,
interest accrued during each such specified period on each class of
Securities entitled to interest (other than a class of Securities that
provides for interest that accrues, but is not currently payable, referred to
hereafter as "Accrual Securities") will be distributable on the Distribution
Dates specified in the related Prospectus Supplement until the aggregate
Class Security Balance of the Securities of such class has been distributed
in full or, in the case of Securities entitled only to distributions
allocable to interest, until the aggregate notional amount of such Securities
is reduced to zero or for the period of time designated in the related
Prospectus Supplement. The original Class Security Balance of each Security
will equal the aggregate distributions allocable to principal to which such
Security is entitled. Distributions allocable to interest on each Security
that is not entitled to distributions allocable to principal will be
calculated based on the notional amount of such Security. The notional
amount of a Security will not evidence an interest in or entitlement to
distributions allocable to principal but will be used solely for convenience
in expressing the calculation of interest and for certain other purposes.
Interest payable on the Securities of a Series on a Distribution Date
will include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending
two or more days prior to a Distribution Date, the effective yield to
Securityholders will be reduced from the yield that would otherwise be
obtainable if interest payable on the Security were to accrue through the day
immediately preceding such Distribution Date, and the effective yield (at
par) to Securityholders will be less than the indicated coupon rate.
With respect to any class of Accrual Securities, if specified in the
related Prospectus Supplement, any interest that has accrued but is not paid
on a given Distribution Date will be added to the aggregate Class Security
Balance of such class of Securities on that Distribution Date. Distributions
of interest on any class of Accrual Securities will commence only after the
occurrence of the events specified in such Prospectus Supplement. Prior to
such time, the beneficial ownership interest in the Trust Fund or the
principal balance, as applicable, of such class of Accrued Securities, as
reflected in the aggregate Class Security Balance of such class of Accrual
Securities, will increase on each Distribution Date by the amount of interest
that accrued on such class of Accrual Securities during the preceding
interest accrual period but that was not required to be distributed to such
class on such Distribution Date. Any such class of Accrual Securities will
thereafter accrue interest on its outstanding Class Security Balance as so
adjusted.
Distributions of Principal. The related Prospectus Supplement will
specify the method by which the amount of principal to be distributed on the
Securities on each Distribution Date will be calculated and the manner in
which such amount will be allocated among the classes of Securities entitled
to distributions of principal. The aggregate Class Security Balance of any
class of Securities entitled to distributions of principal generally will be
the aggregate original Class Security Balance of such class of Securities
specified in such Prospectus Supplement, reduced by all distributions
reported to the holders of such Securities as allocable to principal and, (i)
in the case of Accrual Securities, as described in the related Prospectus
Supplement, increased by interest accrued but not then distributable on such
Accrual Securities and (ii) in the case of adjustable rate Securities,
subject to the effect of negative amortization, if applicable.
If so provided in the related Prospectus Supplement, one or more classes
of Securities will be entitled to receive all or a disproportionate
percentage of the payments of principal which are received from borrowers in
advance of their scheduled due dates and are not accompanied by amounts
representing scheduled interest due after the month of such payments
("Principal Prepayments") in the percentages and under the circumstances or
for the periods specified in such Prospectus Supplement. Any such allocation
of Principal Prepayments to such class or classes of Securities will have the
effect of accelerating the amortization of such Securities while increasing
the interests evidenced by one or more other classes of Securities in the
Trust Fund. Increasing the interests of the other classes of Securities
relative to that of certain Securities is intended to preserve the
availability of the subordination provided by such other Securities. See
"Credit Enhancement--Subordination".
Unscheduled Distributions. If specified in the related Prospectus
Supplement, the Securities will be subject to receipt of distributions before
the next scheduled Distribution Date under the circumstances and in the
manner described below and in such Prospectus Supplement. If applicable, the
Trustee will be required to make such unscheduled distributions on the day
and in the amount specified in the related Prospectus Supplement if, due to
substantial payments of principal (including Principal Prepayments) on the
Trust Fund Assets, the Trustee or the Master Servicer determines that the
funds available or anticipated to be available from the Security Account and,
if applicable, any Reserve Account, may be insufficient to make required
distributions on the Securities on such Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, the amount of any such
unscheduled distribution that is allocable to principal will not exceed
the amount that would otherwise have been required to be
distributed as principal on the Securities on the next Distribution Date.
Unless otherwise specified in the related Prospectus Supplement, the
unscheduled distributions will include interest at the applicable
Pass-Through Rate (if any) or interest rate (if any) on the amount of the
unscheduled distribution allocable to principal for the period and to the
date specified in such Prospectus Supplement.
ADVANCES
To the extent provided in the related Prospectus Supplement, the Master
Servicer will be required to advance on or before each Distribution Date
(from its own funds, funds advanced by Sub-Servicers or funds held in the
Security Account for future distributions to the holders of Securities of the
related Series) an amount equal to the aggregate of payments of interest
and/or principal that were delinquent on the related Determination Date (as
such term is defined in the related Prospectus Supplement) and were not
advanced by any Sub-Servicer, subject to the Master Servicer's determination
that such advances may be recoverable out of late payments by borrowers,
Liquidation Proceeds, Insurance Proceeds or otherwise.
In making Advances, the Master Servicer will endeavor to maintain a
regular flow of scheduled interest and principal payments to Securityholders,
rather than to guarantee or insure against losses. If Advances are made by
the Master Servicer from cash being held for future distribution to
Securityholders, the Master Servicer will replace such funds on or before any
future Distribution Date to the extent that funds in the applicable Security
Account on such Distribution Date would be less than the amount required to
be available for distributions to Securityholders on such date. Any Master
Servicer funds advanced will be reimbursable to the Master Servicer out of
recoveries on the specific Loans with respect to which such Advances were
made (e.g., late payments made by the related borrower, any related Insurance
Proceeds, Liquidation Proceeds or proceeds of any Loan purchased by Provident
or a Sub-Servicer pursuant to the related Agreement). Advances by the Master
Servicer (and any advances by a Sub-Servicer) also will be reimbursable to
the Master Servicer (or Sub-Servicer) from cash otherwise distributable to
Securityholders (including the holders of Senior Securities) to the extent
that the Master Servicer determines that any such Advances previously made
are not ultimately recoverable as described above. To the extent provided in
the related Prospectus Supplement, the Master Servicer also will be obligated
to make Advances, to the extent recoverable out of Insurance Proceeds,
Liquidation Proceeds or otherwise, in respect of certain taxes and insurance
premiums not paid by borrowers on a timely basis. Funds so advanced are
reimbursable to the Master Servicer to the extent permitted by the related
Agreement. The obligations of the Master Servicer to make advances may be
supported by a cash advance reserve fund, a surety bond or other arrangement
of the type described herein under "Credit Enhancement", in each case as
described in the related Prospectus Supplement.
In the event the Master Servicer or a Sub-Servicer fails to make a
required Advance, the Trustee will be obligated to make such Advance in its
capacity as successor servicer if it is acting in such capacity. If the
Trustee makes such an Advance, it will be entitled to be reimbursed for such
Advance to the same extent and degree as the Master Servicer or a
Sub-Servicer is entitled to be reimbursed for Advances. See "Description of
the Securities--Distributions on Securities".
REPORTS TO SECURITYHOLDERS
Prior to or concurrently with each distribution on a Distribution Date,
the Master Servicer or the Trustee will furnish to each Securityholder of
record of the related Series a statement setting forth, to the extent
applicable to such Series of Securities, among other things:
(i) the amount of such distribution allocable to principal,
separately identifying the aggregate amount of any Principal Prepayments
and, if so specified in the related Prospectus Supplement, any
applicable prepayment penalties included therein;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of any Advance;
(iv) the aggregate amount (a) otherwise allocable to the
Subordinated Securityholders on such Distribution Date, and (b)
withdrawn from the Reserve Account, if any, that is included in the
amounts distributed to the Senior Securityholders;
(v) the outstanding principal balance or notional amount of each
class of the related Series of Securities after giving effect to the
distribution of principal on such Distribution Date;
(vi) the percentage of principal payments on the Loans (excluding
prepayments), if any, which each such class will be entitled to receive
on the following Distribution Date;
(vii) the percentage of Principal Prepayments on the Loans, if
any, which each such class will be entitled to receive on the following
Distribution Date;
(viii) the related amount of the servicing compensation retained
or withdrawn from the Security Account by the Master Servicer, and the
amount of additional servicing compensation received by the Master
Servicer attributable to penalties, fees, excess Liquidation Proceeds
and other similar charges and items;
(ix) the number and aggregate principal balances of Loans as to
which the minimum monthly payment is delinquent 30-59 days, 60-89 days
and 90 or more days, respectively, as of the close of business on the
last day of the calendar month preceding such Distribution Date;
(x) the book value of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure;
(xi) the Pass-Through Rate or interest rate, as applicable, if
adjusted from the date of the last statement, of any such class expected
to be applicable to the next distribution to such class;
(xii) if applicable, the amount remaining in any Reserve
Account at the close of business on the Distribution Date;
(xiii) the Pass-Through Rate or interest rate, as applicable, as
of the day prior to the immediately preceding Distribution Date; and
(xiv) any amounts remaining under letters of credit, Pool
policies or other forms of credit enhancement.
Where applicable, any amount set forth above may be expressed as a
dollar amount per single Security of the relevant class having the Percentage
Interest specified in the related Prospectus Supplement. The report to
Securityholders for any Series of Securities may include additional or other
information of a similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Securityholder of record at any time during such calendar year a report (a)
as to the aggregate of amounts reported pursuant to (i) and (ii) above for
such calendar year or, in the event such person was a Securityholder of
record only during a portion of such calendar year, for the applicable
portion of such year and (b) such other customary information as may be
deemed necessary or desirable for Securityholders to prepare their tax
returns.
CATEGORIES OF CLASSES OF SECURITIES
The Securities of any Series may be comprised of one or more classes.
Such classes, in general, fall into different categories. The following
chart identifies and generally defines certain of the more typical
categories. The Prospectus Supplement for a Series of Securities may
identify the classes which comprise such Series by reference to the following
categories:
CATEGORIES OF CLASSES DEFINITION
PRINCIPAL TYPES
Accretion Directed A class that receives principal payments from the
accreted interest from specified classes of Accrual
Securities. An Accretion Directed class also may
receive principal payments from principal paid on
the underlying Trust Fund Assets for the related
Series.
Component Securities A class consisting of "Components." The
Components of a class of Component Securities
may have different principal and/or interest
payment characteristics but together constitute
a single class. Each Component of a class of
Component Securities may be identified as
falling into one or more of the categories in
this chart.
Notional Amount
Securities A class having no principal balance and bearing interest
on the related notional amount. The notional amount is
used for purposes of the determination of interest
distributions.
Planned Principal Class
(also sometimes
referred to as "PACs") A class that is designed to receive principal
payments using a predetermined principal
balance schedule derived by assuming two
constant prepayment rates for the underlying
Trust Fund Assets. These two rates are the
endpoints for the "structuring range" for the
Planned Principal Class. The Planned Principal
Classes in any Series of Securities may be
subdivided into different categories (e.g.,
Primary Planned Principal Classes, Secondary
Planned Principal Classes and so forth) having
different effective structuring ranges and
different principal payment priorities. The
structuring range for the Secondary Planned
Principal Class of a Series of Securities will
be narrower than that for the Primary Planned
Principal Class of such Series.
Scheduled Principal Class A class that is designed to receive
principal payments using a predetermined
principal balance schedule but is not
designated as a Planned Principal Class or
Targeted Principal Class. In many cases,
the schedule is derived by assuming two
constant prepayment rates for the
underlying Trust Fund Assets. These two
rates are the endpoints for the
"structuring range" for the Scheduled
Principal Class.
Sequential Pay Classes that receive principal payments in a prescribed
sequence, that do not have predetermined principal
balance schedules and that under all circumstances
receive payments of principal continuously from the first
Distribution Date on which they receive principal until
they are retired. A single class that receives principal
payments before or after all other classes in the same
Series of Securities may be identified as a Sequential Pay
class.
Strip A class that receives a constant proportion, or "strip," of
the principal payments on the underlying Trust Fund Assets.
Support Class (also
sometimes referred to
as "Companion Classes") A class that receives principal payments
on any Distribution Date only if scheduled
payments have been made on specified
Planned Principal Classes, Targeted
Principal Classes and/or Scheduled
Principal Classes.
Targeted Principal Class
(also sometimes
referred to as "TACs") A class that is designed to receive principal
payments using a predetermined principal
balance schedule derived by assuming a single
constant prepayment rate for the underlying
Trust Fund Assets.
INTEREST TYPES
Fixed Rate A class with an interest rate that is fixed throughout
the life of the class.
Floating Rate A class with an interest rate that resets periodically
based upon a designated index and that varies directly
with changes in such index.
Inverse Floating
Rate A class with an interest rate that resets
periodically based upon a designated index and
that varies inversely with changes in such
index.
Variable Rate A class with an interest rate that resets periodically
and is calculated by reference to the rate or rates of
interest applicable to specified assets or instruments
(e.g., the Loan Rates borne by the underlying Loans).
Interest Only A class that receives some or all of the interest
payments made on the underlying Trust Fund Assets and
little or no principal. Interest Only Classes have
either a nominal principal balance or a notional amount.
A nominal principal balance represents actual principal
that will be paid on the class. It is referred to as
nominal since it is extremely small compared to other
classes. A notional amount is the amount used as a
reference to calculate the amount of interest due on
an Interest Only Class that is not entitled to any
distributions in respect of principal.
Principal Only A class that does not bear interest and is entitled to
receive only distributions in respect of principal.
Partial Accrual A class that accretes a portion of the amount of
accrued interest thereon, which amount will be added
to the principal balance of such class on each
applicable Distribution Date, with the remainder of
such accrued interest to be distributed currently as
interest on such class. Such accretion may continue
until a specified event has occurred or until such
Partial Accrual Class is retired.
Accrual A class that accretes the amount of accrued interest
otherwise distributable on such class, which amount will
be added as principal to the principal balance of such
class on each applicable Distribution Date. Such
accretion may continue until some specified event has
occurred or until such Accrual Class is retired.
BOOK-ENTRY REGISTRATION OF SECURITIES
As described in the related Prospectus Supplement, if not issued in
fully registered form, each class of Securities will be registered as
book-entry certificates (the "Book-Entry Securities"). Persons acquiring
beneficial ownership interests in the Securities ("Security Owners") will
hold their Securities through DTC in the United States, or Cedel Bank,
soci t anonyme ("CEDEL"), or the Euroclear System ("Euroclear") in Europe,
if they are participants of such systems, or indirectly through organizations
which are participants in such systems. The Book-Entry Securities will be
issued in one or more certificates which equal the aggregate principal
balance of the Securities and will initially be registered in the name of
Cede & Co., the nominee of DTC. CEDEL and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositaries which in turn will hold such positions in customers' securities
accounts in the depositaries' names on the books of DTC. Citibank, N.A.,
will act as depositary for CEDEL and The Chase Manhattan Bank will act as
depositary for Euroclear (in such capacities, individually the "Relevant
Depositary" and collectively the "European Depositaries"). Except as
described below, no person acquiring a Book-Entry Security (each, a
"beneficial owner") will be entitled to receive a physical certificate
representing such Security (a "Definitive Security"). Unless and until
Definitive Securities are issued, it is anticipated that the only
"Securityholder" of the Securities will be Cede & Co., as nominee of DTC.
Security Owners are only permitted to exercise their rights indirectly
through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Security will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that
maintains the beneficial owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Book-Entry Security will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on
the records of DTC, if the beneficial owner's Financial Intermediary is not a
DTC participant, and on the records of CEDEL or Euroclear, as appropriate).
Security Owners will receive all distributions of principal of, and
interest on, the Securities from the Trustee through DTC and DTC
participants. While the Securities are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to the Securities and is required to receive and transmit
distributions of principal of, and interest on, the Securities. Participants
and indirect participants with whom Security Owners have accounts with
respect to Securities are similarly required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective
Security Owners. Accordingly, although Security Owners will not possess
certificates, the Rules provide a mechanism by which Security Owners will
receive distributions and will be able to transfer their interest.
Security Owners will not receive or be entitled to receive certificates
representing their respective interests in the Securities, except under the
limited circumstances described below. Unless and until Definitive
Securities are issued, Security Owners who are not Participants may transfer
ownership of Securities only through Participants and indirect participants
by instructing such Participants and indirect participants to transfer
Securities, by book-entry transfer, through DTC for the account of the
purchasers of such Securities, which account is maintained with their
respective Participants. Under the Rules and in accordance with DTC's normal
procedures, transfers of ownership of Securities will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the Participants and indirect participants will make
debits or credits, as the case may be, on their records on behalf of the
selling and purchasing Security Owners.
Because of time zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or CEDEL Participants on such business
day. Cash received in CEDEL or Euroclear as a result of sales of securities
by or through a CEDEL Participant (as defined herein) or Euroclear
Participant (as defined herein) to a DTC Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL
or Euroclear cash account only as of the business day following settlement
with DTC.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will,
if the transaction meets its settlement requirements, deliver instructions to
the Relevant Depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same day funds settlement
applicable to DTC. CEDEL Participants and Euroclear Participants may not
deliver instructions directly to the European Depositaries.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations
("CEDEL Participants") and facilitates the clearance and settlement of
securities transactions between CEDEL Participants through electronic
book-entry changes in accounts of CEDEL Participants, thereby eliminating the
need for physical movement of certificates. Transactions may be settled in
CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. CEDEL interfaces
with domestic markets in several countries. As a professional depository,
CEDEL is subject to regulation by the Luxembourg Monetary Institute.
CEDEL participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations.
Indirect access to CEDEL is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities
and cash. Transactions may be settled in any of 32 currencies, including
United States dollars. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York ("Morgan" and in
such capacity, the "Euroclear Operator"), under contract with Euroclear
Clearance Systems S.C., a Belgian cooperative corporation (the "Belgian
Cooperative"). All operations are conducted by Morgan, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with
the Euroclear Operator, not the Belgian Cooperative. The Belgian Cooperative
establishes policy for Euroclear on behalf of Euroclear Participants.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
Morgan is the Belgian branch of a New York banking corporation which is
a member bank of the Federal Reserve System. As such, it is regulated and
examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with Morgan are governed
by the Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities
and cash from Euroclear, and receipts of payments with respect to securities
in Euroclear. All securities in Euroclear are held on a fungible basis
without attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants, and has no record of or relationship with
persons holding through Euroclear Participants.
Under a book-entry format, beneficial owners of the Book-Entry
Securities may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede & Co., as nominee of DTC.
Distributions with respect to Securities held through CEDEL or Euroclear will
be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures,
to the extent received by the Relevant Depositary. Such distributions will
be subject to tax reporting in accordance with relevant United States tax
laws and regulations. See "Federal Income Tax Consequences -Tax Treatment of
Foreign Investors" and "--Tax Consequences to Holders of the Notes--Backup
Withholding" herein. Because DTC can only act on behalf of Financial
Intermediaries, the ability of a beneficial owner to pledge Book-Entry
Securities to persons or entities that do not participate in the Depository
system may be limited due to the lack of physical certificates for such
Book-Entry Securities. In addition, issuance of the Book-Entry Securities in
book-entry form may reduce the liquidity of such Securities in the secondary
market since certain potential investors may be unwilling to purchase
Securities for which they cannot obtain physical certificates.
Monthly and annual reports on the Trust will be provided to Cede & Co.,
as nominee of DTC, and may be made available by Cede & Co. to beneficial
owners upon request, in accordance with the rules, regulations and procedures
creating and affecting the Depository, and to the Financial Intermediaries to
whose DTC accounts the Book-Entry Securities of such beneficial owners are
credited.
DTC has advised the Trustee that, unless and until Definitive Securities
are issued, DTC will take any action permitted to be taken by the holders of
the Book-Entry Securities under the applicable Agreement only at the
direction of one or more Financial Intermediaries to whose DTC accounts the
Book-Entry Securities are credited, to the extent that such actions are taken
on behalf of Financial Intermediaries whose holdings include such Book-Entry
Securities. CEDEL or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Securityholder under the
Agreement on behalf of a CEDEL Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to the ability
of the Relevant Depositary to effect such actions on its behalf through DTC.
DTC may take actions, at the direction of the related Participants, with
respect to some Securities which conflict with actions taken with respect to
other Securities.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Securities. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Securities and instructions for
re-registration, the Trustee will issue Definitive Securities, and thereafter
the Trustee will recognize the holders of such Definitive Securities as
Securityholders under the applicable Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Securities among participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued
at any time.
None of the Master Servicer, Provident or the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Securities held
by Cede & Co., as nominee of DTC, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
CREDIT ENHANCEMENT
GENERAL
Credit enhancement may be provided with respect to one or more classes
of a Series of Securities or with respect to the related Trust Fund Assets.
Credit enhancement may be in the form of a limited financial guaranty policy
issued by an entity named in the related Prospectus Supplement, the
subordination of one or more classes of the Securities of such Series, the
establishment of one or more Reserve Accounts, the use of a cross-collateral-
ization feature, use of a mortgage pool insurance policy, bankruptcy bond,
special hazard insurance policy, surety bond, letter of credit, guaranteed
investment contract, overcollateralization, or another method of credit
enhancement contemplated herein and described in the related Prospectus
Supplement, or any combination of the foregoing. Unless otherwise specified
in the related Prospectus Supplement, credit enhancement will not provide
protection against all risks of loss and will not guarantee repayment of the
entire principal balance of the Securities and interest thereon. If losses
occur which exceed the amount covered by credit enhancement or which are not
covered by the credit enhancement, Securityholders will bear their allocable
share of any deficiencies.
If specified in the related Prospectus Supplement, the coverage provided
by one or more of the forms of credit enhancement described in this
Prospectus may apply concurrently to two or more separate Trust Funds. If
applicable, the related Prospectus Supplement will identify the Trust Funds
to which such credit enhancement relates and the manner of determining the
amount of coverage provided to such Trust Funds thereby and of the
application of such coverage to the identified Trust Funds.
SUBORDINATION
If so specified in the related Prospectus Supplement, protection
afforded to holders of one or more classes of Securities of a Series by means
of the subordination feature may be accomplished by the preferential right of
holders of one or more other classes of such Series (the "Senior Securities")
to distributions in respect of scheduled principal, Principal Prepayments,
interest or any combination thereof that otherwise would have been payable to
holders of Subordinated Securities under the circumstances and to the extent
specified in the related Prospectus Supplement. Protection may also be
afforded to the holders of Senior Securities of a Series by: (i) reducing the
ownership interest (if applicable) of the related Subordinated Securities;
(ii) a combination of the immediately preceding sentence and clause (i)
above; or (iii) as otherwise described in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, delays in receipt of
scheduled payments on the Loans and losses on defaulted Loans may be borne
first by the various classes of Subordinated Securities and thereafter by the
various classes of Senior Securities, in each case under the circumstances
and subject to the limitations specified in such Prospectus Supplement. The
aggregate distributions in respect of delinquent payments on the Loans over
the lives of the Securities or at any time, the aggregate losses in respect
of defaulted Loans which must be borne by the Subordinated Securities by
virtue of subordination and the amount of the distributions otherwise
distributable to the Subordinated Securityholders that will be distributable
to Senior Securityholders on any Distribution Date may be limited as
specified in the related Prospectus Supplement. If aggregate distributions
in respect of delinquent payments on the Loans or aggregate losses in respect
of such Loans were to exceed an amount specified in the related Prospectus
Supplement, Senior Securityholders would experience losses on their
Securities.
In addition to or in lieu of the foregoing, if so specified in the
related Prospectus Supplement, all or any portion of distributions otherwise
payable to Subordinated Securityholders on any Distribution Date may instead
be deposited into one or more Reserve Accounts established with the Trustee
or distributed to Senior Securityholders. Such deposits may be made on each
Distribution Date, for specified periods or until the balance in the Reserve
Account has reached a specified amount and, following payments from the
Reserve Account to Senior Securityholders or otherwise, thereafter to the
extent necessary to restore the balance in the Reserve Account to required
levels, in each case as specified in the related Prospectus Supplement.
Amounts on deposit in the Reserve Account may be released to the holders of
certain classes of Securities at the times and under the circumstances
specified in such Prospectus Supplement.
If specified in the related Prospectus Supplement, various classes of
Senior Securities and Subordinated Securities may themselves be subordinate
in their right to receive certain distributions to other classes of Senior
and Subordinated Securities, respectively, through a cross-collateralization
mechanism or otherwise. As between classes of Senior Securities and as
between classes of Subordinated Securities, distributions may be allocated
among such classes (i) in the order of their scheduled final Distribution
Dates, (ii) in accordance with a schedule or formula, (iii) in relation to
the occurrence of events, or (iv) otherwise, in each case as specified in the
related Prospectus Supplement. As between classes of Subordinated
Securities, payments to holders of Senior Securities on account of
delinquencies or losses and payments to any Reserve Account will be allocated
as specified in the related Prospectus Supplement.
LETTER OF CREDIT
The letter of credit, if any, with respect to a Series of Securities
will be issued by the bank or financial institution specified in the related
Prospectus Supplement (the "L/C Bank"). Under the letter of credit, the L/C
Bank will be obligated to honor drawings thereunder in an aggregate fixed
dollar amount, net of unreimbursed payments thereunder, equal to the
percentage specified in the related Prospectus Supplement (i) of the
aggregate principal balance of the Loans on the related Cut-Off Date or (ii)
of one or more Classes of Securities. If so specified in the related
Prospectus Supplement, the letter of credit may permit drawings in the event
of losses not covered by insurance policies or other credit support, such as
losses arising from damage not covered by standard hazard insurance policies,
losses resulting from the bankruptcy of a borrower and the application of
certain provisions of the federal Bankruptcy Code, or losses resulting from
denial of insurance coverage due to misrepresentations in connection with the
origination of a Loan. The amount available under the letter of credit will,
in all cases, be reduced to the extent of the unreimbursed payments
thereunder. The obligations of the L/C Bank under the letter of credit for
each Series of Securities will expire at the earlier of the date specified
in the related Prospectus Supplement or the termination of the Trust Fund.
See "The Agreements--Termination: Optional Termination." A copy of the
letter of credit for a Series, if any, will be filed with the Commission as
an exhibit to a Current Report on Form 8-K to be filed within 15 days of
issuance of the Securities of the related Series.
INSURANCE POLICIES, SURETY BONDS AND GUARANTIES
If so provided in the Prospectus Supplement for a Series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments
may cover, with respect to one or more classes of Securities of the related
Series, timely distributions of interest and/or full distributions of
principal on the basis of a schedule of principal distributions set forth in
or determined in the manner specified in the related Prospectus Supplement.
In addition, if specified in the related Prospectus Supplement, a Trust Fund
may also include bankruptcy bonds, special hazard insurance policies, other
insurance or guaranties for the purpose of (i) maintaining timely payments
or providing additional protection against losses on the assets included in
such Trust Fund, (ii) paying administrative expenses or (iii) establishing a
minimum reinvestment rate on the payments made in respect of such assets or
principal payment rate on such assets. Such arrangements may include
agreements under which Securityholders are entitled to receive amounts
deposited in various accounts held by the Trustee upon the terms specified in
such Prospectus Supplement. A copy of any such instrument for a Series will
be filed with the Commission as an exhibit to a Current Report on Form 8-K to
be filed with the Commission within 15 days of issuance of the Securities of
the related Series.
OVER-COLLATERALIZATION
If so provided in the Prospectus Supplement for a Series of Securities,
a portion of the interest payment on each Loan may be applied as an
additional distribution in respect of principal to reduce the principal
balance of a certain class or classes of Securities and, thus, accelerate the
rate of payment of principal on such class or classes of Securities relative
to the principal balance of the Loans in the related Trust Fund.
RESERVE ACCOUNTS
If specified in the related Prospectus Supplement, credit support with
respect to a Series of Securities will be provided by the establishment and
maintenance with the Trustee for such Series of Securities, in trust, of one
or more Reserve Accounts for such Series. The related Prospectus Supplement
will specify whether or not any such Reserve Accounts will be included in the
Trust Fund for such Series.
The Reserve Account for a Series will be funded (i) by the deposit
therein of cash, United States Treasury securities, instruments evidencing
ownership of principal or interest payments thereon, letters of credit,
demand notes, certificates of deposit or a combination thereof in the
aggregate amount specified in the related Prospectus Supplement, (ii) by the
deposit therein from time to time of certain amounts, as specified in the
related Prospectus Supplement to which the Subordinated Securityholders, if
any, would otherwise be entitled or (iii) in such other manner as may be
specified in the related Prospectus Supplement.
Any amounts on deposit in the Reserve Account and the proceeds of any
other instrument upon maturity will be held in cash or will be invested in
"Permitted Investments" which may include (i) direct obligations of, or
obligations fully guaranteed as to timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided that
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such obligations are backed by the full faith and credit of
the United States; (ii) repurchase agreements on obligations specified in
clause (i) maturing not more than three months from the date of acquisition
thereof, provided that the short-term unsecured debt obligations
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of the party agreeing to repurchase such obligations are at the time
rated by each Rating Agency in its highest short-term rating category; (iii)
certificates of deposit, time deposits and bankers' acceptances (which, if
Moody's is a Rating Agency, shall each have an original maturity of not more
than 90 days and, in the case of bankers' acceptances, shall in no event have
an original maturity of more than 365 days) of any U.S. depository
institution or trust company incorporated under the laws of the United States
or any state thereof and subject to supervision and examination by federal
and/or state banking authorities, provided that the unsecured short-term debt
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obligations of such depository institution or trust company at the date of
acquisition thereof have been rated by each Rating Agency in its highest
unsecured short-term debt rating category; (iv) commercial paper (having
original maturities of not more than 90 days) of any corporation incorporated
under the laws of the United States or any state thereof which on the date of
acquisition has been rated by the Rating Agencies in their highest short-term
rating categories; (v) short-term investment funds ("STIFS") sponsored by any
trust company or bank incorporated under the laws of the United States or
any state thereof which on the date of acquisition has been rated by the
Rating Agencies in their respective highest rating category of long-term
unsecured debt; (vi) interests in any money market fund which at the
date of acquisition of the interests in such fund and throughout
the time as the interest is held in such fund has the rating specified
in the related Prospectus Supplement by each Rating Agency; and (vii)
other obligations or securities that are acceptable to each Rating
Agency as a Permitted Investment hereunder and will not result in a reduction
in the then current rating of the Securities, as evidenced by a letter to
such effect from such Rating Agency and with respect to which the Master
Servicer has received confirmation that, for tax purposes, the investment
complies with the last clause of this definition; provided that no instrument
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described hereunder shall evidence either the right to receive (a) only
interest with respect to the obligations underlying such instrument
or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with
respect to such instrument provided a yield to maturity at par greater
--------
than 120% of the yield to maturity at par of the underlying obligations;
and provided, further, that no instrument described hereunder may be
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purchased at a price greater than par if such instrument may be prepaid or
called at a price less than its purchase price prior to its stated
maturity. Unless otherwise specified in the related Prospectus Supplement,
any instrument deposited therein will name the Trustee, in its capacity as
trustee for the holders of the Securities, as beneficiary and will be
issued by an entity acceptable to each Rating Agency that rates the
Securities of the related Series. Additional information with respect to
such instruments deposited in the Reserve Accounts will be set forth in
the related Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will
be available for withdrawal from the Reserve Account for distribution to the
holders of Securities of the related Series for the purposes, in the manner
and at the times specified in the related Prospectus Supplement.
POOL INSURANCE POLICIES
If specified in the related Prospectus Supplement, a separate pool
insurance policy ("Pool Insurance Policy") will be obtained for the Pool and
issued by the insurer (the "Pool Insurer") named in such Prospectus
Supplement. Each Pool Insurance Policy will, subject to the limitations
described below, cover loss by reason of default in payment on Loans in the
Pool in an amount equal to a percentage specified in such Prospectus
Supplement of the aggregate principal balance of such Loans on the Cut-Off
Date which are not covered as to their entire outstanding principal balances
by Primary Mortgage Insurance Policies. As more fully described below, the
Master Servicer will present claims thereunder to the Pool Insurer on behalf
of itself, the Trustee and the holders of the Securities of the related
Series. The Pool Insurance Policies, however, are not blanket policies
against loss, since claims thereunder may only be made respecting particular
defaulted Loans and only upon satisfaction of certain conditions precedent
described below. The Pool Insurance Policies generally will not cover losses
due to a failure to pay or denial of a claim under a Primary Mortgage
Insurance Policy.
The Pool Insurance Policies generally will provide that no claims may be
validly presented unless (i) any required Primary Mortgage Insurance Policy
is in effect for the defaulted Loan and a claim thereunder has been submitted
and settled; (ii) hazard insurance on the related Property has been kept in
force and real estate taxes and other protection and preservation expenses
have been paid; (iii) if there has been physical loss or damage to the
Property, it has been restored to its physical condition (reasonable wear and
tear excepted) at the time of issuance of the policy; and (iv) the insured
has acquired good and merchantable title to the Property free and clear of
liens except certain permitted encumbrances. Upon satisfaction of these
conditions, the Pool Insurer will have the option either (a) to purchase the
property securing the defaulted Loan at a price equal to the principal
balance thereof plus accrued and unpaid interest at the Loan Rate to the date
of such purchase and certain expenses incurred by the Master Servicer on
behalf of the Trustee and Securityholders, or (b) to pay the amount by which
the sum of the principal balance of the defaulted Loan plus accrued and
unpaid interest at the Loan Rate to the date of payment of the claim and
the aforementioned expenses exceeds the proceeds received from an
approved sale of the Property, in either case net of certain amounts paid
or assumed to have been paid under the related Primary Mortgage Insurance
Policy. If any Property securing a defaulted Loan is damaged and proceeds,
if any, from the related hazard insurance policy or the applicable special
hazard insurance policy are insufficient to restore the damaged Property to
a condition sufficient to permit recovery under the Pool Insurance Policy,
the Master Servicer will not be required to expend its own funds to
restore the damaged Property unless it determines that (i) such restoration
will increase the proceeds to Securityholders on liquidation of the Loan
after reimbursement of the Master Servicer for its expenses and (ii) such
expenses will be recoverable by it through proceeds of the sale of the
Property or proceeds of the related Pool Insurance Policy or any related
Primary Mortgage Insurance Policy.
The Pool Insurance Policies generally will not insure (and many Primary
Mortgage Insurance Policies do not insure) against loss sustained by reason
of a default arising from, among other things, (i) fraud or negligence in the
origination or servicing of a Loan, including misrepresentation by the
borrower, the originator or persons involved in the origination thereof, or
(ii) failure to construct a Property in accordance with plans and
specifications. A failure of coverage attributable to one of the foregoing
events might result in a breach of Provident's representations described
above, and, in such events might give rise to an obligation on the part of
Provident to repurchase the defaulted Loan if the breach cannot be cured by
Provident. No Pool Insurance Policy will cover (and many Primary Mortgage
Insurance Policies do not cover) a claim in respect of a defaulted Loan
occurring when the servicer of such Loan, at the time of default or
thereafter, was not approved by the applicable insurer.
The original amount of coverage under each Pool Insurance Policy
generally will be reduced over the life of the related Securities by the
aggregate dollar amount of claims paid less the aggregate of the net amounts
realized by the Pool Insurer upon disposition of all foreclosed properties.
The amount of claims paid will include certain expenses incurred by the
Master Servicer as well as accrued interest on delinquent Loans to the date
of payment of the claim or such other date set forth in the related
Prospectus Supplement. Accordingly, if aggregate net claims paid under any
Pool Insurance Policy reach the original policy limit, coverage under that
Pool Insurance Policy will be exhausted and any further losses will be borne
by the related Securityholders.
CROSS-COLLATERALIZATION
If specified in the related Prospectus Supplement, the beneficial
ownership of separate groups of assets included in a Trust Fund may be
evidenced by separate classes of the related Series of Securities. In such
case, credit support may be provided by a cross-collateralization feature
which requires that distributions be made to Securities evidencing a
beneficial ownership interest in, or secured by, one or more asset groups
within the same Trust Fund prior to distributions to Subordinated Securities
evidencing a beneficial ownership interest in, or secured by, one or more
other asset groups within such Trust Fund. Cross-collateralization may be
provided by (i) the allocation of certain excess amounts generated by one or
more asset groups to one or more other asset groups within the same Trust
Fund or (ii) the allocation of losses with respect to one or more asset
groups to one or more other asset groups within the same Trust Fund. The
Prospectus Supplement for a Series of Securities which includes a
cross-collateralization feature will describe the manner and conditions for
applying such cross-collateralization feature.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity and weighted average lives of the Securities will
be affected primarily by the amount and timing of principal payments received
on or in respect of the Trust Fund Assets included in the related Trust Fund.
The original terms to maturity of the Loans in a given Pool will vary
depending upon the type of Loans included therein. Each Prospectus
Supplement will contain information with respect to the type and maturities
of the Loans in the related Pool. The related Prospectus Supplement will
specify the circumstances, if any, under which the related Loans will be
subject to prepayment penalties. The prepayment experience on the Loans in a
Pool will affect the weighted average life of the related Series of
Securities.
The rate of prepayment on the Loans cannot be predicted. Home equity
loans and home improvement contracts have been originated in significant
volume only during the past few years and Provident is not aware of any
publicly available studies or statistics on the rate of prepayment of such
loans. Generally, home equity loans and home improvement contracts are not
viewed by borrowers as permanent financing. Accordingly, such Loans may
experience a higher rate of prepayment than traditional first mortgage loans.
On the other hand, because home equity loans such as the Revolving Credit
Line Loans generally are not fully amortizing, the absence of voluntary
borrower prepayments could cause rates of principal payments lower than, or
similar to, those of traditional fully-amortizing first mortgage loans. The
prepayment experience of the related Trust Fund may be affected by a wide
variety of factors, including general economic conditions, prevailing
interest rate levels, the availability of alternative financing, homeowner
mobility and the frequency and amount of any future draws on any Revolving
Credit Line Loans. Other factors that might be expected to affect the
prepayment rate of a pool of home equity mortgage loans or home improvement
contracts include the amounts of, and interest rates on, the underlying
senior mortgage loans, and the use of first mortgage loans as long-term
financing for home purchase and subordinate mortgage loans as shorter-term
financing for a variety of purposes, including home improvement, education
expenses and purchases of consumer durables such as automobiles.
Accordingly, such Loans may experience a higher rate of prepayment than
traditional fixed-rate mortgage loans. In addition, any future limitations
on the right of borrowers to deduct interest payments on home equity loans
for federal income tax purposes may further increase the rate of prepayments
of the Loans. The enforcement of a "due-on-sale" provision (as described
below) will have the same effect as a prepayment of the related Loan. See
"Certain Legal Aspects of the Loans--Due-on-Sale Clauses".
The yield to an investor who purchases Securities in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Loans is actually different than the rate
anticipated by such investor at the time such Securities were purchased.
Collections on Home Equity Loans may vary because, among other things,
borrowers may (i) make payments during any month as low as the minimum
monthly payment for such month or, during the interest-only period for
certain Revolving Credit Line Loans and, in more limited circumstances,
Closed-End Loans, with respect to which an interest-only payment option has
been selected, the interest and the fees and charges for such month or (ii)
make payments as high as the entire outstanding principal balance plus
accrued interest and the fees and charges thereon. In addition, collections
on the Loans may vary due to seasonal purchasing and the payment habits of
borrowers.
As specified in the related Prospectus Supplement, certain of the
conventional Loans will contain "due-on-sale" provisions permitting the
mortgagee to accelerate the maturity of the Loan upon sale or certain
transfers by the borrower of the related Property. Thus, the rate of
prepayments on such Loans may be lower than that of conventional Loans
bearing comparable interest rates. The Master Servicer generally will
enforce any due-on-sale or due-on-encumbrance clause to the extent it has
knowledge of the conveyance or further encumbrance or the proposed conveyance
or proposed further encumbrance of the Property and reasonably believes that
it is entitled to do so under applicable law. See "The Agreements--
Collection Procedures" and "Certain Legal Aspects of the Loans" for a
description of certain provisions of each Agreement and certain legal
developments that may affect the prepayment experience on the Loans.
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing rates
fall significantly below the Loan Rates borne by the Loans, such Loans are
more likely to be subject to higher prepayment rates than if prevailing
interest rates remain at or above such Loan Rates. Conversely, if prevailing
interest rates rise appreciably above the Loan Rates borne by the Loans, such
Loans are more likely to experience a lower prepayment rate than if
prevailing rates remain at or below such Loan Rates. However, there can be
no assurance that such will be the case.
When a full prepayment is made on a Loan, the borrower is charged
interest on the principal amount of the Loan so prepaid only for the number
of days in the month actually elapsed up to the date of the prepayment,
rather than for a full month. The effect of prepayments in full will be to
reduce the amount of interest passed through or paid in the following month
to holders of Securities because interest on the principal amount of any
Loan so prepaid will generally be paid only to the date of prepayment.
Partial prepayments in a given month may be applied to the outstanding
principal balances of the Loans so prepaid on the first day of the month of
receipt or the month following receipt. In the latter case, partial
prepayments will not reduce the amount of interest passed through or paid in
such month. Generally, neither full nor partial prepayments will be passed
through or paid until the month following receipt.
Even assuming that the Properties provide adequate security for the
Loans, substantial delays could be encountered in connection with the
liquidation of defaulted Loans and corresponding delays in the receipt of
related proceeds by Securityholders could occur. An action to foreclose on a
Property securing a Loan is regulated by state statutes and rules and is
subject to many of the delays and expenses of other lawsuits if defenses or
counterclaims are interposed, sometimes requiring several years to complete.
Furthermore, in some states an action to obtain a deficiency judgment is not
permitted following a nonjudicial sale of a property. In the event of a
default by a borrower, these restrictions, among other things, may impede the
ability of the Master Servicer to foreclose on or sell the Property or to
obtain liquidation proceeds sufficient to repay all amounts due on the
related Loan. In addition, the Master Servicer will be entitled to deduct
from related liquidation proceeds all expenses reasonably incurred in
attempting to recover amounts due on defaulted Loans and not yet repaid,
including payments to senior lienholders, legal fees and costs of legal
action, real estate taxes and maintenance and preservation expenses.
Liquidation expenses with respect to defaulted mortgage loans do not
vary directly with the outstanding principal balance of the loan at the time
of default. Therefore, assuming that a servicer took the same steps in
realizing upon a defaulted mortgage loan having a small remaining principal
balance as it would in the case of a defaulted mortgage loan having a large
remaining principal balance, the amount realized after expenses of
liquidation would be smaller as a percentage of the remaining principal
balance of the small mortgage loan than would be the case with the defaulted
mortgage loan having a large remaining principal balance.
Applicable state laws generally regulate interest rates and other
charges, require certain disclosures, and require licensing of certain
originators and servicers of Loans. In addition, most have other laws,
public policy and general principles of equity relating to the protection of
consumers, unfair and deceptive practices and practices which may apply to
originating, servicing and collecting Loans. Depending on the provisions of
the applicable law and the specific facts and circumstances involved,
violations of these laws, policies and principles may limit the ability of
the Master Servicer to collect all or part of the principal of or interest on
the Loans, may entitle the borrower to a refund of amounts previously paid
and, in addition, could subject the Master Servicer to damages and
administrative sanctions.
If the rate at which interest is passed through or paid to the holders
of Securities of a Series is calculated on a Loan-by-Loan basis,
disproportionate principal prepayments among Loans with different Loan Rates
will affect the yield on such Securities. In most cases, the effective yield
to Securityholders will be lower than the yield otherwise produced by the
applicable Pass-Through Rate or interest rate and purchase price, because
while interest will accrue on each Loan from the first day of the month
(unless otherwise specified in the related Prospectus Supplement), the
distribution of such interest will not be made earlier than the month
following the month of accrual.
Under certain circumstances, the Master Servicer, the holders of the
residual interests in a REMIC or any person specified in the related
Prospectus Supplement may have the option to purchase the assets of a Trust
Fund and thereby affect earlier retirement of the related Series of
Securities. See "The Agreements--Termination; Optional Termination".
The relative contribution of the various factors affecting prepayment
may vary from time to time. There can be no assurance as to the rate of
payment of principal of the Trust Fund Assets at any time or over the lives
of the Securities.
The Prospectus Supplement relating to a Series of Securities will
discuss in greater detail the effect of the rate and timing of principal
payments (including prepayments), delinquencies and losses on the yield,
weighted average lives and maturities of such Securities.
THE AGREEMENTS
Set forth below is a description of the material provisions of each
Agreement which are not described elsewhere in this Prospectus. The
description is subject to, and qualified in its entirety by reference to, the
provisions of each Agreement. Where particular provisions or terms used in
the Agreements are referred to, such provisions or terms are as specified in
the Agreements.
ASSIGNMENT OF THE TRUST FUND ASSETS
Assignment of the Loans. At the time of issuance of the Securities of a
Series, Provident will assign the Loans comprising the related Trust Fund to
the Trustee, without recourse, together with all principal and interest
received by or on behalf of Provident on or with respect to such Loans after
the Cut-Off Date, other than principal and interest due on or before the Cut-
Off Date and other than any Retained Interest specified in the related
Prospectus Supplement. The Trustee will, concurrently with such assignment,
deliver such Securities to Provident in exchange for the Loans. Each Loan
will be identified in a schedule appearing as an exhibit to the related
Agreement. Such schedule will include information as to the outstanding
principal balance of each Loan after application of payments due on or before
the Cut-Off Date, as well as information regarding the Loan Rate or APR, the
maturity of the Loan, the Loan-to-Value Ratios or Combined Loan-to-Value
Ratios, as applicable, at origination and certain other information.
Unless otherwise specified in the related Prospectus Supplement, the
Agreement will require that, within the time period specified therein,
Provident will also deliver or cause to be delivered to the Trustee (or to
the custodian hereinafter referred to) as to each Mortgage Loan or Home
Equity Loan, among other things, (i) the mortgage note or contract endorsed
without recourse in blank or to the order of the Trustee, (ii) the mortgage,
deed of trust or similar instrument (a "Mortgage") with evidence of recording
indicated thereon (except for any Mortgage not returned from the public
recording office, in which case Provident will deliver or cause to be
delivered a copy of such Mortgage together with a certificate that the
original of such Mortgage was delivered to such recording office), (iii) an
assignment of the Mortgage to the Trustee, which assignment will be in
recordable form in the case of a Mortgage assignment, and (iv) such other
security documents, including those relating to any senior interests in the
Property, as may be specified in the related Prospectus Supplement or the
related Agreement. Unless otherwise specified in the related Prospectus
Supplement, Provident will not promptly cause the assignments of the
Mortgages to be recorded in the appropriate public office for real property
records. If specified in the related Prospectus Supplement, some or all of
the Loan documents may not be delivered to the Trustee until after the
occurrence of certain events specified in the related Prospectus Supplement.
The Trustee (or the custodian hereinafter referred to) will review such
Loan documents within the time period specified in the related Prospectus
Supplement after receipt thereof, and the Trustee will hold such documents in
trust for the benefit of the related Securityholders. Unless otherwise
specified in the related Prospectus Supplement, if any such document is
found to be missing or defective in any material respect, the Trustee (or
such custodian) will notify the Master Servicer and Provident. If Provident
cannot cure the omission or defect within the time period specified in the
related Prospectus Supplement after receipt of such notice, Provident will be
obligated to either (i) purchase the related Loan from the Trust Fund at the
Purchase Price or (ii) if so specified in the related Prospectus Supplement,
remove such Loan from the Trust Fund and substitute in its place one or more
other Loans that meets certain requirements set forth therein. There can be
no assurance that Provident will fulfill this purchase or substitution
obligation. Unless otherwise specified in the related Prospectus Supplement,
this obligation to cure, purchase or substitute constitutes the sole remedy
available to the Securityholders or the Trustee for omission of, or a
material defect in, a constituent document.
The Trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review
the documents relating to the Loans as agent of the Trustee.
Notwithstanding the foregoing provisions, with respect to a Trust Fund
for which a REMIC election is to be made, no purchase or substitution of a
Loan will be made if such purchase or substitution would result in a
prohibited transaction tax under the Code.
No Recourse to Provident or Master Servicer. As described above under
"--Assignment of the Loans," Provident will assign the Loans comprising the
related Trust Fund to the Trustee, without recourse. However, Provident will
be obligated to repurchase or substitute for any Loan as to which certain
representations and warranties are breached or for failure to deliver certain
documents relating to the Loans as described herein under "Assignment of the
Loans" and "Loan Program--Representations by Provident; Repurchases." These
obligations to purchase or substitute constitute the sole remedy available to
the Securityholders or the Trustee for a breach of any such representation or
warranty or failure to deliver a constituent document.
PAYMENTS ON LOANS; DEPOSITS TO SECURITY ACCOUNT
The Master Servicer will establish and maintain or cause to be
established and maintained with respect to the related Trust Fund a separate
account or accounts for the collection of payments on the related Trust Fund
Assets in the Trust Fund (the "Security Account") which, unless otherwise
specified in the related Prospectus Supplement, must be either (i) maintained
with a depository institution whose short-term debt obligations and long-term
debt obligations at the time of any deposit therein and throughout the time
the interest is maintained are rated as specified in the related Prospectus
Supplement by the Rating Agencies, and the deposits in such account or
accounts are fully insured by either the Bank Insurance Fund (the "BIF") or
the Savings Association Insurance Fund ("SAIF") (as successor to the Federal
Savings and Loan Insurance Corporation) and which is any of (a) a federal
savings and loan association duly organized, validly existing and in good
standing under the applicable banking laws of any state, (b) an institution
duly organized, validly existing and in good standing under the applicable
banking laws of any state, (c) a national banking association duly organized,
validly existing and in good standing under the federal banking laws or (d) a
principal subsidiary of a bank holding company, (ii) a segregated trust
account maintained with the corporate trust department of a federal or state
chartered depository or trust company, having capital and surplus of not less
than $50,000,000, acting in its fiduciary capacity, or (iii) an account
otherwise acceptable to each Rating Agency as evidenced by a letter from each
Rating Agency to the Trustee, without reduction or withdrawal of the then
current ratings of the Securities. The collateral eligible to secure amounts
in the Security Account is limited to Permitted Investments. A Security
Account may be maintained as an interest bearing account or the funds held
therein may be invested pending each succeeding Distribution Date in
Permitted Investments. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or its designee will be entitled to receive
any such interest or other income earned on funds in the Security Account as
additional compensation and will be obligated to deposit in the Security
Account the amount of any loss immediately as realized. The Security Account
may be maintained with the Master Servicer or with a depository institution
that is an affiliate of the Master Servicer, provided it meets the standards
set forth above.
The Master Servicer will deposit or cause to be deposited in the
Security Account for each Trust Fund, to the extent applicable and unless
otherwise specified in the related Prospectus Supplement, the following
payments and collections received or advances made by or on behalf of it
subsequent to the Cut-Off Date (other than certain payments due on or before
the Cut-Off Date and exclusive of any amounts representing Retained
Interest):
(i) all payments on account of principal, including Principal
Prepayments and, if specified in the related Prospectus Supplement, any
applicable prepayment penalties, on the Loans;
(ii) all payments on account of interest on the Loans, net of
applicable servicing compensation;
(iii) all proceeds (net of unreimbursed payments of property
taxes, insurance premiums and similar items ("Insured Expenses")
incurred, and unreimbursed Advances made, by the Master Servicer, if
any) of the hazard insurance policies and any Primary Mortgage Insurance
Policies, to the extent such proceeds are not applied to the restoration
of the property or released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures (collectively, "Insurance
Proceeds") and all other cash amounts (net of unreimbursed expenses
incurred in connection with liquidation or foreclosure ("Liquidation
Expenses") and unreimbursed Advances made, by the Master Servicer, if
any) received and retained in connection with the liquidation of
defaulted Loans, by foreclosure or otherwise ("Liquidation Proceeds"),
together with any net proceeds received on a monthly basis with respect
to any properties acquired on behalf of the Securityholders by
foreclosure or deed in lieu of foreclosure;
(iv) all proceeds of any Loan or property in respect thereof
purchased by Provident as described under "Loan Program--Representations
by Provident; Repurchases" or "--Assignment of Trust Fund Assets" above
and all proceeds of any Loan repurchased as described under "--
Termination; Optional Termination" below;
(v) all payments required to be deposited in the Security Account
with respect to any deductible clause in any blanket insurance policy
described under "--Hazard Insurance" below;
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the
Master Servicer of funds held in the Security Account and, to the extent
specified in the related Prospectus Supplement, any payments required to
be made by the Master Servicer in connection with prepayment interest
shortfalls; and
(vii) all other amounts required to be deposited in the
Security Account pursuant to the Agreement.
The Master Servicer may from time to time direct the institution that
maintains the Security Account to withdraw funds from the Security Account
for the following purposes:
(i) to pay to the Master Servicer the servicing fees described in
the related Prospectus Supplement, the master servicing fees (subject to
reduction) and, as additional servicing compensation, earnings on or
investment income with respect to funds in the Security Account credited
thereto;
(ii) to reimburse the Master Servicer for Advances, such right of
reimbursement with respect to any Loan being limited to amounts received
that represent late recoveries of payments of principal and/or interest
on such Loan (or Insurance Proceeds or Liquidation Proceeds with respect
thereto) with respect to which such Advance was made;
(iii) to reimburse the Master Servicer for any Advances
previously made which the Master Servicer has determined to be
nonrecoverable;
(iv) to reimburse the Master Servicer from Insurance Proceeds for
expenses incurred by the Master Servicer and covered by the related
insurance policies;
(v) to reimburse the Master Servicer for unpaid master servicing
fees and unreimbursed out-of-pocket costs and expenses incurred by the
Master Servicer in the performance of its servicing obligations, such
right of reimbursement being limited to amounts received representing
late recoveries of the payments for which such advances were made;
(vi) to pay to the Master Servicer, with respect to each Loan or
property acquired in respect thereof that has been purchased by the
Master Servicer pursuant to the Agreement, all amounts received thereon
and not taken into account in determining the principal balance of such
repurchased Loan;
(vii) to reimburse the Master Servicer or Provident for
expenses incurred and reimbursable pursuant to the Agreement;
(viii) to withdraw any amount deposited in the Security Account
and not required to be deposited therein; and
(ix) to clear and terminate the Security Account upon termination
of the Agreement.
In addition, unless otherwise specified in the related Prospectus
Supplement, on or prior to the business day immediately preceding each
Distribution Date, the Master Servicer shall withdraw from the Security
Account the amount of Available Funds, to the extent on deposit, for deposit
in an account maintained by the Trustee for the related Series of Securities.
The applicable Agreement may require the Master Servicer to establish
and maintain one or more escrow accounts into which Mortgagors deposit
amounts sufficient to pay taxes, assessments, hazard insurance premiums or
comparable items. Withdrawals from the escrow accounts maintained for
Mortgagors may be made to effect timely payment of taxes, assessments and
hazard insurance premiums or comparable items, to reimburse the Master
Servicer out of related assessments for maintaining hazard insurance, to
refund to Mortgagors amounts determined to be overages, to remit to
Mortgagors, if required, interest earned, if any, on balances in any of the
escrow accounts, to repair or otherwise protect the Property and to clear and
terminate any of the escrow accounts. The Master Servicer will be solely
responsible for administration of the escrow accounts and will be expected to
make advances to such account when a deficiency exists therein.
PRE-FUNDING ACCOUNT
If so provided in the related Prospectus Supplement, the Master Servicer
will establish and maintain a Pre-Funding Account, in the name of the related
Trustee on behalf of the related Securityholders, into which Provident will
deposit cash in an amount equal to the Pre-Funded Amount on the related
Closing Date. The Pre-Funding Account will be maintained with the Trustee
for the related Series of Securities and is designed solely to hold funds to
be applied by such Trustee during the Funding Period to pay to Provident the
purchase price for Subsequent Loans. Monies on deposit in the Pre-Funding
Account will not be available to cover losses on or in respect of the related
Loans. The Pre-Funded Amount will not exceed 50% of the initial aggregate
principal amount of the Securities of the related Series. The Pre-Funded
Amount will be used by the related Trustee to purchase Subsequent Loans from
Provident from time to time during the Funding Period. The Funding Period,
if any, for a Trust Fund will begin on the related Closing Date and will end
on the date specified in the related Prospectus Supplement, which in no event
will be later than the date that is one year after the related Closing Date.
Monies on deposit in the Pre-Funding Account may be invested in Permitted
Investments under the circumstances and in the manner described in the
related Agreement. Earnings on investment of funds in the Pre-Funding
Account will be deposited into the related Security Account or such other
trust account as is specified in the related Prospectus Supplement and losses
will be charged against the funds on deposit in the Pre-Funding Account. Any
amounts remaining in the Pre-Funding Account at the end of the Funding Period
will be distributed to the related Securityholders in the manner and priority
specified in the related Prospectus Supplement, as a prepayment of principal
of the related Securities.
In addition, if so provided in the related Prospectus Supplement, on the
related Closing Date Provident will deposit in an account (the "Capitalized
Interest Account") cash in such amount as is necessary to cover shortfalls in
interest on the related Series of Securities that may arise as a result of
utilization of the Pre-Funding Account as described above. The Capitalized
Interest Account shall be maintained with the Trustee for the related Series
of Securities and is designed solely to cover the above-mentioned interest
shortfalls. Monies on deposit in the Capitalized Interest Account will not
be available to cover losses on or in respect of the related Loans. To the
extent that the entire amount on deposit in the Capitalized Interest Account
has not been applied to cover shortfalls in interest on the related Series of
Securities by the end of the Funding Period, any amounts remaining in the
Capitalized Interest Account will be paid to Provident.
SUB-SERVICING
The Master Servicer may enter into an agreement (a "Sub-Servicing
Agreement") with any servicing entity which will act as the Sub-Servicer for
the related Loans, which Sub-Servicing Agreement will not contain any terms
inconsistent with the related Agreement. Notwithstanding any such
subservicing arrangement, unless otherwise provided in the related Prospectus
Supplement, the Master Servicer will remain liable for its servicing duties
and obligations under the Master Servicing Agreement as if the Master
Servicer alone were servicing the Loans.
COLLECTION PROCEDURES
The Master Servicer, directly or through one or more Sub-Servicers, will
make reasonable efforts to collect all payments called for under the Loans
and will, consistent with each Agreement and any Pool Insurance Policy,
Primary Mortgage Insurance Policy, bankruptcy bond or alternative
arrangements, follow such collection procedures as are customary with respect
to loans that are comparable to the Loans. Consistent with the above, the
Master Servicer may, in its discretion, (i) waive any assumption fee, late
payment or other charge in connection with a Loan and (ii) to the extent not
inconsistent with the coverage of such Loan by a Pool Insurance Policy,
Primary Mortgage Insurance Policy, bankruptcy bond or alternative
arrangements, if applicable, arrange with a borrower a schedule for the
liquidation of delinquencies consistent with the Master Servicer's policies
with respect to the mortgage loans it owns and services for others. To the
extent the Master Servicer is obligated to make or cause to be made Advances,
such obligation will remain during any period of such an arrangement.
In any case in which property securing a Loan has been, or is about to
be, conveyed by the mortgagor or obligor, the Master Servicer will, to the
extent it has knowledge of such conveyance or proposed conveyance, exercise
or cause to be exercised its rights to accelerate the maturity of such Loan
under any due-on-sale clause applicable thereto, but only if the exercise of
such rights is permitted by applicable law. If these conditions are not met
or if the Master Servicer reasonably believes it is unable under applicable
law to enforce such due-on-sale clause, the Master Servicer will enter into
or cause to be entered into an assumption and modification agreement with the
person to whom such property has been or is about to be conveyed, pursuant to
which such person becomes liable for repayment of the Loan and, to the extent
permitted by applicable law, the mortgagor remains liable thereon. Any fee
collected by or on behalf of the Master Servicer for entering into an
assumption agreement will be retained by or on behalf of the Master Servicer
as additional servicing compensation. See "Certain Legal Aspects of the
Loans--Due-on-Sale Clauses". In connection with any such assumption, the
terms of the related Loan may not be changed.
HAZARD INSURANCE
Except as otherwise specified in the related Prospectus Supplement, the
Master Servicer will require the mortgagor or obligor on each Loan to
maintain a hazard insurance policy providing for no less than the coverage of
the standard form of fire insurance policy with extended coverage customary
for the type of Property in the state in which such Property is located.
Such coverage will be in an amount that is at least equal to the lesser of
(i) the maximum insurable value of the improvements securing such Loan from
time to time, (ii) the combined principal balance owing on such Loan and any
mortgage loan senior to such Loan and (iii) the minimum amount required to
compensate for damage or loss on a replacement cost basis. All amounts
collected by the Master Servicer under any hazard policy (except for amounts
to be applied to the restoration or repair of the Property or released to the
mortgagor or obligor in accordance with the Master Servicer's normal
servicing procedures) will be deposited in the related Security Account. In
the event that the Master Servicer maintains a blanket policy insuring
against hazard losses on all the Loans comprising part of a Trust Fund, it
will conclusively be deemed to have satisfied its obligation relating to the
maintenance of hazard insurance. Such blanket policy may contain a
deductible clause, in which case the Master Servicer will be required to
deposit from its own funds into the related Security Account the amounts
which would have been deposited therein but for such clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements securing a Loan
by fire, lightning, explosion, smoke, windstorm and hail, riot, strike and
civil commotion, subject to the conditions and exclusions particularized in
each policy. Although the policies relating to the Loans may have been
underwritten by different insurers under different state laws in accordance
with different applicable forms and therefore may not contain identical terms
and conditions, the basic terms thereof are dictated by respective state
laws, and most such policies typically do not cover any physical damage
resulting from the following: war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mud flows), nuclear reactions, wet or dry rot, vermin,
rodents, insects or domestic animals, theft and, in certain cases, vandalism.
The foregoing list is merely indicative of certain kinds of uninsured risks
and is not intended to be all inclusive. If the Property securing a Loan is
located in a federally designated special flood area at the time of
origination, the Master Servicer will require the mortgagor or obligor to
obtain and maintain flood insurance.
The hazard insurance policies covering properties securing the Loans
typically contain a clause which in effect requires the insured at all time
to carry insurance of a specified percentage (generally 80% to 90%) of the
full replacement value of the insured property in order to recover the full
amount of any partial loss. If the insured's coverage falls below this
specified percentage, then the insurer's liability in the event of partial
loss will not exceed the larger of (i) the actual cash value (generally
defined as replacement cost at the time and place of loss, less physical
depreciation) of the improvements damaged or destroyed or (ii) such
proportion of the loss as the amount of insurance carried bears to the
specified percentage of the full replacement cost of such improvements.
Since the amount of hazard insurance the Master Servicer may cause to be
maintained on the improvements securing the Loans declines as the principal
balances owing thereon decrease, and since improved real estate generally has
appreciated in value over time in the past, the effect of this requirement in
the event of partial loss may be that hazard insurance proceeds will be
insufficient to restore fully the damaged property. If specified in the
related Prospectus Supplement, a special hazard insurance policy will be
obtained to insure against certain of the uninsured risks described above.
See "Credit Enhancement."
If the Property securing a defaulted Loan is damaged and proceeds, if
any, from the related hazard insurance policy are insufficient to restore the
damaged Property, the Master Servicer is not required to expend its own funds
to restore the damaged Property unless it determines (i) that such
restoration will increase the proceeds to Securityholders on liquidation of
the Loan after reimbursement of the Master Servicer for its expenses and (ii)
that such expenses will be recoverable by it from related Insurance Proceeds
or Liquidation Proceeds.
If recovery on a defaulted Loan under any related Insurance Policy is
not available, or if the defaulted Loan is not covered by an Insurance
Policy, the Master Servicer will be obligated to follow or cause to be
followed such normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted Loan. If the proceeds of any
liquidation of the Property securing the defaulted Loan are less than the
principal balance of such Loan plus interest accrued thereon that is payable
to Securityholders, the Trust Fund will realize a loss in the amount of such
difference plus the aggregate of expenses incurred by the Master Servicer in
connection with such proceedings which are reimbursable under the Agreement.
In the unlikely event that any such proceedings result in a total recovery
which is, after reimbursement to the Master Servicer of its expenses, in
excess of the principal balance of such Loan plus interest accrued thereon
that is payable to Securityholders, the Master Servicer will be entitled to
withdraw or retain from the Security Account amounts representing its normal
servicing compensation with respect to such Loan and, unless otherwise
specified in the related Prospectus Supplement, amounts representing the
balance of such excess, exclusive of any amount required by law to be
forwarded to the related borrower, as additional servicing compensation.
If the Master Servicer or its designee recovers Insurance Proceeds
which, when added to any related Liquidation Proceeds and after deduction of
certain expenses reimbursable to the Master Servicer, exceed the principal
balance of such Loan plus interest accrued thereon that is payable to
Securityholders, the Master Servicer will be entitled to withdraw or retain
from the Security Account amounts representing its normal servicing
compensation with respect to such Loan. In the event that the Master
Servicer has expended its own funds to restore the damaged Property and such
funds have not been reimbursed under the related hazard insurance policy, it
will be entitled to withdraw from the Security Account out of related
Liquidation Proceeds or Insurance Proceeds an amount equal to such
expenses incurred by it, in which event the Trust Fund may realize a loss
up to the amount so charged. Since Insurance Proceeds cannot exceed
deficiency claims and certain expenses incurred by the Master Servicer,
no such payment or recovery will result in a recovery to the Trust Fund
which exceeds the principal balance of the defaulted Loan together with
accrued interest thereon. See "Credit Enhancement".
The proceeds from any liquidation of a Loan will be applied in the
following order of priority: first, to reimburse the Master Servicer for any
unreimbursed expenses incurred by it to restore the related Property and any
unreimbursed servicing compensation payable to the Master Servicer with
respect to such Loan; second, to reimburse the Master Servicer for any
unreimbursed Advances with respect to such Loan; third, to accrued and unpaid
interest (to the extent no Advance has been made for such amount) on such
Loan; and fourth, as a recovery of principal of such Loan.
REALIZATION UPON DEFAULTED LOANS
Primary Mortgage Insurance Policies. If so specified in the related
Prospectus Supplement, the Master Servicer will maintain or cause to be
maintained, as the case may be, in full force and effect, a Primary Mortgage
Insurance Policy with regard to each Loan for which such coverage is
required. Primary Mortgage Insurance Policies reimburse certain losses
sustained by reason of defaults in payments by borrowers. The Master
Servicer will not cancel or refuse to renew any such Primary Mortgage
Insurance Policy in effect at the time of the initial issuance of a Series of
Securities that is required to be kept in force under the applicable
Agreement unless the replacement Primary Mortgage Insurance Policy for such
cancelled or nonrenewed policy is maintained with an insurer whose claims-
paying ability is sufficient to maintain the current rating of the classes of
Securities of such Series that have been rated.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal servicing compensation to be paid to the Master Servicer
in respect of its master servicing activities for each Series of Securities
will be equal to the percentage per annum described in the related Prospectus
Supplement (which may vary under certain circumstances) of the outstanding
principal balance of each Loan, and such compensation will be retained by it
from collections of interest on such Loan in the related Trust Fund (the
"Master Servicing Fee"). As compensation for its servicing duties, a Sub-
Servicer, if any, will be entitled to a monthly servicing fee as described in
the related Prospectus Supplement. In addition, the Master Servicer or Sub-
Servicer will retain all prepayment charges, assumption fees and late payment
charges, to the extent collected from borrowers, and any benefit that may
accrue as a result of the investment of funds in the applicable Security
Account (unless otherwise specified in the related Prospectus Supplement).
The Master Servicer will pay or cause to be paid certain ongoing
expenses associated with each Trust Fund and incurred by it in connection
with its responsibilities under the related Agreement, including, without
limitation, and if so specified in the related Prospectus Supplement, payment
of any fee or other amount payable in respect of any credit enhancement
arrangements, payment of the fees and disbursements of the Trustee, any
custodian appointed by the Trustee, the certificate registrar and any paying
agent, and payment of expenses incurred in enforcing the obligations of Sub-
Servicers. The Master Servicer will be entitled to reimbursement of expenses
incurred in enforcing the obligations of Sub-Servicers under certain limited
circumstances.
EVIDENCE AS TO COMPLIANCE
Each Agreement will provide that on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to
the Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, the servicing by or on behalf of the Master Servicer of the Trust Fund
Assets pursuant to the Agreement was conducted in compliance therewith except
for any significant exceptions or errors in records that, in the opinion of
the firm, the Audit Program for Mortgages serviced for FHLMC, or the Uniform
Single Attestation Program for Mortgage Bankers, it is required to report.
In rendering its statement such firm may rely, as to matters relating
to the direct servicing of Loans by Sub-Servicers, upon comparable statements
for examinations conducted substantially in compliance with the Uniform
Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FHLMC (rendered within one year of such
statement) of firms of independent public accountants with respect to
the related Sub-Servicer.
Each Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of
officers of the Master Servicer may be obtained by Securityholders of the
related Series without charge upon written request to the Master Servicer at
the address set forth in the related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND PROVIDENT
The Master Servicer under each Pooling and Servicing Agreement or Master
Servicing Agreement, as applicable, will be named in the related Prospectus
Supplement. Any of Provident, an affiliate of Provident or another entity
may serve as Master Servicer.
Each Agreement will provide that the Master Servicer may not resign from
its obligations and duties under the Agreement except upon (a) appointment of
a successor servicer and receipt by the Trustee of a letter from the Rating
Agency that such resignation and appointment will not result in a downgrade
of the Securities and (b) a determination that its duties thereunder are no
longer permissible under applicable law. The Master Servicer may, however,
be removed from its obligations and duties as set forth in the Agreement. No
such resignation will become effective until the Trustee or a successor
servicer has assumed the Master Servicer's obligations and duties under the
Agreement.
Each Agreement will further provide that neither the Master Servicer,
Provident nor any director, officer, employee, or agent of the Master
Servicer or Provident will be under any liability to the related Trust Fund
or Securityholders for any action taken or for refraining from the taking of
any action in good faith pursuant to the Agreement, or for errors in
judgment; provided, however, that neither the Master Servicer,
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Provident nor any such person will be protected against any liability which
would otherwise be imposed by reason of wilful misfeasance, bad faith or
gross negligence in the performance of duties thereunder or by reason of
reckless disregard of obligations and duties thereunder. Each Agreement will
further provide that the Master Servicer, Provident and any director,
officer, employee or agent of the Master Servicer or Provident will be
entitled to indemnification by the related Trust Fund and will be held
harmless against any loss, liability or expense incurred in connection with
any legal action relating to the Agreement or the Securities, other than any
loss, liability or expense related to any specific Loan or Loans (except any
such loss, liability or expense otherwise reimbursable pursuant to the Agree-
ment) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder. In addition, each Agreement will provide that neither the Master
Servicer nor Provident will be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its respective
responsibilities under the Agreement and which in its opinion may involve it
in any expense or liability. The Master Servicer or Provident may, however,
in its discretion undertake any such action which it may deem necessary or
desirable with respect to the Agreement and the rights and duties of the
parties thereto and the interests of the Securityholders thereunder. In such
event, the legal expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and liabilities of the Trust
Fund, and the Master Servicer or Provident, as the case may be, will be
entitled to be reimbursed therefor out of funds otherwise distributable to
Securityholders.
Except as otherwise specified in the related Prospectus Supplement, any
person into which the Master Servicer may be merged or consolidated, or any
person resulting from any merger or consolidation to which the Master
Servicer is a party, or any person succeeding to the business of the Master
Servicer, will be the
successor of the Master Servicer under each Agreement, provided that such
person is qualified to sell mortgage loans to, and service mortgage loans on
behalf of, FNMA or FHLMC and further provided that such merger, consolidation
or succession does not adversely affect the then current rating or ratings of
the class or classes of Securities of such Series that have been rated.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
Pooling and Servicing Agreement; Master Servicing Agreement. Except as
otherwise specified in the related Prospectus Supplement, Events of Default
under each Agreement will consist of (i) any failure by the Master Servicer
to make any required deposit pursuant to the related Agreement (other than an
Advance) which continues unremedied for five days after the giving of written
notice of such failure to the Master Servicer by the Trustee, or to the
Master Servicer and the Trustee by a holder of the Securities of the related
Series; (ii) any failure by the Master Servicer to make an Advance as
required under the Agreement; (iii) any failure by the Master Servicer duly
to observe or perform in any material respect any of its other covenants or
agreements in the Agreement which continues unremedied for thirty days after
the giving of written notice of such failure to the Master Servicer by the
Trustee, or to the Master Servicer and the Trustee by a holder of the
Securities of the related Series; and (iv) certain events of insolvency,
readjustments of debt, marshalling of assets and liabilities or similar
proceedings and certain actions by or on behalf of the Master Servicer
indicating its insolvency, reorganization or inability to pay its
obligations.
If specified in the related Prospectus Supplement, the Agreement will
permit the Trustee to sell the Trust Fund Assets in the event that payments
in respect thereto are insufficient to make payments required in the
Agreement. The Trust Fund Assets will be sold only under the circumstances
and in the manner specified in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, so long
as an Event of Default under an Agreement remains unremedied, the Trustee may
(and at the direction of holders of Securities evidencing not less than 51%
of the aggregate Percentage Interests and under such other circumstances as
may be specified in such Agreement, the Trustee shall) terminate all of the
rights and obligations of the Master Servicer under the Agreement relating to
such Trust Fund and in and to the related Trust Fund Assets, whereupon the
Trustee will succeed to all of the responsibilities, duties and liabilities
of the Master Servicer under the Agreement, including, if specified in the
related Prospectus Supplement, the obligation to make Advances, and will be
entitled to similar compensation arrangements; provided, however, that if the
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Event of Default results from the Master Servicer's failure to make an
Advance, the Trustee shall terminate the Master Servicer. In the event
that the Trustee is unwilling or unable so to act, it may appoint, or
petition a court of competent jurisdiction for the appointment of, a
mortgage loan servicing institution with a net worth of a least $50,000,000
to act as successor to the Master Servicer under the Agreement. Pending
such appointment, the Trustee is obligated to act in such capacity.
The Trustee and any such successor may agree upon the servicing compensation
to be paid, which in no event may be greater than the compensation payable
to the Master Servicer under the Agreement.
Unless otherwise provided in the related Prospectus Supplement, no
Securityholder, solely by virtue of such holder's status as a Securityholder,
will have any right under any Agreement to institute any proceeding with
respect to such Agreement, unless such holder previously has given to the
Trustee written notice of default and unless the holders of Securities of any
class of such Series evidencing not less than 25% of the aggregate Percentage
Interests constituting such class have made written request upon the Trustee
to institute such proceeding in its own name as Trustee thereunder and have
offered to the Trustee reasonable indemnity, and the Trustee for 60 days has
neglected or refused to institute any such proceeding.
Indenture. Except as otherwise specified in the related Prospectus
Supplement, Events of Default under the Indenture for each Series of Notes
include: (i) a default in the payment of any principal of or interest on any
Note of such Series which continues unremedied for five days after written
notice of such default is given as specified in the related Prospectus
Supplement; (ii) failure to perform in any material respect any other
covenant of Provident or the Trust Fund in the Indenture which continues for
a period of thirty days after notice thereof is given in accordance with the
procedures described in the related Prospectus Supplement; (iii) certain
events of bankruptcy, insolvency, receivership or liquidation of Provident
or the Trust Fund; or (iv) any other Event of Default provided with respect
to Notes of that Series including but not limited to certain defaults on the
part of the issuer, if any, of a credit enhancement instrument supporting
such Notes.
If an Event of Default with respect to the Notes of any Series at the
time outstanding occurs and is continuing, either the Trustee or the holders
of a majority of the then aggregate outstanding amount of the Notes of such
Series may declare the principal amount (or, if the Notes of that Series have
an interest rate of 0%, such portion of the principal amount as may be
specified in the terms of that Series, as provided in the related Prospectus
Supplement) of all the Notes of such Series to be due and payable
immediately. Such declaration may, under certain circumstances, be rescinded
and annulled by the holders of more than 50% of the Percentage Interests of
the Notes of such Series.
If, following an Event of Default with respect to any Series of Notes,
the Notes of such Series have been declared to be due and payable, the
Trustee may, in its discretion, notwithstanding such acceleration, elect to
maintain possession of the collateral securing the Notes of such Series and
to continue to apply distributions on such collateral as if there had been no
declaration of acceleration if such collateral continues to provide
sufficient funds for the payment of principal of and interest on the Notes of
such Series as they would have become due if there had not been such a
declaration. In addition, the Trustee may not sell or otherwise liquidate
the collateral securing the Notes of a Series following an Event of Default,
other than a default in the payment of any principal or interest on any Note
of such Series which continues unremedied for five days after written notice
of such default is given as specified in the related Prospectus Supplement,
unless (a) the holders of 100% of the Percentage Interests of the Notes of
such Series consent to such sale, (b) the proceeds of such sale or
liquidation are sufficient to pay in full the principal of and accrued
interest, due and unpaid, on the outstanding Notes of such Series at the date
of such sale or (c) the Trustee determines that such collateral would not be
sufficient on an ongoing basis to make all payments on such Notes as such
payments would have become due if such Notes had not been declared due and
payable, and the Trustee obtains the consent of the holders of 662/3% of the
Percentage Interests of the Notes of such Series.
In the event that the Trustee liquidates the collateral in connection
with an Event of Default involving a default in the payment of principal of
or interest on the Notes of a Series which continues unremedied for five days
after written notice of such default is given as specified in the related
Prospectus Supplement, the Indenture provides that the Trustee will have a
prior lien on the proceeds of any such liquidation for unpaid fees and
expenses. As a result, upon the occurrence of such an Event of Default, the
amount available for distribution to the Noteholders would be less than would
otherwise be the case. However, the Trustee may not institute a proceeding
for the enforcement of its lien except in connection with a proceeding for
the enforcement of the lien of the Indenture for the benefit of the
Noteholders after the occurrence of such an Event of Default.
Except as otherwise specified in the related Prospectus Supplement, in
the event the principal of the Notes of a Series is declared due and payable
as described above, the holders of any such Notes issued at a discount from
par may be entitled to receive no more than an amount equal to the unpaid
principal amount thereof less the amount of such discount which is
unamortized.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing with
respect to a Series of Notes, the Trustee shall be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of Notes of such Series unless such holders
offered to the Trustee security or indemnity satisfactory to it against the
costs, expenses and liabilities which might be incurred by it in complying
with such request or direction. Subject to such provisions for
indemnification and certain limitations contained in the Indenture, the
holders of a majority of the then aggregate outstanding amount of the Notes
of such Series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Notes of such Series, and the holders of a majority of the then aggregate
outstanding amount of the Notes of such Series may, in certain cases, waive
any default with respect thereto, except a default in the payment of
principal or interest or a default in respect of a covenant
or provision of the Indenture that cannot be modified without the waiver or
consent of all the holders of the outstanding Notes of such Series affected
thereby.
AMENDMENT
Except as otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by Provident, the Master Servicer and the Trustee,
without the consent of any of the Securityholders, (i) to cure any ambiguity;
(ii) to correct or supplement any provision therein which may be defective or
inconsistent with any other provision therein; or (iii) to make any other
revisions with respect to matters or questions arising under the Agreement
which are not inconsistent with the provisions thereof, provided that such
action will not adversely affect in any material respect the interests of any
Securityholder. An amendment will be deemed not to adversely affect in any
material respect the interests of the Securityholders if the person
requesting such amendment obtains a letter from each Rating Agency requested
to rate the class or classes of Securities of such Series stating that such
amendment will not result in the downgrading or withdrawal of the respective
ratings then assigned to such Securities. In addition, to the extent
provided in the related Agreement, an Agreement may be amended without the
consent of any of the Securityholders to change the manner in which the
Security Account is maintained, provided that any such change does not
adversely affect the then current rating on the class or classes of
Securities of such Series that have been rated. In addition, if a REMIC
election is made with respect to a Trust Fund, the related Agreement may be
amended to modify, eliminate or add to any of its provisions to such extent
as may be necessary to maintain the qualification of the related Trust Fund
as a REMIC, provided that the Trustee has received an opinion of counsel to
the effect that such action is necessary or helpful to maintain such
qualification. Each Agreement may also be amended by Provident, the Master
Servicer and the Trustee with consent of holders of Securities of such Series
evidencing not less than 51% of the aggregate Percentage Interests of each
class affected thereby for the purpose of adding any provisions to or
changing in an manner or eliminating any of the provisions of the Agreement
or of modifying in any manner the rights of the holders of the related
Securities; provided, however, that no such amendment may (i)
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reduce in any manner the amount of or delay the timing of, payments received
on Loans which are required to be distributed on any Security without the
consent of the holder of such Security, or (ii) reduce the aforesaid
percentage of Securities of any class the holders of which are required to
consent to any such amendment without the consent of the holders of all
Securities of such class covered by such Agreement then outstanding. If a
REMIC election is made with respect to a Trust Fund, the Trustee will not be
entitled to consent to an amendment to the related Agreement without having
first received an opinion of counsel to the effect that such amendment will
not cause such Trust Fund to fail to qualify as a REMIC.
TERMINATION; OPTIONAL TERMINATION
Pooling and Servicing Agreement; Trust Agreement. Unless otherwise
specified in the related Agreement, the obligations created by each Pooling
and Servicing Agreement and Trust Agreement for each Series of Securities
will terminate upon the payment to the related Securityholders of all amounts
held in the Security Account by the Master Servicer and required to be paid
to them pursuant to such Agreement following the later of (i) the final
payment of or other liquidation of the last of the Trust Fund Assets subject
thereto or the disposition of all property acquired upon foreclosure of any
such Trust Fund Assets remaining in the Trust Fund and (ii) the purchase by
the Master Servicer or, if REMIC treatment has been elected and if specified
in the related Prospectus Supplement, by the holder of the residual interest
in the REMIC or any other party specified to have such right (see "Federal
Income Tax Consequences" below), from the related Trust Fund of all of the
remaining Trust Fund Assets and all property acquired in respect of such
Trust Fund Assets.
Unless otherwise specified by the related Prospectus Supplement, any
such purchase of Trust Fund Assets and property acquired in respect of Trust
Fund Assets evidenced by a Series of Securities will be made at the option of
the Master Servicer, such other person or, if applicable, such holder of the
REMIC residual interest, at a price specified in the related Prospectus
Supplement. The exercise of such right will affect early retirement of the
Securities of that Series, but the right of the Master Servicer, such other
person or, if applicable, such holder of the REMIC residual interest, to so
purchase is subject to the principal balance of the related Trust Fund Assets
being less than the percentage specified in the related Prospectus Supplement
of the aggregate principal balance of the Trust Fund Assets at the Cut-Off
Date for the Series. The foregoing is subject to the provision that if a
REMIC election is made with respect to a Trust Fund, any repurchase pursuant
to clause (ii) above will be made only in connection with a "qualified
liquidation" of the REMIC within the meaning of Section 860F(g)(4) of the
Code.
Indenture. The Indenture will be discharged with respect to a Series of
Notes (except with respect to certain continuing rights specified in the
Indenture) upon the delivery to the Trustee for cancellation of all the Notes
of such Series or, with certain limitations, upon deposit with the Trustee of
funds sufficient for the payment in full of all of the Notes of such Series.
In addition to such discharge with certain limitations, the Indenture
will provide that, if so specified with respect to the Notes of any Series,
the related Trust Fund will be discharged from any and all obligations in
respect of the Notes of such Series (except for certain obligations relating
to temporary Notes and exchange of Notes, to register the transfer of or
exchange Notes of such Series, to replace stolen, lost or mutilated Notes of
such Series, to maintain paying agencies and to hold monies for payment in
trust) upon the deposit with the Trustee, in trust, of money and/or direct
obligations of or obligations guaranteed by the United States of America
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of and each installment of interest on the Notes of such Series
on the last scheduled Distribution Date for such Notes and any installment of
interest on such Notes in accordance with the terms of the Indenture and the
Notes of such Series. In the event of any such defeasance and discharge of
Notes of such Series, holders of Notes of such Series would be able to look
only to such money and/or direct obligations for payment of principal and
interest, if any, on their Notes until maturity.
THE TRUSTEE
The Trustee under each Agreement will be named in the applicable
Prospectus Supplement. The commercial bank or trust company serving as
Trustee may have normal banking relationships with Provident, the Master
Servicer and any of their respective affiliates.
CERTAIN LEGAL ASPECTS OF THE LOANS
The following discussion contains summaries, which are general in
nature, of certain legal matters relating to the Loans. Because such legal
aspects are governed primarily by applicable state law (which laws may differ
substantially), the descriptions do not, except as expressly provided below,
reflect the laws of any particular state, nor do they encompass the laws of
all states in which the security for the Loans is situated. The descriptions
are qualified in their entirety by reference to the applicable federal laws
and the appropriate laws of the states in which Loans may be originated.
GENERAL
The Loans for a Series may be secured by deeds of trust, mortgages,
security deeds or deeds to secure debt, depending upon the prevailing
practice in the state in which the property subject to the loan is located.
Deeds of trust are used almost exclusively in California instead of
mortgages. A mortgage creates a lien upon the real property encumbered by
the mortgage, which lien is generally not prior to the lien for real estate
taxes and assessments. Priority between mortgages depends on their terms and
generally on the order of recording with a state or county office. There are
two parties to a mortgage, the mortgagor, who is the borrower and owner of
the mortgaged property, and the mortgagee, who is the lender. Under the
mortgage instrument, the mortgagor delivers to the mortgagee a note or bond
and the mortgage. Although a deed of trust is similar to a mortgage, a deed
of trust formally has three parties, the borrower-property owner called the
trustor (similar to a mortgagor), a lender (similar to a mortgagee) called
the beneficiary, and a third-party grantee called the trustee. Under a deed
of trust, the borrower grants the property, irrevocably until the debt is
paid, in trust, generally with a power of sale, to the trustee to secure
payment of the obligation. A security deed and a deed to secure debt are
special types of deeds which indicate on their face that they are granted to
secure an underlying debt.
By executing a security deed or deed to secure debt, the grantor conveys
title to, as opposed to merely creating a lien upon, the subject property to
the grantee until such time as the underlying debt is repaid. The trustee's
authority under a deed of trust, the mortgagee's authority under a mortgage
and the grantee's authority under a security deed or deed to secure debt are
governed by law and, with respect to some deeds of trust, the directions of
the beneficiary.
FORECLOSURE/REPOSSESSION
Deed of Trust. Foreclosure of a deed of trust is generally accomplished
by a non-judicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any
default by the borrower under the terms of the note or deed of trust. In
certain states, such foreclosure also may be accomplished by judicial action
in the manner provided for foreclosure of mortgages. In addition to any
notice requirements contained in a deed of trust, in some states (such as
California), the trustee must record a notice of default and send a copy to
the borrower-trustor, to any person who has recorded a request for a copy of
any notice of default and notice of sale, to any successor in interest to the
borrower-trustor, to the beneficiary of any junior deed of trust and to
certain other persons. In some states (including California), the borrower-
trustor has the right to reinstate the loan at any time following default
until shortly before the trustee's sale. In general, the borrower, or any
other person having a junior encumbrance on the real estate, may, during a
statutorily prescribed reinstatement period, cure a monetary default by
paying the entire amount in arrears plus other designated costs and expenses
incurred in enforcing the obligation. Generally, state law controls the
amount of foreclosure expenses and costs, including attorney's fees, which
may be recovered by a lender. After the reinstatement period has expired
without the default having been cured, the borrower or junior lienholder no
longer has the right to reinstate the loan and must pay the loan in full to
prevent the scheduled foreclosure sale. If the deed of trust is not
reinstated within any applicable cure period, a notice of sale must be posted
in a public place and, in most states (including California), published for a
specific period of time in one or more newspapers. In addition, some state
laws require that a copy of the notice of sale be posted on the property and
sent to all parties having an interest of record in the real property. In
California, the entire process from recording a notice of default to a non-
judicial sale usually takes four to five months.
Mortgages. Foreclosure of a mortgage is generally accomplished by
judicial action. The action is initiated by the service of legal pleadings
upon all parties having an interest in the real property. Delays in
completion of the foreclosure may occasionally result from difficulties in
locating necessary parties. Judicial foreclosure proceedings are often not
contested by any of the parties. When the mortgagee's right to foreclosure
is contested, the legal proceedings necessary to resolve the issue can be
time consuming. After the completion of a judicial foreclosure proceeding,
the court generally issues a judgment of foreclosure and appoints a referee
or other court officer to conduct the sale of the property. In some states,
mortgages may also be foreclosed by advertisement, pursuant to a power of
sale provided in the mortgage.
Although foreclosure sales are typically public sales, frequently no
third party purchaser bids in excess of the lender's lien because of the
difficulty of determining the exact status of title to the property, the
possible deterioration of the property during the foreclosure proceedings and
a requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the
trustee or referee for an amount equal to the principal amount outstanding
under the loan, accrued and unpaid interest and the expenses of foreclosure
in which event the mortgagor's debt will be extinguished or the lender may
purchase for a lesser amount in order to preserve its right against a
borrower to seek a deficiency judgment in states where such judgment is
available. Thereafter, subject to the right of the borrower in some states
to remain in possession during the redemption period, the lender will assume
the burden of ownership, including obtaining hazard insurance and making such
repairs at its own expense as are necessary to render the property suitable
for sale. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the
sale of the property may not equal the lender's investment in the property.
Any loss may be reduced by the receipt of any mortgage guaranty insurance
proceeds.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of
the borrower's defaults under the loan documents. Some courts have been
faced with the issue of whether federal or state constitutional provisions
reflecting due process concerns for fair notice require that borrowers under
deeds of trust receive notice longer than that prescribed by statute. For the
most part, these cases have upheld the notice provisions as being reasonable
or have found that the sale by a trustee under a deed of trust does not
involve sufficient state action to afford constitutional protection to the
borrower.
When the beneficiary under a junior mortgage or deed of trust cures the
default and reinstates or redeems by paying the full amount of the senior
mortgage or deed of trust, the amount paid by the beneficiary so to cure or
redeem becomes a part of the indebtedness secured by the junior mortgage or
deed of trust. See "Junior Mortgages; Rights of Senior Mortgagees" below.
ENVIRONMENTAL RISKS
Real property pledged as security to a lender may be subject to
unforeseen environmental risks. Under the laws of certain states,
contamination of a property may give rise to a lien on the property to assure
the payment of the costs of clean-up. In several states such a lien has
priority over the lien of an existing mortgage against such property. In
addition, under CERCLA, the United States Environmental Protection Agency
("EPA") may impose a lien on property where EPA has incurred clean-up costs.
However, a CERCLA lien is subordinate to pre-existing, perfected security
interests.
Under the laws of some states and under CERCLA, it is conceivable that a
secured lender may be held liable as an "owner" or "operator" for the costs
of addressing releases or threatened releases of hazardous substances at a
property, even though the environmental damage or threat was caused by a
prior or current owner or operator. CERCLA imposes liability for such costs
on any and all "responsible parties," including owners or operators. How-
ever, CERCLA excludes from the definition of "owner or operator" a secured
creditor who holds indicia of ownership primarily to protect its security
interest but without "participating in the management" of the Property (the
"Secured Creditor Exclusion"). Thus, if a lender's activities begin to
encroach on the actual management of a contaminated facility or property, the
lender may incur liability as an "owner or operator" under CERCLA. Similarly,
if a lender forecloses and takes title to a contaminated facility or
property, the lender may incur CERCLA liability in various circumstances,
including, but not limited to, when it holds the facility or property as an
investment (including leasing the facility or property to third party) or
fails to market the property in a timely fashion.
Whether actions taken by a lender would constitute participation in the
management of a mortgaged property or the business of a borrower so as to
render the secured creditor exemption unavailable to a lender has been a
matter of judicial interpretation of the statutory language, and court
decisions have been inconsistent. In 1990, the Court of Appeals for the
Eleventh Circuit suggested that the mere capacity of the lender to influence
a borrower's decisions regarding disposal of hazardous substances was
sufficient participation in the management of the borrower's business to deny
the protection of the Secured Creditor Exclusion to the lender.
This ambiguity appears to have been resolved by the enactment of the
Asset Conservation, Lender Liability and Deposit Insurance Protection Act of
1996, which was signed into law by President Clinton on September 30, 1996.
The new legislation provides that in order to be deemed to have participated
in the management of a mortgaged property, a lender must actually participate
in the operational affairs of the property or the borrower. The legislation
also provides that participation in the management of the property does not
include "merely having the capacity to influence, or unexercised right to
control" operations. Rather, a lender will lose the protection of the
Secured Creditor Exclusion only if it exercises decision-making control over
the borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the mortgaged property. If a lender is or becomes liable, it
can bring an action for contribution against any other "responsible parties,"
including a previous owner or operator, who created the environmental hazard,
but those persons or entities may be bankrupt or otherwise judgment proof.
The costs associated with environmental cleanup may be substantial. It
is conceivable that such costs arising from the circumstances set forth above
would result in a loss to Securityholders.
CERCLA does not apply to petroleum products, and the Secured Creditor
Exclusion does not govern liability for cleanup costs under federal laws
other than CERCLA, in particular Subtitle I of the federal Resource
Conservation and Recovery Act ("RCRA"), which regulates underground petroleum
storage tanks (except heating oil tanks). The EPA has adopted a lender
liability rule for underground storage tanks under Subtitle I of RCRA. Under
such rule, a holder of a security interest in an underground storage tank or
real property containing an underground storage tank is not considered an
operator of the underground storage tank as long as petroleum is not added
to, stored in or dispensed from the tank. In addition, under the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996,
the protections accorded to lenders under CERCLA are also accorded to the
holders of security interests in underground storage tanks. Liability for
cleanup of petroleum contamination may, however, be governed by state law,
which may not provide for any specific protection for secured creditors.
Except as otherwise specified in the related Prospectus Supplement, at
the time the Loans were originated, no environmental assessments or very
limited environmental assessments of the Properties were conducted.
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust or foreclosure of
a mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In certain
other states (including California), this right of redemption applies only to
sales following judicial foreclosure and not to sales pursuant to a non-
judicial power of sale. In most states where the right of redemption is
available, statutory redemption may occur upon payment of the foreclosure
purchase price, accrued interest and taxes. In other states, redemption may
be authorized if the former borrower pays only a portion of the sums due.
The effect of a statutory right of redemption is to diminish the ability of
the lender to sell the foreclosed property. The exercise of a right of
redemption would defeat the title of any purchaser from the lender subsequent
to foreclosure or sale under a deed of trust. Consequently, the practical
effect of the redemption right is to force the lender to retain the property
and pay the expenses of ownership until the redemption period has run. In
some states, there is no right to redeem property after a trustee's sale
under a deed of trust.
ANTI-DEFICIENCY LEGISLATION; BANKRUPTCY LAWS; TAX LIENS
Certain states have imposed statutory and judicial restrictions that
limit the remedies of a beneficiary under a deed of trust or a mortgagee
under a mortgage. In some states, including California, statutes and case
law limit the right of the beneficiary or mortgagee to obtain a deficiency
judgment against borrowers financing the purchase of their residence or
following sale under a deed of trust or certain other foreclosure
proceedings. A deficiency judgment is a personal judgment against the
borrower equal in most cases to the difference between the amount due to the
lender and the fair market value of the real property at the time of the
foreclosure sale. As a result of these prohibitions, it is anticipated that
in most instances the Master Servicer will utilize the non-judicial
foreclosure remedy and will not seek deficiency judgments against defaulting
borrowers.
Some state statutes require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against
the borrower. In certain other states, the lender has the option of bringing
a personal action against the borrower on the debt without first exhausting
such security; however, in some of these states, the lender, following
judgment on such personal action, may be deemed to have elected a remedy and
may be precluded from exercising remedies with respect to the security.
Consequently, the practical effect of the election requirement, when
applicable, is that lenders will usually proceed first against the security
rather than bringing a personal action against the borrower. In some states,
exceptions to the anti-deficiency statutes are provided for in certain
instances where the value of the lender's security has been impaired by acts
or omissions of the borrower, for example, in the event of waste of the
property. Finally, other statutory provisions limit any deficiency
judgment against the former borrower following a foreclosure sale to
the excess of the outstanding debt over the fair market value of the
property at the time of the public sale. The purpose of these statutes
is generally to prevent a beneficiary or a mortgagee from obtaining a
large deficiency judgment against the former borrower as a result of
low or no bids at the foreclosure sale.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws
and state laws affording relief to debtors, may interfere with or affect the
ability of the secured mortgage lender to realize upon its security. For
example, in a proceeding under the federal Bankruptcy Code, a lender may not
foreclose on a mortgaged property without the permission of the bankruptcy
court. The rehabilitation plan proposed by the debtor may provide, if the
mortgaged property is not the debtor's principal residence and the court
determines that the value of the mortgaged property is less than the
principal balance of the mortgage loan, for the reduction of the secured
indebtedness to the value of the mortgaged property as of the date of the
commencement of the bankruptcy, rendering the lender a general unsecured
creditor for the difference, and also may reduce the monthly payments due
under such mortgage loan, change the rate of interest and alter the mortgage
loan repayment schedule. The effect of any such proceedings under the
federal Bankruptcy Code, including but not limited to any automatic stay,
could result in delays in receiving payments on the Loans underlying a Series
of Securities and possible reductions in the aggregate amount of such
payments.
The federal tax laws provide priority to certain tax liens over the lien
of a mortgage or secured party.
DUE-ON-SALE CLAUSES
Each conventional Loan generally will contain a due-on-sale clause which
will generally provide that if the mortgagor or obligor sells, transfers or
conveys the Property, the Loan or contract may be accelerated by the
mortgagee or secured party. Court decisions and legislative actions have
placed substantial restrictions on the right of lenders to enforce such
clauses in many states. For instance, the California Supreme Court in August
1978 held that due-on-sale clauses were generally unenforceable. However,
the Garn-St Germain Depository Institutions Act of 1982 (the "Garn-St Germain
Act"), subject to certain exceptions, preempts state constitutional,
statutory and case law prohibiting the enforcement of due-on-sale clauses.
As a result, due-on-sale clauses are generally enforceable except in those
states whose legislatures exercised their authority to regulate the
enforceability of such clauses with respect to mortgage loans that were (i)
originated or assumed during the "window period" under the Garn-St Germain
Act which ended in all cases not later than October 15, 1982, and (ii)
originated by lenders other than national banks, federal savings institutions
and federal credit unions. FHLMC has taken the position in its published
mortgage servicing standards that, out of a total of eleven "window period
states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah) have
enacted statutes extending, on various terms and for varying periods, the
prohibition on enforcement of due-on-sale clauses with respect to certain
categories of "window period loans". Also, the Garn-St Germain Act does
"encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.
As to loans secured by an owner-occupied residence, the Garn-St Germain
Act sets forth nine specific instances in which a mortgagee covered by the
Act may not exercise its rights under a due-on-sale clause, notwithstanding
the fact that a transfer of the property may have occurred. The inability to
enforce a due-on-sale clause may result in transfer of the related Property
to an uncreditworthy person, which could increase the likelihood of default
or may result in a mortgage bearing an interest rate below the current market
rate being assumed by a new home buyer, which may affect the average life of
the Loans and the number of Loans which may extend to maturity.
In addition, under federal bankruptcy law, due-on-sale clauses may not
be enforceable in bankruptcy proceedings and may, under certain
circumstances, be eliminated in any modified mortgage resulting from such
bankruptcy proceeding.
ENFORCEABILITY OF PREPAYMENT AND LATE PAYMENT FEES
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states,
there are or may be specific limitations upon the late charges which a lender
may collect from a borrower for delinquent payments. Certain states also
limit the amounts that a lender may collect from a borrower as an additional
charge if the loan is prepaid. Under certain state laws, prepayment charges
may not be imposed after a certain period of time following the origination
of mortgage loans with respect to prepayments on loans secured by liens
encumbering owner-occupied residential properties. Since many of the
Properties will be owner-occupied, it is anticipated that prepayment charges
may not be imposed with respect to many of the Loans. The absence of such a
restraint on prepayment, particularly with respect to fixed rate Loans having
higher Loan Rates, may increase the likelihood of refinancing or other early
retirement of such Loans or contracts. Late charges and prepayment fees are
typically retained by servicers as additional servicing compensation.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply
to certain types of residential first mortgage loans originated by certain
lenders after March 31, 1980. The Office of Thrift Supervision, as successor
to the Federal Home Loan Bank Board, is authorized to issue rules and
regulations and to publish interpretations governing implementation of Title
V. Title V authorized the states to reimpose interest rate limits by
adopting, before April 1, 1983, a law or constitutional provision which
expressly rejects application of the federal law. Fifteen states adopted
such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on mortgage loans covered
by Title V. Certain states have taken action to reimpose interest rate
limits and/or to limit discount points or other charges.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
Generally, under the terms of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Relief Act"), a borrower who enters military
service after the origination of such borrower's Loan (including a borrower
who is a member of the National Guard or is in reserve status at the time of
the origination of the Loan and is later called to active duty) may not be
charged interest above an annual rate of 6% during the period of such
borrower's active duty status, unless a court orders otherwise upon
application of the lender. It is possible that such interest rate limitation
could have an effect, for an indeterminate period of time, on the ability of
the Master Servicer to collect full amounts of interest on certain of the
Loans. Unless otherwise provided in the related Prospectus Supplement, any
shortfall in interest collections resulting from the application of the
Relief Act could result in losses to Securityholders. The Relief Act also
imposes limitations which would impair the ability of the Master Servicer to
foreclose on an affected Loan during the borrower's period of active duty
status. Moreover, the Relief Act permits the extension of a Loan's maturity
and the re-adjustment of its payment schedule beyond the completion of
military service. Thus, in the event that such a Loan goes into default,
there may be delays and losses occasioned by the inability to realize upon
the Property in a timely fashion.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES
To the extent that the Loans comprising the Trust Fund for a Series are
secured by mortgages which are junior to other mortgages held by other
lenders or institutional investors, the rights of the Trust Fund (and
therefore the Securityholders) as mortgagee under any such junior mortgage
are subordinate to those of any mortgagee under any senior mortgage. The
senior mortgagee has the right to receive hazard insurance and condemnation
proceeds and to cause the property securing the Loan to be sold upon default
of the mortgagor, thereby extinguishing the junior mortgagee's lien unless
the junior mortgagee asserts its subordinate interest in the property in
foreclosure litigation and, possibly, satisfies the defaulted senior
mortgage. A junior mortgagee may satisfy a defaulted senior loan in full
and, in some states, may cure a default and bring the senior loan
current, in either event adding the amounts expended to the balance due on
the junior loan. In most states, absent a provision in the mortgage or deed
of trust, no notice of default is required to be given to a junior mortgagee.
The standard form of the mortgage used by most institutional lenders
confers on the mortgagee the right both to receive all proceeds collected
under any hazard insurance policy and all awards made in connection with
condemnation proceedings, and to apply such proceeds and awards to any
indebtedness secured by the mortgage, in such order as the mortgagee may
determine. Thus, in the event improvements on the property are damaged or
destroyed by fire or other casualty, or in the event the property is taken by
condemnation, the mortgagee or beneficiary under a senior mortgage will have
the prior right to collect any insurance proceeds payable under a hazard
insurance policy and any award of damages in connection with the condemnation
and to apply the same to the indebtedness secured by the senior mortgage.
Proceeds in excess of the amount of senior mortgage indebtedness, in most
cases, may be applied to the indebtedness of a junior mortgage.
Another provision sometimes found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay before
delinquency all taxes and assessments on the property and, when due, all
encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding
purporting to affect the property or the rights of the mortgagee under the
mortgage. Upon a failure of the mortgagor to perform any of these
obligations, the mortgagee is given the right under certain mortgages to
perform the obligation itself, at its election, with the mortgagor
reimbursing the mortgagee for any sums expended by the mortgagee on behalf of
the mortgagor. All sums so expended by the mortgagee become part of the
indebtedness secured by the mortgage.
The form of credit line trust deed or mortgage generally used by most
institutional lenders which make Revolving Credit Line Loans typically
contains a "future advance" clause, which provides, in essence, that
additional amounts advanced to or on behalf of the borrower by the
beneficiary or lender are to be secured by the deed of trust or mortgage.
Any amounts so advanced after the Cut-Off Date with respect to any Mortgage
will not be included in the Trust Fund. The priority of the lien securing
any advance made under the clause may depend in most states on whether the
deed of trust or mortgage is called and recorded as a credit line deed of
trust or mortgage. If the beneficiary or lender advances additional amounts,
the advance is entitled to receive the same priority as amounts initially
advanced under the trust deed or mortgage, notwithstanding the fact that
there may be junior trust deeds or mortgages and other liens which intervene
between the date of recording of the trust deed or mortgage and the date of
the future advance, and notwithstanding that the beneficiary or lender had
actual knowledge of such intervening junior trust deeds or mortgages and
other liens at the time of the advance. In most states, the trust deed or
mortgage lien securing mortgage loans of the type which includes home equity
credit lines applies retroactively to the date of the original recording of
the trust deed or mortgage, provided that the total amount of advances under
the home equity credit line does not exceed the maximum specified principal
amount of the recorded trust deed or mortgage and except as to advances made
after receipt by the lender of a written notice of lien from a judgment lien
creditor of the trustor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws impose substantive
requirements upon mortgage lenders in connection with originating, servicing
and enforcing loans secured by Single Family Properties. These laws include
the federal Truth-in-Lending Act and Regulation Z promulgated thereunder,
Real Estate Settlement Procedures Act and Regulation B promulgated
thereunder, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes and regulations. In particular,
Regulation Z requires certain disclosures to borrowers regarding terms of the
Loans; the Equal Credit Opportunity Act and Regulation B promulgated
thereunder prohibit discrimination in the extension of credit on the basis of
age, race, color, sex, religion, marital status, national origin, receipt of
public assistance or the exercise of any right under the Consumer Credit
Protection Act; and the Fair Credit Reporting Act regulates the use and
reporting of information related to the borrower's credit experience.
Certain provisions of these laws impose specific statutory liabilities upon
lenders who fail to comply therewith. In addition, violations of such laws
may limit the ability of Provident to collect all or part of the principal of
or interest on the Loans and could subject Provident and in some cases its
assignees to damages and administrative enforcement.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the anticipated material federal income
tax consequences of the purchase, ownership, and disposition of the
Securities and is based on advice of Brown & Wood LLP, special counsel to
Provident. The summary is based upon the provisions of the Code, the
regulations promulgated thereunder, including, where applicable, proposed
regulations, and the judicial and administrative rulings and decisions now in
effect, all of which are subject to change or possible differing
interpretations. The statutory provisions, regulations, and interpretations
on which this interpretation is based are subject to change, and such a
change could apply retroactively.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily
upon investors who will hold Securities as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code,
but much of the discussion is applicable to other investors as well.
Prospective investors are advised to consult their own tax advisers
concerning the federal, state, local and any other tax consequences to them
of the purchase, ownership and disposition of the Securities.
The federal income tax consequences to Holders will vary depending on
whether (i) the Securities of a Series are classified as indebtedness; (ii)
an election is made to treat the Trust Fund relating to a particular Series
of Securities as a REMIC under the Code; (iii) the Securities represent an
ownership interest in some or all of the assets included in the Trust Fund
for a Series; or (iv) an election is made to treat the Trust Fund relating to
a particular Series of Certificates as a partnership. The Prospectus
Supplement for each Series of Securities will specify how the Securities will
be treated for federal income tax purposes and will discuss whether a REMIC
election, if any, will be made with respect to such Series. Prior to
issuance of each Series of Securities, Provident shall file with the
Commission a Form 8-K on behalf of the related Trust Fund containing an
opinion of Brown & Wood LLP with respect to the validity of the information
set forth under "Federal Income Tax Consequences" herein and in the related
Prospectus Supplement.
TAXATION OF DEBT SECURITIES
Status as Real Property Loans. Except to the extent otherwise provided
in the related Prospectus Supplement, Brown & Wood LLP will have advised
Provident that: (i) Securities held by a domestic building and loan
association will constitute "loans... secured by an interest in real
property" within the meaning of Code section 7701(a)(19)(C)(v); and (ii)
Securities held by a real estate investment trust will constitute "real
estate assets" within the meaning of Code section 856(c)(5)(A) and interest
on such Securities will be considered "interest on obligations secured by
mortgages on real property or on interests in real property" within the
meaning of Code section 856(c)(3)(B).
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application
of Code section 593(d) to any taxable year beginning after December 31, 1995.
Interest and Acquisition Discount. Securities representing regular
interests in a REMIC ("Regular Interest Securities") are generally taxable to
Holders in the same manner as evidences of indebtedness issued by the REMIC.
Stated interest on the Regular Interest Securities will be taxable as
ordinary income and taken into account using the accrual method of
accounting, regardless of the Holder's normal accounting method. Interest
(other than original issue discount) on Securities (other than Regular
Interest Securities) that are characterized as
indebtedness for federal income tax purposes will be includible in income by
Holders thereof in accordance with their usual methods of accounting.
Securities characterized as debt for federal income tax purposes and Regular
Interest Securities will be referred to hereinafter collectively as "Debt
Securities."
Debt Securities that are Compound Interest Securities will, and certain
of the other Debt Securities may, be issued with "original issue discount"
("OID"). The following discussion is based in part on the rules governing
OID which are set forth in Sections 1271-1275 of the Code and the Treasury
regulations issued thereunder on February 2, 1994 (the "OID Regulations"). A
Holder should be aware, however, that the OID Regulations do not adequately
address certain issues relevant to prepayable securities, such as the Debt
Securities.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Debt Security and its issue price. A
Holder of a Debt Security must include such OID in gross income as ordinary
interest income as it accrues under a method taking into account an economic
accrual of the discount. In general, OID must be included in income in
advance of the receipt of the cash representing that income. The amount of
OID on a Debt Security will be considered to be zero if it is less than a de
minimis amount determined under the Code.
The issue price of a Debt Security is the first price at which a
substantial amount of Debt Securities of that class are sold to the public
(excluding bond houses, brokers, underwriters or wholesalers). If less than
a substantial amount of a particular class of Debt Securities is sold for
cash on or prior to the related Closing Date, the issue price for such class
will be treated as the fair market value of such class on such Closing Date.
The issue price of a Debt Security also includes the amount paid by an
initial Debt Security Holder for accrued interest that relates to a period
prior to the issue date of the Debt Security. The stated redemption price at
maturity of a Debt Security includes the original principal amount of the
Debt Security, but generally will not include distributions of interest if
such distributions constitute "qualified stated interest."
Under the OID Regulations, qualified stated interest generally means
interest payable at a single fixed rate or qualified variable rate (as
described below) provided that such interest payments are unconditionally
payable at intervals of one year or less during the entire term of the Debt
Security. The OID Regulations state that interest payments are
unconditionally payable only if a late payment or nonpayment is expected to
be penalized or reasonable remedies exist to compel payment. Certain Debt
Securities may provide for default remedies in the event of late payment or
nonpayment of interest. The interest on such Debt Securities will be
unconditionally payable and constitute qualified stated interest, not OID.
However, absent clarification of the OID Regulations, where Debt Securities
do not provide for default remedies, the interest payments will be included
in the Debt Security's stated redemption price at maturity and taxed as OID.
Interest is payable at a single fixed rate only if the rate appropriately
takes into account the length of the interval between payments.
Distributions of interest on Debt Securities with respect to which deferred
interest will accrue, will not constitute qualified stated interest payments,
in which case the stated redemption price at maturity of such Debt Securities
includes all distributions of interest as well as principal thereon. Where
the interval between the issue date and the first Distribution Date on a Debt
Security is either longer or shorter than the interval between subsequent
Distribution Dates, all or part of the interest foregone, in the case of the
longer interval, and all of the additional interest, in the case of the
shorter interval, will be included in the stated redemption price at maturity
and tested under the de minimis rule described below. In the case of a Debt
Security with a long first period which has non-de minimis OID, all stated
interest in excess of interest payable at the effective interest rate for the
long first period will be included in the stated redemption price at maturity
and the Debt Security will generally have OID. Holders of Debt Securities
should consult their own tax advisors to determine the issue price and stated
redemption price at maturity of a Debt Security.
Under the de minimis rule, OID on a Debt Security will be considered to
be zero if such OID is less than 0.25% of the stated redemption price at
maturity of the Debt Security multiplied by the weighted average maturity of
the Debt Security. For this purpose, the weighted average maturity of the
Debt Security is computed as the sum of the amounts determined by multiplying
the number of full years (i.e., rounding down partial years) from the issue
date until each distribution in reduction of stated redemption price at
maturity is scheduled to be made by a fraction, the numerator of which is the
amount of each distribution included in the stated redemption price at
maturity of the Debt Security and the denominator of which is the stated
redemption price at maturity of the Debt Security. Holders generally must
report de minimis OID pro rata as principal payments are received, and such
income will be capital gain if the Debt Security is held as a capital
asset. However, accrual method Holders may elect to accrue all de minimis
OID as well as market discount under a constant interest method.
Debt Securities may provide for interest based on a qualified variable
rate. Under the OID Regulations, interest is treated as payable at a
qualified variable rate and not as contingent interest if, generally, (i)
such interest is unconditionally payable at least annually, (ii) the issue
price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating
rate," an "objective rate," or a combination of "qualified floating rates"
that do not operate in a manner that significantly accelerates or defers
interest payments on such Debt Security. In the case of Compound Interest
Securities, certain Interest Weighted Securities (as defined herein under "--
Interest Weighted Securities"), and certain of the other Debt Securities,
none of the payments under the instrument will be considered qualified stated
interest, and thus the aggregate amount of all payments will be included in
the stated redemption price.
The Internal Revenue Service (the "IRS") recently issued final
regulations (the "Contingent Regulations") governing the calculation of OID
on instruments having contingent interest payments. The Contingent
Regulations specifically do not apply for purposes of calculating OID on debt
instruments subject to Code Section 1272(a)(6), such as the Debt Security.
Additionally, the OID Regulations do not contain provisions specifically
interpreting Code Section 1272(a)(6). Until the Treasury issues guidance to
the contrary, the Trustee intends to base its computation on Code Section
1272(a)(6) and the OID Regulations as described in this Prospectus. However,
because no regulatory guidance currently exists under Code Section
1272(a)(6), there can be no assurance that such methodology represents the
correct manner of calculating OID.
The Holder of a Debt Security issued with OID must include in gross
income, for all days during its taxable year on which it holds such Debt
Security, the sum of the "daily portions" of such OID. The amount of OID
includible in income by a Holder will be computed by allocating to each day
during a taxable year a pro rata portion of the OID that accrued during the
relevant accrual period. In the case of a Debt Security that is not a
Regular Interest Security and the principal payments on which are not subject
to acceleration resulting from prepayments on the Loans, the amount of OID
includible in income of a Holder for an accrual period (generally the period
over which interest accrues on the debt instrument) will equal the product of
the yield to maturity of the Debt Security and the adjusted issue price of
the Debt Security, reduced by any payments of qualified stated interest. The
adjusted issue price is the sum of its issue price plus prior accruals or
OID, reduced by the total payments made with respect to such Debt Security in
all prior periods, other than qualified stated interest payments.
The amount of OID to be included in income by a Holder of a debt
instrument, such as certain Classes of the Debt Securities, that is subject
to acceleration due to prepayments on other debt obligations securing such
instruments (a "Pay-Through Security"), is computed by taking into account
the anticipated rate of prepayments assumed in pricing the debt instrument
(the "Prepayment Assumption"). The amount of OID that will accrue during an
accrual period on a Pay-Through Security is the excess (if any) of the sum of
(a) the present value of all payments remaining to be made on the Pay-Through
Security as of the close of the accrual period and (b) the payments during
the accrual period of amounts included in the stated redemption price of the
Pay-Through Security, over the adjusted issue price of the Pay-Through
Security at the beginning of the accrual period. The present value of the
remaining payments is to be determined on the basis of three factors: (i)
the original yield to maturity of the Pay-Through Security (determined on the
basis of compounding at the end of each accrual period and properly adjusted
for the length of the accrual period), (ii) events which have occurred before
the end of the accrual period and (iii) the assumption that the remaining
payments will be made in accordance with the original Prepayment Assumption.
The effect of this method is to increase the portions of OID required to be
included in income by a Holder to take into account prepayments with respect
to the Loans at a rate that exceeds the Prepayment Assumption, and to
decrease (but not below zero for any period) the portions of OID required to
be included in income by a Holder of a Pay-Through Security to take into
account prepayments with respect to the Loans at a rate that is slower than
the Prepayment Assumption. Although OID will be reported to Holders of
Pay-Through Securities based on the Prepayment Assumption, no representation
is made to Holders that Loans will be prepaid at that rate or at any other
rate.
Provident may adjust the accrual of OID on a Class of Regular Interest
Securities (or other regular interests in a REMIC) in a manner that it
believes to be appropriate to take account of realized losses on the Loans,
although the OID Regulations do not provide for such adjustments. If the IRS
were to require that OID be accrued without such adjustments, the rate of
accrual of OID for a Class of Regular Interest Securities could increase.
Certain classes of Regular Interest Securities may represent more than
one class of REMIC regular interests. Unless otherwise provided in the
related Prospectus Supplement, the Trustee intends, based on the OID
Regulations, to calculate OID on such Securities as if, solely for the
purposes of computing OID, the separate regular interests were a single debt
instrument.
A subsequent Holder of a Debt Security will also be required to include
OID in gross income, but such a Holder who purchases such Debt Security for
an amount that exceeds its adjusted issue price will be entitled (as will an
initial Holder who pays more than a Debt Security's issue price) to offset
such OID by comparable economic accruals of portions of such excess.
Effects of Defaults and Delinquencies. Holders will be required to
report income with respect to the related Securities under an accrual method
without giving effect to delays and reductions in distributions attributable
to a default or delinquency on the Loans, except possibly to the extent that
it can be established that such amounts are uncollectible. As a result, the
amount of income (including OID) reported by a Holder of such a Security in
any period could significantly exceed the amount of cash distributed to such
Holder in that period. The Holder will eventually be allowed a loss (or will
be allowed to report a lesser amount of income) to the extent that the
aggregate amount of distributions on the Securities is deducted as a result
of a Loan default. However, the timing and character of such losses or
reductions in income are uncertain and, accordingly, Holders of Securities
should consult their own tax advisors on this point.
Interest Weighted Securities. It is not clear how income should be
accrued with respect to Regular Interest Securities or Stripped Securities
(as defined under "--Tax Status as a Grantor Trust; General" herein) the
payments on which consist solely or primarily of a specified portion of the
interest payments on qualified mortgages held by the REMIC or on Loans
underlying Pass-Through Securities ("Interest Weighted Securities"). The
Issuer intends to take the position that all of the income derived from an
Interest Weighted Security should be treated as OID and that the amount and
rate of accrual of such OID should be calculated by treating the Interest
Weighted Security as a Compound Interest Security. However, in the case of
Interest Weighted Securities that are entitled to some payments of principal
and that are Regular Interest Securities, the IRS could assert that income
derived from an Interest Weighted Security should be calculated as if the
Security were a security purchased at a premium equal to the excess of the
price paid by such Holder for such Security over its stated principal amount,
if any. Under this approach, a Holder would be entitled to amortize such
premium only if it has in effect an election under Section 171 of the Code
with respect to all taxable debt instruments held by such Holder, as
described below. Alternatively, the IRS could assert that an Interest
Weighted Security should be taxable under the rules governing bonds issued
with contingent payments. Such treatment may be more likely in the case of
Interest Weighted Securities that are Stripped Securities as described below.
See "--Tax Status as a Grantor Trust; Discount or Premium on Pass-Through
Securities."
Variable Rate Debt Securities. In the case of Debt Securities bearing
interest at a rate that varies directly, according to a fixed formula, with
an objective index, it appears that (i) the yield to maturity of such Debt
Securities and (ii) in the case of Pay-Through Securities, the present value
of all payments remaining to be made on such Debt Securities, should be
calculated as if the interest index remained at its value as of the issue
date of such Securities. Because the proper method of adjusting accruals of
OID on a variable rate Debt Security is uncertain, Holders of variable rate
Debt Securities should consult their own tax advisers regarding the
appropriate treatment of such Securities for federal income tax purposes.
Market Discount. A purchaser of a Security may be subject to the market
discount rules of Sections 1276-1278 of the Code. A Holder that acquires a
Debt Security with more than a prescribed de minimis amount of "market
discount" (generally, the excess of the principal amount of the Debt Security
over the purchaser's purchase price) will be required to include accrued
market discount in income as ordinary income in each month, but limited to an
amount not exceeding the principal payments on the Debt Security received in
that month and, if the Securities are sold, the gain realized. Such market
discount would accrue in a manner to be provided in Treasury regulations but,
until such regulations are issued, such market discount would in general
accrue either (i) on the basis of a constant yield (in the case of a
Pay-Through Security, taking into account a prepayment assumption) or (ii) in
the ratio of (a) in the case of Securities (or in the case of a Pass-Through
Security (as defined herein under "--Tax Status as a Grantor Trust"), as set
forth below, the Loans underlying such Security) not originally issued with
OID, stated interest payable in the relevant period to total stated interest
remaining to be paid at the beginning of the period or (b) in the case of
Securities (or, in the case of a Pass-Through Security, as described below,
the Loans underlying such Security) originally issued at a discount, OID in
the relevant period to total OID remaining to be paid.
Section 1277 of the Code provides that, regardless of the origination
date of the Debt Security (or, in the case of a Pass-Through Security, the
Loans), the excess of interest paid or accrued to purchase or carry a
Security (or, in the case of a Pass-Through Security, as described below, the
underlying Loans) with market discount over interest received on such
Security is allowed as a current deduction only to the extent such excess is
greater than the market discount that accrued during the taxable year in
which such interest expense was incurred. In general, the deferred portion
of any interest expense will be deductible when such market discount is
included in income, including upon the sale, disposition, or repayment of the
Security (or in the case of a Pass-Through Security, an underlying Loan). A
Holder may elect to include market discount in income currently as it
accrues, on all market discount obligations acquired by such Holder during
the taxable year such election is made and thereafter, in which case the
interest deferral rule will not apply.
Premium. A Holder who purchases a Debt Security (other than an Interest
Weighted Security to the extent described above) at a cost greater than its
stated redemption price at maturity, generally will be considered to have
purchased the Security at a premium, which it may elect to amortize as an
offset to interest income on such Security (and not as a separate deduction
item) on a constant yield method. Although no regulations addressing the
computation of premium accrual on securities similar to the Securities have
been issued, the legislative history of the 1986 Act indicates that premium
is to be accrued in the same manner as market discount. Accordingly, it
appears that the accrual of premium on a Class of Pay-Through Securities will
be calculated using the Prepayment Assumption used in pricing such Class. If
a Holder makes an election to amortize premium on a Debt Security, such
election will apply to all taxable debt instruments (including all REMIC
regular interests and all pass-through certificates representing ownership
interests in a trust holding debt obligations) held by the Holder at the
beginning of the taxable year in which the election is made, and to all
taxable debt instruments acquired thereafter by such Holder, and will be
irrevocable without the consent of the IRS. Purchasers who pay a premium for
the Securities should consult their tax advisers regarding the election to
amortize premium and the method to be employed.
On June 27, 1996, the IRS issued proposed regulations (the "Amortizable
Bond Premium Regulations") dealing with amortizable bond premium. These
regulations specifically do not apply to prepayable debt instruments subject
to Code Section 1272(a)(6) such as the Securities. Absent further guidance
from the IRS, the Trustee intends to account for amortizable bond premium in
the manner described above. Prospective purchasers of the Securities should
consult their tax advisors regarding the possible application of the
Amortizable Bond Premium Regulations.
Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a Holder of a Debt Security to elect to accrue all
interest, discount (including de minimis market or original issue discount)
and premium income as interest, based on a constant yield method for Debt
Securities acquired on or after April 4, 1994. If such an election were to
be made with respect to a Debt Security with market discount, the Holder of
the Debt Security would be deemed to have made an election to include in
income currently market discount
with respect to all other debt instruments having market discount that such
Holder of the Debt Security acquires during the year of the election or
thereafter. Similarly, a Holder of a Debt Security that makes this election
for a Debt Security that is acquired at a premium will be deemed to have made
an election to amortize bond premium with respect to all debt instruments
having amortizable bond premium that such Holder owns or acquires. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Debt Security is irrevocable.
TAXATION OF THE REMIC AND ITS HOLDERS
General. In the opinion of Brown & Wood LLP, special counsel to
Provident, if a REMIC election is made with respect to a Series of
Securities, then the arrangement by which the Securities of that Series are
issued will be treated as a REMIC as long as all of the provisions of the
applicable Agreement are complied with and the statutory and regulatory
requirements are satisfied. Securities will be designated as "Regular
Interests" or "Residual Interests" in a REMIC, as specified in the related
Prospectus Supplement.
Except to the extent specified otherwise in a Prospectus Supplement, if
a REMIC election is made with respect to a Series of Securities, (i)
Securities held by a domestic building and loan association will constitute
"a regular or a residual interest in a REMIC" within the meaning of Code
Section 7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets
consist of cash, government securities, "loans secured by an interest in real
property," and other types of assets described in Code Section
7701(a)(19)(C)); and (ii) Securities held by a real estate investment trust
will constitute "real estate assets" within the meaning of Code Section
856(c)(6)(B), and income with respect to the Securities will be considered
"interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Code Section 856(c)(3)(B)
(assuming, for both purposes, that at least 95% of the REMIC's assets are
qualifying assets). If less than 95% of the REMIC's assets consist of assets
described in (i) or (ii) above, then a Security will qualify for the tax
treatment described in (i), (ii) or (iii) in the proportion that such REMIC
assets are qualifying assets.
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application
of Code Section 593(d) to any taxable year beginning after December 31, 1995.
REMIC EXPENSES; SINGLE CLASS REMICS
As a general rule, all of the expenses of a REMIC will be taken into
account by Holders of the Residual Interest Securities. In the case of a
"single class REMIC," however, the expenses will be allocated, under Treasury
regulations, among the Holders of the Regular Interest Securities and the
Holders of the Residual Interest Securities (as defined herein) on a daily
basis in proportion to the relative amounts of income accruing to each Holder
on that day. In the case of a Holder of a Regular Interest Security who is
an individual or a "pass-through interest holder" (including certain
pass-through entities, but not including real estate investment trusts), such
expenses will be deductible only to the extent that such expenses, plus other
"miscellaneous itemized deductions" of the Holder, exceed 2% of such Holder's
adjusted gross income. In addition, for taxable years beginning after
December 31, 1990, the amount of itemized deductions otherwise allowable for
the taxable year for an individual whose adjusted gross income exceeds the
applicable amount (which amount will be adjusted for inflation for taxable
years beginning after 1990) will be reduced by the lesser of (i) 3% of the
excess of adjusted gross income over the applicable amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for such taxable year. The
reduction or disallowance of this deduction may have a significant impact on
the yield of the Regular Interest Security to such a Holder. In general
terms, a single class REMIC is one that either (i) would qualify under
existing Treasury regulations as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be
classified as debt for federal income tax purposes) or (ii) is similar to
such a trust and which is structured with the principal purpose of avoiding
the single class REMIC rules. Unless otherwise specified in the related
Prospectus Supplement, the expenses of the REMIC will be allocated to Holders
of the related Residual Interest Securities.
TAXATION OF THE REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC is taken into account by the Holders of
Residual Interests. As described above, the Regular Interests are generally
taxable as debt of the REMIC.
Calculation of REMIC Income. The taxable income or net loss of a REMIC
is determined under an accrual method of accounting and in the same manner as
in the case of an individual, with certain adjustments. In general, the
taxable income or net loss will be the difference between (i) the gross
income produced by the REMIC's assets, including stated interest and any OID
or market discount on Loans and other assets, and (ii) deductions, including
stated interest and OID accrued on Regular Interest Securities, amortization
of any premium with respect to Loans, and servicing fees and other expenses
of the REMIC. A Holder of a Residual Interest Security that is an individual
or a "pass-through interest holder" (including certain pass-through entities,
but not including real estate investment trusts) will be unable to deduct
servicing fees payable on the Loans or other administrative expenses of the
REMIC for a given taxable year, to the extent that such expenses, when
aggregated with such Holder's other miscellaneous itemized deductions for
that year, do not exceed two percent of such Holder's adjusted gross income.
For purposes of computing its taxable income or net loss, the REMIC
should have an initial aggregate tax basis in its assets equal to the
aggregate fair market value of the Regular Interests and the Residual
Interests on the Startup Day (generally, the day that the interests are
issued). That aggregate basis will be allocated among the assets of the
REMIC in proportion to their respective fair market values.
The OID provisions of the Code apply to loans of individuals originated
on or after March 2, 1984, and the market discount provisions apply to loans
originated after July 18, 1984. Subject to possible application of the de
minimis rules, the method of accrual by the REMIC of OID income on such Loans
will be equivalent to the method under which Holders of Pay-Through
Securities accrue OID (i.e., under the constant yield method taking into
account the Prepayment Assumption). The REMIC will deduct OID on the Regular
Interest Securities in the same manner that the Holders of the Regular
Interest Securities include such discount in income, but without regard to
the de minimis rules. See "Taxation of Debt Securities" above. However, a
REMIC that acquires Loans at a market discount must include such market
discount in income currently, as it accrues, on a constant interest basis.
To the extent that the REMIC's basis allocable to Loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the
life of the Loans (taking into account the Prepayment Assumption) on a
constant yield method. Although the law is somewhat unclear regarding
recovery of premium attributable to Loans originated on or before such date,
it is possible that such premium may be recovered in proportion to payments
of Loan principal.
Prohibited Transactions and Contributions Tax. The REMIC will be
subject to a 100% tax on any net income derived from a "prohibited
transaction." For this purpose, net income will be calculated without taking
into account any losses from prohibited transactions or any deductions
attributable to any prohibited transaction that resulted in a loss. In
general, prohibited transactions include: (i) subject to limited exceptions,
the sale or other disposition of any qualified mortgage transferred to the
REMIC; (ii) subject to limited exceptions, the sale or other disposition of a
cash flow investment; (iii) the receipt of any income from assets not
permitted to be held by the REMIC pursuant to the Code; or (iv) the receipt
of any fees or other compensation for services rendered by the REMIC. It is
anticipated that a REMIC will not engage in any prohibited transactions in
which it would recognize a material amount of net income. In addition,
subject to a number of exceptions, a tax is imposed at the rate of 100% on
amounts contributed to a REMIC after the close of the three-month period
beginning on the Startup Day. The Holders of Residual Interest Securities
will generally be responsible for the payment of any such taxes imposed on
the REMIC. To the extent not paid by such Holders or otherwise, however,
such taxes will be paid out of the Trust Fund and will be allocated pro rata
to all outstanding classes of Securities of such REMIC.
TAXATION OF HOLDERS OF RESIDUAL INTEREST SECURITIES
The Holder of a Security representing a Residual Interest (a "Residual
Interest Security") will take into account the "daily portion" of the taxable
income or net loss of the REMIC for each day during the taxable year in which
such Holder held the Residual Interest Security. The daily portion is
determined by allocating to each day in any calendar quarter its ratable
portion of the taxable income or net loss of the REMIC for such quarter, and
by allocating that amount among the Holders (on such day) of the Residual
Interest Securities in proportion to their respective holdings on such day.
The Holder of a Residual Interest Security must report its proportionate
share of the taxable income of the REMIC whether or not it receives cash
distributions from the REMIC attributable to such income or loss. The
reporting of taxable income without corresponding distributions could occur,
for example, in certain REMIC issues in which the Loans held by the REMIC
were issued or acquired at a discount, since mortgage prepayments cause
recognition of discount income, while the corresponding portion of the
prepayment could be used in whole or in part to make principal payments on
Regular Interests issued without any discount or at an insubstantial discount
(if this occurs, it is likely that cash distributions will exceed taxable
income in later years). Taxable income may also be greater in earlier years
of certain REMIC issues as a result of the fact that interest expense
deductions, as a percentage of outstanding principal on Regular Interest
Securities, will typically increase over time as lower yielding Securities
are paid, whereas interest income with respect to Loans will generally remain
constant over time as a percentage of Loan principal.
In any event, because the Holder of a Residual Interest is taxed on the
net income of the REMIC, the taxable income derived from a Residual Interest
Security in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pretax yield. Therefore, the after-tax
yield on the Residual Interest Security may be less than that of such a bond
or instrument.
Limitation on Losses. The amount of the REMIC's net loss that a Holder
may take into account currently is limited to the Holder's adjusted basis at
the end of the calendar quarter in which such loss arises. A Holder's basis
in a Residual Interest Security will initially equal such Holder's purchase
price, and will subsequently be increased by the amount of the REMIC's
taxable income allocated to the Holder, and decreased (but not below zero) by
the amount of distributions made and the amount of the REMIC's net loss
allocated to the Holder. Any disallowed loss may be carried forward
indefinitely, but may be used only to offset income of the REMIC generated by
the same REMIC. The ability of Holders of Residual Interest Securities to
deduct net losses may be subject to additional limitations under the Code, as
to which such Holders should consult their tax advisers.
Distributions. Distributions on a Residual Interest Security (whether
at their scheduled times or as a result of prepayments) will generally not
result in any additional taxable income or loss to a Holder of a Residual
Interest Security. If the amount of such payment exceeds a Holder's adjusted
basis in the Residual Interest Security, however, the Holder will recognize
gain (treated as gain from the sale of the Residual Interest Security) to the
extent of such excess.
Sale or Exchange. A Holder of a Residual Interest Security will
recognize gain or loss on the sale or exchange of a Residual Interest
Security equal to the difference, if any, between the amount realized and
such Holder's adjusted basis in the Residual Interest Security at the time of
such sale or exchange. Except to the extent provided in regulations, which
have not yet been issued, any loss upon disposition of a Residual Interest
Security will be disallowed if the selling Holder acquires any residual
interest in a REMIC or similar mortgage pool within six months before or
after such disposition.
Excess Inclusions. The portion of the REMIC taxable income of a Holder
of a Residual Interest Security consisting of "excess inclusion" income may
not be offset by other deductions or losses, including net operating losses,
on such Holder's federal income tax return. Further, if the Holder of a
Residual Interest Security is an organization subject to the tax on unrelated
business income imposed by Code Section 511, such holder's excess inclusion
income will be treated as unrelated business taxable income of such Holder.
In addition, under Treasury regulations yet to be issued, if a real estate
investment trust, a regulated investment company, a common trust fund,
or certain cooperatives were to own a Residual Interest Security, a portion
of dividends (or other distributions) paid by the real estate investment
trust (or other entity) would be treated as excess inclusion income. If
a Residual Security is owned by a foreign person, excess inclusion income
is subject to tax at a rate of 30% which may not be reduced by treaty,
is not eligible for treatment as "portfolio interest" and is subject
to certain additional limitations. See "Tax Treatment of Foreign
Investors." The Small Business Job Protection Act of 1996 has eliminated
the special rule permitting Section 593 institutions ("thrift institutions")
to use net operating losses and other allowable deductions to offset their
excess inclusion income from REMIC residual certificates that have
"significant value" within the meaning of the REMIC Regulations, effective
for taxable years beginning after December 31, 1995, except with respect
to residual certificates continuously held by a thrift institution
since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides
three rules for determining the effect of excess inclusions on the
alternative minimum taxable income of a residual Holder. First, alternative
minimum taxable income for such residual Holder is determined without regard
to the special rule that taxable income cannot be less than excess
inclusions. Second, a residual Holder's alternative minimum taxable income
for a tax year cannot be less than excess inclusions for the year. Third,
the amount of any alternative minimum tax net operating loss deductions must
be computed without regard to any excess inclusions. These rules are
effective for tax years beginning after December 31, 1986, unless a residual
Holder elects to have such rules apply only to tax years beginning after
August 20, 1996.
The excess inclusion portion of a REMIC's income is generally equal to
the excess, if any, of REMIC taxable income for the quarterly period
allocable to a Residual Interest Security, over the daily accruals for such
quarterly period of (i) 120% of the long-term applicable federal rate on the
Startup Day multiplied by (ii) the adjusted issue price of such Residual
Interest Security at the beginning of such quarterly period. The adjusted
issue price of a Residual Interest at the beginning of each calendar quarter
will equal its issue price (calculated in a manner analogous to the
determination of the issue price of a Regular Interest), increased by the
aggregate of the daily accruals for prior calendar quarters, and decreased
(but not below zero) by the amount of loss allocated to a Holder and the
amount of distributions made on the Residual Interest Security before the
beginning of the quarter. The long-term federal rate, which is announced
monthly by the Treasury Department, is an interest rate that is based on the
average market yield of outstanding marketable obligations of the United
States government having remaining maturities in excess of nine years.
Under the REMIC Regulations, in certain circumstances, transfers of
Residual Securities may be disregarded. See "--Restrictions on Ownership and
Transfer of Residual Interest Securities" and "--Tax Treatment of Foreign
Investors" below.
Restrictions on Ownership and Transfer of Residual Interest Securities.
As a condition to qualification as a REMIC, reasonable arrangements must be
made to prevent the ownership of a Residual Interest by any "Disqualified
Organization." Disqualified Organizations include the United States, any
State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, a rural electric or telephone cooperative described in Section
1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
Sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income. Accordingly, the applicable Pooling and Servicing
Agreement will prohibit Disqualified Organizations from owning a Residual
Interest Security. In addition, no transfer of a Residual Interest Security
will be permitted unless the proposed transferee shall have furnished to the
Trustee an affidavit representing and warranting that it is neither a
Disqualified Organization nor an agent or nominee acting on behalf of a
Disqualified Organization.
If a Residual Interest Security is transferred to a Disqualified
Organization (in violation of the restrictions set forth above), a
substantial tax will be imposed on the transferor of such Residual Interest
Security at the time of the transfer. In addition, if a Disqualified
Organization holds an interest in a pass-
through entity (including, among others, a partnership, trust, real estate
investment trust, regulated investment company, or any person holding as
nominee), that owns a Residual Interest Security, the pass-through entity
will be required to pay an annual tax on its allocable share of the excess
inclusion income of the REMIC.
Under the REMIC Regulations, if a Residual Interest Security is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Security to a United States person will be disregarded for all
Federal tax purposes unless no significant purpose of the transfer was to
impede the assessment or collection of tax. A Residual Interest Security is
a "noneconomic residual interest" unless at the time of the transfer (i) the
present value of the expected future distributions on the Residual Interest
Security at least equals the product of the present value of the anticipated
excess inclusions and the highest rate of tax for the year in which the
transfer occurs, and (ii) the transferor reasonably expects that the
transferee will receive distributions from the REMIC at or after the time at
which the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. If a transfer of a Residual
Interest is disregarded, the transferor would be liable for any Federal
income tax imposed upon taxable income derived by the transferee from the
REMIC. The REMIC Regulations provide no guidance as to how to determine if a
significant purpose of a transfer is to impede the assessment or collection
of tax. A similar type of limitation exists with respect to certain
transfers of Residual Interests by foreign persons to United States persons.
See "--Tax Treatment of Foreign Investors."
Mark to Market Rules. Prospective purchasers of a Residual Interest
Security should be aware that the IRS recently finalized regulations (the
"Mark-to-Market Regulations") which provide that a Residual Interest Security
acquired after January 3, 1995 cannot be marked-to-market. The Mark-to-
Market Regulations replace the temporary regulations which allowed a Residual
Interest Security to be marked-to-market provided that it was not a negative
value Residual Interest and did not have the same economic effect as a
negative value Residual Interest. Prospective purchasers of a Residual
Interest Security should consult their tax advisors regarding the possible
application of the Mark-to-Market Regulations.
ADMINISTRATIVE MATTERS
The REMIC's books must be maintained on a calendar year basis and the
REMIC must file an annual federal income tax return. The REMIC will also be
subject to the procedural and administrative rules of the Code applicable to
partnerships, including the determination of any adjustments to, among other
things, items of REMIC income, gain, loss, deduction, or credit, by the IRS
in a unified administrative proceeding.
TAX STATUS AS A GRANTOR TRUST
General. As specified in the related Prospectus Supplement if a REMIC
or partnership election is not made, in the opinion of Brown & Wood LLP,
special counsel to Provident, the Trust Fund relating to a Series of
Securities will be classified for federal income tax purposes as a grantor
trust under Subpart E, Part I of Subchapter J of the Code and not as an
association taxable as a corporation (the Securities of such Series, "Pass-
Through Securities"). In some Series there will be no separation of the
principal and interest payments on the Loans. In such circumstances, a
Holder will be considered to have purchased a pro rata undivided interest in
each of the Loans. In other cases ("Stripped Securities"), sale of the
Securities will produce a separation in the ownership of all or a portion of
the principal payments from all or a portion of the interest payments on the
Loans.
Each Holder must report on its federal income tax return its share of
the gross income derived from the Loans (not reduced by the amount payable as
fees to the Trustee and the Servicer and similar fees (collectively, the
"Servicing Fees")), at the same time and in the same manner as such items
would have been reported under the Holder's tax accounting method had it held
its interest in the Loans directly, received directly its share of the
amounts received with respect to the Loans, and paid directly its share of
the Servicing Fees. In the case of Pass-Through Securities other than
Stripped Securities, such income will consist of a pro rata share of all of
the income derived from all of the Loans and, in the case of Stripped
Securities, such income will consist of a pro rata share of the income
derived from each stripped bond or stripped coupon in which the Holder owns
an interest. The holder of a Security will generally be entitled to deduct
such Servicing Fees under Section 162 or
Section 212 of the Code to the extent that such Servicing Fees represent
"reasonable" compensation for the services rendered by the Trustee and the
Servicer (or third parties that are compensated for the performance of
services). In the case of a noncorporate Holder, however, Servicing Fees (to
the extent not otherwise disallowed, e.g., because they exceed reasonable
compensation) will be deductible in computing such Holder's regular tax
liability only to the extent that such fees, when added to other
miscellaneous itemized deductions, exceed 2% of adjusted gross income and may
not be deductible to any extent in computing such Holder's alternative
minimum tax liability. In addition, the amount of itemized deductions
otherwise allowable for the taxable year for an individual whose adjusted
gross income exceeds the applicable amount (which amount will be adjusted for
inflation) will be reduced by the lesser of (i) 3% of the excess of adjusted
gross income over the applicable amount or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year.
Discount or Premium on Pass-Through Securities. The Holder's purchase
price of a Pass-Through Security is to be allocated among the Loans in
proportion to their fair market values determined as of the time of purchase
of the Securities. In the typical case, the Trustee (to the extent necessary
to fulfill its reporting obligations) will treat each Loan as having a fair
market value proportional to the share of the aggregate principal balances of
all of the Loans that it represents, since the Securities, unless otherwise
specified in the related Prospectus Supplement, will have a relatively
uniform interest rate and other common characteristics. To the extent that
the portion of the purchase price of a Pass-Through Security allocated to a
Loan (other than to a right to receive any accrued interest thereon and any
undistributed principal payments) is less than or greater than the portion of
the principal balance of the Loan allocable to the Security, the interest in
the Loan allocable to the Pass-Through Security will be deemed to have been
acquired at a discount or premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a Loan with OID in excess
of a prescribed de minimis amount or a Stripped Security, a Holder of a
Security will be required to report as interest income in each taxable year
its share of the amount of OID that accrues during that year in the manner
described above. OID with respect to a Loan could arise, for example, by
virtue of the financing of points by the originator of the Loan, or by virtue
of the charging of points by the originator of the Loan in an amount greater
than a statutory de minimis exception, in circumstances under which the
points are not currently deductible pursuant to applicable Code provisions.
Any market discount or premium on a Loan will be includible in income,
generally in the manner described above, except that in the case of Pass-
Through Securities, market discount is calculated with respect to the Loans
underlying the Certificate, rather than with respect to the Security. A
Holder that acquires an interest in a Loan originated after July 18, 1984
with more than a de minimis amount of market discount (generally, the excess
of the principal amount of the Loan over the purchaser's allocable purchase
price) will be required to include accrued market discount in income in the
manner set forth above. See "--Taxation of Debt Securities; Market Discount"
and "--Premium" above.
In the case of market discount on a Pass-Through Security attributable
to Loans originated on or before July 18, 1984, the Holder generally will be
required to allocate the portion of such discount that is allocable to a Loan
among the principal payments on the Loan and to include the discount
allocable to each principal payment in ordinary income at the time such
principal payment is made. Such treatment would generally result in discount
being included in income at a slower rate than discount would be required to
be included in income using the method described in the preceding paragraph.
Stripped Securities. A Stripped Security may represent a right to
receive only a portion of the interest payments on the Loans, a right to
receive only principal payments on the Loans, or a right to receive certain
payments of both interest and principal. Certain Stripped Securities ("Ratio
Strip Securities") may represent a right to receive differing percentages of
both the interest and principal on each Loan. Pursuant to Section 1286 of
the Code, the separation of ownership of the right to receive some or all of
the interest payments on an obligation from ownership of the right to receive
some or all of the principal payments results in the creation of "stripped
bonds" with respect to principal payments and "stripped coupons" with respect
to interest payments. Section 1286 of the Code applies the OID rules to
stripped bonds and stripped coupons. For purposes of computing OID, a
stripped bond or a stripped coupon is treated as a debt instrument issued on
the date that such stripped interest is purchased with an issue price equal
to its purchase price or, if more than one stripped interest is purchased,
the ratable share of the purchase price allocable to such stripped interest.
Servicing Fees in excess of reasonable Servicing Fees ("Excess Servicing
Fees") will be treated under the stripped bond rules. If the Excess
Servicing Fees are less than 100 basis points (i.e., 1% interest on the Loan
principal balance) or the Securities are initially sold with a de minimis
discount (assuming no Prepayment Assumption is required), any non-de minimis
discount arising from a subsequent transfer of the Securities should be
treated as market discount. The IRS appears to require that reasonable
Servicing Fees be calculated on a Loan-by-Loan basis, which could result in
some Loans being treated as having more than 100 basis points of interest
stripped off.
The Code, OID Regulations and judicial decisions provide no direct
guidance as to how the interest and OID rules are to apply to Stripped
Securities and other Pass-Through Securities. Under the method described
above for Pay-Through Securities (the "Cash Flow Bond Method"), a Prepayment
Assumption is used and periodic recalculations are made which take into
account with respect to each accrual period the effect of prepayments during
such period. However, the 1986 Act does not, absent Treasury regulations,
appear specifically to cover instruments such as the Stripped Securities
which technically represent ownership interests in the underlying Loans,
rather than being debt instruments "secured by" those Loans. Nevertheless,
it is believed that the Cash Flow Bond Method is a reasonable method of
reporting income for such Securities, and it is expected that OID will be
reported on that basis unless otherwise specified in the related Prospectus
Supplement. In applying the calculation to Pass-Through Securities, the
Trustee will treat all payments to be received by a Holder with respect to
the underlying Loans as payments on a single installment obligation. The IRS
could, however, assert that OID must be calculated separately for each Loan
underlying a Security.
Under certain circumstances, if the Loans prepay at a rate faster than
the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Holder's recognition of income. If, however, the Loans prepay
at a rate slower than the Prepayment Assumption, in some circumstances the
use of this method may decelerate a Holder's recognition of income.
In the case of a Stripped Security that is an Interest Weighted
Security, the Trustee intends, absent contrary authority, to report income to
Securityholders as OID, in the manner described above for Interest Weighted
Securities.
Possible Alternative Characterizations. The characterizations of the
Stripped Securities described above are not the only possible interpretations
of the applicable Code provisions. Among other possibilities, the IRS could
contend that (i) in certain Series, each non-Interest Weighted Security is
composed of an unstripped undivided ownership interest in Loans and an
installment obligation consisting of stripped principal payments; (ii) the
non-Interest Weighted Securities are subject to the contingent payment
provisions of the Contingent Regulations; or (iii) each Interest Weighted
Stripped Security is composed of an unstripped undivided ownership interest
in Loans and an installment obligation consisting of stripped interest
payments.
Given the variety of alternatives for treatment of the Stripped
Securities and the different federal income tax consequences that result from
each alternative, potential purchasers are urged to consult their own tax
advisers regarding the proper treatment of the Securities for federal income
tax purposes.
Character as Qualifying Loans. In the case of Stripped Securities,
there is no specific legal authority existing regarding whether the character
of the Securities, for federal income tax purposes, will be the same as the
Loans. The IRS could take the position that the Loans' character is not
carried over to the Securities in such circumstances. Pass-Through
Securities will be, and, although the matter is not free from doubt, Stripped
Securities should be, considered to represent "real estate assets" within the
meaning of Section 856(c)(6)(B) of the Code and "loans secured by an interest
in real property" within the meaning of Section 7701(a)(19)(C)(v) of the
Code; and interest income attributable to the Securities should be considered
to represent "interest on obligations secured by mortgages on real property
or on interests in real property" within the meaning of
Section 856(c)(3)(B) of the Code. Reserves or funds underlying the
Securities may cause a proportionate reduction in the above-described
qualifying status categories of Securities.
SALE OR EXCHANGE
Subject to the discussion below with respect to Trust Funds as to which
a partnership election is made, a Holder's tax basis in its Security is the
price such Holder pays for a Security, plus amounts of original issue or
market discount included in income and reduced by any payments received
(other than qualified stated interest payments) and any amortized premium.
Gain or loss recognized on a sale, exchange, or redemption of a Security,
measured by the difference between the amount realized and the Security's
basis as so adjusted, will generally be capital gain or loss, assuming that
the Security is held as a capital asset. In the case of a Security held by a
bank, thrift, or similar institution described in Section 582 of the Code,
however, gain or loss realized on the sale or exchange of a Regular Interest
Security will be taxable as ordinary income or loss. In addition, gain from
the disposition of a Regular Interest Security that might otherwise be
capital gain will be treated as ordinary income to the extent of the excess,
if any, of (i) the amount that would have been includible in the Holder's
income if the yield on such Regular Interest Security had equaled 110% of the
applicable federal rate as of the beginning of such Holder's holding period,
over the amount of ordinary income actually recognized by the Holder with
respect to such Regular Interest Security. For taxable years beginning after
December 31, 1993, the maximum tax rate on ordinary income for individual
taxpayers is 39.6% and the maximum tax rate on long-term capital gains
reported after December 31, 1990 for such taxpayers is 28%. The maximum tax
rate on both ordinary income and long-term capital gains of corporate
taxpayers is 35%.
MISCELLANEOUS TAX ASPECTS
Backup Withholding. Subject to the discussion below with respect to
Trust Funds as to which a partnership election is made, a Holder, other than
a Holder of a Residual Interest Security, may, under certain circumstances,
be subject to "backup withholding" at a rate of 31% with respect to
distributions or the proceeds of a sale of certificates to or through brokers
that represent interest or OID on the Securities. This withholding generally
applies if the Holder of a Security (i) fails to furnish the Trustee with its
taxpayer identification number ("TIN"); (ii) furnishes the Trustee an
incorrect TIN; (iii) fails to report properly interest, dividends or other
"reportable payments" as defined in the Code; or (iv) under certain
circumstances, fails to provide the Trustee or such Holder's securities
broker with a certified statement, signed under penalty of perjury, that the
TIN provided is its correct number and that the Holder is not subject to
backup withholding. Backup withholding will not apply, however, with respect
to certain payments made to Holders, including payments to certain exempt
recipients (such as exempt organizations) and to certain Nonresidents (as
defined below). Holders should consult their tax advisers as to their
qualification for exemption from backup withholding and the procedure for
obtaining the exemption.
The Trustee will report to the Holders and to the Servicer for each
calendar year the amount of any "reportable payments" during such year and
the amount of tax withheld, if any, with respect to payments on the
Securities.
TAX TREATMENT OF FOREIGN INVESTORS
Subject to the discussion below with respect to Trust Funds as to which
a partnership election is made, under the Code, unless interest (including
OID) paid on a Security (other than a Residual Interest Security) is
considered to be "effectively connected" with a trade or business conducted
in the United States by a nonresident alien individual, foreign partnership
or foreign corporation ("Nonresidents"), such interest will normally qualify
as portfolio interest (except where (i) the recipient is a holder, directly
or by attribution, of 10% or more of the capital or profits interest in the
issuer, or (ii) the recipient is a controlled foreign corporation to which
the issuer is a related person) and will be exempt from federal income tax.
Upon receipt of appropriate ownership statements, the issuer normally will be
relieved of obligations to withhold tax from such interest payments. These
provisions supersede the generally applicable provisions of United States law
that would otherwise require the issuer to withhold at a 30% rate (unless
such rate were reduced or eliminated by an
applicable tax treaty) on, among other things, interest and other fixed or
determinable, annual or periodic income paid to Nonresidents. Holders of
Pass-Through Securities and Stripped Securities, including Ratio Strip
Securities, however, may be subject to withholding to the extent that the
Loans were originated on or before July 18, 1984.
Interest and OID of Holders who are foreign persons are not subject to
withholding if they are effectively connected with a United States business
conducted by the Holder. They will, however, generally be subject to the
regular United States income tax.
Payments to Holders of Residual Interest Securities who are foreign
persons will generally be treated as interest for purposes of the 30% (or
lower treaty rate) United States withholding tax. Holders should assume that
such income does not qualify for exemption from United States withholding tax
as "portfolio interest." It is clear that, to the extent that a payment
represents a portion of REMIC taxable income that constitutes excess
inclusion income, a Holder of a Residual Interest Security will not be
entitled to an exemption from or reduction of the 30% (or lower treaty rate)
withholding tax rule. If the payments are subject to United States
withholding tax, they generally will be taken into account for withholding
tax purposes only when paid or distributed (or when the Residual Interest
Security is disposed of). The Treasury has statutory authority, however, to
promulgate regulations which would require such amounts to be taken into
account at an earlier time in order to prevent the avoidance of tax. Such
regulations could, for example, require withholding prior to the distribution
of cash in the case of Residual Interest Securities that do not have
significant value. Under the REMIC Regulations, if a Residual Interest
Security has tax avoidance potential, a transfer of a Residual Interest
Security to a Nonresident will be disregarded for all federal tax purposes.
A Residual Interest Security has tax avoidance potential unless, at the time
of the transfer, the transferor reasonably expects that the REMIC will
distribute to the transferee amounts that will equal at least 30% of each
excess inclusion, and that such amounts will be distributed at or after the
time at which the excess inclusions accrue and not later than the calendar
year following the calendar year of accrual. If a Nonresident transfers a
Residual Interest Security to a United States person, and if the transfer has
the effect of allowing the transferor to avoid tax on accrued excess
inclusions, then the transfer is disregarded and the transferor continues to
be treated as the owner of the Residual Interest Security for purposes of the
withholding tax provisions of the Code. See "--Excess Inclusions."
TAX CHARACTERIZATION OF THE TRUST FUND AS A PARTNERSHIP
Brown & Wood LLP, special counsel to Provident, will deliver its opinion
that a Trust Fund for which a partnership election is made will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption
that the terms of the Trust Agreement and related documents will be complied
with, and on counsel's conclusions that (1) the Trust Fund will not have
certain characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust Fund will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations or the issuance of the Securities
has been structured as a private placement under an IRS safe harbor, so that
the Trust Fund will not be characterized as a publicly traded partnership
taxable as a corporation.
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its
taxable income. The Trust Fund's taxable income would include all its
income, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments
on the Notes and distributions on the Certificates, and Certificateholders
could be liable for any such tax that is unpaid by the Trust Fund.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Trust Fund will agree, and
the Noteholders will agree by their purchase of Notes, to treat the Notes as
debt for federal income tax purposes. Brown & Wood LLP, special counsel to
Provident, will, except as otherwise provided in the related Prospectus
Supplement, advise Provident that the Notes will be classified as debt
for federal income tax purposes. The discussion below assumes this
characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes. Moreover, the discussion assumes that
the interest formula for the Notes meets the requirements for "qualified
stated interest" under the OID Regulations, and that any OID on the Notes
(i.e., any excess of the principal amount of the Notes over their issue
price) does not exceed a de minimis amount (i.e., 0.25% of their principal
amount multiplied by the number of full years included in their term), all
within the meaning of the OID Regulations. If these conditions are not
satisfied with respect to any given series of Notes, additional tax
considerations with respect to such Notes will be disclosed in the applicable
Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID Regulations, a Holder
of a Note issued with a de minimis amount of OID must include such OID in
income, on a pro rata basis, as principal payments are made on the Note. It
is believed that any prepayment premium paid as a result of a mandatory
redemption will be taxable as contingent interest when it becomes fixed and
unconditionally payable. A purchaser who buys a Note for more or less than
its principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
A Holder of a Note that has a fixed maturity date of not more than one
year from the issue date of such Note (a "Short-Term Note") may be subject to
special rules. An accrual basis Holder of a Short-Term Note (and certain
cash method Holders, including regulated investment companies, as set forth
in Section 1281 of the Code) generally would be required to report interest
income as interest accrues on a straight-line basis over the term of each
interest period. Other cash basis Holders of a Short-Term Note would, in
general, be required to report interest income as interest is paid (or, if
earlier, upon the taxable disposition of the Short-Term Note). However, a
cash basis Holder of a Short-Term Note reporting interest income as it is
paid may be required to defer a portion of any interest expense otherwise
deductible on indebtedness incurred to purchase or carry the Short-Term Note
until the taxable disposition of the Short-Term Note. A cash basis taxpayer
may elect under Section 1281 of the Code to accrue interest income on all
nongovernment debt obligations with a term of one year or less, in which case
the taxpayer would include interest on the Short-Term Note in income as it
accrues, but would not be subject to the interest expense deferral rule
referred to in the preceding sentence. Certain special rules apply if a
Short-Term Note is purchased for more or less than its principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the Holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the Holder's adjusted tax basis in the Note.
The adjusted tax basis of a Note to a particular Noteholder will equal the
Holder's cost for the Note, increased by any market discount, acquisition
discount, OID and gain previously included by such Noteholder in income with
respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously
received by such Noteholder with respect to such Note. Any such gain or loss
will be capital gain or loss if the Note was held as a capital asset, except
for gain representing accrued interest and accrued market discount not
previously included in income. Capital losses generally may be used only to
offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder
who is a nonresident alien, foreign corporation or other non-United States
person (a "foreign person") generally will be considered "portfolio
interest", and generally will not be subject to United States federal income
tax and withholding tax if the interest is not effectively connected with the
conduct of a trade or business within the United States by the foreign person
and the foreign person (i) is not actually or constructively a "10 percent
shareholder" of the Trust Fund or Provident (including a Holder of 10% of the
outstanding Certificates) or a "controlled foreign corporation" with respect
to which the Trust Fund or Provident is a "related person" within the meaning
of the Code and (ii) provides the Owner Trustee or other person who is
otherwise required to withhold U.S. tax with respect to the Notes with an
appropriate statement (on Form W-8 or a similar form), signed under penalties
of perjury, certifying that the beneficial owner of the Note is a foreign
person and providing the foreign person's name and address. If a Note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide the relevant
signed statement to the withholding agent; in that case, however, the
signed statement must be accompanied by a Form W-8 or substitute form
provided by the foreign person that owns the Note. If such interest is
not portfolio interest, then it will be subject to United States federal
income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days
or more in the taxable year.
Backup Withholding. Each Holder of a Note (other than an exempt Holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the Holder's
name, address, correct federal taxpayer identification number and a statement
that the Holder is not subject to backup withholding. Should a nonexempt
Noteholder fail to provide the required certification, the Trust Fund will be
required to withhold 31 percent of the amount otherwise payable to the
Holder, and remit the withheld amount to the IRS as a credit against the
Holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Brown & Wood LLP special counsel to Provident, the IRS
successfully asserted that one or more of the Notes did not represent debt
for federal income tax purposes, the Notes might be treated as equity
interests in the Trust Fund. If so treated, the Trust Fund might be taxable
as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by
deductions for interest expense on Notes recharacterized as equity).
Alternatively, and most likely in the view of special counsel to Provident,
the Trust Fund might be treated as a publicly traded partnership that would
not be taxable as a corporation because it would meet certain qualifying
income tests. Nonetheless, treatment of the Notes as equity interests in
such a publicly traded partnership could have adverse tax consequences to
certain Holders. For example, income to certain tax-exempt entities
(including pension funds) would be "unrelated business taxable income",
income to foreign Holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual Holders might be
subject to certain limitations on their ability to deduct their share of the
Trust Fund's expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust Fund as a Partnership. The Trust Fund and the
Master Servicer will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust Fund as a partnership for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership
being the assets held by the Trust Fund, the partners of the partnership
being the Certificateholders, and the Notes being debt of the partnership.
However, the proper characterization of the arrangement involving the Trust
Fund, the Certificates, the Notes, the Trust Fund and the Servicer is not
clear because there is no authority on transactions closely comparable to
that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Fund. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in
a partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a Series
of Securities includes a single class of Certificates. If these conditions
are not satisfied with respect to any given Series of Certificates,
additional tax considerations with respect to such Certificates will be
disclosed in the applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be
subject to federal income tax. Rather, each Certificateholder will be
required to separately take into account such Holder's allocated share of
income, gains, losses, deductions and credits of the Trust Fund. The Trust
Fund's income will consist primarily of interest and finance charges earned
on the Loans (including appropriate adjustments for market discount, OID and
bond premium) and any gain upon collection or disposition of Loans. The
Trust Fund's deductions will consist primarily of interest accruing with
respect to the Notes, servicing and other fees, and losses or deductions upon
collection or disposition of Loans.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificateholders will be allocated taxable
income of the Trust Fund for each month equal to the sum of (i) the interest
that accrues on the Certificates in accordance with their terms for such
month, including interest accruing at the Pass-Through Rate for such month
and interest on amounts previously due on the Certificates but not yet
distributed; (ii) any Trust Fund income attributable to discount on the Loans
that corresponds to any excess of the principal amount of the Certificates
over their initial issue price (iii) prepayment premium payable to the
Certificateholders for such month; and (iv) any other amounts of income
payable to the Certificateholders for such month. Such allocation will be
reduced by any amortization by the Trust Fund of premium on Loans that
corresponds to any excess of the issue price of Certificates over their
principal amount. All remaining taxable income of the Trust Fund will be
allocated to Provident. Based on the economic arrangement of the parties,
this approach for allocating Trust Fund income should be permissible under
applicable Treasury regulations, although no assurance can be given that the
IRS would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through
Rate plus the other items described above even though the Trust Fund might
not have sufficient cash to make current cash distributions of such amount.
Thus, cash basis Holders will in effect be required to report income from the
Certificates on the accrual basis and Certificateholders may become liable
for taxes on Trust Fund income even if they have not received cash from the
Trust Fund to pay such taxes. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Certificates at different times and at
different prices, Certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to
them by the Trust Fund.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to a Holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Servicer but not interest expense) would be miscellaneous
itemized deductions. Such deductions might be disallowed to the individual
in whole or in part and might result in such Holder being taxed on an amount
of income that exceeds the amount of cash actually distributed to such Holder
over the life of the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income
and allocations to Certificateholders on an aggregate basis. If the IRS were
to require that such calculations be made separately for each Loan, the Trust
Fund might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Loans were not issued
with OID, and, therefore, the Trust Fund should not have OID income.
However, the purchase price paid by the Trust Fund for the Loans may be
greater or less than the remaining principal balance of the Loans at the time
of purchase. If so, the Loan will have been acquired at a premium or
discount, as the case may be. (As indicated above, the Trust Fund will make
this calculation on an aggregate basis, but might be required to recompute it
on a Loan by Loan basis.)
If the Trust Fund acquires the Loans at a market discount or premium,
the Trust Fund will elect to include any such discount in income currently as
it accrues over the life of the Loans or to offset any such premium against
interest income on the Loans. As indicated above, a portion of such market
discount income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust Fund
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust Fund are sold or exchanged
within a 12-month period. If such a termination occurs, the Trust Fund will
be considered to distribute its assets to the partners, who would then be
treated as recontributing those assets to the Trust Fund as a new
partnership. The Trust Fund will not comply with certain technical
requirements that might apply when such a constructive termination occurs.
As a result, the Trust Fund may be subject to certain tax penalties and may
incur additional expenses if it is required to comply with those
requirements. Furthermore, the Trust Fund might not be able to comply due to
lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
sold. A Certificateholder's tax basis in a Certificate will generally equal
the Holder's cost increased by the Holder's share of Trust Fund income
(includible in income) and decreased by any distributions received with
respect to such Certificate. In addition, both the tax basis in the
Certificates and the amount realized on a sale of a Certificate would include
the Holder's share of the Notes and other liabilities of the Trust Fund. A
Holder acquiring Certificates at different prices may be required to maintain
a single aggregate adjusted tax basis in such Certificates, and, upon sale or
other disposition of some of the Certificates, allocate a portion of such
aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss
on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the Holder's share
of unrecognized accrued market discount on the Loans would generally be
treated as ordinary income to the Holder and would give rise to special tax
reporting requirements. The Trust Fund does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid those special reporting requirements, the Trust Fund will elect to
include market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust
Fund's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the
Certificateholders in proportion to the principal amount of Certificates
owned by them as of the close of the last day of such month. As a result, a
Holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the Trust Fund might be reallocated among the Certificateholders.
The Trust Fund's method of allocation between transferors and transferees
may be revised to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder
had. The tax basis of the Trust Fund's assets will not be adjusted to
reflect that higher (or lower) basis unless the Trust Fund were to file an
election under Section 754 of the Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records,
as well as potentially onerous information reporting requirements, the Trust
Fund will not make such election. As a result, Certificateholders might be
allocated a greater or lesser amount of Trust Fund income than would be
appropriate based on their own purchase price for Certificates.
Administrative Matters. The Owner Trustee is required to keep or have
kept complete and accurate books of the Trust Fund. Such books will be
maintained for financial reporting and tax purposes on an accrual basis and
the fiscal year of the Trust Fund will be the calendar year. The Trustee
will file a partnership information return (IRS Form 1065) with the IRS for
each taxable year of the Trust Fund and will report each Certificateholder's
allocable share of items of Trust Fund income and expense to Holders and the
IRS on Schedule K-1. The Trust Fund will provide the Schedule K-l
information to nominees that fail to provide the Trust Fund with the
information statement described below and such nominees will be required to
forward such information to the beneficial owners of the Certificates.
Generally, Holders must file tax returns that are consistent with the
information return filed by the Trust Fund or be subject to penalties unless
the Holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust
Fund with a statement containing certain information on the nominee, the
beneficial owners and the Certificates so held. Such information includes
(i) the name, address and taxpayer identification number of the nominee and
(ii) as to each beneficial owner (x) the name, address and identification
number of such person, (y) whether such person is a United States person, a
tax-exempt entity or a foreign government, an international organization, or
any wholly owned agency or instrumentality of either of the foregoing, and
(z) certain information on Certificates that were held, bought or sold on
behalf of such person throughout the year. In addition, brokers and
financial institutions that hold Certificates through a nominee are required
to furnish directly to the Trust Fund information as to themselves and their
ownership of Certificates. A clearing agency registered under Section 17A of
the Exchange Act is not required to furnish any such information statement to
the Trust Fund. The information referred to above for any calendar year must
be furnished to the Trust Fund on or before the following January 31.
Nominees, brokers and financial institutions that fail to provide the Trust
Fund with the information described above may be subject to penalties.
Provident or the Trustee will be designated as the tax matters partner
in the related Trust Agreement and, as such, will be responsible for
representing the Certificateholders in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after
the date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust Fund by the
appropriate taxing authorities could result in an adjustment of the returns
of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust Fund. An adjustment could also result
in an audit of a Certificateholder's returns and adjustments of items not
related to the income and losses of the Trust Fund.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust Fund would be considered to be engaged in a trade or business in
the United States for purposes of federal withholding taxes with respect to
non-U.S. persons because there is no clear authority dealing with that issue
under facts substantially similar to those described herein. Although it is
not expected that the Trust Fund would be engaged in a trade or business in
the United States for such purposes, the Trust Fund will withhold as if it
were so engaged in order to protect the Trust Fund from possible adverse
consequences of a failure to withhold. The Trust Fund expects to withhold on
the portion of its taxable income that is allocable to foreign
Certificateholders pursuant to Section 1446 of the Code, as if such income
were effectively connected to a U.S. trade or business, at a rate of 35%
for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust Fund to
change its withholding procedures. In determining a Holder's withholding
status, the Trust Fund may rely on IRS Form W-8, IRS Form W-9 or the Holder's
certification of nonforeign status signed under penalties of perjury.
The term "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under
the laws of the United States or any political subdivision thereof, or an
estate whose income is subject to U.S. federal income tax regardless of its
source of income, or a trust if a court within the United States is able to
exercise primary supervision of the administration of the trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust.
Each foreign Holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust Fund's income. Each foreign
Holder must obtain a taxpayer identification number from the IRS and submit
that number to the Trust Fund on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign Holder generally would be
entitled to file with the IRS a claim for refund with respect to taxes
withheld by the Trust Fund taking the position that no taxes were due because
the Trust Fund was not engaged in a U.S. trade or business. However,
interest payments made (or accrued) to a Certificateholder who is a foreign
person generally will be considered guaranteed payments to the extent such
payments are determined without regard to the income of the Trust Fund. If
these interest payments are properly characterized as guaranteed payments,
then the interest will not be considered "portfolio interest." As a result,
Certificateholders will be subject to United States federal income tax and
withholding tax at a rate of 30 percent, unless reduced or eliminated
pursuant to an applicable treaty. In such case, a foreign Holder would only
be entitled to claim a refund for that portion of the taxes in excess of the
taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding
tax of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the Holder is an exempt recipient under
applicable provisions of the Code.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences," potential investors should consider the state and
local income tax consequences of the acquisition, ownership, and disposition
of the Securities. State and local income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various state and local tax consequences of an investment in
the Securities.
ERISA CONSIDERATIONS
The following describes certain considerations under ERISA and the Code,
which apply only to Securities of a Series that are not divided into
subclasses. If Securities are divided into subclasses, the related
Prospectus Supplement will contain information concerning considerations
relating to ERISA and the Code that are applicable to such Securities.
ERISA imposes requirements on employee benefit plans (and on certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and
separate accounts in which such plans, accounts or arrangements are invested)
(collectively "Plans") subject to ERISA and on persons who are fiduciaries
with respect to such Plans. Generally, ERISA applies to investments made by
Plans. Among other things, ERISA requires that the assets of Plans be held
in trust and that the trustee, or other duly
authorized fiduciary, have exclusive authority and discretion to manage and
control the assets of such Plans. ERISA also imposes certain duties on
persons who are fiduciaries of Plans. Under ERISA, any person who exercises
any authority or control respecting the management or disposition of the
assets of a Plan is considered to be a fiduciary of such Plan (subject to
certain exceptions not here relevant). Certain employee benefit plans, such
as governmental plans (as defined in ERISA Section 3(32)) and, if no election
has been made under Section 410(d) of the Code, church plans (as defined in
ERISA Section 3(33)), are not subject to ERISA requirements. Accordingly,
assets of such plans may be invested in Securities without regard to the
ERISA considerations described above and below, subject to the provisions of
applicable state law. Any such plan which is qualified and exempt from
taxation under Code Sections 401(a) and 501(a), however, is subject to the
prohibited transaction rules set forth in Code Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101). Under this regulation,
the underlying assets and properties of corporations, partnerships and
certain other entities in which a Plan makes an "equity" investment could be
deemed for purposes of ERISA to be assets of the investing Plan in certain
circumstances. However, the regulation provides that, generally, the assets
of a corporation or partnership in which a Plan invests will not be deemed
for purposes of ERISA to be assets of such Plan if the equity interest
acquired by the investing Plan is a publicly-offered security. A
publicly-offered security, as defined in the Labor Reg. Section 2510.3-101,
is a security that is widely held, freely transferable and registered under
the Securities Exchange Act of 1934, as amended.
In addition to the imposition of general fiduciary standards of
investment prudence and diversification, ERISA prohibits a broad range of
transactions involving Plan assets and persons ("Parties in Interest") having
certain specified relationships to a Plan and imposes additional prohibitions
where Parties in Interest are fiduciaries with respect to such Plan. Because
the Loans may be deemed Plan assets of each Plan that purchases Securities,
an investment in the Securities by a Plan might be a prohibited transaction
under ERISA Sections 406 and 407 and subject to an excise tax under Code
Section 4975 unless a statutory or administrative exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's
prohibited transaction rules certain transactions relating to the operation
of residential mortgage pool investment trusts and the purchase, sale and
holding of "mortgage pool pass-through certificates" in the initial issuance
of such certificates. PTE 83-1 permits, subject to certain conditions,
transactions which might otherwise be prohibited between Plans and Parties in
Interest with respect to those Plans related to the origination, maintenance
and termination of mortgage pools consisting of mortgage loans secured by
first or second mortgages or deeds of trust on single-family residential
property, and the acquisition and holding of certain mortgage pool pass-
through certificates representing an interest in such mortgage pools by
Plans. If the general conditions (discussed below) of PTE 83-1 are
satisfied, investments by a Plan in Securities that represent interests in a
Pool consisting of Loans ("Single Family Securities") will be exempt from the
prohibitions of ERISA Sections 406(a) and 407 (relating generally to
transactions with Parties in Interest who are not fiduciaries) if the Plan
purchases the Single Family Securities at no more than fair market value and
will be exempt from the prohibitions of ERISA Sections 406(b)(1) and (2)
(relating generally to transactions with fiduciaries) if, in addition, the
purchase is approved by an independent fiduciary, no sales commission is paid
to the pool sponsor, the Plan does not purchase more than 25% of all Single
Family Securities, and at least 50% of all Single Family Securities are
purchased by persons independent of the pool sponsor or pool trustee. PTE
83-1 does not provide an exemption for transactions involving Subordinate
Securities. Accordingly, no transfer of a Subordinate Security or a Security
which is not a Single Family Security may be made to a Plan unless specified
in the related Prospectus Supplement.
The discussion in this and the next succeeding paragraph applies only to
Single Family Securities. Provident believes that, for purposes of PTE 83-1,
the term "mortgage pass-through certificate" would include: (i) Securities
issued in a Series consisting of only a single class of Securities; and (ii)
Securities issued in a Series in which there is only one class of such
Securities; provided that the Securities in the case of
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clause (i), or the Securities in the case of clause (ii), evidence the
beneficial ownership of both a specified percentage of
future interest payments (greater than 0%) and a specified percentage
(greater than 0%) of future principal payments on the Loans. It is not clear
whether a class of Securities that evidences the beneficial ownership in a
Trust Fund divided into Loan groups, beneficial ownership of a specified
percentage of interest payments only or principal payments only, or a
notional amount of either principal or interest payments, or a class of
Securities entitled to receive payments of interest and principal on the
Loans only after payments to other classes or after the occurrence of certain
specified events would be a "mortgage pass-through certificate" for purposes
of PTE 83-1.
PTE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (i) the maintenance of a system
of insurance or other protection for the pooled mortgage loans and property
securing such loans, and for indemnifying Securityholders against reductions
in pass-through payments due to property damage or defaults in loan payments
in an amount not less than the greater of one percent of the aggregate
principal balance of all covered pooled mortgage loans or the principal
balance of the largest covered pooled mortgage loan; (ii) the existence of a
pool trustee who is not an affiliate of the pool sponsor; and (iii) a
limitation on the amount of the payment retained by the pool sponsor,
together with other funds inuring to its benefit, to not more than adequate
consideration for selling the mortgage loans plus reasonable compensation for
services provided by the pool sponsor to the pool. Provident believes that
the first general condition referred to above will be satisfied with respect
to the Securities in a Series issued without a subordination feature, or the
Securities only in a Series issued with a subordination feature, provided
that the subordination and Reserve Account, subordination by shifting of
interests, the pool insurance or other form of credit enhancement described
under "Credit Enhancement" herein (such subordination, pool insurance or
other form of credit enhancement being the system of insurance or other
protection referred to above) with respect to a Series of Securities is
maintained in an amount not less than the greater of one percent of the
aggregate principal balance of the Loans or the principal balance of the
largest Loan. See "Description of the Securities" herein. In the absence of
a ruling that the system of insurance or other protection with respect to a
Series of Securities satisfies the first general condition referred to above,
there can be no assurance that these features will be so viewed by the DOL.
The Trustee will not be affiliated with Provident.
Each Plan fiduciary who is responsible for making the investment
decisions whether to purchase or commit to purchase and to hold Single Family
Securities must make its own determination as to whether the first and third
general conditions, and the specific conditions described briefly in the
preceding paragraphs, of PTE 83-1 have been satisfied, or as to the
availability of any other prohibited transaction exemptions. Each Plan
fiduciary should also determine whether, under the general fiduciary
standards of investment prudence and diversification, an investment in the
Securities is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
The DOL has granted to certain underwriters individual administrative
exemptions (the "Underwriter Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section
4975 of the Code with respect to the initial purchase, the holding and the
subsequent resale by Plans of certificates in pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Underwriter Exemptions.
While each Underwriter Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions which generally
apply to the Underwriter Exemptions are substantially the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party;
(2) the rights and interests evidenced by the certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the trust fund;
(3) the certificates required by the Plan have received a rating
at the time of such acquisition that is one of the three highest generic
rating categories from Standard & Poor's Ratings
Group, a Division of The McGraw-Hill Companies ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co.
("DCR") or Fitch Investors Service, Inc. ("Fitch");
(4) the trustee must not be an affiliate of any other member of
the Restricted Group as defined below;
(5) the sum of all payments made to and retained by the
underwriters in connection with the distribution of the certificates
represents not more than reasonable compensation for underwriting the
certificates; the sum of all payments made to and retained by the seller
pursuant to the assignment of the loans to the trust fund represents not
more than the fair market value of such loans; the sum of all payments
made to and retained by the servicer and any other servicer represents
not more than reasonable compensation for such person's services under
the agreement pursuant to which the loans are pooled and reimbursements
of such person's reasonable expenses in connection therewith; and
(6) the Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933, as amended.
The trust fund must also meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated
in one of the three highest rating categories of S&P, Moody's, Fitch or DCR
for at least one year prior to the Plan's acquisition of certificates; and
(iii) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of certificates.
Moreover, the Underwriter Exemptions generally provide relief from
certain self-dealing/conflict of interest prohibited transactions that may
occur when the Plan fiduciary causes a Plan to acquire certificates in a
trust as to which the fiduciary (or its affiliate) is an obligor on the
receivables held in the trust, provided that, among other requirements: (i)
in the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent (50%) of each class of certificates in
which Plans have invested is acquired by persons independent of the
Restricted Group (as defined below), (ii) such fiduciary (or its affiliate)
is an obligor with respect to five percent (5%) or less of the fair market
value of the obligations contained in the trust; (iii) the Plan's investment
in certificates of any class does not exceed twenty-five percent (25%) of all
of the certificates of that class outstanding at the time of the acquisition;
and (iv) immediately after the acquisition, no more than twenty-five percent
(25%) of the assets of the Plan with respect to which such person is a
fiduciary is invested in certificates representing an interest in one or more
trusts containing assets sold or serviced by the same entity. The
Underwriter Exemptions do not apply to Plans sponsored by Provident, the
related Underwriter, the Trustee, the Master Servicer, any insurer with
respect to the Loans, any obligor with respect to Loans included in the Trust
Fund constituting more than five percent (5%) of the aggregate unamortized
principal balance of the assets in the Trust Fund, or any affiliate of such
parties (the "Restricted Group").
The Prospectus Supplement for each Series of Securities will indicate
the classes of Securities, if any, offered thereby as to which it is expected
that an Underwriter Exemption will apply.
The Underwriter Exemption contains several requirements, some of which
differ from those in PTE 83-l. The Underwriter Exemption contains an
expanded definition of "certificate" which includes an interest which
entitles the holder to pass-through payments of principal, interest and/or
other payments. The Underwriter Exemption contains an expanded definition of
"trust" which permits the trust corpus to consist of secured consumer
receivables. The definition of "trust", however, does not include any
investment pool unless, inter alia, (i) the investment pool consists only of
assets of the type which have been included in other
investment pools, (ii) certificates evidencing interests in such other
investment pools have been purchased by investors other than Plans for at
least one year prior to the Plan's acquisition of certificates pursuant to
the Underwriter Exemption, and (iii) certificates in such other investment
pools have been rated in one of the three highest generic rating categories
of the four credit rating agencies noted below. Generally, the Underwriter
Exemption holds that the acquisition of the certificates by a Plan must be on
terms (including the price for the certificates) that are at least as
favorable to the Plan as they would be in an arm's length transaction with an
unrelated party. The Underwriter Exemption requires that the rights and
interests evidenced by the certificates not be "subordinated" to the rights
and interests evidenced by other certificates of the same trust. The
Underwriter Exemption requires that certificates acquired by a Plan have
received a rating at the time of their acquisition that is in one of the
three highest generic rating categories of S&P, Moody's, Fitch or DCR. The
Underwriter Exemption specifies that the pool trustee must not be an
affiliate of the pool sponsor, nor an affiliate of the Underwriter, the pool
servicer, any obligor with respect to mortgage loans included in the trust
constituting more than five percent (5%) of the aggregate unamortized
principal balance of the assets in the trust, or any affiliate of such
entities. Finally, the Underwriter Exemption stipulates that any Plan
investing in the certificates must be an "accredited investor" as defined in
Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
Any Plan fiduciary which proposes to cause a Plan to purchase Securities
should consult with their counsel concerning the impact of ERISA and the
Code, the applicability of PTE 83-1 and the Underwriter Exemption, and the
potential consequences in their specific circumstances, prior to making such
investment. Moreover, each Plan fiduciary should determine whether under the
general fiduciary standards of investment prudence and diversification an
investment in the Securities is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
LEGAL INVESTMENT
The Prospectus Supplement for each Series of Securities will specify
which, if any, of the classes of Securities offered thereby constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of Securities that qualify as
"mortgage related securities" will be legal investments for persons, trusts,
corporations, partnerships, associations, business trusts, and business
entities (including depository institutions, life insurance companies and
pension funds) created pursuant to or existing under the laws of the United
States or of any state (including the District of Columbia and Puerto Rico)
whose authorized investments are subject to state regulations to the same
extent as, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any such entities. Under
SMMEA, if a state enacted legislation prior to October 4, 1991 specifically
limiting the legal investment authority of any such entities with respect to
"mortgage related securities", Securities will constitute legal investments
for entities subject to such legislation only to the extent provided therein.
Approximately twenty-one states adopted such legislation prior to the October
4, 1991 deadline.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in Securities
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest "in mortgage related securities", and
national banks may purchase securities for their own account without regard
to the limitations generally applicable to investment securities set forth in
12 U.S.C. 24 (Seventh), subject in each case to such regulations as the
applicable federal authority may prescribe. In this connection, federal
credit unions should review the National Credit Union Administration ("NCUA")
Letter to Credit Unions No. 96, as modified by Letter to Credit Unions No.
108, which includes guidelines to assist federal credit unions in making
investment decisions for "mortgage related securities" and the NCUA's
regulation "Investment and Deposit Activities" (12 C.F.R. Part 703), which
sets forth certain restrictions on investments by federal credit unions in
"mortgage related securities" (in each case whether or not the class of
Securities under consideration for purchase constituted a "mortgage related
security").
All depository institutions considering an investment in the Securities
(whether or not the class of Securities under consideration for purchase
constitutes a "mortgage related security") should review the Federal
Financial Institutions Examination Council's Supervisory Policy Statement on
the Securities Activities (to the extent adopted by their respective
regulators) (the "Policy Statement") setting forth, in relevant part, certain
securities trading and sales practices deemed unsuitable for an institution's
investment portfolio, and guidelines for (and restrictions on) investing in
mortgage derivative products, including "mortgage related securities", which
are "high-risk mortgage securities" as defined in the Policy Statement.
According to the Policy Statement, such "high-risk mortgage securities"
include securities such as Securities not entitled to distributions allocated
to principal or interest, or Subordinated Securities. Under the Policy
Statement, it is the responsibility of each depository institution to
determine, prior to purchase (and at stated intervals thereafter), whether a
particular mortgage derivative product is a "high-risk mortgage security",
and whether the purchase (or retention) of such a product would be consistent
with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to "prudent investor" provisions which may restrict or prohibit
investment in securities which are not "interest bearing" or "income paying".
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Securities or to
purchase Securities representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Securities constitute legal
investments for such investors.
METHOD OF DISTRIBUTION
Securities are being offered hereby in Series from time to time (each
Series evidencing or relating to a separate Trust Fund) through any of the
following methods:
1. By negotiated firm commitment underwriting and public
reoffering by underwriters;
2. By agency placements through one or more placement agents
primarily with institutional investors and dealers; and
3. By placement directly by Provident with institutional
investors.
A Prospectus Supplement will be prepared for each Series which will
describe the method of offering being used for that Series and will set forth
the identity of any underwriters thereof and either the price at which such
Series is being offered, the nature and amount of any underwriting discounts
or additional compensation to such underwriters and the proceeds of the
offering to Provident, or the method by which the price at which the
underwriters will sell the Securities will be determined. Each Prospectus
Supplement for an underwritten offering will also contain information
regarding the nature of the underwriters' obligations, any material
relationship between Provident and any underwriter and, where appropriate,
information regarding any discounts or concessions to be allowed or reallowed
to dealers or others and any arrangements to stabilize the market for the
Securities so offered. In firm commitment underwritten offerings, the
underwriters will be obligated to purchase all of the Securities of such
Series if any such Securities are purchased. Securities may be acquired by
the underwriters for their own accounts and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters and agents may be entitled under agreements entered into
with Provident to indemnification by Provident against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribution with respect to payments which such underwriters
or agents may be required to make in respect thereof.
If a Series is offered other than through underwriters, the Prospectus
Supplement relating thereto will contain information regarding the nature of
such offering and any agreements to be entered into between Provident and
purchasers of Securities of such Series.
LEGAL MATTERS
Certain legal matters relating to the Securities of each Series will be
passed upon for Provident by Keating, Muething & Klekamp, P.L.L., Cincinnati,
Ohio. Certain legal matters relating to certain federal income tax
consequences with respect to the Securities will be passed upon for Provident
by Brown & Wood LLP, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of
Securities and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related Series of
Securities. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of the Securities of each Series
offered hereby and by the Prospectus Supplement that they shall have been
rated in one of the four highest rating categories by the nationally
recognized statistical rating agency or agencies (each, a "Rating Agency")
specified in the related Prospectus Supplement.
Any such rating would be based on, among other things, the adequacy of
the value of the Trust Fund Assets and any credit enhancement with respect to
such class and will reflect such Rating Agency's assessment solely of the
likelihood that Holders of a class of Securities will receive payments to
which such Securityholders are entitled under the related Agreement. Such
rating will not constitute an assessment of the likelihood that principal
prepayments on the related Loans will be made, the degree to which the rate
of such prepayments might differ from that originally anticipated or the
likelihood of early optional termination of the Series of Securities. Such
rating should not be deemed a recommendation to purchase, hold or sell
Securities, inasmuch as it does not address market price or suitability for a
particular investor. Each security rating should be evaluated independently
of any other security rating. Such rating will not address the possibility
that prepayment at higher or lower rates than anticipated by an investor may
cause such investor to experience a lower than anticipated yield or that an
investor purchasing a Security at a significant premium might fail to recoup
its initial investment under certain prepayment scenarios.
There is also no assurance that any such rating will remain in effect
for any given period of time or that it may not be lowered or withdrawn
entirely by the Rating Agency in the future if in its judgment circumstances
in the future so warrant. In addition to being lowered or withdrawn due to
any erosion in the adequacy of the value of the Trust Fund Assets or any
credit enhancement with respect to a Series, such rating might also be
lowered or withdrawn for other reasons, including, but not limited to, an
adverse change in the financial or other condition of a credit enhancement
provider or a change in the rating of such credit enhancement provider's
long-term debt.
The amount, type and nature of credit enhancement, if any, established
with respect to a Series of Securities will be determined on the basis of
criteria established by each Rating Agency rating classes of such Series.
Such criteria are sometimes based upon an actuarial analysis of the behavior
of mortgage loans in a larger group. Such analysis is often the basis upon
which each Rating Agency determines the amount of credit
enhancement required with respect to each such class. There can be no
assurance that the historical data supporting any such actuarial analysis
will accurately reflect future experience nor any assurance that the data
derived from a large pool of mortgage loans accurately predicts the
delinquency, foreclosure or loss experience of any particular pool of Loans.
No assurance can be given that values of any Properties have remained or will
remain at their levels on the respective dates of origination of the related
Loans. If the residential real estate markets should experience an overall
decline in property values such that the outstanding principal balances of
the Loans in a particular Trust Fund and any secondary financing on the
related Properties become equal to or greater than the value of the
Properties, the rates of delinquencies, foreclosures and losses could be
higher than those now generally experienced in the mortgage lending industry.
In additional, adverse economic conditions (which may or may not affect real
property values) may affect the timely payment by mortgagors of scheduled
payments of principal and interest on the Loans and, accordingly, the rates
of delinquencies, foreclosures and losses with respect to any Trust Fund. To
the extent that such losses are not covered by credit enhancement, such
losses will be borne, at least in part, by the Holders of one or more classes
of the Securities of the related Series.
INDEX OF DEFINED TERMS
Term Page
- ---- ----
Accrual Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Amortizable Bond Premium Regulations . . . . . . . . . . . . . . . . . . 63
APR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Balloon payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Belgian Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Beneficial owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Book-Entry Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Buydown Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Buydown Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Capitalized Interest Account . . . . . . . . . . . . . . . . . . . . . . 45
Cash Flow Bond Method . . . . . . . . . . . . . . . . . . . . . . . . . . 69
CEDEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Class Security Balance . . . . . . . . . . . . . . . . . . . . . . . . . 26
Closed-End Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Collateral Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Combined Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . 21
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Companion Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Contingent Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 61
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 18
Cut-Off Date Principal Balance . . . . . . . . . . . . . . . . . . . . . 25
DCR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Debt-to-income ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Definitive Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Detailed Description . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
EPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . 33
European Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Excess Servicing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Financial Intermediary . . . . . . . . . . . . . . . . . . . . . . . . . 32
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Foreign person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Garn-St Germain Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Home Equity Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Insured Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Interest Weighted Securities . . . . . . . . . . . . . . . . . . . . . . 62
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
L/C Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 36
Liquidation Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Loan Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 19
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Lockout Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Mark-to-Market Regulations . . . . . . . . . . . . . . . . . . . . . . . 67
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Master Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . 18
Master Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Morgan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 20
NCUA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Nonresidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 59
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
PACs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Pass-Through Securities . . . . . . . . . . . . . . . . . . . . . . . . . 68
Pay-Through Security . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 17
Pool Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Pool Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . 24
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 16
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Primary Mortgage Insurance Policy . . . . . . . . . . . . . . . . . . . . 20
Principal Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Provident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
PTE 83-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Ratio Strip Securities . . . . . . . . . . . . . . . . . . . . . . . . . 69
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Refinance Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Regular Interest Securities . . . . . . . . . . . . . . . . . . . . . . . 59
Relevant Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Residual Interest Security . . . . . . . . . . . . . . . . . . . . . . . 65
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Retained Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Revolving Credit Line Loans . . . . . . . . . . . . . . . . . . . . . . 1, 4
Riegle Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Secured Creditor Exclusion . . . . . . . . . . . . . . . . . . . . . . . 54
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Security Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Security Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 35
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Short-Term Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Single Family Properties . . . . . . . . . . . . . . . . . . . . . . . . 20
Single Family Securities . . . . . . . . . . . . . . . . . . . . . . . . 78
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 81
STIFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stripped Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Sub-Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 45
Subordinated Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Subsequent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
TACs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Thrift institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
TIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Title V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 24
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Fund Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4, 17
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 24
U.S. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Underwriter Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the Securities being registered under this
Registration Statement, other than underwriting discounts and commissions:
SEC Registration Fee $ 151,515.15
Printing and Engraving Expenses $ 125,000.00
Legal Fees and Expenses $ 500,000.00
Trustee Fees and Expenses $ 50,000.00
Accounting Fees and Expenses $ 125,000.00
Blue Sky Fees and Expenses $ 15,000.00
Rating Agency Fees $ 200,000.00
Miscellaneous $ 100,000.00
---------------
Total $ 1,266,515.15
____________
* All amounts except the SEC Registration Fee are estimates of expenses
incurred in connection with the issuance and distribution of a Series of
Securities in an aggregate principal amount assumed for these purposes
to be equal to $500,000,000 of Securities registered hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Code of Regulations provides for indemnification of
directors and officers of the Registrant to the fullest extent permitted by
law. In particular, the Code of Regulations provides for indemnification for
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is
or was a director, officer, employee or agent of the Registrant, or is or was
serving at the request of the Registrant as a director, trustee, officer,
employee or agent of another corporation, domestic or foreign non-profit or
for profit, partnership,joint venture, trust or other enterprise; provided,
however, that the Registrant shall indemnify any such agent (as opposed to
any director, officer or employee) of the Company to an extent that the
directors may, in their discretion, so determine.
ITEM 16. EXHIBITS.
1.1 Form of Underwriting Agreement.
4.1 Form of Pooling and Servicing Agreement relating to Home
Equity Loan Asset Backed Certificates.**
4.2 Form of Trust Agreement.
4.3 Form of Indenture.
4.4 Form of Master Servicing Agreement.
5.1 Opinion of Keating, Muething & Klekamp, P.L.L. as to the
legality of the Securities.
8.1 Opinion of Brown & Wood LLP as to certain tax matters.
23.1 Consent of Brown & Wood LLP (included in Exhibit 8.1
hereof).
23.2 Consent of Keating, Muething & Klekamp, P.L.L. (included
in Exhibit 5.1).
24.1 Power of Attorney.*
__________________________
*Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the
most recent post-effective amendment hereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
and of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of a Trust Fund's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939 in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act of 1939.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that (i) it reasonably believes that the security
rating requirement of Transaction Requirement B.5 of Form S-3 will be met by
the time of sale of each Series of Securities to which this Registration
Statement relates and (ii) it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Cincinnati, Ohio on the 15th day
of May, 1997.
THE PROVIDENT BANK
By /s/ Mark E. Magee
----------------------------
Name: Mark E. Magee
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
* President May 15, 1997
- -----------------------
Allen L. Davis (Principal Executive Officer)
and Director
* Senior Vice President
- ----------------------- and Chief May 15, 1997
John R. Farrenkopf Financial Officer (Principal
Accounting Officer)
* Director May 15, 1997
- -----------------------
Jack M. Cook
* Director May 15, 1997
- -----------------------
Thomas D. Grote, Jr.
* Director May 15, 1997
- -----------------------
Joseph A. Steger
* Director May 15, 1997
- -----------------------
Philip R. Myers
* Director May 15, 1997
- -----------------------
Joseph A. Pedoto
* Director May 15, 1997
- -----------------------
Sidney A. Peerless
*By: /s/ Mark E. Magee
----------------------
Attorney-in-Fact
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
- ------- ---------------------- ----------
1.1 -- Form of Underwriting Agreement.
4.1 -- Form of Pooling and
Servicing Agreement
relating to Home Equity
Loan Asset Backed
Certificates.
4.2 -- Form of Trust Agreement.
4.3 -- Form of Indenture.
4.4 -- Form of Master Servicing Agreement.
5.1 -- Opinion of Keating,
Muething & Klekamp, P.L.L.
as to the legality of the
Securities.
8.1 -- Opinion of Brown & Wood LLP
as to certain tax matters.
23.1 -- Consent of Brown & Wood LLP
(included in Exhibit 8.1).
23.2 -- Consent of Keating,
Muething & Klekamp, P.L.L.
(included in Exhibit 5.1).
24.1 -- Power of Attorney (included on page
II-3).*
- --------------------
*Previously filed.
EXHIBIT 1.1
$___________ (approximate)
Mortgage Pass-Through Certificates,
Series 1997-1
(DATE)
UNDERWRITING AGREEMENT
----------------------
(Underwriter)
Ladies and Gentlemen:
SECTION 1. Introduction.
------------ The Provident Bank, an Ohio banking
corporation (the "Company"), proposes to sell to you (sometimes referred to
herein as the "Underwriter"), $__________ principal amount of its Mortgage
Pass-Through Certificates identified in Schedule I hereto (the "Offered
Certificates") having the aggregate Initial Certificate Balances set forth in
Schedule I (subject to an upward or downward variance, not to exceed the
percentage set forth in such Schedule I, the precise Initial Certificate
Balance within such range to be determined by the Company in its sole discre-
tion). The Offered Certificates, together with the ___ Classes of
subordinate certificates (the "Non-Offered Certificates") and the Class of
residual certificates (the "Residual Certificates", and together with the
Offered Certificates and the Non-Offered Certificates, the "Certificates"),
evidence the entire ownership interest in the assets of a trust fund (the
"Trust") consisting primarily of fully-amortizing, fixed interest rate,
conventional mortgage loans, as described in Schedule I (the "Mortgage
Loans") originated or acquired by the Company in its ordinary course of
business, and having, as of the close of business on the date specified in
Schedule I as the cut-off date (the "Cut-Off Date"), the aggregate principal
balance set forth in Schedule I. An election will be made to treat the Trust
as a real estate mortgage investment conduit (a "REMIC") for purposes of
federal income taxation. The Certificates are to be issued pursuant to a
pooling and servicing agreement (the "Pooling Agreement"), dated as of the
Cut-Off Date, among the Company, as seller and master servicer (in such
capacities, the "Seller" and the "Master Servicer", respectively) and (
), as trustee (the "Trustee"). The Offered Certificates will be
issued in the denominations specified in Schedule I.
Capitalized terms used herein that are not otherwise defined herein
have the meanings assigned thereto in the Pooling Agreement.
SECTION 2. Representations and Warranties of the
-------------------------------------
Company.
- ------- Each of the Seller and the Company represents and warrants to the
Underwriter as follows:
(a) A Registration Statement on Form S-3 (File No. 333-
____________) (i) has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act")
and the rules and regulations (the "Rules and Regulations of the United
States Securities and Exchange Commission (the "Commission") thereunder,
(ii) been filed with the Commission under the Act and (iii) became effec-
tive under the Act. Copies of such Registration Statement have been
delivered by the Company to the Underwriter. As used in this Agreement,
"Effective Time" means the date and the time as of which such
Registration Statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time. "Registration Statement"
means such registration statement at the Effective Time, including any
documents incorporated by reference therein at such time; "Preliminary
Prospectus" means each prospectus included in such Registration
Statement, including a preliminary prospectus supplement which, as
completed, may be used in connection with the sale of the Offered
Certificates; and "Prospectus" means such final prospectus, as
supplemented by a prospectus supplement (the "Prospectus Supplement")
relating to the Offered Certificates in the form first filed with the
Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules
and Regulations. Reference made herein to any Preliminary Prospectus or
to the Prospectus shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Act, as of the date of such Preliminary Prospectus or the
Prospectus, as the case may be, and any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any document filed under the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of such
Preliminary Prospectus or the Prospectus, as the case may be, and
incorporated by reference in such Preliminary Prospectus or the
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to include any report of the
Company filed with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act after the Effective Time that is incorporated by
reference in the Registration Statement. There are no contracts or
documents of the Company which are required to be filed as exhibits to
the Registration Statement pursuant to the Act which have not been so
filed or incorporated by reference therein on or prior to the Effective
Date. The conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
To the extent that the Underwriter (i) has provided to the Company
Collateral Term Sheets (as hereinafter defined) that the Underwriter has
provided to a prospective investor, the Company has filed such
Collateral Term Sheets as an exhibit to a report on Form 8-K within two
business days of its receipt thereof, or (ii) has provided to the
Company Structural Term Sheets or Computational Materials (each as
defined below) that the Underwriter has provided to a prospective
investor, the Company will file or cause to be filed with the Commission
a report on Form 8-K containing such Structural Term Sheet and
Computational Materials, as soon as reasonably practicable after the
date of this Agreement, but in any event, not later than the date on
which the Prospectus is filed with the Commission pursuant to Rule 424
of the Rules and Regulations.
(b) The documents incorporated by reference in the Preliminary
Prospectus or Prospectus, as the case may be, when they became effective
or were filed with the Commission, as the case may be, conformed in all
material respects to the requirements of the Act or the Exchange Act, as
applicable, and the Rules and Regulations, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed
and incorporated by reference in the Preliminary Prospectus or
Prospectus, as the case may be, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act or the Exchange Act, as
applicable, and the Rules and Regulations and will not contain an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Act and the Rules and Regulations. The Registration
Statement, as of the Effective Date thereof, did not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Prospectus, as amended or supplemented at the Closing
Date, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
contained therein, in the light of the circumstances under which they
were made, not misleading; except that the foregoing does not apply to
statements or omissions in the Registration Statement or the Prospectus,
as amended or supplemented, if applicable, based upon written
information furnished to the Company by the Underwriter specifically for
use therein.
(d) Since the respective dates as of which information is given in
the Prospectus, except as otherwise stated therein, (i) there has been
no material adverse change in the condition, financial or otherwise,
earnings, affairs or business prospects of the Company, whether or not
arising in the ordinary course of business and (ii) there have been no
material transactions entered into by the Company other than those in
the ordinary course of business.
(e) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its respective
jurisdiction of incorporation with corporate power and authority to
execute, deliver and perform the transactions contemplated by this
Agreement and the Pooling Agreement.
(f) The Company is not in violation of its respective charter or
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which it is a party or by which it or any of its properties may be
bound; no consent, approval, authorization or order of any court or
governmental authority or agency is required for the consummation by the
Company of the transactions contemplated by this Agreement, except such
as may be required under the Act, the Rules and Regulations or state
securities or Blue Sky laws; and the execution and delivery of this
Agreement and the Pooling Agreement and the consummation of the
transactions contemplated herein and therein by the Company will not
conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, any material contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Company is a party or by which such party may be bound or to
which any of the property or assets of the Company is subject, nor will
such action result in any violation of the provisions of the charter or
by-laws of the Company or any law, administrative regulation or
administrative or court decree applicable to the Company.
(g) There is no action, investigation, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Company, threatened against or
affecting the Company, which might result in any material adverse change
in the condition, financial or otherwise, earnings, affairs or business
prospects of the Company, or might materially and adversely affect the
properties or assets thereof or might materially and adversely affect
the performance by the Company of its obligations under, or the validity
and enforceability of, this Agreement or the Pooling Agreement.
(h) This Agreement has been, and the Pooling Agreement when
executed and delivered as contemplated hereby and thereby will have
been, duly authorized, executed and delivered by the Company, and this
Agreement constitutes, and the Pooling Agreement, when executed and
delivered as contemplated herein, will constitute, legal, valid and
binding instruments enforceable against the Company in accordance with
their respective terms, subject as to enforceability to (x) applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting creditors' rights generally, (y) general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law), and (z) with respect to rights of indemnity under this
Agreement, limitations of public policy under applicable securities
laws.
(i) The Certificates have been duly authorized, and, when executed
and authenticated in accordance with the provisions of the Pooling
Agreement and delivered to and, with respect to the Offered
Certificates, paid for by the Underwriter in accordance with this
Agreement, will be validly issued and outstanding and entitled to the
benefits of the Pooling Agreement.
(j) At the time of execution and delivery of the Pooling
Agreement, the Company will: (i) have beneficial ownership of the
Mortgage Loans conveyed by the Seller, free and clear of any lien,
mortgage, pledge, charge, encumbrance, adverse claim or other security
interest (collectively, "Liens"); (ii) not have assigned to any person
(other than the Trustee) any of its right, title or interest in the
Mortgage Loans, in the Purchase Agreement or in the Pooling Agreement;
and (iii) have the power and authority to sell its interest in the
Mortgage Loans to the Trustee and to sell the Offered Certificates to
the Underwriter. Upon execution and delivery of the Pooling Agreement
by the Trustee, the Trustee will have acquired beneficial ownership of
all of the Company's right, title and interest in and to the Mortgage
Loans. Upon delivery to the Underwriter of the Offered Certificates,
the Underwriter will have good title to the Offered Certificates free of
any Liens.
(k) Neither the Company nor the Trust created by the Pooling
Agreement is an "investment company" within the meaning of such term
under the Investment Company Act of 1940 (the "1940 Act") and the rules
and regulations of the Commission thereunder.
(l) At the Closing Date, the Certificates and the Pooling
Agreement will conform in all material respects to the descriptions
thereof contained in the Prospectus.
(m) At the Closing Date, the Class A Certificates shall have been
rated in the highest rating category by at least two nationally
recognized rating agencies.
(n) The Company is not aware of (i) any request by the Commission
for any further amendment of the Registration Statement or the
Prospectus or for any additional information, (ii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceed-
ing for that purpose or (iii) any notification with respect to the
suspension of the qualification of the Offered Certificates for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(o) _____________ is an independent public accountant with respect
to the Master Servicer, the Seller and the Company as required by the
Act and the Rules and Regulations.
(p) The Seller possesses all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct the business
now conducted by it and as described in the Prospectus, and the Company
has not received notice of proceedings relating to the revocation or
modification of any such license, certificate, authority or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
conduct of its business, operations or financial condition.
(q) The Pooling Agreement is not required to be registered under
the Trust Indenture Act of 1939, as amended, as in effect on the date
hereof.
(r) Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of this Agreement, the Pooling
Agreement and the Certificates have been paid or will be paid at or
prior to the Closing Date.
(s) On the Closing Date, each of the representations and
warranties of the Company set forth in the Pooling Agreement and in the
Loan Sale Agreement will be true and correct in all material respects.
Any certificate signed by an officer of the Company and delivered
to you or counsel for the Underwriter in connection with an offering of the
Offered Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person
to whom the representations and warranties in this Section 2 are made.
SECTION 3. Purchase, Sale and Delivery of Offered
--------------------------------------
Certificates.
- ------------ On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Company agrees to instruct the Trustee to issue and agrees to sell to the
Underwriter, and the Underwriter agrees to purchase from the Company at a
purchase price set forth in Schedule 1 hereto, the respective principal
amount of Offered Certificates set forth in Schedule I hereto.
The Company will deliver the Offered Certificates to the Under-
writer, against payment of the purchase price therefor in same day funds
wired to such bank as may be designated by the Company, or by such other
manner of payment as may agreed upon by the Company and you, at the offices
of Brown & Wood LLP, One World Trade Center, New York, New York at 10:00
A.M., New York time, on _______________ or at such other place or time not
later than seven full business days thereafter as you and the Company
determine, such time being referred to herein as the "Closing Date."
The Offered Certificates so to be delivered will be in such
denominations and registered in such names as you request two full business
days prior to the Closing Date, as the case may be, and will be made
available for examination by the Underwriter no later than 2:00 p.m. New York
City time on the first business day prior to the Closing Date.
SECTION 4. Offering by the Underwriter.
--------------------------- It is understood that the
Underwriter proposes to offer the Offered Certificates subject to this
Agreement for sale to the public on the terms as set forth in the Prospectus.
SECTION 5. Covenants of the Company.
------------------------ The Company hereby covenants
and agrees with the Underwriter that:
(a) Immediately following the execution of this Agreement, the
Company will prepare the Prospectus Supplement in a form approved by the
Underwriter setting forth the amount of Offered Certificates covered
thereby and the terms thereof not otherwise specified in the Prospectus,
the price at which the Offered Certificates are to be purchased by the
Underwriter from the Company, either the initial public offering price
or the method by which the price at which the Offered Certificates are
to be sold will be determined, the selling concessions and allowances,
if any, and such other information as the Company deems appropriate in
connection with the offering of such Offered Certificates, but the
Company will not file any amendments to the Registration Statement as in
effect with respect to the Offered Certificates, or any amendments or
supplements to the Prospectus, without your consent, which will not be
unreasonably withheld.
(b) If, during such period of time after the first date of the
public offering of the Offered Certificates as in the opinion of counsel
for the Underwriter a prospectus relating to the Offered Certificates is
required by law to be delivered in connection with sales by the
Underwriter or dealer, any event occurs as a result of which the
Prospectus as then amended or supplemented would, in the judgment of the
Underwriter and its counsel, include any untrue statement of a material
fact, or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with the Act or any other law, the Company will
promptly prepare and file with the Commission, an amendment or supple-
ment which will correct such statement or omission or an amendment that
will effect such compliance and will notify you and, upon your request,
prepare and furnish without charge to the Underwriter and to any dealer
in securities as many copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus which
will correct such statement or omission or effect such compliance.
(c) The Company will deliver to the Underwriter such number of the
following documents as the Underwriter shall reasonably request: (i)
conformed copies of the Registration Statement and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein); (ii) the Prospectus and any amendment or supplement thereto;
and (iii) any document incorporated by reference in the Prospectus
(including exhibits thereto).
(d) The Company will endeavor, in cooperation with you, to qualify
the Offered Certificates for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United
States as you may designate, and will maintain such qualifications in
effect for as long as may be required for the distribution of the
Offered Certificates; provided, however, that the Company shall not be
required to qualify to do business in any jurisdiction where it is now
not qualified or to take any action which would subject it to general or
unlimited service of process in any jurisdiction in which it is now
subject to service of process. The Company will file such statements
and reports as may be required by the laws of each jurisdiction in which
the Offered Certificates have been qualified as above provided.
(e) The Company will notify you immediately, and confirm the
notice in writing, of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company will make
every reasonable effort to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment.
(f) The Company will make generally available to holders of the
Offered Certificates as soon as practicable, but in any event not later
than 90 days after the close of the period covered thereby, an earnings
statement of the Trust (which need not be audited) complying with
Section 11(a) of the 1933 Act and the Rules and Regulations (including,
at the option of the Company, Rule 158) and covering a period of at
least twelve consecutive months beginning not later than the first day
of the first fiscal quarter following the Closing Date.
(g) The Company will not, without your prior written consent,
publicly offer or sell or contract to sell any mortgage pass-through
certificates, mortgage pass-through notes or collateralized mortgage
obligations or other similar securities representing interests in or
secured by other mortgage-related assets originated or owned by either
such entity for a period of 30 days following the commencement of the
offering of the Offered Certificates to the public.
(h) So long as the Offered Certificates shall be outstanding, the
Company will deliver to the Underwriter the annual statement as to
compliance delivered to the Trustee pursuant to Section ____ of the
Pooling Agreement and the annual statement of a firm of independent
public accountants furnished to the Trustee pursuant to Section ____ of
the Pooling Agreement, as soon as such statements are furnished to the
Trustee.
(i) The Company will apply the net proceeds from the sale of the
Offered Certificates in the manner set forth in the Prospectus.
SECTION 6. Conditions to the Obligations of the
------------------------------------
Underwriter.
___________ The obligations of the Underwriter to purchase and pay for the
Offered Certificates on the Closing Date will be subject to the accuracy of
the representations and warranties on the part of the Company herein as of
the date hereof and as of the Closing Date with the same force and effect as
if made as of that date, to the performance by the Company of its respective
obligations hereunder and to the following additional conditions precedent:
(a) The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. Prior to the Closing Date
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have
been instituted, or to the knowledge of the Company or you, shall have
been contemplated by the Commission. Any request of the Commission for
inclusion of additional information in the Registration Statement or the
Prospectus shall have been complied with.
(b) The Underwriter shall not have discovered and disclosed to the
Company on or prior to the Closing Date that the Registration Statement
or the Prospectus or any amendment or supplement thereto contains an
untrue statement of a fact or omits to state a fact which, in the
opinion of Brown & Wood LLP, counsel for the Underwriter, is material
and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) You shall have received an opinion of counsel to the Company,
dated the Closing Date, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a banking corporation in good standing under the laws
of Ohio with corporate power and authority to execute, deliver and
perform the transactions contemplated by this Agreement and the
Pooling Agreement;
(ii) Each of this Agreement and the Pooling Agreement has been
duly authorized, executed and delivered by the Company;
(iii) The Certificates have been duly authorized, executed and
delivered by the Company;
(iv) No consent, approval, authorization or order of any court
or governmental authority or agency is required for the
consummation by the Company of the transactions contemplated by the
terms of this Agreement or the Pooling Agreement, except such as
may be required under the state securities or Blue Sky laws of any
jurisdiction in connection with the offering, sale or acquisition
of the Certificates and such other approvals as have been obtained;
(v) The sale of the Mortgage Loans to the Trust pursuant to
the Pooling Agreement, the execution and delivery of this Agreement
and the Pooling Agreement by the Company and the consummation of
the transactions contemplated herein or therein do not conflict
with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to any material
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company is a party or by which it may be
bound or to which any of the property or assets of the Company is
subject, nor will such action result in any violation of the
provisions of the charter or by-laws of the Company, or any law,
administrative regulation or administrative or court decree
applicable to the Company;
(vi) Assuming the Pooling Agreement has been duly authorized,
executed and delivered by the parties thereto, the Pooling
Agreement constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a proceeding in
equity or at law;
(vii) The Registration Statement has become effective under the
Act; no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or threatened under the Act; and the Registration
Statement, the Prospectus and each amendment or supplement thereto
(other than the financial and statistical information therein as to
which such counsel need express no opinion) as of their respective
effective or issue dates complied as to form in all material
respects with the requirements of the Act and the Rules and
Regulations;
(viii) The Pooling Agreement and the Certificates conform in all
material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus;
(ix) The Pooling Agreement will not be required to be
qualified under the Trust Indenture Act of 1939, as amended, and
neither the Company nor the Trust is required to be registered
under the Investment Company Act of 1940, as amended;
(x) Assuming that the Certificates have been duly authorized,
executed and authenticated in the manner contemplated in the
Pooling Agreement, when delivered and paid for by you as provided
in this Agreement, the Certificates purchased by you will be
validly issued and outstanding and entitled to the benefits of the
Pooling Agreement;
(xi) There are no legal or governmental actions,
investigations or proceedings pending to which the Company is a
party, or, to the best knowledge of such counsel, threatened
against the Company, (A) asserting the invalidity of this Agreement
or the Pooling Agreement, (B) seeking to prevent the sale of the
Mortgage Loans to the Trust or the consummation of any of the
transactions contemplated by this Agreement or the Pooling
Agreement or (C) which might materially and adversely affect the
performance by the Company of its obligations under, or the
validity or enforceability of, the Pooling Agreement or the
Mortgage Loans;
(xii) The conditions to the use by the Company of a
registration statement on Form S-3 under the Securities Act, as set
forth in the General Instructions to Form S-3, have been satisfied
with respect to the Registration Statement and the Prospectus.
(xiii) To the best of such counsel's knowledge, there are no
material contracts, indentures or other documents of a character
required to be described or referred to in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement other than those described or referred to
therein or filed or incorporated by reference as exhibits thereto.
Such counsel also shall state that it has no reason to believe that at
its effective date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus on the Closing Date
includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading (other than
the financial and statistical information contained therein as to which
such counsel need express no opinion);
(d) Reserved;
(e) You shall have received copies of any opinions of counsel for
the Company that the Company is required to deliver to the Rating
Agency. Any such opinions shall be dated the Closing Date and addressed
to the Underwriter or accompanied by reliance letters addressed to the
Underwriter.
(f) You shall have received from Brown & Wood LLP, counsel for the
Underwriter, such opinion or opinions, dated the Closing Date, in form
and substance satisfactory to you, with respect to the organization of
the Company, the validity of the Certificates, the Registration
Statement, the Prospectus and other related matters as you may require,
and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass
upon such matters.
(g) You shall have received from Brown & Wood LLP, special tax
counsel for the Company, dated the Closing Date, to the effect that:
(i) The statements in the Prospectus under the headings
"Federal Income Tax Consequences" and "ERISA
Considerations" and the summaries thereof under the headings
"Summary of the Prospectus--Tax Status of REMIC Certificates," "Tax
Status of Non-REMIC Certificates," and "--ERISA Considerations,"
and the statements in the Prospectus Supplement under the headings
"Federal Income Tax Consequence" and the summary thereof under the
heading "Summary of Terms--Certain Federal Income Tax Conse-
quences," to the extent they constitute matters of Federal law or
legal conclusions with respect thereto, have been reviewed by such
counsel and are correct in all material respects; and
(ii) The Trust described in the Prospectus Supplement and the
Pooling Agreement will qualify as a "real estate investment
conduit" ("REMIC") within the meaning of Section 860D of the
Internal Revenue Code of 1986, as amended (the "Code"), assuming
(i) an election is made to treat the Trust as a REMIC, (ii)
compliance with the Pooling Agreement and (iii) compliance with
changes in the law, including any amendments to the Code or appli-
cable Treasury regulations thereunder.
(h) At the Closing Date you shall have received a certificate of
an executive officer of the Company, dated as of the Closing Date, to
the effect that the representations and warranties contained in Section
2 are true and correct with the same force and effect as though made on
and as of the Closing Date.
(i) You shall have received from ( ), independent
public accountants, two letters, the first delivered the day of but
prior to the execution of, and dated the date of, this Agreement and the
other dated the Closing Date, addressed to the Underwriter, in the form
heretofore agreed (and in the case of the second such letter consistent
with the first such letter) with such variations as are reasonably
acceptable to you.
(j) You shall have received an opinion of _______________________,
counsel to the Trustee, dated the Closing Date, in form and substance
satisfactory to you and your counsel, to the effect that:
(i) the Trustee has been duly incorporated and is validly
existing as a ______________ under the laws of the
_________________ and has the power and authority to enter into and
to perform all actions required of it under the Pooling Agreement;
(ii) the Pooling Agreement has been duly authorized, executed
and delivered by the Trustee and constitutes a legal, valid and
binding obligation of the Trustee, enforceable against the Trustee
in accordance with its terms, except as such enforceability may be
limited by (A) bankruptcy, insolvency, liquidation, reorganization,
moratorium, conservatorship, receivership or other similar laws now
or hereafter in effect relating to the enforcement of creditors'
rights in general, and (B) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law) as well as concepts of reasonableness, good faith
and fair dealing;
(iii) the Certificates have been duly authenticated and
delivered by the Trustee;
(iv) the execution and delivery of the Pooling Agreement by
the Trustee and the performance by the Trustee of the terms thereof
do not conflict with or result in a violation of (A) any law or
regulation of the United States of America or the State of
___________ governing the banking or trust powers of the Trustee,
or (B) the certificate of incorporation or articles of association
or by-laws of the Trustee; and
(v) no approval, authorization or other action by, or filing
with, any governmental authority of the United States of America or
the State of ___________ having jurisdiction over the banking or
trust powers of the Trustee is required in connection with the
execution and delivery by the Trustee of the Pooling Agreement or
the performance by the Trustee thereunder.
(k) Each Class of Offered Certificates shall have been rated not
less than "( )" and "( )" by ( ) and (
), respectively, (each a "Rating Agency") and such ratings shall not
have been rescinded.
(l) At the Closing Date counsel for the Underwriter shall have
been furnished with such other documents and opinions as they may
reasonably require.
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Underwriter by notice to the Company at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except as provided in Section 7.
SECTION 7. Payment of Expenses.
------------------- The Company will pay all costs,
expenses, fees and taxes incident to (i) the preparation by the Company,
including, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits), of the
Prospectus, each Preliminary Prospectus and all amendments and supplements to
any of them prior to or during the period specified in Section 5(b), (ii) the
preparation, printing (including word processing and duplication costs) and
delivery of this Agreement, the Pooling Agreement, Preliminary and
Supplemental Blue Sky Memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection with
the offering of the Offered Certificates, (iii) the registration with the
Commission, and the issuance by the Company of the Offered Certificates, (iv)
the registration or qualification of the Offered Certificates for offer and
sale under the securities or Blue Sky laws of the several states as described
in Section 5(d) (including the reasonable fees and disbursements of your
counsel relating to such registration or qualification), (v) the fees and
expenses of the Rating Agencies, (vi) filings and clearance with the National
Association of Securities Dealers, Inc. in connection with the offering, if
applicable, and (vii) the performance by the Company of its other obligations
under this Agreement.
If this Agreement is terminated by you in accordance with the
provisions of Section 6 or Section 10, the Company shall reimburse you for
all of your out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriter.
SECTION 8. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities,
judgments and expenses whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or arising
out of any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus or the Prospectus or the
omission or alleged omission to state therein a material fact necessary
to make the statements therein, in light of the circumstances in which
they were made, not misleading, except insofar as such losses, claims,
damages, liabilities, judgments or expenses are caused by any such
untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to the Company by the
Underwriter expressly for use therein. This indemnity agreement will be
in addition to any liability which the Company may otherwise have to the
persons referred to above in this Section 8(a).
(b) The Underwriter agrees to indemnify and hold harmless the
Company, the directors of the Company, the officers of the Company who
sign the Registration Statement and each person, if any, who controls
the Company within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses,
claims, damages, liabilities, judgments and expenses whatsoever, as
incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus or the Prospectus or the omission or the alleged omission to
state therein a material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading,
but in each case only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
by the Underwriter expressly for use in the Registration Statement, the
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto. This indemnity agreement will be in addition to any liability
which the Underwriter may have to the persons referred to above in this
Section 8(b).
(c) In case any action or proceeding (including any governmental
or regulatory investigation or proceeding) shall be instituted involving
any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs or Section 8(h), such person
(hereinafter called the indemnified party) shall promptly notify the
person against whom such indemnity may be sought (hereinafter called the
indemnifying party) in writing and the indemnifying party, upon request
of the indemnified party, shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the indemnifying
party may designate and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such action or proceeding,
any indemnified party shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the reasonable fees and expenses of more
than one separate firm (in addition to any local counsel) for the
Underwriter and all persons, if any, who control the Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act and (b) the reasonable fees and expenses of more than
one separate firm (in addition to any local counsel) for the Company,
its directors, its officers who sign the Registration Statement and each
person, if any, who controls the Company within the meaning of either
such Section and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the
Underwriter and such control persons of the Underwriter, such firm shall
be designated in writing by the Underwriter. In the case of any such
separate firm for the Company, and such directors, officers and control
persons of the Company, such firm shall be designated in writing by the
Company. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are
the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 8(a), (b)
or (h) is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities, judgments or expenses referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities and expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand
and the Underwriter on the other from the offering of the Offered
Certificates or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company on the one hand and the
Underwriter on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriter on
the other shall be deemed to be in such proportions that the Underwriter
is responsible for its pro rata portion of such losses, liabilities,
claims, damages and expenses determined in accordance with the ratio
that the excess of the aggregate resale price received by the
Underwriter for the Offered Certificates over the purchase price paid to
the Company by the Underwriter (before deducting expenses) bears to the
aggregate resale price received by the Underwriter for the Offered
Certificates, and the Company shall be responsible for the balance. The
relative fault of the Company on the one hand and the Underwriter on the
other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the Underwriter, on the other hand, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and the Underwriter agree that it would not be
just and equitable if contribution pursuant to Section 8(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages,
liabilities, judgments or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
Section 8(d), in no event shall the Underwriter be required to
contribute any amount in excess of the amount by which the total
underwriting commission received by such Underwriter for the sale of the
Offered Certificates underwritten by such Underwriter and distributed to
the public exceeds the amount of any damages which the Underwriter has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
((f) The Underwriter confirms that the information set forth (i) in
the last paragraph on the cover page and (ii) in the second paragraph
under the caption "Method of Distribution" in the Prospectus Supplement
is correct and constitutes the only information furnished in writing to
the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement and the Prospectus.)
(g) The Underwriter agrees to provide the Company (i) all
Collateral Term Sheets, immediately upon distribution to any potential
investor and (ii) any other Derived Information no later than two
Business Days prior to which the Prospectus Supplement is required to be
filed pursuant to Rule 424. For purposes of this Agreement, the term
"Derived Information" means such portion, if any, of the information
delivered to the Company by the Underwriter pursuant to this Section for
filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference;
(ii) does not constitute Seller-Provided Information; and
(iii) is of the type of information defined as Collateral Term
Sheets, Structural Term Sheets or Computational Materials (as such
terms are interpreted in the No-Action Letters (as defined below)).
"Seller-Provided Information" means the information contained on
any computer tape furnished to the Underwriter by the Company concerning
the assets comprising the Trust.
The terms "Collateral Term Sheet" and "Structural Term Sheet" shall
have the respective meanings assigned to them in the February 13, 1995
letter (the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on
behalf of the Public Securities Association (which letter, and the SEC
staff's response thereto, were publicly available February 17, 1995).
The term "Collateral Term Sheet" as used herein includes any subsequent
Collateral Term Sheet that reflects a substantive change in the
information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder Letter"
and together with the PSA Letter, the "No-Action Letters") of Brown &
Wood on behalf of Kidder, Peabody & Co., Inc. (which letter, and the SEC
staff's response thereto, were publicly available May 20, 1994).
(h) The Underwriter agrees, assuming all Seller-Provided
Information (as defined below) is accurate and complete in all material
respects, to indemnify and hold harmless the Company, each of the
Company's officers and directors and each person who controls the
Company within the meaning of Section 15 of the Act against any and all
losses, claims, damages or liabilities, joint or several, to which they
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a material fact contained
in the Derived Information provided by the Underwriter, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such indemnified
party for any legal or other expenses reasonably incurred by such entity
or person in connection with investigating or defending or preparing to
defend any such loss, claim, damage, liability or action as such
expenses are incurred. The obligations of the Underwriter under this
Section 8(h) shall be in addition to any liability which the Underwriter
may otherwise have. The procedures set forth in Section 8(c) shall be
equally applicable to this Section 8(h).
SECTION 9. Representations, Warranties and Agreements
------------------------------------------
to Survive Delivery.
- ------------------- All representations, warranties and agreements
contained in this Agreement, or contained in certificates of officers of the
Company submitted hereto, including indemnity and contribution agreements,
shall remain operative and in full force and effect, regardless of any
termination of this Agreement, or any investigation made by or on behalf of
the Underwriter or any person controlling the Underwriter by or on behalf of
the Company, its officers or directors, and shall survive acceptance and
payment for the Offered Certificates hereunder.
SECTION 10. Effectiveness of Agreement and
------------------------------
Termination.
- ----------- This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.
This Agreement may be terminated for any reason at any time prior
to the Closing Date by the Underwriter upon the giving of written notice of
such termination to the Company, if prior to the Closing Date (i) there has
been, since the respective dates as of which information is given in the
Registration Statement, any material adverse change in the condition,
financial or otherwise, earnings, business affairs or business prospects of
the Company, whether or not arising in the ordinary course of business, or
(ii) there has occurred any outbreak or escalation of hostilities or other
calamity or crisis or material change in existing financial, political,
economic or securities market conditions, the effect of which is such as to
make it, in the judgment of the Underwriter, impracticable or inadvisable to
market the Offered Certificates in the manner contemplated in the Prospectus
or enforce contracts for the sale of the Offered Certificates, or (iii)
trading generally on either the American Stock Exchange or the New York Stock
Exchange has been suspended, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required,
by either of said exchanges or by order of the Commission or any other
governmental authority, or if a banking moratorium has been declared by
either Federal, New York State or New York City authorities. In the event of
any such termination, the provisions of Section 7, the indemnity agreement
and contribution provisions set forth in Section 8, and the provisions of
Sections 9 and 13 shall remain in effect.
( SECTION 11. Default.
------- If, on the Closing Date any one or more of
the Underwriters shall fail or refuse to purchase Offered Certificates that
it or they have agreed to purchase hereunder on such date, and the aggregate
principal amount of Offered Certificates which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate principal amount of the Offered Certificates to be
purchased on such date, the other Underwriters shall be obligated severally
in the proportions that the principal amount of Offered Certificates set
forth opposite their respective names in Schedule I bears to the aggregate
principal amount of Offered Certificates set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Offered Certificates which such defaulting Under-
writer or Underwriters agreed but failed or refused to purchase on such date;
provided
- -------- that in no event shall the principal amount of Offered Certificates
that any Underwriter has agreed to purchase pursuant to Section 3 be increased
pursuant to this Section 11 by an amount in excess of one-ninth of such
principal amount of Offered Certificates without the written consent of such
Underwriter. If, on the Closing Date any Underwriter or Underwriters shall
fail or refuse to purchase Offered Certificates and the aggregate principal
amount of Offered Certificates and the aggregate principal amount of Offered
Certificates with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of Offered Certificates to be purchased on
such date, and arrangements satisfactory to you and the Company for the
purchase of such Offered Certificates are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case either
you or the Company shall have the right to postpone the Closing Date but
in no event for longer than seven days, in order that the required changes,
if any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.)
SECTION 12. Notices.
------- All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the Underwriter directed to ( ); notices to the Company shall be directed
to it at The Provident Bank, One East Fourth Street, Cincinnati, Ohio 45202,
attention: ( ).
SECTION 13. Parties.
------- This Agreement shall inure to the benefit of
and be binding upon the Seller and the Company, the Underwriter, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Offered Certificates from the
Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. Governing Law.
------------- This Agreement shall be governed by the
laws of the State of New York.
SECTION 15. Counterparts.
------------ This Agreement may be signed in two or
more counterparts each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign this Agreement and return it to us.
Very truly yours,
THE PROVIDENT BANK
By ________________________________
Name:
Title:
Confirmed and Accepted, as of
the date first above written:
(UNDERWRITER)
By
-------------------------
SCHEDULE I
Offered Certificates: Mortgage Pass Through Certificates, Series
- -------------------- 1997-1, Class A-1, Class X and Class M-1.
Initial Principal Amount of Offered Certificates:
- ------------------------------------------------
Initial Class Certificate
Class Balance
------------------ ---------------------------
Class A-1 $
Class X $
Class M-1 $
Purchase Price:
- --------------
Class Purchase Price
- ------ --------------
Class A-1 %*
Class X %*
Class M-1 %*
_______________________
*Plus accrued interest
at the applicable Certificate
Rate from the Cut-off Date to,
but not including, the Closing
Date.
Classes of Book-Entry Certificates:
- ----------------------------------
Description of Mortgage Loans:
- ----------------------------- Fixed rate, conventional first loans
having an aggregate principal balance as
of the Cut-Off Date of approximately
$_____________. The Mortgage Loans are
fully-amortizing, ___ to ___ month, fixed
interest rate, conventional mortgage loans
secured by one-to four-family residential
properties.
Denominations:
- ------------- The Offered Certificates will be issued in
book-entry form. Each such Class of
Certificates will be evidenced by one or
more certificates registered in the name
of CEDE & Co. ("CEDE") in the aggregate
amount equal to the Initial Class Certifi-
cate Balance of such Class. Interests in
such Classes of Offered Certificates
issued in the name of CEDE may be pur-
chased by investors in minimum
denominations of $( ) and integral
multiples of $( ).
Cut-Off Date: (__________)
- ------------
Certificate Rate:
- ----------------
Class Rate
--------------- -------------------------
Class A-1 % per annum
Class X % per annum
Class M-1 % per annum
EXHIBIT 4.1
THE PROVIDENT BANK,
as Seller and Master Servicer
and
(______________________________________),
as Trustee
_______________________
POOLING AND SERVICING AGREEMENT
Dated as of ____________, 199_
______________________
Home Equity Loan Asset-Backed Certificates
Series 199_-_
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Interest Calculations . . . . . . . . . . . . . . . . 26
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans . . . . . . . . . . . . 27
Section 2.02. Acceptance by Trustee . . . . . . . . . . . . . . . . 31
Section 2.03. Representations and Warranties Regarding
the Seller and the Master Servicer . . . . . . . . . 32
Section 2.04. Representations and Warranties of the
Seller Regarding the Mortgage Loans . . . . . . . . 34
Section 2.05. (Reserved) . . . . . . . . . . . . . . . . . . . . . 45
Section 2.06. Substitution of Mortgage Loans . . . . . . . . . . . 45
Section 2.07. Execution and Authentication of
Certificates . . . . . . . . . . . . . . . . . . . . 47
Section 2.08. Designation of Interests in REMIC . . . . . . . . . . 47
Section 2.09. Designation of Start-up Day . . . . . . . . . . . . . 47
Section 2.10. REMIC Certificate Maturity Date . . . . . . . . . . . 47
Section 2.11. Tax Returns and Reports to
Certificateholders . . . . . . . . . . . . . . . . . 47
Section 2.12. Tax Matters Person . . . . . . . . . . . . . . . . . 48
Section 2.13. REMIC Related Covenants . . . . . . . . . . . . . . . 48
Section 2.14. Duties of Document Custodian; Authority . . . . . . . 51
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer . . . . . . . . . . . . . . . . . 52
Section 3.02. Collection of Certain Mortgage Loan
Payments . . . . . . . . . . . . . . . . . . . . . . 56
Section 3.03. Withdrawals from the Collection Account . . . . . . . 58
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses . . . . . . . . . . . . . . . . 59
Section 3.05. Maintenance of Mortgage Impairment
Insurance Policy . . . . . . . . . . . . . . . . . . 59
Section 3.06. Fidelity Bond . . . . . . . . . . . . . . . . . . . . 60
Section 3.07. Management and Realization Upon Defaulted
Mortgage Loans . . . . . . . . . . . . . . . . . . . 61
Section 3.08. Trustee to Cooperate . . . . . . . . . . . . . . . . 63
Section 3.09. Servicing Compensation; Payment of
Certain Expenses by Master Servicer . . . . . . . . 64
Section 3.10. Annual Statement as to Compliance . . . . . . . . . . 65
Section 3.11. Annual Servicing Report . . . . . . . . . . . . . . . 65
Section 3.12. Access to Certain Documentation and
Information Regarding the Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . . 66
Section 3.13. Maintenance of Certain Servicing
Insurance Policies . . . . . . . . . . . . . . . . . 66
Section 3.14. Reports to the Securities and Exchange
Commission . . . . . . . . . . . . . . . . . . . . . 66
Section 3.15. Reports of Foreclosures and Abandonments
of Mortgaged Properties, Returns Relating
to Mortgage Interest Received from
Individuals and Returns Relating to
Cancellation of Indebtedness . . . . . . . . . . . . 66
Section 3.16. Advances by the Master Servicer . . . . . . . . . . . 67
Section 3.17. Optional Purchase of Defaulted Mortgage
Loans
Section 3.18. Superior Liens . . . . . . . . . . . . . . . . . . . 68
Section 3.19. Assumption Agreements . . . . . . . . . . . . . . . . 69
Section 3.20. Payment of Taxes, Insurance and Other
Charges . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE IV
Certificate Insurance Policy
Section 4.01. Certificate Insurance Policy . . . . . . . . . . . . 71
Section 4.03. Replacement Credit Enhancement
Instruments . . . . . . . . . . . . . . . . . . . . 71
Section 4.04. Claims Upon the Certificate Insurance
Policy . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE V
Payments and Statements to Certificateholders;
Rights of Certificateholders
Section 5.01. Distributions . . . . . . . . . . . . . . . . . . . . 74
Section 5.02. Compensating Interest . . . . . . . . . . . . . . . . 77
Section 5.03. Statements . . . . . . . . . . . . . . . . . . . . . 77
Section 5.04. Distribution Account . . . . . . . . . . . . . . . . 81
Section 5.05. Investment of Accounts . . . . . . . . . . . . . . . 82
ARTICLE VI
The Certificates
Section 6.01. The Certificates . . . . . . . . . . . . . . . . . . 84
Section 6.02. Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . 84
Section 6.03. Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . . . . . 90
Section 6.04. Persons Deemed Owners . . . . . . . . . . . . . . . . 90
Section 6.05. Appointment of Paying Agent . . . . . . . . . . . . . 90
ARTICLE VII
The Seller and the Master Servicer
Section 7.01. Liability of the Seller and the Master
Servicer . . . . . . . . . . . . . . . . . . . . . . 92
Section 7.02. Merger or Consolidation of, or Assumption
of the Obligations of, the Seller or the
Master Servicer . . . . . . . . . . . . . . . . . . 92
Section 7.03. Limitation on Liability of the Master
Servicer and Others . . . . . . . . . . . . . . . . 92
Section 7.04. Master Servicer Not to Resign . . . . . . . . . . . . 93
Section 7.05. Delegation of Duties . . . . . . . . . . . . . . . . 94
Section 7.06. Indemnification of the Trust by the
Master Servicer . . . . . . . . . . . . . . . . . . 94
Section 7.07. Inspection . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE VIII
Default
Section 8.01. Events of Default . . . . . . . . . . . . . . . . . . 96
Section 8.02. Trustee to Act; Appointment of
Successor . . . . . . . . . . . . . . . . . . . . . 99
Section 8.03. Waiver of Defaults . . . . . . . . . . . . . . . . . 100
Section 8.04. Notification to Certificateholders
Section 8.05. Rights of the Certificate Insurer to
Exercise Rights of Class A
Certificateholders . . . . . . . . . . . . . . . . . 100
Section 8.06. Trustee to Act Solely with Consent of
the Certificate Insurer . . . . . . . . . . . . . . 101
Section 8.07. Mortgage Loans, Trust and Accounts Held
for Benefit of the Certificate Insurer . . . . . . . 101
Section 8.08. Certificate Insurer Default . . . . . . . . . . . . . 102
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee . . . . . . . . . . . . . . . . . . 103
Section 9.02. Certain Matters Affecting the Trustee . . . . . . . . 105
Section 9.03. Trustee Not Liable for Certificates or
Mortgage Loans . . . . . . . . . . . . . . . . . . . 110
Section 9.04. Trustee May Own Certificates . . . . . . . . . . . . 111
Section 9.05. Seller to Pay Trustee Fees and Expenses . . . . . . . 111
Section 9.06. Eligibility Requirements for Trustee . . . . . . . . 111
Section 9.07. Resignation or Removal of Trustee . . . . . . . . . . 112
Section 9.08. Successor Trustee . . . . . . . . . . . . . . . . . . 113
Section 9.09. Merger or Consolidation of Trustee . . . . . . . . . 114
Section 9.10. Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . . . 114
Section 9.11. Limitation of Liability . . . . . . . . . . . . . . . 115
Section 9.12. Trustee May Enforce Claims Without
Possession of Certificates; Inspection . . . . . . . 115
Section 9.13. Suits for Enforcement . . . . . . . . . . . . . . . . 116
ARTICLE X
Termination
Section 10.01. Termination . . . . . . . . . . . . . . . . . . . . 117
Section 10.02. Additional Termination Requirements . . . . . . . . 118
ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment . . . . . . . . . . . . . . . . . . . . . 120
Section 11.02. Recordation of Agreement . . . . . . . . . . . . . . 121
Section 11.03. Limitation on Rights of Certificate-
holders . . . . . . . . . . . . . . . . . . . . . . 122
Section 11.04. Governing Law . . . . . . . . . . . . . . . . . . . 123
Section 11.05. Notices . . . . . . . . . . . . . . . . . . . . . . 123
Section 11.06. Severability of Provisions . . . . . . . . . . . . . 124
Section 11.07. Assignment . . . . . . . . . . . . . . . . . . . . . 125
Section 11.08. Certificates Nonassessable and Fully
Paid . . . . . . . . . . . . . . . . . . . . . . . 125
Section 11.09. Third-Party Beneficiaries . . . . . . . . . . . . . 125
Section 11.10. Counterparts . . . . . . . . . . . . . . . . . . . . 125
Section 11.11. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . 125
Section 11.12. Insurance Agreement . . . . . . . . . . . . . . . . 125
Section 11.13. Subservicing Agreement . . . . . . . . . . . . . . . 125
EXHIBIT A - FORM OF CLASS A CERTIFICATE . . . . . . . . . . . . . . . A-1
EXHIBIT B - CERTIFICATE INSURANCE POLICY . . . . . . . . . . . . . . . B-1
EXHIBIT C - FORM OF CLASS R CERTIFICATE . . . . . . . . . . . . . . . C-1
EXHIBIT D - INITIAL MORTGAGE LOAN SCHEDULE . . . . . . . . . . . . . . D-1
EXHIBIT E - FORM OF INITIAL CERTIFICATE . . . . . . . . . . . . . . . E-1
EXHIBIT F - FORM OF MORTGAGE NOTE . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G - FORM OF MORTGAGES . . . . . . . . . . . . . . . . . . . . G-1
EXHIBIT H - TRANSFER AFFIDAVIT . . . . . . . . . . . . . . . . . . . . H-1
EXHIBIT I - LETTER OF REPRESENTATIONS . . . . . . . . . . . . . . . . I-1
EXHIBIT J - FORM OF REQUEST FOR RELEASE . . . . . . . . . . . . . . . J-1
EXHIBIT K - FORM OF INVESTMENT LETTER . . . . . . . . . . . . . . . . K-1
EXHIBIT L - SPECIMEN OF THE CERTIFICATE INSURANCE POLICY . . . . . . . L-1
EXHIBIT M - FORM OF OFFICER'S CERTIFICATE OF MASTER SERVICER . . . . . M-1
EXHIBIT N - (RESERVED)
EXHIBIT O - FORM OF LIQUIDATION REPORT . . . . . . . . . . . . . . . . O-1
EXHIBIT P - LIST OF SERVICING OFFICERS . . . . . . . . . . . . . . . . P-1
This Pooling and Servicing Agreement, dated as of ___________, 199_,
between The Provident Bank, as Seller (the "Seller"), as Document Custodian
(the "Document Custodian") and as Master Servicer (the "Master Servicer"),
and (________________________), as Trustee (the "Trustee").
W I T N E S S E T H T H A T:
----------------------------
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
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.
Accounts: Collectively, the Collection Account and the Distribution
--------
Account.
Affiliate: With respect to any Person, any other Person controlling,
---------
controlled by or under common control with such Person. For purposes of
this definition, "control" means the power to direct the management and
policies of a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise and "controlling" and
"controlled" shall have meanings correlative to the foregoing.
Aggregate Principal Balance: As of any date of determination, the sum
---------------------------
of all the Principal Balances of the Mortgage Loans.
Agreement: This Pooling and Servicing Agreement and all amendments
---------
hereof and supplements hereto.
Amount Available: As to any Distribution Date, the sum of the Available
----------------
Funds with respect to each of the Group 1 Certificates and the Group 2
Certificates.
Appraised Value: The appraised value of the Mortgaged Property based
---------------
upon the appraisal made by or for the originator at the time of the
origination of the related Mortgage Loan.
Assignment Event: The 30th day following either (i) the occurrence and
----------------
continuance of an Event of Default, (ii) the reduction of the Seller's long-
term unsecured debt rating below "____" by Moody's or "___" by Standard &
Poor's or (iii) the suspension, termination or withdrawal of the Seller's
long-term unsecured debt rating by Moody's or Standard & Poor's.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
----------------------
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Trustee, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged
Properties located in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the Borough
--------------------
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
Available Funds: As to any Distribution Date and Certificate Group, the
---------------
sum of (A) (x) the sum of all amounts described in clauses (i) through (vi)
inclusive, of Section 3.02(b) received by the Master Servicer in respect of
the related Loan Group (including any amounts paid by the Master Servicer and
the Seller and excluding (a) any amounts not required to be deposited in the
Collection Account pursuant to Section 3.02(b), (b) any amounts paid to the
Master Servicer or withdrawn by the Master Servicer pursuant to Sections
3.03(ii), (iii), (iv), (v), (vi) and (vii) in respect of the Mortgage Loans
in the related Loan Group as of the related Determination Date and (c) the
interest portion of Payaheads received during the related Due Period intended
by the Mortgagor to be applied in subsequent Due Periods) during the related
Due Period and deposited into the Collection Account as of the Determination
Date and (y) the interest portion of Payaheads deposited to the Collection
Account during a previous Due Period and intended to be applied by the
Mortgagor in the related Due Period, (B) Insured Payments, if any, with
respect to such Certificate Group and (C) any Termination Price with respect
to the Mortgage Loans in the related Loan Group deposited to the Distribution
Account pursuant to Section 10.01(a). No amount included in this definition
by virtue of being described by any component of the definition thereof shall
be included twice by virtue of also being described by any other component or
otherwise.
Balloon Loan: Any Mortgage Loan that provided on the date of
------------
origination for scheduled monthly payment in level amounts substantially
lower than the amount of the final scheduled payment.
BIF: The Bank Insurance Fund, as from time to time constituted, created
---
under the Financial Institutions Reform, Recovery and Enhancement Act of
1989, or, if at any time after the execution of this Agreement 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 Class A 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 the Certificate Insurer or banking institutions in the States of
New York, Ohio or the State in which the Corporate Truste OFfice is located
are required or authorized by law to be closed.
Certificate: Any Class A or Class R Certificate.
-----------
Certificate Group: Either Group 1 Certificates or Group 2 Certificates,
-----------------
as the context requires.
Certificate Index: For any Distribution Date, the rate for one month
-----------------
United States dollar deposits quoted on Telerate Page 3750 as of 11:00 A.M.,
London time, on the second LIBOR Business Day prior to the first day of the
related Interest Period relating to the Class A-2 Certificates (or the second
LIBOR Business Day prior to the Closing Date, in the case of the first
Distribution Date). "Telerate Page 3750" means the display designated as
page 3750 on the Telerate Service (or such other page as may replace page
3750 on that service for the purpose of displaying London interbank offered
rates of major banks). If such rate does not appear on such page (or such
other page as may replace that page on that service, or if such service is no
longer offered, such other service for displaying LIBOR or comparable rates
as may be reasonably selected by the Trustee after consultation with the
Master Servicer), the rate will be the Reference Bank Rate. If no such
quotations can be obtained and no Reference Bank Rate is available, the
Certificate Rate will be the Certificate Rate applicable to the preceding
Distribution Date. On the second LIBOR Business Day immediately preceding
each Distribution Date, the Trustee shall determine the Certificate Rate for
the Interest Period commencing on such Distribution Date and inform the
Master Servicer of such rate.
Certificate Insurance Policy: The Certificate Guaranty Insurance Policy
----------------------------
(No. _____) with respect to the Class A Certificates and all endorsements
thereto dated the Closing Date, issued by the Certificate Insurer for the
benefit of the Holders of each Class of Class A Certificates, a copy of which
is attached hereto as Exhibit L.
Certificate Insurer: (________________________), a stock insurance
-------------------
company organized and created under the laws of the State of (_______) or any
successor thereto.
Certificate Insurer Default: (i) Any failure of the Certificate Insurer
---------------------------
to make a payment required under the Certificate Insurance Policy in
accordance with its terms; (ii) the entry by a court having jurisdiction in
the premises of (A) a decree or order for relief in respect of the Certificate
Insurer in an involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency, rehabilitation, reorganization or
other similar law or (B) a decree or order adjudging the Certificate Insurer as
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, rehabilitation, arrangement, adjustment or composition of or
in respect of the Certificate Insurer under any applicable United States
federal or state law, or appointing a custodian, receiver, liquidator,
rehabilitator, assignee, trustee, sequestrator or other similar official of
the Certificate Insurer or of any substantial part of its property, or ordering
the winding-up or liquidation of its affairs, and the continuance of any such
decree or order for relief or any such other decree or order unstayed and in
each case in effect for a period of 60 consecutive days; or (iii) the
commencement by the Certificate Insurer of a voluntary case or proceeding
under any applicable United States federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated as bankrupt or insolvent, or the consent by the Certificate
Insurer to the entry of a decree or order for relief in respect of the
Certificate Insurer in an involuntary case or proceeding under any applicable
United States federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against the Certificate Insurer, or the filing by the
Certificate Insurer of a petition or answer or consent seeking reorganization
or relief under any applicable United States federal or state law, or the
consent by the Certificate Insurer to the filing of such petition or to the
appointment of or the taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Certificate
Insurer or of any substantial part of its property, or the making by the
Certificate Insurer of an assignment for the benefit of its creditors, or the
failure by the Certificate Insurer to pay debts generally as they become due,
or the admission by the Certificate Insurer in writing of its inability to
pay its debts generally as they become due, or the taking of corporate action
by the Certificate Insurer in furtherance of any such action.
Certificate Owner: The Person who is the beneficial owner of a
-----------------
Book-Entry Certificate.
Certificate Rate: With respect to the Class A-1 Certificates, ____% per
----------------
annum. With respect to the Class A-2 Certificates, the lesser of (A) the
Class A-2 Formula Rate and (B) the Net Funds Cap for such Distribution Date.
Certificate Register and Certificate Registrar: The register maintained
----------------------------------------------
and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
---------------------------
registered in the Certificate Register, except that, solely for the purpose
of giving any consent, direction, waiver or request pursuant to this Agreement,
(x) any Class A Certificate registered in the name of the Seller or any Person
actually known to a Responsible Officer to be an Affiliate of the Seller and
(y) any Class A Certificate for which the Seller or any Person actually know
to a Responsible Officer to be an Affiliate of the Seller is the Certificate
Owner or Holder shall be deemed not to be outstanding (unless to the
actual knowledge of a Responsible Officer (i) the Seller or such Affiliate
is acting as trustee or nominee for a Person who is not an Affiliate of the
Seller and who makes the voting decision with respect to such Class A
Certificates or (ii) the Seller or such Affiliate is the Certificate Owner or
Holder of all the Class A Certificates, but only with respect to the Class as
to which the Seller or such Affiliate owns all the Certificates) and the
Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary
to effect any such consent, direction, waiver or request has been obtained.
Civil Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940,
----------------
as amended.
Civil Relief Act Interest Shortfall: With respect to any Distribution
-----------------------------------
Date and Loan Group, for any Mortgage Loan in such Loan Group to which there
has been a reduction in the amount of interest collectible thereon for the
most recently ended Due Period as a result of the application of the Civil
Relief Act, the amount by which (i) interest collectible on such Mortgage
Loan during such Due Period is less than (ii) one month's interest on the
Principal Balance of such Mortgage Loan at the Loan Rate for such Mortgage
Loan before giving effect to the application of the Civil Relief Act.
Class: With respect to each of Class A-1, Class A-2 and Class R
-----
Certificates, all of the Certificates of such Class.
Class A Certificate: Any certificate executed and authenticated by the
-------------------
Trustee substantially in the form set forth in Exhibit A and designated as a
Class A-1 or Class A-2 Certificate pursuant to Section 6.01.
Class A Certificateholder: A Holder of a Class A Certificate.
-------------------------
Class A Monthly Principal Distributable Amount: With respect to any
----------------------------------------------
Distribution Date and Certificate Group, the amount equal to the sum of the
following amounts (without duplication) with respect to the immediately
preceding Due Period: (i) that portion of all Monthly Payments allocable to
principal on the Mortgage Loans in the related Loan Group, including all full
and partial principal prepayments received during the related Due Period,
(ii) the Principal Balance of all Mortgage Loans in the related Loan Group
that became Liquidated Mortgage Loans during the related Due Period and (iii)
the portion of the Purchase Price allocable to principal of all Defective
Mortgage Loans in the related Loan Group that were repurchased during the
related Due Period, and any Substitution Adjustments deposited to the
Distribution Account pursuant to Section 2.06(a) on or prior to the previous
Determination Date and not yet distributed.
Class A Principal Distribution: With respect to any Distribution Date
------------------------------
(other than the Final Scheduled Distribution Date) and Certificate Group, the
excess of (A) the sum of the related Class A Monthly Principal Distributable
Amount and Class A Principal Shortfall Amount for such Distribution Date over
(B) the related O/C Reduction Amount for such Distribution Date; provided,
--------
however, that the Class A Principal Distribution shall not exceed the related
- -------
Class Principal Balance. The "Class A Principal Distribution" for a
Certificate Group on the Final Scheduled Distribution Date for such
Certificate Group will equal the related Class Principal Balance for such
Certificate Group as of such Distribution Date.
Class A Principal Shortfall Amount: With respect to any Distribution
----------------------------------
Date and Certificate Group, the amount, if any by which the related Class A
Principal Balance, after giving effect to all distributions of the related
Class A Monthly Principal Distributable Amount and any draws under the
Certificate Insurance Policy for such Distribution Date and Certificate
Group, exceeds the related Loan Group Principal Balance as of the end of the
related Due Period.
Class A-1 Certificate: Any Certificate executed and authenticated by
---------------------
the Trustee and substantially in the form attached hereto as Exhibit A and
designated as a Class A-1 Certificate pursuant to Section 6.01.
Class A-2 Certificate: Any Certificate executed and authenticated by
---------------------
the Trustee and substantially in the form attached hereto as Exhibit A and
designated as a Class A-2 Certificate pursuant to Section 6.01.
Class A-2 Formula Rate: As to any Distribution Date, the sum of the
----------------------
Certificate Index for such Distribution Date plus ____% (or ____0 for each
Distribution Date occurring after the date on which the Seller has the right
to terminate the Trust).
Class Interest Carryover Shortfall: With respect to any Class of Class
----------------------------------
A Certificates and any Distribution Date, the amount by which the Class
Interest Distribution for such Class for each prior Distribution Date
exceeded the amount of interest actually distributed on such prior
Distribution Dates.
Class Interest Distribution: With respect to any Distribution Date and
---------------------------
each Class of Class A Certificates, the sum of (i) the applicable Class
Monthly Interest Distributable Amount for such Class on such Distribution
Date and (ii) the applicable Outstanding Class Interest Carryover Shortfall for
such Class on such Distribution Date.
Class Monthly Interest Distributable Amount: As to any Distribution
-------------------------------------------
Date and Class of Class A Certificates, interest accrued during the related
Interest Period at the applicable Certificate Rate on the related Class
Principal Balance immediately prior to such Distribution Date, reduced by an
amount equal to such Class' pro rata share (based on the amount of interest
to which such Class would have otherwise been entitled) of the related Civil
Relief Act Interest Shortfall, if any, for such Distribution Date.
Class Principal Balance: As of any date of determination and Class of
-----------------------
Certificates, the Original Class Certificate Principal Balance for such Class
reduced by the sum of all amounts previously distributed to the
Certificateholders of such Class in respect of principal on all previous
Distribution Dates.
Class R Certificate: Any Certificate executed and authenticated by the
-------------------
Trustee substantially in the form set forth in Exhibit C hereto.
Class R Certificateholder: The Holder of a Class R Certificate.
-------------------------
Closing Date: ___________, 199_.
------------
Code: The Internal Revenue Code of 1986, as the same may be amended
----
from time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
------------------
maintained for the benefit of the Certificateholders and the Certificate
Insurer pursuant to Section 3.02(b). The Collection Account shall be an
Eligible Account.
Combined Loan-to-Value Ratio or CLTV: With respect to any Mortgage
---------------------------- ----
Loan, the sum of the original principal balance of such Mortgage Loan and the
outstanding principal balance of the First Lien, if any, as of the date of
origination of the Mortgage Loan, divided by the Appraised Value.
Compensating Interest: As to any Distribution Date, the amount
---------------------
calculated pursuant to Section 5.02.
Corporate Trust Office: The principal office of the Trustee at which
----------------------
at any particular time its corporate business shall be administered, which
office on the Closing Date is located at
(________________________________________), Attention: (_______).
Cumulative Net Losses: With respect to each Liquidated Mortgage Loan,
---------------------
the amount by which the aggregate Principal Balance of, and accrued interest
on, such Liquidated Mortgage Loan exceeds the Net Liquidation Proceeds for
such Mortgage Loan allocated to principal and accrued interest.
Curtailment: With respect to a Mortgage Loan, any payment of principal
-----------
received during a Due Period as part of a payment that is in excess of the
amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
Cut-Off Date: For any Mortgage Loan, the opening of business on
------------
__________, 199_.
Cut-Off Date Loan Group Principal Balance: With respect to a Loan
-----------------------------------------
Group, the aggregate of the Cut-Off Date Principal Balances of the Mortgage
Loans in such Loan Group; which equals $_____________, with respect to Loan
Group 1 and $_____________, with respect to Loan Group 2.
Cut-Off Date Loan Group Principal Balance: $_____________ with respect
-----------------------------------------
to Loan Group 1 and $_____________ with respect to Loan Group 2.
Cut-Off Date Pool Principal Balance: $______________.
-----------------------------------
Cut-Off Date Principal Balance: With respect to any Mortgage Loan, the
------------------------------
unpaid principal balance thereof as of its Cut-Off Date (or as of the
applicable date of substitution with respect to an Eligible Substitute
Mortgage Loan pursuant to Section 2.02 or 2.04).
Defective Mortgage Loan: Any Mortgage Loan subject to repurchase or
-----------------------
substitution by the Seller pursuant to Section 2.02 or 2.04 or purchase by
the Master Servicer pursuant to Section 3.01(j).
Deficiency Amount: With respect to any Distribution Date, (A) the
-----------------
excess, if any, of (i) Class Monthly Interest Distributable Amount for each
Class of Class A Certificates (net of any Civil Relief Act Interest
Shortfalls with respect to the related Loan Group) plus any Class Interest
Carryover Shortfall for each Class of Class A Certificates over (ii) funds on
deposit in the Distribution Account available to be distributed therefor on
such Distribution Date and (B) the Guaranteed Principal Amount.
Definitive Certificates: As defined in Section 6.02(c).
-----------------------
Delinquency Loss Factor: As of any date of determination, the sum of:
-----------------------
(a) the Principal Balance of all Mortgage Loans 30-59 days Delinquent
as of such date multiplied by _____%;
(b) the Principal Balance of all Mortgage Loans 60-89 days Delinquent
as of such date multiplied by _____%; and
(c) the Principal Balance of all loans 90 or more days (including loans
in foreclosure and REO Property) as of such date Delinquent multiplied by
_____%.
Delinquent: A Mortgage Loan is "Delinquent" if any Monthly Payment due
----------
thereon is not made by the close of business on the day the related Monthly
Payment is scheduled to be due. A Mortgage Loan is "30 days Delinquent" if
such Monthly Payment has not been received by the close of business on the
last day of the month immediately succeeding the month in which such Monthly
Payment was due. Similarly for "60 days Delinquent," "90 days Delinquent"
and so on.
Depository: The initial Depository shall be The Depository Trust
----------
Company, the nominee of which is Cede & Co., as the registered Holder of
Class A-1 and Class A-2 Certificates evidencing $__________ and $__________,
respectively, in initial aggregate principal amount of such Certificates.
The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(3) of the UCC of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
----------------------
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
(Designated Subservicer: (_________________________) or its successor
----------------------
in interest.)
Determination Date: With respect to any Distribution Date, the
------------------
(eighteenth) day of the month in which such Distribution Date occurs (or if
such day is not a Business Day, the Business Day immediately preceding such
(eighteenth) day).
Distributable Excess Spread: As to any Distribution Date and
---------------------------
Certificate Group, the excess, if any, of the related Specified O/C Amount
for such Distribution Date over the O/C Amount on such date.
Distribution Account: The account established by the Trustee pursuant
--------------------
to Section 5.04. The Distribution Account shall be an Eligible Account.
Distribution Date: The twenty-fifth day of each month or, if such day
-----------------
is not a Business Day, then the next Business Day, beginning in _______ 199_.
Document Custodian: The Provident Bank, as custodian and bailee for the
------------------
Trustee.
Due Date: As to any Mortgage Loan, the day of the month on which the
--------
Monthly Payment is due from the Mortgagor.
Due Period: With respect to each Distribution Date, the calendar month
----------
preceding the month in which such Distribution Date occurs.
Electronic Ledger: The electronic master record of home equity mortgage
-----------------
loans maintained by the Master Servicer.
Eligible Account: A segregated account that is (i) maintained with a
----------------
depository institution whose short-term debt obligations and long-term debt
obligations at the time of any deposit therein and throughout the time the
interest is maintained are rated at least "P-1" and "A2", respectively, by
Moody's and "A-1" and "A", respectively, by Standard & Poor's, and that the
deposits in such account or accounts are fully insured by either the BIF or
the SAIF and which is any of (a) a federal savings and loan association duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (b) an institution duly organized, validly existing and in
good standing under the applicable banking laws of any state, (c) a national
banking association duly organized, validly existing and in good standing
under the federal banking laws or (d) a principal subsidiary of a bank
holding company, and in each case of (a)-(d), approved in writing by the
Certificate Insurer, (ii) a segregated trust account maintained with the
corporate trust department of a federal or state chartered depository or
trust company, having capital and surplus of not less than $50,000,000,
acting in its fiduciary capacity, or (iii) an account otherwise acceptable to
each Rating Agency and the Certificate Insurer as evidenced by a letter from
each Rating Agency and the Certificate Insurer to the Trustee, without
reduction or withdrawal of the then current ratings of the Certificates.
Eligible Investments: One or more of the following (excluding any
--------------------
callable investments purchased at a premium):
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided that such obligations are
--------
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition
thereof, provided that the short-term unsecured debt obligations of the
--------
party agreeing to repurchase such obligations are at the time rated by
each Rating Agency in its highest short-term rating category (which is
"A-1+" for Standard & Poor's and "P-1" for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if Moody's is a Rating Agency, shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days) of any U.S. depository institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal and/or state banking authorities,
provided that the unsecured short-term debt obligations of such depository
--------
institution or trust company at the date of acquisition thereof have been
rated by each of Moody's and Standard & Poor's in its highest unsecured
short-term debt rating category;
(iv) commercial paper (having original maturities of not more than
90 days) of any corporation incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been
rated by Standard & Poor's and Moody's in their highest short-term
rating categories;
(v) short term investment funds ("STIFS") sponsored by any trust
company or national banking association incorporated under the laws of
the United States or any state thereof which on the date of acquisition
has been rated by Standard & Poor's and Moody's in their respective
highest rating category of long term unsecured debt;
(vi) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time as the
interest is held in such fund has a rating of "Aaa" by Moody's and
either "AAAm" or "AAAm-G" by Standard & Poor's; and
(vii) other obligations or securities that are acceptable to each
Rating Agency and the Certificate Insurer as an Eligible Investment
hereunder and will not result in a reduction in the then current rating
of the Certificates, as evidenced by a letter to such effect from such
Rating Agency and the Certificate Insurer and with respect to which the
Master Servicer has received confirmation that, for tax purposes, the
investment complies with the last clause of this definition;
provided that no instrument described hereunder shall evidence either the
- --------
right to receive (a) only interest with respect to the obligations underlying
such instrument or (b) both principal and interest payments derived from
obligations underlying such instrument and the interest and principal
payments with respect to such instrument provided a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obli-
gations; and provided, further, that no instrument described hereunder may
-------- -------
be purchased at a price greater than par if such instrument may be prepaid or
called at a price less than its purchase price prior to its stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
---------------------------------
Seller for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not in excess of and not more than 5% less than
the Principal Balance of the Defective Mortgage Loan; (ii) have a Loan Rate
not less than the Loan Rate of the Defective Mortgage Loan and not more than
1% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) if such
Defective Mortgage Loan is in Loan Group 2, have a Loan Rate based on the
same Index with the next Interest Rate Adjustment Date no later than the
Interest Rate Adjustment Date of the Defective Mortgage Loan and have a
Margin that is not less than the Margin of the Defective Mortgage Loan and
not more than 100 basis points higher than the Margin for the Defective
Mortgage Loan; or (iv) have a Mortgage of the same or higher level of
priority as the Mortgage relating to the Defective Mortgage Loan at the time
such Mortgage was transferred to the Trust; (v) have a remaining term to
maturity not more than six months earlier and not later than the remaining
term to maturity of the Defective Mortgage Loan; (vi) comply with each
representation and warranty set forth in Section 2.04 (deemed to be made as
of the date of substitution); (vii) have an original Combined Loan-to-Value
Ratio not greater than that of the Defective Mortgage Loan; (viii) if such
Defective Mortgage Loan is in Loan Group 2, have a Lifetime Rate Cap and a
Periodic Rate Cap no lower than the Lifetime Rate Cap and Periodic Rate Cap,
respectively, applicable to such Defective Mortgage Loan; and (ix) be of the
same type of Mortgaged Property as the Defective Mortgage Loan or a detached
single family residence. More than one Eligible Substitute Mortgage Loan may
be substituted for a Defective Mortgage Loan if such Eligible Substitute
Mortgage Loans meet the foregoing attributes in the aggregate and such
substitution is approved in writing in advance by the Certificate Insurer.
Event of Default: As defined in Section 8.01.
----------------
Excess O/C Amount: As to any Distribution Date and Certificate Group,
-----------------
the amount by which (i) the related O/C Amount for such Distribution Date
exceeds (ii) the related Specified O/C Amount for such Distribution Date.
Excess Spread: With respect to any Distribution Date and Loan Group,
-------------
the excess, if any, of (x) Available Funds for the related Certificate Group
for such Distribution Date over (y) the sum of (a) the amount required to be
distributed pursuant to Section 5.01(a)(i)(1)-(4), with respect to the Group
1 Certificates, and Section 5.01(a)(ii)(1)-(4), with respect to the Group 2
Certificates, on such Distribution Date and (b) the portion of Available
Funds for such Certificate Group distributed pursuant to Section 5.01(a)(iii)
on such Distribution Date.
FDIC: The Federal Deposit Insurance Corporation or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation.
-----
Final Scheduled Distribution Date: With respect to the Group 1
---------------------------------
Certificates, the Distribution Date in ____________ and with respect to the
Group 2 Certificates, the Distribution Date in ____________.
First Lien: With respect to any Mortgage Loan which is a second
----------
priority lien, the mortgage loan relating to the corresponding Mortgaged
Property having a first priority lien.
Fiscal Agent: As defined in the Certificate Insurance Policy.
------------
FNMA: The Federal National Mortgage Association.
----
Foreclosure Profits: With respect to a Liquidated Mortgage Loan, the
-------------------
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
Group 1 Certificates: The Class A-1 Certificates.
--------------------
Group 2 Certificates: The Class A-2 Certificates.
--------------------
Guaranteed Principal Amount: means (a) for any Distribution Date (other
---------------------------
than a Distribution Date specified in (b)), the amount, if any, by which the
Class Principal Balance of each Certificate Group exceeds the related Loan
Group Principal Balance at the end of the previous month (after giving effect
to all distributions of principal on the related Class A Certificates on such
Distribution Date) and (b) on the Distribution Date in ____________ with
respect to the Group 1 Certificates, and ____________ with respect to the
Group 2 Certificates, (after giving effect to all other distributions of
principal on the Group 1 Certificates and the Group 2 Certificates, as
applicable), an amount equal to the applicable Class Principal Balance.
Index: With respect to each Interest Rate Adjustment Date for a
-----
Mortgage Loan in Loan Group 2, the average of the interbank offered rate for
six-month U.S. dollar denominated deposits in the London Market, as published
in The Wall Street Journal as of the first business day of the month
immediately preceding the month of the Interest Rate Adjustment Date.
Insurance Agreement: The Insurance Agreement dated as of __________,
-------------------
199_ among the DEPOSITOR, the Trustee, the Seller, the Master Servicer and
the Certificate Insurer, including any amendments and supplements thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the
------------------
Certificate Insurer) pursuant to any insurance policy covering a Mortgage
Loan or Mortgaged Property, or amounts required to be paid by the Master
Servicer pursuant to Section 3.05, net of any component thereof (i) covering
any expenses incurred by or on behalf of the Master Servicer in connection
with obtaining such proceeds, (ii) applied to the restoration or repair of
the related Mortgaged Property, (iii) released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures or (iv) required to be
paid to any holder of a mortgage senior to such Mortgage Loan.
Insured Payment: (i) With respect to any Distribution Date, any
---------------
Deficiency Amount and (ii) any Preference Amount.
Interest Period: With respect to any Distribution Date and (i) the
---------------
Class A-1 Certificates, the period from the first day of the calendar month
preceding the month of such Distribution Date through the last day of such
calendar month and (ii) the Class A-2 Certificates, the period from the
Distribution Date in the month preceding the month of such Distribution Date
(or, in the case of the initial Distribution Date, from the Closing Date)
through the day before such Distribution Date.
Interest Rate Adjustment Date: With respect to each Mortgage Loan in
-----------------------------
Loan Group 2, the date or dates on which the Loan Rate is adjusted in
accordance with the related Mortgage Note.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or
------------------
(ii) a day on which banking institutions in the State of New York or in the
city of London, England are required or authorized by law to be closed.
Lifetime Rate Cap: With respect to each Mortgage Loan in Loan Group 2,
-----------------
the maximum Loan Rate permitted over the life of such Mortgage Loan, as
provided by the terms of the related Mortgage Note.
Lifetime Rate Floor: With respect to each Mortgage Loan in Loan Group
-------------------
2, the minimum Loan Rate permitted over the life of such Mortgage Loan, as
provided by the terms of the related Mortgage Note.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage
------------------------
Loan in respect of which the Master Servicer has determined, in accordance
with the servicing procedures specified herein, as of the end of the related
Due Period, that all Liquidation Proceeds which it expects to recover with
respect to the liquidation of the Mortgage Loan or disposition of the related
REO Property have been recovered.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
--------------------
including amounts drawn under the Certificate Insurance Policy) received in
connection with the liquidation of any Mortgage Loan or related REO Property,
whether through trustee's sale, foreclosure sale or otherwise (including
rental income).
Liquidation Report: With respect to each Liquidated Mortgage Loan, the
------------------
report prepared by the Master Servicer in the form attached hereto as Exhibit
O.
Loan Group Principal Balance: Either the Loan Group 1 Principal Balance
----------------------------
or the Loan Group 2 Principal Balance, as applicable.
Loan Group: Either Loan Group 1 or Loan Group 2, as the context
----------
requires.
Loan Group 1: The pool of Mortgage Loans identified in the related
------------
Mortgage Loan Schedule as having been assigned to Loan Group 1.
Loan Group 1 Principal Balance: As of any date, the aggregate of the
------------------------------
Principal Balances of all Mortgage Loans in Loan Group 1 as of such date.
Loan Group 2: The pool of Mortgage Loans identified in the related
------------
Mortgage Loan Schedule as having been assigned to Loan Group 2.
Loan Group 2 Principal Balance: As of any date, the aggregate of the
------------------------------
Principal Balances of all Mortgage Loans in Loan Group 2 as of such date.
Loan Rate: With respect to any Mortgage Loan as of any day, the per
---------
annum rate of interest applicable under the related Mortgage Note to the
calculation of interest for such day on the Principal Balance.
Majority Certificateholder: The Holder or Holders of each Class of
--------------------------
Class A Certificates evidencing Percentage Interests in excess of 51% in the
aggregate.
Margin: As to any Mortgage Loan in Loan Group 2, the percentage set
------
forth as the "Margin" for such Mortgage Loan on the Mortgage Loan Schedule.
Master Servicer: The Provident Bank, an Ohio banking corporation, or
---------------
any successor thereto or any successor hereunder.
Master Servicing Fee: As to any Due Period and each Mortgage Loan, the
--------------------
annual fee payable to the Master Servicer which, subject to Section 3.02, is
calculated as an amount equal to the product of the Master Servicing Fee Rate
and the Principal Balance of such Mortgage Loan as of the first day of such
Due Period.
Master Servicing Fee Rate: ____% per annum.
-------------------------
Maximum Collateral Amount: With respect to each Certificate Group, the
-------------------------
Aggregate Principal Balance of the Mortgage Loans in the related Loan Group
as of the Cut-Off Date.
Monthly Advance: An advance made by the Master Servicer pursuant to
---------------
Section 3.16.
Monthly Payment: The scheduled monthly payment of principal and/or
---------------
interest required to be made by a Mortgagor on the related Mortgage Loan.
Moody's: Moody's Investors Service, Inc. or its successor in interest.
-------
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining
-------------
to a particular Mortgage Loan and any additional documents required to be
added to the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of
----------------------
Mortgage Loans constituting assets of the Trust. The Mortgage Loan Schedule
is the schedule attached hereto as Exhibit D, which schedule sets forth as to
each Mortgage Loan (i) related Cut-Off Date Principal Balance, (ii) the name
of the Mortgagor, (iii) the account number, (iv) the original principal
amount, (v) the CLTV as of the date of the origination of the related
Mortgage Loan, (vi) the Due Date, (vii) the Loan Rate as of the related Cut-
Off Date, (viii) the first date on which a Monthly Payment is or was due
under the Mortgage Note, (ix) the original stated maturity date of the
Mortgage Note and if the Mortgage Loan is a Balloon Loan, the amortization
terms, (x) the remaining number of months to maturity as of the related Cut-
Off Date, (xi) the State and zip code in which the related Mortgaged Property
is situated, (xii) the type of property, (xiii) the lien status (xiv) the
applicable Loan Group and (xv) with respect to each Mortgage Loan in Loan
Group 2, (a) the Periodic Rate Cap, (b) the Margin, (c) the Lifetime Rate Cap
and (d) the next Interest Rate Adjustment Date after the Cut-Off Date. The
Mortgage Loan Schedule will be amended from time to time to reflect the
substitution of an Eligible Substitute Mortgage Loan for a Defective Mortgage
Loan from time to time hereunder.
Mortgage Loans: The mortgage loans that are transferred and assigned
--------------
to the Trustee pursuant to Sections 2.01 and 2.06 together with the Related
Documents, exclusive of Mortgage Loans that are transferred to the Master
Servicer or the Seller, as the case may be, from time to time pursuant to
Sections 2.02, 2.04, 3.01(j) and 2.06, as from time to time are held as a
part of the Trust, such mortgage loans originally so held being identified
in the Mortgage Loan Schedule delivered on the Closing Date.
Mortgage Note: With respect to a Mortgage Loan, the note pursuant to
-------------
which the related mortgagor agrees to pay the indebtedness evidenced thereby
which is secured by the related Mortgage.
Mortgaged Property: The underlying property, including real property
------------------
and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Mortgage Note.
---------
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
------------------------
Liquidation Proceeds net of unreimbursed Master Servicing Fees, Servicing
Advances and Monthly Advances with respect thereto.
Net Funds Cap: As to any Distribution Date, the difference between (A)
-------------
the average of the Loan Rates of the Mortgage Loans in Loan Group 2 as of the
first day of the month preceding the month of such Distribution Date,
weighted on the basis of the related Principal Balances as of such date and
(B) the sum of (i) the Master Servicing Fee Rate, the rate at which the
Trustee Fee is calculated and the Premium Percentage and (ii) commencing with
the thirteenth Distribution Date, ____%.
Net Funds Cap Carryover Amount: As to any Distribution Date, the sum
------------------------------
of (A) if on such Distribution Date the Certificate Rate for the Class A-2
Certificates is based upon the Net Funds Cap, the excess of (i) the amount of
interest the Class A-2 Certificates would be entitled to receive on such
Distribution Date had such rate been calculated at the Class A-2 Formula Rate
for such Distribution Date over (ii) the amount of interest payable on the
Class A-2 Certificates at the Net Funds Cap for such Distribution Date, (B)
the Net Funds Cap Carryover Amount for all previous Distribution Dates not
previously reimbursed pursuant to Section 5.01(a)(vi)(6) and (C) one-month's
interest on the amount calculated in clause (B) at the Class A-2 Formula Rate
for such Distribution Date.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any
-----------------------
Servicing Advance or Monthly Advance previously made and not reimbursed
pursuant to Section 3.03(ii) or (ii) a Servicing Advance or Monthly Advance
proposed to be made in respect of a Mortgage Loan or REO Property which, in
the good faith business judgment of the Master Servicer, as evidenced by an
Officer's Certificate delivered to the Certificate Insurer, the Seller and
the Trustee promptly following such determination, would not be ultimately
recoverable pursuant to Sections 3.03(ii) or 3.03(vii).
O/C Amount: As to any Distribution Date and Certificate Group, the
----------
excess, if any, of (a) the related Loan Group Principal Balance as of the
close of business on the last day of the related Due Period over (b) the
related Class Principal Balance (after giving effect to amounts otherwise
available in respect of the Class A Monthly Principal Distributable Amount and
Class A Principal Shortfall Amount, if any, for such Distribution Date).
O/C Reduction Amount: As to any Distribution Date and Certificate
--------------------
Group, an amount equal to the lesser of (i) the related Excess O/C Amount for
such Distribution Date and (ii) with respect to the Group 1 Certificates,
Available Funds for such Certificates Group remaining after making the
distributions required to be made pursuant to Section 5.01(a)(i)(1) and (2)
on such Distribution Date and with respect to the Class A-2 Certificates,
Available Funds for the related Certificate Group remaining after making the
distributions required to be made pursuant to Section 5.01(a)(ii)(1) and (2)
on such Distribution Date.
Officer's Certificate: A certificate signed by the President, an
---------------------
Executive Vice President, a Senior Vice President, a First Vice President, a
Vice President, Assistant Vice President, the Treasurer, Assistant Treasurer,
Assistant Secretary, Controller or Assistant Controller of the Master
Servicer and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel reasonably acceptable
------------------
to the Trustee, who may be in-house counsel for the Master Servicer (except
that any opinion relating to the qualification of the Trust as a REMIC or
compliance with the REMIC Provisions must be an opinion of independent
outside counsel) and who, in the case of opinions delivered to each of the
Certificate Insurer and the Rating Agency, is reasonably acceptable to it.
Original Class Certificate Principal Balance: With respect to the Class
--------------------------------------------
A-1 Certificates, $__________ and with respect to the Class A-2 Certificates,
$__________.
Original Specified Subordinated Amount: As to the Group 1 Certificates,
--------------------------------------
$_______ and as to the Group 2 Certificates, $_________.
Original Specified Subordinated Amount Percentage: As to the Group 1
-------------------------------------------------
Certificates, ____% and as to the Group 2 Certificates, ____%.
Outstanding Class Interest Carryover Shortfall: As to any Class of
----------------------------------------------
Class A Certificates and any Distribution Date, the amount of Class Interest
Carryover Shortfall for such Distribution Date plus one month's interest
thereon, at the related Certificate Rate, to the extent permitted by law.
Ownership Interest: As to any Certificate 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.
Payahead: With respect to any Due Date and Mortgage Loan, a Monthly
--------
Payment received by the Master Servicer with the scheduled Monthly Payment
for such Due Date, intended by the related Mortgagor to be applied on a
subsequent Due Date.
Paying Agent: Any paying agent appointed pursuant to Section 6.05.
------------
Percentage Interest: As to any Class A Certificate, the percentage
-------------------
obtained by dividing the principal denomination of such Certificate by the
aggregate of the principal denominations of all Class A Certificates of the
same Class. As to any Class R Certificate, the portion of the Class
evidenced thereby as stated on the face thereof, which shall be either
99.999999% or, but only with respect to the Tax Matters Person Residual
Interest held by the Tax Matters Person, 0.000001%.
Periodic Rate Cap: With respect to each Mortgage Loan in Loan Group 2
-----------------
with respect to which the related Mortgage Note provides for a periodic rate
cap, the maximum percentage increase or decrease in the Loan Rate permitted
for such Mortgage Loan over the Loan Rate in effect as of an Interest Rate
Adjustment Date, as set forth on the Mortgage Loan Schedule.
Permitted Transferee: Any Person other than (i) the United States, any
--------------------
State or any political subdivision thereof or any agency or instrumentality
of any of the foregoing, (ii) a foreign government, international
organization or any agency or instrumentality of either of the foregoing,
(iii) an organization which is exempt from tax imposed by Chapter 1 of the
Code (including the tax imposed by section 511 of the Code on unrelated
business taxable income) (except certain farmers' cooperatives describe in
Code section 521) on any excess inclusions (as defined in Section 860E(c)(1))
with respect to any Class R Certificate, (iv) rural electric and telephone
cooperatives described in Code section 1381(a)(2)(C), (v) a Person that is
not a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States
or any political subdivision thereof, or an estate or trust whose income from
sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States and (vi) any other
Person so designated by the Trustee based on an Opinion of Counsel to the
effect that any transfer to such Person may cause the Trust to fail to
qualify as a REMIC at any time the Certificates are outstanding. The terms
"United States", "State" and "international organization" shall have the
meanings set forth in Code section 7701 or successor provisions. A
corporation will not be treated as an instrumentality of the United States or
of any State or political subdivision thereof if all of its activities are
subject to tax and, with the exception of the FHLMC, a majority of its board
of directors is not selected by such governmental unit.
Person: Any individual, corporation, partnership, joint venture,
------
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
Pool Factor: With respect to any Distribution Date and the Mortgage
-----------
Loans, the percentage, carried to six places, obtained by dividing the Class
Principal Balance of a Class of Class A Certificates for such Distribution
Date by the Original Class Certificate Principal Balance of such Class.
Pool Principal Balance: With respect to any date, the aggregate of the
----------------------
Principal Balances of all Mortgage Loans as of such date.
Preference Amount: As defined in the Certificate Insurance Policy.
-----------------
Premium Amount: As to any Distribution Date and Certificate Group, the
--------------
product of the Premium Percentage for such Certificate Group and the related
Class Principal Balance before giving effect to distributions to be made on
such Distribution Date.
Premium Percentage: As defined in the Insurance Agreement for each
------------------
Certificate Group.
Prepayment Assumption: A conditional rate of prepayment equal to __%
---------------------
per annum in the first month of the life of the mortgage loans and an
additional ____% (precisely _____) (expressed as a percentage per annum) in
each month thereafter until the twelfth month; beginning in the twelfth month
and in each month thereafter during the life of the mortgage loans, a
conditional prepayment rate of __% per annum each month is assumed.
Prepayment Interest Shortfall: With respect to any Distribution Date,
-----------------------------
for each Mortgage Loan that was the subject during the related Due Period of
a Principal Prepayment in full an amount equal to the excess, if any, of (i)
30 days' interest on the Principal Balance of such Mortgage Loan at the Loan
Rate (less the Master Servicing Fee Rate) over (ii) the amount of interest
actually remitted by the Mortgagor in connection with such Principal
Prepayment less the Master Servicing Fee for such Mortgage Loan in such
month.
Principal Balance: As to any Mortgage Loan and any day, other than a
-----------------
Liquidated Mortgage Loan, the related Cut-Off Date Principal Balance, minus
all collections credited against the Principal Balance of any such Mortgage
Loan. For purposes of this definition, a Liquidated Mortgage Loan shall be
deemed to have a Principal Balance equal to the Principal Balance of the
related Mortgage Loan immediately prior to the final recovery of related
Liquidation Proceeds and a Principal Balance of zero thereafter.
Principal Prepayment: Any payment or other recovery of principal on a
--------------------
Mortgage Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy a
Mortgage Loan in full.
Projected Monthly Excess Cashflow: As of any date of calculation and
---------------------------------
with respect to a Loan Group, the Excess Spread existing on the Distribution
Date immediately preceding such date of calculation.
Prospectus: The base prospectus dated ____________, 199_.
----------
Prospectus Supplement: The prospectus supplement dated __________,
---------------------
199_, relating to the offering of the Class A Certificates.
Provident: The Provident Bank, or any successor thereto.
---------
Purchase Price: As to any Defective Mortgage Loan repurchased on any
--------------
date pursuant to Sections 2.02 or 2.04 or any Mortgage Loan required or
permitted to be purchased pursuant to Section 3.01(j) or Section 3.17, an
amount equal to the sum of (i) the unpaid Principal Balance thereof, (ii) all
unpaid accrued interest thereon (such accrued and unpaid interest may
constitute all or a portion of unpaid Master Servicing Fees and unreimbursed
Monthly Advances), computed at the applicable Loan Rate and (iii) any
unreimbursed Servicing Advances with respect to such Mortgage Loan.
Rating Agency: Any statistical credit rating agency, or its successor,
-------------
that rated the Class A Certificates at the request of Provident 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 Provident and
acceptable to the Certificate Insurer, notice of which designation shall be
given to the Trustee. References herein to the highest short term unsecured
rating category of a Rating Agency shall mean "A-1+" or better in the case of
Standard & Poor's and "P-1" or better in the case of Moody's, and in the case
of any other Rating Agency shall mean such equivalent ratings. References
herein to the highest long-term rating category of a Rating Agency shall mean
"AAA" in the case of Standard & Poor's and "Aaa" in the case of Moody's and
in the case of any other Rating Agency, such equivalent rating.
Record Date: With respect to (i) the initial Distribution Date and all
-----------
Class A Certificates, the Closing Date, (ii) each subsequent Distribution
Date and the Class A-1 Certificates, the last day of the month immediately
preceding the month in which the related Distribution Date occurs and (iii)
each subsequent Distribution Date and the Class A-2 Certificates, the day
immediately preceding such Distribution Date; provided, however, that if any
-------- -------
Class A-2 Certificate becomes a Definitive Certificate, the record date
for such Class A-2 Certificate will be the last day of the month immediately
preceding the month in which the related Distribution Date occurs.
Reference Bank Rate: As to any Interest Period relating to the Class
-------------------
A-2 Certificates as follows: the arithmetic mean (rounded upwards, if
necessary, to the nearest one sixteenth of a percent) of the offered rates
for United States dollar deposits for one month which are offered by the
Reference Banks as of 11:00 A.M., London time, on the second LIBOR Business
Day prior to the first day of such Interest Period to prime banks in the
London interbank market for a period of one month in amounts approximately
equal to the Class Principal Balance of the Class A-2 Certificates; provided
--------
that at least two such Reference Banks provide such rate. If fewer than two
offered rates appear, the Reference Bank Rate will be the arithmetic mean of
the rates quoted by one or more major banks in New York City, selected by the
Trustee after consultation with the Master Servicer, as of 11:00 A.M., New
York time, on such date for loans in U.S. Dollars to leading European Banks
for a period of one month in amounts approximately equal to the Class
Principal Balance of the Class A-2 Certificates. If no such quotations can
be obtained, the Reference Bank Rate shall be the Reference Bank Rate appli-
cable to the preceding Interest Period.
Reference Banks: Three major banks that are engaged in the London
---------------
interbank market, selected by Provident after consultation with the Trustee.
Regular Certificates: The Class A Certificates.
--------------------
Reimbursement Amount: As of any Distribution Date, the sum of (x) (i)
--------------------
Insured Payments previously received by the Trustee and not previously re-
paid to the Certificate Insurer pursuant to Sections 5.01(a)(i)(4) and
5.01(a)(ii)(4) plus (ii) interest accrued on such Insured Payment not
previously repaid calculated at the Late Payment Rate (as defined in the
Insurance Agreement) from the date the Trustee received such Insured Payment
and (y) (i) the amount of any Premium Amount for either Certificate Group not
paid on the date due plus (ii) interest on such amount at the Late Payment
Rate. The Certificate Insurer shall notify the Trustee and Provident of the
amount of any Reimbursement Amount.
Related Documents: As defined in Section 2.01.
-----------------
Related Group: With respect to the Group 1 Certificates, Loan Group 1.
-------------
With respect to the Group 2 Certificates, Loan Group 2.
REMIC: A "real estate mortgage investment conduit" within the meaning
-----
of Section 860D of the Code.
REMIC Certificate Maturity Date: The "latest possible maturity date"
-------------------------------
of the Regular Certificates as that term is defined in Section 2.10.
REMIC Provisions: Provisions of the federal income tax law relating to
----------------
real estate mortgage investment conduits, which appear at Sections 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations promulgated thereunder, as the foregoing may be
in effect from time to time.
REO Property: A Mortgaged Property that is acquired by the Trustee in
------------
foreclosure or by deed in lieu of foreclosure.
Request for Release: A written request by either the Trustee or the
-------------------
Document Custodian for the release of a Mortgage File, in the form set forth
herein in Exhibit J.
Responsible Officer: When used with respect to the Trustee, any officer
-------------------
assigned to the corporate trust group (or any successor thereto), including
any vice president, assistant vice president, trust officer, any assistant
secretary, any trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration
of this Agreement. When used with respect to the Seller or Servicer, the
President or any Vice President, Assistant Vice President or any Secretary or
Assistant Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
----
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989 or, if at any time after the execution of this
Agreement the Savings Association Insurance Fund is not existing and
performing duties now assigned to it, the body performing such duties on such
date.
Seller: The Provident Bank, an Ohio banking corporation, or any
------
successor thereto, as seller hereunder.
Servicing Advances: All reasonable and customary unanticipated "out of
------------------
pocket" costs and expenses incurred in the performance by the Master Servicer
of its servicing obligations, including, but not limited to, the cost of (i)
the preservation, restoration and protection of the Mortgaged Property, (ii)
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the REO Property, including reasonable fees
paid to any independent contractor in connection therewith, (iv) compliance
with the obligations under Sections 3.04, 3.07 or 3.20 and (v) in connection
with the liquidation of a Mortgage Loan, expenditures relating to the
purchase or maintenance of the First Lien pursuant to Section 3.18, all of
which reasonable and customary unanticipated out-of-pocket costs and expenses
are reimbursable to the Master Servicer to the extent provided in Sections
3.03(ii) and 3.03(vii) and 3.07.
Servicing Certificate: A certificate completed and executed by a
---------------------
Servicing Officer on behalf of the Master Servicer.
Servicing Officer: Any officer of each of the Master Servicer and
-----------------
Designated Subservicer involved in, or responsible for, the administration
and servicing of the Mortgage Loans whose name and specimen signature appear
on a list of servicing officers furnished to the Trustee (with a copy to the
Certificate Insurer) by the Master Servicer and the Designated Subservicer,
as such list may be amended from time to time, initially set forth in Exhibit
P hereto.
Specified O/C Amount: (a) for any Distribution Date and Certificate
--------------------
Group occurring during the period commencing on the Closing Date and ending
on the later of the date upon which principal in the amount of one-half the
related Maximum Collateral Amount has been received by the Class A
Certificateholders of such Certificate Group and the 30th Distribution Date
following the Closing Date, the greater of (i) the applicable Original
Specified Subordinated Amount and (ii) two times the difference of (A)
one-half of the aggregate Principal Balances of all Mortgage Loans in the
related Loan Group which are 91 or more days Delinquent (including REO
Property) and (B) with respect to the Group 1 Certificates, five times, and
with respect to the Group 2 Certificates, three times the related Projected
Monthly Excess Cash Flow as of such Distribution Date;
(b) for any Distribution Date occurring after the end of the period in
clause (a) above, the greatest of (i) an amount equal to the lesser of (A)
the Original Specified Subordinated Amount and (B) two times the product of
the Original Specified Subordinated Amount Percentage and the related Class
Certificate Balance as of such Distribution Date, (ii) two times the
difference of (A) one-half of the aggregate Principal Balances of all
Mortgage Loans in the related Loan Group which are 91 or more days Delinquent
(including REO Property) over (B) with respect to the Group 1 Certificates,
five times, and with respect to the Group 2 Certificates, three times the
related Projected Monthly Excess Cashflow as of such date, (iii) an amount
equal to 0.50% of the Maximum Collateral Amount and (iv) the sum of the four
largest Principal Balances in the related Loan Group; and
(c) notwithstanding anything to the contrary set forth in clauses (a)
and (b) above, on the earlier of (i) any Distribution Date on which an Event
of Default has occurred and is continuing and (ii) any Distribution Date
after which there has been a draw on the Certificate Insurance Policy, the
Specified O/C Amount shall be the same as the Specified O/C Amount which
existed on the last Distribution Date on which an event specified in clause
(i) or (ii) as applicable had not occurred and was not continuing;
provided, however, that the Certificate Insurer may, in its sole discretion,
- -------- -------
at the request of the Seller, modify clause (a) and/or clause (b) above for
the purpose of reducing or eliminating, in whole or in part, the application
of clause (a) and/or clause (b) above and the Trustee and the Rating Agencies
hall be notified in writing of such modification prior to the related
Distribution Date and such modification shall not result in a downgrading of
the then-current ratings of the Certificates.
Standard & Poor's: Standard & Poor's Rating Services, a division of The
-----------------
McGraw-Hill Companies, or its successor in interest.
Start-up Day: The day designated as such pursuant to Section 2.09.
------------
Subservicer: Any Person with whom the Master Servicer has entered into
-----------
a Subservicing Agreement and who satisfies the requirements set forth in
Section 3.01(b) in respect of the qualification of a Subservicer.
Subservicing Agreement: Any agreement between the Master Servicer and
----------------------
any Subservicer relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 3.01(b), a copy of which shall be
delivered, along with any modifications thereto, to the Trustee and the
Certificate Insurer.
Substitution Adjustment: As to any date on which a substitution occurs
-----------------------
pursuant to Section 2.06, the excess of (i) the aggregate Principal Balances
of all Defective Mortgage Loans to be replaced by Eligible Substitute
Mortgage Loans (after application of principal payments received on or before
the date of substitution of any Eligible Substitute Mortgage Loans as of the
date of substitution), together with all accrued and unpaid interest (such
accrued and unpaid interest may constitute all or a portion of a unreimbursed
Monthly Advance) thereon at the Loan Rate, plus the amount of any
unreimbursed Servicing Advances made by the Master Servicer with respect to
such Defective Mortgage Loan over (ii) the Principal Balance of such Eligible
Substitute Mortgage Loan as of the date of substitution.
Supplemental Mortgage Loan Schedule: As defined in Section 2.06(b).
-----------------------------------
Tax Matters Person: As defined in Section 2.12.
------------------
Tax Matters Person Residual Interest: A 0.000001% interest in the Class
------------------------------------
R Certificates, which shall be issued to and held by the Trustee.
Total Expected Losses: The sum of the (i) Cumulative Net Losses from
---------------------
the Closing Date through and including the date of determination and (ii) the
Delinquency Loss Factor.
Trust: The trust created by this Agreement, the corpus of which
-----
consists of the Mortgage Loans, such assets as shall from time to time be
deposited in the Collection Account and the Distribution Account in
accordance with this Agreement, property that secured a Mortgage Loan and
that has become REO Property, the Certificate Insurance Policy, certain
hazard insurance policies maintained by the Mortgagors or the Master Servicer
in respect of the Mortgage Loans and all proceeds of each of the foregoing.
Trustee: (_______________________________________), or any successor
-------
Trustee appointed in accordance with this Agreement that has accepted such
appointment in accordance with this Agreement.
Trustee Fee: As to an Distribution Date and Loan Group, an amount equal
-----------
to ____% per annum of the sum of the related Loan Group Principal Balance as
of the first day of the preceding Due Period.
UCC: The Uniform Commercial Code, as amended from time to time, as in
---
effect in any specified jurisdiction.
Voting Rights: The portion of the aggregate voting rights of all the
-------------
Certificates evidenced by a Certificate. At all times during the term of
this Agreement, the Voting Rights shall be allocated among Holders of the
Class A Certificates in proportion to the Original Class Certificate
Principal Balances of their respective Classes. Voting Rights allocated to a
Class of Certificates shall be allocated among the Certificates of each such
Class in accordance with their respective Percentage Interests. The Holders
of the Class R Certificates shall have no Voting Rights.
Section 1.02. Interest Calculations. All calculations of interest
---------------------
hereunder that are made in respect of the Principal Balance of a Mortgage
Loan shall be made on the basis of a 360-day year consisting of twelve 30-day
months. The Certificate Rate for the Class A-1 Certificates shall be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
The Certificate Rate for the Class A-2 Certificates shall be calculated on
the basis of a 360-day year and the actual number of days elapsed. The
calculation of the Trustee Fee and the Master Servicing Fee shall be made on
the basis of a 360-day year consisting of twelve 30-day months. All dollar
amounts calculated hereunder shall be rounded to the nearest penny with one-
half of one penny being rounded down.
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans. (a) Provident, con
----------------------------
currently with the execution and delivery of this Agreement, does hereby
transfer, assign, sell, set over and otherwise convey to the Trust without
recourse (subject to Sections 2.02 and 2.04) (i) all of its right, title and
interest in and to each Mortgage Loan, including the related Cut-Off Date
Principal Balance, all interest accruing thereon on and after the applicable
Cut-Off Date and all collections in respect of interest and principal
received on and after the Cut-Off Date (exclusive of (i) payments in respect
of interest accrued on the Mortgage Loans during _________________ due on or
after the Cut-Off Date and permitted to be withdrawn from the Collection
Account pursuant to Section 3.03(v)(b) and (ii) payments in respect of
interest on the Mortgage Loans due prior to the Cut-Off Date and received
thereafter); (ii) property which secured such Mortgage Loan and which has
been acquired by foreclosure or deed in lieu of foreclosure; (iii) its
interest in any insurance policies in respect of the Mortgage Loans; and (iv)
all proceeds of any of the foregoing. In addition, on or prior to the
Closing Date, Provident shall cause the Certificate Insurer to deliver the
Certificate Insurance Policy to the Trustee. The foregoing sale, transfer,
assignment, set over and conveyance does not and is not intended to result in
a creation or an assumption by the Trustee of any obligation of the Seller or
any other Person in connection with the Mortgage Loans or any agreement or
instrument relating thereto except as specifically set forth herein.
In connection with such transfer, assignment, sale and conveyance by
Provident, the Seller shall deliver to, and deposit with, the Document
Custodian (in the case of paragraphs (ii), (iv), (v) and (vi) below) or the
Trustee (in the case of paragraphs (i) and (iii) below), on or before the
Closing Date (except that in the case of paragraph (iii) such documents need
not be delivered to the Trustee for up to 90 days from the Closing Date), the
following documents or instruments with respect to each Mortgage Loan (the
"Related Documents") and the related Mortgage Loan Schedule in computer
readable format:
(i) the original Mortgage Note, endorsed without recourse to the
order of the Trustee (which endorsement may be by an allonge), with all
intervening endorsements showing a complete chain of title from the
originator of such Mortgage Loan to the Seller;
(ii) the original Mortgage, with evidence of recording thereon,
provided that if the original Mortgage has been delivered for recording to
the appropriate public recording office of the jurisdiction in which the
Mortgaged Property is located but has not yet been returned to the Seller by
such recording office, the Seller shall deliver to the Document Custodian
a certified true copy of such original Mortgage so certified by the Seller,
together with a certificate of the Seller certifying that such original
Mortgage has been so delivered to such recording office; in all such instances,
the Seller shall deliver or cause to be delivered the original recorded
Mortgage to the Document Custodian promptly upon receipt of the original
recorded Mortgage;
(iii) the original Assignment of Mortgage, from the Seller to the
Trustee, which assignment shall be in form and substance acceptable for
recording;
(iv) the original attorney's opinion of title or the original
policy of title insurance, provided that if any such original policy of title
--------
insurance has not yet been received by the Seller, the Seller may have
delivered to the Document Custodian a copy of such policy or a title
insurance binder or commitment for the issuance of such policy;
(v) originals of all intervening assignments of Mortgage, with
evidence of recording thereon, showing a complete chain of title from the
originator to the Seller, provided that if any such original intervening
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assignment of Mortgage has been delivered for recording to the appropriate
public recording office of the jurisdiction in which the Mortgaged Property
is located but has not yet been returned to the Seller by such recording
office, the Seller may have delivered to the Document Custodian a certified
true copy of such original assignment of Mortgage so certified by the Seller,
together with a certificate of the Seller certifying that such original
assignment of Mortgage has been so delivered to such recording office; in all
such instances, the Seller shall deliver or cause to be delivered any such
original assignments to the Document Custodian promptly upon receipt thereof;
and
(vi) originals of all assumption and modification agreements, if
any.
For so long as an Assignment Event has not occurred, the Document
Custodian shall be entitled to maintain possession of each Mortgage File
(other than the related Mortgage Note and the Assignment of Mortgage) for
each Mortgage Loan. Within 30 days of an Assignment Event, the Seller, at
its expense, shall cause the portion of the Mortgage Files held by the
Document Custodian to be delivered to the Trustee or its designee.
The Seller hereby confirms to the Trustee that as of the Closing Date it
has caused the portions of the Electronic Ledger relating to the Mortgage
Loans to be clearly and unambiguously marked to indicate that the Mortgage
Loans have been transferred to the Trustee and constitute part of the Trust
in accordance with the terms of the trust created hereunder. The Electronic
Ledger shall indicate that the Mortgage Files (other than the Mortgage Notes
and the Assignments of Mortgage) are held by the Document Custodian as
custodian for the Trustee of the Provident Bank Home Equity Loan Trust 199_-_.
Within 30 days of an Assignment Event, the Seller, at its own expense,
shall either (i) record the Assignments of Mortgage in favor of the Trustee
in the appropriate real property or other records (which may be a blanket
assignment if permitted by applicable law) or (ii) deliver to the Trustee,
the Rating Agencies and the Certificate Insurer an Opinion of Counsel in form
and substance acceptable to the Certificate Insurer to the effect that
recording is not required to protect the Trustee's right, title and interest
in and to the related Mortgage Loan or, in the event a court should
recharacterize the conveyance of the Mortgage Loans as a loan or a pledge of
security for a loan, to perfect a first priority security interest in favor
of the Trustee in the related Mortgage Loan. With respect to any Assignment
of Mortgage as to which the related recording information is unavailable
within 30 days of an Assignment Event, such Assignment of Mortgage shall be
submitted by the Seller for recording within 30 days after receipt of such
information but in no event later than one year from the date such Assignment
of Mortgage is otherwise required to be recorded pursuant to this Section.
The Trustee shall be provided a copy of each Assignment of Mortgage submitted
for recording and such copy shall be retained by it. In the event that any
such Assignment of Mortgage is lost or returned unrecorded because of a
defect therein, the Seller, at its own expense, shall promptly prepare a
substitute Assignment of Mortgage or cure such defect, as the case may be,
and thereafter the Seller shall be required to submit each such Assignment of
Mortgage for recording. Any failure of the Seller to comply with this
Section shall result in the obligation of the Seller to purchase the related
Mortgage Loans pursuant to the provisions of Section 2.02 or substitute for
the related Mortgage Loans pursuant to the provisions of Section 2.06.
(b) The parties hereto intend that the transaction set forth herein be
a sale by Provident to the Trust of all Provident's right, title and interest
in and to the Mortgage Loans and other property described above. In the
event the transaction set forth herein is deemed not to be a sale, Provident
hereby grants to the Trust a security interest in all of Provident's right,
title and interest in, to and under the Mortgage Loans and other property
described above; and this Agreement shall constitute a security agreement
under applicable law.
The Seller agrees to prepare, execute and file UCC-1 financing
statements with the Secretary of State in the State of Ohio and the Hamilton
County, Ohio Recorder's Office (which shall have been filed on or before the
Closing Date with respect to the Mortgage Loans) describing the applicable
Mortgage Loans and naming the Seller as debtor and the Trustee as secured
party and all necessary continuation statements and any amendments to the
UCC-1 financing statements required to reflect a change in the name or
corporate structure of the Seller or the filing of any additional UCC-1
financing statements due to the change in the principal officer of the
Seller, as are necessary to perfect and protect the Trustee's interest in each
Mortgage Loan and the proceeds thereof.
The Seller, the Master Servicer and the Trustee shall, to the extent
consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in
the Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be main-
tained as such throughout the term of this Agreement.
(c) The Trustee shall, for the benefit of Certificateholders, within 60
days after execution and delivery of this Agreement certify to the Seller,
the Certificate Insurer and the Master Servicer that all Mortgage Notes have
been executed and received, and that such documents relate to the Mortgage
Loans identified on the Mortgage Loan Schedule and that the Mortgage Notes
have been endorsed as set forth in Section 2.01(a) (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), and in so doing the
Trustee may rely on the purported due execution and genuineness of any
signature thereon. Within 180 days after execution and delivery of this
Agreement, the Trustee agrees, for the benefit of Certificateholders, to
certify to the Seller, the Certificate Insurer and the Master Servicer that
all Assignments of Mortgages have been executed and received, and that such
documents relate to the Mortgage Loans identified on the Mortgage Loan
Schedule, and in so doing the Trustee may rely on the purported due execution
and genuineness of any signature thereon. If within such 60-day period or
180-day period, as applicable, the Trustee finds any such document constitut-
ing a part of a Mortgage File not to have been executed or received or to be
unrelated to the Mortgage Loans identified in said Mortgage Loan Schedule or,
if in the course of its review, the Trustee determines that such Mortgage
File is otherwise defective in any material respect, the Trustee shall,
promptly upon the conclusion of such review, notify the Seller, the Master
Servicer and the Certificate Insurer, and the Seller shall have a period of
90 days after such notice within which to correct or cure any such defect;
provided, however, that if such defect shall not have been corrected or cured
- -------- -------
within such 90-day period due primarily to the failure of the related office
of real property or other records to return any document constituting a part
of a Mortgage File, the Seller shall so notify the Trustee in writing and the
period during which such defect may be corrected or cured shall be extended
until such time as any such documents are returned from such related office
(in no event, however, will such period extend beyond one (1) year from the
date of discovery of such defect); provided that prior to any such extension
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the Seller shall deliver to the Trustee a true copy of such document with a
certification by the Seller on the face of such copy substantially as follows:
"certified true and correct copy of original which has been transmitted for
recordation."
The Trustee agrees, for the benefit of Certificateholders, within 60
days following receipt of the Mortgage Files after an Assignment Event, to
certify to the Seller, the Certificate Insurer and the Master Servicer that
it has reviewed each Mortgage File and that, as to each Mortgage Loan listed
in the related Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the certification in the
form annexed hereto as Exhibit E as not covered by such certification), (i)
all documents constituting part of such Mortgage File required to be
delivered to it pursuant to paragraphs (i) - (iv) of Section 2.01(a) are in
its possession, (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan, (iii) based on its
examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedule which corresponds to items (i), (iii), (iv), (vi) and
(viii) of the definition of "Mortgage Loan Schedule" accurately reflects
information set forth in the Mortgage File. If within such 60-day period,
the Trustee finds any document constituting a part of the Mortgage File not
to have been executed or received or to be unrelated to the Mortgage Loans
identified in said Mortgage Loan Schedule or, if in the course of its review,
the Trustee determines that such Mortgage File is otherwise defective in any
material respect, the Trustee shall notify the parties and follow the other
procedures set forth in the preceding paragraph.
(d) The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in subsection (c) of Section 2.01. Without
limiting the effect of the preceding sentence, in reviewing any Mortgage File
pursuant to such subsection, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form assigned and
endorsed in blank or whether any document has been recorded in accordance
with the requirements of 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, but shall not be required to determine whether any Person executing
any document is authorized to do so or whether any signature thereon is
genuine.
Section 2.02. Acceptance by Trustee. The Trustee hereby acknowledges
---------------------
its receipt of the Certificate Insurance Policy, the Mortgage Notes, and the
sale and assignment of the Mortgage Loans, and, subject to the review and
period for delivery provided for in Section 2.01, and the Document
Custodian's receipt of the Mortgage Files (based on the Document Custodian's
representation that it has received the portion of the Mortgage Files being
held by it hereunder), and declares that the Trustee will hold such documents
and all amounts received by it thereunder and hereunder in trust, upon the
terms herein set forth, for the use and benefit of all present and future
Certificateholders and the Certificate Insurer. If the Seller is given notice
under Section 2.01(c) and if the Seller does not correct or cure such
omission or defect within the applicable 90-day period specified in Section
2.01(c), the Seller shall purchase such Mortgage Loan from the Trustee or
substitute an Eligible Substitute Mortgage Loan for such Mortgage Loan (i) on
the Determination Date in the month following the month in which such 90-day
period expired at the Purchase Price of such Mortgage Loan or in accordance
with Section 2.06, as applicable or (ii) upon the expiration of such 90-day
period if the omission or defect would result in the related Mortgage Loan
not being a "qualified mortgage loan" for purposes of Section 860G(a)(3) of
the Code. The Purchase Price for the purchased Mortgage Loan shall be
deposited in the Collection Account no later than the applicable
Determination Date or the Business Day preceding the expiration of such
90-day period, as the case may be and, upon receipt by the Trustee of written
notification of such deposit signed by an officer ofthe Seller, the Trstee
shall direct the Document Custodian to release to the Seller the related
Mortgage File and the Trustee and the Document Custodian shall execute and
deliver such instruments of transfer or assignment, prepared by and at the
expense of the Seller, in each case without recourse, as shall be necessary
to vest in the Seller or its designee any Mortgage Loan released pursuant
hereto. It is understood and agreed that the obligation of the Seller to
purchase any Mortgage Loan or substitute an Eligible Substitute Mortgage Loan
for such Mortgage Loan as to which a material defect in or omission of a
constituent document exists shall constitute the sole remedy against the
Seller respecting such defect or omission available to the Certificate
Insurer, the Certificateholders or the Trustee on behalf of Certificate-
holders. An Opinion of Counsel to the effect set forth in Section 2.06(d)
shall be delivered to the Trustee in connection with any such repurchase.
The Master Servicer, promptly following the transfer of (i) a Defective
Mortgage Loan from the Trust or (ii) an Eligible Substitute Mortgage Loan to
the Trust pursuant to this Section and Section 2.06, as the case may be,
shall amend the Mortgage Loan Schedule, appropriately mark the Electronic
Ledger and make appropriate entries in its general account records to reflect
such transfer and the addition of any Eligible Substitute Mortgage Loan, if
applicable.
Section 2.03. Representations and Warranties Regarding the Seller and
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the Master Servicer. (a) Provident represents and warrants that, as of the
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Closing Date:
(i) It is an Ohio banking corporation, validly existing and in
good standing under the laws of the State of Ohio and has the corporate power
to own its assets and to transact the business in which it is currently
engaged. It is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the business
transacted by it or any properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on its business, properties, assets or condition (financial or
other);
(ii) It has the corporate 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 its legal, valid and
binding obligation 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 by the
availability of equitable remedies;
(iii) It is not required to obtain the consent of any other party or
any consent, license, approval or authorization from, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement, except for such consent, license, approval or authorization, or
registration or declaration, as shall have been obtained or filed, as the
case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this Agreement by
it will not violate any provision of any existing law or regulation or any
order or decree of any court applicable to it or any of its properties or any
provision of its Articles of Incorporation or Code of Regulations, or
constitute a material breach of any mortgage, indenture, contract or other
agreement to which it is a party or by which it may be bound;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to its
knowledge threatened, against it or any of its properties or with respect to
this Agreement or the Certificates which in its opinion has a reasonable
likelihood of resulting in a material adverse effect on the transactions
contemplated by this Agreement;
(vi) No certificate of an officer, statement furnished in writing
or report delivered by it pursuant to the terms hereof contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading;
(vii) The transactions contemplated by this Agreement are in the
ordinary course of business of Provident; and
(viii) It is not insolvent, nor will it be made insolvent by the
transfer of the Mortgage Loans, nor is it aware of any pending insolvency;
and it did not sell the Mortgage Loans to the Trustee with any intent to
hinder, delay or defraud any of its creditors.
(b) The representations and warranties set forth in this Section shall
survive the sale and assignment of the Mortgage Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially
and adversely affects the interests of the Certificateholders or the
Certificate Insurer, the Person discovering such breach shall give prompt
written notice to the other parties and to the Certificate Insurer. Within
60 days of its discovery or its receipt of notice of breach or, with the
prior written consent of a Responsible Officer of the Trustee, such longer
period specified in such consent, the Seller or the Master Servicer, as
appropriate, shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Seller Regarding
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the Mortgage Loans. (a) The Seller represents and warrants to the Master
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Servicer, the Trustee on behalf of the Certificateholders and the Certificate
Insurer as follows as of the Closing Date or such other specified date:
(i) The information with respect to each Mortgage Loan set forth
in the related Mortgage Loan Schedule is true and correct in all
material respects as of the Cut-Off Date;
(ii) As of the Closing Date, the Mortgage File relating to each
Mortgage Loan contains each of the documents and instruments specified
to be included therein;
(iii) Each Mortgaged Property is improved by a one- to four-family
single family residential dwelling, which may include condominiums,
townhouses and manufactured homes. No Mortgaged Property is a mobile
home. No Mortgage Property securing any Mortgage Loan is improved by a
manufactured home;
(iv) Each Mortgage Loan is being subserviced by the Designated
Subservicer;
(v) Each Mortgage Loan is a closed-end mortgage loan and all
amounts due under the related Mortgage Note have been advanced. Each
Mortgage Loan has an original term to maturity from the date on which
the first Monthly Payment is due of not more than 30 years with respect
to the Mortgage Loans in Loan Group 1 and 30 years with respect to the
Mortgage Loans in Loan Group 2. Not more than _____% of the Mortgage
Loans in Loan Group 1 (by Cut-Off Date Loan Group Initial Principal
Balance) are Balloon Loans;
(vi) Each Mortgage Note in respect of a Mortgage Loan in Loan Group
1 provides for level monthly payments sufficient to fully amortize the
principal balance of such Mortgage Note on its maturity date or is a
Balloon Loan;
(vii) Each Mortgage Note relating to a Mortgage Loan in Loan Group 2
accrues interest at an adjustable Loan Rate computed on an actuarial
basis. Each Loan Rate relating to a Mortgage Loan in Loan Group 2
adjusts semi-annually (after an initial fixed period of either six
months, thirty-six months or sixty months, as specified on the related
Mortgage Note) to equal the sum of the applicable Index and the Margin,
subject to a Periodic Rate Cap, Lifetime Rate Cap and Lifetime Rate
Floor. The Monthly Payment with respect to each Mortgage Loan in Loan
Group 2 adjusts with each adjustment to the Loan Rate and if timely paid
is sufficient to fully amortize the principal balance of such Mortgage
Note on its maturity date. With respect to each Interest Rate
Adjustment Date for a Mortgage Loan in Loan Group 2, the Periodic Rate
Cap is ____%. With respect to the Mortgage Loans in Loan Group 2, the
Lifetime Rate Caps range between _____% per annum and _____% per annum;
(viii) Each Mortgage is a valid and subsisting first or second lien
of record on the Mortgaged Property subject, in the case of any second
Mortgage Loan, only to a First Lien on such Mortgaged Property and
subject in all cases to the exceptions to title set forth in the title
insurance policy with respect to the related Mortgage Loan, which
exceptions are generally acceptable to second mortgage lending
companies, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate,
materially and adversely affect the benefits of the security intended to
be provided by such Mortgage. Any security agreement, chattel mortgage
or equivalent document related to the Mortgage and delivered to the
Trustee establishes in the Seller a valid and subsisting lien on the
property described therein, and the Seller has full right to assign the
same to the Trustee;
(ix) Except with respect to liens released immediately prior to the
transfer herein contemplated, each Mortgage Note and related Mortgage
have not been assigned or pledged and immediately prior to the transfer
and assignment herein contemplated, the Seller held good, marketable and
indefeasible title to, and was the sole owner and holder of, each
Mortgage Loan subject to no liens, charges, mortgages, claims, partici-
pation interests, equities, pledges or security interests of any nature,
encumbrances or rights of others (collectively, a "Lien"); the Seller
has full right and authority under all governmental and regulatory
bodies having jurisdiction over the Seller, subject to no interest or
participation of, or agreement with, any party, to sell and assign the
same pursuant to this Agreement; and immediately upon the transfer and
assignment herein contemplated, the Seller shall have transferred all of
its right, title and interest in and to each Mortgage Loan to the
Purchaser (or its assignee) and the Purchaser (or its assignee) will
hold good, marketable and indefeasible title, to, and be the sole owner
of, each Mortgage Loan subject to no Liens;
(x) Except for no more than ____% of the Mortgage Loans (by Cut-
Off Date Pool Initial Principal Balance), no Mortgage Loan was 30 or
more days delinquent as of its Cut-Off Date. No more than ____% of the
Mortgage Loans (by Cut-Off Date Pool Initial Principal Balance) is
between 30 and 59 days delinquent as of its Cut-Off Date;
(xi) There is no delinquent tax, fee or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of material
damage and is in good repair;
(xii) No Mortgage Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Mortgage Note or Mortgage,
or the exercise of any right thereunder, render either the Mortgage Note
or the Mortgage unenforceable in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, and no such right of rescission, set-off, counterclaim
or defense has been asserted with respect thereto;
(xiii) None of the Mortgage Loans are retail installment contracts
for goods or services or are home improvement loans for goods or
services, which would be either "consumer credit contracts" or "purchase
money loans" as such terms are defined in 16 C.F.R. Section433.1;
(xiv) No Mortgagor has or will have a claim or defense against the
Seller or any assignor or assignee of the Seller under any express or
implied warranty with respect to goods or services provided in
connection with any Mortgage Loan;
(xv) The Mortgage, the Mortgage Note and the other Related
Documents contain the entire agreement of the parties and all
obligations of the Seller under the related Mortgage Loan, and no other
agreement defines, modifies or expands the obligations of the Seller
under the Mortgage Loan;
(xvi) There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien
prior to, or equal or coordinate with, the lien of the related Mortgage,
and no rights are outstanding that under law could give rise to such a
lien except those which are insured against by the title insurance
policy referred to in paragraph (xviii) below;
(xvii) Each Mortgage Loan at the time it was made complied with, and
each Mortgage Loan at all times was serviced in compliance with, in
each case, in all material respects, applicable state and federal
laws and regulations, including, without limitation, usury, equal credit
opportunity, consumer credit, truth-in-lending and disclosure laws;
(xviii) With respect to each Mortgage Loan, either (i) a lender's
title insurance policy, issued in standard American Land Title
Association or California Land Title Association form, or other form
acceptable in a particular jurisdiction, by a title insurance company
authorized to transact business in the state in which the related
Mortgaged Property is situated, together with a condominium endorsement,
if applicable, in an amount at least equal to the original principal
balance of such Mortgage Loan insuring the mortgagee's interest under
the related Mortgage Loan as the holder of a valid first or second
mortgage lien of record on the real property described in the Mortgage,
subject only to the exceptions of the character referred to in paragraph
(viii) above, was valid and in full force and effect on the date of the
origination of such Mortgage Loan and as of the Closing Date or (ii) an
attorney's opinion of title was prepared in connection with the
origination of such Mortgage Loan. The Seller is the sole named insured
of such mortgage title insurance policy, the assignment to the Trustee
as assignee of the Seller's interest in such mortgage title insurance
policy does not require the consent of or notification to the insurer or
the same has been obtained, and such mortgage title insurance policy is
in full force and effect and will be in full force and effect and inure
to the benefit of the Trustee upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and no prior holder of the related
Mortgage, including the Seller, has done, by act or omission, anything
that would impair the coverage of such mortgage title insurance policy;
(xix) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy with a generally acceptable
carrier that provides for fire and extended coverage representing
coverage described in Sections 3.04 and 3.05;
(xx) A flood insurance policy is in effect with respect to each
Mortgaged Property with a generally acceptable carrier in an amount
representing coverage described in Sections 3.04 or 3.05, if and to the
extent required by Sections 3.04 or 3.05;
(xxi) Each Mortgage Note and the related Mortgage are genuine, and
each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the related Mortgagor and is enforceable in accordance
with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in
equity or at law), and all parties to each Mortgage Loan and the Mortgagee
had full legal capacity to execute all Mortgage Loan documents and to
convey the estate therein purported to be conveyed. The Mortgagor is
a natural person who is a party to the Mortgage Note and the Mortgage in
an individual capacity, and not in the capacity of a trustee or otherwise;
(xxii) The Seller has directed the Master Servicer to perform any and
all acts required to be performed to preserve the rights and remedies of
the Trustee in any insurance policies applicable to the Mortgage Loans
including, without limitation, any necessary notifications of insurers,
assign-ments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the
Trustee;
(xxiii) No more than ____% of the Mortgage Loans (by Cut-Off Date Pool
Initial Principal Balance) are secured by Mortgaged Properties located
within any single zip code area;
(xxiv) The terms of the Mortgage Note and the Mortgage have not been
impaired, altered or modified in any material respect, except by a
written instrument which has been recorded or is in the process of being
recorded, if necessary, to protect the interests of the
Certificateholders and the Certificate Insurer and which has been or
will be delivered to the Trustee. The substance of any such alteration
or modification is reflected on the related Mortgage Loan Schedule and
was approved, if required, by the related primary mortgage guaranty
insurer, if any. Each original Mortgage was recorded, and all
subsequent assignments of the original Mortgage have been recorded in
the appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof as against creditors of the Seller, or, subject
to Section 2.2 of the Purchase Agreement, are in the process of being
recorded;
(xxv) No instrument of release or waiver has been executed in
connection with the Mortgage Loan, and no Mortgagor has been released,
in whole or in part;
(xxvi) Except as provided in subclause (x) above, there are no
defaults in complying with the terms of the Mortgage, and any taxes,
governmental assessments, insurance premiums, water, sewer and municipal
charges or ground rents which previously became due and owing have been
paid. The Seller has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the Mort-
gagor, directly or indirectly, for the payment of any amount required by
the Mortgage Note, except for interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage proceeds, whichever
is later, to the day which precedes by one month the Due Date of the
first installment of principal and interest;
(xxvii) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and such property is undamaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado or other
casualty, so as to affect adversely the value of the Mortgaged Property
as security for the Mortgage Loan or the use for which the premises were
intended;
(xxviii) All of the improvements which were included for the purpose of
determining the appraised value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon the Mortgaged
Property;
(xxix) No improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or regulation.
All inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting certificates,
have been made or obtained from the appropriate authorities and the
Mortgaged Property is lawfully occupied under applicable law;
(xxx) The proceeds of each Mortgage Loan have been fully disbursed,
and there is no obligation on the part of the mortgagee to make future
advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing or recording the Mortgage Loans were paid;
(xxxi) Each Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage and, in certain circumstances, additional real
estate collateral;
(xxxii) No Mortgage Loan is subject to the Home Ownership and Equity
Protection Act of 1994;
(xxxiii) There is no obligation on the part of the Seller or any other
party to make payments in respect of a Mortgage Loan in addition to
those made by the Mortgagor;
(xxxiv) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Certificate-
holders to the trustee under the deed of trust, except in connection
with a trustee's sale after default by the Mortgagor;
(xxxv) No Mortgage Loan has a shared appreciation feature or other
contingent interest feature;
(xxxvi) The related First Lien, if any, requires equal monthly
payments, unless such First Lien is a balloon loan, or if it bears an
adjustable interest rate, the monthly payments for the related First
Lien may be adjusted no more frequently than monthly;
(xxxvii) Either (i) no consent for the Mortgage Loan is required by the
holder of the related First Lien or (ii) such consent has been obtained
and is contained in the Mortgage File;
(xxxviii) With respect to any First Lien that provides for negative
amortization or deferred interest, the balance of such First Lien used
to calculate the Combined Loan-to-Value Ratio for the Mortgage Loan is
based on the maximum amount of negative amortization possible under such
First Lien. With respect to any First Lien which is an open-ended loan,
the Combined Loan-to-Value Ratio was calculated based on the maximum
amount of principal which the borrower may incur thereunder;
(xxxix) The maturity date of the Mortgage Loan is prior to the
maturity date of the related First Lien, if any, if such First Lien
provides for a balloon payment. No Mortgage Loan provides for negative
amortization;
(xl) All parties which have had any interest in the Mortgage Loan,
whether as originator, mortgagee, assignee, pledgee, servicer or
otherwise, are (or, during the period in which they held and disposed of
such interest, were) (1) in compliance with any and all applicable
licensing requirements of the laws of the state wherein the Mortgaged
Property is located, and (2)(A) organized under the laws of such state,
or (B) qualified to do business in such state, or (C) federal savings
and loan associations or national banks having principal offices in such
state, or (D) not doing business in such state so as to require
qualification or licensing;
(xli) The Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event the related security for the Mortgage Loan is
sold without the prior consent of the mortgagee thereunder;
(xlii) Any future advances made prior to the Cut-Off Date have been
consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term reflected on the related
Mortgage Loan Schedule. The consolidated principal amount does not
exceed the original principal amount of the Mortgage Loan. The Mortgage
Note does not permit or obligate the Seller to make future advances to
the Mortgagor at the option of the Mortgagor;
(xliii) The Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for
the realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (ii) otherwise by judicial or
non-judicial foreclosure;
(xliv) Except as provided in paragraph (x) above, there is no
default, breach, violation or event of acceleration existing under any
Mortgage or the related Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration; and the Seller has not waived any default, breach,
violation or event of acceleration;
(xlv) All parties to the Mortgage Note and the Mortgage had legal
capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
(xlvi) All amounts received after the Cut-Off Date with respect to
the Mortgage Loans to which the Seller is not entitled have been
deposited into the Collection Account and are, as of the Closing Date in
the Collection Account;
(xlvii) All of the Mortgage Loans were originated in accordance with
the underwriting criteria set forth in the Prospectus Supplement; at
least _____% and _____% of the Mortgage Loans in Loan Group 1 and Loan
Group 2, respectively (by Cut-Off Date Loan Group Initial Principal
Balance), were originated pursuant to one of the Seller's full
documentation origination programs; no more than _____% and _____% of
the Mortgage Loans in Loan Group 1 and Loan Group 2, respectively (by
Cut-Off Date Loan Group Initial Principal Balance), were originated
pursuant to one of the Seller's reduced documentation origination
programs; and no more than _____% and _____% of the Mortgage Loans in
Loan Group 1 and Loan Group 2, respectively (by Cut-Off Date Loan Group
Initial Principal Balance) were originated pursuant to one of the
Seller's no-documentation origination programs;
(xlviii) Each Mortgage Loan conforms, and all such Mortgage Loans in
the aggregate conform, to the description thereof set forth in the
Prospectus Supplement; each Mortgage Note and Mortgage is in
substantially one of the forms attached as Exhibit F and Exhibit G
hereto;
(xlix) The Mortgage Loans were not selected by the Seller for
inclusion in the Trust on any basis intended to adversely affect the
Trust or the Certificate Insurer;
(l) All appraisals were performed by qualified independent
appraisers after analysis of other sales of properties in the area in
which the related Mortgaged Property is located, and a full interior
inspection appraisal was performed on forms acceptable to either FNMA or
FHLMC in connection with each Mortgaged Property;
(li) Each hazard insurance policy required to be maintained under
Section 3.04 with respect to a Mortgage Loan is a valid, binding,
enforceable and subsisting insurance policy and is in full force and
effect;
(lii) Each Mortgage Loan was originated by the Seller or an
affiliate of the Seller or purchased by the Seller;
(liii) Each Mortgaged Property is located in the state identified on
the related Mortgage Loan Schedule and consists of a single parcel of
real property with a one-family residence erected thereon, or an
attached or detached or semi-detached two- to four-family dwelling, or
an individual condominium unit, or an individual unit in a planned unit
development. With respect to each Cut-Off Date Loan Group Principal
Balance (a) no more than ____% and ____% of the Mortgage Loans in Loan
Group 1 and Loan Group 2, respectively (by Cut-Off Date Loan Group
Initial Principal Balance), are secured by real property improved by
two- to four-family dwellings, (b) no more than ____% and ____% of the
Mortgage Loans in Loan Group 1 and Loan Group 2, respectively (by Cut-
Off Date Loan Group Initial Principal Balance), are secured by real
property improved by individual condominium units and units in a planned
unit development and (c) at least _____% and _____% of the Mortgage
Loans in Loan Group 1 and Loan Group 2, respectively (by Cut-Off Date
Loan Group Initial Principal Balance), are secured by real property with
a one-family residence erected thereon. No Mortgaged Property is held
under a ground lease;
(liv) No Mortgage Loan had a Combined Loan-to-Value Ratio at the
time of origination of more than _____%;
(lv) No more than _____% and _____% of the Mortgage Loans in Loan
Group 1 and Loan Group 2, respectively (by Cut-Off Date Loan Group
Initial Principal Balance), are secured by Mortgaged Properties that are
non-owner occupied properties. The Mortgaged Property is lawfully
occupied under applicable law;
(lvi) The Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage;
(lvii) Each Mortgage Loan was originated on or after __________,
199_;
(lviii) As of the Closing Date, the Seller has not received a notice
of default of a First Lien which has not been cured;
(lix) The Seller has not transferred the Mortgage Loans to the
Trustee with any intent to hinder, delay or defraud any of its
creditors;
(lx) No improvement located on or being part of the related
Mortgaged Property is in violation of any applicable zoning law or
regulation. To the best knowledge of such Seller, all inspections,
licenses and certificates required to be made or issued with respect to
all occupied portions of the related Mortgaged Property and, with
respect to the use and occupancy of the same, including but not limited
to certifi-cates of occupancy, have been made or obtained from the
appropriate authorities and such Mortgaged Property is lawfully occupied
under applicable law;
(lxi) Each Mortgage Loan is a "qualified mortgage loan" for purposes
of Section 860G(a)(3) of the Code;
(lxii) No Mortgagor has requested relief under the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended;
(lxiii) To the best of Seller's knowledge, there do not exist any
circumstances or conditions with respect to the Mortgage Loan, the
Mortgaged Property, the Mortgagor or the Mortgagor's credit standing
that can be reasonably expected to materially adversely affect the value
or marketability of the Mortgage Loan;
(lxiv) Each of the documents and instruments included in a Mortgage
File is duly executed and in due and proper form and each such document
or instrument is in a form generally acceptable to prudent institutional
mortgage lenders that regularly originate or purchase mortgage loans;
(lxv) No Mortgage Loan is a construction loan;
(lxvi) The Seller is in possession of a complete Mortgage File and
there are no custodial agreements in effect adversely affecting the right
or ability of the Seller to make the document deliveries required hereby;
(lxvii) To the best of the Seller's knowledge, no Mortgaged Property
was, as of the related Cut-Off Date, located within a one-mile radius of
any site listed in the National Priorities List as defined under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or on any similar state list of hazardous waste sites
which are known to contain any hazardous substance or hazardous waste;
(lxviii) None of the Mortgage Loans is subject to a bankruptcy plan;
(lxix) The collection practices used by the Seller with respect to
the Mortgage Loans have been, in all material respects, legal, proper,
prudent and customary in the non-conforming mortgage servicing business;
(lxx) The transfer, assignment and conveyance of the Mortgage Notes
and the Mortgages by the Seller pursuant to this Agreement are not
subject to the bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction.
With respect to the representations and warranties set forth in this
Section that are made to the best of the Seller's knowledge (other than the
representation and warranty in subclause (lxiii)) or as to which the Seller
has no knowledge, if it is discovered by the Seller, the Master Servicer, the
Certificate Insurer or a Responsible Officer of the Trustee that the
substance of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then, notwithstanding the Seller's lack of knowledge with respect to
the substance of such representation and warranty being inaccurate at the
time the representation or warranty was made, such inaccuracy shall be deemed
a breach of the applicable representation or warranty and with respect to any
breach of such representation or warranty or of any other representation or
warranty, the Seller shall cure, repurchase or substitute in accordance with
the Pooling and Servicing Agreement.
(b) It is understood and agreed that the representations and warranties
set forth in this Section shall survive delivery of the respective Mortgage
Files to the Document Custodian and the Trustee, as applicable, and the
termination of the rights and obligations of the Master Servicer pursuant to
Section 7.04 or 8.01. Upon discovery by the Seller, the Master Servicer, the
Certificate Insurer, the Trustee or the Document Custodian of a breach of any
of the foregoing representations and warranties, without regard to any
limitation set forth therein concerning the knowledge of the Seller as to the
facts stated therein, which materially and adversely affects the interests of
the Trust or the Certificateholders or the Certificate Insurer in the related
Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties and the Certificate Insurer. Within 60 days of
its discovery or its receipt of notice of breach, the Seller shall use all
reasonable efforts to cure such breach in all material respects or shall
purchase such Mortgage Loan from the Trust or substitute an Eligible
Substitute Mortgage Loan as provided in Section 2.06 for such Mortgage Loan.
Any such purchase by the Seller shall be at the Purchase Price and in each
case shall be accomplished in the manner set forth in Section 2.02. It is
understood and agreed that the obligation of the Seller to cure, substitute
or purchase any Mortgage Loan as to which such a breach has occurred and
is continuing shall constitute the sole remedies against the Seller respecting
such breach available to Certificateholders or the Trustee on behalf of
Certificateholders pursuant to this Agreement. An Officer's Certificate and
Opinion of Counsel to the effect set forth in Section 2.06(d) shall be delivered
to the Trustee in connection with any such repurchase.
Section 2.05. (Reserved).
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Section 2.06. Substitution of Mortgage Loans. (a) On a Determination
------------------------------
Date within two years following the Closing Date and which is on or before
the date on which the Seller would otherwise be required to repurchase a
Mortgage Loan under Section 2.02 or 2.04, the Seller may deliver to the
Trustee one or more Eligible Substitute Mortgage Loans in substitution for
any one or more of the Defective Mortgage Loans which the Seller would other-
wise be required to repurchase pursuant to Sections 2.02 or 2.04. In
connection with any such substitution, the Seller shall calculate the
Substitution Adjustment, if any, and shall deposit such amount to the
Collection Account on or before the second Business Day prior to the
Distribution Date in the month succeeding the calendar month during which the
related Mortgage Loan became required to be purchased or replaced hereunder.
(b) The Seller shall notify the Master Servicer and the Trustee in
writing not less than five Business Days before the related Determination
Date which is on or before the date on which the Seller would otherwise be
required to repurchase such Mortgage Loan pursuant to Section 2.02 or 2.04 of
its intention to effect a substitution under this Section. On such
Determination Date (the "Substitution Date"), the Seller shall deliver to the
Trustee (1) the Eligible Substitute Mortgage Loans to be substituted for the
Defective Mortgage Loans, (2) a list of the Defective Mortgage Loans to be
substituted for by such Eligible Substitute Mortgage Loans, (3) an Officer's
Certificate (A) stating that no default by the Master Servicer described in
Section 8.01 shall have occurred and be continuing, (B) stating that the
aggregate principal balance of all Eligible Substitute Mortgage Loans (deter-
mined with respect to each Eligible Substitute Mortgage Loan as of the
Determination Date on which it was substituted) including the principal
balance of Eligible Substitute Mortgage Loans being substituted on such
Determination Date does not exceed an amount equal to 5% of the Pool
Principal Balance as of the Closing Date, (C) stating that all conditions
precedent to such substitution specified in subsection (a) have been satisfied
and attaching as an exhibit a supplemental Mortgage Loan Schedule (the
"Supplemental Mortgage Loan Schedule") setting forth the same type of
information as appears on the Mortgage Loan Schedule and representing as to
the accuracy thereof and (D) confirming that the representations and warranties
contained in Section 2.04 are true and correct in all material respects with
respect to the Substitute Mortgage Loans on and as of such Determination Date,
provided that remedies for the inaccuracy of such representations are limited
- --------
as set forth in Sections 2.02, 2.04 and this Section, (4) an Opinion of
Counsel to the effect set forth below and (5) a certificate stating that cash
in the amount of the related Substitution Adjustment, if any, has been
deposited to the Collection Account. Upon receipt of the foregoing, the
Trustee shall release such Defective Mortgage Loans to the Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Sections 2.06(a) and (b) above and the transfer of such Eligible Substitute
Mortgage Loans to the Trustee pursuant to Section 2.06(a), Exhibit D to this
Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Eligible Substitute Mortgage Loans and to include the
information set forth on the Supplemental Mortgage Loan Schedule with respect
to such Eligible Substitute Mortgage Loans, and all references in this Agree-
ment to Mortgage Loans shall include such Eligible Substitute Mortgage Loans
and be deemed to be made on or after the related Substitution Date, as the
case may be, as to such Eligible Substitute Mortgage Loans.
(d) In connection with the transfer of any Eligible Substitute Mortgage
Loan to the Trustee pursuant to this Section 2.06, the Seller shall deliver
to the Trustee and the Certificate Insurer an Opinion of Counsel to the
effect that such substitution will not cause (x) any federal tax to be
imposed on the Trust, including, without limitation, any Federal tax imposed
on "prohibited transactions" under Section 860F(a)(1) of the Code or on
"contributions after the start-up day" under Section 860G(d)(1) of the Code
or (y) any portion of the Trust to fail to qualify as a REMIC at any time
that any Certificate is outstanding. In the event that such opinion
indicates that a substitution will result in the imposition of a prohibited
transaction tax, give rise to net taxable income or be deemed a contribution
to the REMIC after the Start-up Day, the Seller shall not substitute for any
such Mortgage Loan until the Opinion of Counsel to the effect referred to in
the preceding sentence has been rendered.
Section 2.07. Execution and Authentication of Certificates. The
--------------------------------------------
Trustee on behalf of the Trust shall cause to be executed, authenticated and
delivered on the Closing Date to or upon the order of the DEPOSITOR, in
exchange for the Mortgage Loans, concurrently with the sale, assignment and
conveyance to the Trustee of the Mortgage Loans, each Class of Regular
Certificates in authorized denominations and the Class R Certificates,
together evidencing the ownership of the entire Trust.
Section 2.08. Designation of Interests in REMIC. The Class R
---------------------------------
Certificates are hereby designated as the single class of "residual
interests" in the REMIC for purposes of the REMIC Provisions. The Regular
Certificates are hereby designated as "regular interests" in the REMIC for
purposes of the REMIC Provisions.
Section 2.09. Designation of Start-up Day. The Closing Date is hereby
---------------------------
designated as the "start-up day" of the REMIC within the meaning of Section
860G(a)(9) of the Code.
Section 2.10. REMIC Certificate Maturity Date. Solely for purposes of
-------------------------------
satisfying Section 1.860G-1(a)(4)(iii) of the Treasury Regulations, the
"latest possible maturity date" of the REMIC is the Distribution Date in
____________.
Section 2.11. Tax Returns and Reports to Certificateholders. (a) For
---------------------------------------------
federal income tax purposes, the Trust shall have a calendar year and shall
maintain its books on the accrual method of accounting.
(b) The Trustee shall prepare, or cause to be prepared, execute and
deliver to the Master Servicer or Certificateholders, as applicable, any
income tax information returns for each taxable year with respect to the
Trust containing such information at the times and in the manner as may be
required by the Code or state or local tax laws, regulations, or rules, and
shall furnish or cause to be furnished to the Trust and the
Certificateholders the schedules, statements or information at such times and
in such manner as may be required thereby. Within thirty (30) days of the
Closing Date, the Trustee shall furnish or cause to be furnished to the
Internal Revenue Service, on Form 8811 or as otherwise required by the Code,
the name, title, address and telephone number of the person that Holders of
the Certificates may contact for tax information relating thereto, together
with such additional information at the time or times and in the manner
required by the Code. Such federal, state or local income tax or information
returns shall be signed by the Trustee or such other Person as may be
required to sign such returns by the Code or state or local tax laws, regula-
tions or rules.
(c) In the first federal income tax return of the Trust for its short
taxable year ending ___________, 199_, a REMIC election shall be made with
respect to all assets of the Trust for such taxable year and all succeeding
taxable years.
(d) The Trustee will maintain or cause to be maintained such records
relating to the Trust, including, but not limited to, the income, expenses,
assets and liabilities of the Trust, and the fair market value and adjusted
basis of the Trust property and assets determined at such intervals as may be
required by the Code, as may be necessary to prepare the foregoing returns,
schedules, statements or information.
(e) The Master Servicer, upon request, shall promptly furnish the
Trustee with all such information as to the Mortgage Loans as may be required
in connection with the Trustee's REMIC reporting obligations pursuant to this
Agreement.
Section 2.12. Tax Matters Person. The tax matters person with respect
------------------
to the REMIC (the "Tax Matters Person") shall be the Trustee. The Trustee
shall at all times hold the Tax Matters Person Residual Interest and shall
have the same duties with respect to the Trust as those of a "tax matters
partner" under Subchapter C of Chapter 63 of Subtitle F of the Code. Each
holder of a Class R Certificate shall be deemed to have agreed, by acceptance
thereof, to be bound by this Section.
Section 2.13. REMIC Related Covenants. For as long as the Trust shall
-----------------------
exist, the Trustee shall act in accordance herewith to assure continuing
treatment of the Trust as a REMIC and avoid the imposition of tax on the
Trust. In particular:
(a) The Trustee shall not create, or permit the creation of, any
"interests" in the Trust within the meaning of Code Section 860D(a)(2) other
than the interests represented by the Regular Certificates and the Class R
Certificates.
(b) Except as otherwise provided in the Code, the Seller shall not
grant and the Trustee shall not accept property unless (i) substantially all
of the property held in the Trust constitutes either "qualified mortgages" or
"permitted investments" as defined in Code Sections 860G(a)(3) and (5),
respectively and (ii) except as provided in Section 4.04, no property shall
be contributed to the Trust after the Start-up Day unless such grant would
not subject the Trust to the 100% tax on contributions to a REMIC after the
Start-up Day imposed by Code Section 860G(d).
(c) The Trustee shall not accept on behalf of the Trust any fee or
other compensation for services (other than as otherwise provided herein) and
shall not accept on behalf of the Trust any income from assets other than
those permitted to be held by a REMIC.
(d) The Trustee shall not sell or permit the sale of all or any portion
of the Mortgage Loans (other than in accordance with Sections 2.02 or 2.04,
3.17 or 3.01(j)), unless such sale is pursuant to a "qualified liquidation"
as defined in Code Section 860F(a)(4)(A) and in accordance with Article VIII.
(e) The Trustee shall maintain books with respect to the REMIC on a
calendar year and on an accrual basis.
(f) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Class R Certificates the Form 1066 and each
Form 1066Q for the REMIC and shall respond promptly to written requests made
not more frequently than quarterly by any Holder of Class R Certificates with
respect to the following matters:
(i) The original projected principal and interest cash flows on
the Closing Date on each class of regular and residual interests created
hereunder and on the Mortgage Loans, based on ___% of the Prepayment
Assumption;
(ii) The projected remaining principal and interest cash flows as
of the end of any calendar quarter with respect to each class of regular
and residual interests created hereunder and the Mortgage Loans, based
on ___% of the Prepayment Assumption;
(iii) The Prepayment Assumption and any interest rate assumptions
used in determining the projected principal and interest cash flows
described above;
(iv) The original issue discount (or, in the case of the Mortgage
Loans, market discount) or premium accrued or amortized through the end
of such calendar quarter with respect to each class of regular or
residual interests created hereunder and with respect to the Mortgage
Loans, together with each constant yield to maturity used in computing
the same;
(v) The treatment of losses realized with respect to the Mortgage
Loans or the regular interests created hereunder, including the timing
and amount of any cancellation of indebtedness income of the REMIC with
respect to such regular interests or bad debt deductions claimed with
respect to the Mortgage Loans;
(vi) The amount and timing of any non-interest expenses of the
REMIC; and
(vii) Any taxes (including penalties and interest) imposed on the
REMIC, including, without limitation, taxes on "prohibited
transactions," "contributions" or "net income from foreclosure property"
or state or local income or franchise taxes.
In the event that any tax is imposed on "prohibited transactions" of the
Trust as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of the REMIC as defined in Section 860G(c) of the Code,
on any contribution to the Trust after the Start-up Day pursuant to Section
860G(d) of the Code, or any other tax is imposed, such tax shall be paid by
(i) the Trustee, if such tax arises out of or results from a breach by
the Trustee of any of its obligations under this Agreement, (ii) the
Master Servicer, if such tax arises out of or results from a breach by the
Master Servicer of any of its obligations under this Agreement or (iii)
otherwise the Holders of the Class R Certificates in proportion to their
Percentage Interests. To the extent any tax is chargeable against the
Holders of the Class R Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain
from amounts otherwise distributable to the Holders of the Class R
Certificates on any Distribution Date sufficient funds to reimburse the Trustee
for the payment of such tax (to the extent that the Trustee has not been
previously reimbursed or indemnified therefor).
The Trustee shall not engage in a "prohibited transaction" (as defined
in Code Section 860F(a)(2)), except that, with the prior written consent of
the Seller, the Trustee may engage in the activities otherwise prohibited by
the foregoing clauses (b), (c) and (d), provided that the Seller shall have
--------
delivered to the Trustee an Opinion of Counsel to the effect that such
transaction will not result in the imposition of a contribution or prohibited
transaction tax on the Trust and will not disqualify the Trust from treatment
as a REMIC; and provided that the Seller shall have demonstrated to the
--------
satisfaction of the Trustee that such action will not adversely affect the
rights of the holders of the Certificates, the Certificate Insurer and the
Trustee and that such action will not adversely impact the rating of the
Certificates.
(g) Except as provided below, the Trustee shall pay out of its own
funds, without any right of reimbursement, any and all tax related expenses
of the Trust (including, but not limited to, tax return preparation and
filing expenses and any professional fees or expenses related to audits or
any administrative or judicial proceedings with respect to the Trust that
involve the Internal Revenue Service or state tax authorities), other than
the expense of obtaining any Opinion of Counsel required pursuant to Sections
2.06(d), 2.13(f), 3.01(j), 9.02(b) and 10.02 and other than taxes except as
specified herein. The Trustee shall be entitled to be reimbursed pursuant to
Section 9.05 for any professional fees or expenses related to audits or any
administrative or judicial proceedings that do not result from any breach of
the Trustee's duties hereunder.
Section 2.14. Duties of Document Custodian; Authority.
---------------------------------------
(a) The Document Custodian shall hold the portion of the Mortgage Files
permitted to be held by it hereunder for the benefit of the Trustee and
maintain such accurate and complete accounts, records and computer systems
pertaining to each Mortgage File as shall enable the Seller, the Master
Servicer and the Trustee to comply with this Agreement. The Document
Custodian shall act with reasonable care, using that degree of skill and
attention in the performance of its duties as it exercises with respect to
the mortgage files relating to all comparable home equity loans that it owns
or services for itself or others. The Document Custodian shall promptly
report to Trustee any failure on its part to hold such portion of the Mortgage
Files as herein provided and promptly take appropriate action to remedy any such
failure.
(b) The Document Custodian shall maintain each such portion of the
Mortgage File at one of its offices in Cincinnati, Ohio or at such other
office as shall be specified to the Trustee and the Certificate Insurer by
written notice not later than 30 days after any change in location.
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer. (a) It is intended that the Trust
-------------------
formed hereunder shall constitute, and that the affairs of the Trust shall be
conducted so as to qualify it as, a "real estate mortgage investment conduit"
("REMIC") as defined in, and in accordance with, the REMIC Provisions. In
furtherance of such intentions, the Master Servicer covenants and agrees that
it shall not knowingly or intentionally take any action or omit to take any
action that would cause the termination of the REMIC status of the Trust.
(b) The Master Servicer, as independent contract servicer, shall
service and administer the Mortgage Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Master Servicer may deem necessary or
desirable and consistent with the terms of this Agreement. The Master
Servicer may enter into Subservicing Agreements for any servicing and
administration of Mortgage Loans with any institution which (i) is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement, (ii) is acceptable to the
Certificate Insurer and (iii) (x) has been designated an approved Seller-
Servicer by FHLMC or FNMA for first and second mortgage loans or (y) is an
affiliate of the Master Servicer or (z) is otherwise approved by the
Certificate Insurer. The Master Servicer shall give notice to the
Certificate Insurer, the Rating Agencies and the Trustee prior to the
appointment of any Subservicer. The Master Servicer has appointed the
Designated Subservicer, as a subservicer, such Designated Subservicer being
acceptable to the Certificate Insurer. Any such Subservicing Agreement shall
be consistent with and not violate the provisions of this Agreement and shall
be in form and substance acceptable to the Certificate Insurer. The Master
Servicer shall be entitled to terminate any Subservicing Agreement in
accordance with the terms and conditions of such Subservicing Agreement and
either itself directly service the related Mortgage Loans or enter into a
Subservicing Agreement with a successor subservicer which qualifies
hereunder; provided, however, if an event of default is continuing and has
not been waived, under any Subservicing Agreement, if directed by the
Certificate Insurer, the Master Servicer shall terminate such Subservicing
Agreement.
(c) Notwithstanding any Subservicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Master
Servicer and a Subservicer or reference to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and
primarily liable for the servicing and administering of the Mortgage Loans in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such Subservicing Agreements or arrange-
ments or by virtue of indemnification from the Subservicer and to the same
extent and under the same terms and conditions as if the Master Servicer
alone were servicing and administering the Mortgage Loans. For purposes of
this Agreement, the Master Servicer shall be deemed to have received payments
on Mortgage Loans when the Subservicer has received such payments. The
Master Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Master Servicer by such Subservicer,
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification.
(d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a
Subservicer in its capacity as such and not as an originator shall be deemed
to be between the Subservicer and the Master Servicer alone, and the Trustee
and Certificateholders shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to the
Subservicer except as set forth in Section 3.01(e). The Master Servicer
shall be solely liable for all fees owed by it to any Subservicer irrespec-
tive of whether the Master Servicer's compensation pursuant to this Agreement
is sufficient to pay such fees. The Certificate Insurer shall be designated
as a third-party beneficiary under any Subservicing Agreement.
(e) Subject to subsection (g) below, in the event the Master Servicer
shall for any reason no longer be the Master Servicer (including by reason of
an Event of Default), the Trustee or its designee approved by the Certificate
Insurer shall thereupon assume all of the rights and obligations of the
Master Servicer under each Subservicing Agreement that the Master Servicer
may have entered into, unless the Trustee or designee approved by the
Certificate Insurer elects to terminate any Subservicing Agreement in accor-
dance with the terms of such Subservicing Agreement. Any fee payable in
connection with such a termination will be payable by the outgoing Master
Servicer. If the Trustee does not terminate a Subservicing Agreement, the
Trustee, its designee or the successor servicer for the Trustee shall be
deemed to have assumed all of the Master Servicer's interest therein and to
have replaced the Master Servicer as a party to each Subservicing Agreement
to the same extent as if the Subservicing Agreements had been assigned to the
assuming party, except that the Master Servicer shall not thereby be relieved
of any liability or obligations under the Subservicing Agreements with regard
to events that occurred prior to the date the Master Servicer ceased to be
the Master Servicer hereunder. The Master Servicer, at its expense and
without right of reimbursement therefor, shall, upon the request of the
Trustee, deliver to the assuming party all documents and records relating to
each Subservicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(f) Consistent with the terms of this Agreement, the Master Servicer
may waive, modify or vary any term of any Mortgage Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Master Servicer's determination such
waiver, modification, postponement or indulgence is not materially adverse to
the interests of the Certificateholders and the Certificate Insurer,
provided, however, that the Master Servicer may not permit any modification
- -------- -------
with respect to any Mortgage Loan that would change the Loan Rate, defer or
forgive the payment of any principal or interest or extend the final maturity
date on the Mortgage Loan (unless (x) the Mortgagor is in default with
respect to the Mortgage Loan, or such default is, in the judgment of the
Master Servicer, imminent, and (y) such waiver, modification, postponement or
indulgence would not cause the REMIC to be disqualified or otherwise cause a
tax to be imposed on the REMIC). No costs incurred by the Master Servicer or
any Subservicer in respect of Servicing Advances shall, for the purposes of
distributions to Certificateholders, be added to the amount owing under the
related Mortgage Loan. Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered to
execute and deliver on behalf of the Trustee and each Certificateholder, all
instruments of satisfaction or cancellation, or of partial or full release,
discharge and all other comparable instruments with respect to the Mortgage
Loans and with respect to the Mortgaged Properties. If reasonably required
by the Master Servicer, the Trustee shall furnish the Master Servicer and, if
directed by the Master Servicer, any Subservicer with any powers of attorney
and other documents necessary or appropriate to enable the Master Servicer
and any such Subservicer to carry out its servicing and administrative duties
under this Agreement.
Notwithstanding anything to the contrary contained herein, the Master
Servicer, in servicing and administering the Mortgage Loans, shall employ or
cause to be employed procedures (including collection, foreclosure and REO
Property management procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering mortgage
loans for its own account, in accordance with accepted mortgage servicing
practices of prudent lending institutions servicing mortgage loans similar to
the Mortgage Loans and giving due consideration to the Certificate Insurer's
and the Certificateholders' reliance on the Master Servicer.
(g) On and after such time as the Trustee receives the resignation of,
or notice of the removal of, the Master Servicer from its rights and
obligations under this Agreement, and with respect to resignation pursuant to
Section 7.04, after receipt by the Trustee and the Certificate Insurer of the
Opinion of Counsel required pursuant to Section 7.04, the Designated
Subservicer, if it so elects, and with the consent of the Certificate Insurer
(or, if the Designated Subservicer does not assume the Master Servicer's
rights and obligations, then the Trustee or its designee approved by the
Certificate Insurer) shall assume all of the rights and obligations of the
Master Servicer, subject to Section 8.02. The Master Servicer shall, upon
request of the Designated Subservicer or the Trustee, as the case may be, but
at the expense of the Master Servicer, deliver to the Designated Subservicer
or the Trustee, as the case may be, all documents and records relating to the
Mortgage Loans and an accounting of amounts collected and held by the Master
Servicer and otherwise use its best efforts to effect the orderly and
efficient transfer of servicing rights and obligations to the assuming party.
(h) The Master Servicer shall deliver a list of Servicing Officers to
the Trustee and the Certificate Insurer on or before the Closing Date and
shall revise such list from time to time, as appropriate, and shall deliver
all revisions promptly to the Trustee and the Certificate Insurer.
(i) The Master Servicer shall not consent to the placement of a lien on
the Mortgaged Property senior to that of the related Mortgage unless (i) such
action is consistent with reasonable commercial practice and (ii) such
consent is given in any one of the following situations:
(A) such Mortgage succeeded to a first lien position after the
related Mortgage Loan was conveyed to the Trust and, immediately
following the placement of such senior lien, such Mortgage is in a
second lien position and both (i) the outstanding principal amount
of the mortgage loan secured by such senior lien is no greater than
the outstanding principal amount of the first mortgage loan secured
by the Mortgaged Property as of the date the related Mortgage Loan
was conveyed to the Trust and (ii) the updated Combined Loan-to-
Value Ratio of such Mortgage Loan is not greater than the Combined
Loan-to-Value Ratio of such Mortgage Loan as of the date such
Mortgage Loan was conveyed to the Trust; or
(B) such senior lien secures a mortgage loan that refinances an
existing first mortgage loan and either (i) the outstanding
principal amount of the replacement first mortgage loan immediately
following such refinancing is not greater than the outstanding
principal amount of such existing first mortgage loan at the date
of such refinancing or (ii) the updated Combined Loan-to-Value
Ratio of the applicable Mortgage Loan is not greater than the
Combined Loan-to-Value Ratio of such Mortgage Loan as of the date
such Mortgage Loan was conveyed to the Trust.
(j) Except as otherwise provided by Section 3.01(f), the Master
Servicer may agree to changes in the terms of a Mortgage Loan that would not
cause the Trust to fail to qualify as a REMIC, as evidenced by an Opinion of
Counsel delivered by the Master Servicer to the Trustee and the Certificate
Insurer prior to the effective date of any such change, provided, however,
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that such changes (i) do not adversely affect the interests of Certificate-
holders or the Certificate Insurer, (ii) are consistent with prudent
business practice, as evidenced by an Officer's Certificate, substantially
in the form of Exhibit N hereto, delivered by the Master Servicer to the
Trustee and the Certificate Insurer prior to such effective date, (iii) do
not extend the maturity date of such Mortgage Loan in excess of one year and
(iv) do not result in any change of the Loan Rate of such Mortgage Loan. Any
changes to the terms of a Mortgage Loan that may cause the Trust to fail to
qualify as a REMIC may be agreed to by the Master Servicer, provided, however,
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that (i) the Master Servicer has determined that such changes are necessary
to avoid prepayment of the Mortgage Loan as a result of a refinancing thereof
provided by another lender and that such changes are consistent with
prudent business practice, as evidenced by an Officer's Certificate to such
effect, substantially in the form of Exhibit N hereto, delivered by the Master
Servicer to the Trustee and the Certificate Insurer prior to the effective
date of any such change, (ii) the Master Servicer purchases such Mortgage
Loan on the Business Day immediately preceding the Distribution Date following
the related Due Period during which such determination was made at the
Purchase Price for such Mortgage Loan and (iii) after giving effect to
such purchase, the Trust continues, as evidenced by an Opinion of Counsel
delivered by the Master Servicer and the Certificate Insurer to the Trustee,
to qualify as a REMIC. In the event that such purchase does not occur, the
proposed changes to the terms of the related Mortgage Loan shall not be made.
The Master Servicer shall notify the Certificate Insurer of any changes in
the terms of a Mortgage Loan pursuant to this Section 3.01(j).
Section 3.02. Collection of Certain Mortgage Loan Payments. (a) The
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Master Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans and shall, to the
extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it follows with respect to mortgage loans in its
servicing portfolio comparable to the Mortgage Loans. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Master
Servicer may in its discretion (i) waive any prepayment penalty or late
payment charge or any assumption fees or other fees which may be collected in
the ordinary course of servicing such Mortgage Loan and (ii) arrange with
a Mortgagor a schedule for the payment of interest due and unpaid; provided
--------
that such arrangement is consistent with the Master Servicer's policies with
respect to the mortgage loans it owns or services; provided, further, that
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notwithstanding such arrangement such Mortgage Loans will be included in the
monthly information delivered by the Master Servicer to the Trustee pursuant
to Section 5.03.
(b) The Master Servicer shall establish and maintain a separate trust
account, which shall be an Eligible Account (the "Collection Account") titled
"(Trustee), as Trustee, in trust for the registered holders of Home Equity Loan
Asset Backed Certificates, Series 199_-_ Collection Account." The Collection
Account shall be an Eligible Account. The Master Servicer shall on the
Closing Date deposit any amounts representing payments on and any collections
in respect of the Mortgage Loans received on and after the Cut-Off Date and
prior to the Closing Date, and thereafter deposit within two Business Days
following receipt thereof, the following payments and collections received
or made by it (without duplication):
(i) all payments received on and after the related Cut-Off Date
on account of principal on the Mortgage Loans and all Principal
Prepayments and Curtailments collected on and after the related Cut-Off
Date;
(ii) all payments received on and after the related Cut-Off Date
on account of interest on the Mortgage Loans;
(iii) all Net Liquidation Proceeds net of related Foreclosure
Profits;
(iv) all Insurance Proceeds;
(v) any amounts payable in connection with the repurchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.02, 2.04, 2.06, 3.01(j) and 3.17; and
(vi) any amount required to be deposited in the Collection
Account pursuant to Sections 3.01(j), 3.05, 3.07, 5.02 or 5.05(e);
provided, however, that with respect to each Due Period, the Master Servicer
- -------- -------
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Master Servicing Fee for such Due Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Master Servicer need not deposit in the Collection Account amounts
representing Foreclosure Profits, fees (including annual fees) or late charge
penalties payable by Mortgagors or amounts received by the Master Servicer
for the accounts of Mortgagors for application toward the payment of taxes,
insurance premiums, assessments and similar items.
(c) All funds in the Collection Account shall be held (i) uninvested or
(ii) invested at the direction of the Master Servicer in Eligible
Investments. Any investments of funds in the Collection Account shall mature
or be withdrawable at par on or prior to the second Business Day preceding
the immediately succeeding Distribution Date. Any investment earnings on
funds held in the Collection Account shall be for the account of the Master
Servicer and may be withdrawn from the Collection Account by the Master
Servicer at any time. Any investment losses on funds held in the Collection
Account shall be for the account of the Master Servicer and promptly
upon the realization of such loss shall be contributed by the Master Servicer
to the Collection Account. Any references herein to amounts on deposit in the
Collection Account shall refer to amounts net of such investment earnings.
Section 3.03. Withdrawals from the Collection Account. The Master
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Servicer shall withdraw or cause to be withdrawn funds from the Collection
Account for the following purposes:
(i) four Business Days prior to each Distribution Date, to
deposit the portion of the Available Funds in respect of each
Certificate Group then in the Collection Account to the Distribution
Account;
(ii) to reimburse the Master Servicer for any accrued unpaid
Master Servicing Fees and for unreimbursed Monthly Advances made with
its own funds and Servicing Advances. The Master Servicer's right to
reimbursement for such unpaid Master Servicing Fees and unreimbursed
Servicing Advances shall be limited to late collections on the related
Mortgage Loan, including Liquidation Proceeds, Insurance Proceeds and
such other amounts as may be collected by the Master Servicer from the
related Mortgagor or otherwise relating to the Mortgage Loan in respect
of which such reimbursed amounts are owed. The Master Servicer's right
to reimbursement for such unreimbursed Monthly Advances shall be limited
to late collections of interest on any Mortgage Loan and to Liquidation
Proceeds and Insurance Proceeds on related Mortgage Loans;
(iii) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;
(iv) subject to Section 5.05 hereof, to make investments in
Eligible Investments and to pay to the Master Servicer interest earned
in respect of Eligible Investments or on funds deposited in the
Collection Account;
(v) (a) to withdraw any funds deposited in the Collection
Account that were not required to be deposited therein or were deposited
therein in error and to pay such funds to the appropriate Person and (b)
to pay to the Seller any funds deposited in the Collection Account
representing _____________ interest accruals;
(vi) to pay the Master Servicer the servicing compensation it is
entitled to receive pursuant to Section 3.09 to the extent not retained
or paid pursuant to Section 3.02(b);
(vii) to reimburse the Master Servicer for Servicing Advances and
Monthly Advances which are determined in good faith to have become
Nonrecoverable Advances that are not, with respect to aggregate
Servicing Advances on any single Mortgage Loan or REO property, in
excess of the Principal Balance thereof (the foregoing limitation on
aggregate Servicing Advances on any single Mortgage Loan or REO Property
shall not be applicable so long as the Designated Subservicer is acting
as Subservicer); and
(viii) to clear and terminate the Collection Account upon the
termination of this Agreement and to pay any amounts remaining therein
to the Class R Certificateholders.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
----------------------------------------------------
Expenses. The Master Servicer shall cause to be maintained for each Mortgage
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Loan fire and hazard insurance naming the Master Servicer or its designee as
loss payee thereunder providing extended coverage in an amount which is at
least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan from time to time and (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan. The Master Servicer shall also maintain on
property acquired upon foreclosure, or by deed in lieu of foreclosure, hazard
insurance with extended coverage in an amount which is at least equal to the
lesser of (i) the maximum insurable value from time to time of the improve-
ments which are a part of such property and (ii) the combined principal
balance owing on such Mortgage Loan and any mortgage loan senior to such
Mortgage Loan. Amounts collected by the Master Servicer under any such
policies shall be deposited in the Collection Account to the extent called
for by Section 3.02. In cases in which any Mortgaged Property is located in
a federally designated flood area as designated by the Seller to the Master
Servicer, the hazard insurance to be maintained for the related Mortgage Loan
shall include flood insurance to the extent such flood insurance is available
and the Master Servicer has determined such insurance to be necessary in
accordance with accepted first and second mortgage loan servicing standards,
as applicable. All such flood insurance shall be in amounts equal to the
lesser of (A) the amount in clause (ii) above and (B) the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as
amended. The Master Servicer shall be under no obligation to require that
any Mortgagor maintain earthquake or other additional insurance and shall be
under no obligation itself to maintain any such additional insurance on
property acquired in respect of a Mortgage Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance.
Section 3.05. Maintenance of Mortgage Impairment Insurance Policy. In
---------------------------------------------------
the event that the Master Servicer shall obtain and maintain a blanket policy
consistent with prudent industry standards with an insurer either (A) having
a General Policy rating of A.VIII or better in Best's Key Rating Guide, or
(B) approved by the Certificate Insurer, such approval not to be unreasonably
withheld; insuring against fire and hazards of extended coverage on all of
the Mortgage Loans, then, to the extent such policy names the Master Servicer
or its designee as loss payee and provides coverage in an amount equal to the
aggregate unpaid principal balance on the Mortgage Loans without co-
insurance, and otherwise complies with the requirements of Section 3.04, the
Master Servicer shall be deemed conclusively to have satisfied its
obligations with respect to fire and hazard insurance coverage under Section
3.04, it being understood and agreed that such blanket policy may contain a
deductible clause, in which case the Master Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property a
policy complying with Section 3.04, and there shall have been a loss which
would have been covered by such policy, deposit in the Collection Account the
difference, if any, between the amount that would have been payable under a
policy complying with Section 3.04 and the amount paid under such blanket
policy. Upon the request of the Certificate Insurer or the Trustee, the
Master Servicer shall cause to be delivered to the Certificate Insurer or the
Trustee, as the case may be, a certified true copy of such policy. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Master Servicer agrees to prepare and present, on behalf of
itself, the Trustee, the Certificate Insurer and Certificateholders, claims
under any such policy in a timely fashion in accordance with the terms of
such policy.
Section 3.06. Fidelity Bond. The Master Servicer shall maintain with
-------------
responsible companies, at its own expense, a blanket fidelity bond ("Fidelity
Bond"), with coverage on all officers and employees acting in any capacity
requiring such persons to handle funds, money, documents or papers relating
to the Mortgage Loans ("Master Servicer Employees"). Any such Fidelity Bond
may be a Financial Institution Bond, Standard Form No. 24. Any such Fidelity
Bond shall protect and insure the Master Servicer against losses typically
covered by the Financial Institution Bond, Standard Form No. 24, including
fidelity, promises, in transit, forgery, or alteration and securities covered
losses. The Master Servicer shall maintain with responsible companies, at
its own expense, a Mortgage Protection Insurance Policy insuring against
mortgagee errors and omissions meeting the requirements of the FHLMC Sellers'
and Servicers' Guide, except with respect to the payment of real estate taxes
and any other mandatory assessments on the mortgaged premises. The minimum
coverage under any such Fidelity Bond and insurance policy shall be at least
equal to the corresponding amounts required by FNMA in the FNMA Mortgage-
Backed Securities Selling and Servicing Guide or by FHLMC in the FHLMC
Sellers' and Servicers' Guide or otherwise in an amount as is commercially
available at a cost that is not generally regarded as excessive by industry
standards. The Master Servicer shall be deemed to have complied with this
provision if one of its Affiliates has such a Fidelity Bond and insurance
policy and by the terms thereof the coverage afforded thereunder extends to
the Master Servicer. Any such Fidelity Bond and errors and omissions
insurance shall protect and insure the Master Servicer against losses,
including losses resulting from forgery, theft, embezzlement, fraud, errors
and omissions and negligent acts of such Master Servicer Employees. No
provision of this Section requiring such Fidelity Bond and errors and omis-
sions insurance shall diminish or relieve the Master Servicer from its duties
and obligations as set forth in this Agreement. Upon the reasonable request
of the Trustee, the Certificate Insurer or any Certificateholder, the Master
Servicer shall cause to be delivered to the Trustee, such Certificateholder
or the Certificate Insurer a certified true copy of such Fidelity Bond and
insurance policy.
Section 3.07. Management and Realization Upon Defaulted Mortgage Loans.
--------------------------------------------------------
The Master Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders solely for the purpose of its prudent and
prompt disposition and sale. The Master Servicer shall, either itself or
through an agent selected by the Master Servicer, manage, conserve, protect
and operate the REO Property in the same manner that it manages, conserves,
protects and operates other foreclosed property for its own account, and in
the same manner that similar property in the same locality as the REO
Property is managed. The Master Servicer shall attempt to sell the same (and
may temporarily rent the same) on such terms and conditions as the Master
Servicer deems to be in the best interest of the Certificate Insurer and the
Certificateholders.
The Master Servicer shall cause to be deposited, no later than two
Business Days after the receipt thereof, in the Collection Account, all
revenues received with respect to the related REO Property and shall retain,
or cause the Trustee to withdraw therefrom, funds necessary for the proper
operation, management and maintenance of the REO Property and the fees of any
managing agent acting on behalf of the Master Servicer.
The disposition of REO Property shall be carried out by the Master
Servicer for cash at such price, and upon such terms and conditions, as the
Master Servicer deems to be in the best interest of the Certificateholders
and, as soon as practicable thereafter, the expenses of such sale shall be
paid. The cash proceeds of sale of the REO Property shall be promptly
deposited in the Collection Account, net of Foreclosure Profits and of any
related unreimbursed Servicing Advances, accrued and unpaid Master Servicing
Fees and unreimbursed Monthly Advances payable to the Master Servicer in
accordance with Section 3.03, for distribution to the Certificateholders in
accordance with Section 5.01.
The Master Servicer shall foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into and continue in default either when no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.01 subject
to the provisions contained in the last paragraph of this Section.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be issued to the Trustee or its nominee on behalf of Certificate-
holders and the Certificate Insurer.
In the event any Mortgaged Property is acquired as aforesaid or
otherwise in connection with a default or imminent default on a Mortgage
Loan, the Master Servicer shall dispose of such Mortgaged Property (i) within
two years after its acquisition or (ii) (a) prior to the expiration of any
extension to such two-year grace period which is requested on behalf of the
Trust by the Master Servicer (at the expense of the Trust) more than 60 days
prior to the end of such two-year grace period and granted by the Internal
Revenue Service, (b) if the Internal Revenue Service rejects such extension
to such two-year grace period which is requested on behalf of the Trust by
the Master Servicer more than 60 days prior to the end of such two-year grace
period, within 30 days of such rejection or (c) if such extension has not
been granted or rejected by the Internal Revenue Service prior to the
expiration of such two-year grace period, within the number of days specified
in such extension unless the Master Servicer shall have received an Opinion
of Counsel to the effect that the holding of such Mortgaged Property
subsequent to two years after its acquisition will not result in the
imposition of taxes on "prohibited transactions" as defined in Section 860F
of the Code or cause the Trust to fail to qualify as a REMIC at any time that
any Class A Certificates are outstanding. Notwithstanding any other
provision of this Agreement, (i) no Mortgaged Property acquired by the Master
Servicer pursuant to this Section shall be rented (or allowed to continue to
be rented) or otherwise used for the production of income by or on behalf of
the Trust and (ii) no construction shall take place on such Mortgaged
Property in such a manner or pursuant to any terms, in either case, that
would cause such Mortgaged Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in
the receipt by the Trust of any "net income from foreclosure property" which
is subject to taxation within the meaning of Sections 860G(c) and
857(b)(4)(B) of the Code. If a period greater than two years is permitted
under this Agreement and is necessary to sell any REO Property, the Master
Servicer shall give appropriate notice to the Trustee, the Certificate
Insurer and the Certificateholders and shall report monthly to the Trustee as
to the progress being made in selling such REO Property.
If the Master Servicer has actual knowledge that a Mortgaged Property
which the Master Servicer is contemplating acquiring in foreclosure or by
deed in lieu of foreclosure is located within a 1 mile radius of any site
with environmental or hazardous waste risks, the Master Servicer will notify
the Certificate Insurer prior to acquiring the Mortgaged Property and shall
not take any action without prior written approval of the Certificate
Insurer.
On each Distribution Date, the Master Servicer shall provide to the
Certificate Insurer the Liquidation Report with respect to each Mortgage Loan
that became a Liquidated Mortgage Loan during the preceding Due Period.
Section 3.08. Trustee to Cooperate. Upon any Principal Prepayment in
--------------------
full, the Master Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.01(f), if the related Assignment of
Mortgage has been recorded as required hereunder, an instrument of
satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Master Servicer if required by applicable law and be
delivered to the Person entitled thereto. It is understood and agreed that
no expenses incurred in connection with such instrument of satisfaction or
transfer shall be reimbursed from amounts deposited in the Collection
Account. If the Trustee and/or the Document Custodian is holding all or a
portion of the Mortgage Files, from time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, the Trustee shall, upon
request of the Master Servicer or the Designated Subservicer and delivery to
the Trustee of a Request for Release, in the form attached hereto as Exhibit
J, signed by a Servicing Officer, release or direct the Document Custodian to
release the related Mortgage File to the Master Servicer or the Designated
Subservicer, as the case may be, and the Trustee shall execute such
documents, in the forms provided by the Master Servicer or the Designated
Subservicer, as the case may be, as shall be necessary for the prosecution of
any such proceedings or the taking of other servicing actions. Such Request
for Release shall obligate the Master Servicer or the Designated Subservicer,
as the case may be, to return the Mortgage File to the Trustee or the
Document Custodian, as appropriate, when the need therefor by the Master
Servicer or the Designated Subservicer, as the case may be, no longer exists
unless the Mortgage Loan shall be liquidated, in which case, upon receipt of
a certificate of a Servicing Officer similar to that hereinabove specified, a
copy of the Request for Release shall be released by the Trustee to the
Master Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the related
Assignment of Mortgage in accordance with the provisions hereof, the Trustee
shall, if so requested in writing by the Master Servicer or the Designated
Subservicer, as the case may be, execute an appropriate assignment in the
form provided to the Trustee by the Master Servicer or the Designated
Subservicer, as the case may be, to assign such Mortgage Loan for the purpose
of collection to the Master 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 will thereupon bring all
required actions in its own name and otherwise enforce the terms of the
Mortgage Loan and deposit or credit the Net Liquidation Proceeds, exclusive
of Foreclosure Profits, received with respect thereto in the Collection
Account. In the event that all delinquent payments due under any such
Mortgage Loan are paid by the Mortgagor and any other defaults are cured then
the assignee for collection shall promptly reassign such Mortgage Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.
Each Request for Release may be delivered to the Trustee or the Document
Custodian, as the case may be, (i) via mail or courier, (ii) via facsimile or
(iii) by such other means, including, without limitation, electronic or
computer readable format, as the Master Servicer or the Designated
Subservicer, as the case may be, and the Trustee shall mutually agree. The
Trustee or the Document Custodian shall promptly release the related Mortgage
File within five to seven business day of receipt of a properly completed
Request for Release pursuant to clauses (i), (ii) or (iii) above. Receipt of
a Request for Release pursuant to clauses (i), (ii) or (iii) above shall be
authorization to the Trustee or the Document Custodian to release such
Mortgage Files, provided the Trustee or the Document Custodian, as the case
may be, has determined that such Request for Release has been executed, with
respect to clauses (i) or (ii) above, or approved, with respect to clause
(iii) above, by a Servicing Officer of the Master Servicer or the Designated
Subservicer, as the case may be. If the Trustee or the Document Custodian is
unable to release the Mortgage Files within the time frames previously
specified after receipt of a fully completed and executed Request for
Release, the Trustee or the Document Custodian shall immediately notify the
Master Servicer or the Designated Subservicer, as the case may be, indicating
the reason for such delay, but in no event shall such notification be later
than five business days after receipt of such Request for Release. If the
Master Servicer is required to pay penalties or damages due solely to the
Trustee's or the Document Custodian's negligent failure to release the
related Mortgage File or the Trustee's or the Document Custodian's negligent
failure to execute and release documents in a timely manner, the Trustee or
the Document Custodian, as the case may be, shall be liable for such
penalties or damages.
On each day that the Master Servicer or the Designated Subservicer
remits to the Trustee or the Document Custodian Requests for Release pursuant
to clauses (ii) or (iii) above, the Master Servicer or the Designated
Subservicer shall also submit to the Trustee or the Document Custodian, as
the case may be, a summary of the total amount of such Requests for Release
requested on such day by the same method as described in such clauses (ii) or
(iii) above.
Section 3.09. Servicing Compensation; Payment of Certain Expenses by
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Master Servicer. Subject to Section 5.02, the Master Servicer shall be
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entitled to retain the Master Servicing Fee in accordance with Section 3.02
as compensation for its services in connection with servicing the Mortgage
Loans. Moreover, additional servicing compensation in the form of fees in
connection with assumption agreements or substitution agreements, tax service
fees, fees for statement of account or payoff of the Mortgage Loan,
prepayment penalties or late payment charges or other receipts not required
to be deposited in the Collection Account, including, without limitation,
Foreclosure Profits and, subject to Section 3.02(b), investment income on the
Collection Account or the Distribution Account shall be retained by the
Master Servicer. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder (including payment
of all other fees and expenses not expressly stated hereunder to be for the
account of the Trust or the Certificateholders) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 3.10. Annual Statement as to Compliance. (a) The Master
---------------------------------
Servicer will deliver to the Trustee, Provident, the Certificate Insurer and
the Rating Agencies, on or before the last day of the fifth month following
the end of the Master Servicer's fiscal year (December 31), beginning in
199_, an Officer's Certificate stating that (i) to the best knowledge of such
person, the Master Servicer has fully complied in all material respects with
the provisions of Articles III and V, if applicable, (ii) a review of the
activities of the Master Servicer during the preceding fiscal year (or such
shorter period as is applicable in the case of the first report) and of its
performance under this Agreement has been made under such officer's
supervision and (iii) to the best of such officer's knowledge, based on such
review, the Master Servicer has fulfilled all its material obligations under
this Agreement throughout such fiscal year or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof. The Master Servicer shall
promptly notify the Certificate Insurer, Provident, the Trustee and the
Rating Agencies upon any change in the basis on which its fiscal year is
determined.
(b) The Master Servicer shall deliver to the Trustee, the Certificate
Insurer, Provident and each of the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice by means of an Officer's Certificate of any event
which, with the giving of notice or the lapse of time or both, would become
an Event of Default.
Section 3.11. Annual Servicing Report. Not later than the last day of
-----------------------
the fifth month following the end of the Master Servicer's fiscal year
(December 31), beginning in 199_, the Master Servicer, at its expense, shall
cause a firm of independent public accountants reasonably acceptable to
Provident and the Certificate Insurer to furnish a letter or letters to the
Certificate Insurer, Provident, the Trustee and the Rating Agencies to the
effect that such firm has, with respect to the Master Servicer's overall
servicing operations, examined such operations in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers,
and stating such firm's conclusions relating thereto.
Section 3.12. Access to Certain Documentation and Information Regarding
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the Mortgage Loans. The Master Servicer shall provide to the Trustee, the
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Certificate Insurer, Certificateholders which are federally insured savings
and loan associations, the Office of Thrift Supervision, the FDIC and the
supervisory agents and examiners of the Office of Thrift Supervision access
to the documentation regarding the Mortgage Loans required by applicable
regulations of the Office of Thrift Supervision and the FDIC (acting as
operator of the SAIF or the BIF), such access being afforded without charge
but only upon reasonable request and during normal business hours at the
offices of the Master Servicer. Nothing in this Section shall derogate from
the obligation of the Master Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the
failure of the Master Servicer to provide access as provided in this Section
as a result of such obligation shall not constitute a breach of this Section.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The
---------------------------------------------------
Master Servicer shall during the term of its service as servicer maintain in
force a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder. Such policy or
policies shall, together, comply with the requirements from time to time of
FNMA for persons performing servicing for mortgage loans purchased by FNMA.
Section 3.14. Reports to the Securities and Exchange Commission. The
-------------------------------------------------
Trustee shall, on behalf of the Trust, cause to be filed with the Securities
and Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission thereunder. Upon
the request of the Trustee, each of the Seller and the Master Servicer shall
cooperate with the Trustee in the preparation of any such report and shall
provide to the Trustee in a timely manner all such information or
documentation within their control as the Trustee may reasonably request in
connection with the performance of its duties and obligations under this
Section. Any costs and expenses incurred by the Trustee hereunder shall not
be reimbursable to it pursuant to Section 9.05.
Section 3.15. Reports of Foreclosures and Abandonments of Mortgaged
Properties, Returns Relating to Mortgage Interest Received from Individuals
and Returns Relating to Cancellation of Indebtedness. The Master Servicer
- ---------------------------------------------------- shall make reports of
foreclosures and abandonments of any Mortgaged Property for each year
beginning in 199_. The Master Servicer shall file reports relating to each
instance occurring during the previous calendar year in which the Master
Servicer (i) on behalf of the Trustee acquires an interest in any Mortgaged
Property through foreclosure or other comparable conversion in full or
partial satisfaction of a Mortgage Loan or (ii) knows or has reason to know
that any Mortgaged Property has been abandoned. The reports from the Master
Servicer shall be in form and substance sufficient to meet the reporting
requirements imposed by Sections 6050J, 6050H and 6050P of the Code.
Section 3.16. Advances by the Master Servicer. (a) Not later than the
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close of business three Business Days prior to each Distribution Date (a
"Master Servicer Remittance Date"), the Master Servicer shall remit to the
Trustee for deposit in the Distribution Account an amount to be distributed
on such Distribution Date pursuant to Section 5.01, equal to the interest
accrued on each Mortgage Loan through the related Due Date, but not received
as of the close of business on the day preceding the related Determination
Date (net of the Master Servicing Fee); such amount being defined herein as
the "Monthly Advance". Such deposit of the Monthly Advance to the
Distribution Account may be made in whole or in part from funds in the
Collection Account being held for future distribution or withdrawal on or in
connection with Distribution Dates in subsequent months. Any funds being
held for future distribution to Certificateholders and so used shall be
replaced by the Master Servicer from its own funds by deposit in the
Distribution Account on or before the Business Day preceding the next
succeeding Master Servicer Remittance Date to the extent that such amounts
have not been remitted to the Collection Account since such Monthly Advances
were made. With respect to any Balloon Loan that is delinquent on its
maturity date, the Master Servicer will continue to make Monthly Advances
with respect to such Balloon Loan in an amount equal to one month's interest
on the unpaid principal balance at the applicable Loan Rate (net of the
Master Servicing Fee). The obligation to make Monthly Advances with respect
to each Mortgage Loan shall continue until such Mortgage Loan becomes a
Liquidated Mortgage Loan.
(b) Notwithstanding anything herein to the contrary, no Servicing
Advance or Monthly Advance (including, without limitation, Servicing Advances
and Monthly Advances with respect to Balloon Loans) shall be required to be
made hereunder if the Master Servicer determines, and provides the Trustee
with a Servicing Certificate to the effect, that such Servicing Advance or
Monthly Advance would, if made, constitute a Nonrecoverable Advance.
Section 3.17. Optional Purchase of Defaulted Mortgage Loans. The
---------------------------------------------
Seller, in its sole discretion, shall have the right to elect (by written
notice sent to the Trustee and the Certificate Insurer) to purchase for its
own account from the Trust any Mortgage Loan which is 90 days or more
delinquent in the manner and at the price specified in Section 2.02. The
Purchase Price for any Mortgage Loan purchased hereunder shall be deposited
in the Collection Account and the Trustee, upon receipt of such deposit,
shall release or cause to be released to the Seller the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment
prepared by the Seller, in each case without recourse, as shall be necessary
to vest in the Seller any Mortgage Loan released pursuant hereto and the
Seller shall succeed to all the Trustee's right, title and interest in and to
such Mortgage Loan and all security and documents related thereto. Such
assignment shall be an assignment outright and not for security. The Seller
shall thereupon own such Mortgage Loan, and all security and documents, free
of any further obligation to the Trustee, the Certificate Insurer or the
Certificateholders with respect thereto.
Notwithstanding the foregoing, unless the Certificate Insurer consents,
the Seller may only exercise its option pursuant to this Section 3.17 with
respect to the Mortgage Loan or Mortgage Loans that have been delinquent for
the longest period at the time of such repurchase. Any request by the Seller
to the Certificate Insurer for consent to repurchase Mortgage Loans that are
not the most delinquent shall be accompanied by a description of the Mortgage
Loans that have been delinquent longer than the Mortgage Loan or Mortgage
Loans that the Seller proposes to repurchase. If the Certificate Insurer
fails to respond to such request within 10 Business Days after receipt
thereof, the Seller may repurchase the Mortgage Loan or Mortgage Loans
proposed to be repurchased without the consent of, or any further action by,
the Certificate Insurer.
Section 3.18. Superior Liens. The Master Servicer shall file (or cause
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to be filed) a request for notice of any action by a superior lienholder
under a First Lien for the protection of the Trustee's interest, where
permitted by local law and whenever applicable state law does not require
that a junior lienholder be named as a party defendant in foreclosure
proceedings in order to foreclose such junior lienholder's equity of
redemption.
If the Master Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by the First
Lien, or has declared or intends to declare a default under the mortgage or
the promissory note secured thereby, or has filed or intends to file an
election to have the Mortgaged Property sold or foreclosed, the Master
Servicer shall take, on behalf of the Trust, whatever actions are necessary
to protect the interests of the Certificateholders and the Certificate
Insurer, and/or to preserve the security of the related Mortgage Loan,
subject to the application of the REMIC Provisions in accordance with the
terms of this Agreement. The Master Servicer shall immediately notify the
Trustee and the Certificate Insurer of any such action or circumstances. The
Master Servicer shall advance the necessary funds to cure the default or
reinstate the superior lien, if such advance is in the best interests of the
Certificate Insurer and the Certificateholders. The Master Servicer shall
not make such an advance except to the extent that it determines in its
reasonable good faith judgment that the advance would be recoverable from
Liquidation Proceeds on the related Mortgage Loan and in no event in an
amount that is greater than the Principal Balance of the related Mortgage
Loan, except with the consent of the Certificate Insurer, which consent shall
not be unreasonably withheld. The Master Servicer shall thereafter take such
action as is necessary to recover the amount so advanced. Notwithstanding
the prior sentence, the Master Servicer shall not have an obligation to
obtain the Certificate Insurer's consent to make an advance in an amount
greater than the Principal Balance of the related Mortgage Loan so long as
the Designated Servicer is acting as Subservicer.
Notwithstanding the foregoing, the Master Servicer may change, modify or
amend any or all of the foregoing procedures if such change, modification or
amendment is applicable to the Mortgage Loans and all other mortgage loans
serviced by the Master Servicer and is otherwise in accordance with Section
3.01.
Section 3.19. Assumption Agreements. When a Mortgaged Property has
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been or is about to be conveyed by the Mortgagor, the Master Servicer shall,
to the extent it has knowledge of such conveyance or prospective conveyance,
exercise its right to accelerate the maturity of the related Mortgage Loan
under any "due-on-sale" clause contained in the related Mortgage or Mortgage
Note; provided, however, that the Master Servicer shall not exercise any such
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right if the "due-on-sale" clause, in the reasonable belief of the Master
Servicer, is not enforceable under applicable law. In such event, the Master
Servicer shall enter into an assumption and modification agreement with the
person to whom such property has been or is about to be conveyed, pursuant to
which such person shall become liable under the Mortgage Note and, unless
prohibited by applicable law, the Mortgagor shall remain liable thereon. The
Master Servicer, in accordance with accepted mortgage loan servicing
standards for mortgage loans similar to the Mortgage Loans, is also
authorized to enter into a substitution of liability whereby such person is
substituted as mortgagor and becomes liable under the Mortgage Note. The
Master Servicer shall notify the Trustee and the Certificate Insurer that any
such substitution or assumption agreement has been completed by forwarding to
the Trustee the original of such substitution or assumption agreement, which
original shall be added by the Trustee to the related Mortgage File and
shall, for all purposes, be considered a part of such Mortgage File to the
same extent as all other documents and instruments constituting a part
thereof. Except as otherwise provided in Section 3.01(j), in connection with
any assumption or substitution agreement entered into pursuant to this
Section, the Master Servicer shall not change the Loan Rate or the Monthly
Payment, defer or forgive the payment of principal or interest, reduce the
outstanding principal amount or extend the final maturity date on such
Mortgage Loan.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or any assumption which the
Master Servicer may be restricted by law from preventing, for any reason
whatsoever.
Section 3.20. Payment of Taxes, Insurance and Other Charges. With
---------------------------------------------
respect to each Mortgage Loan, the Master Servicer shall maintain accurate
records reflecting fire and hazard insurance coverage.
With respect to each Mortgage Loan as to which the Master Servicer
maintains escrow accounts, the Master Servicer shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water
rates and other charges which are or may become a lien upon the Mortgaged
Property and the status of primary mortgage guaranty insurance premiums, if
any, and fire and hazard insurance coverage and shall obtain, from time to
time, all bills for the payment of such charges (including renewal premiums)
and shall effect payment thereof prior to the applicable penalty or
termination date and at a time appropriate for securing maximum discounts
allowable, employing for such purpose deposits of the Mortgagor in any escrow
account which shall have been estimated and accumulated by the Master
Servicer in amounts sufficient for such purposes, as allowed under the terms
of the Mortgage. To the extent that a Mortgage does not provide for escrow
payments, the Master Servicer shall, if it has received notice of a default
or deficiency, monitor such payments to determine if they are made by the
Mortgagor.
ARTICLE IV
Certificate Insurance Policy
Section 4.01. Certificate Insurance Policy. As soon as possible, and
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in no event later than 3:00 p.m., New York time, on the third Business Day
immediately preceding each Distribution Date, the Trustee shall determine the
amount of Available Funds for each Certificate Group (net of any Insured
Payments) for such Distribution Date minus the amount of any related Premium
Amount and Trustee Fee to be paid on such Distribution Date.
If for any Distribution Date a Deficiency Amount exists, the Trustee
shall complete a notice in the form set forth as Exhibit A to the Certificate
Insurance Policy (the "Notice") and shall submit such Notice to the Fiscal
Agent no later than 12:00 noon, New York time, on the second Business Day
preceding such Distribution Date. The Notice shall constitute a claim for an
Insured Payment pursuant to the Certificate Insurance Policy for an amount
equal to the Deficiency Amount. Upon receipt of the Insured Payment, at or
prior to the latest time payments of the Insured Payment are to be made by
the Certificate Insurer pursuant to the Certificate Insurance Policy, on
behalf of the Class A Certificateholders, the Trustee shall deposit such
Insured Payments in the Distribution Account and shall distribute such
Insured Payments only in accordance with, with respect to the Group 1
Certificates, Sections 5.01(a)(i)(2) and (3) and, with respect to the Group 2
Certificates, 5.01(a)(ii)(2) and (3).
The Trustee shall receive, as attorney-in-fact of each Holder of a Class
A Certificate, any Insured Payment from the Certificate Insurer and disburse
the same to each Holder of a Class A Certificate in accordance with the
provisions of Article V. Insured Payments disbursed by the Trustee from
proceeds of the Certificate Insurance Policy shall not be considered payment
by the Trust nor shall such payments discharge the obligation of the Trust
with respect to such Class A Certificate, and the Certificate Insurer shall
become the owner of such unpaid amounts due from the Trust in respect of such
Insured Payments as the deemed assignee of such Holder and shall be entitled
to be reimbursed therefore in accordance with Section 5.01. The Trustee
hereby agrees on behalf of each Holder of a Class A Certificate for the
benefit of the Certificate Insurer that it and they recognize that to the
extent the Certificate Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Class A
Certificateholders, the Certificate Insurer will be entitled to be reimbursed
therefore in accordance with Section 5.01.
Section 4.02. (Reserved).
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Section 4.03. Replacement Credit Enhancement Instruments. In the event
------------------------------------------
of a Certificate Insurer Default (a "Replacement Event"), the Seller, in
-----------------
accordance with and upon satisfaction of the conditions set forth in the
Certificate Insurance Policy, including, without limitation payment in full
of all amounts owed to the Certificate Insurer, may, but shall not be
required to, substitute a new surety bond or surety bonds for the existing
Certificate Insurance Policy or may arrange for any other form of credit
enhancement; provided, however, that in each case the
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Class A Certificates shall be rated no lower than the rating assigned by each
Rating Agency to the Class A Certificates immediately prior to such
Replacement Event and the timing and mechanism for drawing on such new credit
enhancement shall be reasonably acceptable to the Trustee and the Master
Servicer. It shall be a condition to substitution of any new credit
enhancement that there be delivered to the Trustee (i) Opinion of Counsel,
acceptable in form to the Trustee, from counsel to the provider of such new
credit enhancement with respect to the enforceability thereof and such other
matters as the Trustee may require and (ii) an Opinion of Counsel to the
effect that such substitution would not (a) adversely affect in any material
respect the tax status of the Class A Certificates, (b) cause the Trust to be
subject to a tax at the entity level or to be classified as a taxable
mortgage pool within the meaning of Section 7701(i) of the Code or (c) result
in a material modification to this Agreement or of the Class A Certificates
as described in Section 1001 of the Code and the regulations thereunder.
Upon receipt of the items referred to above and the taking of physical
possession of the new credit enhancement, the Trustee shall, within five
Business Days following receipt of such items and such taking of physical
possession, deliver the replaced Certificate Insurance Policy to the
Certificate Insurer.
Section 4.04. Claims Upon the Certificate Insurance Policy. (a) The
--------------------------------------------
Trustee shall comply with the provisions of the Certificate Insurance Policy
with respect to claims upon the Certificate Insurance Policy.
(b) The Trustee shall keep a complete and accurate record of the amount
of interest and principal paid in respect of any Class A Certificate from
moneys received under the Certificate Insurance Policy. The Certificate
Insurer shall have the right to inspect such records at reasonable times
during normal business hours upon one Business Day's prior written notice to
the Trustee.
(c) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer
of the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under the Bankruptcy Code (a "Preference Claim") of any distribution
made with respect to the Class A Certificates. Each Certificateholder of
Class A Certificates, by its purchase of Class A Certificates, the Master
Servicer, the Seller and the Trustee hereby agree that the Certificate
Insurer (so long as no Certificate Insurer Default exists) may at any time
during the continuation of any proceeding relating to a Preference Claim
direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedeas or
performance bond pending any such appeal.
ARTICLE V
Payments and Statements to Certificateholders;
Rights of Certificateholders
Section 5.01. Distributions. (a) On each Distribution Date, the
-------------
Trustee shall withdraw from the Distribution Account the Amount Available and
make distributions thereof as described below:
(i) With respect to the Group 1 Certificates, the Available Funds
with respect to the Group 1 Certificates in the following order of
priority:
(1) to the Trustee, the Trustee Fee for Loan Group 1 for such
Distribution Date and, other than the _______ Distribution Date, to
the Certificate Insurer, so long as no Certificate Insurer Default
exists, the Premium Amount for the Group 1 Certificates for such
Distribution Date;
(2) to the Holders of the Class A-1 Certificates, an amount
equal to the Class Interest Distribution for the Class A-1
Certificates for such Distribution Date;
(3) to the Class A-1 Certificateholders, the related Class A
Principal Distribution, until the Class Principal Balance thereof
is reduced to zero; and
(4) to the Certificate Insurer, the amount owing to the
Certificate Insurer under the Insurance Agreement for reimbursement
for draws made on the Policy in respect of the Group 1
Certificates.
(ii) With respect to the Group 2 Certificates, the Available Funds
with respect to the Group 2 Certificates in the following order of
priority:
(1) to the Trustee, the Trustee Fee for such Loan Group for
such Distribution Date and, other than the ____________
Distribution Date, to the Certificate Insurer, so long as no
Certificate Insurer Default exists, the Premium Amount for the
Group 2 Certificates for such Distribution Date;
(2) to the Holders of the Class A-2 Certificates, an amount
equal to the related Class Interest Distribution for such
Distribution Date;
(3) to the Class A-2 Certificateholders, the related Class A
Principal Distribution, until the Class Principal Balance thereof
is reduced to zero; and
(4) to the Certificate Insurer, the amount owing to the
Certificate Insurer under the Insurance Agreement for reimbursement
for draws made on the Policy in respect of the Group 2
Certificates;
(iii) To the extent Available Funds for a Certificate Group are
insufficient to make the distributions specified above pursuant to (1)-
(4) of the applicable subclause, Available Funds for the other
Certificate Group remaining after making the distributions required to
be made pursuant to (1)-(4) of the applicable subclause for such other
Certificate Group shall be distributed to the extent of such
insufficiency in accordance with the priorities for distribution set
forth above for the Certificate Group experiencing such insufficiency.
(iv) To the Class A-1 Certificateholders, to the extent of the
related Available Funds remaining, the related Distributable Excess
Spread for such Distribution Date, until the Class Principal Balance
thereof is reduced to zero.
(v) To the Class A-2 Certificateholders, the related Distributable
Excess Spread for such Distribution Date, until the Class Principal
Balance thereof is reduced to zero.
(vi) After making the distributions referred to in clauses (i)
through (v) above, the Trustee shall make distributions in the following
order of priority, to the extent of the balance of the Amount Available:
(1) (a) to the Class A-1 Certificateholders, until the Class
Principal Balance thereof is reduced to zero, the excess of the
related Distributable Excess Spread for such Distribution Date over
the amount distributed to the Class A-1 Certificateholders pursuant
to subsection (iv) above and (b) to the Class A-2
Certificateholders, until the Class Principal Balance thereof is
reduced to zero, the excess of the related Distributable Excess
Spread for such Distribution Date over the amount distributed to
the Class A-2 Certificateholders pursuant to subsection (v) above;
(2) to the Master Servicer, the amount of any accrued and
unpaid Master Servicing Fees;
(3) to the Master Servicer, the amount of Nonrecoverable
Advances to the extent not previously reimbursed;
(4) to the Certificate Insurer, any Reimbursement Amount;
(5) solely from Available Funds with respect to the Group 2
Certificates, to the Class A-2 Certificateholders, the Net Funds
Cap Carryover Amount, if any; and
(6) to the Class R Certificateholders, the balance, if any.
Notwithstanding clause (6) above, any amounts due to the Master Servicer
pursuant to Section 7.03 shall be distributed to the Master Servicer prior to
distributions to the Class R Certificateholders.
(b) Distribution of Insured Payments. With respect to any Distribution
--------------------------------
Date, in the event of an Insured Payment, the Trustee shall make such
payments from the amount drawn under the Certificate Insurance Policy
pursuant to Section 4.01 for such Distribution Date in accordance with
Section 5.01(a). The Certificate Insurer shall be deemed to be the assignee
of the Holders of the Class A Certificates to the extent of any amount of
Insured Payments disbursed by the Trustee from proceeds of the Certificate
Insurance Policy and to such extent, shall be the subrogee of each such
Holder of the Class A Certificates; provided, however, that any such right
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of subrogation inuring to the Certificate Insurer hereunder or otherwise
shall be and is subordinated to the rights under this Agreement of the
Holders of the Class A Certificates and in accordance with Section 5.01(a).
(c) Method of Distribution. The Trustee shall make distributions in
----------------------
respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 10.01 respecting the
final distribution), in the case of Class A Certificateholders, by check or
money order mailed to such Certificateholder at the address appearing in the
Certificate Register, or, upon written request by a Class A Certificateholder
delivered to the Trustee at least five Business Days prior to such Record
Date, by wire transfer (but only if such Class A Certificateholder is the
Depository or such Class A Certificateholder owns of record one or more Class
A Certificates of a Class aggregating at least $1,000,000 Original Class
Certificate Principal Balance) and, in the case of Class R
Certificateholders, by wire transfer. Distributions among Certificateholders
shall be made in proportion to the Percentage Interests evidenced by the
Certificates held by such Certificateholders.
(d) Distributions on Book-Entry Certificates. Each distribution with
----------------------------------------
respect to a Book-Entry Certificate shall be paid to the Depository, which
shall credit the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution
to the Certificate Owners that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible
for disbursing funds to the Certificate Owners that it represents. All such
credits and disbursements with respect to a Book-Entry Certificate are to be
made by the Depository and the Depository Participants in accordance with the
provisions of the Certificates. None of the Trustee, the Paying Agent, the
Certificate Registrar, the Certificate Insurer, the Master Servicer, any
Subservicer or the Seller shall have any responsibility therefor except as
otherwise provided by applicable law.
Section 5.02. Compensating Interest. Not later than the close of
---------------------
business on each Determination Date, the Master Servicer shall remit to the
Collection Account an amount equal to the lesser of (A) the aggregate of the
Prepayment Interest Shortfalls for the related Distribution Date resulting
from Principal Prepayments during the related Due Period and (B) its
aggregate Master Servicing Fee received in the related Due Period. The
Master Servicer shall not have the right to reimbursement for any amounts
deposited to the Collection Account pursuant to this Section. Such amounts
so deposited shall be included in the Available Funds relating to the Loan
Group experiencing the Principal Prepayments and distributed therewith on the
next Distribution Date. If on any Determination Date the amount deposited
into the Collection Account is the amount calculated in (B), such amount
shall be allocated between the Available Funds of each Loan Group pro rata
based on the aggregate Prepayment Interest Shortfall experienced by both Loan
Groups during the related Due Period. The Master Servicer shall not be
obligated to pay Compensating Interest with respect to Civil Relief Act
Interest Shortfalls.
Section 5.03. Statements. (a) Not later than 12:00 noon, New York
----------
time, on each Determination Date, the Master Servicer shall deliver to the
Trustee a computer tape (or such other report in a form and format mutually
agreeable to the Master Servicer and the Trustee) as to each Mortgage Loan as
of the end of the preceding Due Period and such other information as the
Trustee shall reasonably require. Not later than 12:00 noon, New York time,
on the Distribution Date, the Trustee shall deliver to the Master Servicer
and to the Certificate Insurer, by telecopy, with a hard copy thereof to be
delivered on such Distribution Date, a statement (the "Trustee's Remittance
Report") (based solely on the information contained on the computer tape)
containing the information set forth below with respect to such Distribution
Date:
(i) The Available Funds for each Certificate Group and each
Class' Certificate Rate for the related Distribution Date;
(ii) The Class Principal Balance of each Class, the Pool
Principal Balance and the Loan Group Principal Balance of the Mortgage
Loans in each Loan Group as reported in the prior Trustee's Remittance
Report or, in the case of the first Determination Date, the Original
Class Principal Balance of each Class, the Cut-Off Date Pool Principal
Balance and the Cut-Off Date Loan Group Principal Balance of the
Mortgage Loans in each Loan Group;
(iii) The aggregate amount of collections received on the Mortgage
Loans on or prior to such Determination Date in respect of the preceding
Due Period, separately stating the amounts received in respect of
principal and interest;
(iv) The number and Principal Balances of all Mortgage Loans that
were the subject of Principal Prepayments during the Due Period;
(v) The amount of all Curtailments that were received during the
Due Period;
(vi) The principal portion of all Monthly Payments received
during the Due Period;
(vii) The interest portion of all Monthly Payments received on the
Mortgage Loans during the Due Period;
(viii) The amount required to be paid by the Seller or Master
Servicer (reported separately) pursuant to Sections 2.03, 2.06 or
3.01(j);
(ix) The amount of the Monthly Advances and the amount of any
Compensating Interest payment to be made with respect to such Distri-
bution Date;
(x) The Class A Principal Distribution for each Certificate
Group for the related Distribution Date, the Class Interest Distribution
for the related Distribution Date to be distributed on each Class of
Class A Certificates and any Net Funds Cap Carryover Amount to be
distributed on the Class A-2 Certificates on the related Distribution
Date;
(xi) The amount, if any, of the Outstanding Class Interest
Carryover Shortfall and Class A Principal Shortfall Amount for each
Class after giving effect to the distributions on the related
Distribution Date;
(xii) The amount of the Insured Payments, if any, to be made on
the related Distribution Date;
(xiii) The amount to be distributed to the Class R Certif-
icateholders for the related Distribution Date;
(xiv) The Class Principal Balance for each Class after giving
effect to the distribution to be made on the related Distribution Date;
(xv) The weighted average remaining term to maturity of the
Mortgage Loans in each Loan Group and the weighted average Loan Rate in
each Loan Group;
(xvi) (a) The Master Servicing Fee to be paid to the Master
Servicer and (b) the amounts paid to the Certificate Insurer, separately
stated, pursuant to Sections 5.01(a)(i)(4) and 5.01(a)(ii)(4) and the
Reimbursement Amount to be paid to the Certificate Insurer pursuant to
Section 5.01(a)(vi)(4);
(xvii) The aggregate Premium Amount to be paid to the Certificate
Insurer pursuant to Section 5.01;
(xviii) The amount of all payments or reimbursements to the Master
Servicer pursuant to Section 3.03;
(xix) The Pool Factor for each Loan Group determined using the
balances in subclause (xxiv) above, computed to six (6) decimal places;
(xx) The O/C Amount, the O/C Reduction Amount, the Excess O/C
Amount and the Specified O/C Amount for the Distribution Date and each
Certificate Group and the Excess Spread for each related Loan Group for
such Distribution Date;
(xxi) The amount paid to Class R Certificateholders pursuant to
Section 5.01(a)(vi)(7);
(xxii) The amount of Distributable Excess Spread to be distributed
to the Class A Certificateholders of each Class on such Distribution
Date pursuant to Sections 5.01(a)(iv), 5.01(a)(v) and 5.01(a)(vi)(1), as
applicable, on such Distribution Date;
(xxiii) The number of Mortgage Loans outstanding at the beginning
and at the end of the related Due Period;
(xxiv) The Pool Principal Balance and the Loan Group Principal
Balance for each Loan Group, each as of the end of the Due Period
related to such Distribution Date;
(xxv) Separately stated for each Loan Group, the number and
aggregate Principal Balances of Mortgage Loans (w) as to which the
Monthly Payment is delinquent for 30-59 days, 60-89 days and 90 or more
days, respectively, (x) that have become REO Properties, in each case as
of the end of the preceding Due Period, (y) that are in foreclosure and
(z) the Mortgagor of which is the subject of any bankruptcy or
insolvency proceeding;
(xxvi) The unpaid principal amount of all Mortgage Loans that
became Liquidated Mortgage Loans during such Due Period;
(xxvii) The Net Liquidation Proceeds received during such Due
Period;
(xxviii) The book value (within the meaning of 12 C.F.R.
Section 571.13 or comparable provision) of any real estate acquired
through foreclosure or grant of a deed in lieu of foreclosure;
(xxix) For so long as the Master Servicer is the Seller, the Rating
Agencies' ratings of the long-term unsecured debt of the Seller (to the
extent such information is provided to the Trustee by the Certificate
Insurer or the Master Servicer); and
(xxx) Cumulative Net Losses, the Delinquency Loss Factor and Total
Expected Losses, as of such Distribution Date; and
(xxxi) Such other information as is required by the Code and
regulations thereunder to be made available to Holders of the Class A
Certificates.
The Trustee shall forward such report to the Master Servicer, the
Certificate Insurer, the Certificateholders and the Rating Agencies. The
Trustee may fully rely upon and shall have no liability with respect to
information provided by the Master Servicer.
To the extent that there are inconsistencies between the telecopy of the
Trustee's Remittance Report and the hard copy thereof, the Master Servicer
may rely upon the latter.
In the case of information furnished pursuant to subclauses (ii), (xii)
and (xvii) above, the amounts shall be expressed in a separate section of the
report as a dollar amount for each Class for each $1,000 original dollar
amount as of the Cut-Off Date.
(b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Class A Certificateholder, if requested in writing by
such Person, such information as is reasonably necessary to provide to such
Person a statement containing the information set forth in subclauses (ix)
and (xiv) above, aggregated for such calendar year or applicable portion
thereof during which such Person was a Certificateholder. Such obligation of
the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be prepared and furnished by the
Trustee to Certificateholders pursuant to any requirements of the Code as are
in force from time to time.
(c) On each Distribution Date, the Trustee shall forward to the Class R
Certificateholders a copy of the reports forwarded to the Class A
Certificateholders in respect of such Distribution Date and a statement
setting forth the amounts actually distributed to the Class R
Certificateholders on such Distribution Date together with such other
information as the Trustee deems necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall deliver to each Person who at any time during the
calendar year was a Class R Certificateholder, if requested in writing by
such Person, such information as is reasonably necessary to provide to such
Person a statement containing the information provided pursuant to the
previous paragraph aggregated for such calendar year or applicable portion
thereof during which such Person was a Class R Certificateholder. Such
obligation of the Trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall be prepared and
furnished to Certificateholders by the Trustee pursuant to any requirements
of the Code as from time to time in force.
(e) The Master Servicer and the Trustee shall furnish to each
Certificateholder and to the Certificate Insurer (if requested in writing),
during the term of this Agreement, such periodic, special or other reports or
information, whether or not provided for herein, as shall be necessary,
reasonable or appropriate with respect to the Certificateholder or the
Certificate Insurer, as the case may be, or otherwise with respect to the
purposes of this Agreement, all such reports or information to be provided by
and in accordance with such applicable instructions and directions (if
requested in writing) as the Certificateholder or the Certificate Insurer, as
the case may be, may reasonably require; provided that the Master Servicer
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and the Trustee shall be entitled to be reimbursed by such Certificateholder
or the Certificate Insurer, as the case may be, for their respective fees and
actual expenses associated with providing such reports, if such reports are
not generally produced in the ordinary course of their respective businesses
or readily obtainable.
(f) Reports and computer tapes furnished by the Master Servicer
pursuant to this Agreement shall be deemed confidential and of a proprietary
nature, and shall not be copied or distributed except to the extent provided
in this Agreement and to the extent required by law or to the Rating
Agencies, the Depositor, the Certificate Insurer's reinsurers, parent, regu-
lators, liquidity providers and auditors and to the extent the Seller
instructs the Trustee in acting to furnish information regarding the Trust or
the Mortgage Loans to third-party information providers. No Person entitled
to receive copies of such reports or tapes or lists of Certificateholders
shall use the information therein for the purpose of soliciting the customers
of the Seller or for any other purpose except as set forth in this Agreement.
Section 5.04. Distribution Account. The Trustee shall establish with
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(___________________________________________), a separate trust account (the
"Distribution Account") titled "(Trustee), as Trustee, in trust for the
registered holders of Home Equity Loan Asset-Backed Certificates, Series
199_-_ Distribution Account." The Distribution Account shall be an Eligible
Account. The Trustee shall deposit any amounts representing payments on and
any collections in respect of the Mortgage Loans received by it immediately
following receipt thereof, including, without limitation, all amounts
withdrawn by the Master Servicer from the Collection Account pursuant to
Section 3.03 for deposit to the Distribution Account. Amounts on deposit in
the Distribution Account may be invested in Eligible Investments pursuant to
Section 5.05.
Section 5.05. Investment of Accounts. (a) So long as no Event of
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Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account held by the Trustee
shall be invested and reinvested by the Trustee, as directed in writing by
the Master Servicer, in one or more Eligible Investments bearing interest or
sold at a discount. If an Event of Default shall have occurred and be
continuing or if the Master Servicer does not provide investment directions,
the Trustee shall invest all Accounts in Eligible Investments described in
paragraph (vi) of the definition of Eligible Investments. No such investment
in any Account shall mature later than the Business Day immediately preceding
the next Distribution Date (except that (i) if such Eligible Investment is an
obligation of the Trustee, then such Eligible Investment shall mature not
later than such Distribution Date and (ii) any other date as may be approved
by the Rating Agencies and the Certificate Insurer).
(b) If any amounts are needed for disbursement from any Account held by
the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in such Account. The Trustee
shall not be liable for any investment loss or other charge resulting
therefrom unless the Trustee's failure to perform in accordance with this
Section 5.05 is the cause of such loss or charge.
(c) Subject to Section 9.01, the Trustee shall not in any way be held
liable by reason of any investment loss or charge or any insufficiency in any
Account held by it resulting from any investment loss on any Eligible
Investment included therein unless the Trustee's failure to perform in
accordance with this Section is the cause of such loss or charge (except as
provided in subsection (b) of this Section).
(d) The Trustee shall invest and reinvest funds in the Accounts held by
the Trustee, to the fullest extent practicable, in such manner as the Master
Servicer shall from time to time direct as set forth in Section 5.05(a), but
only in one or more Eligible Investments.
(e) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in the Collection Account and the Distribution
Account shall be for the benefit of the Master Servicer as servicing
compensation (in addition to the Master Servicing Fee), and shall be subject
to withdrawal on or before the first Business Day of the month following the
month in which such income or gain is received. The Master Servicer shall
deposit in the Collection Account or the Distribution Account, as the case
may be, the amount of any loss incurred in respect of any Eligible Investment
held therein which is in excess of the income and gain thereon immediately
upon realization of such loss from its own funds, without any right to
reimbursement therefore.
ARTICLE VI
The Certificates
Section 6.01. The Certificates. Each of the Class A Certificates and
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Class R Certificates shall be substantially in the forms set forth in
Exhibits A and B hereto, respectively, and shall, on original issue, be
executed, authenticated and delivered by the Trustee to or upon the order of
the Seller concurrently with the sale and assignment to the Trustee of the
Trust. Each Class of Class A Certificates shall be initially evidenced by
one or more certificates representing a fraction of the Original Class A
Certificate Principal Balance and shall be held in minimum dollar denomina-
tions of $1,000 and dollar multiples in excess thereof, except that one of
each of the Class A Certificate may be in a different denomination so that
the sum of the denominations of all outstanding Class A Certificates shall
equal the Original Class A Certificate Principal Balance.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by a Responsible Officer. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall
bind the Trust, notwithstanding that such individuals or any of them have
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of such Certificate.
No Certificate shall be entitled to any benefit under this Agreement or be
valid for any purpose, unless such Certificate shall have been manually
authenticated by the Trustee substantially in the form provided for herein,
and such authentication upon any Certificate shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication. Subject to Section 6.02(c), the Class A Certificates shall
be Book-Entry Certificates. The Class R Certificates shall not be Book-Entry
Certificates.
Section 6.02. Registration of Transfer and Exchange of Certificates.
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(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 and of transfers and exchanges of Certifi-
cates 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 Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph and, in the case of a Class R
Certificate, upon satisfaction of the conditions set forth below, the Trustee
on behalf of the Trust shall execute, authenticate and deliver, in the name
of the designated transferee or transferees, one or more new Certificates of
the same aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates in authorized denominations and the same aggregate
Percentage Interests, 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 and authenticate and deliver the Certifi-
cates which the Certificateholder making the exchange is entitled to receive.
Every Certificate presented or surrendered for registration of transfer or
exchange shall (if so required by the Trustee or the Certificate Registrar)
be duly endorsed by, or be accompanied by a written instrument of transfer
satisfactory to the Trustee and the Certificate Registrar duly executed by,
the Holder thereof or his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry Certifi-
cates shall at all times remain registered in the name of the Depository or
its nominee and at all times: (i) registration of such 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 such Certificates on the
books of the Depository shall be governed by applicable rules established by
the Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Trustee shall
deal with the Depository as representative of the Certificate Owners of the
Certificates for purposes of exercising the rights of Holders under this
Agreement, and requests and directions for and votes of such representative
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be
fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and Persons shown
on the books of such indirect participating firms as direct or indirect
Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owners. Each
Depository Participant shall only transfer Book-Entry Certificates of Certi-
ficate Owners that it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures. The parties
hereto are hereby authorized to execute a Letter of Representations with the
Depository or take such other action as may be necessary or desirable to
register a Book-Entry Certificate to the Depository. In the event of any
conflict between the terms of any such Letter of Representation and this
Agreement the terms of this Agreement shall control.
(c) If (i)(x) the Depository or the Seller advises the Trustee in
writing that the Depository is no longer willing or able to discharge
properly its responsibilities as Depository and (y) the Trustee or the Seller
is unable to locate a qualified successor, (ii) the Depositor, at its sole
option, with the consent of the Trustee, elects to terminate the book-entry
system through the Depository or (iii) after the occurrence of an Event of
Default, the Certificate Owners of each Class of Class A Certificates
representing Percentage Interests aggregating not less than 51% advises the
Trustee and Depository through the Financial Intermediaries and the
Depository Participants in writing that the continuation of a book-entry
system through the Depository to the exclusion of definitive, fully regis-
tered certificates (the "Definitive Certificates") to Certificate Owners is
no longer in the best interests of the Certificate Owners. Upon surrender to
the Certificate Registrar of each Class of Class A Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall, at the Seller's expense, in the case of (i)
and (ii) above, or the Seller's expense, in the case of (iii) above, execute
and authenticate the Definitive Certificates. Neither the Seller 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, the Trustee, the
Certificate Registrar, the Master Servicer, any Paying Agent and the Seller
shall recognize the Holders of the Definitive Certificates as Certificate-
holders hereunder.
(d) Except with respect to the initial transfer of the Class R
Certificates by the Seller, no transfer, sale, pledge or other disposition of
any Class R Certificate shall be made unless such disposition is exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and any applicable state securities laws or is made in
accordance with the 1933 Act and laws. In the event of any such transfer,
other than the transfer of the Tax Matters Person Residual Interest to the
Trustee (i) unless such transfer is made in reliance upon Rule 144A (as
evidenced by the investment letter delivered to the Trustee, in substantially
the form attached hereto as Exhibit K) under the 1933 Act, the Trustee and
the Seller shall require a written Opinion of Counsel (which may be in-house
counsel) acceptable to and in form and substance reasonably satisfactory to
the Trustee and the Seller that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from
the 1933 Act or is being made pursuant to the 1933 Act, which Opinion of
Counsel shall not be an expense of the Trustee or the Seller or (ii) the
Trustee shall require the transferor to execute a transferor certificate (in
substantially the form attached hereto as Exhibit H) and the transferee to
execute an investment letter (in substantially the form attached hereto as
Exhibit K) acceptable to and in form and substance reasonably satisfactory to
the Seller and the Trustee certifying to the Seller and the Trustee the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or the Seller. The Holder of a Class R Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee,
the Master Servicer and the Seller against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal
and state laws.
No transfer of a Class R Certificate shall be made unless the Trustee
shall have received either (i) a representation from the transferee of such
Certificate, acceptable to and in form and substance satisfactory to the
Trustee and the Seller, such requirement is satisfied only by the Trustee's
receipt of a representation letter from the transferee substantially in the
form of Exhibit M or Exhibit N hereto, as appropriate), to the effect that
such transferee is not an employee benefit plan or arrangement subject to
Section 406 of ERISA or a plan subject to Section 4975 of the Code, nor a
person acting on behalf of any such plan or arrangement nor using the assets
of any such plan or arrangement to effect such transfer or (ii) if the
purchaser is an insurance company, a representation that the purchaser is an
insurance company which is purchasing such Certificates with funds contained
in an "insurance company general account" (as such term is defined in Section
V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") and that
the purchase and holding of such Certificates are covered under PTCE 95-60 or
(iii) in the case of any such Class R Certificate presented for registration
in the name of an employee benefit plan subject to ERISA or a plan or
arrangement subject to Section 4975 of the Code (or comparable provisions of
any subsequent enactments), or a trustee of any such plan or any other person
acting on behalf of any such plan or arrangement or using such plan's or
arrangement's assets, an Opinion of Counsel satisfactory to the Trustee which
Opinion of Counsel shall not be an expense of the Master Servicer, the
Trustee or the Trust, addressed to the Trustee, to the effect that the
purchase or holding of such Class R Certificate will not result in the assets
of the Trust being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the Trustee
to any obligation in addition to those expressly undertaken in this Agreement
or to any liability. Notwithstanding anything else to the contrary herein,
any purported transfer of a Class R Certificate to or on behalf of an
employee benefit plan subject to ERISA or to the Code without the delivery to
the Trustee of an Opinion of Counsel satisfactory to the Trustee as described
above shall be void and of no effect.
Each Person who has or who acquires any Ownership Interest in a Class R
Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions and
to have irrevocably appointed the Seller or its designee as its attorney-in-
fact to negotiate the terms of any mandatory sale under clause (v) below and
to execute all instruments of transfer and to do all other things necessary
in connection with any such sale, and the rights of each Person acquiring any
Ownership Interest in a Class R Certificate are expressly subject to the
following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall be a Permitted Transferee and shall promptly
notify the Trustee of any change or impending change in its status as a
Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Class R
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(iii) In connection with any proposed transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall as a condition to
registration of the transfer, require delivery to it, in form and
substance satisfactory to it, of each of the following:
A. an affidavit in the form of Exhibit H hereto from the
proposed transferee to the effect that such transferee is a
Permitted Transferee and that it is not acquiring its Ownership
Interest in the Class R Certificate that is the subject of the
proposed transfer as a nominee, trustee or agent for any Person who
is not a Permitted Transferee; and
B. a covenant of the proposed transferee to the effect that
the proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the Class R Certificates.
(iv) Any attempted or purported transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of this
Section shall be absolutely null and void and shall vest no rights in
the purported transferee. If any purported transferee shall, in
violation of the provisions of this Section, become a Holder of a Class
R Certificate, then the prior Holder of such Class R Certificate that is
a Permitted Transferee shall, upon discovery that the registration of
transfer of such Class R Certificate was not in fact permitted by this
Section, be restored to all rights as Holder thereof retroactive to the
date of registration of transfer of such Class R Certificate. The
Trustee shall be under no liability to any Person for any registration
of transfer of a Class R Certificate that is in fact not permitted by
this Section or for making any distributions due on such Class R
Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of this Agreement so long as
the Trustee received the documents specified in clause (iii). The
Trustee shall be entitled to recover from any Holder of a Class R
Certificate that was in fact not a Permitted Transferee at the time such
distributions were made all distributions made on such Class R
Certificate. Any such distributions so recovered by the Trustee shall
be distributed and delivered by the Trustee to the prior Holder of such
Class R Certificate that is a Permitted Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section, then the Trustee shall have the right but
not the obligation, without notice to the Holder of such Class R
Certificate or any other Person having an Ownership Interest therein, to
notify the Seller to arrange for the sale of such Class R Certificate.
The proceeds of such sale, net of commissions (which may include
commissions payable to the Seller or its affiliates in connection with
such sale), expenses and taxes due, if any, will be remitted by the
Trustee to the previous Holder of such Class R Certificate that is a
Permitted Transferee, except that in the event that the Trustee
determines that the Holder of such Class R Certificate may be liable for
any amount due under this Section or any other provisions of this
Agreement, the Trustee may withhold a corresponding amount from such
remittance as security for such claim. The terms and conditions of any
sale under this clause (v) shall be determined in the sole discretion of
the Trustee and it shall not be liable to any Person having an Ownership
Interest in a Class R Certificate as a result of its exercise of such
discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section, then the Trustee will provide to the
Internal Revenue Service, and to the persons specified in Sections
860E(e)(3) and (6) of the Code, information needed to compute the tax
imposed under Section 860E(e)(5) of the Code on transfers of residual
interests to disqualified organizations.
The foregoing provisions of this Section shall cease to apply to transfers
occurring on or after the date on which there shall have been delivered to
the Trustee, in form and substance satisfactory to the Trustee, (i) written
notification from each Rating Agency that the removal of the restrictions on
Transfer set forth in this Section will not cause such Rating Agency to
downgrade its rating of the Certificates and (ii) an Opinion of Counsel to
the effect that such removal will not cause the Trust to fail to qualify as a
REMIC.
The Tax Matters Person Residual Interest shall at all times be
registered in the name of the Trustee.
(e) No service charge shall be made for any registration of transfer or
exchange of Certificates of any Class, but the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Certifi-
cates.
All Certificates surrendered for registration of transfer or exchange
shall be cancelled by the Certificate Registrar and disposed of pursuant to
its standard procedures.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) any mutilated Certificate is surrendered to the Certificate Registrar or-
- ------------------------------------------------ the Certificate Registrar
receives evidence to its satisfaction of the destruction, loss or theft of
any Certificate and (ii) there is delivered to the Trustee, the Seller and
the Certificate Registrar such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of notice to the
Trustee or the Certificate Registrar that such Certificate has been acquired
by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section, the Trustee or
the Certificate Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Trustee and the Certificate Registrar) in connection therewith. Any
duplicate Certificate issued pursuant to this Section, shall constitute
complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Master Servicer, the Seller,
the Trustee, the Certificate Registrar, the Certificate Insurer, any Paying
Agent and any agent of the Master Servicer, the Seller, the Certificate
Registrar, any Paying Agent or the Trustee may treat the Person, including a
Depository, 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 none of the Master Servicer,
the Trustee, the Certificate Insurer, the Trustee nor any agent of any of
them shall be affected by notice to the contrary.
Section 6.05. Appointment of Paying Agent. (a) The Paying Agent shall
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make distributions to Certificateholders from the Distribution Account
pursuant to Section 5.01 and shall report the amounts of such distributions
to the Trustee. The duties of the Paying Agent may include the obligation
(i) to withdraw funds from the Collection Account pursuant to Section 3.03
and for the purpose of making the distributions referred to above and (ii) to
distribute statements and provide information to Certificateholders as
required hereunder. The Paying Agent hereunder shall at all times be a
corporation duly incorporated and validly existing under the laws of the
United States of America or any state thereof, authorized under such laws to
exercise corporate trust powers and subject to supervision or examination by
federal or state authorities. The Paying Agent shall initially be the
Trustee. The Trustee may appoint a successor to act as Paying Agent, which
appointment shall be reasonably satisfactory to the Seller and the
Certificate Insurer.
(b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold
all sums, if any, held by it for payment to the Certificateholders in trust
for the benefit of the Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders and shall agree that it shall comply
with all requirements of the Code regarding the withholding of payments in
respect of Federal income taxes due from Certificate Owners and otherwise
comply with the provisions of this Agreement applicable to it.
ARTICLE VII
The Seller and the Master Servicer
Section 7.01. Liability of the Seller and the Master Servicer. The
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Seller and the Master Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically imposed upon and undertaken by the
Seller or Master Servicer, as the case may be, herein.
Section 7.02. Merger or Consolidation of, or Assumption of the
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Obligations of, the Seller or the Master Servicer. Any corporation into
- -------------------------------------------------
which the Seller or the Master Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Seller or the Master Servicer shall be a party, or any corporation
succeeding to the business of the Seller or the Master Servicer, shall be the
successor of the Seller or the Master Servicer, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor Master Servicer shall
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satisfy all the requirements of Section 8.02 with respect to the
qualifications of a successor Master Servicer.
Section 7.03. Limitation on Liability of the Master Servicer and
--------------------------------------------------
Others. Neither the Master Servicer nor any of the directors or officers or
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employees or agents of the Master Servicer shall be under any liability to
the Trust or the Certificateholders for any action taken or for refraining
from the taking of any action by the Master Servicer in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that this
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provision shall not protect the Master Servicer or any such Person against
any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or negligence in the performance of duties of the
Master Servicer or by reason of its reckless disregard of its obligations and
duties of the Master Servicer hereunder. The preceding sentence shall not
limit the obligations of the Master Servicer pursuant to Section 9.05. The
Master Servicer and any director or officer or employee or agent of the
Master 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 Master Servicer and any director or officer or
employee or agent of the Master Servicer shall be indemnified by the Trust
and held harmless against any loss, liability or expense incurred in
connection with any legal action relating to this Agreement or the Certifi-
cates, other than any loss, liability or expense related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of its willful misfeasance, bad
faith or negligence in the performance of duties hereunder or by reason of
its reckless disregard of obligations and duties hereunder; provided,
--------
however, that such indemnification shall be limited solely to amounts
- ------
otherwise available for distribution pursuant to Section 5.01(a)(vi)(6) and
such amounts shall be paid to the Master Servicer prior to distributions to
the Class R Certificateholders. The Master Servicer's right to indemnity or
reimbursement pursuant to this Section shall survive any resignation or
termination of the Master Servicer pursuant to Section 7.04 or 8.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to
such resignation or termination). This paragraph shall apply to the Master
Servicer solely in its capacity as Master Servicer hereunder and in no other
capacities.
Section 7.04. Master Servicer Not to Resign. Subject to the provisions
-----------------------------
of Section 7.02, the Master Servicer shall not resign from the obligations
and duties hereby imposed on it except (i) upon determination that the
performance of its obligations or duties hereunder are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it or its subsidiaries or Affiliates,
the other activities of the Master Servicer so causing such a conflict being
of a type and nature carried on by the Master Servicer or its subsidiaries or
Affiliates at the date of this Agreement or (ii) upon satisfaction of the
following conditions: (a) the Master Servicer has proposed a successor master
servicer to the Trustee in writing, which shall be the Designated
Subservicer, unless the Designated Subservicer elects not to become the
successor master servicer, then another successor master servicer, and such
proposed successor master servicer is reasonably acceptable to the Trustee;
(b) each Rating Agency shall have delivered a letter to the Trustee prior to
the appointment of the successor servicer stating that the proposed
appointment of such successor master servicer as Master Servicer hereunder
will not result in the reduction or withdrawal of the then current rating of
the Class A Certificates; and (c) such proposed successor servicer is
reasonably acceptable to the Certificate Insurer, as evidenced by a letter to
the Trustee; provided, however, that no such resignation by the Master
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Servicer shall become effective until such successor master servicer shall
have assumed the Master Servicer's responsibilities and obligations hereunder
or the Trustee shall have designated a successor servicer in accordance with
Section 8.02. Any such resignation shall not relieve the Master 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 Master
Servicer. Any such determination permitting the resignation of the Master
Servicer pursuant to clause (i) above shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee and the Certificate Insurer.
The Master Servicer shall have no claim (whether by subrogation or otherwise)
or other action against any Certificateholder or the Certificate Insurer for
any amounts paid by the Master Servicer pursuant to any provision of this
Agreement. Any such determination permitting the resignation of the Master
Servicer shall be evidenced by an Opinion of Counsel to such effect delivered
to the Trustee and the Certificate Insurer.
Section 7.05. Delegation of Duties. In the ordinary course of
--------------------
business, the Master Servicer at any time may delegate any of its duties
hereunder to any Person, including any of its Affiliates, who agrees to
conduct such duties in accordance with standards comparable to those set
forth in Section 3.01. Such delegation shall not relieve the Master Servicer
of its liabilities and responsibilities with respect to such duties and shall
not constitute a resignation within the meaning of Section 7.04. The Master
Servicer shall provide the Certificate Insurer and the Trustee with written
notice prior to the delegation of any of its duties to any Person other than
any of the Master Servicer's Affiliates or their respective successors and
assigns.
Section 7.06. Indemnification of the Trust by the Master Servicer. (a)
---------------------------------------------------
The Master Servicer shall indemnify and hold harmless the Trust and the
Trustee from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of the Master Servicer's willful misfeasance,
bad faith or negligence in the performance of its activities in servicing or
administering the Mortgage Loans pursuant to this Agreement, including, but
not limited to, any judgment, award, settlement, reasonable attorneys' fees
and other costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim related to the Master
Servicer's willful misfeasance, bad faith or negligence. Any such
indemnification shall not be payable from the assets of the Trust and shall
survive the termination of the Agreement.
(b) Notwithstanding anything to the contrary contained herein, the
Seller (i) agrees to be liable directly to the injured party for the entire
amount and (ii) shall indemnify and hold harmless the Master Servicer, any
Designated Subservicer, the Trust and the Trustee from and against any loss,
liability, expense, damage, claim or injury (including, without limitation,
any prohibited transactions tax imposed on the Trust, but excluding any loss,
liability, expense, damage, claim or injury attributable to a holder of a
Regular Certificate in the capacity as an investor in such Certificates as a
result of defaults on the Mortgage Loans) arising out of or based on the
retention of the Mortgage Loans and Mortgage Files pursuant to this Agreement
by reason of any acts, omissions or alleged acts or omissions arising out of
activities of the Trust or the Trustee, or the actions of the Master Servicer
including, in either case, but not limited to, amounts payable to the Master
Servicer pursuant to Section 7.03, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided that the Seller shall not indemnify any such party (but shall
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indemnify any other injured party) if such loss, liability, expense, damage
or injury is due to such party's willful malfeasance, bad faith or negligence
or by reason of such party's reckless disregard of its obligations hereunder.
The provisions of this indemnity shall run directly to and be enforceable by
an injured party subject to the limitations hereof. The provisions of this
Section shall survive the termination of this Agreement.
Section 7.07. Inspection. The Master Servicer shall (and shall require
----------
any Subservicer in the related Subservicing Agreement to) afford the
Certificate Insurer, upon reasonable notice, during normal business hours,
access to all records maintained by the Master Servicer in respect of its
rights and obligations hereunder and access to officers of the Master
Servicer and each Subservicer responsible for such obligations. Upon
request, the Master Servicer shall furnish to the Certificate Insurer the
Master Servicer's most recent publicly available financial statements and
each Subservicer's most recent financial statements (annual or quarterly
statements, as the case may be) and such other information relating to their
capacity to perform their obligations under this Agreement as the Master
Servicer or such Subservicer possesses.
ARTICLE VIII
Default
Section 8.01. Events of Default. (a) If any one of the following
-----------------
events ("Events of Default") shall occur and be continuing:
(i) (A) The failure by the Master Servicer to make any Monthly
Advance; or (B) any other failure by the Master Servicer to deposit in
the Collection Account or Distribution Account any deposit required to
be made under the terms of this Agreement which continues unremedied for
a period of two Business Days after the date upon which written notice
of such failure shall have been given to the Master Servicer by the
Trustee or to the Master Servicer and the Trustee by the Certificate
Insurer or by any holder of a Regular Certificate; or
(ii) The failure by the Master Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days, or, except as otherwise described in subclause (vi) below, the
failure by the Master Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Master Servicer as set forth in this Agreement, which failure continues
unremedied for a period of 30 days, after the date on which written
notice of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Trustee or to the Master
Servicer and the Trustee by the Certificate Insurer or by any holder of
a Regular Certificate; or
(iii) The entry against the Master Servicer of a decree or order
by a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(iv) The Master Servicer shall voluntarily 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
Master Servicer 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, 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 Master Servicer and such decree or order
shall have remained in force undischarged, unbonded or unstayed for a
period of 60 days; or the Master 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; or
(v) Any breach by the Master Servicer of a representation or
warranty made in Section 2.03, which breach materially and adversely
affects the interests of the Certificateholders or the Certificate
Insurer and continues unremedied for a period of 30 days after the
giving of written notice of such failure to the Master Servicer by the
Trustee, or to the Master Servicer and the Trustee by the Certificate
Insurer or Holders of Certificates evidencing Percentage Interests
aggregating not less than 25%; or
(vi) The failure of the Seller to deliver the Assignments of
Mortgage as required pursuant to Section 2.01(a)(iii); or
(vii) (A) On or prior to __________, ____, the Total Expected
Losses equal or exceed ____% of the Cut-Off Date Pool Principal Balance
or (B) after __________, ____, the Total Expected Losses equal or exceed
_____% of the Cut-Off Date Pool Principal Balance.
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied within the applicable grace period, (x)
subject to the succeeding paragraph, with respect solely to clause (i)(A)
above, if such Monthly Advance is not made by 4:00 P.M., New York time, on
the Business Day following written notice to the Master Servicer of such
event the Trustee shall terminate all of the rights and obligations of the
Master Servicer under this Agreement and the Designated Subservicer if it so
elects and with the consent of the Certificate Insurer shall immediately make
such Monthly Advance and assume, or if such Subservicer does not make such
election, then the Trustee, or any other successor servicer appointed in
accordance with Section 8.02, shall immediately make such Monthly Advance and
assume, pursuant to Section 8.02, the duties of a successor Master Servicer
and (y) in the case of (i)(B), (ii), (iii), (iv), (v) and (vi) above, the
Trustee shall, at the direction of the Certificate Insurer or the Holders of
each Class of Class A Certificates evidencing Percentage Interests
aggregating not less than 51%, (with the consent of the Certificate Insurer,
so long as no Certificate Insurer Default exists), by notice then given in
writing to the Master Servicer (and to the Trustee if given by Holders of
Certificates), terminate all of the rights and obligations of the Master
Servicer as servicer under this Agreement. Upon the occurrence of clause
(vii) above, the Certificate Insurer may require that an audit of the Master
Servicer's servicing practices be performed, at the expense of the Seller, by
a Person selected by the Certificate Insurer. The Master Servicer shall
promptly provide the Certificate Insurer the written results of such audit.
If, upon being furnished with the results of such audit, the Certificate
Insurer reasonably concludes that the Master Servicer's servicing practices
have not been in compliance with the servicing standards set forth herein,
the Certificate Insurer may declare an Event of Default and may remove the
Master Servicer by giving written notice of such determination to the Seller,
the Master Servicer and the Trustee. Any such notice to the Master Servicer
shall also be given to each Rating Agency, the Seller and the Certificate
Insurer. On or after the receipt by the Master Servicer of such written
notice, all authority and power of the Master Servicer under this Agreement,
whether with respect to the Certificates or the Mortgage Loans or otherwise,
shall pass to and be vested in the Designated Subservicer if it elects to
assume the obligations of successor Master Servicer hereunder and provided
that an event of default under such Subservicing Agreement does not exist (or
has been waived, with the consent of the Certificate Insurer) and the
Certificate Insurer consents to the succession of the Designated Master as
the successor master servicer, or the Trustee, as the case may be, pursuant
to and under this Section; and, without limitation, the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Mortgage Loan and related docu-
ments or otherwise. The Master Servicer agrees to cooperate with the Trustee
in effecting the termination of the responsibilities and rights of the Master
Servicer hereunder, including, without limitation, the transfer to the Desig-
nated Subservicer or the Trustee, as the case may be, for the administration
by it of all cash amounts that shall at the time be held by the Master
Servicer and to be deposited by it in the Collection Account, or that have
been deposited by the Master Servicer in the Collection Account or thereafter
received by the Master Servicer with respect to the Mortgage Loans. All
reasonable costs and expenses (including attorneys' fees) incurred in connec-
tion with transferring the Mortgage Files to the successor Master Servicer
and amending this Agreement to reflect such succession as Master Servicer
pursuant to this Section shall be paid by the predecessor Master Servicer (or
if the predecessor Master Servicer is the Trustee, the initial Master
Servicer) upon presentation of reasonable documentation of such costs and
expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.01(i) for a period of ten Business Days or under Section
8.01(ii) for a period of 30 Business Days, shall not constitute an Event of
Default if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Master Servicer and such delay or failure was
caused by an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion or sabotage, epidemics, landslides, lightn-
ing, fire, hurricanes, earthquakes, floods or similar causes. The preceding
sentence shall not relieve the Master Servicer from using its best efforts to
perform its respective obligations in a timely manner in accordance with the
terms of this Agreement and the Master Servicer shall provide the Trustee and
the Certificateholders with an Officers' Certificate giving prompt notice of
such failure or delay by it, together with a description of its efforts to so
perform its obligations. The Master Servicer shall immediately notify the
Trustee in writing of any Events of Default.
Section 8.02. Trustee to Act; Appointment of Successor. (a) On and
----------------------------------------
after the time the Master Servicer receives a notice of termination pursuant
to Section 8.01 or 7.04, the Designated Subservicer or the Trustee, as the
case may be, shall be the successor in all respects to the Master 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 Master Servicer by the
terms and provisions hereof arising on and after its succession. As
compensation therefor, such successor Master Servicer shall be entitled to
such compensation as the Master Servicer would have been entitled to
hereunder if no such notice of termination had been given. Notwithstanding
the above, if the Designated Subservicer does not become the successor Master
Servicer and (i) if the Trustee is unwilling to act as successor Master
Servicer or (ii) if the Trustee is legally unable so to act, the Trustee
shall appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution, bank or other mortgage loan
or home equity loan servicer having a net worth of not less than $50,000,000
as the successor to the Master Servicer hereunder in the assumption of all or
any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder; provided that any such successor Master Servicer shall
--------
be acceptable to the Certificate Insurer, as evidenced by the Certificate
Insurer's prior written consent which consent shall not be unreasonably
withheld and provided, further, that the appointment of any such successor
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Master Servicer will not result in the qualification, reduction or withdrawal
of the ratings assigned to the Certificates by the Rating Agencies.
Pending appointment of a successor to the Master Servicer hereunder, unless
the Trustee is prohibited by law from so acting, the Trustee shall act in
such capacity as hereinabove provided. In connection with such appointment
and assumption, the successor shall be entitled to receive compensation out
of payments on Mortgage Loans in an amount equal to the compensation which the
Master Servicer would otherwise have received pursuant to Section 3.09 (or such
lesser compensation as the Trustee and such successor shall agree). The
appointment of a successor Master Servicer shall not affect any liability
of the predecessor Master Servicer which may have arisen under this Agreement
prior to its termination as Master Servicer to pay any deductible under an
insurance policy pursuant to Section 3.05 or to indemnify the Trustee
pursuant to Section 7.06), nor shall any successor Master Servicer be liable
for any acts or omissions of the predecessor Master Servicer or for any breach
by such Master Servicer of any of its representations or warranties contained
herein or in any related document or agreement. 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 Master Servicer as
servicer shall during the term of its service as servicer (i) continue to
service and administer the Mortgage Loans for the benefit of Certificate-
holders and the Certificate Insurer, (ii) maintain in force a policy or
policies of insurance covering errors and omissions in the performance of its
obligations as Master Servicer hereunder and a Fidelity Bond in respect of
its officers, employees and agents to the same extent as the Master Servicer
is so required pursuant to Section 3.06.
Section 8.03. Waiver of Defaults. The Certificate Insurer or the
------------------
Majority Certificateholders with the consent of the Certificate Insurer may,
on behalf of all Certificateholders, waive any events permitting removal of
the Master Servicer as servicer pursuant to this Article VIII, provided,
--------
however, that the Majority Certificateholders may not waive a default in
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making a required distribution on a Certificate without the consent of the
Holder of such Certificate. Upon any waiver of a past default, such default
shall cease to exist and any Event of Default arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto except to the extent expressly so waived. Notice of any
such waiver shall be given by the Trustee to the Rating Agencies.
Section 8.04. Notification to Certificateholders. Upon any termination
----------------------------------
or appointment of a successor to the Master Servicer pursuant to this Article
VIII or Section 7.04, the Trustee shall give prompt written notice thereof to
the Certificateholders at their respective addresses appearing in the Certi-
ficate Register, the Certificate Insurer and each Rating Agency.
Section 8.05. Rights of the Certificate Insurer to Exercise Rights of
-------------------------------------------------------
Class A Certificateholders. By accepting its Certificate, each Class A
- --------------------------
Certificateholder agrees that unless a Certificate Insurer Default exists,
the Certificate Insurer shall be deemed to be the Certificateholders for all
purposes (other than with respect to payment on the Certificates) and shall
have the right to exercise all rights of the Class A Certificateholders under
this Agreement and under each Class of Class A Certificates without any
further consent of the Class A Certificateholders, including, without
limitation:
(a) the right to require the Seller to repurchase Mortgage Loans
pursuant to Section 2.02 or 2.04;
(b) the right to give notices of breach or to terminate the rights and
obligations of the Master Servicer as servicer pursuant to Section 8.01 and
to consent to or direct waivers of Master Servicer defaults pursuant to
Section 8.03;
(c) the right to direct the actions of the Trustee during the
continuance of a Master Servicer default pursuant to Sections 8.01 and 8.02;
(d) the right to institute proceedings against the Master Servicer
pursuant to Section 8.01;
(e) the right to direct the Trustee to investigate certain matters
pursuant to Section 9.02;
(f) the right to remove the Trustee pursuant to Section 9.07;
(g) the right to direct foreclosures upon the failure of the Master
Servicer to do so in accordance with this Agreement; and
(h) any rights or remedies expressly given the Majority
Certificateholders.
In addition, each Certificateholder agrees that unless a Certificate Insurer
Default exists, the rights specifically enumerated in this Agreement may be
exercised by the Certificateholders only with the prior written consent of
the Certificate Insurer.
Section 8.06. Trustee to Act Solely with Consent of the Certificate
-----------------------------------------------------
Insurer. Unless a Certificate Insurer Default exists, the Trustee shall not,
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without the Certificate Insurer's consent or unless directed by the
Certificate Insurer:
(a) terminate the rights and obligations of the Master Servicer as
Master Servicer pursuant to Section 8.01;
(b) agree to any amendment pursuant to Article XI, provided, however,
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that such consent shall not be unreasonably withheld; or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole discretion
renounce all or any of its rights under Section 8.05, 8.06 or 8.07 or any
requirement for the Certificate Insurer's consent for any period of time.
Section 8.07. Mortgage Loans, Trust and Accounts Held for Benefit of
------------------------------------------------------
the Certificate Insurer. The Trustee shall hold the Trust and the Mortgage
- -----------------------
Files for the benefit of the Certificateholders and the Certificate Insurer
and all references in this Agreement and in the Certificates to the benefit
of Holders of the Certificates shall be deemed to include the Certificate
Insurer. The Trustee shall cooperate in all reasonable respects with any
reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement
and the Certificates unless, as stated in an Opinion of Counsel addressed to
the Trustee and the Certificate Insurer, such action is adverse to the
interests of the Certificateholders or diminishes the rights of the Certifi-
cateholders or imposes additional burdens or restrictions on the Certificate-
holders.
The Master Servicer hereby acknowledges and agrees that it shall service
the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Certificate Insurer, and all references in this Agreement to
the benefit of or actions on behalf of the Certificateholders shall be deemed
to include the Certificate Insurer.
Section 8.08. Certificate Insurer Default. Notwithstanding anything
---------------------------
elsewhere in this Agreement or in the Certificates to the contrary, if a
Certificate Insurer Default exists, or if and to the extent the Certificate
Insurer has delivered its written renunciation of its rights, the provisions
of this Article VIII and all other provisions of this Agreement which (a)
permit the Certificate Insurer to exercise rights of the Certificateholders,
(b) restrict the ability of the Certificateholders, the Master Servicer or
the Trustee to act without the consent or approval of the Certificate
Insurer, (c) provide that a particular act or thing must be acceptable to the
Certificate Insurer, (d) permit the Certificate Insurer to direct (or
otherwise to require) the actions of the Trustee, the Master Servicer or the
Certificateholders, (e) provide that any action or omission taken with the
consent, approval or authorization of the Certificate Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to
take such action to any liability hereunder or (f) which have a similar
effect, shall be of no further force and effect and the Trustee shall
administer the Trust and perform its obligations hereunder solely for the
benefit of the Holders of the Certificates. Nothing in the foregoing
sentence, nor any action taken pursuant thereto or in compliance therewith,
shall be deemed to have released the Certificate Insurer from any obligation
or liability it may have to any party or to the Certificateholders hereunder,
under any other agreement, instrument or document (including, without
limitation, the Certificate Insurance Policy) or under applicable law.
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence
-----------------
of an Event of Default and after the curing of all Events of Default which
may have occurred, undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement. If an Event of Default has
occurred (which has not been cured) of which a Responsible Officer has
knowledge, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement; provided, however, that the
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Trustee shall not be responsible for the accuracy or content of any such
resolution, certificate, statement, opinion, report, document, order or other
instrument. If any such instrument is found not to be in the form specified
in this Agreement, on its face, the Trustee shall take action as it deems
appropriate to have the instrument corrected, and if the instrument is not
corrected to the Trustee's reasonable satisfaction, the Trustee will provide
notice thereof to the Certificate Insurer and will, at the expense of the
Seller, which expense shall be reasonable given the scope and nature of the
required action, take such further action as directed by the Certificate
Insurer.
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:
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(i) prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge, and
after the curing of all such Events of Default which may have occurred,
the duties and obligations of the Trustee shall be determined solely by
the express provisions of this Agreement, the Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
or investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the consent or direction of the Certificate Insurer or
in accordance with the direction of the Holders of Class A Certificates
evidencing Percentage Interests aggregating not less than 51% (with the
consent of the Certificate Insurer, so long as no Certificate Insurer
Default exists) relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising or
omitting to exercise 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 Master Servicer to comply with the obligations of the
Master Servicer referred to in clauses (i) and (ii) of Section 8.01
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 Master Servicer, the Certificate
Insurer or the Holders of Class A Certificates evidencing Percentage
Interests aggregating not less than 51%.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, 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 Master 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 Master Servicer
in accordance with the terms of this Agreement.
Subject to the other provisions of this Agreement and without limiting
the generality of this Section, the Trustee shall have no duty (A) to see to
the payment or discharge of any tax, assessment, or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust from funds available in the Collection
Account or (B) to confirm or verify the contents of any reports or
certificates of the Master Servicer delivered to the Trustee pursuant to this
Agreement believed by the Trustee to be genuine and to have been signed or
presented by the proper party or parties.
Section 9.02. Certain Matters Affecting the Trustee. (a) Except as
-------------------------------------
otherwise provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be
protected in acting or refraining from acting upon, any resolution,
Officer's Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(ii) the Trustee may consult with counsel and any written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered
or omitted by it hereunder in good faith and in accordance with such
advice or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at the
request, order or direction of any of the Certificateholders or the
Certificate Insurer, pursuant to the provisions of this Agreement,
unless such Certificateholders or the Certificate Insurer shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby; the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of any such act; nothing contained herein
shall, however, relieve the Trustee of the obligations, upon the
occurrence of an Event of Default (which has not been cured) of which a
Responsible Officer has actual knowledge, 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 such person's own affairs;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper
or documents, unless requested in writing to do so by the Certificate
Insurer or Holders of Certificates evidencing Percentage Interests
aggregating not less than 51% (with the consent of the Certificate
Insurer, so long as no Certificate Insurer Default exists); 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 Master Servicer or, if paid by the
Trustee, shall be reimbursed by the Master Servicer upon demand. Nothing in
this clause (v) shall derogate from the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding
the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or omissions
hereunder of the Master Servicer until such time as the Trustee may be
required to act as Master Servicer pursuant to Section 8.02;
(vii) 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;
(viii) the Trustee shall not be required to give any bond or surety
in respect of the execution of the Trust created hereby or the powers
granted here; and
(ix) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.
(b) It is intended that the Trust formed hereunder shall constitute,
and that the affairs of the Trust shall be conducted so as to qualify it as,
a REMIC as defined in and in accordance with the REMIC Provisions. In
furtherance of such intention, the Trustee covenants and agrees that it shall
act as agent (and the Trustee is hereby appointed to act as agent) and as Tax
Matters Person on behalf of the REMIC, and that in such capacities, it shall:
(i) prepare, sign and file, or cause to be prepared and filed,
in a timely manner, a U.S. Real Estate Mortgage Investment Conduit
Income Tax Return (Form 1066) and any other Tax Return required to be
filed by the Trust, using a calendar year as the taxable year for the
Trust;
(ii) make, or cause to be made, an election, on behalf of the
Trust, to be treated as a REMIC on the federal tax return of the Trust
for its first taxable year;
(iii) prepare and forward, or cause to be prepared and forwarded,
to the Master Servicer, the Certificateholders and the Internal Revenue
Service and any other relevant governmental taxing authority all
information returns or reports as and when required to be provided to
them in accordance with the REMIC Provisions;
(iv) to the extent that the affairs of the Trust are within its
control, conduct such affairs of the Trust at all times that any
Certificates are outstanding so as to maintain the status of the Trust
as a REMIC under the REMIC Provisions and any other applicable federal,
state and local laws, including, without limitation, information reports
relating to "original issue discount," as defined in the Code, based
upon ___% of the Prepayment Assumption and calculated by using the issue
price of the Certificates;
(v) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the REMIC status of
the Trust;
(vi) pay the amount of any and all federal, state and local
taxes, prohibited transaction taxes as defined in Section 860F of the
Code, other than any amount due as a result of a transfer or attempted
or purported transfer in violation of Section 6.02, imposed on the Trust
when and as the same shall be due and payable (but such obligation shall
not prevent the Trustee or any other appropriate Person from contesting
any such tax in appropriate proceedings and shall not prevent the
Trustee from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings). The Trustee shall be entitled
to reimbursement in accordance with Section 2.13;
(vii) ensure that any such returns or reports filed on behalf of
the Trust by the Trustee are properly executed by the appropriate
person;
(viii) represent the Trust in any administrative or judicial
proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable
year of the Trust, enter into settlement agreements with any government
taxing agency, extend any statute of limitations relating to any item of
the Trust and otherwise act on behalf of the Trust in relation to any
tax matter involving the Trust;
(ix) as provided in Section 6.02(d)(vi), make available
information necessary for the computation of any tax imposed (1) on
transferors of residual interests to transferees that are not Permitted
Transferees or (2) on pass-through entities any interest in which is
held by an entity which is not a Permitted Transferee. The Trustee
covenants and agrees that it will sign, as Trustee, any and all Tax
Returns required to be filed by the Trust. Notwithstanding the
foregoing, at such time as the Trustee becomes the successor Master
Servicer, the holder of the largest percentage of the Class R
Certificates shall serve as Tax Matters Person until such time as an
entity is appointed to succeed the Trustee as Master Servicer;
(x) make available to the Internal Revenue Service and those
Persons specified by the REMIC Provisions all information necessary to
compute any tax imposed (A) as a result of the Transfer of an Ownership
Interest in a Class R Certificate to any Person who is not a Permitted
Transferee, including the information described in Treasury regulations
sections 1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess
inclusions" of such Class R Certificate and (B) as a result of any
regulated investment company, real estate investment trust, common trust
fund, partnership, trust, estate or organization described in Section
1381 of the Code that holds an Ownership Interest in a Class R
Certificate having as among its record holders at any time any Person
that is not a Permitted Transferee. Reasonable compensation for
providing such information may be accepted by the Trustee;
(xi) pay out of its own funds, without any right of
reimbursement, any and all tax-related expenses of the Trust (including,
but not limited to, tax return preparation and filing expenses and any
professional fees or expenses related to audits or any administrative or
judicial proceedings with respect to the Trust that involve the Internal
Revenue Service or state tax authorities), other than (A) the expense of
obtaining any Opinion of Counsel required pursuant to Sections 2.06(d),
2.13(f), 3.01(j), 9.02(b) and 10.02, (B) any expenses for which the
Trustee is otherwise indemnified pursuant to Section 9.05, (C) taxes
except as specified herein, and (D) any professional fees or expenses
related to audits or any administrative or judicial proceedings that do
not result from any breach of the Trustee's duties hereunder,; and
(xii) Upon filing with the Internal Revenue Service, the Trustee
shall furnish to the Holders of the Class R Certificates the Form 1066
and each Form 1066Q for the REMIC and shall respond promptly to written
requests made not more frequently than quarterly by any Holder of Class
R Certificates with respect to the following matters:
(1) The original projected principal and interest cash flows
on the Closing Date on each class of regular and residual interests
created hereunder and on the Mortgage Loans, based on ___% of the
Prepayment Assumption;
(2) The projected remaining principal and interest cash flows
as of the end of any calendar quarter with respect to each class of
regular and residual interests created hereunder and the Mortgage
Loans, based on ___% of the Prepayment Assumption;
(3) The Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and
interest cash flows described above;
(4) The original issue discount (or, in the case of the
Mortgage Loans, market discount) or premium accrued or amortized
through the end of such calendar quarter with respect to each class
of regular or residual interests created hereunder and with respect
to the Mortgage Loans, together with each constant yield to
maturity used in computing the same;
(5) The treatment of losses realized with respect to the
Mortgage Loans or the regular interests created hereunder,
including the timing and amount of any cancellation of indebtedness
income of the REMIC with respect to such regular interests or bad
debt deductions claims with respect to the Mortgage Loans;
(6) The amount and timing of any non-interest expenses of the
REMIC; and
(7) Any taxes (including penalties and interest) imposed on
the REMIC, including, without limitation, taxes on "prohibited
transactions," "contribution" or "net income from foreclosure
property" or state or local income or franchise taxes.
The Trustee shall have no obligation to perform pursuant to this
Section 902(b)(xii) if the information required to perform hereunder is
not provided to it.
(xiii) Following the Closing Date, and except as otherwise provided
in this Agreement, the Trustee shall not knowingly accept any
contribution of assets to the Trust unless it shall have been provided
with an Opinion of Counsel at the expense of the party delivering such
assets acceptable to it and the Certificate Insurer to the effect that
the inclusion of such assets in the REMIC will not cause the REMIC to
fail to qualify as a REMIC at any time that any Certificates are
outstanding or subject to the Trust to any tax under the REMIC
Provisions or other applicable provisions of federal, state and local
law or ordinances.
(xiv) The Trustee agrees to indemnify the Trust, the Certificate
Insurer and the Master Servicer for any taxes and costs, including,
without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust, the Certificate Insurer or the Master Servicer,
as a result of a negligent or willful breach of the Trustee's covenants
set forth in this Section.
Unless otherwise specified, any costs and expenses incurred by the
Trustee pursuant to the Section 9.02 shall not be reimbursable to it pursuant
to Section 9.05.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
-----------------------------------------------------
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Seller, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Agreement or of the Certificates (other than
the signature and authentication of the Trustee on the Certificates) or of
any Mortgage Loan or related document. The Trustee shall not be accountable
for the use or application by the Master Servicer or for the use or applica-
tion of any funds paid to the Master Servicer in respect of the Mortgage
Loans or deposited in or withdrawn from the Collection Account by the Master
Servicer. The Trustee shall at no time have any responsibility or liability
for or with respect to the legality, validity and enforceability of any
Mortgage or any Mortgage Loan, or the perfection and priority of any Mortgage
or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Trust or its ability to generate the
payments to be distributed to Certificateholders under this Agreement,
including, without limitation: the existence, condition and ownership of any
Mortgaged Property; the existence and enforceability of any hazard insurance
thereon (other than the Trustee as Master Servicer if the Trustee shall
assume the duties of the Master Servicer pursuant to Section 8.02); the
validity of the assignment of any Mortgage Loan to the Trustee or of any
intervening assignment; the completeness of any Mortgage Loan; the perfor-
mance or enforcement of any Mortgage Loan (other than the Trustee as Master
Servicer if the Trustee shall assume the duties of Master Servicer pursuant
to Section 8.02); the compliance by the Seller or the Master Servicer with
any warranty or representation made under this Agreement or in any related
document or the accuracy of any such warranty or representation prior to the
Trustee's receipt of notice or other discovery of any noncompliance therewith
or any breach thereof; any investment of monies by or at the direction of the
Master Servicer in Eligible Investments or any loss resulting therefrom, it
being understood that the Trustee shall remain responsible for any Trust
property that it may hold in its individual capacity; the acts or omissions
of any of the Master Servicer (other than the Trustee as Master Servicer if
the Trustee shall assume the duties of Master Servicer pursuant to Section
8.02), any Subservicer or any Mortgagor; any action of the Master Servicer
(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02), or any Subservicer taken in the name of the
Trustee; the failure of the Master Servicer or any Subservicer to act or
perform any duties required of it as agent of the Trustee hereunder; or any
action by the Trustee taken at the instruction of the Master Servicer (other
than if the Trustee shall assume the duties of the Master Servicer pursuant
to Section 8.02); provided, however, that the foregoing shall not relieve the
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Trustee of its obligation to perform its duties under this Agreement,
including, without limitation, the Trustee's duty to review the Mortgage
Files pursuant to Section 2.01. The Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any
time or to otherwise perfect or maintain the perfection of any security
interest or lien granted to it hereunder.
Section 9.04. Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Certifi-
cates with the same rights as it would have if it were not Trustee and may
transact any banking and trust business with the Seller or the Master
Servicer.
Section 9.05. Seller to Pay Trustee Fees and Expenses. The Trustee
---------------------------------------
shall be entitled to receive the Trustee Fee for each Loan Group pursuant to
Section 5.01(a)(i)(1) and 5.01(a)(ii)(1), and the Seller shall pay or
reimburse, the Trustee upon its request for all reasonable expenses, dis-
bursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Agreement (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence, willful misfeasance or bad faith or
which is the responsibility of Certificateholders hereunder. In addition,
the Seller covenants and agrees to indemnify the Trustee and its officers,
directors, employees and agents from, and hold it harmless against, any and
all losses, liabilities, damages, claims or expenses (i) incurred in
connection with any legal action or relating to this Agreement, the Insurance
Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence of the
Trustee in the performance of its duties hereunder or by reason of the
Trustee's reckless disregard of obligations and duties hereunder or
(ii) resulting from any error in any tax or information return prepared by
the Master Servicer. This Section shall survive termination of this
Agreement or the resignation or removal of any Trustee hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times be a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, have a
combined capital and surplus of at least $50,000,000 and a minimum long-term
debt rating of "Baa3" by Moody's and "BBB-" by S&P, and be subject to
supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
The principal office of the Trustee (other than the initial Trustee) shall be
in a state with respect to which an Opinion of Counsel has been delivered to
such Trustee at the time such Trustee is appointed Trustee to the effect that
the Trust will not be a taxable entity under the laws of such state. In case
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, 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 Seller, the Master Servicer, the Certificate
Insurer and each Rating Agency. Upon receiving such notice of resignation,
the Seller shall promptly appoint a successor Trustee (approved in writing by
the Certificate Insurer, so long as such approval shall not be unreasonably
withheld) by written instrument, copies of which instrument shall be
delivered to the resigning Trustee, the successor Trustee; provided, however,
-------- -------
that any such successor Trustee shall be subject to the prior written
approval of the Master Servicer. If no successor Trustee shall have been so
appointed and having accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.06 and shall fail to resign after written request
therefor by the Seller, with the consent of the Certificate Insurer (so long
as no Certificate Insurer Default exists) or the Certificate Insurer, or if
at any time the Trustee shall be legally unable to act, or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Seller, the Master Servicer or the
Certificate Insurer may remove the Trustee. If the Seller, the Master
Servicer or the Certificate Insurer removes the Trustee under the authority
of the immediately preceding sentence, the Seller shall promptly appoint a
successor Trustee (approved in writing by the Certificate Insurer, so long as
such approval is not unreasonably withheld) by written instrument, copies of
which instrument shall be delivered to the resigning Trustee and the
successor Trustee.
The Holders of Certificates evidencing Percentage Interests aggregating
at least 51% may, with the prior written consent of the Certificate Insurer,
so long as no Certificate Insurer Default exists, at any time remove the
Trustee by written instrument or instruments delivered to the Master
Servicer, the Seller and the Trustee; shall thereupon use its best efforts to
appoint a successor trustee in accordance with this Section.
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.
Notwithstanding anything to the contrary contained herein, so long as no
Certificate Insurer Default exists, the Trustee may not be removed by the
Seller or the Certificateholders without the prior written consent of the
Certificate Insurer, which consent shall not be unreasonably withheld.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
-----------------
provided in Section 9.07 shall execute, acknowledge and deliver to the
Seller, the Master Servicer and to its predecessor Trustee and the
Certificate Insurer 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 Seller, the Master 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 Master Servicer shall mail notice of the succession of such
Trustee hereunder to all Holders of Certificates at their addresses as shown
in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
Notwithstanding anything to the contrary contained herein, so long as no
Certificate Insurer Default exists, the appointment of any successor Trustee
pursuant to any provision of this Agreement will be subject to the prior
written consent of the Certificate Insurer, which consent shall not be
unreasonably withheld.
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 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.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust or any Mortgaged Property may at the time be located, the
Seller 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 and the Certificate Insurer to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of the Certificateholders, such title to the
Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. Any such co-trustee or separate trustee
shall be subject to the written approval of the Seller and the Certificate
Insurer, so long as no Certificate Insurer Default exists. If the
Certificate Insurer shall not have responded within 15 days after the receipt
by it of a request for approval pursuant to this Section 9.10, the Trustee
alone shall have the power to make such appointment. No co-trustee or sepa-
rate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 9.06 and no notice to Certificateholders of
the appointment of any co-trustee or separate trustee shall be required under
Section 9.08. The Seller shall be responsible for the fees of any co-trustee
or separate trustee appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Trustee, with the consent of the Certificate Insurer, so
long as no Certificate Insurer Default exists, may at any time accept
the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article IX. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Trustee or separately, as may be 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 Seller, the Certificate
Insurer and the Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of 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. Limitation of Liability. The Certificates are executed
-----------------------
by the Trustee, not in its individual capacity but solely as Trustee of the
Trust, in the exercise of the powers and authority conferred and vested in it
by this Agreement. Each of the undertakings and agreements made on the part
of the Trustee in the Certificates is made and intended not as a personal
undertaking or agreement by the Trustee but is made and intended for the
purpose of binding only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Certificates; Inspection. (a) All rights of action and claims under this
- ------------------------
Agreement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof
in any proceeding relating thereto, and such proceeding instituted by the
Trustee shall be brought in its own name or in its capacity as Trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursement and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Certificateholders and the
Certificate Insurer in respect of which such judgment has been recovered.
(b) The Trustee shall afford the Seller, the Master Servicer, the
Certificate Insurer and each Certificateholder upon reasonable notice during
normal business hours, access to all records maintained by the Trustee in
respect of its duties hereunder and access to officers of the Trustee
responsible for performing such duties. Upon request, the Trustee shall
furnish the Seller, the Master Servicer, the Certificate Insurer and any
requesting Certificateholder with its most recent financial statements. The
Trustee shall cooperate fully with the Seller, the Master Servicer, the
Certificate Insurer and such Certificateholder and shall make available to
the Seller, the Master Servicer, the Certificate Insurer and such
Certificateholder for review and copying such books, documents or records as
may be requested with respect to the Trustee's duties hereunder. The Seller,
the Master Servicer, the Certificate Insurer and the Certificateholders shall
not have any responsibility or liability for any action or failure to act by
the Trustee and are not obligated to supervise the performance of the Trustee
under this Agreement or otherwise.
Section 9.13. Suits for Enforcement. In case an Event of Default or
---------------------
other default by the Master Servicer or the Seller hereunder shall occur and
be continuing, the Trustee, in its discretion, may proceed to protect and
enforce its rights and the rights of the Certificateholders or the
Certificate Insurer under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution
of any power granted in this Agreement or for the enforcement of any other
legal, equitable or other remedy, as the Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of the
Trustee, the Certificateholders and the Certificate Insurer.
ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
-----------
responsibilities of the Seller, the Master Servicer and the Trustee created
hereby (other than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date and the obligation of
the Master Servicer to send certain notices as hereinafter set forth) shall
terminate upon notice to the Trustee of the later of (A) payment in full of
all amounts owing to the Certificate Insurer unless the Certificate Insurer
shall otherwise consent and (B) the earliest of (i) the Distribution Date on
which the Class Principal Balance of both Certificate Groups has been reduced
to zero, (ii) the final payment or other liquidation of the last Mortgage
Loan in the Trust, (iii) the optional purchase by the Seller of the Mortgage
Loans as described below and (iv) the Distribution Date in ____________.
Notwithstanding the foregoing, in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last
surviving descendant of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, living on the date hereof.
The Seller may, at its option, terminate this Agreement on any date on
which the Pool Principal Balance is less than 5% of the Cut-Off Date Pool
Principal Balance, by purchasing, on the next succeeding Distribution Date,
all of the outstanding Mortgage Loans and REO Properties at a price equal to
the sum of the outstanding Pool Balance and accrued and unpaid interest
thereon at the weighted average of the Loan Rates through the end of the Due
Period preceding the final Distribution Date together with all amounts due
and owing to the Certificate Insurer (the "Termination Price").
In connection with any such purchase pursuant to the preceding
paragraph, the Master Servicer shall deposit in the Distribution Account all
amounts then on deposit in the Collection Account (less amounts permitted to
be withdrawn by the Master Servicer pursuant to Section 3.03), which deposit
shall be deemed to have occurred immediately preceding such purchase.
Any such purchase shall be accomplished by the Seller by depositing into
the Distribution Account on the Determination Date before such Distribution
Date of the Termination Price.
(b) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a 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 to the Certificate Insurer and by letter to Class A
Certificateholders mailed not earlier than the 15th day and not later than
the 25th day of the month next preceding the month of such final distribution
specifying (i) the Distribution Date upon which final distribution of the
Class A Certificates will be made upon presentation and surrender of Class A
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 Class A
Certificates at the office or agency of the Trustee therein specified.
(c) Upon presentation and surrender of the Class A Certificates, the
Trustee shall cause to be distributed to the holders of Class A Certificates
on the Distribution Date for such final distribution, in proportion to the
Percentage Interests of their respective Class A Certificates and to the
extent that funds are available for such purpose, an amount equal to the
amount required to be distributed to holders of Class A Certificates pursuant
to Section 5.01 for such Distribution Date. On the final Distribution Date,
the Trustee will withdraw from the Distribution 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
holders of Class A Certifi-cates pursuant to Section 5.01(a) and any amounts
owing to the Trustee in respect of the Trustee Fee and due and unpaid Monthly
Advances and Master Servicing Fees, (y) the unpaid amounts due and owing to
the Certificate Insurer pursuant to Section 5.01(a).
(d) In the event that all of the Class A Certificateholders shall not
surrender their Class A Certificates for final payment and cancellation on or
before such final Distribution Date, the Trustee shall promptly following
such date cause all funds in the Distribution Account not distributed in
final distribution to Class A Certificateholders to be withdrawn therefrom
and credited to the remaining Class A Certificateholders by depositing such
funds in a separate escrow account for the benefit of such Class A Certifi-
cateholders and the Master Servicer (if the Master Servicer has exercised its
right to purchase the Mortgage Loans) or the Trustee (in any other case)
shall give a second written notice to the remaining Class A Certificate-
holders to surrender their Class A Certificates for cancellation and receive
the final distribution with respect thereto. If within nine months after the
second notice all the Certificates shall not have been surrendered for
cancellation, the Class R Certificateholder shall be entitled to all
unclaimed funds and other assets which remain subject hereto and the Trustee
upon transfer of such funds shall be discharged of any responsibility for
such funds and the Certificateholders shall look to the Class R
Certificateholder for payment.
Section 10.02. Additional Termination Requirements. (a) In the event
-----------------------------------
that the Master Servicer exercises its purchase option as provided in Section
10.01, the Trust shall be terminated in accordance with the following
additional requirements, unless the Trustee have been furnished with an
Opinion of Counsel to the effect that the failure of the Trust to comply with
the requirements of this Section will not (i) result in the imposition of
taxes on "prohibited transactions" of the Trust as defined in Section 860F of
the Code or (ii) cause the Trust to fail to qualify as a REMIC at any time
that any Class A Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date, the
Master Servicer shall adopt and the Trustee shall sign a plan of
complete liquidation of the REMIC meeting the requirements of a
"Qualified Liquidation" under Section 860F of the Code and any regu-
lations thereunder;
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Trustee
shall sell all of the assets of the Trust to the Master Servicer for
cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to each Class of Class A Certificateholders
the related Class Principal Balance, plus one month's interest thereon
at the applicable Certificate Rate, (B) to the Certificate Insurer, all
amounts owing to the Certificate Insurer under this Agreement and the
Insurance Agreement and (C) to the Class R Certificateholders, all cash
on hand after such payment to the Class A Certificateholders (other than
cash retained to meet claims) and the Trust shall terminate at such
time.
(b) By their acceptance of the Certificates, the Holders thereof hereby
agree to appoint the Trustee as their attorney in fact to: (i) adopt such a
plan of complete liquidation (and the Certificateholders hereby appoint the
Trustee as their attorney in fact to sign such plan) as appropriate or upon
the written request of the Certificate Insurer and (ii) to take such other
action in connection therewith as may be reasonably required to carry out
such plan of complete liquidation all in accordance with the terms hereof.
ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment. This Agreement may be amended from time to
---------
time by the Seller, the Master Servicer, and the Trustee, in each case
without the consent of any of the Certificateholders, but only with the
consent of the Certificate Insurer (which consent shall not be unreasonably
withheld), (i) to cure any ambiguity, (ii) to correct any defective
provisions or to correct or supplement any provisions herein that may be
inconsistent with any other provisions herein, (iii) to add to the duties of
the Master Servicer, (iv) to add any other provisions with respect to matters
or questions arising under this Agreement or the Certificate Insurance
Policy, as the case may be, which shall not be inconsistent with the
provisions of this Agreement, (v) to add or amend any provisions of this
Agreement as required by any Rating Agency or any other nationally recognized
statistical rating agency in order to maintain or improve any rating of each
Class of Class A Certificates (it being understood that, after obtaining the
ratings in effect on the Closing Date, neither the Trustee, the Seller nor
the Master Servicer is obligated to obtain, maintain or improve any such
rating) or (vi) to add or amend any provisions of this Agreement to such
extent as shall be necessary to maintain the qualification of the Trust as a
REMIC; provided, however, that (x) as evidenced by an Opinion of Counsel
-------- -------
(at the expense of the requesting party) in each case such action shall not,
adversely affect in any material respect the interest of any
Certificateholder, (y) in each case, such action is necessary or desirable to
maintain the qualification of the Trust as a REMIC or shall not adversely
affect such qualification and (z) if the opinion called for in clause (x)
cannot be delivered with regard to an amendment pursuant to clause (vi)
above, such amendment is necessary to maintain the qualification of the Trust
as a REMIC; provided, further, that the amendment shall not be deemed to
-------- -------
adversely affect in any material respect the interests of the Certificate-
holders and no Opinion of Counsel to that effect shall be required if the
Person requesting the amendment obtains a letter from the Rating Agency
stating that the amendment would not result in the downgrading or withdrawal
of the respective ratings then assigned to the Class A Certificates; and
provided, further, that the Master Servicer shall not consent to any
- -------- -------
amendment hereunder without the Designated Subservicer's consent.
This Agreement also may be amended from time to time by the Seller, the
Master Servicer and the Trustee, and the Master Servicer and the Certificate
Insurer may from time to time consent to the amendment of the Certificate
Insurance Policy with the consent of the Holders of each Class of Class A
Certificates which is affected by such amendment, evidencing Percentage
Interests aggregating not less than 51%, and in the case of an amendment to
this Agreement, with the consent of the Certificate Insurer, for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of this Agreement or of modifying in any manner the rights of
the Certificateholders; provided, however, that no such amendment shall (i)
-------- -------
reduce in any manner the amount of, or delay the timing of, payments on the
Certificates or distributions or payments under the Certificate Insurance
Policy which are required to be made on any Certificate without the consent
of the Holder of such Certificate or (ii) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the Holders
of all Certificates then outstanding.
Prior to the solicitation of consent of Certificateholders in connection
with any such amendment, the party seeking such amendment shall furnish the
Trustee with an Opinion of Counsel stating whether such amendment would
adversely affect the qualification of the Trust as a REMIC and notice of the
conclusion expressed in such Opinion of Counsel shall be included with any
such solicitation. An amendment made with the consent of all
Certificateholders and executed in accordance with this Section shall be
permitted or authorized by this Agreement notwithstanding that such Opinion
of Counsel may conclude that such amendment would adversely affect the
qualification of the Trust as a REMIC.
Prior to the execution of any such amendment, the Trustee shall furnish
written notification of the substance of such amendment to each Rating
Agency. In addition, promptly after the execution of any such amendment made
with the consent of the Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder and
fully executed original counterparts of the instruments effecting such
amendment to the Certificate Insurer.
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.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an opinion of counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement.
Section 11.02. Recordation of Agreement. This Agreement is subject to
------------------------
recordation in all appropriate public offices for real property records in
all the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Trustee, but only upon direction of Certificateholders or the
Certificate Insurer accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of
Certificateholders or the Certificate Insurer. The Certificateholders or the
Certificate Insurer requesting such recordation shall bear all costs and
expenses of such recordation. The Trustee shall have no obligation to
ascertain whether such recordation so affects the interests of the
Certificateholders.
Section 11.03. Limitation on Rights of Certificateholders. The death
------------------------------------------
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as provided in
Sections 8.01, 9.01, 9.02 and 11.01) or in any manner otherwise control the
operation and management of the Trust, 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 Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Class A Certificates evidencing
Percentage Interests aggregating not less than 51% shall have made written
request upon the Trustee to institute such action, suit or proceeding in its
own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it
being understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner what-
ever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificate-
holder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Section 11.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 11.05. Notices. (a) All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt
requested, to (a) in the case of the Master Servicer, One East Fourth Street,
Cincinnati, Ohio 45202, Attention: General Counsel, (b) in the case of the
Trustee, the Corporate Trust Office, (c) in the case of the Certificate
Insurer, ___________________________________, Attention: __________________,
Telecopy No.: (___) ________, Confirmation: (___) ________ (in each case in
which notice or other communication to the Certificate Insurer refers to an
Event of Default, a claim on the Certificate Insurance Policy or with respect
to which failure on the part of the Certificate Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or
other communication shall be marked to indicate "URGENT MATERIAL ENCLOSED"),
(e) in the case of Moody's, Home Mortgage Loan Monitoring Group, 4th Floor,
99 Church Street, New York, New York 10007 and (f) in the case of Standard &
Poor's, 26 Broadway, 15th Floor, New York, New York 10004, Attention:
Residential Mortgage 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 within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice. Any notice
or other document required to be delivered or mailed by the Trustee to any
Rating Agency shall be given on a best efforts basis and only as a matter of
courtesy and accommodation and the Trustee shall have no liability for
failure to delivery such notice or document to any Rating Agency.
(b) Notice to the Rating Agencies. The Trustee and the Master Servicer
-----------------------------
shall each be obligated to use its best efforts promptly to provide notice,
at the expense of the Master Servicer, to the Rating Agencies with respect to
each of the following of which a Responsible Officer of the Trustee or Master
Servicer, as the case may be, has actual knowledge:
(i) Any material change or amendment to this Agreement;
(ii) The occurrence of any Event of Default that has not been
cured or waived;
(iii) The resignation or termination of the Master Servicer or the
Trustee;
(iv) The final payment to Holders of the Certificates of any
Class;
(v) Any change in the location of any Account; and
(vi) Any event that would result in the inability of the Trustee
to make advances regarding Delinquent Mortgage Loans.
(c) In addition, (i) the Trustee shall promptly furnish to each Rating
Agency copies of the following:
(A) Each annual report to Certificateholders described in
Section 5.03; and
(B) Each Statement to Certificateholders described in Section
5.03; and
(ii) The Master Servicer shall promptly furnish to each Rating
Agency copies of the following:
(A) Each annual statement as to compliance described in
Section 3.10;
(B) Each annual independent public accountants' servicing
report described in Section 3.11; and
(C) Each notice delivered pursuant to Section 8.01(b) which
relates to the fact that the Master Servicer has not made a
Delinquency Advance.
Any such notice pursuant to this Section shall be in writing and shall
be deemed to have been duly given if personally delivered or mailed by first
class mail, postage prepaid, or by express delivery service to the addresses
specified above for each such Rating Agency.
Section 11.06. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the Certi-
ficates or the rights of the Holders thereof.
Section 11.07. Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in Sections 7.02, 7.04 and 7.05 (or
3.01), this Agreement may not be assigned by the Seller or the Master
Servicer without the prior written consent of the Certificate Insurer and
Holders of the Certificates evidencing Percentage Interests aggregating not
less than 662/3%.
Section 11.08. 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 the Certificates upon execution,
authentication and delivery thereof by the Trustee pursuant to Section 6.02
are and shall be deemed fully paid.
Section 11.09. Third-Party Beneficiaries. This Agreement will inure
-------------------------
to the benefit of and be binding upon the parties hereto, the Certificate-
holders, the Certificate Owners, the Certificate Insurer and their respective
successors and permitted assigns. Except as otherwise provided in this
Agreement, no other person will have any right or obligation hereunder.
Section 11.10. Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.11. 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 11.12. Insurance Agreement. The Trustee is authorized and
-------------------
directed to execute and deliver the Insurance Agreement and to perform the
obligations of the Trustee thereunder.
Section 11.13. Subservicing Agreement. The Trustee is authorized and
----------------------
directed to acknowledge the Subservicing Agreement relating to the Designated
Subservicer designated in Section 3.01(b) hereof; provided, however, that
notwithstanding the terms of such Subservicing Agreement, Section 3.01(c)
hereof shall control.
IN WITNESS WHEREOF, the Seller, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers
all as of the day and year first above written.
THE PROVIDENT BANK,
as Seller, Document Custodian
and Master Servicer
By:
---------------------------------
Name:
Title:
(TRUSTEE),
as Trustee
By: _________________________________
Name:
Title:
State of ____________)
) ss.:
County of __________ )
On the ____ day of ________, 199_ before me, a notary public in and
for the State of ________, personally appeared _____________________, known
to me who, being by me duly sworn, did depose and say that he is the
______________ of The Provident Bank, an Ohio banking corporation, one of the
parties that executed the foregoing instrument; that he knows the seal of
said company; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
company; and that he signed his name thereto by like order.
----------------------
Notary Public
(Notarial Seal)
State of ____________)
) ss.:
County of __________ )
On the ____ day of ________, 199_ 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 she is the
_________________ of (Trustee), a (national banking association), one of the
parties that executed the foregoing instrument; that she knows the seal of
said company; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
company; and that she signed her name thereto by like order.
----------------------
Notary Public
(Notarial Seal)
EXHIBIT 4.2
TRUST AGREEMENT
between
THE PROVIDENT BANK,
as Seller
and
(___________________________),
as Owner Trustee
Dated as of ___________, 199_
Table of Contents
---------------
Page
----
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . 4
ARTICLE II
Organization
SECTION 2.01. Name . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.02. Office . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.03. Purposes and Powers . . . . . . . . . . . . . . . 5
SECTION 2.04. Appointment of Owner Trustee . . . . . . . . . . . 5
SECTION 2.05. Initial Capital Contribution of Owner Trust
Estate . . . . . . . . . . . . . . . . . . . 5
SECTION 2.06. Declaration of Trust . . . . . . . . . . . . . . . 6
SECTION 2.07. Liability of the Owners . . . . . . . . . . . . . 6
SECTION 2.08. Title to Trust Property . . . . . . . . . . . . . 6
SECTION 2.09. Situs of Trust . . . . . . . . . . . . . . . . . . 6
SECTION 2.10. Representations and Warranties of the Seller . . . 7
SECTION 2.11. Federal Income Tax Allocations . . . . . . . . . . 7
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership . . . . . . . . . . . . . . . . 8
SECTION 3.02. The Trust Certificates . . . . . . . . . . . . . . 8
SECTION 3.03. Authentication of Trust Certificates . . . . . . . 9
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates . . . . . . . . . . . . . . . . 9
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
Certificates . . . . . . . . . . . . . . . . 10
SECTION 3.06. Persons Deemed Owners . . . . . . . . . . . . . . 10
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses . . . . . . . . . . . . . . . . . . 10
SECTION 3.08. Maintenance of Office or Agency . . . . . . . . . 11
SECTION 3.09. Appointment of Paying Agent . . . . . . . . . . . 11
(SECTION 3.10. Ownership by COMPANY of Trust Certificates . . . . 11
SECTION 3.11. Book-Entry Trust Certificates . . . . . . . . . . 11
SECTION 3.12. Notices to Clearing Agency . . . . . . . . . . . . 12
SECTION 3.13. Definitive Trust Certificates . . . . . . . . . . 12
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to Certain
Matters . . . . . . . . . . . . . . . . . . . 13
SECTION 4.02. Action by Owners with Respect to Certain
Matters . . . . . . . . . . . . . . . . . . . 14
SECTION 4.03. Action by Owners with Respect to Bankruptcy . . . 14
SECTION 4.04. Restrictions on Owners' Power . . . . . . . . . . 14
SECTION 4.05. Majority Control . . . . . . . . . . . . . . . . . 14
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account . . . . . . . . . . 14
SECTION 5.02. Application of Trust Funds . . . . . . . . . . . . 15
SECTION 5.03. Method of Payment . . . . . . . . . . . . . . . . 15
SECTION 5.04. No Segregation of Moneys; No Interest . . . . . . 15
SECTION 5.05. Accounting and Reports to the Noteholders,
Owners, the Internal Revenue Service and Others . 15
SECTION 5.06. Signature on Returns; Tax Matters Partner . . . . 16
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority . . . . . . . . . . . . . . . . 16
SECTION 6.02. General Duties . . . . . . . . . . . . . . . . . . 16
SECTION 6.03. Action upon Instruction . . . . . . . . . . . . . 17
SECTION 6.04. No Duties Except as Specified in this Agreement
or in Instructions . . . . . . . . . . . . . 17
SECTION 6.05. No Action Except Under Specified Documents or
Instructions . . . . . . . . . . . . . . . . 18
SECTION 6.06. Restrictions . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties . . . . . . . . . 18
SECTION 7.02. Furnishing of Documents . . . . . . . . . . . . . 19
SECTION 7.03. Representations and Warranties . . . . . . . . . . 19
SECTION 7.04. Reliance; Advice of Counsel . . . . . . . . . . . 20
SECTION 7.05. Not Acting in Individual Capacity . . . . . . . . 20
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates
or Mortgage Loans. . . . . . . . . . . . . . 20
SECTION 7.07. Owner Trustee May Own Trust Certificates and
Notes . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses . . . . . . . . 21
SECTION 8.02. Indemnification . . . . . . . . . . . . . . . . . 21
SECTION 8.03. Payments to the Owner Trustee . . . . . . . . . . 22
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement . . . . . . . . . . 22
SECTION 9.02. Dissolution upon Bankruptcy of the Seller . . . . 23
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee . . . . 23
SECTION 10.02. Resignation or Removal of Owner Trustee . . . . . 24
SECTION 10.03. Successor Owner Trustee . . . . . . . . . . . . . 24
SECTION 10.04. Merger or Consolidation of Owner Trustee . . . . . 25
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee . . 25
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments . . . . . . . . . . . . 26
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners . . 27
SECTION 11.03. Limitations on Rights of Others . . . . . . . . . 27
SECTION 11.04. Notices . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.05. Severability . . . . . . . . . . . . . . . . . . . 28
SECTION 11.06. Separate Counterparts . . . . . . . . . . . . . . 28
SECTION 11.07. Successors and Assigns . . . . . . . . . . . . . . 28
SECTION 11.08. Covenants of the COMPANY . . . . . . . . . . . . . 28
SECTION 11.09. No Petition . . . . . . . . . . . . . . . . . . . 28
SECTION 11.10. No Recourse . . . . . . . . . . . . . . . . . . . 28
SECTION 11.11. Headings . . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . 29
SECTION 11.13. Seller Payment Obligation . . . . . . . . . . . . 29
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Certificate Depository Agreement
TRUST AGREEMENT (the "Trust Agreement") dated as of ________, 199_,
between THE PROVIDENT BANK, an Ohio banking corporation, as seller (the
"Seller"), and (____________), a (__________________), as owner trustee
(the "Owner Trustee").
The Seller and the Owner Trustee hereby agree as follows:
ARTICLE I
Definitions
----------
SECTION 1.01. Capitalized Terms. For all purposes of this
------------------
Agreement the following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement dated
----------------------
as of ________, 199_, among the Trust, the Indenture Trustee and
(_________________________), as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended
---------
and supplemented from time to time.
"Assignment" shall mean the assignment of right, title and interest of
----------
and Seller in the Mortgage Loans to the Trust.
"Basic Documents" shall mean the Master Servicing Agreement, the
---------------
Indenture, the Administration Agreement and the other documents and
certificates delivered in connection therewith.
"Benefit Plan" shall mean any of (a) an employee benefit plan (as
-------------
defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code
or (c) any entity whose underlying assets include plan assets by reason of
a plan's investment in the entity.
"Book-Entry Trust Certificate" shall mean a beneficial interest in the
----------------------------
Trust Certificates, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
----------------------
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
-- ---
from time to time.
"Certificate" shall mean any of the Book-Entry Trust Certificates or
-----------
Definitive Trust Certificates.
"Certificate Distribution Account" shall have the meaning assigned to
--------------------------------
such term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust in the form
--------------------
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry Trust
----------------
Certificate, a Person who is the beneficial owner of such Book-Entry Trust
Certificate, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly
as a Clearing Agency Participant or as an indirect participant, in each case
in accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the
-------------------- --------------------
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
----------------- ------
Trust Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
----------------------
the principal corporate trust office of the Owner Trustee located at
(____________________________), or at such other address as the Owner Trustee
may designate by notice to the Owners and the Seller, or the principal
corporate trust office of any successor Owner Trustee at the address
designated by such successor Owner Trustee by notice to the Owners and the
Seller.
"Definitive Trust Certificates" shall have the meaning set forth in
-----------------------------
Section 3.11.
"Eligible Distribution Account" shall mean an account that is (i)
-----------------------------
maintained with a depository institution whose debt obligations at the time
of any deposit therein have the highest short-term debt rating by the Rating
Agencies, (ii) one or more accounts with a depository institution which
accounts are fully insured by either the Savings Association Insurance Fund
or the Bank Insurance Fund of the Federal Deposit Insurance Corporation
established by such fund, (iii) a segregated trust account maintained with
the Owner Trustee or an affiliate of the Owner Trustee in its fiduciary
capacity or (iv) otherwise acceptable to each Rating Agency as evidenced by a
letter from each Rating Agency to the Owner Trustee, without reduction or
withdrawal of their then currently ratings of the Certificates.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
--------
"Indemnified Parties" shall have the meaning assigned to such term in
-------------------
Section 8.02.
"Indenture" shall mean the Indenture dated as of ________, 199_ between
---------
the Trust and (_____________________________), as Indenture Trustee.
"Initial Certificate Balance" shall mean $__________.
---------------------------
"Master Servicing Agreement" shall mean the Master Servicing Agreement
--------------------------
dated as of ________, 199_, among the Trust, as issuer and The Provident
Bank, as master servicer, as the same may be amended or supplemented from
time to time.
"Mortgage Loans" shall mean a pool of (adjustable rate) home equity
--------------
revolving credit line loans made or to be made in the future under certain
home equity revolving credit line loan agreements.
"Owner" shall mean each Holder of a Trust Certificate.
-----
"Owner Trust Estate" shall mean all right, title and interest of the
------------------
Trust in and to the property and rights assigned to the Trust pursuant to the
Assignment, all funds on deposit from time to time in the Trust Accounts and
the Certificate Distribution Account and all other property of the Trust from
time to time, including any rights of the Owner Trustee and the Trust
pursuant to the Master Servicing Agreement and the Administration Agreement.
"Owner Trustee" shall mean (____________________), a (_________) banking
-------------
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
------------
pursuant to Section 3.09 and shall initially be (_____________).
"Rating Agency" shall mean any nationally recognized statistical rating
-------------
organization asked to rate the Certificates.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
close of business on the day prior to such Distribution Date occurs or,
if Definitive Trust Certificates are issued pursuant to Section 3.13, the
last day of the month preceding such Distribution Date.
"Secretary of State" shall mean the Secretary of State of the State of
-----------------
Delaware.
"Seller" shall mean The Provident Bank in its capacity as seller
------
hereunder.
"Treasury Regulations" shall mean regulations, including proposed or
--------------------
temporary Regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" shall mean the trust established by this Agreement.
-----
"Trust Account" shall mean any account set up by the Owner Trustee
-------------
pursuant to the provisions of Section 5.01.
"Trust Certificate" shall mean a certificate evidencing the beneficial
-----------------
interest of an Owner in the Trust, substantially in the form attached hereto
as Exhibit A.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
-----------------------------
used and not otherwise defined herein have the meanings assigned to them in
the Master Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Organization
------------
SECTION 2.01. Name. The Trust created hereby shall be known as
----
"Provident Home Equity Loan Trust 19__-__," in which name the Owner Trustee
may conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of
------
the Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the Owners
and the Seller.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is
-------------------
to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the
Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Mortgage Loans, and to pay the
organizational, start-up and transactional expenses of the Trust and to
pay the balance to the Seller pursuant to the Master Servicing
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the terms of the Master Servicing
Agreement any portion of the Trust Estate released from the Lien of, and
remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Owners and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Basic Documents.
SECTION 2.04. Appointment of Owner Trustee. The Seller hereby
----------------------------
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate.
--------------------------------------------------
The Seller hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $(_____________). The Owner
Trustee hereby acknowledges receipt in trust from the Seller, as of the date
hereof, of the foregoing contribution, which shall constitute the initial
Owner Trust Estate and shall be deposited in the Certificate Distribution
Account. The Seller shall pay organizational expenses of the Trust as they
may arise or shall, upon the request of the Owner Trustee, promptly reimburse
the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby
--------------------
declares that it will hold the Owner Trust Estate in trust upon and subject
to the conditions set forth herein for the use and benefit of the Owners,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust
under the Business Trust Statute and that this Agreement constitute the
governing instrument of such business trust. It is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Trust
shall be treated as a partnership, with the assets of the partnership being
the Mortgage Loans and other assets held by the Trust, the partners of the
partnership being the Certificateholders, and the Notes being debt of the
partnership. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual
or other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes.
Effective as of the date hereof, the Owner Trustee shall have all rights,
powers and duties set forth herein and in the Business Trust Statute with
respect to accomplishing the purposes of the Trust.
SECTION 2.07. Liability of the Owners. (a) The Seller shall be
-----------------------
liable directly to and will indemnify any injured party for all losses,
claims, damages, liabilities and expenses of the Trust (including Expenses,
to the extent not paid out of the Owner Trust Estate) to the extent that the
Seller would be liable if the Trust were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the Seller were a general
partner; provided, however, that the Seller shall not be liable for any
losses incurred by a Certificateholder in the capacity of an investor in the
Trust Certificates, or a Noteholder in the capacity of an investor in the
Notes. In addition, any third party creditors of the Trust (other than in
connection with the obligations described in the preceding sentence for which
the Seller shall not be liable) shall be deemed third party beneficiaries of
this paragraph and paragraph (c) below. The obligations of the Seller under
this paragraph shall be evidenced by the Trust Certificates described in
Section 3.10, which for purposes of the Business Trust Statute shall be
deemed to be a separate class of Trust Certificates from all other Trust
Certificates issued by the Trust; provided that the rights and obligations
evidenced by all Trust Certificates, regardless of class, shall, except as
provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraph (a),
shall have any personal liability for any liability or obligation of the
Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
-----------------------
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in
which case title shall be deemed to be vested in the Owner Trustee, a co-
trustee and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and
--------------
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of
Delaware or the State of ________. The Trust shall not have any employees in
any state other than Delaware; provided, however, that nothing herein shall
restrict or prohibit the Owner Trustee from having employees within or
without the State of Delaware. Payments will be received by the Trust only
in Delaware or ________, and payments will be made by the Trust only from
Delaware or ________. The only office of the Trust will be at the Corporate
Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Seller.
-----------------------------------------------------
(a) The Seller hereby represents and warrants to the Owner Trustee that:
(i) The Seller is duly organized and validly existing as a banking
corporation in good standing under the laws of the State of Ohio, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
(ii) The Seller is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such
qualifications.
(iii) The Seller has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Seller has full
power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Seller has duly
authorized such sale and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement have been duly authorized by the Seller by all
necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Seller, or any
indenture, agreement or other instrument to which the Seller is a party
or by which it is bound; nor result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the
Basic Documents); nor violate any law or, to the best of the Seller's
knowledge, any order, rule or regulation applicable to the Seller of any
court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the
Seller or its properties.
(v) To the Seller's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or (C) seeking
any determination or ruling that might materially and adversely affect
the performance by the Seller of its obligations under, or the validity
or enforceability of, this Agreement.
SECTION 2.11. Federal Income Tax Allocations. Net income of the
------------------------------
Trust for any month as determined for federal income tax purposes (and each
item of income, gain, loss and deduction entering into the computation
thereof) shall be allocated:
(a) among the Certificate Owners as of the first Record Date following
the end of such month, in proportion to their ownership of principal amount
of Trust Certificates on such date, net income in an amount up to the sum of
(i) the Certificateholders' Monthly Interest Distributable Amount for such
month, (ii) interest on the excess, if any, of the Certificateholders'
Interest Distributable Amount for the preceding Distribution Date over the
amount in respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate from such preceding Distribution
Date through the current Distribution Date, (iii) the portion of the market
discount on the Mortgage Loans accrued during such month that is allocable to
the excess, if any, of the initial aggregate principal amount of the Trust
Certificates over their initial aggregate issue price, (iv) any amount
expected to be distributed to the Certificateholders pursuant to the Master
Servicing Agreement (to the extent not previously allocated pursuant to this
clause), (v) any Certificateholders' Prepayment Premium distributable to the
Certificateholders with respect to such month and (vi) any other amounts of
income payable to the Certificateholders for such month; such sum to be
reduced by any amortization by the Trust of premium on Mortgage Loans that
corresponds to any excess of the issue price of Certificates over their
principal amount; and
(b) to the Seller, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a) above, subsequent net income shall first
be allocated to make up such shortfall before being allocated as provided in
the preceding sentence. Net losses of the Trust, if any, for any month as
determined for federal income tax purposes (and each item of income, gain,
loss and deduction entering into the computation thereof) shall be allocated
to the Seller to the extent the Seller is reasonably expected to bear the
economic burden of such net losses, and any remaining net losses shall be
allocated among the Certificate Owners as of the first Record Date following
the end of such month in proportion to their ownership of principal amount of
Trust Certificates on such Record Date. The Seller is authorized to modify
the allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain
or loss to the Seller or to the Certificate Owners, or as otherwise required
by the Code.
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by
-----------------
the contribution by the Seller pursuant to Section 2.05 and until the
issuance of the Trust Certificates, the Seller shall be the sole beneficiary
of the Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall
----------------------
be issuedin minimum denominations of $(_______) and in integral multiples of
$1 in excess thereof; provided, however, that the Trust Certificates issued
to the Seller pursuant to Section 3.10 may be issued in such denomination
as required to include any residual amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be
so authorized prior to the authentication and delivery of such Trust
Certificates or did not hold such offices at the date of authentication and
delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section
3.04.
SECTION 3.03. Authentication of Trust Certificates. Concurrently
------------------------------------
with the initial sale of the Mortgage Loans to the Trust pursuant to the
Master Servicing Agreement, the Owner Trustee shall cause the Trust
Certificates in an aggregate principal amount equal to the Initial
Certificate Balance to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Seller, signed by its chairman
of the board, its president, any vice president, secretary or any assistant
treasurer, without further corporate action by the Seller, in authorized
denominations. No Trust Certificate shall entitle its Holder to any benefit
under this Agreement or be valid for any purpose unless there shall appear on
such Trust Certificate a certificate of authentication substantially in the
form set forth in Exhibit A, executed by the Owner Trustee or (____________),
as the Owner Trustee's authenticating agent, by manual signature; such
authentication shall constitute conclusive evidence that such Trust
Certificate shall have been duly authenticated and delivered hereunder. All
Trust Certificates shall be dated the date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
----------------------------------------------
Certificates.
- ------------
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.08, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. (___________) shall be
the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver (or shall cause (_______________ ) as
its authenticating agent to authenticate and deliver), in the name of
the designated transferee or transferees, one or more new Trust Certificates
in authorized denominations of a like aggregate amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the
option of a Holder, Trust Certificates may be exchanged for other Trust
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of 15 days
preceding the due date for any payment with respect to the Trust
Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
------------------------------------------
Certificates.
- ------------
If (a) any mutilated Trust Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust
Certificate and (b) there shall be delivered to the Certificate Registrar and
the Owner Trustee such security or indemnity as may be required by them to
save each of them harmless, then in the absence of notice that such Trust
Certificate has been acquired by a bona fide purchaser, the Owner Trustee on
behalf of the Trust shall execute and the Owner Trustee or
(_________________), as the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like
tenor and denomination. In connection with the issuance of any new Trust
Certificate under this Section, the Owner Trustee or the Certificate
Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith. Any
duplicate Trust Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Trust Certificate shall be found
at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of
---------------------
a Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name
any Trust Certificate is registered in the Certificate Register as the owner
of such Trust Certificate for the purpose of receiving distributions pursuant
to Section 5.02 and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar or any Paying Agent shall be bound by any
notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
- ---------
Master Servicer and the Seller, within 15 days after receipt by the Owner
Trustee of a written request therefor from the Master Servicer or the
Depositor, a list, in such form as the Master Servicer or the Seller may
reasonably require, of the names and addresses of the Certificateholders as
of the most recent Record Date. If three or more Certificateholders or one
or more Holders of Trust Certificates evidencing not less than 25% of the
Certificate Balance apply in writing to the Owner Trustee, and such
application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Trust Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner
Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to
the current list of Certificateholders. Each Holder, by receiving and
holding a Trust Certificate, shall be deemed to have agreed not to hold any
of the Seller, the Certificate Registrar or the Owner Trustee accountable by
reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee
-------------------------------
shall maintain in the Borough of Manhattan, The City of New York, an office
or offices or agency or agencies where Trust Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Owner Trustee in respect of the Trust Certificates and the Basic
Documents may be served. The Owner Trustee initially designates
(_______________________________) as its office for such purposes. The Owner
Trustee shall give prompt written notice to the Seller and to the
Certificateholders of any change in the location of the Certificate Register
or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall
---------------------------
make distributions to Certificateholders from the Certificate Distribution
Account pursuant to Section 5.02 and shall report the amounts of such
distributions to the Owner Trustee. Any Paying Agent shall have the
revocable power to withdraw funds from the Certificate Distribution Account
for the purpose of making the distributions referred to above. The Owner
Trustee may revoke such power and remove the Paying Agent if the Owner
Trustee determines in its sole discretion that the Paying Agent shall have
failed to perform its obligations under this Agreement in any material
respect. The Paying Agent initially shall be (___________), and any co-
paying agent chosen by (___________) and acceptable to the Owner Trustee.
(_____________) shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Owner
Trustee. In the event that (___________) shall no longer be the Paying
Agent, the Owner Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company). The Owner Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument in which
such successor Paying Agent or additional Paying Agent shall agree with the
Owner Trustee that, as Paying Agent, such successor Paying Agent or
additional Paying Agent will hold all sums, if any, held by it for payment to
the Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders.
The Paying Agent shall return all unclaimed funds to the Owner Trustee and
upon removal of a Paying Agent such Paying Agent shall also return all funds
in its possession to the Owner Trustee. The provisions of Sections 7.01,
7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its role as
Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and,
to the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
(SECTION 3.10. Ownership by COMPANY of Trust Certificates. The
----------------------------------------------
Seller shall on the Closing Date purchase Trust Certificates representing at
least __% of the Initial Certificate Balance and shall thereafter retain
beneficial and record ownership of Trust Certificates representing at least
__% of the Certificate Balance. Any attempted transfer of any Trust
Certificate that would reduce such interest of the Seller below __% of the
Certificate Balance shall be void. The Owner Trustee shall cause any Trust
Certificate issued to the Seller to contain a legend stating "THIS
CERTIFICATE IS NON-TRANSFERABLE".)
SECTION 3.11. Book-Entry Trust Certificates. The Trust Certificates,
-----------------------------
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Trust Certificates,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Trust; provided, however, that one Definitive Trust
Certificate may be issued to the Seller pursuant to Section 3.10. Such Trust
Certificate or Trust Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive Trust
Certificate representing such Certificate Owner's interest in such Trust
Certificate, except as provided in Section 3.13. Unless and until
definitive, fully registered Trust Certificates (the "Definitive Trust
Certificates") have been issued to Certificate Owners pursuant to
Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Agreement
(including the payment of principal of and interest on the Trust Certificates
and the giving of instructions or directions hereunder) as the sole Holder of
the Trust Certificates and shall have no obligation to the Certificate
Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Certificate Depository
Agreement, unless and until Definitive Trust Certificates are issued pursuant
to Section 3.13, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Trust Certificates to such Clearing Agency
Participants; and
(e) Whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Trust Certificates and
has delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Certificateholders is required under this Agreement,
unless and until Definitive Trust Certificates shall have been issued to
Certificate Owners pursuant to Section 3.13, the Owner Trustee shall give all
such notices and communications specified herein to be given to
Certificateholders to the Clearing Agency, and shall have no obligations to
the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the
-----------------------------
Administrator advises the Owner Trustee in writing that the Clearing Agency
is no longer willing or able to properly discharge its responsibilities with
respect to the Trust Certificates and the Administrator is unable to locate a
qualified successor, (ii) the Administrator at its option advises the Owner
Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default or a
Master Servicer Default, Certificate Owners representing beneficial interests
aggregating at least a majority of the Certificate Balance advise the
Clearing Agency in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the
Certificate Owners, then the Clearing Agency shall notify all Certificate
Owners and the Owner Trustee of the occurrence of any such event and of the
availability of the Definitive Trust Certificates to Certificate Owners
requesting the same. Upon surrender to the Owner Trustee of the typewritten
Trust Certificate or Trust Certificates representing the Book-Entry Trust
Certificates by the Clearing Agency, accompanied by registration
instructions, the Owner Trustee shall execute and authenticate the Definitive
Trust Certificates in accordance with the instructions of the Clearing
Agency. Neither the Certificate Registrar nor the Owner Trustee shall be
liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Trust Certificates, the Owner Trustee shall recognize
the Holders of the Definitive Trust Certificates as Certificateholders. The
Definitive Trust Certificates shall be printed, lithographed or engraved or
may be produced in any other manner as is reasonably acceptable to the Owner
Trustee, as evidenced by its execution thereof.
ARTICLE IV
Actions by Owner Trustee
------------------------
SECTION 4.01. Prior Notice to Owners with Respect to Certain
------------------------------------------------------
Matters.
- -------
With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Owners shall not have notified the Owner Trustee in writing
prior to the 30th day after such notice is given that such Owners have
withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Mortgage Loans)
and the compromise of any action, claim or lawsuit brought by or against the
Trust (except with respect to the aforementioned claims or lawsuits for
collection of the Mortgage Loans;
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business
Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially
adversely affect the interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of
a successor Certificate Registrar, or the consent to the assignment by the
Note Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of
its obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
------------------------------------------------
Owner Trustee shall not have the power, except upon the direction of the
Owners, to (a) remove the Administrator under the Administration Agreement
pursuant to Section ( ) thereof, (b) appoint a successor Administrator
pursuant to Section ( ) of the Administration Agreement, (c) remove the
Master Servicer under the Master Servicing Agreement pursuant to Section (
) thereof or (d) except as expressly provided in the Basic Documents, sell
the Mortgage Loans after the termination of the Indenture. The Owner Trustee
shall take the actions referred to in the preceding sentence only upon
written instructions signed by the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The owner
-------------------------------------------
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a
certificate certifying that such Owner reasonably believes that the Trust is
insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not
----------------------------
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the
Owner Trustee under this Agreement or any of the Basic Documents or would be
contrary to Section 2.03, nor shall the Owner Trustee be obligated to follow
any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein,
-----------------
any action that may be taken by the Owners under this Agreement may be taken
by the Holders of Trust Certificates evidencing not less than a majority of
the Certificate Balance. Except as expressly provided herein, any written
notice of the Owners delivered pursuant to this Agreement shall be effective
if signed by Holders of Trust Certificates evidencing not less than a
majority of the Certificate Balance at the time of the delivery of such
notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for
-------------------------------
the benefit of the Certificateholders, shall establish and maintain in the
name of the Trust an Eligible Deposit Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account
and in all proceeds thereof. Except as otherwise expressly provided herein,
the Certificate Distribution Account shall be under the sole dominion and
control of the Owner Trustee for the benefit of the Certificateholders. If,
at any time, the Certificate Distribution Account ceases to be an Eligible
Deposit Account, the Owner Trustee (or the DEPOSITOR on behalf of the Owner
Trustee, if the Certificate Distribution Account is not then held by the
Owner Trustee or an affiliate thereof) shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, as to which each Rating Agency
may consent) establish a new Certificate Distribution Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such
new Certificate Distribution Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
--------------------------
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee
by the Master Servicer pursuant to Section (____) of the Master Servicing
Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the
amount otherwise distributable to the Owner in accordance with this Section.
The Owner Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Owners sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not
prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to an Owner shall be treated as cash distributed to such
Owner at the time it is withheld by the Trust and remitted to the appropriate
taxing authority. If there is a possibility that withholding tax is payable
with respect to a distribution (such as a distribution to a non-U.S. Owner),
the Owner Trustee may in its sole discretion withhold such amounts in
accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
-----------------
distributions required to be made to Certificateholders on any Distribution
Date shall be made to each Certificateholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Distribution Date and such Holder's Trust Certificates in
the aggregate evidence a denomination of not less than $(____________), or,
if not, by check mailed to such Certificateholder at the address of such
holder appearing in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to
------------------------------------
Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need
not be segregated in any manner except to the extent required by law or the
Master Servicing Agreement and may be deposited under such general conditions
as may be prescribed by law, and the Owner Trustee shall not be liable for
any interest thereon.
SECTION 5.05. Accountng and Reports to the Noteholders, Owners, the
-----------------------------------------------------
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain
(or -----------------------------------
cause to be maintained) the books of the Trust on a calendar year basis and
the accrual method of accounting, (b) deliver to each Owner, as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1) to enable each Owner to prepare its
federal and state income tax returns, (c) file such tax returns relating to
the Trust (including a partnership information return, IRS Form 1065) and
make such elections as from time to time may be required or appropriate under
any applicable state or federal statute or any rule or regulation thereunder
so as to maintain the Trust's characterization as a partnership for federal
income tax purposes, (d) cause such tax returns to be signed in the manner
required by law and (e) collect or cause to be collected any withholding tax
as described in and in accordance with Section 5.02(c) with respect to income
or distributions to Owners. The Owner Trustee shall elect under Section 1278
of the Code to include in income currently any market discount that accrues
with respect to the Mortgage Loans. The Owner Trustee shall not make the
election provided under Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner. (a) The
-----------------------------------------
Owner Trustee shall sign on behalf of the Trust the tax returns of the Trust,
unless applicable law requires an Owner to sign such documents, in which case
such documents shall be signed by the Seller.
(b) The Seller shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
SECTION 6.01. General Authority. The Owner Trustee is authorized and
------------------
directed to execute and deliver the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to
or contemplated by the Basic Documents to which the Trust is to be a party
and any amendment or other agreement or instrument, in each case, in such
form as the Seller shall approve, as evidenced conclusively by the Owner
Trustee's execution thereof. In addition to the foregoing, the Owner Trustee
is authorized, but shall not be obligated, to take all actions required of
the Trust pursuant to the Basic Documents. The Owner Trustee is further
authorized from time to time to take such action as the Administrator
recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner
--------------
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust in the interest of the Owners,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the
Basic Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Basic Document, and the Owner Trustee
shall not be held liable for the default or failure of the Administrator to
carry out its obligations under the Administration Agreement.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV
-----------------------
and in accordance with the terms of the Basic Documents, the Owners may by
written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the
Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or
is contrary to the terms hereof or of any Basic Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or
under any Basic Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the Owners
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or
may be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action not inconsistent with this
Agreement or the Basic Documents, as it shall deem to be in the best
interests of the Owners, and shall have no liability to any Person for such
action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction and, to the extent that the Owner Trustee acts
or refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this Agreement
or the Basic Documents, as it shall deem to be in the best interests of the
Owners, and shall have no liability to any Person for such action or
inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions. The Owner Trustee shall not have any duty or obligation to
- ------------
manage, make any payment with respect to, register, record, sell, dispose of,
or otherwise deal with the Owner Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as
expressly provided by the terms of this Agreement or in any document or
written instruction received by the Owner Trustee pursuant to Section 6.03;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection
of any security interest or lien granted to it hereunder or to prepare or
file any Securities and Exchange Commission filing for the Trust or to record
this Agreement or any Basic Document. The Owner Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Owner Trust Estate that
result from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Owner Trustee shall not manage, control, use, sell,
- ------------
dispose of or otherwise deal with any part of the Owner Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Owner Trustee pursuant to this Agreement, (ii) in accordance with the
Basic Documents and (iii) in accordance with any document or instruction
delivered to the Owner Trustee pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any
------------
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for federal income
tax purposes. The Owners shall not direct the Owner Trustee to take action
that would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
----------------------------
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee
-------------------------------
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful (malfeasance, bad faith or gross) negligence
or (ii) in the case of the inaccuracy of any representation or warranty
contained in Section 7.03 expressly made by the Owner Trustee. In
particular, but not by way of limitation (and subject to the exceptions set
forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or
under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by
the Seller or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the
validity or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty, or obligation to any Noteholder or
to any Owner, other than as expressly provided for herein or expressly agreed
to in the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Seller, the Indenture Trustee or the Master
Servicer under any of the Basic Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations of the Trust
under this Agreement or the Basic Documents that are required to be performed
by the Administrator under the Administration Agreement, the Indenture
Trustee under the Indenture or the Master Servicer or the Seller under the
Master Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of
any of the Owners, unless such Owners have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby.
The right of the Owner Trustee to perform any discretionary act enumerated in
this Agreement or in any Basic Document shall not be construed as a duty, and
the Owner Trustee shall not be answerable for other than its (willful
malfeasance, bad faith or negligence) in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall
-----------------------
furnish to the Owners promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee
------------------------------
hereby represents and warrants to the COMPANY, for the benefit of the Owners,
that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor compliance
by it with any of the terms or provisions hereof will contravene any federal
or Delaware law, governmental rule or regulation governing the banking or
trust powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any
indenture, mortgage, contract, agreement or instrument to which it is a party
or by which any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee
----------------------------
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion,
bond, or other document or paper believed by it to be genuine and believed by
it to be signed by the proper party or parties. The Owner Trustee may accept
a certified copy of a resolution of the board of directors or other governing
body of any corporate party as conclusive evidence that such resolution has
been duly adopted by such body and that the same is in full force and effect.
As to any fact or matter the method of determination of which is not
specifically prescribed herein, the Owner Trustee may for all purposes hereof
rely on a certificate, signed by the president or any vice president or by
the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith
in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents
or attorneys pursuant to agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been selected by
the Owner Trustee with reasonable care, and (ii) may consult with counsel,
accountants and other skilled Persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written
opinion or advice of any such counsel, accountants or other such Persons and
not contrary to this Agreement or any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided
---------------------------------
in this Article VII, in accepting the trusts hereby created
(_____________________) acts solely as Owner Trustee hereunder and not in its
individual capacity, and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Basic Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
--------------------------------------------------
Mortgage Loans. The recitals contained herein and in the Certificates (other
- --------------
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Seller, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any Basic Document or of the Trust Certificates (other than the
signature and countersignature of the Owner Trustee on the Trust
Certificates) or the Notes, or of any Mortgage Loan or related documents.
The Owner Trustee shall at no time have any responsibility or liability for
or with respect to the legality, validity and enforceability of any Mortgage
Loan, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to Certificateholders
under this Agreement or the Noteholders under the Indenture, including,
without limitation: the existence, condition and ownership of any property
securing a Mortgage Loan; the existence and enforceability of any insurance
thereon; the validity of the assignment of any Mortgage Loan to the Trust or
of any intervening assignment; the performance or enforcement of any Mortgage
Loan; the compliance by the Seller or the Master Servicer with any warranty
or representation made under any Basic Document or in any related document or
the accuracy of any such warranty or representation, or any action of the
Administrator, the Indenture Trustee or the Master Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes.
--------------------------------------------------
The Owner Trustee in its individual or any other capacity may become the
owner or pledgee of Trust Certificates or Notes and may deal with the Seller,
the Administrator, the Indenture Trustee and the Master Servicer in banking
transactions with the same rights as it would have if it were not Owner
Trustee.
ARTICLE VIII
Compensation of Owner Trustee
--------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee
---------------------------------
shall receive as compensation for its services hereunder such fees as have
been separately agreed upon before the date hereof between the Seller and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Seller for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.02. Indemnification. The Seller shall be liable as primary
---------------
obligor for, and shall indemnify the Owner Trustee and its successors,
assigns, agents and servants (collectively, the "Indemnified Parties") from
and against, any and all liabilities, obligations, losses, damages, taxes,
claims, actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever (collectively, "Expenses") which may at any time be imposed
on, incurred by, or asserted against the Owner Trustee or any Indemnified
Party in any way relating to or arising out of this Agreement, the Basic
Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder, except only
that the Seller shall not be liable for or required to indemnify an
Indemnified Party from and against Expenses arising or resulting from any of
the matters described in the third sentence of Section 7.01. The indemnities
contained in this Section shall survive the resignation or termination of the
Owner Trustee or the termination of this Agreement. In any event of any
claim, action or proceeding for which indemnity will be sought pursuant to
this Section, the Owner Trustee's choice of legal counsel shall be subject to
the approval of the Seller, which approval shall not be unreasonably
withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
-----------------------------
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part
of the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement
------------------------------
(other than Article VIII) and the Trust shall terminate and be of no further
force or effect (i) upon the final distribution by the Owner Trustee of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture, the Master Servicing Agreement and Article V
or (ii) at the time provided in Section 9.02. The bankruptcy, liquidation,
dissolution, death or incapacity of any Owner, other than the COMPANY as
described in Section 9.02, shall not (x) operate to terminate this Agreement
or the Trust or (y) entitle such Owner's legal representatives or heirs to
claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
or (z) otherwise affect the rights, obligations and liabilities of the
parties hereto.
(b) Except as provided in Section 9.01(a), neither the Seller nor any
Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates
to the Paying Agent for payment of the final distribution and cancellation,
shall be given by the Owner Trustee by letter to Certificateholders mailed
within five Business Days of receipt of notice of such termination from the
Master Servicer stating (i) the Distribution Date upon or with respect to
which final payment of the Trust Certificates shall be made upon presentation
and surrender of the Trust Certificates at the office of the Paying Agent
therein designated, (ii) the amount of any such final payment and (iii) that
the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Trust Certificates at the office of the Paying Agent therein specified. The
Owner Trustee shall give such notice to the Certificate Registrar (if other
than the Owner Trustee) and the Paying Agent at the time such notice is given
to Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant
to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give
a second written notice to the remaining Certificateholders to surrender
their Trust Certificates for cancellation and receive the final distribution
with respect thereto. If within one year after the second notice all the
Trust Certificates shall not have been surrendered for cancellation, the
Owner Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Trust Certificates, and the cost thereof shall be paid out
of the funds and other assets that shall remain subject to this Agreement.
Any funds remaining in the Trust after exhaustion of such remedies shall be
distributed by the Owner Trustee to the COMPANY.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with
the provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Seller. In the
-----------------------------------------
event that an Insolvency Event shall occur with respect to the Seller, this
Agreement shall be terminated in accordance with Section 9.01 90 days after
the date of such Insolvency Event, unless, before the end of such 90-day
period, the Owner Trustee shall have received written instructions from
Holders of Certificates (other than the Seller) representing more than 50% of
the Certificate Balance (not including the Certificate Balance of the Trust
Certificates held by the Seller), to the effect that each such party
disapproves of the liquidation of the Mortgage Loans and of the Trust.
Promptly after the occurrence of any Insolvency Event with respect to the
Seller, (A) the Seller shall give the Indenture Trustee and the Owner Trustee
written notice of such Insolvency Event, (B) the Owner Trustee shall, upon
the receipt of such written notice from the Seller, give prompt written
notice to the Certificateholders and the Indenture Trustee, of the occurrence
of such event and (C) the Indenture Trustee shall, upon receipt of written
notice of such Insolvency Event from the Owner Trustee or the Seller, give
prompt written notice to the Noteholders of the occurrence of such event;
provided, however, that any failure to give a notice required by this
sentence shall not prevent or delay, in any manner, a termination of the
Trust pursuant to the first sentence of this Section 9.02. Upon a
termination pursuant to this Section, the Owner Trustee shall direct the
Indenture Trustee promptly to sell the assets of the Trust (other than the
Trust Accounts and the Certificate Distribution Account) and, on behalf of
the Seller, in a commercially reasonable manner and on commercially
reasonable terms. The proceeds of such a sale of the assets of the Trust
shall be treated as collections under the Master Servicing Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
------------------------------------------
Trustee shall at all times be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute; authorized to exercise
corporate trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities; and having (or having a parent that has) a rating of at least
(____) by (__________). If such corporation shall publish reports of
condition at least annually pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published. In case at any time the Owner Trustee shall cease
to be eligible in accordance with the provisions of this Section, the Owner
Trustee shall resign immediately in the manner and with the effect specified
in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
---------------------------------------
Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Administrator. Upon
receiving such notice of resignation, the Administrator shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Owner Trustee
and one copy to the successor Owner Trustee. If no successor Owner Trustee
shall have been so appointed and have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign
after written request therefor by the Administrator, or if at any time the
Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt
or insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Administrator shall
promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee, and
shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.03 and payment of all fees and expenses
owed to the outgoing Owner Trustee. The Administrator shall provide notice
of such resignation or removal of the Owner Trustee to each of the Rating
Agencies.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
-----------------------
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument
accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become
effective, and such successor Owner Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee. The predecessor Owner Trustee shall upon
payment of its fees and expenses deliver to the successor Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
Administrator and the predecessor Owner Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor Owner Trustee all
such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense
of the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any
----------------------------------------
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, that such corporation shall be eligible pursuant
to Section 10.01 and, provided, further, that the Owner Trustee shall mail
notice of such merger or consolidation to the Rating Agencies.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate may at the time be located, the Administrator
and the Owner Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Administrator and Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or as separate trustee or separate trustees, of all or any part of
the Owner Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust or any part thereof and, subject to the other provisions
of this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If
the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor Owner Trustee pursuant to Section 10.01 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant
to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by
the Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed, the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Owner Trust
Estate or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at
the direction of the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Owner Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be
--------------------------
amended by the Seller and the Owner Trustee, with prior written notice to the
Rating Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions in this
Agreement or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Seller and
the Owner Trustee, with prior written notice to the Rating Agencies, with the
consent of the Holders (as defined in the Indenture) of Notes evidencing not
less than a majority of the Principal Balance of the Notes and the consent of
the Holders of Certificates evidencing not less than a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall
(a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Mortgage Loans or distributions
that shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Principal
Balance of the Notes and the Certificate Balance required to consent to any
such amendment, without the consent of the holders of all the outstanding
Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Indenture Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner
of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
----------------------------------------------
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and
IX. No transfer, by operation of law or otherwise, of any right, title or
interest of the Owners to and in their ownership interest in the Owner Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for
------------------------------
Section 2.07, the provisions of this Agreement are solely for the benefit of
the Owner Trustee, the Seller, the Owners, the Administrator and, to the
extent expressly provided herein, the Indenture Trustee and the Noteholders,
and nothing in this Agreement (other than Section 2.07), whether express or
implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
-------
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days
after mailing if mailed by certified mail, postage prepaid (except that
notice to the Owner Trustee shall be deemed given only upon actual receipt by
the Owner Trustee), if to the Owner Trustee, addressed to the Corporate Trust
Office; if to the Seller, addressed to (_____________________________),
Attention: (____________); or, as to each party, at such other address as
shall be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to 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 within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed
---------------------
by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, each of
the Seller, the Owner Trustee and its successors and each Owner and its
successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by an Owner
shall bind the successors and assigns of such Owner.
SECTION 11.08. Covenants of the COMPANY. The COMPANY will not at any
------------------------
time institute against the Trust any bankruptcy proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Trust Certificates, the Notes, the Trust
Agreement or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
----------
Agreement, each Certificateholder, by accepting a Trust Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the COMPANY or the Trust, or join in any institution against the
COMPANY or the Trust of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a
-----------
Trust Certificate acknowledges that such Certificateholder's Trust
Certificates represent beneficial interests in the Trust only and do not
represent interests in or obligations of the Seller, the Master Servicer, the
Administrator, the Owner Trustee, the Indenture Trustee or any Affiliate
thereof and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated in this Agreement, the
Trust Certificates or the Basic Documents.
SECTION 11.11. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Seller Payment Obligation. The Seller shall be
-------------------------
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and
liabilities of the Administrator incurred thereunder.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as
of the day and year first above written.
THE PROVIDENT BANK
as Seller,
by: ________________________________________
Name:
Title:
(_____________________),
not in its individual capacity but solely as
Owner Trustee,
by: _________________________________________
Name:
Title:
EXHIBIT A
FORM OF TRUST CERTIFICATE
-------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIF-
ICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NUMBER $_________
R-___________ CUSIP NO. _________
PROVIDENT HOME EQUITY LOAN TRUST 199_-__
(_____)% HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199__-__
evidencing a fractional undivided beneficial ownership interest in the Trust,
as defined below, the property of which includes a pool of (fixed-rate)
(adjustable rate) home equity revolving credit line loans caused to be sold
to the Trust by (_______________).
(This Trust Certificate does not represent an interest in or obligation of
THE PROVIDENT BANK or any of its affiliates, except to the extent described
below.)
THIS CERTIFIES THAT (________________________) is the registered owner
of (____________________) DOLLARS nonassessable, fully paid, fractional
undivided interest in PROVIDENT HOME EQUITY LOAN TRUST 199_-__ (the "Trust")
formed by The Provident Bank, an Ohio banking corporation (the "Seller").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned
Trust Agreement.
(___________________), (___________________),
as Owner Trustee or as Owner Trustee
by: __________________________ by:______________________
(_____________________),
Authorized Signatory
as Authenticating Agent
by: _________________________
Authorized Signatory
The Trust was created pursuant to a Trust Agreement, dated as of
______________, 199_ (the "Trust Agreement"), between the Seller and
(____________), as owner trustee (the "Owner Trustee"), a summary of certain
of the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement or the Master Servicing Agreement
dated as of ___________, 199_ (as amended and supplemented from time to time,
the "Master Servicing Agreement"), among the Trust, the Seller and
(_______________), as servicer (the "Master Servicer"), as applicable.
This Certificate is one of a duly authorized issue of Home Equity
Loan Asset-Backed Certificates, Series 199__-__ (herein called the "Trust
Certificates"). Also issued under the Indenture dated as of ___________,
199__ between the Trust and (________________), as indenture trustee, are the
(_______) classes of Notes designated as (_________________________
_____________________________________________________________________________
________ ______________________________________________) (collectively, the
"Notes"). This Trust Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the Holder of this Trust Certificate by virtue of its acceptance
hereof assents and by which such Holder is bound. The property of the Trust
consists of a pool of (adjustable rate) home equity loan revolving credit
line loans made or to be made int he future (the "Mortgage Loans"), under
certain home equity revolving credit line loan agreements and secured
primarily by second (deeds of trust) (mortgages) on residential properties
that are primarily one- to four-family properties (the "Mortgaged
Properties"); the collections in respect of the Mortgage Loans received after
the Cut-off Date; property that secured a Mortgage Loan which has been
acquired by foreclosure or deed in lieu of foreclosure; (a surety bond) (a
letter of credit); rights under certain hazard insurance policies covering
the Mortgaged Properties; and certain other property. (The rights of the
Holders of the Trust Certificates are subordinated to the rights of the
Holders of the Notes, as set forth in the Master Servicing Agreement.)
Under the Trust Agreement, there will be distributed on the
(_______) day of each month or, if such (_______) day is not a Business Day,
the next Business Day (each, a "Distribution Date"), commencing on
___________, 199__, to the Person in whose name this Trust Certificates is
registered at the close of business on the first day of the month or, if
Definitive Certificates are issued, the (_______) day of the prior month (the
"Record Date"), such Certificateholder's fractional undivided interest in the
amount to be distributed to Certificateholders on such Distribution Date. No
distributions of principal will be made on any Certificate until all of the
Notes have been paid in full.
(The Holder of this Trust Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Master
Servicing Agreement and the Indenture.)
It is the intent of the Seller, the Master Servicer and the
Certificateholders that, for purposes of federal income, state and local
income and single business tax and any other income taxes, the Trust will be
treated as a partnership and the Certificateholders (including the Seller)
will be treated as partners in that partnership. The Seller and the other
Certificateholders, by acceptance of a Trust Certificate, agree to treat, and
to take no action inconsistent with the treatment of, the Trust Certificates
for such tax purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial
interest in a Trust Certificate, covenants and agrees that such
Certificateholder or Certificate Owner, as the case may be, will not at any
time institute against the COMPANY, or join in any institution against the
COMPANY of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal
or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, the Trust Agreement or any of
the Basic Documents.
Distributions on this Trust Certificate will be made as provided in
the Trust Agreement by the Owner Trustee by wire transfer or check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon, except that with respect to Trust Certificates registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee.
Except as otherwise provided in the Trust Agreement and notwithstanding the
above, the final distribution on this Trust Certificate will be made after
due notice by the Owner Trustee of the pendency of such distribution and only
upon presentation and surrender of this Trust Certificate at the office or
agency maintained for that purpose by the Owner Trustee in the Borough of
Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit
under the Trust Agreement or the Master Servicing Agreement or be valid for
any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Trust Certificate to be duly
executed.
(___________________)
by: (_____________________), not in its
individual capacity but solely as Owner
Trustee
Dated: by: ______________________________________
Authorized Signatory
(REVERSE OF TRUST CERTIFICATE)
The Trust Certificates do not represent an obligation of, or an
interest in, the Seller, the Master Servicer, the Owner Trustee or any
affiliates of any of them and no recourse may be had against such parties or
their assets, except as expressly set forth or contemplated herein or in the
Trust Agreement or the Basic Documents. In addition, this Trust Certificate
is not guaranteed by any governmental agency or instrumentality and is
limited in right of payment to certain collections and recoveries with
respect to the Mortgage Loans (and certain other amounts), all as more
specifically set forth herein and in the Master Servicing Agreement. A copy
of each of the Master Servicing Agreement and the Trust Agreement may be
examined by any Certificateholder upon written request during normal business
hours at the principal office of the Seller and at such other places, if any,
designated by the Seller.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Seller and the rights of the Certificateholders under the
Trust Agreement at any time by the Seller and the Owner Trustee with the
consent of the Holders of the Trust Certificates and the Notes, each voting
as a class, evidencing not less than a majority of the Certificate Balance
and the outstanding principal balance of the Notes of each such class. Any
such consent by the Holder of this Trust Certificate shall be conclusive and
binding on such Holder and on all future Holders of this Trust Certificate
and of any Trust 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 Trust Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders
of any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Trust Certificate is
registerable in the Certificate Register upon surrender of this Trust
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Owner Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate
Registrar duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Trust Certificates of
authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate
Registrar appointed under the Trust Agreement is (_________________), New
York, New York.
Except as provided in the Trust Agreement, the Trust Certificates
are issuable only as registered Trust Certificates without coupons in
denominations of $(__________) and in integral multiples of $1 in excess
thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new
Trust Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but
the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none
of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Master Servicing Agreement and the disposition of all
property held as part of the Owner Trust Estate. The Master Servicer of the
Mortgage Loans may at its option purchase the Owner Trust Estate at a price
specified in the Master Servicing Agreement, and such purchase of the
Mortgage Loans and other property of the Trust will effect early retirement
of the Trust Certificates; however, such right of purchase is exercisable
only as of the last day of any Collection Period as of which the Pool Balance
is less than or equal to (____)% of the Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the Code or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding this Trust Certificate, the Holder hereof shall be
deemed to have represented and warranted that it is not a Benefit Plan.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
___________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
___________________________________________________________________________
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
___________________________________________________________________________
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
___________________________________________*/
Signature Guaranteed:
____________________________*/
_________________
*/ NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Trust Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company.
EXHIBIT B
CERTIFICATE OF TRUST OF
PROVIDENT HOME EQUITY LOAN TRUST 199___
-----------------------------------
THIS Certificate of Trust of PROVIDENT HOME EQUITY LOAN TRUST
199__-__ (the "Trust"), dated ____________, 199__, is being duly executed and
filed by (_____________________), a (___________________________), as
trustee, to form a business trust under the Delaware Business Trust Act (12
Del. Code, Section 3801 et seq.).
-- ---
1. Name. The name of the business trust formed hereby is
----
PROVIDENT HOME EQUITY LOAN TRUST 199__-__.
2. Delaware Trustee. The name and business address of the trustee
----------------
of the Trust in the State of Delaware is (______________), Delaware (____),
Attention: (_______________________________).
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
(______________),
not in its individual capacity but solely as
owner trustee under a Trust Agreement dated
_______________, 199___
By: _______________________
Name:
Title:
EXHIBIT C
(Form of Certificate Depository Agreement)
EXHIBIT 4.3
PROVIDENT HOME EQUITY LOAN TRUST 199_-__,
Issuer
AND
(_________________)
INDENTURE TRUSTEE
_________________________________________
INDENTURE
Dated as of _________, 199_
__________________________________________
HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 199__-__
Cross-reference sheet showing the location in the indenture of the
provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.
TIA Indenture Section
--- -----------------
Section 310
(a) (1) 6.11
(a) (2) 6.11
(a) (3) 6.10(b)(i)
(a) (4) Not Applicable
(a) (5) 6.11
(b) 6.11
6.08
11.05
(c) Not Applicable
Section 311
(a) 6.12
(b) 6.12
Section 312
(a) 7.01(a)(i)
7.02(a)(i)
(b) 7.02(a)(ii)
(c) 7.02(a)(iii)
Section 313
(a) 7.04
(b) 7.04
(c) 7.04
11.05
(d) 7.04
Section 314
(a) 7.03
11.05
3.11
(b) (1) 2.03
(b) (2) 3.07
(c) (1) 2.03
4.10
11.01
(c) (2) 2.03
4.10
11.01
(c) (3) 1.01
2.02
(d) (1) 1.01
8.05
(d) (2) 1.01
Not Applicable
(d) (3) 1.01
2.02
(e) 11.01
Section 315
(a) 6.01(b)
6.01(c)(i)
(b) 6.05
11.05
(c) 6.01(a)
(d) 6.01(c)
(d) (1) 6.01(b)
(d) (2) 6.01(c)(ii)
(d) (3) 6.01(c)(iii)
(e) 5.16
Section 316
(a) (1) (A) 5.11
8.01
(a) (1) (B) 5.02
5.12
(a) (2) Not Applicable
(b) 5.07
(c) Not Applicable
Section 317
(a) (1) 5.03
(a) (2) 5.03(d)(iv)
(b) 3.03
Section 318
(a) 11.07
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
Definition
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Incorporation by Reference of Trust Indenture Act . . . . . . 2
1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
Original Issuance of Notes
2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02. Execution, Authentication and Delivery . . . . . . . . . . . 4
2.03. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
Covenants
3.01. Collection of Payments on Mortgage Loan Accounts . . . . . . 6
3.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . 6
3.03. Money for Payments To Be Held in Trust; Paying Agent;
Certificate Paying Agent . . . . . . . . . . . . . . . . . 6
3.04. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.05. Payment of Principal and Interest; Defaulted Interest . . . . 9
3.06. Protection of Trust Estate . . . . . . . . . . . . . . . . . 11
3.07. Opinions as to Trust Estate . . . . . . . . . . . . . . . . . 12
3.08. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.09. Performance of Obligations; Master Servicing Agreement . . . 13
3.10. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 15
3.11. Annual Statement as to Compliance . . . . . . . . . . . . . . 16
3.12. Recording of Assignments . . . . . . . . . . . . . . . . . . 16
3.13. Representations and Warranties Concerning the Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.14. Indenture Trustee's Review of Related Documents . . . . . . . 16
3.15. Trust Estate; Related Documents . . . . . . . . . . . . . . . 17
3.16. Amendments to Master Servicing Agreement . . . . . . . . . . 19
3.17. Master Servicer as Agent and Bailee of Indenture Trustee . . 19
3.18. Investment Company Act . . . . . . . . . . . . . . . . . . . 19
3.19. Issuer May Consolidate, etc., Only on Certain Terms . . . . . 20
3.20. Successor or Transferee . . . . . . . . . . . . . . . . . . . 22
3.21. No Other Business . . . . . . . . . . . . . . . . . . . . . . 22
3.22. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 22
3.23. Guarantees, Loans, Advances and Other Liabilities . . . . . . 22
3.24. Capital Expenditures . . . . . . . . . . . . . . . . . . . . 22
3.25. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.26. Restricted Payments . . . . . . . . . . . . . . . . . . . . . 23
3.27. Notice of Events of Default . . . . . . . . . . . . . . . . . 23
3.28. Further Instruments and Acts . . . . . . . . . . . . . . . . 23
3.29. Statements to Noteholders . . . . . . . . . . . . . . . . . . 23
3.30. (Reserved) (Grant of the Additional Loans . . . . . . . . . . 23
3.31. Determination of Note Rate and Certificate Rate. . . . . . . 25
3.32. Payments under the Credit Enhancement Instrument . . . . . . 25
3.33. Replacement Credit Enhancement Instrument . . . . . . . . . . 26
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
4.01. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.02. Registration of and Limitations on Transfer and Exchange of
Notes; Appointment of Certificate Registrar . . . . . . . 27
4.03. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . . 29
4.04. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . 30
4.05. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 30
4.06. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . 30
4.07. Notices to Depository . . . . . . . . . . . . . . . . . . . . 31
4.08. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . 31
4.09. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . 32
4.10. Satisfaction and Discharge of Indenture . . . . . . . . . . . 32
4.11. Application of Trust Money . . . . . . . . . . . . . . . . . 33
4.12. Subrogation and Cooperation . . . . . . . . . . . . . . . . . 33
4.13. Repayment of Moneys Held by Paying Agent . . . . . . . . . . 34
ARTICLE V
Remedies
5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . 35
5.02. Acceleration of Maturity; Rescission and Annulment . . . . . 35
5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee . . . . . . . . . . . . . . . . . . . . 36
5.04. Remedies; Priorities . . . . . . . . . . . . . . . . . . . . 38
5.05. Optional Preservation of the Trust Estate . . . . . . . . . . 40
5.06. Limitation of Suits . . . . . . . . . . . . . . . . . . . . . 41
5.07. Unconditional Rights of Noteholders To Receive Principal and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.08. Restoration of Rights and Remedies . . . . . . . . . . . . . 42
5.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . . 42
5.10. Delay or Omission Not a Waiver . . . . . . . . . . . . . . . 42
5.11. Control by Noteholders . . . . . . . . . . . . . . . . . . . 43
5.12. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 43
5.13. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 44
5.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 44
5.15. Sale of Trust Estate . . . . . . . . . . . . . . . . . . . . 44
5.16. Action on Notes . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
The Indenture Trustee
6.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . 48
6.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . 49
6.03. Individual Rights of Indenture Trustee . . . . . . . . . . . 50
6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . . . . . 50
6.05. Notice of Event of Default . . . . . . . . . . . . . . . . . 50
6.06. Reports by Indenture Trustee to Holders . . . . . . . . . . . 50
6.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . 50
6.08. Replacement of Indenture Trustee . . . . . . . . . . . . . . 51
6.09. Successor Indenture Trustee by Merger . . . . . . . . . . . . 52
6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.11. Eligibility; Disqualification . . . . . . . . . . . . . . . . 54
6.12. Preferential Collection of Claims Against Issuer . . . . . . 54
6.13. Representation and Warranty . . . . . . . . . . . . . . . . . 55
6.14. Directions to Indenture Trustee . . . . . . . . . . . . . . . 55
6.15. No Consent to Certain Acts of Depositor . . . . . . . . . . . 55
ARTICLE VII
Noteholders' Lists and Reports
7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders . . . . . . . . . . . . . . . . . . . . . . . 56
7.02. Preservation of Information; Communications to Noteholders . 56
7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . . . . . 56
7.04. Reports by Indenture Trustee . . . . . . . . . . . . . . . . 57
ARTICLE VIII
Accounts, Disbursements and Releases
8.01. Collection of Money . . . . . . . . . . . . . . . . . . . . . 58
8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . 58
8.03. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . 60
8.04. Termination Upon Distribution to Noteholders . . . . . . . . 60
8.05. Release of Trust Estate . . . . . . . . . . . . . . . . . . . 60
8.06. Surrender of Notes Upon Final Payment . . . . . . . . . . . . 61
ARTICLE IX
Supplemental Indentures
9.01. Supplemental Indentures Without Consent of Noteholders . . . 62
9.02. Supplemental Indentures With Consent of Noteholders . . . . . 63
9.03. Execution of Supplemental Indentures . . . . . . . . . . . . 65
9.04. Effect of Supplemental Indenture . . . . . . . . . . . . . . 65
9.05. Conformity with Trust Indenture Act . . . . . . . . . . . . . 65
9.06. Reference in Notes to Supplemental Indentures . . . . . . . . 66
ARTICLE X
(Reserved)
ARTICLE XI
Miscellaneous
11.01. Compliance Certificates and Opinions, etc . . . . . . . . . 68
11.02. Form of Documents Delivered to Indenture Trustee . . . . . . 70
11.03. Acts of Noteholders . . . . . . . . . . . . . . . . . . . . 71
11.04. Notices, etc., to Indenture Trustee, Issuer, (Credit
Enhancer) and Rating Agencies . . . . . . . . . . . . . . 71
11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . . . 72
11.06. Alternate Payment and Notice Provisions . . . . . . . . . . 73
11.07. Conflict with Trust Indenture Act . . . . . . . . . . . . . 73
11.08. Effect of Headings . . . . . . . . . . . . . . . . . . . . . 74
11.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . 74
11.10. Separability . . . . . . . . . . . . . . . . . . . . . . . . 74
11.11. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 74
11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 74
11.13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 74
11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 74
11.15. Recording of Indenture . . . . . . . . . . . . . . . . . . . 74
11.16. Issuer Obligation . . . . . . . . . . . . . . . . . . . . . 75
11.17. No Petition . . . . . . . . . . . . . . . . . . . . . . . . 75
11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.19. Authority of the Administrator . . . . . . . . . . . . . . . 76
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Mortgage Loan Schedule
This Indenture, dated as of ______, 199_, between PROVIDENT HOME
EQUITY LOAN TRUST 199_-_, a Delaware business trust, as Issuer (the
"Issuer"), and (________________), as Indenture Trustee (the "Indenture
Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's
Home Equity Loan Asset Backed Notes, Series 199__-__ (the "Notes").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing
Date, as Indenture Trustee for the benefit of the Holders of the Notes, all
of the Issuer's right, title and interest in and to whether now existing or
hereafter created (a) the Mortgage Loans and all monies and proceeds due
thereon after the Cut-off Date (exclusive of payments in respect of accrued
interest due on a prior to the Cut-off Date or due in the month of
___________), (b) all funds on deposit from time to time in the Collection
Account allocable to the Mortgage Loans; (c) all funds on deposit from time
to time in the Payment Account and in all proceeds thereof; ((d) the Policy);
(e) all Additional Balances; (f) all REO properties; and (g) all present and
future claims, demands, causes and choses in action in respect of any or all
of the foregoing and all payments on or under, and all proceeds of every kind
and nature whatsoever in respect of, any or all of the foregoing and all
payments on or under, and all proceeds of every kind and nature whatsoever in
the conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, checks, deposit accounts, rights to payment of any and every
kind (including but not limited to all proceeds of any hazard insurance
policy with respect to any Mortgaged Property), and other forms of obli-
gations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the fore-
going (collectively, the "Trust Estate" or the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in
this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Holders of the Notes, acknowledges such Grant, accepts the trust under this
Indenture in accordance with the provisions hereof and agrees to perform its
duties as Indenture Trustee as required herein.
ARTICLE I
Definition
Section 1.01. Definitions. For all purposes of this Indenture, except
-----------
as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms used but not otherwise defined herein shall have
the meanings assigned to such terms in Appendix A hereto which are incorpo-
rated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to
time amended, modified or supplemented and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
ARTICLE II
Original Issuance of Notes
Section 2.01. Form. The Notes together with the Indenture Trustee's
----
certificate of authentication, shall be in substantially the forms set forth
in Exhibit A with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by
the officers executing such Notes, as evidenced by their execution of the
Notes. Any portion of the text of any Note may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Notes,
as evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibit A are part of the terms of
this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall
--------------------------------------
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not
hold such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and deliver
Notes for original issue in an aggregate initial principal amount of
$(______________). The aggregate principal amount of Notes outstanding at
any time may not exceed $(_____________).
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum initial Security
Balances of $(________) and in integral multiples of $(______) in excess
thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Section 2.03. Opinions of Counsel. On the Closing Date, the Indenture
-------------------
Trustee shall have received: (i) an Opinion of Counsel, in form and
substance reasonably satisfactory to the Indenture Trustee and its counsel,
with respect to securities law matters; (ii) an Opinion of Counsel, in form
and substance reasonably satisfactory to the Indenture Trustee and its
counsel, with respect to the tax status of the arrangement created by the
Indenture; and (iii) an Opinion of Counsel to the Issuer, in form and
substance reasonably satisfactory to the Indenture Trustee and its counsel,
with respect to the due authorization, valid execution and delivery of this
Indenture and with respect to its binding effect on the Issuer.
ARTICLE III
Covenants
Section 3.01. Collection of Payments on Mortgage Loan Accounts. The
------------------------------------------------
Indenture Trustee shall establish and maintain with itself a trust account
(the "Payment Account") in which the Indenture Trustee shall, subject to the
terms of this paragraph, deposit, on the same day as it is received from the
Master Servicer, each remittance received by the Indenture Trustee with
respect to the Mortgage Loans. The Indenture Trustee shall make all payments
of principal of and interest on the Notes, subject to Section 3.03 as
provided in Section 3.05 herein from moneys on deposit in the Payment
Account.
Section 3.02. Maintenance of Office or Agency. The Issuer will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
agency where, subject to satisfaction of conditions set forth herein, Notes
may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. If at any time the
Issuer shall fail to maintain any such office or agency or shall fail to
furnish the Indenture Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust Office, and
the Issuer hereby appoints the Indenture Trustee as its agent to receive all
such surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust; Paying Agent;
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Certificate Paying Agent. (a) As provided in Section 3.01, all payments of
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amounts due and payable with respect to any Notes that are to be made from
amounts withdrawn from the Payment Account pursuant to Section 3.01 shall be
made on behalf of the Issuer by the Indenture Trustee or by the Paying Agent,
and no amounts so withdrawn from the Payment Account for payments of Notes
shall be paid over to the Issuer except as provided in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer of which it has actual knowledge in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes
if at any time it ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Request direct any Paying Agent to pay to the Indenture Trustee all
sums held in trust by such Paying Agent, such sums to be held by the
Indenture Trustee upon the same trusts as those upon which the sums were held
by such Paying Agent; and upon such payment by any Paying Agent to the Inden-
ture Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such
trust and be paid to the Issuer on Issuer Request; and the Holder of such
Note shall thereafter, as an unsecured general creditor, look only to the
Issuer for payment thereof (but only to the extent of the amounts so paid to
the Issuer), and all liability of the Indenture Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided, however,
that the Indenture Trustee or such Paying Agent, before being required to
make any such repayment, shall at the expense and direction of the Issuer
cause to be published once, in an Authorized Newspaper published in the
English language, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Issuer. The Indenture Trustee shall also adopt and employ, at
the expense and direction of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice
of such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
The Issuer hereby appoints (__________________) as Certificate Paying
Agent and Residual Ownership Interest Paying Agent to make payments to
Certificateholders and holders of the Residual Ownership Interest on behalf
of the Issuer in accordance with the provisions of the Certificates, Section
3.05 hereof and the provisions of the Trust Agreement, and (_______________)
hereby accepts such appointment and further agrees that it will be bound by
the provisions of the Trust Agreement relating to the Certificate Paying
Agent and Residual Ownership Interest Paying Agent and will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Certificates and the Residual Ownership Interest in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided and as
provided in the Trust Agreement and pay such sums to such Persons as
herein and therein provided;
(ii) give the Owner Trustee notice of any default by the Issuer
of which it has actual knowledge in the making of any payment required
to be made with respect to the Certificates;
(iii) at any time during the continuance of any such default, upon
the written request of the Owner Trustee forthwith pay to the Owner
Trustee on behalf of the Issuer all sums so held in trust by such
Certificate Paying Agent;
(iv) immediately resign as Certificate Paying Agent and forthwith
pay to the Owner Trustee on behalf of the Issuer all sums held by it in
trust for the payment of Certificates and the Residual Ownership
Interest if at any time it ceases to meet the standards required to be
met by the Certificate Paying Agent or the Residual Ownership Interest
Paying Agent at the time of its appointment;
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Certificates or the
holders of the Residual Ownership Interest of any applicable withholding
taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith; and
(vi) deliver to the Owner Trustee a copy of the report to
Certificateholders and holders of Residual Ownership Interest prepared
with respect to each Payment Date by the Master Servicer pursuant to
Section 4.01 of the Master Servicing Agreement.
Section 3.04. Existence. The Issuer will keep in full effect its
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existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other state or of the United States
of America, in which case the Issuer will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Mortgage Loans and each
other instrument or agreement included in the Trust Estate.
Section 3.05. Payment of Principal and Interest; Defaulted Interest.
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(a) On each Payment Date from amounts on deposit in the Payment Account
after making (x) any deposit to the Funding Account pursuant to Section
8.02(b) and (y) any deposits to the Payment Account pursuant to Section
8.02(c)(ii) and Section 8.02(c)(i)(2), the Indenture Trustee, on behalf of
the Issuer shall pay to the Noteholders and the Certificate Paying Agent, on
behalf of the Issuer shall pay to the Certificateholders and the Certificate
Paying Agent, on behalf of the Issuer shall pay to the holders of the
Residual Ownership Interest, and the Indenture Trustee, in its capacity as
agent for the Issuer shall pay to other Persons, the amounts to which they
are entitled as set forth below:
(i) The sum of (x) to the Noteholders the sum of (a) one month's
interest at the Note Rate on the Security Balances of Notes immediately
prior to such Payment Date and (b) any previously accrued and unpaid
interest for prior Payment Dates and (y) to the Certificateholders, the
Certificate Distribution Amount for such Payment Date;
(ii) as principal on the Notes and the Certificates, the
applicable Security Percentage of the Principal Collection Distribution
Amount;
(iii) to the Noteholders and the Certificateholders, as the case
may be, as principal on the Notes and the Certificates, pro rata, based
on the Security Balances from the amount remaining on deposit in the
Payment Account, up to the applicable Security Percentage of Liquidation
Loss Amounts for the related Collection Period;
(iv) to the Noteholders and the Certificateholders, as the case
may be, as principal on the Notes and the Certificates, pro rata, based
on the Security Balances from the amount remaining on deposit in the
Payment Account, up to the applicable Security Percentage of Carryover
Loss Amounts;
((v) to the Credit Enhancer, in the amount of the premium for the
Credit Enhancement Instrument (and for any Additional Credit Enhancement
Instrument);
(vi) to the Credit Enhancer, to reimburse it for prior draws made
on the Credit Enhancement Instrument (and on any Additional Credit
Enhancement Instrument) (with interest thereon as provided in the
Insurance Agreement);)
(vii) to the Noteholders and the Certificateholders, as the case
may be, as principal on the Notes and the Certificates, pro rata, based
on the Security Balances from Security Interest Collections, up to the
Accelerated Principal Distribution Amount for such Payment Date (such
amount, if any, paid pursuant to this clause (vii) being referred to
herein as the "Accelerated Principal Payment Amount");
((viii) to the Credit Enhancer, any other amounts owed to the Credit
Enhancer pursuant to the Insurance Agreement;)
(ix) (Reserved);
(x) to reimburse the Administrator for expenditures made on
behalf of the Issuer with respect to the performance of its duties under
the Indenture; and
(xi) any remaining amounts to the holders of the Residual
Ownership Interest as described in Section 5.01 of the Trust Agreement;
provided, however, (in the event that on a Payment Date a Credit Enhancer
Default shall have occurred and be continuing then the priorities of
distributions described above will be adjusted such that payments of the
Certificate Distribution Amount and all other amounts to be paid in respect
of principal on the Certificates will not be paid until the full amount of
interest and principal in accordance with clauses (i)(x) and (ii) through
(iv) above that are due on the Notes on such Payment Date have been paid and
provided, further,) that on the Final Scheduled Payment Date or other final
Payment Date, the amount to be paid pursuant to clause (ii) above shall be
equal to the Security Balances of the Securities immediately prior to such
Payment Date.
The amounts paid to Noteholders shall be paid to each Class in
accordance with paragraph (b) below. Interest will accrue on the Notes
during an Interest Period on the basis of the actual number of days in such
Interest Period and a year assumed to consist of 360 days.
Any installment of interest or principal, if any, payable on any Note or
Certificate that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, if such Holder holds Notes or Certificates
other than the Designated Certificate of an aggregate initial Principal
Balance of at least $(___________) be paid to each Holder of record on the
preceding Record Date, by wire transfer to an account specified in writing by
such Holder reasonably satisfactory to the Indenture Trustee as of the
preceding Record Date or in all other cases or if no such instructions have
been delivered to the Indenture Trustee, by check to such Noteholder mailed
to such Holder's address as it appears in the Note Register the amount
required to be distributed to such Holder on such Payment Date pursuant to
such Holder's Securities; provided, however, that the Indenture Trustee shall
not pay to such Holders any amount required to be withheld from a payment to
such Holder by the Code.
(b) The principal of each Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the related form of
Note set forth in Exhibit A. All principal payments on each Class of Notes
shall be made to the Noteholders of such Class entitled thereto in accordance
with the Percentage Interests represented by such Notes. Upon notice to the
Indenture Trustee by the Issuer, the Indenture Trustee shall notify the
Person in whose name a Note is registered at the close of business on the
Record Date preceding the Final Scheduled Payment Date or other final Payment
Date. Such notice shall be mailed no later than five Business Days prior to
such Final Scheduled Payment Date or other final Payment Date and shall
specify that payment of the principal amount and any interest due with
respect to such Note at the Final Scheduled Payment Date or other final
Payment Date will be payable only upon presentation and surrender of such
Note and shall specify the place where such Note may be presented and
surrendered for such final payment.
Section 3.06. Protection of Trust Estate. (a) The Issuer will from
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time to time execute and deliver all such supplements and amendments hereto
and all such financing statements, continuation statements, instruments of
further assurance and other instruments, and will take such other action
necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust Estate
against the claims of all persons and parties.
(b) Except as otherwise provided in the Master Servicing Agreement or
this Indenture, the Indenture Trustee shall not remove any portion of the
Trust Estate that consists of money or is evidenced by an instrument,
certificate or other writing from the jurisdiction in which it was held at
the date of the most recent Opinion of Counsel delivered pursuant to Section
3.06 (or from the jurisdiction in which it was held as described in the
Opinion of Counsel delivered at the Closing Date pursuant to Section 3.07(a),
if no Opinion of Counsel has yet been delivered pursuant to Section 3.07(b)
unless the Trustee shall have first received an Opinion of Counsel to the
effect that the lien and security interest created by this Indenture with
respect to such property will continue to be maintained after giving effect
to such action or actions.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement
or other instrument required to be executed pursuant to this Section 3.06.
Section 3.07. Opinions as to Trust Estate. (a) On the Closing Date,
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the Issuer shall furnish to the Indenture Trustee, the Owner Trustee and to
the Administrator an Opinion of Counsel either stating that, in the opinion
of such counsel, such action has been taken with respect to the delivery of
the Mortgage Notes, the recording of the Assignments of Mortgage, the record-
ing and filing of this Indenture, any indentures supplemental hereto, and any
other requisite documents, and with respect to the execution and filing of
any financing statements and continuation statements, as are necessary to
perfect and make effective the lien and security interest of this Indenture
and reciting the details of such action, or stating that, in the opinion of
such counsel, no such action is necessary to make such lien and security
interest effective.
(b) On or before December 31 in each calendar year, beginning in 199_,
the Issuer shall furnish to the Indenture Trustee and to the Administrator an
Opinion of Counsel at the expense of the Issuer either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording of the Assignments of Mortgage, the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any
other requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such lien and security interest. Such Opinion
of Counsel shall also describe the recording, filing, re-recording and refil-
ing of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements
and continuation statements that will, in the opinion of such counsel, be
required to maintain the lien and security interest of this Indenture until
December 31 in the following calendar year.
Section 3.08. (Reserved)
Section 3.09. Performance of Obligations; Master Servicing Agreement.
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(a) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document, including without limitation the
Master Servicing Agreement or any provision thereof without the consent of
the Indenture Trustee or the Holders of at least a majority of the Security
Balances of the Notes, the Master Servicer (and the Credit Enhancer). Upon
the taking of any such action with respect to any Basic Document the Issuer
shall give written notice thereof to the Rating Agencies.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee in an Officer's
Certificate of the Issuer shall be deemed to be action taken by the Issuer.
Initially, the Issuer has contracted with the Administrator to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Mortgage
Loans or under any instrument included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the
documents relating to the Mortgage Loans or any such instrument, except such
actions as the Master Servicer is expressly permitted to take in the Master
Servicing Agreement.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Servicing Termination, the Issuer shall promptly notify the Indenture Trustee
thereof, and shall specify in such notice the action, if any, the Issuer is
taking in respect of such Event of Servicing Termination. If such Event of
Servicing Termination arises from the failure of the Master Servicer to
perform any of its duties or obligations under the Master Servicing Agreement
with respect to the Mortgage Loans, the Issuer may remedy such failure,
provided that if such Event of Servicing Termination arises from the failure
by the Master Servicer to comply with requirements imposed upon it under
Section 3.04 of the Master Servicing Agreement with respect to hazard
insurance for the Mortgaged Properties securing the Mortgage Loans, the
Issuer shall promptly, as the case may be, pay such premiums or obtain
substitute insurance coverage meeting the requirements of said Section 3.04.
So long as any such Event of Servicing Termination shall be continuing, the
Indenture Trustee may exercise its remedies set forth in Section 7.01 of the
Master Servicing Agreement. Unless granted or permitted by (the Credit
Enhancer or) the Holders of Securities to the extent provided above, the
Issuer may not waive any such Event of Servicing Termination or terminate the
rights and powers of the Master Servicer under the Master Servicing
Agreement.
(e) Upon any termination of the Master Servicer's rights and powers
pursuant to Section 7.01 of the Master Servicing Agreement, all rights,
powers, duties and responsibilities of the Master Servicer with respect to
the Mortgage Loans shall vest in and be assumed by the Indenture Trustee, and
the Indenture Trustee shall be the successor in all respect to the Master
Servicer in its capacity as servicer with respect to the Mortgage Loans under
the Master Servicing Agreement. Upon any such termination, the Indenture
Trustee is hereby authorized, and the Indenture Trustee hereby agrees, to
mail a notice to each Mortgagor directing each such Mortgagor to mail all
payments in respect of the related Mortgage Loan to the Indenture Trustee or
its agent at the address specified in such notice. The Indenture Trustee may
resign as the Master Servicer by giving written notice of such resignation to
the Issuer (and the Credit Enhancer) and in such event will be released from
such duties and obligations, such release to be effective on the date a new
servicer enters into a servicing agreement with the Issuer as provided below.
Upon delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer, satisfactory in all respects to the Indenture Trustee (and the
Credit Enhancer), which shall enter into a servicing agreement with the
Issuer and the Indenture Trustee, (such agreement to be not less favorable to
the Credit Enhancer in its reasonable judgment, or the Noteholders if a
Credit Enhancer Default shall have occurred and be continuing,) than the
Master Servicing Agreement in any material respect. If, within 30 days after
the delivery of the notice referred to above, the Issuer shall not have
obtained such new servicer, the Indenture Trustee may appoint, or may
petition a court of competent jurisdiction to appoint, a successor servicer
(acceptable to the Credit Enhancer) to service the Mortgage Loans. In
connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such successor
shall agree, and the Issuer shall enter into an agreement with such successor
for the servicing of the Mortgage Loans, such agreement to be substantially
similar to the Master Servicing Agreement (or otherwise acceptable to the
Credit Enhancer); provided that any such compensation of the successor
servicer (unless otherwise agreed to by the Credit Enhancer,) shall not be in
excess of the Servicing Fee payable to the Master Servicer under the Master
Servicing Agreement. If the Indenture Trustee shall succeed to the Master
Servicer's duties as servicer of the Mortgage Loans as provided herein, it
shall do so in its individual capacity and not in its capacity as Indenture
Trustee.
(f) The Issuer shall at all times retain an Administrator ((approved by
the Credit Enhancer under the Administration Agreement)) and may enter into
contracts with other Persons for the performance of the Issuer's obligations
hereunder, and performance of such obligations by such Persons shall be
deemed to be performance of such obligations by the Issuer.
Section 3.10. Negative Covenants. So long as any Notes are
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Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, sell,
transfer, exchange or otherwise dispose of the Trust Estate, unless
directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds
thereof or (C) permit the lien of this Indenture not to constitute a
valid first priority security interest in the Trust Estate.
Section 3.11. Annual Statement as to Compliance. The Issuer will
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deliver to the Indenture Trustee, within 120 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year 199_), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year
and of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 3.12. Recording of Assignments. The Issuer shall exercise its
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right under the Mortgage Loan Purchase Agreement with respect to the
obligation of the Seller to submit or cause to be submitted for recording all
Assignments of Mortgages on or prior to _________, 199_ with respect to the
Initial Loans and within (__) days following the related Deposit Date with
respect to any Additional Loans.
Section 3.13. Representations and Warranties Concerning the Mortgage
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Loans. The Issuer has pledged to the Indenture Trustee all of its right
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under the Mortgage Loan Purchase Agreement and the Indenture Trustee has the
benefit of the representations and warranties made by the Seller in
Section (_____) thereof, Section (____) thereof and Section (__) thereof
concerning the Mortgage Loans and the right to enforce any remedy against the
Seller provided in such Section (_____) or Section (_____) to the same extent
as though such representations and warranties were made directly to the
Indenture Trustee.
Section 3.14. Indenture Trustee's Review of Related Documents. (a)
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The Indenture Trustee agrees, for the benefit of the holders of the Notes, to
review, or the related Custodian shall review, unless the Indenture Trustee
or such Custodian made such review prior to the Closing Date, on or prior to
________, 199_ the Related Documents delivered to it on or prior to the
Closing Date and within 90 days of the related Deposit Date, the Related
Documents delivered to it in connection with any Additional Loan, in each
case in connection with the Grant of the Mortgage Loan listed on the Schedule
of Mortgage Loans as security for the Notes. Such review shall be limited to
a determination that all documents referred to in the definition of the term
Related Documents have been executed and are appropriately endorsed in the
manner called for in the Mortgage Loan Purchase Agreement and that the
Related Documents have been delivered with respect to each such Mortgage Loan
(other than the documents related to (i) any Mortgage Loan so listed which
has been subject to a Prepayment in full and termination of related Mortgage
Loan, the proceeds of which have been deposited in the Collection Account in
lieu of delivery of the applicable Related Documents, (ii) any Mortgage Loan
with respect to which the related Mortgaged Property was foreclosed,
repossessed or otherwise converted subsequent to the Cut-off Date and prior
to the Closing Date or with respect to which foreclosure proceedings have
been commenced and for which the related Related Documents are required in
connection with the prosecution of such foreclosure proceedings and for which
the Issuer has delivered a trust receipt called for by Section 3.15(c) and
(iii) any Mortgage Loan as to which the original Assignment of Mortgage has
been submitted for recording), that all such documents have been executed,
and that all such documents relate to the Mortgage Loans listed on the
Schedule of Mortgage Loans. In performing such review, the Trustee may rely
upon the purported genuineness and due execution of any such document and on
the purported genuineness of any signature thereon.
(b) If any Related Document is defective in any material respect which
may materially and adversely affect the value of the related Mortgage Loan,
the interest of the Indenture Trustee or the Noteholders in such Mortgage
Loan, or if any document required to be delivered to the Indenture Trustee
has not been delivered, the Indenture Trustee or the related Custodian on
behalf of the Indenture Trustee shall notify the Issuer, the Seller, (the
Credit Enhancer) and the Master Servicer immediately after obtaining
knowledge thereof and the Indenture Trustee, as assignee of the Issuer's
rights under the Mortgage Loan Purchase Agreement, shall exercise its
remedies in respect of any such defect against the Seller as provided in the
Mortgage Loan Purchase Agreement.
Section 3.15. Trust Estate; Related Documents. (a) When required by
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the provisions of this Indenture, the Indenture Trustee shall execute
instruments to release property from the lien of this Indenture, or convey
the Indenture Trustee's interest in the same, in a manner and under
circumstances which are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article III shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) In order to facilitate the servicing of the Mortgage Loans, the
Master Servicer is hereby authorized in the name and on behalf of the
Indenture Trustee and the Issuer, to execute assumption agreements,
substitution agreements, and instruments of satisfaction or cancellation or
of partial or full release or discharge, or any other document contemplated
by the Master Servicing Agreement and other comparable instruments with
respect to the Mortgage Loans and with respect to the Mortgaged Properties
subject to the Mortgages (and the Indenture Trustee and the Owner Trustee
shall promptly execute any such documents on request of the Master Servicer),
subject to the obligations of the Master Servicer under the Master Servicing
Agreement. If from time to time the Master Servicer shall deliver to the
Indenture Trustee or the related Custodian copies of any written assurance,
assumption agreement or substitution agreement or other similar agreement
pursuant to Section 3.05 of the Master Servicing Agreement, the Indenture
Trustee or the related Custodian shall check that each of such documents
purports to be an original executed copy (or a copy of the original executed
document if the original executed copy has been submitted for recording and
has not yet been returned) and, if so, shall file such documents, and upon
receipt of the original executed copy from the applicable recording office or
receipt of a copy thereof certified by the applicable recording office shall
file such originals or certified copies with the Related Documents. If any
such documents submitted by the Master Servicer do not meet the above
qualifications, such documents shall promptly be returned by the Indenture
Trustee or the related Custodian to the Master Servicer, with a direction to
the Master Servicer to forward the correct documentation.
(c) Upon Issuer Request accompanied by an Officers' Certificate of the
Master Servicer pursuant to Section 3.07 of the Master Servicing Agreement to
the effect that a Mortgage Loan has been the subject of a final payment or a
prepayment in full and the related Mortgage Loan has been terminated or that
substantially all Liquidation Proceeds which have been determined by the
Master Servicer in its reasonable judgment to be finally recoverable have
been recovered, and upon deposit to the Collection Account of such final
monthly payment, prepayment in full together with accrued and unpaid interest
to the date of such payment with respect to such Mortgage Loan or, if
applicable, Liquidation Proceeds, the Indenture Trustee and the Issuer shall
promptly release the Related Documents to the Master Servicer upon the order
of the Issuer, along with such documents as the Master Servicer or the
Mortgagor may request as contemplated by the Master Servicing Agreement to
evidence satisfaction and discharge of such Mortgage Loan. If from time to
time and as appropriate for the servicing or foreclosure of any Mortgage
Loan, the Master Servicer requests the Indenture Trustee or the related
Custodian to release the Related Documents and delivers to the Indenture
Trustee or the related Custodian a trust receipt reasonably satisfactory to
the Indenture Trustee or the related Custodian and signed by a Responsible
Officer of the Master Servicer, the Issuer and the Indenture Trustee or the
related Custodian shall release the Related Documents to the Master Servicer.
If such Mortgage Loans shall be liquidated and the Indenture Trustee or the
related Custodian receives a certificate from the Master Servicer as provided
above, then, upon request of the Issuer, the Indenture Trustee or the related
Custodian shall release the trust receipt to the Master Servicer upon the
order of the Issuer.
(d) The Indenture Trustee shall, at such time as there are no Notes
Outstanding (and no amounts due to the Credit Enhancer), release all of the
Trust Estate to the Issuer (other than any cash held for the payment of the
Notes pursuant to Section 3.03 or 4.11), subject, however, to the rights of
the Indenture Trustee under Section 6.07.
Section 3.16. Amendments to Master Servicing Agreement. The Indenture
----------------------------------------
Trustee may enter into any amendment or supplement to the Master Servicing
Agreement only in accordance with Section 8.01 of the Master Servicing
Agreement. The Indenture Trustee may, in its discretion, decline to enter
into or consent to any such supplement or amendment if its own rights, duties
or immunities shall be adversely affected.
Section 3.17. Master Servicer as Agent and Bailee of Indenture Trustee.
--------------------------------------------------------
Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code or other similar applicable law, rule or regulation of the
state in which such property is held by the Master Servicer, the Indenture
Trustee hereby acknowledges that the Master Servicer is acting as agent and
bailee of the Indenture Trustee in holding amounts on deposit in the
Collection Account pursuant to Section 3.02 of the Master Servicing
Agreement, as well as its agent and bailee in holding any Related Documents
released to the Master Servicer pursuant to Section 3.15(c), and any other
items constituting a part of the Trust Estate which from time to time come
into the possession of the Master Servicer. It is intended that, by the
Master Servicer's acceptance of such agency pursuant to Section 3.02 of the
Master Servicing Agreement, the Trustee, as a secured party, will be deemed
to have possession of such Related Documents, such moneys and such other
items for purposes of Section 9-305 of the Uniform Commercial Code of the
state in which such property is held by the Master Servicer.
Section 3.18. Investment Company Act. The Issuer shall not become an
----------------------
"investment company" or under the "control" of an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended (or
any successor or amendatory statute), and the rules and regulations
thereunder (taking into account not only the general definition of the term
"investment company" but also any available exceptions to such general
definition); provided, however, that the Issuer shall be in compliance with
this Section 3.18 if it shall have obtained an order exempting it from
regulation as an "investment company" so long as it is in compliance with the
conditions imposed in such order.
Section 3.19. Issuer May Consolidate, etc., Only on Certain Terms. (a)
---------------------------------------------------
The Issuer shall not consolidate or merge with or into any other Person,
unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any state or the
District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee, in
form reasonably satisfactory to the Indenture Trustee, the due and
punctual payment of the principal of and interest on all Notes and
Certificates and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes or the Certificates
to be reduced, suspended or withdrawn or to be considered by either
Rating Agency to be below investment grade (without taking into account
the Credit Enhancement Instrument);
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any state, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the
rights of Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and
(E) expressly agrees by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person) shall make
all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes or the Certificates
to be reduced, suspended or withdrawn;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
Section 3.20. Successor or Transferee. (a) Upon any consolidation or
-----------------------
merger of the Issuer in accordance with Section 3.19(a), the Person formed by
or surviving such consolidation or merger (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power
of, the Issuer under this Indenture with the same effect as if such Person
had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.19(b), the Issuer will be released from
every covenant and agreement of this Indenture to be observed or performed on
the part of the Issuer with respect to the Notes immediately upon the
delivery of written notice to the Indenture Trustee that the Issuer is to be
so released.
Section 3.21. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning and selling and managing
the Mortgage Loans in the manner contemplated by this Indenture and the Basic
Documents and all activities incidental thereto.
Section 3.22. No Borrowing. The Issuer shall not issue, incur, assume,
------------
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
Section 3.23. Guarantees, Loans, Advances and Other Liabilities.
-------------------------------------------------
Except as contemplated by this Indenture, the Issuer shall not make any loan
or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuring another's payment or performance on
any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire
(or agree contingently to do so) any stock, obligations, assets or securities
of, or any other interest in, or make any capital contribution to, any other
Person.
Section 3.24. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.25. (Reserved)
Section 3.26. Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made,
(w) distributions to the Owner Trustee and the Certificateholders as
contemplated by, and to the extent funds are available for such purpose under
the Trust Agreement, (x) payment to the Master Servicer pursuant to the terms
of the Master Servicing Agreement and (y) payments to the Indenture Trustee
pursuant to Section 1(a)(ii) of the Administration Agreement and (z) make
distributions to the holders of the Residual Ownership Interest as
contemplated by the Trust Agreement. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account
except in accordance with this Indenture and the Basic Documents.
Section 3.27. Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee, (the Credit Enhancer) and the Rating Agencies prompt
written notice of each Event of Default hereunder and under the Trust
Agreement.
Section 3.28. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Indenture.
Section 3.29. Statements to Noteholders. The Indenture Trustee and the
-------------------------
Certificate Registrar shall forward by mail to each Noteholder and
Certificateholder, respectively, the Statement delivered to it pursuant to
Section 4.01 of the Master Servicing Agreement.
Section 3.30. (Reserved) (Grant of the Additional Loans. (a) In con
-----------------------------
sideration of the delivery on each Deposit Date to or upon the order of the
Issuer of all or a portion of the amount in respect of Security Principal
Collections on deposit in the Funding Account, the Issuer shall, to the
extent of the availability thereof, on such Deposit Date during the Funding
Period Grant to the Indenture Trustee all of its right, title and interest in
the Additional Loans and simultaneously with the Grant of the Additional
Loans the Issuer will deliver the related Related Documents to the Indenture
Trustee or the related Custodian.
(b) The obligation of the Indenture Trustee to accept the Grant of the
Additional Loans and the other property and rights related thereto described
in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to each Deposit Date:
(i) the Indenture Trustee shall not have received written notice
from any Rating Agency (or the Credit Enhancer) to the effect that such
transfer of Additional Loans would adversely affect the then current
rating of the Notes or cause the rating assigned to the Securities to be
below investment grade (without taking into account the Credit
Enhancement Instrument);
(ii) the Indenture Trustee shall have received a revised Mortgage
Loan Schedule, listing the Additional Loans;
(iii) the Master Servicer shall confirm to the Indenture Trustee
that it has deposited in the Collection Account all Principal
Collections and Interest Collections in respect of such Additional Loans
on or after the related Deposit Date for the Additional Loans;
(iv) the Indenture Trustee shall have received a duly completed
and executed Transfer Certificate in the form of Exhibit 1 to the
Mortgage Loan Purchase Agreement;
(v) the Seller at its expense and the Issuer at its expense, as
appropriate, shall have provided the Rating Agencies (and the Credit
Enhancer) with an opinion of counsel relating to the sale of the
Additional Loans to the Issuer and the Grant of the Additional Loans to
the Indenture Trustee which opinion shall be in the form of Exhibit 2 to
the Mortgage Loan Purchase Agreement; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel confirming the
satisfaction of each condition precedent specified in this paragraph
(b).
(c) The obligation of the Indenture Trustee to accept the Grant of an
Additional Loan on the related Deposit Date is subject to each Additional
Loan and the Additional Loans in the aggregate, as the case may be,
satisfying the conditions set forth in the Mortgage Loan Purchase Agreement.)
(Section 3.31. Determination of Note Rate and Certificate Rate. On the
-----------------------------------------------
second LIBOR Business Day immediately preceding (i) the Closing Date in the
case of the first Interest Period and (ii) the first day of each succeeding
Interest Period, the Indenture Trustee shall determine LIBOR and the Note
Rate and the Certificate Rate for such Interest Period and shall inform the
Issuer, the Master Servicer and the DEPOSITOR at their respective facsimile
numbers given to the Indenture Trustee in writing thereof.)
(Section 3.32. Payments under the Credit Enhancement Instrument. (a)
------------------------------------------------
On any Payment Date, other than a Dissolution Payment Date, the Indenture
Trustee on behalf of the Noteholders, and in its capacity as Certificate
Paying Agent on behalf of the Certificateholders shall make a draw on the
Credit Enhancement Instrument in an amount if any equal to the sum of (x) the
amount by which the sum of (i) interest accrued at the Note Rate on the
Security Balance of the Notes plus (ii) the Certificate Distribution Amount
exceeds the amount on deposit in the Payment Account available to be
distributed therefor on such Payment Date and (y) the Guaranteed Principal
Payment Amount (the "Credit Enhancement Draw Amount").
(b) The Indenture Trustee shall submit, if a Credit Enhancement Draw
Amount is specified in any Statement to Holders prepared by the Master
Servicer pursuant to Section 4.01 of the Master Servicing Agreement, the
Notice for Payment (as defined in the Credit Enhancement Instrument) in the
amount of the Credit Enhancement Draw Amount to the Credit Enhancer no later
than 2:00 P.M., New York City time, on the second Business Day prior to the
applicable Payment Date. Upon receipt of such Credit Enhancement Draw Amount
in accordance with the terms of the Credit Enhancement Instrument, the
Indenture Trustee shall deposit such Credit Enhancement Draw Amount in the
Payment Account for distribution to Holders pursuant to Section 3.05.
In addition, a draw may be made under the Credit Enhancement Instrument
in respect of any Avoided Payment (as defined in and pursuant to the terms
and conditions of the Credit Enhancement Instrument) and the Indenture
Trustee shall submit a Notice for Payment with respect thereto together with
the other documents required to be delivered to the Credit Enhancer pursuant
to the Credit Enhancement Instrument in connection with a draw in respect of
any Avoided Payment.
(c) In the event that any Additional Credit Enhancement Instruments are
issued pursuant to Section 4.01 and Section 2.02(B) of the Insurance
Agreement, the Indenture Trustee shall be authorized to make draws thereon
subject to the terms and conditions therein.)
(Section 3.33. Replacement Credit Enhancement Instrument. In the event
-----------------------------------------
of a Credit Enhancer Default or if the claims paying ability rating of the
Credit Enhancer is downgraded and such downgrade results in a downgrading of
the then current rating of the Securities (in each case, a "Replacement
Event"), the Issuer, at its expense, in accordance with and upon satisfaction
of the conditions set forth in the Credit Enhancement Instrument, including,
without limitation, payment in full of all amounts owed to the Credit
Enhancer, may, but shall not be required to, substitute a new surety bond or
surety bonds for the existing Credit Enhancement Instrument or may arrange
for any other form of credit enhancement; provided, however, that in each
case the Notes and the Certificates shall be rated no lower than the rating
assigned by each Rating Agency to the Notes and the Certificates immediately
prior to such Replacement Event and the timing and mechanism for drawing on
such new credit enhancement shall be reasonably acceptable to the Indenture
Trustee and provided further that the premiums under the proposed credit
enhancement shall not exceed such premiums under the existing Credit
Enhancement Instrument. It shall be a condition to substitution of any new
credit enhancement that there be delivered to the Indenture Trustee (i) an
Opinion of Counsel, acceptable in form to the Indenture Trustee, from counsel
to the provider of such new credit enhancement with respect to the
enforceability thereof and such other matters as the Indenture Trustee may
require and (ii) an Opinion of Counsel to the effect that such substitution
would not (a) adversely affect in any material respect the tax status of the
Notes and the Certificates or (b) cause the Issuer to be subject to a tax at
the entity level or to be classified as a taxable mortgage pool within the
meaning of Section 7701(i) of the Code. Upon receipt of the items referred
to above and payment of all amounts owing to the Credit Enhancer and the
taking of physical possession of the new credit enhancement, the Indenture
Trustee shall, within five Business Days following receipt of such items and
such taking of physical possession, deliver the replaced Credit Enhancement
Instrument to the Credit Enhancer. In the event of any such replacement the
Issuer shall give written notice thereof to the Rating Agencies.)
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
Section 4.01. The Notes. (a) The Notes shall be registered in the
---------
name of a nominee designated by the Depository. Beneficial Owners will hold
interests in the Notes through the book-entry facilities of the Depository in
minimum initial Principal Balances of $(________) and integral multiples of
$(_________) in excess thereof.
The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Notes for the
purposes of exercising the rights of Holders of Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the
Notes as to which they are the Beneficial Owners. Requests and directions
from, and votes of, the Depository as Holder of the Notes shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners.
The Indenture Trustee may establish a reasonable record date in connection
with solicitations of consents from or voting by Noteholders and give notice
to the Depository of such record date. Without the consent of the Issuer and
the Indenture Trustee, no Note may be transferred by the Depository except to
a successor Depository that agrees to hold such Note for the account of the
Beneficial Owners.
In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint
a successor Depository. If no successor Depository has been appointed within
30 days of the effective date of the Depository's resignation or removal,
each Beneficial Owner shall be entitled to certificates representing the
Notes it beneficially owns in the manner prescribed in Section 4.08.
The Notes shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Note Registrar and delivered by the Indenture
Trustee to or upon the order of the Issuer.
Section 4.02. Registration of and Limitations on Transfer and Exchange
--------------------------------------------------------
of Notes; Appointment of Certificate Registrar. The Note Registrar shall
- ----------------------------------------------
cause to be kept at its Corporate Trust Office a Note Register in which,
subject to such reasonable regulations as it may prescribe, the Note
Registrar shall provide for the registration of Notes and of transfers and
exchanges of Notes as herein provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the Corporate Trust
Office, the Indenture Trustee shall execute and the Note Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.
Subject to the foregoing, at the option of the Noteholders, Notes may be
exchanged for other Notes of like tenor or, in each case in authorized
initial Principal Balances evidencing the same aggregate Percentage Interests
upon surrender of the Notes to be exchanged at the Corporate Trust Office of
the Note Registrar. Whenever any Notes are so surrendered for exchange, the
Indenture Trustee shall execute and the Note Registrar shall authenticate and
deliver the Notes which the Noteholder making the exchange is entitled to
receive. Each Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Note Registrar) be duly endorsed by, or
be accompanied by a written instrument of transfer in form reasonably
satisfactory to the Note Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing. Notes delivered upon any such
transfer or exchange will evidence the same obligations, and will be entitled
to the same rights and privileges, as the Notes surrendered.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
All Notes surrendered for registration of transfer and exchange shall be
cancelled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.
The Issuer hereby appoints (___________________) as Certificate
Registrar to keep at its Corporate Trust Office a Certificate Register
pursuant to Section 3.09 of the Trust Agreement in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of Residual Ownership Interests and of transfers
and exchanges thereof pursuant to Section 3.05 of the Trust Agreement.
(___________________) hereby accepts such appointment.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee such
security or indemnity as may be required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by a
bona fide purchaser, and provided that the requirements of Section 8-405 of
the UCC are met, the Issuer shall execute, and upon its request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Note, a replacement Note of the
same Class; provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within seven days shall
be due and payable, instead of issuing a replacement Note, the Issuer may pay
such destroyed, lost or stolen Note when so due or payable without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the
Issuer and the Indenture Trustee shall be entitled to recover such replace-
ment Note (or such payment) from the Person to whom it was delivered or any
Person taking such replacement Note from such Person to whom such replacement
Note was delivered or any assignee of such Person, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred
by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not
the mutilated, destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.04. Persons Deemed Owners. Prior to due presentment for
---------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and
any agent of the Issuer or the Indenture Trustee may treat the Person in
whose name any Note is registered (as of the day of determination) as the
owner of such Note for the purpose of receiving payments of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether
or not such Note be overdue, and neither the Issuer, the Indenture Trustee
nor any agent of the Issuer or the Indenture Trustee shall be affected by
notice to the contrary.
Section 4.05. Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture
Trustee and shall be promptly cancelled by the Indenture Trustee. The Issuer
may at any time deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be
promptly cancelled by the Indenture Trustee. No Notes shall be authenticated
in lieu of or in exchange for any Notes cancelled as provided in this Section
4.05, except as expressly permitted by this Indenture. All cancelled Notes
may be held or disposed of by the Indenture Trustee in accordance with its
standard retention or disposal policy as in effect at the time unless the
Issuer shall direct by an Issuer Request that they be destroyed or returned
to it; provided, that such Issuer Request is timely and the Notes have not
been previously disposed of by the Indenture Trustee.
Section 4.06. Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial
Depository, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Depository, and no Beneficial Owner will receive a definitive Note
representing such Beneficial Owner's interest in such Note, except as
provided in Section 4.08. Unless and until definitive, fully registered
Notes (the "Definitive Notes") have been issued to Beneficial Owners pursuant
to Section 4.08:
(i) the provisions of this Section 4.06 shall be in full force
and effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of
the Notes, and shall have no obligation to the Owners of Notes;
(iii) to the extent that the provisions of this Section 4.06
conflict with any other provisions of this Indenture, the provisions of
this Section 4.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised only
through the Depository and shall be limited to those established by law
and agreements between such Owners of Notes and the Depository and/or
the Depository Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 4.08,
the initial Depository will make book-entry transfers among the
Depository Participants and receive and transmit payments of principal
of and interest on the Notes to such Depository Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Security Balances of the Notes,
the Depository shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Beneficial
Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture Trustee.
Section 4.07. Notices to Depository. Whenever a notice or other
---------------------
communication to the Note Holders is required under this Indenture, unless
and until Definitive Notes shall have been issued to Beneficial Owners
pursuant to Section 4.08, the Indenture Trustee shall give all such notices
and communications specified herein to be given to Holders of the Notes to
the Depository, and shall have no obligation to the Beneficial Owners.
Section 4.08. Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Depository is no longer willing or able
to properly discharge its responsibilities with respect to the Notes and the
Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Depository or (iii)
after the occurrence of an Event of Default, Owners of Notes representing
beneficial interests aggregating at least a majority of the Security Balances
of the Notes advise the Depository in writing that the continuation of a
book-entry system through the Depository is no longer in the best interests
of the Beneficial Owners, then the Depository shall notify all Beneficial
Owners and the Indenture Trustee of the occurrence of any such event and of
the availability of Definitive Notes to Beneficial Owners requesting the
same. Upon surrender to the Indenture Trustee of the typewritten Notes
representing the Book-Entry Notes by the Depository, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate the Definitive Notes in accordance with the instructions
of the Depository. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the Holders of the Definitive Notes as Noteholders.
Section 4.09. Tax Treatment. The Issuer has entered into this
-------------
Indenture, and the Notes will be issued, with the intention that, for
federal, state and local income, single business and franchise tax purposes,
the Notes will qualify as indebtedness of the Issuer. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of its
Note (and each Beneficial Owner by its acceptance of an interest in the
applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Section 4.10. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon,
(iv) Sections 3.03, 3.04, 3.06, 3.10, 3.19, 3.21 and 3.22, (v) the rights,
obligations and immunities of the Indenture Trustee hereunder (including the
rights of the Indenture Trustee under Section 6.07 and the obligations of the
Indenture Trustee under Section 4.11) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them, and the Indenture Trustee,
on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 4.03 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
a. have become due and payable, or
b. will become due and payable at the Final Scheduled
Payment Date within one year,
and the Issuer, in the case of a. or b. above, has irrevocably deposited
or caused to be irrevocably deposited with the Indenture Trustee cash or
direct obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are payable),
in trust for such purpose, in an amount sufficient to pay and discharge
the entire indebtedness on such Notes and Certificates then outstanding
not theretofore delivered to the Indenture Trustee for cancellation when
due on the Final Scheduled Payment Date;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder and under the Insurance Agreement by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee (and the
Credit Enhancer) an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA or the Indenture Trustee) an Independent Certificate
from a firm of certified public accountants, each meeting the applicable
requirements of Section 11.01 and, subject to Section 11.01 each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with
and, if the Opinion of Counsel relates to a deposit made in connection
with Section 4.10(A)(2)b. above, such opinion shall further be to the
effect that such deposit will not have any material adverse tax
consequences to the Issuer, any Noteholders or any Certificateholders.
Section 4.11. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent or
Certificate Paying Agent, as the Indenture Trustee may determine, to the
Holders of Securities, of all sums due and to become due thereon for
principal and interest; but such moneys need not be segregated from other
funds except to the extent required herein or required by law.
(Section 4.12. Subrogation and Cooperation. (a) The Issuer and the
---------------------------
Indenture Trustee acknowledge that (i) to the extent the Credit Enhancer
makes payments under the Credit Enhancement Instrument on account of
principal of or interest on the Notes or the Certificates, the Credit
Enhancer will be fully subrogated to the rights of such Holders to receive
such principal and interest from the Issuer, and (ii) the Credit Enhancer
shall be paid such principal and interest but only from the sources and in
the manner provided herein and in the Insurance Agreement for the payment of
such principal and interest.
The Indenture Trustee shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce
the Credit Enhancer's rights or interest under this Indenture or the
Insurance Agreement without limiting the rights of the Noteholders as
otherwise set forth in the Indenture, including, without limitation, upon the
occurrence and continuance of a default under the Insurance Agreement, a
request to take any one or more of the following actions:
(i) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture in respect to Notes and
all amounts payable under the Insurance Agreement enforce any judgment
obtained and collect from the Issuer moneys adjudged due;
(ii) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private Sales called and
conducted in any manner permitted by law;
(iii) file or record all Assignments that have not previously been
recorded;
(iv) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture; and
(v) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Credit Enhancer hereunder.)
Section 4.13. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the
Notes, all moneys then held by any Administrator other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.05 and thereupon such Paying Agent shall
be released from all further liability with respect to such moneys.
ARTICLE V
Remedies
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Section 5.01. Events of Default. "Event of Default," wherever used
-----------------
herein, shall have the meaning provided in Appendix A(; provided, however,
that no Event of Default will occur under clause (i) or clause (ii) of the
definition of "Event of Default" if the Issuer fails to make payments of
principal of and interest on the Notes so long as the Credit Enhancer makes
payments sufficient therefore under the Credit Enhancement Instrument).
The Issuer shall deliver to the Indenture Trustee (and the Credit
Enhancer), within five days after the occurrence of an Event of Default,
written notice in the form of an Officer's Certificate of any event which
with the giving of notice and the lapse of time would become an Event of
Default under clause (iii) of the definition of "Event of Default", its
status and what action the Issuer is taking or proposes to take with respect
thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If
---------------------------------------------------
an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee or the Holders of Notes representing not less than
a majority of the Security Balances of all Notes may declare the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Class of Notes, together with accrued and
unpaid interest thereon through the date of acceleration, shall become
immediately due and payable. (Unless the prior written consent of the Credit
Enhancer shall have been obtained by the Indenture Trustee, the Payment Date
upon which such accelerated payment is due and payable shall not be a Payment
Date under the Credit Enhancement Instrument and the Indenture Trustee shall
not be authorized under Section 3.32 to make a draw therefor.)
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided,
the Holders of Notes representing a majority of the Security Balances of all
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee
a sum sufficient to pay:
(A) all payments of principal of and interest on the Notes
and all other amounts that would then be due hereunder or upon the
Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee and its agents and counsel;
and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in
- -----------------
the payment of any interest on any Note when the same becomes due and
payable, and such default continues for a period of five days, or
(ii) default is made in the payment of the principal of or any installment of
the principal of any Note when the same becomes due and payable, the Issuer
will, upon demand of the Indenture Trustee, pay to it, for the benefit of the
Holders of Notes (and of the Credit Enhancer), the whole amount then due and
payable on the Notes for principal and interest, with interest upon the
overdue principal, and in addition thereto such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an
express trust, subject to the provisions of Section 11.17 hereof may
institute a Proceeding for the collection of the sums so due and unpaid, and
may prosecute such Proceeding to judgment or final decree, and may enforce
the same against the Issuer or other obligor upon the Notes and collect in
the manner provided by law out of the property of the Issuer or other obligor
the Notes, wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee subject to the provisions of Section 11.17 hereof may, as more
particularly provided in Section 5.04, in its discretion, proceed to protect
and enforce its rights and the rights of the Noteholders (and the Credit
Enhancer), by such appropriate Proceedings as the Indenture Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Indenture Trustee by this
Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest
in the Trust Estate, Proceedings under Title 11 of the United States Code or
any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorgani-
zation, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors
or property of the Issuer or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention
in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee and each
predecessor Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Indenture
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such Noteholders,
to pay to the Indenture Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of
negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any Note-
holder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without
the possession of any of the Notes or the production thereof in any trial or
other Proceedings relative thereto, and any such action or proceedings
instituted by the Indenture Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall
be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall
--------------------
have occurred and be continuing, the Indenture Trustee subject to the
provisions of Section 11.17 hereof may do one or more of the following
(subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, and all amounts payable under the Insurance
Agreement, enforce any judgment obtained, and collect from the Issuer
and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee, the Holders of the Notes (and the
Credit Enhancer); and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than a
default in the payment of any principal or interest on the Notes for thirty
(30) days or more, unless (A) the Holders of 100% of the Security Balances of
the Securities (and the Credit Enhancer), which consent will not be
unreasonably withheld consent thereto, (B) the proceeds of such sale or
liquidation distributable to Holders are sufficient to discharge in full all
amounts then due and unpaid upon the Securities for principal and interest
(and to reimburse the Credit Enhancer for any amounts drawn under the Credit
Enhancement Instrument and any other amounts due the Credit Enhancer under
the Insurance Agreement) or (C) the Indenture Trustee determines that the
Mortgage Loans will not continue to provide sufficient funds for the payment
of principal of and interest on either the Notes or the Certificates, as they
would have become due if the Notes had not been declared due and payable, and
the Indenture Trustee obtains the consent of (the Credit Enhancer, which
consent will not be unreasonably withheld, and of) the Holders of not less
than 66-2/3% of the Security Balances of the Securities. In determining such
sufficiency or insufficiency with respect to clause (B) and (C), the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as
to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose. Notwithstanding the foregoing, so long as an
Event of Servicer Termination has not occurred, any Sale of the Trust Estate
shall be made subject to the continued Servicing of the Mortgage Loans by the
Master Servicer as provided in the Master Servicing Agreement.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following
order:
FIRST: to the Indenture Trustee for amounts due under
Section 6.07;
SECOND: to each Class of Noteholders for amounts due and unpaid
on the related Class of Notes for interest and to each Noteholder
of such Class in each case, ratably, without preference or priority
of any kind, according to the amounts due and payable on such Class
of Notes for interest from amounts available in the Trust Estate
for such Noteholders;
THIRD: to Holders of each Class of Notes for amounts due and
unpaid on the related Class of Notes for principal, from amounts
available in the Trust Estate for such Noteholders, and to each
Noteholder of such Class in each case ratably, without preference
or priority of any kind, according to the amounts due and payable
on such Class of Notes for principal, until the Security Balances
of each Class of Notes is reduced to zero;
FOURTH: to the Issuer for amounts required to be distributed to
the Certificateholders in respect of interest and principal
pursuant to the Trust Agreement;
FIFTH: (Reserved) (To the payment of all amounts due and owing to
the Credit Enhancer under the Insurance Agreement);
SIXTH: to the Issuer for amounts due under Article VIII of the
Trust Agreement; and
SEVENTH: to the payment of the remainder, if any to the Issuer or
any other person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.04. At least 15 days
before such record date, the Issuer shall mail to each Noteholder and the
Indenture Trustee a notice that states the record date, the payment date and
the amount to be paid.
Section 5.05. Optional Preservation of the Trust Estate. If the Notes
-----------------------------------------
have been declared to be due and payable under Section 5.02 following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Trust Estate. It is the desire of the parties
hereto and the Noteholders that there be at all times sufficient funds for
the payment of principal of and interest on the Securities and other
obligations of the Issuer (including payment to the Credit Enhancer), and the
Indenture Trustee shall take such desire into account when determining
whether or not to maintain possession of the Trust Estate. In determining
whether to maintain possession of the Trust Estate, the Indenture Trustee
may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless and subject to the provisions of Section 11.17
hereof:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Security Balances of
the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders
of a majority of the Security Balances of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Security Balances of the
Notes, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
Section 5.07. Unconditional Rights of Noteholders To Receive Principal
--------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, the
- ------------
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest, if any, on such Note on
or after the respective due dates thereof expressed in such Note or in this
Indenture and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right
or remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had
been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the
Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of
------------------------------
the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the
Indenture Trustee or to the Noteholders may be exercised from time to time,
and as often as may be deemed expedient, by the Indenture Trustee or by the
Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
----------------------
Security Balances of Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Indenture Trustee to sell or liquidate the Trust Estate shall be
by Holders of Notes representing not less than 100% of the Security
Balances of Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Security Balances of
Notes to sell or liquidate the Trust Estate shall be of no force and
effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject
to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. Prior to the declaration of
------------------------
the acceleration of the maturity of the Notes as provided in Section 5.02,
the Holders of Notes of not less than a majority of the Security Balances of
the Notes may waive any past Event of Default and its consequences except an
Event of Default (a) with respect to payment of principal of or interest on
any of the Notes or (b) in respect of a covenant or provision hereof which
cannot be modified or amended without the consent of the Holder of each Note
(or (c) the waiver of which would materially and adversely affect the
interests of the Credit Enhancer or modify its obligation under the Credit
Enhancement Instrument). In the case of any such waiver, the Issuer, the
Indenture Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other Event of Default or impair any right conse-
quent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event
of Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
----------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Indenture Trustee for any action taken, suffered or
omitted by it as Indenture Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.13 shall not apply to (a) any suit
instituted by the Indenture Trustee, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate
more than 10% of the Security Balances of the Notes or (c) any suit
instituted by any Noteholder for the enforcement of the payment of principal
of or interest on any Note on or after the respective due dates expressed in
such Note and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
--------------------------------
(to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead or in any manner whatsoever, claim or take the benefit
or advantage of, any stay or extension law wherever enacted, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.15. Sale of Trust Estate. (a) The power to effect any sale
--------------------
or other disposition (a "Sale") of any portion of the Trust Estate pursuant
to Section 5.04 is expressly subject to the provisions of Section 5.05 and
this Section 5.15. The power to effect any such Sale shall not be exhausted
by any one or more Sales as to any portion of the Trust Estate remaining
unsold, but shall continue unimpaired until the entire Trust Estate shall
have been sold or all amounts payable on the Notes and under this Indenture
and under the Insurance Agreement shall have been paid. The Indenture
Trustee may from time to time postpone any public Sale by public announcement
made at the time and place of such Sale. The Indenture Trustee hereby
expressly waives its right to any amount fixed by law as compensation for any
Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
(1) the Holders of all Securities and the Credit Enhancer consent
to or direct the Indenture Trustee to make, such Sale, or
(2) the proceeds of such Sale would be not less than the entire
amount which would be payable to the Noteholders under the Notes,
Certificateholders under the Certificates (and the Credit Enhancer in respect
of amounts drawn under the Credit Enhancement Instrument and any other
amounts due the Credit Enhancer under the Insurance Agreement), in full
payment thereof in accordance with Section 5.02, on the Payment Date next
succeeding the date of such Sale, or
(3) The Indenture Trustee determines, in its sole discretion, that
the conditions for retention of the Trust Estate set forth in Section 5.05
cannot be satisfied (in making any such determination, the Indenture Trustee
may rely upon an opinion of an Independent investment banking firm obtained
and delivered as provided in Section 5.05, (and the Credit Enhancer consents
to such Sale, which consent will not be unreasonably withheld) and the
Holders representing at least 66-2/3% of the Security Balances of the
Securities consent to such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or other disposition
thereof for purposes of this Section 5.15(b).
(c) Unless the Holders (and the Credit Enhancer) have otherwise
consented or directed the Indenture Trustee, at any public Sale of all or any
portion of the Trust Estate at which a minimum bid equal to or greater than
the amount described in paragraph (2) of subsection (b) of this Section 5.15
has not been established by the Indenture Trustee and no Person bids an
amount equal to or greater than such amount, the Indenture Trustee shall bid
an amount at least $1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate
(1) any Holder or Holders of Notes may bid for and (with the
consent of the Credit Enhancer) purchase the property offered for sale, and
upon compliance with the terms of sale may hold, retain and possess and
dispose of such property, without further accountability, and may, in paying
the purchase money therefor, deliver any Notes or claims for interest thereon
in lieu of cash up to the amount which shall, upon distribution of the net
proceeds of such sale, be payable thereon, and such Notes, in case the
amounts so payable thereon shall be less than the amount due thereon, shall
be returned to the Holders thereof after being appropriately stamped to show
such partial payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any Sale thereof, and, subject to any
requirements of, and to the extent permitted by, applicable law in connection
therewith, may purchase all or any portion of the Trust Estate in a private
sale, and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting the gross Sale price against the sum of (A) the
amount which would be distributable to the Holders of the Notes and Holders
of Certificates (and amounts owing to the Credit Enhancer) as a result of
such Sale in accordance with Section 5.04(b) on the Payment Date next
succeeding the date of such Sale and (B) the expenses of the Sale and of any
Proceedings in connection therewith which are reimbursable to it, without
being required to produce the Notes in order to complete any such Sale or in
order for the net Sale price to be credited against such Notes, and any
property so acquired by the Indenture Trustee shall be held and dealt with by
it in accordance with the provisions of this Indenture;
(3) the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the
Trust Estate in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its interest
in any portion of the Trust Estate in connection with a Sale thereof, and to
take all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under
or with respect to this Indenture. Neither the lien of this Indenture nor
any rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion
of the Trust Estate or upon any of the assets of the Issuer. Any money or
property collected by the Indenture Trustee shall be applied in accordance
with Section 5.04(b).
Section 5.17. Performance and Enforcement of Certain Obligations.
---------------------------------------------------
(a) Promptly following a request from the Indenture Trustee to do so and at
the Administrator's expense, the Issuer shall take all such lawful action as
the Indenture Trustee may request to compel or secure the performance and
observance by the Seller and the Master Servicer, as applicable, of each of
their obligations to the Issuer under or in connection with the Mortgage Loan
Purchase Agreement and the Master Servicing Agreement, and to exercise any
and all rights, remedies, powers and privileges lawfully available to the
Issuer under or in connection with the Mortgage Loan Purchase Agreement and
the Master Servicing Agreement to the extent and in the manner directed by
the Indenture Trustee, including the transmission of notices of default on
the part of the Seller or the Master Servicer thereunder and the institution
of legal or administrative actions or proceedings to compel or secure
performance by the Seller or the Master Servicer of each of their obligations
under the Mortgage Loan Purchase Agreement and the Master Servicing
Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee (subject to the rights of the Credit Enhancer under the
Master Servicing Agreement) may, and at the direction (which direction shall
be in writing or by telephone (confirmed in writing promptly thereafter)) of
the Holders of 66-2/3% of the Security Balances of the Notes shall, exercise
all rights, remedies, powers, privileges and claims of the Issuer against the
Seller or the Master Servicer under or in connection with the Mortgage Loan
Purchase Agreement and the Master Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Seller or the Master Servicer, as the case may be, of each of their
obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Mortgage Loan
Purchase Agreement and the Master Servicing Agreement, as the case may be,
and any right of the Issuer to take such action shall not be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default
---------------------------
has occurred and is continuing, the Indenture Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it (A) pursuant to Section 5.11 (or (B) from the
Credit Enhancer, which it is entitled to give under any of the Basic
Documents).
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section 6.01.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
Section 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee
---------------------------
may rely on any document believed by it to be genuine and to have been signed
or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee
shall not be responsible for any misconduct or negligence on the part of, or
for the supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
its rights or powers; provided, however, that the Indenture Trustee's conduct
does not constitute willful misconduct, (______) negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any
Administrator, Note Registrar, co-registrar or co-paying agent may do the
same with like rights. However, the Indenture Trustee must comply with
Sections 6.11 and 6.12.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
Section 6.05. Notice of Event of Default. If an Event of Default
--------------------------
occurs and is continuing and if it is known to a Responsible Officer of the
Indenture Trustee, (the Indenture Trustee shall give notice thereof to the
Credit Enhancer.) The Indenture Trustee shall mail to each Noteholder notice
of the Event of Default within 90 days after it occurs. Except in the case
of an Event of Default in payment of principal of or interest on any Note,
the Indenture Trustee may withhold the notice if and so long as a committee
of its Responsible Officers in good faith determines that withholding the
notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
---------------------------------------
Trustee shall deliver to each Noteholder such information as may be required
to enable such holder to prepare its federal and state income tax returns.
In addition, upon the Issuer's written request, the Indenture Trustee shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Indenture Trustee to enable the Issuer to perform
its federal and state income tax reporting obligations.
Section 6.07. Compensation and Indemnity. The Issuer shall or shall
--------------------------
cause the Administrator to pay to the Indenture Trustee on each Payment Date
reasonable compensation for its services. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee of
an express trust. The Issuer shall or shall cause the Administrator to
reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Indenture
Trustee's agents, counsel, accountants and experts. The Issuer shall or
shall cause the Administrator to indemnify the Indenture Trustee against any
and all loss, liability or expense (including attorneys' fees) incurred by it
in connection with the administration of this trust and the performance of
its duties hereunder. The Indenture Trustee shall notify the Issuer and the
Administrator promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Issuer and the Administrator shall
not relieve the Issuer or the Administrator of its obligations hereunder.
The Issuer shall or shall cause the Administrator to defend any such claim,
and the Indenture Trustee may have separate counsel and the Issuer shall or
shall cause the Administrator to pay the fees and expenses of such counsel.
Neither the Issuer nor the Administrator need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of an Event of Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture
Trustee may resign at any time by so notifying the Issuer (and the Credit
Enhancer). The Holders of a majority of Security Balances of the Notes may
remove the Indenture Trustee by so notifying the Indenture Trustee (and the
Credit Enhancer) and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
the resignation or removal of the retiring Indenture Trustee shall become
effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The succes-
sor Indenture Trustee shall mail a notice of its succession to Noteholders.
The retiring Indenture Trustee shall promptly transfer all property held by
it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority of Security
Balances of the Notes may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture
Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under
Section 6.07 shall continue for the benefit of the retiring Indenture
Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall
provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may authen-
ticate such Notes either in the name of any predecessor hereunder or in the
name of the successor to the Indenture Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Indenture Trustee
shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
- -------
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and
to vest in such Person or Persons, in such capacity and for the benefit of
the Noteholders, such title to the Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties, obli-
gations, rights and trusts as the Indenture Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and
no notice to Noteholders of the appointment of any co-trustee or separate
trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust Estate or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VI. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Indenture Trustee or separately, as may be provided therein, subject to
all the provisions of this Indenture, specifically including every provision
of this Indenture relating to the conduct of, affecting the liability of, or
affording protection to, the Indenture Trustee. Every such instrument shall
be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Indenture Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition and it or its parent shall have a long-term debt rating of (____)
or better by (______). The Indenture Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). An Indenture Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
Section 6.13. Representation and Warranty. The Indenture Trustee
---------------------------
represents and warrants to the Issuer, for the benefit of the Noteholders,
that this Indenture has been executed and delivered by one of its Responsible
Officers who is duly authorized to execute and deliver such document in such
capacity on its behalf.
Section 6.14. Directions to Indenture Trustee. The Indenture Trustee
-------------------------------
is hereby directed:
(a) to accept assignment of the Mortgage Loans and hold the assets of
the Trust in trust for the Noteholders;
(b) to issue, execute and deliver the Notes substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the
terms of this Indenture.
Section 6.15. No Consent to Certain Acts of DEPOSITOR. The Indenture
---------------------------------------
Trustee shall not consent to any action proposed to be taken by the DEPOSITOR
pursuant to Article (_______________) of the DEPOSITOR's Certificate of
Incorporation.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
Section 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
-------------------------------------------------------
of Noteholders. The Issuer will furnish or cause to be furnished to the
- --------------
Indenture Trustee (a) not more than five days after each Record Date, a list,
in such form as the Indenture Trustee may reasonably require, of the names
and addresses of the Holders of Notes as of such Record Date, (b) at such
other times as the Indenture Trustee (and the Credit Enhancer) may request in
writing, within 30 days after receipt by the Issuer of any such request, a
list of similar form and content as of a date not more than 10 days prior to
the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished.
Section 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form
- -----------
as is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as
provided in Section 7.01 and the names and addresses of Holders of Notes
received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in such
Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
-----------------
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) that the Issuer
may be required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants of
this Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of
this Section 7.03(a) and by rules and regulations prescribed from time
to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA
----------------------------
Section 313(a), within 60 days after each January 1 beginning with
___________, 199_, the Indenture Trustee shall mail to each Noteholder as
required by TIA Section 313(c) (and to the Credit Enhancer) a brief report
dated as of such date that complies with TIA Section 313(a). The Indenture
Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
Section 8.01. Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable
to or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in
this Indenture. Except as otherwise expressly provided in this Indenture, if
any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Trust Estate, the Indenture
Trustee may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to
claim a Default or Event of Default under this Indenture and any right to
proceed thereafter as provided in Article V.
Section 8.02. Trust Accounts. (a) On or prior to the Closing Date,
--------------
the Issuer shall cause the Indenture Trustee to establish and maintain, in
the name of the Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders (and the Credit Enhancer), the Payment Account as provided
in Section 3.01 of this Indenture.
(b) All moneys deposited from time to time in the Payment Account
pursuant to the Master Servicing Agreement and all deposits therein pursuant
to this Indenture are for the benefit of the Noteholders, the
Certificateholders and the holders of the Residual Ownership Interest and all
investments made with such moneys including all income or other gain from
such investments are for the benefit of the Master Servicer as provided by
the Master Servicing Agreement.
On each Payment Date during the Funding Period the Indenture Trustee
shall withdraw Net Principal Collections from the Payment Account and deposit
Net Principal Collections to the Funding Account.
On each Payment Date, the Indenture Trustee shall distribute all amounts
on deposit in the Payment Account (after giving effect to the withdrawal
referred to in the preceding paragraph) to Noteholders in respect of the
Notes and in its capacity as Certificate Paying Agent to Certificateholders
in the order of priority set forth in Section 3.05 (except as otherwise
provided in Section 5.04(b).
The Master Servicer may direct the Indenture Trustee to invest any funds
in the Payment Account in Eligible Investments maturing no later than the
Business Day preceding each Payment Date and shall not be sold or disposed of
prior to the maturity. Unless otherwise instructed by the Master Servicer,
the Indenture Trustee shall invest all funds in the Payment Account in its
(__________) Short Term Investment Fund so long as it is an Eligible
Investment.
((c) On or before the Closing Date the Issuer shall open, at the
Corporate Trust Office, an account which shall be the "Funding Account". The
Master Servicer may direct the Indenture Trustee to invest any funds in the
Funding Account in Eligible Investments maturing no later than the Business
Day preceding each Payment Date and shall not be sold or disposed of prior to
the maturity. (Unless otherwise instructed by the Master Servicer, the
Indenture Trustee shall invest all funds in the Payment Account in its
_________________________ Fund so long as it is an Eligible Investment.)
During the Funding Period, any amounts received by the Indenture Trustee in
respect of Net Principal Collections for deposit in the Funding Account,
together with any Eligible Investments in which such moneys are or will be
invested or reinvested during the term of the Notes, shall be held by the
Indenture Trustee in the Funding Account as part of the Trust Estate, subject
to disbursement and withdrawal as herein provided.
(i) Amounts on deposit in the Funding Account in respect of Net
Principal Collections may be withdrawn on each Deposit Date and (1) paid
to the Issuer in payment for Additional Loans by the deposit of such
amount to the Collection Account and (2) at the end of the Funding
Period any amounts remaining in the Funding Account after the withdrawal
called for by clause (1) shall be deposited in the Payment Account to be
included in the payment of principal on the Payment Date that is the
last day of the Funding Period.
(ii) Amounts on deposit in the Funding Account in respect of
investment earnings shall be withdrawn on each Payment Date and
deposited in the Payment Account and included in the amounts paid to
Noteholders and Certificateholders.
(d) (i) Any investment in the institution with which the Funding
Account is maintained may mature on such Payment Date and (ii) any other
investment may mature on such Payment Date if the Indenture Trustee shall
advance funds on such Payment Date to the Funding Account in the amount
payable on such investment on such Payment Date, pending receipt thereof to
the extent necessary to make distributions on the Notes and the Certificates)
and shall not be sold or disposed of prior to maturity.)
Section 8.03. Opinion of Counsel. The Indenture Trustee shall receive
------------------
at least seven days notice when requested by the Issuer to take any action
pursuant to Section 8.05(a), accompanied by copies of any instruments to be
executed, and the Indenture Trustee shall also require, as a condition to
such action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such
action will not materially and adversely impair the security for the Notes or
the rights of the Noteholders in contravention of the provisions of this
Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Trust Estate.
Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
Section 8.04. Termination Upon Distribution to Noteholders. This
--------------------------------------------
Indenture and the respective obligations and responsibilities of the Issuer
and the Indenture Trustee created hereby shall terminate upon the
distribution to Noteholders, Certificateholders, holders of the Residual
Ownership Interest and the Indenture Trustee of all amounts required to be
distributed pursuant to Article III; provided, however, that in no event
shall the trust created hereby continue beyond the expiration of 21 years
from the death of the survivor of the descendants of Joseph P. Kennedy, the
late ambassador of the United States to the Court of St. James, living on the
date hereof.
Section 8.05. Release of Trust Estate. (a) Subject to the payment of
-----------------------
its fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property
from the lien of this Indenture, or convey the Indenture Trustee's interest
in the same, in a manner and under circumstances that are not inconsistent
with the provisions of this Indenture. No party relying upon an instrument
executed by the Indenture Trustee as provided in Article IV hereunder shall
be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent, or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this
Indenture have been paid, (and (iii) all sums due the Credit Enhancer have
been paid,) release any remaining portion of the Trust Estate that secured
the Notes from the lien of this Indenture. The Indenture Trustee shall
release property from the lien of this Indenture pursuant to this Section
8.05 only upon receipt of an request from the Issuer accompanied by an
Officers' Certificate, an Opinion of Counsel, and (if required by the TIA)
Independent Certificates in accordance with TIA Section 314(c) and 314(d)(1)
meeting the applicable requirements as described herein(, and a letter from
the President or any Vice President or any Secretary of the Credit Enhancer,
if any, stating that the Credit Enhancer has no objection to such request
from the Issuer).
Section 8.06. Surrender of Notes Upon Final Payment. By acceptance of
-------------------------------------
any Note, the Holder thereof agrees to surrender such Note to the Indenture
Trustee promptly, prior to such Noteholder's receipt of the final payment
thereon.
ARTICLE IX
Supplemental Indentures
-----------------------
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with (the consent of
the Credit Enhancer and) prior notice to the Rating Agencies (and the Credit
Enhancer), the Issuer and the Indenture Trustee, when authorized by an Issuer
Request, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in
form satisfactory to the Indenture Trustee, for any of the following
purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided, that such action shall not adversely affect the interests of
the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as shall
be necessary to facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA;
provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse
tax consequences to the Noteholders.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with (the consent of the Credit Enhancer and) prior notice to the Rating
Agencies (and the Credit Enhancer), enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, (i) adversely affect in any material respect the
interests of any Noteholder or (ii) cause the Issuer to be subject to an
entity level tax or be classified as a taxable mortgage pool within the
meaning of Section 7701(i) of the Code.
Section 9.02. Supplemental Indentures With Consent of Noteholders. The
---------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and, (with the written consent
of the Credit Enhancer and) with the consent of the Holders of not less than
a majority of the Security Balances of each Class of Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Note affected
thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof or
the interest rate thereon, change the provisions of this Indenture
relating to the application of collections on, or the proceeds of the
sale of, the Trust Estate to payment of principal of or interest on the
Notes, or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the right
to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as
provided in Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof;
(ii) reduce the percentage of the Security Balances of the Notes,
the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" or modify or alter the exception in
the definition of the term "Holder";
(iv) reduce the percentage of the Security Balances of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including the
calculation of any of the individual components of such calculation); or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Note of the security provided by the
lien of this Indenture; and provided, further, that such action shall
not, as evidenced by an Opinion of Counsel, cause the Issuer to be
subject to an entity level tax or be classified as a taxable mortgage
pool within the meaning of Section 7701(i) of the Code.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture
Trustee shall mail to the Holders of the Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.01 and 6.02, shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of
--------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and
immunities under this Indenture of the Indenture Trustee, the Issuer and the
Holders of the Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and
all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
-----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as
then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
(Reserved)
ARTICLE XI
Miscellaneous
-------------
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon
------------------------------------------
any application or request by the Issuer to the Indenture Trustee to take any
action under any provision of this Indenture, the Issuer shall furnish to the
Indenture Trustee (and to the Credit Enhancer) (i) an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA)
an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section 11.01, except that, in
the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with; and
(5) if the signer of such Certificate or Opinion is required to be
Independent, the Statement required by the definition of the term
"Independent".
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.01(a)
or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the
Issuer of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as to
the same matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such with-
drawal or release since the commencement of the then-current fiscal year of
the Issuer, as set forth in the certificates delivered pursuant to clause (i)
above and this clause (ii), is 10% or more of the Security Balances of the
Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth
in the related Officer's Certificate is less than $25,000 or less than one
percent of the Security Balances of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to
the same matters if the fair value of the property or securities and of all
other property, other than property as contemplated by clause (v) below or
securities released from the lien of this Indenture since the commencement of
the then-current calendar year, as set forth in the certificates required by
clause (iii) above and this clause (iv), equals 10% or more of the Security
Balances of the Notes, but such certificate need not be furnished in the case
of any release of property or securities if the fair value thereof as set
forth in the related Officer's Certificate is less than $25,000 or less than
one percent of the then Security Balances of the Notes.
(v) Notwithstanding any provision of this Indenture, the Issuer
may, without compliance with the requirements of the other provisions of this
Section 11.01, (A) collect, sell or otherwise dispose of Mortgage Loans and
Mortgaged Properties as and to the extent permitted or required by the Basic
Documents or (B) make cash payments out of the Payment Account as and to the
extent permitted or required by the Basic Documents, so long as the Issuer
shall deliver to the Indenture Trustee every six months, commencing
__________, 199_, an Officer's Certificate of the Issuer stating that all the
dispositions of Collateral described in clauses (A) or (B) above that
occurred during the preceding six calendar months were in the ordinary course
of the Issuer's business and that the proceeds thereof were applied in
accordance with the Basic Documents.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person,
or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one or
more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized
Officer or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer
or officers of the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Seller, the Issuer or the Administrator, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof,
it is intended that the truth and accuracy, at the time of the granting of
such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion
contained in any such document as provided in Article VI.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
-------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except
as herein otherwise expressly provided such action shall become effective
when such instrument or instruments are delivered to the Indenture Trustee,
and, where it is hereby expressly required, to the Issuer. Such instrument
or instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Noteholders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.01) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section 11.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, (Credit
----------------------------------------------------
Enhancer) and Rating Agencies. Any request, demand, authorization,
- ------------------------------
direction, notice, consent, waiver or Act of Noteholders or other documents
provided or permitted by this Indenture shall be in writing and if such
request, demand, authorization, direction, notice, consent, waiver or act of
Noteholders is to be made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at the
Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the Issuer addressed to: Provident Home
Equity Loan Trust 199_-__ in care of (_____________), (______________)
Attention of (_________) with a copy to the Administrator at
(______________), Attention: (_____________), or at any other address
previously furnished in writing to the Indenture Trustee by the Issuer
or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee, or
((iii) the Credit Enhancer by the Issuer, the Indenture Trustee or
by any Noteholders shall be sufficient for every purpose hereunder to in
writing and mailed, first-class postage pre-paid, or personally
delivered or telecopied to: (_______________), Attention:
(______________), Telephone: (_____________), Telecopier:
(___________).)
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to ((i) in
the case of DCR, at the following address: (________________);) (and) ((ii)
in the case of Fitch Investors Service, L.P., at the following address:
(______________);) (and) ((iii) in the case of Moody's, at the following
address: Moody's Investors Service, ABS Monitoring Department, 99 Church
Street, New York, New York 10007); (and) ((iv) in the case of Standard &
Poor's, at the following address: Standard & Poor's Corporation, 26 Broadway
(15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department;) or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such
notice with respect to other Noteholders, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have been duly
given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to
mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute an Event of
Default.
Section 11.06. Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Administrator to such Holder, that is different from the methods provided for
in this Indenture for such payments or notices. The Issuer will furnish to
the Indenture Trustee a copy of each such agreement and the Indenture Trustee
will cause payments to be made and notices to be given in accordance with
such agreements.
Section 11.07. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the
Trust Indenture Act, such required provision shall control.
The provisions of TIA SectionSection 310 through 317 that impose duties
on any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
Section 11.08. Effect of Headings. The Article and Section headings
------------------
herein are for convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture
Trustee in this Indenture shall bind its successors, co-trustees and agents.
Section 11.10. Separability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
Section 11.11. Benefits of Indenture. (The Credit Enhancer and its
---------------------
successors and assigns shall be a third-party beneficiary to the provisions
of this Indenture.) Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.12. Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest
shall accrue for the period from and after any such nominal date.
Section 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.14. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.15. Recording of Indenture. If this Indenture is subject
----------------------
to recording in any appropriate public recording offices, such recording is
to be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any
other Person secured hereunder or for the enforcement of any right or remedy
granted to the Indenture Trustee under this Indenture.
Section 11.16. Issuer Obligation. No recourse may be taken, directly
-----------------
or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee or the Indenture Trustee on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or
the Owner Trustee in its individual capacity, except as any such Person may
have expressly agreed (it being understood that the Indenture Trustee and the
Owner Trustee have no such obligations in their individual capacity) and
except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance
of any duties or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions of
Article VI, VII and VIII of the Trust Agreement.
Section 11.17. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the DEPOSITOR or the
Issuer, or join in any institution against the DEPOSITOR or the Issuer of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Basic Documents.
Section 11.18. Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with
the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall and shall cause its representatives
to hold in confidence all such information except to the extent disclosure
may be required by law (and all reasonable applications for confidential
treatment are unavailing) and except to the extent that the Indenture Trustee
may reasonably determine that such disclosure is consistent with its
obligations hereunder.
Section 11.19. Authority of the Administrator. Each of the parties to
------------------------------
this Indenture acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the
Issuer or the Owner Trustee, copies of all notices, requests, demands and
other documents to be delivered to the Issuer or the Owner Trustee pursuant
to the terms hereof shall be delivered to the Administrator. Unless
otherwise instructed by the Issuer or the Owner Trustee, all notices,
requests, demands and other documents to be executed or delivered, and any
action to be taken, by the Issuer or the Owner Trustee pursuant to the terms
hereof may be executed, delivered and/or taken by the Administrator pursuant
to the Administration Agreement.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
(PROVIDENT) HOME EQUITY LOAN
TRUST 199_-__ as Issuer
By: (______________________),
not in its individual capacity
but solely as Owner Trustee
By:___________________________________
Name:
Title:
(________________________________),
as Indenture Trustee, as Certificate Paying Agent
and as Certificate Registrar
By:____________________________________
Name:
Title:
(___________________)
hereby accepts the appointment as Certificate Paying Agent
pursuant to Section 3.03 hereof and as Certificate Registrar
pursuant to Section 4.02 hereof.
______________________________
By:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
______________, to me known, who being by me duly sworn, did depose and say,
that he resides at _________________, __________________ _____, that he is
the of the Owner Trustee, one of the corporations
------------------
described in and which executed the above instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
___________________________
Notary Public
(NOTARIAL SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
--------
, to me known, who being by me duly sworn, did depose and say,
- ------------
that he resides at , that
-------------------------------------------------
he is the ______________ of ________________, as Indenture Trustee, one of
the corporations described in and which executed the above instrument; that
he knows the seal of said corporation; that the seal affixed to said instru-
ment is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation; and that he signed his name thereto by like
order.
___________________________
Notary Public
(NOTARIAL SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
--------
, to me known, who being by me duly sworn, did depose and say,
- ------------
that he resides at , that
-------------------------------------------------
he is an ________________ of _______________, as Indenture Trustee, one of
the corporations described in and which executed the above instrument; that
he knows the seal of said corporation; that the seal affixed to said instru-
ment is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation; and that he signed his name thereto by like
order.
___________________________
Notary Public
(NOTARIAL SEAL)
APPENDIX A
----------
DEFINITIONS
Accelerated Principal Distribution Amount:
----------------------------------------- With respect to any Payment
Date, the lesser of (x) the amount remaining in the Payment Account after the
application of funds on deposit therein in accordance with clauses (i)
through (vi) of Section 3.05 of the Indenture and (y) the amount required to
reach the Required Overcollateralization Amount.
Accelerated Principal Payment Amount:
------------------------------------ As defined in Section 3.05 of the
Indenture.
Additional Balance:
------------------ With respect to any Mortgage Loan, any future Draw
made by the related Mortgagor pursuant to the related Loan Agreement after
the Cut-off Date in the case of an Initial Loan, or after the Deposit Date in
the case of an Additional Loan; provided, however, that if an Amortization
-------- -------
Event occurs, then any Draw after such Amortization Event shall not be acquired
by the Issuer and shall not be an Additional Balance.
(Additional Loans:
---------------- All home equity line of credit loans sold by the
Seller to the Issuer after the Closing Date pursuant to Section 2 of the Loan
Purchase Agreement.)
Administration Agreement:
------------------------ The Administration Agreement dated as
of___________, 199_ among the Issuer, the Indenture Trustee and
(______________), as Administrator, as it may be amended from time to time.
Administrator:
------------- (______________), as administrator under the
Administration Agreement or any successor Administrator appointed pursuant to
the terms of the Administration Agreement.
Affiliate:
--------- With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of
this definition, "control" means the power to direct the management and
policies of a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise and "controlling" and
"controlled" shall have meanings correlative to the foregoing.
Aggregate Security Balance:
-------------------------- With respect to any Payment Date, the
aggregate of the Principal Balances of all Securities as of such date.
(Amortization Event: Any one of the following events:
------------------
(a) the failure on the part of the Seller (i) to make any payment
or deposit required to be made under the Loan
Purchase Agreement within four Business Days after the date such payment
or deposit is required to be made; or (ii) to observe or perform in any
material respect any other covenants or agreements of the Seller set
forth in the Loan Purchase Agreement, which failure continues unremedied
for a period of 60 days after written notice and such failure materially
and adversely affects the interests of the Securityholders or the Credit
Enhancer;
(b) if any representation or warranty made by the Seller in the
Loan Purchase Agreement proves to have been incorrect in any material
respect when made and which continues to be incorrect in any material
respect for a period of 45 days with respect to any representation or
warranty of the Seller made in Section (___) of the Loan Purchase
Agreement or 90 days with respect to any representation or warranty made
in Section (___) or (___) of the Loan Purchase Agreement after written
notice and as a result of which the interests of the Securityholders or
the Credit Enhancer are materially and adversely affected; provided,
--------
however,
------- that an Amortization Event shall not be deemed to occur if
the Seller has repurchased or substituted for the related Mortgage
Loans or all Mortgage Loans, if applicable, during such period (or
within an additional 60 days with the consent of the Indenture Trustee
and the Credit Enhancer) in accordance with the provisions of the
Indenture;
(c) The entry against the Seller of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises
for the appointment of a trustee, conservator, receiver or liquidator in
any insolvency, conservatorship, receivership, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding up or liquidation of its affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 60 consec-
utive days;
(d) The Seller shall voluntarily go into liquidation, consent to
the appointment of a conservator, receiver, liquidator or similar person
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Seller or of or
relating to all or substantially all of its property, or a decree or
order of a court, 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
Seller and such decree or order shall have remained in force undis-
charged, unbonded or unstayed for a period of 60 days; or the Seller
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;
(e) the Issuer becomes subject to regulation by the Commission as
an investment company within the meaning of the Investment Company Act
of 1940, as amended; and
(f) an Event of Servicing Termination relating to the Master
Servicer occurs under the Master Servicing Agreement and the Master
Servicer is the Seller.
In the case of any event described in (a), (b) or (f), an Amortization
Event will be deemed to have occurred only if, after any applicable grace
period described in such clauses, either the Indenture Trustee, the Credit
Enhancer or, with the consent of the Credit Enhancer, Securityholders
evidencing not less than 51% of the Security Balance of each of the Notes and
the Certificates by written notice to the Seller, the Master Servicer, the
DEPOSITOR and the Owner Trustee (and to the Indenture Trustee, if given by
the Credit Enhancer or the Securityholders) may declare that an Amortization
Event has occurred as of the date of such notice. In the case of any event
described in clauses (c), (d) or (e), an Amortization Event will be deemed to
have occurred without any notice or other action on the part of the Indenture
Trustee, the Securityholders or the Credit Enhancer immediately upon the
occurrence of such event.)
Appraised Value:
--------------- With respect to any Mortgaged Property,
set forth in an appraisal of such Mortgaged Property made to establish
compliance with the underwriting criteria then in effect in connection with
the later of the application for the Mortgage Loan secured by such Mortgaged
Property or any subsequent increase or decrease in the related Credit Limit
or to reduce or eliminate the amount of any primary insurance, or (y) if the
sales price of the Mortgaged Property is considered in accordance with the
underwriting criteria applicable to the Mortgage Loan, the lesser of (i) the
appraised value referred to in (x) above and (ii) the sales price of such
Mortgaged Property.
Asset Balance:
------------- With respect to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any day, the related Cut-off Date Asset
Balance or Deposit Date Asset Balance, (plus (i) any Additional Balances in
----
respect of such Mortgage Loan conveyed to the Issuer,) minus ((ii)) all
-----
collections credited as principal in respect of any such Mortgage Loan in
accordance with the related Loan Agreement (except for any such collections
that are allocable to the Excluded Amount) and applied in reduction of the
Asset Balance thereof. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have an Asset Balance equal to the Asset
Balance of the related Mortgage Loan immediately prior to the final recovery
of all related Liquidation Proceeds and an Asset Balance of zero thereafter.
Assignment of Mortgage:
---------------------- With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the conveyance of the Mortgage, which assignment, notice
of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged
Properties located in the same jurisdiction.
Authorized Newspaper:
-------------------- A newspaper of general circulation in the Borough
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.
Authorized Officer:
------------------ Owner Trustee who is authorized to act for the Owner
Trustee in matters relating to the Issuer and who is identified on the list
of Authorized Officers delivered by the Owner Trustee to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented
from time to time thereafter) and, so long as the Administration Agreement is
in effect, any Responsible Officer of the Administrator who is authorized to
act for the Administrator in matters relating to the Issuer and to be acted
upon by the Administrator pursuant to the Administration Agreement and who is
identified on the list of Authorized Officers delivered by the Administrator
to the Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter).
Basic Documents:
--------------- Indenture, the Loan Purchase Agreement, the Insurance
Agreement, the Administration Agreement, the Master Servicing Agreement, the
Custodial Agreement and the other documents and certificates delivered in
connection with any of the above.
Beneficial Owner:
---------------- With respect to any Note, the Person who is the
beneficial owner of such Note as reflected on the books of the Depository or
on the books of a Person maintaining an account with such Depository
(directly as a Depository Participant or indirectly through a Depository
Participant, in accordance with the rules of such Depository).
Billing Cycle:
------------- With respect to any Mortgage Loan and Due Date, the
calendar month preceding such Due Date.
Book-Entry Notes:
---------------- Beneficial interests in the Notes, ownership and
transfers of which shall be made through book entries by the Depository as
described in Section 4.06 of the Indenture.
Business Day:
------------ Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the State of New York, (_______________) or
(_____________) are required or authorized by law to be closed.
Business Trust Statute:
---------------------- Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code Section Section 3801 et seq., as the same may be ---
-- ----
amended from time to time.
Carryover Loss Amount:
--------------------- With respect to any Payment Date, the aggregate
of Loss Amounts (other than Loss Amounts arising during the related
Collection Period) with respect to which either (i) payments of principal
have not been previously made on the Notes and the Certificates or (ii) were
not reflected in a reduction (not below zero) of the Overcollateralization
Amount.
Certificate Distribution Amount:
------------------------------- With respect to any Payment Date, the
sum of (x) the amount accrued during the related Interest Period on the
Principal Balance of the Certificates at the Certificate Rate for such
Interest Period and (y) any Unpaid Certificate Distribution Amount Shortfall.
The amount available for distribution on any Payment Date shall be allocated
first to the amount in clause (x) above, and second to the amount in clause
(y) above.
Certificate Paying Agent:
------------------------ The meaning specified in Section 3.03 of the
Indenture.
Certificate Percentage:
---------------------- With respect to any Payment Date, the ratio,
expressed as a percentage, of the aggregate of the Principal Balance of the
Certificates immediately prior to such Payment Date to the sum of the
aggregate of the Principal Balance of the Securities immediately prior to
such date.
Certificate Rate:
---------------- With respect to any Interest Period, the per annum
rate determined by the Master Servicer equal to the sum of (i) LIBOR and (ii)
(______)%; provided, however, that in no event shall the Certificate Rate with
-------- -------
respect to any Interest Period exceed the Maximum Rate.
Certificate Register:
-------------------- The register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Certificate Registrar:
--------------------- Initially, (______________), in its capacity as
Certificate Registrar, or any successor to the Indenture Trustee in such
capacity.
Certificate of Trust:
-------------------- The Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Business Trust Statute.
Certificates:
------------ The Home Equity Loan Asset-Backed Certificates, Series
199_-_, each evidencing undivided beneficial interests in the Issuer and
executed by the Owner Trustee in substantially the form set forth in Exhibit
A to the Trust Agreement.
Certificateholder:
----------------- The Person in whose name a Certificate is registered
in the Certificate Register except that, any Certificate registered in the
name of the Issuer, the Owner Trustee or the Indenture Trustee or any
Affiliate of any of them shall be deemed not to be outstanding and the
registered holder will not be considered a Certificateholder or a holder for
purposes of giving any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or the Trust Agreement provided that,
in determining whether the Indenture Trustee or the Owner Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Certificates that the Indenture Trustee or
the Owner Trustee knows to be so owned shall be so disregarded. Owners of
Certificates that have been pledged in good faith may be regarded as Holders
if the pledgee establishes to the satisfaction of the Indenture Trustee or
the Owner Trustee, as the case may be, the pledgee's right so to act with
respect to such Certificates and that the pledgee is not the Issuer, any
other obligor upon the Certificates or any Affiliate of any of the foregoing
Persons.
Class: The Notes or the Certificates, as the case may be.
-----
Closing Date: ___________, 199_.
------------
Code: The Internal Revenue Code of 1986, as amended, and the
----
rules and regulations promulgated thereunder.
Collateral:
---------- The meaning specified in the Granting Clause of the
Indenture.
Collection Account:
------------------ The account or accounts created and maintained
pursuant to Section ( ) of the Master Servicing Agreement. The Collection
Account shall be an Eligible Account.
Collection Period:
----------------- With respect to any Mortgage Loan and Payment Date
other than the first Payment Date, the calendar month preceding any such
Payment Date and with respect to the first Payment Date, the period from
_____________ through (___________).
Combined Loan-to-Value Ratio:
---------------------------- With respect to any Mortgage Loan and any
date, the percentage equivalent of a fraction, the numerator of which is the
sum of (i) the greater of (x) the Credit Limit and (y) the Cut-off Date Asset
Balance of such Mortgage Loan and (ii) the outstanding principal balance as
of the date of the origination of such Mortgage Loan (or any subsequent date
as of which such outstanding principal balance may be determined in
connection with an increase or decrease in the Credit Limit or to
reduce the amount of primary insurance for such Mortgage Loan) of any
mortgage loan or mortgage loans that are secured by liens on the Mortgaged
Property that are senior or subordinate to the Mortgage and the denominator
of which is the Appraised Value of the related Mortgaged Property.
Corporate Trust Office:
---------------------- With respect to the Indenture Trustee,
Certificate Registrar, Certificate Paying Agent and Paying Agent, the
principal corporate trust office of the Indenture Trustee and Note Registrar
at which at any particular time its corporate trust business shall be admin-
istered, which office at the date of the execution of this instrument is
located at (______________), except that for purposes of Section 4.02 of the
Indenture and Section 3.09 of the Trust Agreement, such term shall include
the Indenture Trustee's office or agency at (__________) to the Owner
Trustee, the principal corporate trust office of the Owner Trustee at which
at any particular time its corporate trust business shall be administered,
which office at the date of the execution of this Trust Agreement is located
at (___________), Attention: (__________________).
(Credit Enhancement Draw Amount:
------------------------------ As defined in Section 3.32 of the
Indenture.
Credit Enhancement Instrument:
----------------------------- The security bond number (__________),
dated as of the Closing Date, issued by the Credit Enhancer to the Indenture
Trustee for the benefit of the Noteholders and to the Certificate Paying
Agent as agent for the Issuer for the benefit of the Certificateholders.
Credit Enhancer:
--------------- (______________________), a (_______________), any
successor thereto or any replacement credit enhancer substituted pursuant to
Section 3.33 of the Indenture.
Credit Enhancer Default:
----------------------- If the Credit Enhancer fails to make a payment
required under the Credit Enhancement Instrument in accordance with its
terms.)
Credit Limit:
------------ With respect to any Mortgage Loan, the maximum Asset
Balance permitted under the terms of the related Loan Agreement.
Custodial Agreement:
------------------- Any Custodial Agreement between the Custodian, the
Indenture Trustee, the Issuer and the Master Servicer relating to the custody
of the Mortgage Loans and the Related Documents.
Custodian:
--------- With respect to the Mortgage Loans, (______________), a
(_______________), and its successors and assigns.
Cut-Off Date:
------------ With respect to the Initial Loans ________, 199_.
DCR:
--- Duff & Phelps Credit Rating Co. or its successor in interest.
Default:
------- Any occurrence which is or with notice or the lapse of time or
both would become an Event of Default.
Definitive Notes:
---------------- The meaning specified in Section 4.06 of the
Indenture.
Deleted Mortgage Loan:
--------------------- A Mortgage Loan replaced or to be replaced with
an Eligible Substitute Mortgage Loan.
(Deposit Date:
------------ The applicable date as of which any Additional Loan is
sold to the Issuer pursuant to the Loan Purchase Agreement.
Deposit Date Asset Balance:
-------------------------- With respect to any Additional Loan, the
Asset Balance thereof as of the Deposit Date.)
Depository or Depository Agency:
------------------------------- The Depository Trust Company or a
successor appointed by the Indenture Trustee with the approval of the Seller.
Any successor to the Depository shall be an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and the
regulations of the Securities and Exchange Commission thereunder.
Depository Participant:
---------------------- A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
Designated Certificate:
---------------------- The meaning specified in Section 3.11 of the
Trust Agreement.
Dissolution Payment Date:
------------------------ Following an Event of Default under the
Indenture and an acceleration of the Maturity Date of the Notes, a date on
which the proceeds of the sale of the Trust Estate are paid to
Securityholders.
Draw:
---- With respect to any Mortgage Loan, a borrowing by the Mortgagor
under the related Loan Agreement.
Due Date:
-------- With respect to the Mortgage Loans, the (__)th day of the
month.
Eligible Account:
---------------- An account that is any of the following: (i)
maintained with a depository institution the short-term debt obligations of
which have been rated by each Rating Agency in its highest rating available,
or (ii) an account or accounts in a depository institution in which such
accounts are fully insured to the limits established by the FDIC, provided
--------
that any deposit not so insured shall, to the extent acceptable to each Rating
Agency, as evidenced in writing, be maintained such that (as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee and each Rating Agency)
the Indenture Trustee have a claim with respect to the funds in such account
or a perfected first security interest against any collateral (which shall be
limited to Eligible Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution
with which such account is maintained, or (iii) in the case of the Collection
Account, either (A) a trust account or accounts maintained at the Corporate
Trust Department of the Indenture Trustee or (B) an account or accounts
maintained at the Corporate Trust Department of the Indenture Trustee, as
long as its short term debt obligations are rated (___) by (_____) and (___)
by (_____________) or the equivalent or better by each Rating Agency and its
long term debt obligations are rated (___) by (___) and (___) by
(___________) or the equivalent or better by each Rating Agency, or (iv) in
the case of the Collection Account and the Payment Account, a trust account
or accounts maintained in the corporate trust division of the Indenture
Trustee, or (v) an account or accounts of a depository institution acceptable
to each Rating Agency as evidenced in writing by each Rating Agency that use
of any such account as the Collection Account or the Payment Account will not
reduce the rating assigned to any of the Securities by such Rating Agency
below investment grade (without taking into account the Credit Enhancement
Instrument.)
Eligible Investments: One or more of the following:
--------------------
(i) obligations of the United States or any agency thereof, provided such
obligations are backed by the full faith and credit of the United States;
(ii) general obligations of or obligations guaranteed by any state of the
United States or the District of Columbia receiving the highest long-term
debt rating of each Rating Agency rating the related Series of Securities, or
such lower rating as will not result in the downgrading or withdrawal of the
ratings then assigned to the Securities by each such Rating Agency; (iii)
commercial paper issued by Countrywide Home Loans, Inc. or any of its
Affiliates or commercial or finance company paper which is then receiving the
highest commercial or finance company paper rating of each such Rating
Agency, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Securities by each such Rating
Agency; (iv) certificates of deposit, demand or time deposits, or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof and
subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long term unsecured
debt obligations of such depository institution or trust company (or in the
case of the principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company, but only if Moody's is not a Rating Agency) are then rated
one of the two highest long-term and the highest short-term ratings of each
such Rating Agency for such securities, or such lower ratings as will not
result in the downgrading or withdrawal of the rating then assigned to the
Securities by any such Rating Agency; (iv) demand or time deposits or
certificates of deposit issued by any bank or trust company or savings
institution to the extent that such deposits are fully insured by the FDIC;
(v) guaranteed reinvestment agreements issued by any bank, insurance company
or other corporation containing, at the time of the issuance of such
agreements, such terms and conditions as will not result in the downgrading
or withdrawal of the rating then assigned to the Securities by any such
Rating Agency; (vi) repurchase obligations with respect to any security
described in clauses (i) and (ii) above, in either case entered into with a
depository institution or trust company (acting as principal) described in
clause (iv) above; (vii) securities (other than stripped bonds, stripped
coupons or instruments sold at a purchase price in excess of 115% of the face
amount thereof) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any state
thereof which, at the time of such investment, have one of the two highest
ratings of each Rating Agency (except if the Rating Agency is Moody's, such
rating shall be the highest commercial paper rating of Moody's for any such
securities), or such lower rating as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating
Agency; and (viii) such other investments having a specified stated maturity
and bearing interest or sold at a discount acceptable to each Rating Agency
as will not result in the downgrading or withdrawal of the rating then
assigned to the Securities of such Series by any such Rating Agency, as
evidenced by a signed writing delivered by each such Rating Agency; provided
--------
that no such instrument shall be an Eligible Investment if such instrument
evidences the right to receive interest only payments with respect to the
obligations underlying such instrument.
Eligible Substitute Mortgage Loan:
--------------------------------- A Mortgage Loan substituted by the
DEPOSITOR for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in an Officers' Certificate delivered to the
Indenture Trustee, (i) have an outstanding principal balance, after deduction
of the principal portion of the monthly payment due in the month of
substitution (or in the case of a substitution of more than one Mortgage Loan
for a Deleted Mortgage Loan, an aggregate outstanding principal balance,
after such deduction), not in excess of the outstanding principal balance of
the Deleted Mortgage Loan (the amount of any shortfall to be deposited by the
Seller in the Collection Account in the month of substitution); (ii) have a
Loan Rate not less than the Loan Rate of the Deleted Mortgage Loan and not
more than __% in excess of the Loan Rate of such Deleted Mortgage Loan; (iii)
have a Loan Rate based on the same index with adjustments to such Loan Rate
made on the same interest rate adjustment date as that of the Deleted
Mortgage Loan; (iv) have a Margin that is not less than the Margin of the
Deleted Mortgage Loan and not more than _____ basis points higher than the
Margin for the Deleted Mortgage Loan; (v) have a mortgage of the same or
higher level of priority as the mortgage relating to the Deleted Mortgage
Loan; (vi) have a remaining term to maturity not more than ____ months
earlier and not more than ____ months later than the remaining term to
maturity of the Deleted Mortgage Loan; (vii) comply with each representation
and warranty as to the Mortgage Loans set forth in the Loan Purchase
Agreement (deemed to be made as of the date of substitution); (viii) in
general, have an original Combined Loan-to-Value Ratio not greater than that
of the Deleted Mortgage Loans; and (ix) satisfy certain other conditions
specified in the Purchase Agreement. To the extent the Principal Balance of
an Eligible Substitute Mortgage Loan is less than the Principal Balance of
the related Deleted Mortgage Loan, the Seller will be required to make a
deposit tot he Collection Account equal to such difference; and (x) not be __
days or more delinquent.
ERISA:
----- The Employee Retirement Income Security Act of 1974, as amended.
Event of Default:
---------------- With respect to the Indenture, any one of the
following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) a default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five days; or
(ii) a default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable; or
(iii) (a Credit Enhancer Default shall have occurred and be
continuing and) there occurs a default in the observance or performance
of any covenant or agreement of the Issuer made in the Indenture, or any
representation or warranty of the Issuer made in the Indenture or in any
certificate or other writing delivered pursuant hereto or in connection
herewith proving to have been incorrect in any material respect as of
the time when the same shall have been made, and such default shall
continue or not be cured, or the circumstance or condition in respect of
which such representation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there shall
have been given, by registered or certified mail, to the Issuer by the
Indenture Trustee or to the Issuer and the Indenture Trustee by the
Holders of at least 25% of the Outstanding Amount of the Notes, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is
a notice of default hereunder; or
(iv) (a Credit Enhancer Default shall have occurred and be
continuing and) there occurs the filing of a decree or order for relief
by a court having jurisdiction in the premises in respect of the Issuer
or any substantial part of the Trust Estate in an involuntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(v) (a Credit Enhancer Default shall have occurred and be
continuing and) there occurs the commencement by the Issuer of a
voluntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the
consent by the Issuer to the entry of an order for relief in an
involuntary case under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or
for any substantial part of the assets of the Trust Estate, or the
making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as
such debts become due, or the taking of any action by the Issuer in
furtherance of any of the foregoing.
Event of Servicer Termination:
----------------------------- With respect to the Master Servicing
Agreement, an Event of Default as defined in Section 7.01 of the Master
Servicing Agreement.
Exchange Act:
------------ The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
Excluded Amount:
--------------- For any Payment Date on or after the occurrence of an
Amortization Event, with respect to all collections whether interest or
principal (other than any amounts received in respect of a Repurchase Price
and pursuant to Section ( ) of the Master Servicing Agreement) ("Total
Collections") on all Initial Loans and Additional Loans in each case
including all Draws whether or not transferred to the Issuer (collectively,
"Total Balances of Obligors"), an amount equal to the product of (A) Total
Collections during the related Collection Period and (B) a fraction equal to
one (1) minus a fraction the numerator of which is (x) the aggregate Asset
-----
Balances of the end of the last Collection Period and the denominator of
which is (y) the Total Balances of Obligors.
Expenses:
-------- The meaning specified in Section 8.02 of the Trust Agreement.
FDIC:
---- The Federal Deposit Insurance Corporation or any successor
thereto.
Final Scheduled Payment Date:
---------------------------- To the extent not previously paid, the
principal balance of each Class of Notes will be due on the Payment Date in
____________ ____.
Fitch:
----- Fitch Investors Service, L.P. or its successor in interest.
FNMA:
---- The Federal National Mortgage Association, or any successor
thereto.
Foreclosure Profit:
------------------ With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Asset Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
(Funding Account:
--------------- The trust account created and maintained with the
Indenture Trustee pursuant to Section 8.02 of the Indenture and referred to
therein as the Funding Account. Funds deposited in the Funding Account shall
be held in trust for the uses and purposes set forth in Article VIII of the
Indenture.
Funding Period:
-------------- The period commencing on the Cut-off Date and ending on
the earlier of (x) the Payment Date in __________, 199_ and (y) the
occurrence of an Amortization Event.)
Grant:
----- Mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and
confirm pursuant to the Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but
none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give
receipt for principal and interest payments in respect of such collateral or
other agreement or instrument and all other moneys payable thereunder, to
give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring proceedings in the
name of the granting party or otherwise, and generally to do and receive
anything that the granting party is or may be entitled to do or receive
thereunder or with respect thereto.
Gross Margin:
------------ With respect to any Mortgage Loan, the percentage set
forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule, as adjusted from time to time with respect to any (______________)
Loan in accordance with the terms of the Master Servicing Agreement.
(Guaranteed Principal Payment Amount:
----------------------------------- With respect to any Payment Date,
other than the Dissolution Payment Date, the amount, if any, by which the
Aggregate Security Balance (after giving effect to all amounts allocable and
distributable to principal on the Securities on such Payment Date) exceeds
the sum of (A) the Pool Balance plus (B) all amounts on deposit in the
----
Funding Account on such date (after giving effect to all withdrawals
therefrom and deposits thereto pursuant to Sections 8.02(b) and 8.02(c) of
the Indenture on such Payment Date). With respect to the Payment Date in
________ ____, if such Payment Date is not a Dissolution Payment Date, the
amount, if any, by which the aggregate of the Security Balances (after giving
effect to all amounts allocable and distributable to principal on the
Securities) exceeds the amount on deposit in the Payment Account available to
be paid as principal on the Securities (after giving effect to all amounts
allocable and distributable as principal on the Securities on such date).)
Holder: Any of the Noteholders or Certificateholders.
------
Indemnified Party:
----------------- The meaning specified in Section 8.02 of the Trust
Agreement.
Indenture:
--------- The indenture dated as of _________, 199_ between the Issuer
and the Indenture Trustee, as Indenture Trustee.
Indenture Trustee:
----------------- (______________), and its successors and assigns or
any successor indenture trustee appointed pursuant to the terms of the
Indenture.
Independent:
----------- When used with respect to any specified Person, the Person
(i) is in fact independent of the Issuer, any other obligor on the Notes, the
Seller, the DEPOSITOR and any Affiliate of any of the foregoing Persons, (ii)
does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller, the
DEPOSITOR or any Affiliate of any of the foregoing Persons and (iii) is not
connected with the Issuer, any such other obligor, the Seller, the DEPOSITOR
or any Affiliate of any of the foregoing Persons as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing
similar functions.
Independent Certificate:
----------------------- A certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer
has read the definition of "Independent" in this Indenture and that the
signer is Independent within the meaning thereof.
Index Rate:
---------- (The rate (equal to) (based on) the highest "prime rate"
published in the 'Money Rates' table of The Wall Street Journal as of the
first Business Day of each calendar month.)
Initial Loans:
------------- All home equity lines of credit sold by the Seller to the
Purchaser on ________, 199_ pursuant to the terms of the Loan Purchase
Agreement, as specified in the Mortgage Loan Schedule.
Initial Principal Balance: With respect to the Certificates,
-------------------------
$______________; and the Notes, $___________.
Insolvency Event:
---------------- With respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction in the premises
in respect of such Person or any substantial part of its property in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its property, or ordering the winding-
up or liquidation of such Person's affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or (b) the
commencement by such Person of a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for
any substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due or the admission
by such Person in writing (as to which the Indenture Trustee shall have
notice) of its inability to pay its debts generally, or the adoption by the
Board of Directors or managing member of such Person of a resolution which
authorizes action by such Person in furtherance of any of the foregoing.
(Insurance Agreement:
------------------- The insurance and reimbursement agreement dated as
of ______________, 199_ among the Master Servicer, the Seller, the Issuer and
the Credit Enhancer, including any amendments and supplements thereto.)
Insurance Proceeds:
------------------ Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan which are required to be remitted
to the Master Servicer, or amounts required to be paid by the Master Servicer
pursuant to the last sentence of Section ( ) of the Master
Servicing Agreement, net of any component thereof (i) covering any expenses
incurred by or on behalf of the Master Servicer in connection with obtaining
such proceeds, (ii) that is applied to the restoration or repair of the
related Mortgaged Property, (iii) released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures or (iv) required to be
paid to any holder of a mortgage senior to such Mortgage Loan.
Interest Collections:
-------------------- With respect to any Payment Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
interest (including without limitation such portion of Insurance Proceeds,
Net Liquidation Proceeds and Repurchase Prices as is allocable to interest on
the applicable Mortgage Loan) as is paid by the Seller or the Master Servicer
or is collected by the Servicer under the Mortgage Loans, reduced by the
Servicing Fees for the related Collection Period and by any fees (including
annual fees) or late charges or similar administrative fees paid by
Mortgagors during the related Collection Period. The terms of the related
Loan Agreement shall determine the portion of each payment in respect of such
Mortgage Loan that constitutes principal or interest.
Interest Period:
--------------- With respect to any Payment Date other than the first
Payment Date, the period beginning on the preceding Payment Date and ending
on the day preceding such Payment Date, and in the case of the first Payment
Date, the period beginning on the Closing Date and ending on the day
preceding the first Payment Date.
Issuer:
------ Provident Home Equity Loan Trust 199_-_, a Delaware business
trust, or its successor in interest.
Issuer Request:
-------------- A written order or request signed in the name of the
Issuer by any one of its Authorized Officers and delivered to the Indenture
Trustee.
(LIBOR:
----- For any Interest Period other than the first Interest Period,
the rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. With respect to
the first Interest Period, the rate for United States dollar deposits for one
month which appears on the Telerate Screen Page 3750 as of _____ A.M.,
_________________ time, two LIBOR Business Days prior to the Closing Date.
If such rate does not appear on such page (or such other page as may replace
that page on that service, or if such
service is no longer offered, such other service for displaying LIBOR or
comparable rates as may be reasonably selected by the Indenture Trustee after
consultation with the Master Servicer), the rate will be the Reference Bank
Rate. If no such quotations can be obtained and no Reference Bank Rate is
available, LIBOR will be LIBOR applicable to the preceding Payment Date.)
LIBOR Business Day:
------------------ Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York,
(__________) or (________), or in the city of London, England are required or
authorized by law to be closed.
Lien:
---- Any mortgage, deed of trust, pledge, conveyance hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory
or other), preference, priority right or interest or other security agreement
or preferential arrangement of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the UCC (other
than any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing;
provided, however, that any assignment pursuant to Section ( )
- -------- -------
of the Master Servicing Agreement shall not be deemed to constitute a Lien.
Lifetime Rate Cap:
----------------- With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of
such Mortgage Note, as set forth on the Mortgage Loan Schedule and initially
as set forth on Exhibit A to the Master Servicing Agreement.
Liquidated Mortgage Loan:
------------------------ With respect to any Payment Date, any
Mortgage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Master Servicing
Agreement, as of the end of the related Collection Period that substantially
all Liquidation Proceeds which it reasonably expects to recover with respect
to the disposition of the related REO have been recovered.
Liquidation Expenses:
-------------------- Out-of-pocket expenses (exclusive of overhead)
which are incurred by or on behalf of the Master Servicer in connection with
the liquidation of any Mortgage Loan and not recovered under any insurance
policy, such expenses including, without limitation, legal fees and expenses,
any unreimbursed amount expended (including, without limitation, amounts
advanced to correct defaults on any mortgage loan which is senior to such
Mortgage Loan and amounts advanced to keep current or pay off a mortgage loan
that is senior to such Mortgage Loan) respecting the related Mortgage Loan
and any related and unreimbursed expenditures for real estate property taxes
or for property restoration, preservation or insurance against casualty loss
or damage.
Liquidation Loss Amounts:
------------------------ With respect to any Payment Date and any
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered portion of the related Asset Balance
thereof at the end of such Collection Period, after giving effect to the Net
Liquidation Proceeds applied in reduction of the Asset Balance.
Liquidation Proceeds:
-------------------- Proceeds (including Insurance Proceeds (but not
including amounts drawn under the Credit Enhancement Instrument)) received in
connection with the liquidation of any Mortgage Loan or related REO, whether
through trustee's sale, foreclosure sale or otherwise.
Loan Agreement:
-------------- With respect to any Mortgage Loan, the credit line
account agreement executed by the related Mortgagor and any amendment or
modification thereof.
Loan Purchase Agreement:
----------------------- The Loan Purchase Agreement, dated as of the
Cut-off Date, between the Seller, as seller, and the ______________________,
with respect to the Mortgage Loans.
Loan Rate:
--------- With respect to any Mortgage Loan and any day, the sum of
the Index Rate and the Margin.
Margin: The (spread).
------
Master Servicer:
--------------- The Provident Bank, and its successors and assigns.
Master Servicing Agreement:
-------------------------- The Master Servicing Agreement dated as of
______________, 199_ between (______________), as Indenture Trustee, and the
Master Servicer, as master servicer.
Master Servicing Fee:
-------------------- With respect to any Collection Period, the
product of (i) the Master Servicing Fee Rate divided by 12 and (ii) the
aggregate Asset Balance of the Mortgage Loans, as of the first day of such
Collection Period.
Master Servicing Fee Rate:
------------------------- With respect to any (______________) Loan,
(____)% per annum.
Maximum Pool Balance:
-------------------- As to any Payment Date the highest Pool Balance at
the end of any Collection Period from the Closing Date up to and including
the related Collection Period.
Maximum Rate:
------------ With respect to any Interest Period, the Weighted Average
Net Loan Rate related to the Due Date in the month preceding the month in
which such Interest Period ends (adjusted to an effective rate reflecting
accrued interest calculated on the
basis of the actual number of days in the Collection Period commencing in the
month in which such Interest Period commences and a year assumed to consist
of 360 days).
Moody's:
------- Moody's Investors Service, Inc. or its successor in interest.
Mortgage:
-------- The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File:
------------- The file containing the Related Documents pertaining to
a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to the Loan Purchase Agreement or the Master
Servicing Agreement.
Mortgage Loan Schedule:
---------------------- With respect to any date, the schedule of
Mortgage Loans included in the Trust Estate on such date. The initial
schedule of Mortgage Loans as of the Cut-Off Date is the schedule set forth
in Exhibit A of the Master Servicing Agreement, which schedule sets forth as
to each Mortgage Loan (i) the Cut-Off Date Trust Balance, (ii) the Credit
Limit, (iii) the Gross Margin, (iv) the name of the Mortgagor, (v) the
Lifetime Rate Cap, if any, (vi) the loan number, (vii) an indication as to
the applicable Mortgage Loan Group, and (viii) the lien position of the
related Mortgage. The Mortgage Loan Schedule will be amended from time to
time by annex to reflect Additional Loans.
Mortgage Loans:
-------------- At any time, collectively, all Initial Loans (and
Additional Loans, in each case including Additional Balances, if any, that
have been sold to the DEPOSITOR under the Loan Purchase Agreement,) in each
case together with the Related Documents, and that remain subject to the
terms thereof.
Mortgage Note:
------------- With respect to a Mortgage Loan, the Loan Agreement
pursuant to which the related mortgagor agrees to pay the indebtedness
evidenced thereby and secured by the related Mortgage as modified or amended.
Mortgaged Property:
------------------ The underlying property, including real property and
improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
---------
Net Liquidation Proceeds:
------------------------ With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate:
------------- With respect to any Mortgage Loan and any day, the
related Loan Rate less the related Servicing Fee Rate.
(Net Principal Collections:
------------------------- With respect to any Distribution Date, the
excess, if any, of Security Principal Collections for the related Collection
Period over the amount of Additional Balances created during the related
Collection Period.)
Notes:
----- The Notes designated as the "Notes" in the Indenture.
Note Owner: The Beneficial Owner of a Note.
----------
Note Rate:
--------- With respect to any Interest Period, a per annum rate
determined by the Master Servicer equal to (LIBOR as of the second LIBOR
Business Day) prior to the first day of such Interest Period and (___)%;
provided however, that in no event shall the Note Rate with respect to any
- -------- -------
Interest Period exceed the Maximum Rate for such Interest Period.
Note Register:
------------- The register maintained by the Note Registrar in which
the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.
Note Registrar:
-------------- The Indenture Trustee, in its capacity as Note
Registrar.
Noteholder:
---------- The Person in whose name a Note is registered in the Note
Register, except that, any Note registered in the name of the DEPOSITOR, the
Issuer or the Indenture Trustee or any Affiliate of any of them shall be
deemed not to be outstanding and the registered holder will not be considered
a Noteholder or holder for purposes of giving any request, demand,
authorization, direction, notice, consent or waiver under the Indenture or
the Trust Agreement provided that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the
Indenture Trustee or the Owner Trustee knows to be so owned shall be so
disregarded. Owners of Notes that have been pledged in good faith may be
regarded as Holders if the pledgee establishes to the satisfaction of the
Indenture Trustee or the Owner Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, any other
obligor upon the Notes or any Affiliate of any of the foregoing Persons.
Officer's Certificate:
--------------------- With respect to the Master Servicer, a
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of the Master Servicer and
delivered to the Indenture Trustee. With respect to the Issuer, a
certificate signed by any Authorized Officer of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section (11.01) of the Indenture, and delivered to the
Indenture Trustee. Unless otherwise specified, any reference in the
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
Opinion of Counsel:
------------------ A written opinion of counsel who may be in-house
counsel for the Master Servicer if acceptable to the Indenture Trustee, (the
Credit Enhancer) and the Rating Agencies or counsel for the DEPOSITOR, as the
case may be.
Outstanding: With respect to the Notes, as of the date of
-----------
determination, all Notes theretofore executed, authenticated and delivered
under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered
to the Indenture Trustee for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes have
been executed, authenticated and delivered pursuant to the Indenture
unless proof satisfactory to the Indenture Trustee is presented that any
such Notes are held by a holder in due course;
(provided, however, that for purposes of effectuating the Credit
-------- -------
Enhancer's right of subrogation as set forth in Section 4.12 of the Indenture
only, all Notes that have been paid with funds provided under the Credit
Enhancement Instrument shall be deemed to be Outstanding until the Credit
Enhancer has been reimbursed with respect thereto.)
Overcollateralization Amount:
---------------------------- With respect to any Payment Date, the
amount by which the sum of (x) the Pool Balance as of the last day of the
related Collection Period and (y) the amount on deposit in the Funding
Account in respect of Net Principal Collections, on such Payment Date exceeds
-------
the Aggregate Security Balance on such Payment Date (after giving effect to
all amounts distributed and allocable to principal on the Securities and
deposits to and withdrawals from the Funding Account that are applied to
reduce the Security Balances on such Payment Date).
Owner Trust Estate:
------------------ The corpus of the Issuer created by the Trust
Agreement which consists of the Mortgage Loans, such assets as shall from
time to time be deposited in the Collection Account and/or the Payment
Account allocable to the Mortgage Loans in accordance with the Trust
Agreement, property that secured a Mortgage Loan and that has become REO,
certain hazard insurance policies maintained by the Mortgagors or by or on
behalf of the Master Servicer in respect of the Mortgage Loans, (the Credit
Enhancement Instrument,) an assignment of the DEPOSITOR's rights under the
Loan Purchase Agreement and the obligation of the DEPOSITOR to purchase
Additional Balances under the Loan Purchase Agreement and all proceeds of
each of the foregoing.
Owner Trustee:
------------- (______________), and its successors and assigns or any
successor owner trustee appointed pursuant to the terms of the Trust
Agreement.
Paying Agent:
------------ Any paying agent or co-paying agent appointed pursuant to
Section 3.03 of the Indenture, which initially shall be (______________).
Payment Account:
--------------- The account established by the Indenture Trustee
pursuant to Section 8.02 of the Indenture and Section ( ) of the Master
Servicing Agreement. The Payment Account shall be an Eligible Account.
Payment Date:
------------ The (___) day of each month, or if such day is not a
Business Day, then the next Business Day.
Percentage Interest:
------------------- With respect to any Note, the percentage obtained
by dividing the Security Balance of such Note by the aggregate of the
Security Balances of all Notes of the same Class. With respect to any
Certificate, the percentage obtained by dividing the denomination specified
on such Certificate by the Initial Principal Balance of the Certificates.
Person:
------ Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(Policy:
------ The irrevocable and unconditional limited financial guaranty
insurance policy number (__________), dated as of the Closing Date, issued by
the Credit Enhancer to the Indenture Trustee for the benefit of the
Noteholders and to the Certificate Paying Agent as agent for the Issuer for
the benefit of the Certificateholders.)
Pool Balance:
------------ With respect to any date, the aggregate of the Asset
Balances of all Mortgage Loans as of such date.
Principal Balance:
----------------- With respect to any Payment Date, the Initial
Principal Balance thereof, reduced by all distributions of principal thereon
prior to such Payment Date.
Principal Collection Distribution Amount:
---------------------------------------- For any Payment Date, (i) so
long as an Amortization Event has not occurred, Net Principal Collections and
(ii) following an Amortization Event, Security Principal Collections;
provided, however, on any Payment Date with respect to which the
- ------- --------
Overcollateralization Amount that would result if determined without regard to
this proviso exceeds the Required Overcollateralization Amount the Principal
Collection Distribution Amount will be reduced by the amount of such excess
until the Overcollateralization Amount equals the Required
Overcollateralization Amount.
Principal Collections:
--------------------- With respect to any Payment Date and any Mortgage
Loan, the aggregate of the following amounts:
(i) the total amount of payments made by or on behalf of the
Mortgagor, received and applied as payments of principal on the Mortgage
Loan during the related Collection Period, as reported by the related
Subservicer;
(ii) any Net Liquidation Proceeds, allocable as a recovery of
principal, received in connection with the Mortgage Loan during the
related Collection Period;
(iii) if the Mortgage Loan was purchased by the Master Servicer
pursuant to Section 3.14 of the Master Servicing Agreement, or was
repurchased by the Seller pursuant to the Loan Purchase Agreement,
during the related Collection Period, 100% of the Asset Balance of the
Mortgage Loan as of the date of such purchase or repurchase; and
(iv) any other amounts received as payments on or proceeds of the
Mortgage Loan during the Collection Period to the extent applied in
reduction of the principal amount thereof;
provided that Principal Collections shall not include any Fore
- --------
closure Profits, and shall be reduced by any amounts withdrawn from the
Collection Account pursuant to clauses (iii), (iv), (vii) and (viii) of
Section ( ) of the Master Servicing Agreement other than any portion of
such amounts that are attributable to the Excluded Amount in respect of any
Mortgage Loan that are allocable to principal of such Mortgage Loan and not
otherwise excluded from the amounts specified in (i) - (iv) above.
Proceeding:
---------- Any suit in equity, action at law or other judicial or
administrative proceeding.
Purchaser:
--------- The Provident Bank, an Ohio banking corporation, and its
successors and assigns.
Qualified Insurer:
----------------- A mortgage guaranty insurance company duly qualified
as such under the laws of the state of its principal place of business and
each state having jurisdiction over such insurer in connection with the
insurance policy issued by such insurer, duly authorized and licensed in such
states to transact a mortgage guaranty insurance business in such states and
to write the insurance provided by the insurance policy issued by it,
approved as an insurer by the Master Servicer and as a FNMA-approved mortgage
insurer.
Rating Agency:
------------- Any nationally recognized statistical rating
organization, or its successor, that rated the Securities at the request of
the DEPOSITOR at the time of the initial issuance of the Securities.
Initially, (________) or (__________). If such organization or a successor
is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization, or other comparable Person,
designated by the DEPOSITOR, notice of which designation shall be given to
the Indenture Trustee. References herein to the highest short term unsecured
rating category of a Rating Agency shall mean (___) or better in the case of
(__________)and (___) or better in the case of (_____) and in the case of any
other Rating Agency shall mean such equivalent ratings. References herein to
the highest long-term rating category of a Rating Agency shall mean "(___)"
in the case of (__________) and (_____) in the case of (________) and in the
case of any other Rating Agency, such equivalent rating.
Record Date:
----------- With respect to the Notes and any Payment Date, the
Business Day next preceding such Payment Date and with respect to the
Certificates and any Payment Date, the last Business Day of the month
preceding the month of such Payment Date.
(Reference Bank Rate:
------------------- With respect to any Interest Period, as follows:
the arithmetic mean (rounded upwards, if necessary, to the nearest one
sixteenth of a percent) of the offered rates for United States dollar
deposits for one month which are offered by the Reference Banks as of _____
A.M., _________________ time, on the second LIBOR Business Day prior to the
first day of such Interest Period to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the sum of
the Outstanding Amount of Notes and the Certificate Principal Balance;
provided that at least two such Reference Banks provide such rate. If fewer
- --------
than two offered rates appear, the Reference Bank Rate will be the arithmetic
mean of the rates quoted by one or more major banks in New York City, selected
by the DEPOSITOR after consultation with the Indenture Trustee, as of ______
a.m., ______________ time, on such date for loans in U.S. Dollars to leading
European Banks for a period of one month in amounts approximately equal to the
Aggregate Security Balance. If no such quotations can be obtained, the
Reference Bank Rate shall be the Reference Bank Rate applicable to the
preceding Interest Period.)
Reference Banks:
--------------- (_________________________________________ ____ and
______________________.)
Related Documents:
----------------- With respect to each Mortgage Loan, the documents
specified in Section 1(a) of the Loan Purchase Agreement and any documents
required to be added to such documents pursuant to the Loan Purchase
Agreement, the Trust Agreement or the Master Servicing Agreement.
REO:
--- A Mortgaged Property that is acquired by the Issuer in foreclosure
or by deed in lieu of foreclosure.
Repurchase Price:
---------------- With respect to any Mortgage Loan required to be
repurchased on any date pursuant to the Loan Purchase Agreement or purchased
by the Master Servicer pursuant to the Master Servicing Agreement, an amount
equal to the sum of (i) 100% of the Asset Balance thereof (without reduction
for any amounts charged off) and (ii) unpaid accrued interest at the Loan
Rate on the outstanding principal balance thereof from the Due Date to which
interest was last paid by the Mortgagor to the first day of the month
following the month of purchase. No portion of any Repurchase Price shall be
included in the Excluded Amount for any Payment Date.
(Required Overcollateralization Percentage:
----------------------------------------- The greater of (___)% and a
percentage as determined by (_________) during the Funding Period in
connection with the delivery of Additional Loans.
Required Overcollateralization Amount:
------------------------------------- As to any Payment Date prior to
the Payment Date in (___________), the Required Overcollateralization
Percentage of the greater of (i) the Pool Balance as of the Cut-off Date and
(ii) the Maximum Pool Balance as of the end of the Related Collection Period
(the "Initial Required Overcollateralization Amount"). As to any Payment
Date on or after the Payment Date in (_______), the greater of (A) the lesser
of (x) the Initial Required Overcollateralization Amount and (y) (___)% of
the Pool Balance as of the end of the related Collection Period and (B)
(___)% of the greater of (i) the Pool Balance as of the Cut-off Date and (ii)
the Maximum Pool Balance; Any scheduled reduction to the Required
Overcollateralization Amount described above shall not be made as of any
Payment Date unless (i) the outstanding Principal Balance of the Mortgage
Loans delinquent __ days or more averaged over the last 12 months as a
percentage of the aggregate outstanding Principal Balance of all Mortgage
Loans averaged over the last 12 months does not exceed (____)% (or if the
Pool Balance is less than (___)% of the Maximum Pool Balance, (___)%) and
(ii) aggregate Liquidated Loss Amounts on the Mortgage Loans to date for such
Payment Date occurring during the first two years after the Closing Date or
occurring during the ___, ___, ___, or ___ year (or any year thereafter)
after the Closing Date, are less than (___), (___), (____), (___) or (___)%
respectively, of the Maximum Pool Balance and (iii) there has been no draw on
the Credit Enhancement Instrument. The Required Overcollateralization Amount
may be reduced with the prior written consent of the Credit Enhancer and the
Rating Agencies.)
Residual Ownership Interest:
--------------------------- Collectively, the beneficial ownership
interests in the Issuer established under the Trust Agreement that are
entitled to receive all amounts to be paid to the Issuer or its designee
pursuant to Section 3.05(a)(xi) of the Indenture, over the term thereof.
Residual Ownership Interest Paying Agent:
---------------------------------------- Any residual ownership
interest paying agent appointed pursuant to Section 3.03 of the Indenture,
which initially shall be (______________).
Responsible Officer:
------------------- With respect to the Indenture Trustee, any officer
of the Indenture Trustee with direct responsibility for the administration of
the Trust Agreement and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge
of and familiarity with the particular subject.
Securities Act:
-------------- The Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Security:
-------- Any of the Certificates or Notes.
Security Balance:
---------------- The Principal Balance of the Notes or the
Certificates, as the case may be.
Securityholder or Holder:
-------------- ------ Any Noteholder or a Certificateholder.
Security Interest Collections:
----------------------------- With respect to any Payment Date,
Interest Collections during the related Collection Period excluding the
portion thereof allocable to the Excluded Amount.
Security Percentage:
------------------- With respect to any Payment Date and Security, the
percentage equivalent of a fraction the numerator of which is the Security
Balance of such Security immediately prior to such Payment Date and the
denominator of which is the aggregate of the Security Balances of all
Securities as of such date.
Security Principal Collections:
------------------------------ With respect to any Payment Date,
Principal Collections during the related Collection Period excluding the
portion thereof allocable to the Excluded Amount.
Seller:
------ The Provident Bank, and its successors and assigns.
Servicing Fee:
------------- With respect to any Mortgage Loan, the sum of the
related Master Servicing Fee and the related Subservicing Fee.
Servicing Fee Rate:
------------------ With respect to any Mortgage Loan, the sum of the
related Master Servicing Fee Rate and the related Subservicing Fee Rate.
Servicing Officer:
----------------- Any officer of the Master Servicer responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Indenture Trustee by the Master Servicer, as such list may be amended from
time to time.
Standard & Poor's:
----------------- Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or its successor in interest.
Subservicer:
----------- Any Person with whom the Master Servicer has entered into a
Subservicing Agreement as a Subservicer by the Master Servicer, including the
Initial Subservicers.
Subservicing Agreement:
---------------------- The written contract between the Master Servicer
and any Subservicer relating to servicing and administration of certain
Mortgage Loans as provided in Section ( ) of the Master Servicing
Agreement.
Subservicing Fee:
---------------- With respect to any Mortgage Loan and any Collection
Period, the fee retained monthly by the Subservicer (or, in the case of a
nonsubserviced Mortgage Loan, by the Master Servicer) equal to the product of
(i) the Subservicing Fee Rate divided by 12 and (ii) the aggregate Asset
Balance of the Mortgage Loans as of the first day of such Collection Period.
Subservicing Fee Rate:
--------------------- With respect to any Mortgage Loan, (____)% per
annum.
(Substitution Adjustment Amounts:
-------------------------------- With respect to any Eligible
Substitute Mortgage Loan, the amount as defined in Section ( ) of the
Loan Purchase Agreement.)
(Telerate Screen Page 3750:
------------------------- The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks).
If such rate does not appear on such page (or such other page as may replace
that page on that service, or if such service is no longer offered, such
other service for displaying LIBOR or comparable rates as may be selected by
the Issuer after consultation with the Indenture Trustee), the rate will be
the Reference Bank Rate.)
Treasury Regulations:
-------------------- Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust Agreement:
--------------- The Trust Agreement dated as of __________, 199_
between the Owner Trustee, and the Seller.
Trust Estate:
------------ The meaning specified in the Granting Clause of the
Indenture.
Trust Indenture Act or TIA:
-------------------------- The Trust Indenture Act of 1939, as amended
from time to time, as in effect on any relevant date.
UCC:
--- The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
Unpaid Certificate Distribution Amount Shortfall:
------------------------------------------------ With respect to any
Payment Date, the aggregate amount, if any, of Certificate Distribution
Amount that was accrued in respect of a prior Payment Date and has not been
distributed to Certificateholders.
Weighted Average Net Loan Rate:
------------------------------ With respect to the Mortgage Loans in
the aggregate, and any Due Date, the average of the Net Loan Rate for each
Mortgage Loan as of the last day of the related Billing Cycle weighted on the
basis of the related Asset Balances outstanding as of the last day of the
related Billing Cycle (except for the (______________) Loans where the Net
Loan Rate will represent the average Net Loan Rate during the related Billing
Cycles weighted on the basis of the daily Asset Balance during the related
Billing Cycle for such Mortgage Loans) for each Mortgage Loan as determined
by the Master Servicer in accordance with the Master Servicer's normal
servicing procedures.
EXHIBIT 4.4
MASTER SERVICING AGREEMENT
Dated as of ( )
among
(Provident) Home Equity Loan Trust 199_, Issuer
and
(The Provident Bank), Seller and Master Servicer
and
( ), Trustee
Relating to the Mortgage Loans
Pledged as Collateral for the Issuer's
Asset Backed Notes and Asset Backed Certificates,
Series 199_,
in the Aggregate Initial
Principal Amount of $( )
TABLE OF CONTENTS
-----------------
Page
----
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . 5
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . 6
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . 6
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Excess Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . . 10
Master Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . 11
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Mortgage File . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . 12
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . 12
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 13
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Payment Account . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Payment Account Deposit Date . . . . . . . . . . . . . . . . . . . . 14
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . 14
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Prepayment Period . . . . . . . . . . . . . . . . . . . . . . . . . 16
Principal Prepayment . . . . . . . . . . . . . . . . . . . . . . . . 16
Principal Prepayment in Full . . . . . . . . . . . . . . . . . . . . 16
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Qualified Insurer . . . . . . . . . . . . . . . . . . . . . . . . . 16
Realized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Relief Act Reductions . . . . . . . . . . . . . . . . . . . . . . . 18
REO Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Request for Release . . . . . . . . . . . . . . . . . . . . . . . . 18
Required Insurance Policy . . . . . . . . . . . . . . . . . . . . . 18
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . . 19
Servicing Officer . . . . . . . . . . . . . . . . . . . . . . . . . 19
Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . 20
Substitution Adjustment Amount . . . . . . . . . . . . . . . . . . . 20
2. Conveyance of Mortgage Loans; Representations and Warranties . . . . 21
------------------------------------------------------------
(a) Conveyance of Mortgage Loans; Retention of Obligation to
--------------------------------------------------------
Fund Advances Under Credit Line Agreements . . . . . . . . 21
------------------------------------------
(b) Acceptance by Trustee; Retransfer of Mortgage Loans . . . 26
---------------------------------------------------
(c) Documents, Records and Funds in Possession of Master
---------------------------------------------------------
Servicer to be Held for Trustee . . . . . . . . . . . . . 27
-------------------------------
(d) Representations, Warranties and Covenants of the Seller
-------------------------------------------------------
and the Master Servicer. . . . . . . . . . . . . . . . . . 28
-----------------------
(e) Covenants of the Master Servicer. . . . . . . . . . . . . 31
--------------------------------
(f) Covenants of the Depositor . . . . . . . . . . . . . . . . 32
--------------------------
3. Administration and Servicing of Mortgage Loans . . . . . . . . 32
----------------------------------------------
(a) Master Servicer to Service Mortgage Loans . . . . . . . . 32
-----------------------------------------
(b) Subservicing; Enforcement of the Obligations of
-----------------------------------------------
Servicers . . . . . . . . . . . . . . . . . . . . . . . . 35
---------
(c) Successor Servicers . . . . . . . . . . . . . . . . . . . 36
-------------------
(d) Liability of the Master Servicer . . . . . . . . . . . . . 37
--------------------------------
(e) No Contractual Relationship Between Subservicers and the
--------------------------------------------------------
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------
(f) Rights of the Depositor and the Trustees in Respect of
------------------------------------------------------
the Master Servicer . . . . . . . . . . . . . . . . . . . 37
-------------------
(g) Trustee to Act as Master Servicer . . . . . . . . . . . . 38
---------------------------------
(h) Collection of Mortgage Loan Payments; Collection
------------------------------------------------
Accounts; Payment Account . . . . . . . . . . . . . . . . 38
-------------------------
(i) Collection of Taxes, Assessments and Similar Items;
---------------------------------------------------
Escrow Accounts . . . . . . . . . . . . . . . . . . . . . 41
---------------
(j) Access to Certain Documentation and Information
-----------------------------------------------
Regarding the Mortgage Loans . . . . . . . . . . . . . . . 42
----------------------------
(k) Permitted Withdrawals from the Note Account . . . . . . . 43
-------------------------------------------
(l) Maintenance of Hazard Insurance; Maintenance of Primary
-------------------------------------------------------
Insurance Policies . . . .. . . . . . . . . . . . . . . . 44
------------------
(m) Enforcement of Due-On-Sale Clauses; Assumption
----------------------------------------------
Agreements . . . . . . . . . . . . . . . . . . . . . . . . 46
----------
(n) Realization Upon Defaulted Mortgage Loans; Repurchase of
--------------------------------------------------------
Certain Mortgage Loans . . . . . . . . . . . . . . . . . . 48
----------------------
(o) Access to Certain Documentation . . . . . . . . . . . . . 51
-------------------------------
(p) Annual Statement as to Compliance . . . . . . . . . . . . 51
---------------------------------
(q) Annual Independent Public Accountants' Servicing
------------------------------------------------
Statement;
----------
Financial Statements. . . . . . . . . . . . . . . . . . . 52
(r) Errors and Omissions Insurance; Fidelity Bonds. . . . . . 53
----------------------------------------------
(s) Master Servicer Monthly Data. . . . . . . . . . . . . . . 53
----------------------------
4. Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--------
5. Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . 53
----------------------
6. The Master Servicer. . . . . . . . . . . . . . . . . . . . . . . . . 54
-------------------
(a) Respective Liabilities of the Depositor and the Master
------------------------------------------------------
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--------
(b) Merger or Consolidation of the Depositor or the Master
------------------------------------------------------
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--------
(c) Limitation on Liability of the Depositor, the Seller, Master
------------------------------------------------------------
Servicer and Others. . . . . . . . . . . . . . . . . . . . . . 55
-------------------
(d) Limitation on Resignation of the Master Servicer. . . . . . . . 56
------------------------------------------------
7. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-------
(a) Events of Default . . . . . . . . . . . . . . . . . . . . . . . 56
-----------------
(b) Trustee to Act; Appointment of Successor. . . . . . . . . . . . 59
----------------------------------------
(c) Notification to Securityholders . . . . . . . . . . . . . . . . 60
-------------------------------
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-------------
(a) Term of Master Servicing Agreement . . . . . . . . . . . . . . 60
----------------------------------
(b) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 60
----------
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
-------
(d) Inspection and Audit Rights. . . . . . . . . . . . . . . . . . 62
---------------------------
(e) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------------
(f) Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
---------
(g) Severability of Provisions . . . . . . . . . . . . . . . . . . 64
--------------------------
(h) No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . 64
----------------
(i) Recordation of Agreement; Counterparts . . . . . . . . . . . . 64
--------------------------------------
(j) Limitation of Liability of (owner trustee).
------------------------------------------
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by (owner trustee), not individually
or personally but solely as owner trustee of (Provident) Home Equity Loan
Trust 199_ under the Trust Agreement, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
(owner trustee) but is made and intended for the purpose for binding only the
Issuer, (c) nothing herein contained shall be construed as creating any
liability on (owner trustee), other than any liability arising out of its
gross negligence, bad faith or willful misconduct, and (d) under no
circumstances shall (owner trustee) be personally liable for the payment of
any indebtedness or expenses of the Issuer or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Agreement or the other Operative
Documents.
(k) Nonpetition Covenants . . . . . . . . . . . . . . . . . . 65
---------------------
SCHEDULE I
Mortgage Loan Schedule . . . . . . . . . . S-I-1
EXHIBIT A
FORM OF INITIAL CERTIFICATION OF TRUSTEE . . . . . . . A-1
EXHIBIT B
FORM OF FINAL CERTIFICATION OF TRUSTEE . . . . . . . B-1
EXHIBIT C
REQUEST FOR RELEASE
(for Trustee) . . . . . . . . . . . . . . C-1
EXHIBIT D
REQUEST FOR RELEASE OF DOCUMENTS . . . . . . . . . D-1
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . 6
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . 8
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . 10
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Excess Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . . 17
Master Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . 18
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Mortgage File . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . 20
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . 20
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 20
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Payment Account . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment Account Deposit Date . . . . . . . . . . . . . . . . . . . .
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . 22
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Prepayment Period . . . . . . . . . . . . . . . . . . . . . . . . . 24
Principal Prepayment . . . . . . . . . . . . . . . . . . . . . . . . 25
Principal Prepayment in Full . . . . . . . . . . . . . . . . . . . . 25
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Qualified Insurer . . . . . . . . . . . . . . . . . . . . . . . . . 25
Realized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Relief Act Reductions . . . . . . . . . . . . . . . . . . . . . . . 27
REO Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Request for Release . . . . . . . . . . . . . . . . . . . . . . . . 27
Required Insurance Policy . . . . . . . . . . . . . . . . . . . . . 27
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . . 29
Servicing Officer . . . . . . . . . . . . . . . . . . . . . . . . . 30
Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . 30
Substitution Adjustment Amount . . . . . . . . . . . . . . . . . . . 30
Trustee Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Trustee Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2. Conveyance of Mortgage Loans; Representations and Warranties . . . . 31
------------------------------------------------------------
(a) Conveyance of Mortgage Loans; Retention of Obligation to Fund
--------------------------------------------------------------
Advances Under Credit Line Agreements . . . . . . . . . . . . . 31
-------------------------------------
(b) Acceptance by Trustee; Retransfer of Mortgage Loans . . . . . . 36
---------------------------------------------------
(c) Documents, Records and Funds in Possession of Master Servicer
-------------------------------------------------------------
to be Held for Trustee . . . . . . . . . . . . . . . . . . . . 38
----------------------
(d) Representations, Warranties and Covenants of the Seller and
------------------------------------------------------------
the Master Servicer. . . . . . . . . . . . . . . . . . . . . . 40
-------------------
(e) Covenants of the Master Servicer. . . . . . . . . . . . . . . . 42
--------------------------------
(f) Covenants of the Depositor . . . . . . . . . . . . . . . . . . 43
--------------------------
3. Administration and Servicing of Mortgage Loans . . . . . . . . 44
----------------------------------------------
(a) Master Servicer to Service Mortgage Loans . . . . . . . . . . . 44
-----------------------------------------
(b) Subservicing; Enforcement of the Obligations of Servicers . . . 47
---------------------------------------------------------
(c) Successor Servicers . . . . . . . . . . . . . . . . . . . . . . 48
-------------------
(d) Liability of the Master Servicer . . . . . . . . . . . . . . . 48
--------------------------------
(e) No Contractual Relationship Between Servicers and the Trustee . 49
-------------------------------------------------------------
(f) Rights of the Depositor and the Trustee in Respect of the Master
----------------------------------------------------------------
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
--------
(g) Trustee to Act as Master Servicer . . . . . . . . . . . . . . . 49
---------------------------------
(h) Collection of Mortgage Loan Payments; Collection Accounts;
----------------------------------------------------------
Payment Account . . . . . . . . . . . . . . . . . . . . . . . . 50
---------------
(i) Collection of Taxes, Assessments and Similar Items; Escrow
----------------------------------------------------------
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--------
(j) Access to Certain Documentation and Information Regarding the
-------------------------------------------------------------
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 54
--------------
(k) Permitted Withdrawals from the Note Account . . . . . . . . . . 54
-------------------------------------------
(l) Maintenance of Hazard Insurance; Maintenance of Primary
-------------------------------------------------------
Insurance Policies . . . . . . . . . . . . . . . . . . . . . . 56
------------------
(m) Enforcement of Due-On-Sale Clauses; Assumption Agreements . . . 58
---------------------------------------------------------
(n) Realization Upon Defaulted Mortgage Loans; Repurchase of Certain
----------------------------------------------------------------
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 60
--------------
(o) Access to Certain Documentation . . . . . . . . . . . . . . . . 63
-------------------------------
(p) Annual Statement as to Compliance . . . . . . . . . . . . . . . 64
---------------------------------
(q) Annual Independent Public Accountants' Servicing Statement;
--------------------------------------
Financial Statements. . . . . . . . . . . . . . . . . . . . . . 64
--------------------
(r) Errors and Omissions Insurance; Fidelity Bonds. . . . . . . . . 65
----------------------------------------------
(s) Master Servicer Monthly Data. . . . . . . . . . . . . . . . . . 65
----------------------------
4. Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------
5. Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . 66
----------------------
6. The Master Servicer. . . . . . . . . . . . . . . . . . . . . . . . . 66
-------------------
(a) Respective Liabilities of the Depositor and the Master
------------------------------------------------------
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------
(b) Merger or Consolidation of the Depositor or the Master
------------------------------------------------------
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------
(c) Limitation on Liability of the Depositor, the Seller, Master
------------------------------------------------------------
Servicer and Others. . . . . . . . . . . . . . . . . . . . . . 67
-------------------
(d) Limitation on Resignation of the Master Servicer. . . . . . . . 68
------------------------------------------------
7. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-------
(a) Events of Default . . . . . . . . . . . . . . . . . . . . . . . 68
-----------------
(b) Trustee to Act; Appointment of Successor. . . . . . . . . . . . 71
----------------------------------------
(c) Notification to Securityholders . . . . . . . . . . . . . . . . 72
-------------------------------
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
-------------
(a) Term of Master Servicing Agreement . . . . . . . . . . . . . . 72
----------------------------------
(b) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 73
----------
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
-------
(d) Inspection and Audit Rights. . . . . . . . . . . . . . . . . . 74
---------------------------
(e) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 74
-------------
(f) Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
---------
(g) Severability of Provisions . . . . . . . . . . . . . . . . . . 76
--------------------------
(h) No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . 77
----------------
(i) Recordation of Agreement; Counterparts . . . . . . . . . . . . 77
--------------------------------------
(j) Limitation of Liability of (owner trustee).
------------------------------------------
(k) Nonpetition Covenants . . . . . . . . . . . . . . . . . . . . . 78
---------------------
SCHEDULE I: Mortgage Loan Schedule . . . . . . . . . . . . . . . . . S-I-1
SCHEDULE II: Representations and Warranties of
the Master Servicer . . . . . . . . . . . . . . . . . S-II-1
SCHEDULE III: Representations and Warranties as
to the Mortgage Loans . . . . . . . . . . . . . . . . S-III-1
SCHEDULE IV: Representations and Warranties of
the Issuer . . . . . . . . . . . . . . . . . . . . . S-IV-1
EXHIBITS
EXHIBIT A FORM OF INITIAL CERTIFICATION OF TRUSTEE . . . . . . . . . A-1
EXHIBIT B FORM OF FINAL CERTIFICATION OF TRUSTEE . . . . . . . . . . B-1
EXHIBIT C REQUEST FOR RELEASE
(for Trustee) . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D REQUEST FOR RELEASE (Mortgage Loan
Paid in Full, Repurchased and Released) . . . . . . . . . D-1
MASTER SERVICING AGREEMENT
--------------------------
THIS MASTER SERVICING AGREEMENT is made and entered into as of ( ),
by and among (Provident) Home Equity Loan Trust 199_, a statutory business
trust formed under the laws of the State of (Delaware) (the "Issuer"), (The
Provident Bank), a (n Ohio banking) corporation (the "Master Servicer" or, in
its capacity as seller, the "Seller") and ( ), a ( ) corporation (in its
capacity as trustee under the Indenture referred to below, the "Trustee").
PRELIMINARY STATEMENT
The Issuer was formed for the purpose of issuing asset backed notes
and asset backed certificates secured by mortgage collateral. The Issuer has
entered into a trust indenture, dated as of ( ) (the "Indenture"), between
the Issuer and the Trustee, pursuant to which the Issuer intends to issue its
Home Equity Loan Asset Backed Notes and Home Equity Loan Asset Backed
Certificates, Series 199_, in the aggregate initial principal amount of $( )
(the "Securities"). Pursuant to the Indenture, as security for the
indebtedness represented by such Securities, the Issuer is and will be
pledging to the Trustee, or granting the Trustee a security interest in,
among other things, certain Mortgage Loans and Additional Balances, its
rights under this Agreement, the Payment Account, the Collection Account (and
certain Insurance Policies) (as each such term is defined herein).
The parties desire to enter into this Agreement to provide, among
other things, for the servicing of the Mortgage Loans by the Master Servicer.
The Master Servicer acknowledges that, in order further to secure the
Securities, the Issuer is and will be granting to the Trustee a security
interest in, among other things, its rights under this Agreement, and the
Master Servicer agrees that all covenants and agreements made by the Master
Servicer herein with respect to the Mortgage Loans shall also be for the
benefit and security of the Trustee and Holders of the Securities. For its
services hereunder, the Master Servicer will receive a Master Servicing Fee
(as defined herein) with respect to each Mortgage Loan serviced hereunder.
1. Defined Terms.
-------------
Except as otherwise specified or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Agreement, and the definitions of such terms are
applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms:
Advance: The payment required to be made by the Master Servicer with
-------
respect to any Distribution Date pursuant to Section 4, the amount of any
such payment being equal to the aggregate of payments of principal and
interest (net of the Master Servicing Fee and net of any net income in the
case of any REO Property) on the Mortgage Loans that were due on the related
Due Date and not received as of the close of business on the related
Determination Date, less the aggregate amount of any such delinquent payments
that the Master Servicer has determined would constitute a Nonrecoverable
Advance if advanced.
Additional Balance: With respect to any Mortgage Loan, any future Draw
------------------
made by the related Mortgagor pursuant to the related Loan Agreement after
the Cut-off Date in the case of an Initial Loan, or after the Deposit Date in
the case of an Additional Loan; provided, however, that if an Amortization
-------- -------
Event occurs, then any Draw after such Amortization Event shall not be
acquired by the Issuer and shall not be an Additional Balance.
Additional Loans: All home equity line of credit loans sold by
----------------
Provident to the Issuer after the Closing Date.
Administration Agreement: The Administration Agreement dated as of
------------------------
___________, 199_ among the Issuer, the Trustee and (______________), as
Administrator, as it may be amended from time to time.
Administrator: (______________), as administrator under the
-------------
Administration Agreement or any successor Administrator appointed pursuant to
the terms of the Administration Agreement.
Agreement: Means this Master Servicing Agreement, as the same may be
---------
amended or supplemented from time to time.
Appraised Value: With respect to any Mortgaged Property, either (x) the
---------------
value set forth in an appraisal of such Mortgaged Property made to establish
compliance with the underwriting criteria then in effect in connection with
the later of the application for the Mortgage Loan secured by such Mortgaged
Property or any subsequent increase or decrease in the related Credit Limit
or to reduce or eliminate the amount of any primary insurance, or (y) if the
sales price of the Mortgaged Property is considered in accordance with the
underwriting criteria applicable to the Mortgage Loan, the lesser of (i) the
appraised value referred to in (x) above and (ii) the sales price of such
Mortgaged Property.
Asset Balance: With respect to any Mortgage Loan, other than a Liqui
-------------
dated Mortgage Loan, and as of any day, the related Cut-off Date Asset
Balance or Deposit Date Asset Balance, (plus (i) any Additional Balances in
----
respect of such Mortgage Loan conveyed to the Issuer,) minus ((ii)) all
-----
collections credited as principal in respect of any such Mortgage Loan in
accordance with the related Loan Agreement (except for any such collections
that are allocable to the Excluded Amount) and applied in reduction of the
Asset Balance thereof. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have an Asset Balance equal to the Asset
Balance of the related Mortgage Loan immediately prior to the final recovery
of all related Liquidation Proceeds and an Asset Balance of zero thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
----------------------
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the conveyance of the Mortgage, which assignment, notice
of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged
Properties located in the same jurisdiction.
Bankruptcy Code: Means the United States Bankruptcy Reform Act of 1978,
---------------
as amended.
Basic Documents: The Trust Agreement, the Certificate of Trust, the
---------------
Indenture, the Insurance Agreement, the Administration Agreement, the Master
Servicing Agreement, the Custodial Agreement and the other documents and
certificates delivered in connection with any of the above.
Billing Cycle: With respect to any Mortgage Loan and Due Date, the
-------------
calendar month preceding such Due Date.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
------------
day on which banking institutions in the State of New York, (_______________)
or (_____________) are required or authorized by law to be closed.
Certificateholder: The Person in whose name a Certificate is registered
-----------------
in the Certificate Register except that, any Certificate registered in the
name of the Issuer, the Owner Trustee or the Trustee or any Affiliate of any
of them shall be deemed not to be outstanding and the registered holder will
not be considered a Certificateholder or a holder for purposes of giving any
request, demand, authorization, direction, notice, consent or waiver under
the Indenture or the Trust Agreement provided that, in determining whether
the Trustee or the Owner Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Trustee or the Owner Trustee knows to be so owned shall
be so disregarded. Owners of Certificates that have been pledged in good
faith may be regarded as Holders if the pledgee establishes to the
satisfaction of the Trustee or the Owner Trustee, as the case may be, the
pledgee's right so to act with respect to such Certificates and that the
pledgee is not the Issuer, any other obligor upon the Certificates or any
Affiliate of any of the foregoing Persons.
Certificates: The Home Equity Loan Asset Backed Certificates, Series
------------
199_-_, each evidencing undivided beneficial interests in the Issuer and
executed by the Owner Trustee in substantially the form set forth in Exhibit
A to the Trust Agreement.
Class: The Notes or the Certificates, as the case may be.
-----
Closing Date: ___________, 199_.
------------
Code: The Internal Revenue Code of 1986, as amended, and the rules and
----
regulations promulgated thereunder.
Collateral: The meaning specified in the Granting Clause of the
----------
Indenture.
Collection Account: Means the Eligible Account or Accounts established
------------------
and maintained by the Master Servicer in accordance with Section 3(h)(iii).
Collection Period: With respect to any Mortgage Loan and Payment Date
-----------------
other than the first Payment Date, the calendar month preceding any such
Payment Date and with respect to the first Payment Date, the period from
_____________ through (___________).
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan and any
----------------------------
date, the percentage equivalent of a fraction, the numerator of which is the
sum of (i) the greater of (x) the Credit Limit and (y) the Cut-off Date Asset
Balance of such Mortgage Loan and (ii) the outstanding principal balance as
of the date of the origination of such Mortgage Loan (or any subsequent date
as of which such outstanding principal balance may be determined in
connection with an increase or decrease in the Credit Limit or to reduce the
amount of primary insurance for such Mortgage Loan) of any mortgage loan or
mortgage loans that are secured by liens on the Mortgaged Property that are
senior or subordinate to the Mortgage and the denominator of which is the
Appraised Value of the related Mortgaged Property.
Corporate Trust Office: The designated office of the Trustee in the
----------------------
State of ________ at which at any particular time its corporate trust
business with respect to this Agreement shall be administered, which office
at the date of the execution of this Agreement is located at
__________________________________ (Attn:
____________________________________, facsimile no. ________________, and
which is the address to which notices to and correspondence with the Trustee
should be directed.
Credit Limit: With respect to any Mortgage Loan, the maximum Asset
------------
Balance permitted under the terms of the related Loan Agreement.
Custodial Agreement: Any Custodial Agreement between the Custodian, the
-------------------
Trustee, the Issuer and the Master Servicer relating to the custody of the
Mortgage Loans and the Related Documents.
Custodian: With respect to the Mortgage Loans, (______________), a
---------
(_______________), and its successors and assigns.
Cut-Off Date: With respect to the Initial Loans ________, 199_.
------------
DCR: Means Duff & Phelps Credit Rating Company, or any successor
---
thereto. If DCR is designated as a Rating Agency in the Indenture, for
purposes of Section 8(c) the address for notices to DCR shall be Duff &
Phelps Credit Rating Company, 55 E. Monroe Street, 35th Floor, Chicago,
Illinois 60603, Attention: MBS Monitoring, or such other address as DCR may
hereafter furnish to the Issuer and the Master Servicer.
Deleted Mortgage Loan: Has the meaning ascribed thereto in Section 5.
---------------------
(Deposit Date: The applicable date as of which any Additional Loan is
------------
sold to the Issuer.
Deposit Date Asset Balance: With respect to any Additional Loan, the
--------------------------
Asset Balance thereof as of the Deposit Date.)
Determination Date: As to any Distribution Date, the ____ day of each
------------------
month or if such ____ day is not a Business Day the next preceding Business
Day; provided, however, that if such ____ day or such Business Day, whichever
-------- -------
is applicable, is less than two Business Days prior to the related
Distribution Date, the Determination Date shall be the first Business Day
which is two Business Days preceding such Distribution Date.
Distribution Date: The ____ day of each calendar month after the
-----------------
initial issuance of the Certificates, or if such ____ day is not a Business
Day, the next succeeding Business Day, commencing in ____________, 199_.
Draw: With respect to any Mortgage Loan, a borrowing by the Mortgagor
----
under the related Loan Agreement.
Due Date: With respect to the Mortgage Loans, the (__)th day of the
--------
month.
Eligible Account: Any of (i) an account or accounts maintained with a
----------------
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the debt obligations of such holding company) have the
highest short-term ratings of each Rating Agency at the time any amounts are
held on deposit therein, or (ii) an account or accounts in a depository
institution or trust company in which such accounts are insured by the FDIC
(to the limits established by the FDIC) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of
Counsel delivered to the Trustee and to each Rating Agency, the
Securityholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which
shall be limited to Permitted Investments) securing such funds that is
superior to claims of any other depositors or creditors of the depository
institution or trust company in which such account is maintained, or (iii) a
trust account or accounts maintained with (a) the trust department of a
federal or state chartered depository institution or (b) a trust company,
acting in its fiduciary capacity or (iv) any other account acceptable to each
Rating Agency. Eligible Accounts may bear interest, and may include, if
otherwise qualified under this definition, accounts maintained with the
Trustee.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by
---------------------------------
Provident for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in an Officers' Certificate delivered to the
Trustee, (i) have an outstanding principal balance, after deduction of the
principal portion of the monthly payment due in the month of substitution (or
in the case of a substitution of more than one Mortgage Loan for a Deleted
Mortgage Loan, an aggregate outstanding principal balance, after such
deduction), not in excess of the outstanding principal balance of the Deleted
Mortgage Loan (the amount of any shortfall to be deposited by the Seller in
the Collection Account in the month of substitution); (ii) have a Loan Rate
not less than the Loan Rate of the Deleted Mortgage Loan and not more than
__% in excess of the Loan Rate of such Deleted Mortgage Loan; (iii) have a
Loan Rate based on the same index with adjustments to such Loan Rate made on
the same interest rate adjustment date as that of the Deleted Mortgage Loan;
(iv) have a Margin that is not less than the Margin of the Deleted Mortgage
Loan and not more than _____ basis points higher than the Margin for the
Deleted Mortgage Loan; (v) have a mortgage of the same or higher level of
priority as the mortgage relating to the Deleted Mortgage Loan; (vi) have a
remaining term to maturity not more than ____ months earlier and not more
than ____ months later than the remaining term to maturity of the Deleted
Mortgage Loan; (vii) comply with each representation and warranty as to the
Mortgage Loans set forth herein (deemed to be made as of the date of
substitution); (viii) in general, have an original Combined Loan-to-Value
Ratio not greater than that of the Deleted Mortgage Loans; and (ix) satisfy
certain other conditions specified in the Purchase Agreement. To the extent
the Principal Balance of an Eligible Substitute Mortgage Loan is less than
the Principal Balance of the related Deleted Mortgage Loan, the Seller will
be required to make a deposit tot he Collection Account equal to such
difference; and (x) not be __ days or more delinquent.
Escrow Account: Means the Eligible Account or Accounts established and
--------------
maintained pursuant to Section 3(i) hereof.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
---------------
amount, if any, by which the sum of any Liquidation Proceeds of such Mortgage
Loan received in the calendar month in which such Mortgage Loan became a
Liquidated Mortgage Loan, net of any amounts previously reimbursed to the
Master Servicer as Nonrecoverable Advance(s) with respect to such Mortgage
Loan pursuant to Section 3(k)(i)(C), exceeds (i) the unpaid principal balance
of such Liquidated Mortgage Loan as of the Due Date in the month in which
such Mortgage Loan became a Liquidated Mortgage Loan plus (ii) accrued
interest at the Mortgage Rate from the Due Date as to which interest was last
paid or advanced (and not reimbursed) to Securityholders up to the Due Date
applicable to the Distribution Date immediately following the calendar month
during which such liquidation occurred.
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of
the Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
------
Act of 1989.
Fitch: Fitch Investors Service, L.P., or any successor thereto. If
-----
Fitch is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 8(c) the address for notices to Fitch shall be Fitch
Investors Service, L.P., One State Street Plaza, New York, New York 10004,
Attention: _______________________________________, or such other address as
Fitch may hereafter furnish to Provident and the Master Servicer.
FNMA: The Federal National Mortgage Association, a federally
----
chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, or any successor thereto.
Gross Margin: With respect to any Mortgage Loan, the percentage set
------------
forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule, as adjusted from time to time with respect to any (______________)
Loan in accordance with the terms of this Agreement.
Holder: Any of the Noteholders or Securityholders.
------
Increased Senior Lien Limitation: shall have the meaning set forth in
--------------------------------
Section 3(a).
Indenture: Means the trust indenture, dated as of the date hereof,
---------
between the Issuer and the Trustee, as such Indenture may be amended or
supplemented from time to time in accordance with its terms.
(Insurance Agreement: The insurance and reimbursement agreement dated
-------------------
as of ______________, 199_ among the Master Servicer, the Seller, Provident,
the Issuer and the Credit Enhancer, including any amendments and supplements
thereto.)
Insurance Policy: Means, with respect to any Mortgage Loan, any
----------------
insurance policy, including all riders and endorsements thereto in effect,
including any replacement policy or policies for any Insurance Policies.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
------------------
insurance policy covering a Mortgage Loan which are required to be remitted
to the Master Servicer, or amounts required to be paid by the Master Servicer
pursuant to the last sentence of Section ( ) of the Master
Servicing Agreement, net of any component thereof (i) covering any expenses
incurred by or on behalf of the Master Servicer in connection with obtaining
such proceeds, (ii) that is applied to the restoration or repair of the
related Mortgaged Property, (iii) released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures or (iv) required to
be paid to any holder of a mortgage senior to such Mortgage Loan.
Interest Period: With respect to any Payment Date other than the first
---------------
Payment Date, the period beginning on the preceding Payment Date and ending
on the day preceding such Payment Date, and in the case of the first Payment
Date, the period beginning on the Closing Date and ending on the day
preceding the first Payment Date.
Issuer: (Provident) Home Equity Loan Trust 199_-_, a Delaware business
------
trust, or its successor in interest.
Issuer Request: A written order or request signed in the name of the
--------------
Issuer by any one of its Authorized Officers and delivered to the Trustee.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
----
assignment, participation, deposit arrangement, encumbrance, lien (statutory
or other), preference, priority right or interest or other security agreement
or preferential arrangement of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the UCC (other
than any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing;
provided, however, that any assignment pursuant to Section ( ) of the
- -------- -------
Master Servicing Agreement shall not be deemed to constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
-----------------
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of
such Mortgage Note, as set forth on the Mortgage Loan Schedule and initially
as set forth on Exhibit A to the Master Servicing Agreement.
Liquidated Mortgage Loan: With respect to any Payment Date, any Mort
------------------------
gage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Master Servicing
Agreement, as of the end of the related Collection Period that substantially
all Liquidation Proceeds which it reasonably expects to recover with respect
to the disposition of the related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
--------------------
which are incurred by or on behalf of the Master
Servicer in connection with the liquidation of any Mortgage Loan and not
recovered under any insurance policy, such expenses including, without
limitation, legal fees and expenses, any unreimbursed amount expended
(including, without limitation, amounts advanced to correct defaults on any
mortgage loan which is senior to such Mortgage Loan and amounts advanced to
keep current or pay off a mortgage loan that is senior to such Mortgage Loan)
respecting the related Mortgage Loan and any related and unreimbursed
expenditures for real estate property taxes or for property restoration,
preservation or insurance against casualty loss or damage.
Liquidation Loss Amounts: With respect to any Payment Date and any
------------------------
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered portion of the related Asset Balance
thereof at the end of such Collection Period, after giving effect to the Net
Liquidation Proceeds applied in reduction of the Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds (but not
--------------------
including amounts drawn under the Credit Enhancement Instrument)) received in
connection with the liquidation of any Mortgage Loan or related REO, whether
through trustee's sale, foreclosure sale or otherwise.
Loan Agreement: With respect to any Mortgage Loan, the credit line
--------------
account agreement executed by the related Mortgagor and any amendment or
modification thereof.
Loan Rate: With respect to any Mortgage Loan and any day, the sum of
---------
the Index Rate and the Margin.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any
-------------------
date of determination, (i) the principal balance of such Mortgage Loan
divided by (ii) the Collateral Value of the related Mortgaged Property.
Margin: The (spread).
------
Master Servicer: Means (The Provident Bank), a (n Ohio banking)
---------------
corporation, and its successors and assigns, in its capacity as master
servicer hereunder.
Master Servicer Advance Date: Means as to any Distribution Date, 12:30
----------------------------
p.m. Pacific time on the Business Day immediately preceding such Distribution
Date.
Master Servicing Fee: As to each Mortgage Loan and any Distribution
--------------------
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the
Due Date in the month of such Distribution Date (prior to giving effect to
any Scheduled Payments due on such Mortgage Loan on such Due Date), subject
to reduction as provided in Section 5.
Master Servicing Fee Rate: Means with respect to each Mortgage Loan,
-------------------------
( )% per annum.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
-------
If Moody's is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 8(c) the address for notices to Moody's shall be Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: ___________________________________, or such other address as
Moody's may hereafter furnish to Provident or the Master Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The file containing the Related Documents pertaining to
-------------
a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to the Master Servicing Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of
----------------------
Mortgage Loans included in the Trust Estate on such date. The initial
schedule of Mortgage Loans as of the Cut-Off Date is the schedule set forth
in Exhibit A of the Master Servicing Agreement, which schedule sets forth as
to each Mortgage Loan (i) the Cut-Off Date Trust Balance, (ii) the Credit
Limit, (iii) the Gross Margin, (iv) the name of the Mortgagor, (v) the
Lifetime Rate Cap, if any, (vi) the loan number, (vii) an indication as to
the applicable Mortgage Loan Group, and (viii) the lien position of the
related Mortgage. The Mortgage Loan Schedule will be amended from time to
time by annex to reflect Additional Loans.
Mortgage: Means the mortgage, deed of trust or other instrument
--------
creating a first lien on an estate in fee simple or leasehold interest in
real property securing a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2(a)(i) hereof
-------------
pertaining to a particular Mortgage Loan and any additional documents
delivered to the Trustee to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Loans: At any time, collectively, all Initial Loans (and
--------------
Additional Loans, in each case including Additional Balances, if any, that
have been sold transferred to the Trust,) in each case together with the
Related Documents, and that remain subject to the terms thereof. Such
schedule shall also set forth the total of the amounts described under (iv)
and (v) above for all of the Mortgage Loans.
Mortgage Note: With respect to a Mortgage Loan, the Loan Agreement
-------------
pursuant to which the related mortgagor agrees to pay the indebtedness
evidenced thereby and secured by the related Mortgage as modified or amended.
Mortgaged Property: The underlying property, including real property
------------------
and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
---------
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
------------------------
Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and any day, the
-------------
related Loan Rate less the related Servicing Fee Rate.
Nonrecoverable Advance: Any portion of an Advance previously made or
----------------------
proposed to be made by the Master Servicer that, in the good faith judgment
of the Master Servicer, will not be ultimately recoverable by the Master
Servicer from the related Mortgagor, related Liquidation Proceeds or
otherwise.
Notes: The Notes designated as the "Notes" in the Indenture.
-----
Noteholder or Holder: Means the Person in whose name a Note is
---------- ------
registered in the Note Register (as defined in the Indenture).
Officer's Certificate: A certificate (i) signed by the Chairman of the
---------------------
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of Provident or the Master Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing Officer, as the case may be, and
delivered to Provident and the Trustee, as the case may be, as required by
this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for Provident or the Master Servicer, including, in-house counsel, reasonably
acceptable to the Trustee; provided, however, that with respect to the
-------- -------
interpretation or application of the REMIC Provisions, such counsel must
(i) in fact be independent of Provident and the Master Servicer, (ii) not
have any direct financial interest in Provident or the Master Servicer or
in any affiliate of either, and (iii) not be connected with Provident or
the Master Servicer as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
Outstanding: With respect to the Certificates as of any date of
-----------
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or delivered
to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Owner Trust Estate: The corpus of the Issuer created by the Trust
------------------
Agreement which consists of the Mortgage Loans, such assets as shall from
time to time be deposited in the Collection Account and/or the Payment
Account allocable to the Mortgage Loans in accordance with the Trust
Agreement, property that secured a Mortgage Loan and that has become REO,
certain hazard insurance policies maintained by the Mortgagors or by or on
behalf of the Master Servicer in respect of the Mortgage Loans, (the Credit
Enhancement Instrument,) and the obligation of Provident to purchase
Additional Balances and all proceeds of each of the foregoing.
Owner Trustee: (______________), and its successors and assigns or any
-------------
successor owner trustee appointed pursuant to the terms of the Trust
Agreement.
Paying Agent: Any paying agent or co-paying agent appointed pursuant
------------
to Section 3.03 of the Indenture, which initially shall be (______________).
Payment Account: The account established by the Trustee pursuant to
---------------
Section 8.02 of the Indenture and Section ( ) of the Master Servicing
Agreement. The Payment Account shall be an Eligible Account.
Payment Account: The separate Eligible Account created and maintained
---------------
by the Trustee pursuant to Section 3(h) in the name of the Trustee for the
benefit of the Securityholders and designated "_________________________ in
trust for registered holders of Home Equity Loan Trust Asset Backed
Certificates, Series 199_-_." Funds in the Payment Account shall be held in
trust for the Securityholders for the uses and purposes set forth in this
Agreement.
Payment Account Deposit Date: As to any Distribution Date, 12:30 p.m.
----------------------------
Pacific time on the Business Day immediately preceding such Distribution
Date.
Payment Date: The (___) day of each month, or if such day is not a
------------
Business Day, then the next Business Day.
Percentage Interest: With respect to any Note, the percentage obtained
-------------------
by dividing the Security Balance of such Note by the aggregate of the
Security Balances of all Notes of the same Class. With respect to any
Certificate, the percentage obtained by dividing the denomination specified
on such Certificate by the Initial Principal Balance of the Certificates.
Permitted Investments: At any time, any one or more of the following
---------------------
obligations and securities: (i) obligations of the United States or any
agency thereof, provided such obligations are backed by the full faith and
credit of the United States; (ii) general obligations of or obligations
guaranteed by any state of the United States or the District of Columbia
receiving the highest long-term debt rating of each Rating Agency rating the
related Series of Securities, or such lower rating as will not result in the
downgrading or withdrawal of the ratings then assigned to the Securities by
each such Rating Agency; (iii) commercial or finance company paper
(including, without limitation, commercial paper issued by
_____________________ or any of its affiliates) which is then receiving the
highest commercial or finance company paper rating of each such Rating
Agency, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Securities by each such Rating
Agency; (iv) certificates of deposit, demand or time deposits, or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof and
subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long term unsecured
debt obligations of such depository institution or trust company (or in the
case of the principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such holding
company, but only if Moody's Investors Service, Inc. ("Moody's") is not a
Rating Agency) are then rated one of the two highest long-term and the
highest short-term ratings of each such Rating Agency for such securities, or
such lower ratings as will not result in the downgrading or withdrawal of the
rating then assigned to the Securities by any such Rating Agency; (iv)
demand or time deposits or certificates of deposit issued by any bank or
trust company or savings institution to the extent that such deposits are
fully insured by the FDIC; (v) guaranteed reinvestment agreements issued by
any bank, insurance company or other corporation containing, at the time of
the issuance of such agreements, such terms and conditions as will not result
in the downgrading or withdrawal of the rating then assigned to the
Securities by any such Rating Agency; (vi) repurchase obligations with
respect to any security described in clauses (i) and (ii) above, in either
case entered into with a depository institution or trust company (acting as
principal) described in clause (iv) above; (vii) securities (other than
stripped bonds, stripped coupons or instruments sold at a purchase price in
excess of 115% of the face amount thereof) bearing interest or sold at a
discount issued by any corporation incorporated under the laws of the United
States or any state thereof which, at the time of such investment, have one
of the two highest ratings of each Rating Agency (except if the Rating Agency
is Moody's, such rating shall be the highest commercial paper rating of
Moody's for any such securities), or such lower rating as will not result in
the downgrading or withdrawal of the rating then assigned to the Securities
by any such Rating Agency, as evidenced by a signed writing delivered by each
such Rating Agency; and (viii) such other investments having a specified
stated maturity and bearing interest or sold at a discount acceptable to each
Rating Agency as will not result in the downgrading or withdrawal of the
rating then assigned to the Securities of such Series by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating
Agency; provided that no such instrument shall be a Permitted Investment
--------
Investment if such instrument evidences the right to receive interest only
payments with respect to the obligations underlying such instrument.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
(Policy: The irrevocable and unconditional limited financial guaranty
------
insurance policy number (__________), dated as of the Closing Date, issued by
the Credit Enhancer to the Trustee for the benefit of the Noteholders and to
the Certificate Paying Agent as agent for the Issuer for the benefit of the
Securityholders.)
Pool Balance: With respect to any date, the aggregate of the Asset
------------
Balances of all Mortgage Loans as of such date.
Prepayment Period: As to any Distribution Date, the period from the
-----------------
__th day of the calendar month preceding the month of such Distribution Date
(or, in the case of the first Distribution
Date, from the Cut-off Date) through the __th of the month of such
Distribution Date.
Principal Balance: With respect to any Payment Date, the Initial Prin
-----------------
cipal Balance thereof, reduced by all distributions of principal thereon
prior to such Payment Date.
Principal Prepayment: Any payment of principal by a Mortgagor on a
--------------------
Mortgage Loan that is received in advance of its scheduled Due Date and is
not accompanied by an amount representing scheduled interest due on any date
or dates in any month or months subsequent to the month of prepayment.
Partial Principal Prepayments shall be applied by the Master Servicer in
accordance with the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made by a
----------------------------
Mortgagor of the entire principal balance of a Mortgage Loan.
Prospectus Supplement: Means the Prospectus Supplement dated ( )
---------------------
relating to the Notes.
Provident: The Provident Bank, an Ohio banking corporation, or its
---------
successor in interest.
Purchase Price: With respect to any Mortgage Loan required to be
--------------
purchased by the Seller pursuant to Section 2(a)(ii) or 2(d)(iv) hereof or
purchased at the option of the Master Servicer pursuant to Section 3(n), an
amount equal to the sum of (i) 100% of the unpaid principal balance of the
Mortgage Loan on the date of such purchase, and (ii) accrued interest thereon
at the applicable Mortgage Rate (or at the applicable Adjusted Mortgage Rate
if (x) the purchaser is the Master Servicer or (y) if the purchaser is the
Seller and the Seller is the Master Servicer) from the date through which
interest was last paid by the Mortgagor to the Due Date in the month in which
the Purchase Price is to be distributed to Securityholders.
Qualified Insurer: A mortgage guaranty insurance company duly qualified
-----------------
as such under the laws of the state of its principal place of business and
each state having jurisdiction over such insurer in connection with the
insurance policy issued by such insurer, duly authorized and licensed in such
states to transact a mortgage guaranty insurance business in such states and
to write the insurance provided by the insurance policy issued by it,
approved as a FNMA-approved mortgage insurer and having a claims paying
ability rating of at least "AA" or equivalent rating by a nationally
recognized statistical rating organization. Any replacement insurer with
respect to a Mortgage Loan must have at least as high a claims paying ability
rating as the insurer it replaces had on the Closing Date.
Rating Agency: Any nationally recognized statistical rating
-------------
organization, or its successor, that rated the Securities at the request of
Provident at the time of the initial issuance of the Securities. Initially,
(________) or (__________). If such organization or a successor is no longer
in existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, designated by Provident,
notice of which designation shall be given to the Trustee. References herein
to the highest short term unsecured rating category of a Rating Agency shall
mean (___) or better in the case of (__________)and (___) or better in the
case of (_____) and in the case of any other Rating Agency shall mean such
equivalent ratings. References herein to the highest long-term rating
category of a Rating Agency shall mean "(___)" in the case of (__________)
and (_____) in the case of (________) and in the case of any other Rating
Agency, such equivalent rating.
Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
-------------
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation,
plus (ii) interest at the Adjusted Net Mortgage Rate from the Due Date as to
which interest was last paid or advanced (and not reimbursed) to
Securityholders up to the Due Date in the month in which Liquidation Proceeds
are required to be distributed on the Stated Principal Balance of such
Liquidated Mortgage Loan from time to time, minus (iii) the Liquidation
Proceeds, if any, received during the month in which such liquidation
occurred, to the extent applied as recoveries of interest at the Adjusted Net
Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect
to each Mortgage Loan which has become the subject of a Deficient Valuation,
if the principal amount due under the related Mortgage Note has been reduced,
the difference between the principal balance of the Mortgage Loan outstanding
immediately prior to such Deficient Valuation and the principal balance of
the Mortgage Loan as reduced by the Deficient Valuation. With respect to
each Mortgage Loan which has become the subject of a Debt Service Reduction
and any Distribution Date, the amount, if any, by which the principal portion
of the related Scheduled Payment has been reduced.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
----------
amended.
Relief Act Reductions: With respect to any Distribution Date and any
---------------------
Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended
calendar month as a result of the application of the Relief Act, the amount,
if any, by which (i) interest collectible on such Mortgage Loan for the most
recently ended calendar month is less than (ii) interest accrued thereon for
such month pursuant to the Mortgage Note.
REO Property: A Mortgaged Property acquired by the Issuer through
------------
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan required to be
----------------
repurchased on any date pursuant hereto or purchased by the Master Servicer
pursuant to the Master Servicing Agreement, an amount equal to the sum of (i)
100% of the Asset Balance thereof (without reduction for any amounts charged
off) and (ii) unpaid accrued interest at the Loan Rate on the outstanding
principal balance thereof from the Due Date to which interest was last paid
by the Mortgagor to the first day of the month following the month of
purchase. No portion of any Repurchase Price shall be included in the
Excluded Amount for any Payment Date.
Request for Release: The Request for Release submitted by the Master
-------------------
Servicer to the Trustee, substantially in the form of Exhibits C and D, as
appropriate.
Required Insurance Policy: With respect to any Mortgage Loan, any
-------------------------
insurance policy that is required to be maintained from time to time under
this Agreement.
SAIF: Means the Savings Association Insurance Fund, or any successor
----
thereto.
S&P: Means Standard & Poor's Ratings Group, a division of McGraw-Hill
---
Inc. If S&P is designated as a Rating Agency in the Indenture, for purposes
of Section 8(c) the address for notices to S&P shall be Standard & Poor's
Ratings Group, 26 Broadway, 15th Floor, New York, New York 10004, Attention:
Mortgage Surveillance Monitoring, or such other address as S&P may hereafter
furnish to the Issuer and the Master Servicer.
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations promulgated thereunder.
Security: Any of the Certificates or Notes.
--------
Securityholder or Holder: Any Noteholder or any Certificateholder.
-------------- ------
Seller: (The Provident Bank), and its successors and assigns.
------
Servicer Advance: Means the meaning ascribed to such term in Section
----------------
3(h)(iv).
Servicing Account: Means the separate Eligible Account or Accounts
-----------------
created and maintained pursuant to Section 3(h)(ii).
Servicing Advances: All customary, reasonable and necessary "out of
------------------
pocket" costs and expenses incurred in the performance by the Master Servicer
of its servicing obligations, including, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property, (ii)
any expenses reimbursable to the Master Servicer pursuant to Section 3(n) and
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3(l).
Servicing Default: Means a servicing default as described under Section
-----------------
7(a) of this Agreement.
Servicing Fee: Means, as to each Mortgage Loan and any Distribution
-------------
Date, an amount equal to one month's interest at the applicable Servicing Fee
Rate on the Stated Principal Balance of such Mortgage Loan.
Servicing Fee Rate: Means, with respect to any Mortgage Loan, the per
------------------
annum rate set forth in the Mortgage Loan Schedule for such Mortgage Loan.
Servicing Officer: Any officer of the Master Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished
to the Trustee by the Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.
Subservicer: Any Person with whom the Master Servicer has entered into
-----------
a Subservicing Agreement as a Subservicer by the Master Servicer pursuant to
Section 3(b).
Subservicing Agreement: The written contract between the Master
----------------------
Servicer and any Subservicer relating to servicing and administration of
certain Mortgage Loans as provided in Section ( ) of the Master
Servicing Agreement.
Subservicing Fee: With respect to any Mortgage Loan and any Collection
----------------
Period, the fee retained monthly by the Subservicer (or, in the case of a
nonsubserviced Mortgage Loan, by the Master Servicer) equal to the product of
(i) the Subservicing Fee Rate divided by 12 and (ii) the aggregate Asset
Balance of the Mortgage Loans as of the first day of such Collection Period.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for
------------------------
a Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit C,
(i) have a Stated Principal Balance, after deduction of the principal portion
of the Scheduled Payment due in the month of substitution, not in excess of,
and not more than 10% less than the Stated Principal Balance of the Deleted
Mortgage Loan; (ii) be accruing interest at a rate no lower than and not more
than 1% per annum higher than, that of the Deleted Mortgage Loan; (iii) have
a Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (iv)
have a remaining term to maturity no greater than (and not more than one year
less than that of) the Deleted Mortgage Loan; and (v) comply with each
representation and warranty set forth in Section 2(d) hereof.
Substitution Adjustment Amount: The meaning ascribed to such term
------------------------------
pursuant to Section 2(d)(iv).
Trust Agreement: Means the Trust Agreement, dated as of ( ), between
---------------
Provident and the Owner Trustee, as such Trust Agreement may be amended or
supplemented from time to time.
Trustee: Shall mean (______________), and its successors and assigns
-------
or any successor trustee appointed pursuant to the terms of the Indenture.
Trustees: Shall mean the Trustee and the Owner Trustee.
--------
Trust Estate: Shall have the meaning ascribed to such term in the
------------
Indenture.
UCC: The Uniform Commercial Code, as amended from time to time, as in
---
effect in any specified jurisdiction.
Withdrawal Date: Means the ____ day of each month, or if such day is
---------------
not a Business Day, the next preceding Business Day.
2. Conveyance of Mortgage Loans; Representations and Warranties.
------------------------------------------------------------
(a) Conveyance of Mortgage Loans; Retention of Obligation to Fund
-------------------------------------------------------------
Advances Under Credit Line Agreements.
-------------------------------------
Provident, concurrently with the execution and delivery of this
Agreement, does hereby transfer, assign, set over and otherwise convey to the
Trust without recourse (subject to Sections 2(b)and 2(d) all of its right,
title and interest in and to (i) each Mortgage Loan, including its Asset
Balance (including all Additional Balances) and all collections in respect
thereof received on or after the Cut-off Date (excluding payments in respect
of accrued interest due prior to the Cut-off Date or due in the month of
____________); (ii) property that secured a Mortgage Loan that is acquired by
foreclosure or deed in lieu of foreclosure; (iii) (Provident's rights under
the hazard insurance policies,) (iv) the Collection Account (excluding net
earnings thereon); (vii) the Policy, (viii) the Payment Account and (ix) all
other assets included or to be included in the Trust for the benefit of
Securityholders; provided, however, neither the Trustee nor the Trust assumes
-------- -------
the obligation under any Credit Line Agreement that provides for the funding
of future advances to the Mortgagor thereunder, and neither the Trust nor the
Trustee shall be obligated or permitted to fund any such future advances.
Additional Balances shall be part of the related Asset Balance and are hereby
transferred to the Trust on the Closing Date pursuant to this Section 2(a),
and therefore part of the Trust property. In addition, on or prior to the
Closing Date, Provident shall cause the Credit Enhancer to deliver the Policy
to the Trustee for the benefit of the Securityholders. The foregoing
transfer, assignment, set-over and conveyance to the Trust shall be made to
the Trustee, on behalf of the Trust, and each reference in this Agreement to
such transfer, assignment, set-over and conveyance shall be construed
accordingly.
Provident agrees to take or cause to be taken such actions and execute
such documents (including without limitation the filing of all necessary
continuation statements for the UCC-1 financing statements filed in the State
of __________ (which shall have been filed within 90 days of the Closing
Date) describing the Cut-off Date Asset Balances and Additional Balances and
naming Provident as debtor and the Trustee as secured party and any
amendments to UCC-1 financing statements required to reflect a change in the
name or corporate structure of Provident or the filing of any additional
UCC-1 financing statements due to the change in the principal office of
Provident (within 90 days of any event necessitating such filing) as are
necessary to perfect and protect the Securityholders' and Credit Enhancer's
interests in each Cut-off Date Asset Balance and Additional Balances and the
proceeds thereof (other than maintaining possession by the Trustee of the
Mortgage Loans and the Mortgage Files, which possession will, subject to the
terms hereof, be maintained by the Master Servicer as custodian and bailee of
the Trustee).
In connection with such transfer and assignment by Provident, the Master
Servicer acknowledges that it is holding as custodian and bailee for the
Trustee the following documents or instruments (the "Related Documents") with
respect to each Mortgage Loan:
(A) the original Mortgage Note endorsed in blank;
(B) an original Assignment of Mortgage in blank in recordable
form;
(C) the original recorded Mortgage or, if, in connection with
any Mortgage Loan, the original recorded Mortgage with evidence of
recording thereon cannot be delivered on or prior to the Closing Date
because of a delay caused by the public recording office where such
original Mortgage has been delivered for recordation or because such
original Mortgage has been lost, Provident, shall deliver or cause to be
delivered to the Custodian, as agent for the Trustee, a true and correct
copy of such Mortgage, together with (i) in the case of a delay caused
by the public recording office, an Officer's Certificate of Provident
stating that such original Mortgage has been dispatched to the
appropriate public recording official or (ii) in the case of an original
Mortgage that has been lost, a certificate by the appropriate county
recording office where such Mortgage is recorded;
(D) if applicable, the original intervening assignments, if any
("Intervening Assignments"), with evidence of recording thereon, showing
a complete chain of title to the Mortgage from the originator to
Provident or, if any such original Intervening Assignment has not been
returned from the applicable recording office or has been lost, a true
and correct copy thereof, together with (i) in the case of a delay
caused by the public recording office, an Officer's Certificate of the
Seller stating that such original Intervening Assignment has been
dispatched to the appropriate public recording official for recordation
or (ii) in the case of an original Intervening Assignment that has been
lost, a certificate by the appropriate county recording office where
such Mortgage is recorded;
(E) either (1) for each Mortgage Loan with a Credit Limit in
excess of $_________, a title policy or (2) for all other Mortgage
Loans, either a title policy, a title search
or guaranty of title with respect to the related Mortgaged Property;
(F) the original of any guaranty executed in connection with the
Mortgage Note;
(G) the original of each assumption, modification, consolidation
or substitution agreement, if any, relating to the Mortgage Loan; and
(H) any security agreement, chattel mortgage or equivalent
instrument executed in connection with the Mortgage;
provided, however, that as to any Mortgage Loan, if (a) as evidenced by an
- -------- -------
Opinion of Counsel delivered to and in form and substance satisfactory to the
Trustee and the Credit Enhancer, (x) an optical image or other representation
of the related documents specified in clauses (i) through (viii) above are
enforceable in the relevant jurisdictions to the same extent as the original
of such document and (y) such optical image or other representation does not
impair the ability of an owner of such Mortgage Loan to transfer its interest
in such Mortgage Loan, and (b) the retention of such documents in such format
will not result in a reduction in the then current rating of the Notes or
Certificates, without regard to the Policy, such optical image or other
representation may be held by the Master Servicer, as custodian for the
Trustee or assignee in lieu of the physical documents specified above.
The Seller hereby confirms to the Trustee that it has caused the
portions of its electronic ledgers relating to the Mortgage Loans to be
clearly and unambiguously marked, and has made the appropriate entries in its
general accounting records, to indicate that such Mortgage Loans have been
transferred to the Trust at the direction of Provident. The Master Servicer
hereby confirms to the Trustee that it has clearly and unambiguously made
appropriate entries in its general accounting records indicating that such
Mortgage Loans constitute part of the Trust and are serviced by it on behalf
of the Trust in accordance with the terms hereof.
The parties hereto intend that the transaction set forth herein be a
sale by Provident to the Trust of all Provident's right, title and interest
in and to the Mortgage Loans and other property described above. In the
event the transaction set forth herein is deemed not to be a sale, Provident
hereby grants to the Trust a security interest in all of Provident's right,
title and interest in, to and under the Mortgage Loans whether now existing
or hereafter created, all monies due or to become due on the Mortgage Loans
and all proceeds of any thereof; and this Agreement shall constitute a
security agreement under applicable law.
Except as hereinafter provided, the Master Servicer shall be entitled to
maintain possession of all of the foregoing documents and instruments and
shall not be required to deliver any of them to the Trustee or the Owner
Trustee. In the event, however, that possession of any of such documents or
instruments is required by any Person (including any such Trustee) acting as
successor servicer pursuant to Section 6(d) or 7(b) in order to carry out the
duties of Master Servicer hereunder, then such successor shall be entitled to
request delivery, at the expense of the Master Servicer, of such documents or
instruments by the Master Servicer and to retain such documents or
instruments for servicing purposes; provided that the Trustee or such
--------
servicers shall maintain such documents at such offices as may be required by
any regulatory body having jurisdiction over such Mortgage Loans.
The Master Servicer's right to maintain possession of the documents
enumerated above shall continue so long as the long term unsecured debt of (
) is assigned ratings of at least "____" by
__________________ and "____" by _______________. At such time as the
condition specified in the preceding sentence is not satisfied, as promptly
as practicable but in no event more than __ days in the case of clause (i)
below and __ days in the case of clause (ii) below following the occurrence
of such event (a "Delivery Event"), the Master Servicer shall, at its
expense, (i) either (x) record an assignment of Mortgage in favor of the
Trustee (which may be a blanket assignment if permitted by applicable law) in
the appropriate real property or other records or (y) deliver to the Trustee
the assignment of such Mortgage in favor of the Trustee in form for
recordation, together with an Opinion of Counsel addressed to the Trustee and
the Credit Enhancer to the effect that recording is not required to protect
the Trustee's right, title and interest in and to the related Mortgage Loan
or, in case a court should recharacterize the sale of the Mortgage Loans as a
financing, to perfect a first priority security interest in favor of the
Trustee in the related Mortgage Loan, which Opinion of Counsel also shall be
reasonably acceptable to each of the Rating Agencies (as evidenced in
writing) and the Credit Enhancer, and (ii) unless an Opinion of Counsel,
reasonably acceptable to the Trustee, the Rating Agencies (as evidenced in
writing) and the Credit Enhancer, is delivered to the Trustee and the Credit
Enhancer to the effect that delivery of the Mortgage Files is not necessary
to protect the Trustee's right, title and interest in the related Mortgage
Loans; provided that the lack of delivery will not result in a reduction in
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the then current rating of the "Notes or Certificates", without regard to the
Policy, deliver the related Mortgage Files to the Trustee or to a custodian
located in the State of (California) appointed by the Trustee and acceptable
to the Rating Agencies and the Credit Enhancer to be held by the Custodian on
behalf of the Trustees in trust, upon the terms herein set forth, for the use
and benefit of all present and future Securityholders and the Custodian on
behalf of the Trustee shall retain possession thereof except to the extent
the Master Servicer requires any Mortgage Files for normal servicing as
contemplated by Section _____. The Trustee is hereby appointed as the
attorney-in-fact of the Master Servicer with the power to prepare, execute
and record Assignments of Mortgages in the event that the Master Servicer
fails to do so on a timely basis as provided in this paragraph.
Within 90 days following delivery, if any, of the Mortgage Files to the
Trustee pursuant to the preceding paragraph, the Trustee shall review each
such Mortgage File to ascertain that all required documents set forth in this
Section 2(a) have been executed and received, and that such documents relate
to the Mortgage Loans identified on the Mortgage Loan Schedule and in so
doing the Trustee may rely on the purported due execution and genuineness of
any signature thereon. If within such 90-day period the Trustee finds any
document constituting a part of a Mortgage File not to have been executed or
received or to be unrelated to the Mortgage Loans identified in said Mortgage
Loan Schedule or, if in the course of its review, the Trustee determines that
such Mortgage File is otherwise defective in any material respect, the
Trustee shall promptly upon the conclusion of its review notify the Issuer
and the Credit Enhancer, and the Seller shall have a period of 90 days after
such notice within which to correct or cure any such defect.
The Trustee shall have no responsibility for reviewing any Mortgage File
except as expressly provided in this Section 2(a). In reviewing any Mortgage
File pursuant to this Section, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, whether any Person executing any document is
authorized to do so or whether any signature thereon is genuine, but shall
only be required to determine whether a document has been executed, that it
appears to be what it purports to be, and, where applicable, that it purports
to be recorded.
(b) Acceptance by Trustee; Retransfer of Mortgage Loans.
---------------------------------------------------
The Trustee hereby acknowledges its receipt of the Policy and the
Mortgage Loans, and declares that the Trustee holds and will hold such
instrument, and to the extent that any documents are delivered to it pursuant
to Section 2(a), will hold such documents, and all amounts received by it
thereunder and hereunder, in trust, upon the terms herein set forth, for the
use and benefit of all present and future Securityholders and the Credit
Enhancer. If the time to cure any defect in respect of any Mortgage Loan of
which the Trustee has notified the Issuer and Provient, following the review
pursuant to Section 2(a) has expired or if at any time any loss is suffered
by the Trustee on behalf of the Securityholders or the Credit Enhancer, in
respect of any Mortgage Loan as a result of (i) a defect in any document
constituting a part of its Mortgage File or (ii) an Assignment of Mortgage to
the Trustee not having been recorded as required by Section 2(a),then on the
next succeeding Business Day upon satisfaction of the applicable conditions
described herein, all right, title and interest of the Trust in and to such
Mortgage Loan shall be deemed to be retransferred, reassigned and otherwise
reconveyed, without recourse, representation or warranty, to Provident on
such Business Day and the Asset Balance of such Mortgage Loan shall be
deducted from the Pool Balance; provided, however, that interest
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accrued on the Asset Balance of such Mortgage Loan to the end of the related
Collection Period shall be the property of the Trust. Upon receipt of any
Eligible Substitute Mortgage Loan or then as promptly as practicable
following such deemed transfer, the Trustee shall execute such documents and
instruments of transfer presented by the Seller, in each case without
recourse, representation or warranty, and take such other actions as shall
reasonably be requested by the Seller to effect such transfer by the Trust of
such Defective Mortgage Loan pursuant to this Section.
The Master Servicer, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall amend the
Mortgage Loan Schedule and make appropriate entries in its general account
records to reflect such transfer. The Master Servicer shall, following such
retransfer, appropriately mark its records to indicate that it is no longer
servicing such Mortgage Loan on behalf of the Trust. The Seller, promptly
following such transfer, shall appropriately mark its electronic ledger and
make appropriate entries in its general account records to reflect such
transfer.
As to any Eligible Substitute Mortgage Loan or Loans, the Seller shall,
if a Delivery Event has occurred, deliver to the Trustee with respect to such
Eligible Substitute Mortgage Loan or Loans such documents and agreements as
are required to be held by the Trustee in accordance with Section 2(a).
For any Collection Period during which the Seller substitutes one or more
Eligible Substitute Mortgage Loans, the Master Servicer shall determine
the Substitution Adjustment Deposit Amount which amount shall be deposited
by the Seller in the Collection Account at the time of substitution.
All amounts received in respect of the Eligible Substitute Mortgage Loan
or Loans during the Collection Period in which the circumstances giving
rise to such substitution occur shall not be a part of the Issuer and
shall not be deposited by the Master Servicer in the Collection Account.
All amounts received by the Master Servicer during the Collection
Period in which the circumstances giving rise to such substitution occur in
respect of any Defective Mortgage Loan so removed by the Issuer shall be
deposited by the Master Servicer in the Collection Account. Upon such
substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject
to the terms of this Agreement in all respects, and the Seller shall be
deemed to have made with respect to such Eligible Substitute Mortgage Loan or
Loans, as of the date of substitution, the covenants, representations and
warranties set forth in Section 2(d). The procedures applied by the Seller
in selecting each Eligible Substitute Mortgage Loan shall not be materially
adverse to the interests of the Trustees, the Securityholders and the Credit
Enhancer.
(c) Documents, Records and Funds in Possession of Master Servicer
-------------------------------------------------------------
to be Held for Trustee.
----------------------
(i) Notwithstanding any other provisions of this Agreement, the
Master Servicer shall transmit to the Trustee as required by this Agreement
all documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully
to the Trustees for any funds received by the Master Servicer or which
otherwise are collected by the Master Servicer as Liquidation Proceeds or
Insurance Proceeds in respect of any Mortgage Loan. All Mortgage Files and
funds collected or held by, or under the control of, the Master Servicer in
respect of any Mortgage Loans, whether from the collection of principal and
interest payments or from Liquidation Proceeds, including but not limited to,
any funds on deposit in the Collection Account, shall be held by the Master
Servicer for and on behalf of the Trustees and shall be and remain the sole
and exclusive property of the Trustees, subject to the applicable provisions
of this Agreement. The Master Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Collection Account, Payment Account or any Escrow Account, or any funds that
otherwise are or may become due or payable to the Trustee for the benefit of
the Securityholders, to any claim, lien, security interest, judgment, levy,
writ of attachment or other encumbrance, or assert by legal action or
otherwise any claim or right of setoff against any Mortgage File or any funds
collected on, or in connection with, a Mortgage Loan, except, however, that
the Master Servicer shall be entitled to set off against and deduct from any
such funds any amounts that are properly due and payable to the Master
Servicer under this Agreement.
(ii) The Master Servicer hereby acknowledges that concurrently with
the execution of this Agreement, the Trustee has acquired and holds a
security interest in the Trustee Mortgage Files and in all Mortgage Loans
represented by such Mortgage Files and in all funds now or hereafter held by,
or under the control of, the Master Servicer that are collected by the Master
Servicer in connection with the Mortgage Loans, whether as Scheduled
Payments, as Principal Prepayments, or as Liquidation Proceeds or Insurance
Proceeds, and in all proceeds of the foregoing and proceeds of proceeds (but
excluding any Master Servicing Fees, Servicing Fees, Trustee Fees and any
other amounts or reimbursements to which the Master Servicer is entitled
under this Agreement). The Master Servicer agrees that so long as the
Mortgage Loans are assigned to the Trustee, all Master Servicer Mortgage
Files and Trustee Mortgage Files (and any documents or instruments
constituting a part of such files), and such funds which come into the
possession or custody of, or which are subject to the control of, the Master
Servicer shall be held by the Master Servicer for and on behalf of the
Trustee as the Trustee's agent and bailee for purposes of perfecting the
Trustee's security interest therein, as provided by Section 9-305 of the
Uniform Commercial Code of the state in which such property is located, or by
other laws, as specified in Section _____ of the Indenture. The Master
Servicer hereby accepts such agency and acknowledges that the Trustee, as
secured party, will be deemed to have possession at all times of all Mortgage
Files and any other documents or instruments constituting a part of such
files, such funds and other items for purposes of Section 9-305 of the
Uniform Commercial Code of the state in which such property is held by the
Master Servicer.
(d) Representations, Warranties and Covenants of the Seller and
-----------------------------------------------------------
the Master Servicer.
-------------------
(i) (The Provident Bank), in its capacities as Seller and Master
Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, and by this reference incorporated herein, to Provident
and the Trustee, as of the Closing Date, or if so specified therein, as of
the Cut-off Date.
(ii) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to Provident and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(iii) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2(d)(ii) that materially
and adversely affects the interests of the Securityholders in any Mortgage
Loan, the party discovering such breach shall give prompt notice thereof to
the other parties. The Seller hereby covenants that within 90 days of the
earlier of its discovery or its receipt of written notice from any party of a
breach of any representation or warranty made pursuant to Section 2(d)(ii)
which materially and adversely affects the interests of the Securityholders
in any Mortgage Loan, it shall cure such breach in all material respects, and
if such breach is not so cured, shall, (i) if such 90-day period expires
prior to the second anniversary of the Closing Date, remove such Mortgage
Loan (a "Deleted Mortgage Loan") from the Issuer and substitute in its place
---------------------
a Substitute Mortgage Loan, in the manner and subject to the conditions set
forth in this Section; or (ii) repurchase the affected Mortgage Loan or
Mortgage Loans from the Trustee at the Purchase Price in the manner set forth
below; provided, however, that any such substitution pursuant to (i) above
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shall not be effected prior to the delivery to the Trustees of the Opinion of
Counsel required by (Section ____ {delivery of opinion}) hereof, if any, and
any such substitution pursuant to (i) above shall not be effected prior to
the additional delivery to the Trustee of a Request for Release substantially
in the form of Exhibit D and the Mortgage File for any such Substitute
Mortgage Loan. The Seller shall promptly reimburse the Master Servicer and
the Trustee for any expenses reasonably incurred by the Master Servicer or
any Trustee in respect of enforcing the remedies for such breach. With
respect to the representations and warranties described in this Section which
are made to the best of the Seller's knowledge, if it is discovered by either
Provident, the Seller or any Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the interests of
the Securityholders therein, notwithstanding the Seller's lack of knowledge
with respect to the substance of such representation or warranty, such
inaccuracy shall be deemed a breach of the applicable representation or
warranty.
With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee for the benefit of the Securityholders the Mortgage
Note, the Mortgage, the related assignment of the Mortgage, and such other
documents and agreements as are required by Section 2(a), with the Mortgage
Note endorsed and the Mortgage assigned as required by Section 2(a). No
substitution is permitted to be made in any calendar month after the
Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of
the Issuer and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Securityholders will include the monthly payment due on any Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Master
Servicer shall amend the Mortgage Loan Schedule for the benefit of the
Securityholders to reflect the removal of such Deleted Mortgage Loan and the
substitution of the Substitute Mortgage Loan or Loans and the Master Servicer
shall deliver the amended Mortgage Loan Schedule to the Trustees. Upon such
substitution, the Substitute Mortgage Loan or Loans shall be subject to the
terms of this Agreement in all respects, and the Seller shall be deemed to
have made with respect to such Substitute Mortgage Loan or Loans, as of the
date of substitution, the representations and warranties made pursuant to
Section 2(d)(ii) with respect to such Mortgage Loan. Upon any such
substitution and the deposit to the Collection Account of the amount required
to be deposited therein in connection with such substitution as described in
the following paragraph, the Trustee shall release the Mortgage File held for
the benefit of the Securityholders relating to such Deleted Mortgage Loan to
the Seller and shall execute and deliver at the Seller's direction such
instruments of transfer or assignment prepared by the Seller, in each case
without recourse, as shall be necessary to vest title in the Seller, or its
designee, the Trustee's interest in any Deleted Mortgage Loan substituted for
pursuant to this Section 2(d).
For any month in which the Seller substitutes one or more Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer
will determine the amount (if any) by which the aggregate principal balance
of all such Substitute Mortgage Loans as of the date of substitution is less
than the aggregate Stated Principal Balance of all such Deleted Mortgage
Loans (after application of the scheduled principal portion of the monthly
payments due in the month of substitution). The amount of such shortage (the
"Substitution Adjustment Amount") plus an amount equal to the aggregate of
------------------------------
any unreimbursed Advances with respect to such Deleted Mortgage Loans shall
be deposited in the Collection Account by the Seller on or before the Payment
Account Deposit Date for the Distribution Date in the month succeeding the
calendar month during which the related Mortgage Loan became required to be
purchased or replaced hereunder.
In the event that the Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Collection Account pursuant
to Section 3(h) on or before the Payment Account Deposit Date for the
Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and
upon such deposit of the Purchase Price, the delivery of the Opinion of
Counsel required by Section 2(d) and receipt of a Request for Release in the
form of Exhibit D hereto, the Trustee shall release the related Mortgage File
held for the benefit of the Securityholders to such Person, and the Trustee
shall execute and deliver at such Person's direction such instruments of
transfer or assignment prepared by such Person, in each case without
recourse, as shall be necessary to transfer title from the Trustee. It is
understood and agreed that the obligation under this Agreement of any Person
to cure, repurchase or replace any Mortgage Loan as to which a breach has
occurred and is continuing shall constitute the sole remedy against such
Persons respecting such breach available to Securityholders, Provident or the
Trustees on their behalf.
The representations and warranties made pursuant to this Section 2(d)
shall survive delivery of the respective Mortgage Files to the Trustee for
the benefit of the Securityholders.
(e) Covenants of the Master Servicer.
--------------------------------
The Master Servicer hereby covenants to Provident and the Trustees as
follows:
(i) the Master Servicer shall comply in the performance of
its obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy; and
(ii) no written information, certificate of an officer,
statement furnished in writing or written report delivered to Provident,
any affiliate of Provident or any Trustee and prepared by the Master
Servicer pursuant to this Agreement will contain any untrue statement of
a material fact or omit to state a material fact necessary to make such
information, certificate, statement or report not misleading.
(f) Covenants of Provident.
----------------------
Provident hereby covenants that, except for the transfer under the
Indenture, Provident will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any
Lien on any
Mortgage Loan, whether now existing or hereafter created, or any
interest therein; Provident will notify the Trustee of the existence of
any Lien on any Mortgage Loan immediately upon discovery thereof; and
Provident will defend the right, title and interest of the Trust in, to
and under the Mortgage Loans, whether now existing or hereafter created,
against all claims of third parties claiming through or under Provident;
provided, however, that nothing in this Section 2(e) shall prevent or
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be deemed to prohibit Provident from suffering to exist upon any of the
Mortgage Loans any Liens for municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at the
time be due and payable or if Provident shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
3. Administration and Servicing of Mortgage Loans.
----------------------------------------------
The parties agree that, subject to the provisions of Section 7 hereof,
the Master Servicer shall service the Mortgage Loans in the manner and on the
terms and conditions set forth below:
(a) Master Servicer to Service Mortgage Loans.
-----------------------------------------
(i) The Master Servicer shall service and administer the Mortgage
Loans in a manner consistent with the terms of this Agreement and with
general industry practice and shall have full power and authority,
acting alone or through a subservicer, to do any and all things in
connection with such servicing and administration which it may deem
necessary or desirable, it being understood, however, that the Master
Servicer shall at all times remain responsible to the Trustees, the
Securityholders and the Credit Enhancer for the performance of its
duties and obligations hereunder in accordance with the terms hereof.
Any amounts received by any subservicer in respect of a Mortgage Loan
shall be deemed to have been received by the Master Servicer whether or
not actually received by it. Without limiting the generality of the
foregoing, the Master Servicer shall continue, and is hereby authorized
and empowered by the Trustee, to execute and deliver, on behalf of
itself, the Securityholders and the Trustee, or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect
to the Mortgage Loans and with respect to the Mortgaged Properties. The
Trustee shall, upon the written request of a Servicing Officer, furnish
the Master Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Master Servicer to carry out
its servicing and administrative duties hereunder.
The Master Servicer in such capacity may also consent to the placing of
a lien senior to that of any Mortgage on the related Mortgaged Property,
provided that
(x) such Mortgage succeeded to a first lien position after
the related Mortgage Loan was conveyed to the Trust and,
immediately following the placement of such senior lien, such
Mortgage is in a second lien position and the outstanding principal
amount of the mortgage loan secured by such subsequent senior lien
is no greater than the outstanding principal amount of the senior
mortgage loan secured by the Mortgaged Property as of the date the
related Mortgage Loan was originated; or
(y) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the Cut-off Date and the new senior lien
secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount of the replacement first
mortgage loan immediately following such refinancing is not greater
than the outstanding principal amount of such existing first
mortgage loan at the date of origination of such Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
- -------- -------
for negative amortization. Notwithstanding the foregoing, the Master
Servicer can consent to the placing of liens senior to that of a Mortgage on
the related Mortgaged Property which have a principal balance in excess of
the principal balance of the senior lien it replaces on Mortgage Loans having
in the aggregate Asset Balances not in excess of ___% of the Cut-off Date
Pool Balance; provided, however, that, with respect to Mortgage Loans which
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as of the Cut-off Date had Combined Loan-to-Value Ratios in excess of ___%,
the aggregate Asset Balance of such Mortgage Loans with respect to which the
senior lien may be so modified shall not exceed _____% of the Cut-off Date
Pool Balance (such ___% and _____% herein referred to as the "Increased
Senior Lien Limitation"). Any such increase to the principal balance of the
senior lien shall not exceed the greater of $_______ and _____% of the
principal balance of the senior lien prior to such increase.
The Master Servicer may also, without prior approval from the Rating
Agencies or the Credit Enhancer, increase the Credit Limits on Mortgage Loans
provided that (i) new appraisals are obtained and the Combined Loan-to-Value
Ratios of the Mortgage Loans after giving effect to such increase are less
than or equal to the Combined Loan-to-Value Ratios or the Mortgage Loans as
of the Cut-off Date and (ii) such increases are consistent with the Master
Servicer's underwriting policies. In addition, the Master Servicer may
increase the Credit Limits on Mortgage Loans having aggregate balances of up
to ____% of the aggregate Cut-off Date Pool Balance, without obtaining new
appraisals provided that (i) the increase in the Credit Limit does not cause
the Combined Loan-to-Value Ratios of the Mortgage Loans to exceed _____% and
(ii) the increase is consistent with the Master Servicer's underwriting
policies.
Furthermore, the Master Servicer may, without prior approval from the
Rating Agencies and the Credit Enhancer solicit Mortgagors for a reduction in
Loan Rates; provided that the Master Servicer can only reduce such Loan
--------
Rates on up to ____% of the Mortgage Loans by Cut-off Date Pool Balance. Any
such solicitations shall not result in a reduction in the weighted average
Gross Margin of the Mortgage Loans in the pool by more than ____ basis points
taking into account any such prior reductions.
In addition, the Master Servicer may agree to changes in the terms of a
Mortgage Loan at the request of the Mortgagor provided that such changes
--------
(i) do not materially and adversely affect the interests of Securityholders
or the Credit Enhancer and (ii) are consistent with prudent and customary
business practice as evidenced by a certificate signed by a Servicing Officer
delivered to the Trustee and the Credit Enhancer.
In addition to the foregoing, the Master Servicer may solicit Mortgagors
to change any other terms of the related Mortgage Loans, provided that such
--------
changes (i) do not materially and adversely affect the interest of
Securityholders or the Credit Enhancer and (ii) are consistent with prudent
and customary business practice as evidenced by a certificate signed by a
Servicing Officer delivered to the Trustee and the Credit Enhancer. Nothing
herein shall limit the right of the Master Servicer to solicit Mortgagors
with respect to new loans (including mortgage loans) that are not Mortgage
Loans.
The relationship of the Master Servicer (and of any successor to the
Master 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.
(ii) In the event that the rights, duties and obligations of the
Master Servicer are terminated hereunder, any successor to the Master
Servicer in its sole discretion may, to the extent permitted by
applicable law, terminate the existing subservicer arrangements with any
subservicer
or assume the terminated Master Servicer's rights under such
subservicing arrangements which termination or assumption will not
violate the terms of such arrangements.
(b) Subservicing; Enforcement of the Obligations of Servicers.
---------------------------------------------------------
(i) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement;
provided, however, that such subservicing arrangement and the terms of the
- -------- -------
related subservicing agreement must provide for the servicing of such
Mortgage Loans in a manner consistent with the servicing arrangements
contemplated hereunder. Unless the context otherwise requires, references in
this Agreement to actions taken or to be taken by the Master Servicer in
servicing the Mortgage Loans include actions taken or to be taken by a
Subservicer on behalf of the Master Servicer. Notwithstanding the provisions
of any subservicing agreement, any of the provisions of this Agreement
relating to agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Master Servicer shall remain obligated and liable to Provident, the
Trustees and the Securityholders for the servicing and administration of the
Mortgage Loans in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue of such subservicing
agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as
if the Master Servicer alone were servicing and administering the Mortgage
Loans. All actions of each Subservicer performed pursuant to the related
subservicing agreement shall be performed as an agent of the Master Servicer
with the same force and effect as if performed directly by the Master
Servicer.
(ii) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect
to the Mortgage Loans that are received by a Subservicer regardless of
whether such payments are remitted by the Subservicer to the Master Servicer.
(iii) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustees and the Securityholders, shall use
its best reasonable efforts to enforce the obligations of each Subservicer
under the related Subservicing Agreement, to the extent that the non-
performance of any such obligation would have material and adverse effect on
a Mortgage Loan. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Subservicing Agreements and the pursuit
of other appropriate remedies, shall be in such form and carried out to such
an extent and at such time as the Master Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense,
and shall be reimbursed therefor only (i) from a general recovery resulting
from such enforcement to the extent, if any, that such recovery exceeds all
amounts due in respect of the related Mortgage Loan or (ii) from a specific
recovery of costs, expenses or attorneys fees against the party against whom
such enforcement is directed.
(c) Successor Servicers.
-------------------
The Master Servicer shall be entitled to terminate any Subservicing
Agreement that may exist in accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by virtue of this
Agreement; provided, however, that in the event of termination of any
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Subservicing Agreement by the Master Servicer or the Subservicer, the Master
Servicer shall either act as servicer of the related Mortgage Loan or enter
into a Subservicing Agreement with a successor Subservicer which will be
bound by the terms of the related Subservicing Agreement. If the Master
Subservicer or any affiliate of the Master Servicer acts as Subservicer, it
will not assume liability for the representations and warranties of the
Subservicer which it replaces. If the Master Subservicer enters into a
Subservicing Agreement with a successor Subservicer, the Master Servicer
shall use reasonable efforts to have the successor Subservicer assume
liability for the representations and warranties made by the terminated
Subservicer in respect of the related Mortgage Loans and, in the event of any
such assumption by the successor Subservicer, the Master Servicer may, in the
exercise of its business judgment, release the terminated Servicer from
liability for such representations and warranties.
(d) Liability of the Master Servicer.
--------------------------------
Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer or a Subservicer or references to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and
liable to the Trustees and Securityholders for the servicing and
administering of the Pledged Mortgages in accordance with the provisions of
Section 3(a) without diminution of such obligation or liability by virtue of
such Subservicing Agreements or arrangements or by virtue of indemnification
from the Subservicer and to the same extent and under the same terms and
conditions as if the Master Servicer alone were servicing and administering
the Pledged Mortgages. The Master Servicer shall be entitled to enter into
any agreement with a Subservicer for indemnification of the Master Servicer
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification.
(e) No Contractual Relationship Between Subservicers and the
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Trustees.
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Any Servicing Agreement that may be entered into and any other
transactions or services relating to the Mortgage Loans involving a Servicer
in its capacity as such and not as an originator shall be deemed to be
between the Subservicer and the Master Servicer alone and the Trustees and
Securityholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer in
its capacity as such except as set forth in Section 3(g).
(f) Rights of Provident and the Trustees in Respect of the Master
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Servicer.
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Provident may, but is not obligated to, enforce the obligations of the
Master Servicer hereunder and may, but is not obligated to, perform, or cause
a designee to perform, any defaulted obligation of the Master Servicer
hereunder and in connection with any such defaulted obligation to exercise
the related rights of the Master Servicer hereunder; provided that the Master
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Servicer shall not be relieved of any of its obligations hereunder by virtue
of such performance by Provident or its designee. Neither the Trustees nor
Provident shall have any responsibility or liability for any action or
failure to act by the Master Servicer nor shall the Trustees or Provident be
obligated to supervise the performance of the Master Servicer hereunder or
otherwise.
(g) Trustee to Act as Master Servicer.
---------------------------------
In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of an Event of Default),
the Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that
the Trustee shall not be (i) liable for losses of the Master Servicer
pursuant to Section 3(l) hereof or any acts or omissions of the predecessor
Master Servicer hereunder), (ii) obligated to make Advances if it is
prohibited from doing so by applicable law, (iii) obligated to effectuate
repurchases or substitutions of Mortgage Loans hereunder including, but not
limited to, repurchases or substitutions of Mortgage Loans pursuant to
Section 2(c)(ii) or 2(d) hereof, (iv) responsible for expenses of the Master
Servicer pursuant to Section 2(d) or (v) deemed to have made any
representations and warranties of the Master Servicer hereunder). Any such
assumption shall be subject to Section 7(b) hereof. If the Master Servicer
shall for any reason no longer be the Master Servicer (including by reason of
any Event of Default), the Trustee or its successor shall succeed to any
rights and obligations of the Master Servicer under each subservicing
agreement.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party all documents
and records relating to each subservicing agreement or substitute
subservicing agreement and the Mortgage Loans then being serviced thereunder
and an accounting of amounts collected or held by it and otherwise use its
best efforts to effect the orderly and efficient transfer of the substitute
subservicing agreement to the assuming party.
(h) Collection of Mortgage Loan Payments; Collection Accounts;
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Payment Account.
---------------
(i) The Master Servicer shall make reasonable efforts in
accordance with the customary and usual standards of practice of prudent
mortgage servicers to collect all payments called for under the terms and
provisions of the Mortgage Loans to the extent such procedures shall be
consistent with this Agreement and the terms and provisions of any related
Required Insurance Policy. Consistent with the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or any
prepayment charge or penalty interest in connection with the prepayment of a
Mortgage Loan and (ii) extend the due dates for payments due on a Mortgage
Note for a period not greater than 180 days; provided, however, that the
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Master Servicer cannot extend the maturity of any such Mortgage Loan past the
date on which the final payment is due on the latest maturing Mortgage Loan
as of the Cut-off Date. In the event of any such arrangement, the Master
Servicer shall make Advances on the related Mortgage Loan in accordance with
the provisions of Section 4 during the scheduled period in accordance with
the amortization schedule of such Mortgage Loan without modification thereof
by reason of such arrangements. The Master Servicer shall not be required to
institute or join in litigation with respect to collection of any payment
(whether under a Mortgage, Mortgage Note or otherwise or against any public
or governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.
(ii) The Master Servicer shall establish and maintain a Collection
Account into which the Master Servicer shall deposit or cause to be deposited
on a daily basis within one Business Day of receipt, except as otherwise
specifically provided herein, the following payments and collections remitted
by Subservicers or received by it in respect of Mortgage Loans subsequent to
the Cut-off Date (other than in respect of principal and interest due on the
Mortgage Loans on or before the Cut-off Date) and the following amounts
required to be deposited hereunder:
(A) all collections on account of principal on the Mortgage Loans;
(B) all collections on account of interest on the Mortgage Loans,
net of the related Master Servicing Fee;
(C) all Insurance Proceeds and Liquidation Proceeds, other than
proceeds to be applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures;
(D) any amount required to be deposited by the Master Servicer
pursuant to Section 3(h)(v) in connection with any losses on Permitted
Investments;
(E) any amounts required to be deposited by the Master Servicer
pursuant to Section 3(l)(ii), 3(l)(iv), and in respect of net monthly
rental income from REO Property pursuant to Section 3(n) hereof;
(F) all Substitution Adjustment Amounts;
(G) all Advances made by the Master Servicer pursuant to Section
4; and
(H) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges or assumption fees, if collected, need not be remitted
by the Master Servicer. In the event that the Master Servicer shall remit
any amount not required to be remitted, it may at any time withdraw or direct
the institution maintaining the Collection Account to withdraw such amount
from the Collection Account, any provision herein to the contrary
notwithstanding. Such withdrawal or direction may be accomplished by
delivering written notice thereof to the Trustee or such other institution
maintaining the Collection Account which describes the amounts deposited in
error in the Collection Account. The Master Servicer shall maintain adequate
records with respect to all withdrawals made pursuant to this Section. All
funds deposited in the Collection Account shall be held in trust for the
Securityholders until withdrawn in accordance with Section 3(k).
(iii) The Trustee shall establish and maintain, on behalf of
the Securityholders, the Payment Account. The Trustee shall, promptly upon
receipt, deposit in the Payment Account and retain therein the following:
(A) the aggregate amount remitted by the Master Servicer to the
Trustee pursuant to Section 3(k)(i)(I);
(B) any amount deposited by the Master Servicer pursuant to
Section 3(h)(iv) in connection with any losses on Permitted Investments;
and
(C) any other amounts deposited hereunder which are required to be
deposited in the Payment Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw
such amount from the Payment Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an
Officer's Certificate to the Trustee which describes the amounts deposited in
error in the Payment Account. All funds deposited in the Payment Account
shall be held by the Trustee in trust for the Securityholders until disbursed
in accordance with this Agreement or withdrawn in accordance with Section
3(k). In no event shall the Trustee incur liability for withdrawals from the
Payment Account at the direction of the Master Servicer.
(iv) Each institution at which the Collection Account or the
Payment Account is maintained shall invest the funds therein as directed in
writing by the Master Servicer in Permitted Investments, which shall mature
not later than (i) in the case of the Collection Account, the second Business
Day next preceding the related Payment Account Deposit Date (except that if
such Permitted Investment is an obligation of the institution that maintains
such account, then such Permitted Investment shall mature not later than the
Business Day next preceding such Payment Account Deposit Date) and (ii) in
the case of the Payment Account, the Business Day next preceding the
Distribution Date (except that if such Permitted Investment is an obligation
of the institution that maintains such fund or account, then such Permitted
Investment shall mature not later than such Distribution Date) and, in each
case, shall not be sold or disposed of prior to its maturity. All such
Permitted Investments shall be made in the name of the Trustee, for the
benefit of the Securityholders. All income and gain net of any losses
realized from any such investment of funds on deposit in the Collection
Account or the Payment Account shall be for the benefit of the Master
Servicer as servicing compensation and shall be remitted to it monthly as
provided herein. The amount of any realized losses in the Collection Account
or the Payment Account incurred in any such account in respect of any such
investments shall promptly be deposited by the Master Servicer in the
Collection Account or paid to the Trustee for deposit into the Payment
Account, as applicable. The Trustee in its fiduciary capacity shall not be
liable for the amount of any loss incurred in respect of any investment or
lack of investment of funds held in the Collection Account or the Payment
Account and made in accordance with this Section 3(h).
(v) The Master Servicer shall give notice to the Trustee, the
Seller, each Rating Agency and Provident of any proposed change of the
location of the Collection Account prior to any change thereof. The Trustee
shall give notice to the Master Servicer, the Seller, each Rating Agency and
Provident of any proposed change of the location of the Payment Account prior
to any change thereof.
(i) Collection of Taxes, Assessments and Similar Items; Escrow
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Accounts.
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(i) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain
one or more accounts (each, an "Escrow Account") and deposit and retain
therein all collections from the Mortgagors (or advances by the Master
Servicer) for the payment of taxes, assessments, hazard insurance premiums or
comparable items for the account of the Mortgagors. Nothing herein shall
require the Master Servicer to compel a Mortgagor to establish an Escrow
Account in violation of applicable law.
(ii) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable items,
to reimburse the Master Servicer out of related collections for any payments
made pursuant to Sections 3(a) hereof (with respect to taxes and assessments
and insurance premiums) and 3(l) hereof (with respect to hazard insurance),
to refund to any Mortgagors any sums determined to be overages, to pay
interest, if required by law or the terms of the related Mortgage or Mortgage
Note, to Mortgagors on balances in the Escrow Account or to clear and
terminate the Escrow Account at the termination of this Agreement in
accordance with Section 8(a) hereof. The Escrow Accounts shall not be a part
of the Issuer.
(iii) The Master Servicer shall advance any payments referred
to in Section 3(i)(i) that are not timely paid by the Mortgagors on the date
when the tax, premium or other cost for which such payment is intended is
due, but the Master Servicer shall be required so to advance only to the
extent that such advances, in the good faith judgment of the Master Servicer,
will be recoverable by the Master Servicer out of Insurance Proceeds,
Liquidation Proceeds or otherwise.
(j) Access to Certain Documentation and Information Regarding the
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Mortgage Loans.
--------------
The Master Servicer shall afford Provident and the Trustee reasonable
access to all records and documentation regarding the Mortgage Loans and all
accounts, insurance information and other matters relating to this Agreement,
such access being afforded without charge, but only upon reasonable request
and during normal business hours at the office designated by the Master
Servicer.
Upon reasonable advance notice in writing, the Master Servicer will
provide to each Securityholder which is a savings and loan association, bank
or insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Securityholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates;
provided that the Master Servicer shall be entitled to be reimbursed by each
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such Securityholder for actual expenses incurred by the Master Servicer in
providing such reports and access.
(k) Permitted Withdrawals from the Note Account.
-------------------------------------------
(i) The Master Servicer may from time to time make withdrawals
from the Collection Account for the following purposes:
(A) to pay to the Master Servicer (to the extent not previously
retained by the Master Servicer) the servicing compensation to which it
is entitled pursuant to Section 5, and to pay to the Master Servicer, as
additional servicing compensation, earnings on or investment income with
respect to funds in or credited to the Collection Account;
(B) to reimburse the Master Servicer for unreimbursed Advances
made by it, such right of reimbursement pursuant to this subclause (ii)
being limited to amounts received on the Mortgage Loan(s) in respect of
which any such Advance was made;
(C) to reimburse the Master Servicer for any Nonrecoverable
Advance previously made;
(D) to reimburse the Master Servicer for Insured Expenses from the
related Insurance Proceeds;
(E) to reimburse the Master Servicer for (a) unreimbursed
Servicing Advances, the Master Servicer's right to reimbursement
pursuant to this clause (a) with respect to any Mortgage Loan being
limited to amounts received on such Mortgage Loan(s) which represent
late recoveries of the payments for which such advances were made
pursuant to Section 3(a) or Section 3(i) and (b) for unpaid Master
Servicing Fees as provided in Section 3(n) hereof;
(F) to pay to the purchaser, with respect to each Mortgage Loan or
property acquired in respect thereof that has been purchased pursuant to
Section 2(c)(ii), 2(d) or 3(n), all amounts received thereon after the
date of such purchase;
(G) to reimburse the Seller, the Master Servicer or Provident for
expenses incurred by any of them and reimbursable pursuant to Section
6(c) hereof;
(H) to withdraw any amount deposited in the Collection Account and
not required to be deposited therein;
(I) on or prior to the Payment Account Deposit Date, to withdraw
an amount equal to the related Available Funds and the Trustees Fees for
such Distribution Date and remit
such amount to the Trustee for deposit in the Payment Account; and
(J) to clear and terminate the Collection Account upon termination
of this Agreement pursuant to Section 8 (a) hereof.
The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi). Prior to making any withdrawal from the Collection
Account pursuant to subclause (iii), the Master Servicer shall deliver to the
Trustee an Officer's Certificate of a Servicing Officer indicating the amount
of any previous Advance determined by the Master Servicer to be a
Nonrecoverable Advance and identifying the related Mortgage Loans(s), and
their respective portions of such Nonrecoverable Advance.
(ii) The Trustee shall withdraw funds from the Payment Account for
distributions to Securityholders in the manner specified in this Agreement
(and to withhold from the amounts so withdrawn, the amount of any taxes that
it is authorized to withhold pursuant to the last paragraph of (Section
8.11/trustee)). In addition, the Trustee may from time to time make
withdrawals from the Payment Account for the following purposes:
(A) to pay to itself the Trustee Fee for the related Distribution
Date;
(B) to pay to the Master Servicer as additional servicing
compensation earnings on or investment income with respect to funds in
the Payment Account;
(C) to withdraw and return to the Master Servicer any amount
deposited in the Payment Account and not required to be deposited
therein; and
(D) to clear and terminate the Payment Account upon termination of
the Agreement pursuant to 8(a) hereof.
(l) Maintenance of Hazard Insurance; Maintenance of Primary
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Insurance Policies.
------------------
(i) The Master Servicer shall cause to be maintained, for each
Mortgage Loan, hazard insurance with extended coverage in an amount that is
at least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan or (ii) the greater of (y) the
outstanding principal balance of the Mortgage Loan and (z) an amount such
that the proceeds of such policy shall be sufficient to prevent the
Mortgagor and/or the mortgagee from becoming a co-insurer. Each such
policy of standard hazard insurance shall contain, or have an accompanying
endorsement that contains, a standard mortgagee clause. Any amounts
collected by the Master Servicer under any such policies (other than the
amounts to be applied to the restoration or repair of the related
Mortgaged Property or amounts released to the Mortgagor in accordance
with the Master Servicer's normal servicing
procedures) shall be deposited in the Collection Account. Any cost incurred
by the Master Servicer in maintaining any such insurance shall not, for the
purpose of calculating monthly distributions to the Securityholders or
remittances to the Trustee for their benefit, be added to the principal
balance of the Mortgage Loan, notwithstanding that the terms of the Mortgage
Loan so permit. Such costs shall be recoverable by the Master Servicer out
of late payments by the related Mortgagor or out of Liquidation Proceeds to
the extent permitted by Section 3(k) hereof. It is understood and agreed
that no earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired in respect of a Mortgage other
than pursuant to such applicable laws and regulations as shall at any time be
in force and as shall require such additional insurance. If the Mortgaged
Property is located at the time of origination of the Mortgage Loan in a
federally designated special flood hazard area and such area is participating
in the national flood insurance program, the Master Servicer shall cause
flood insurance to be maintained with respect to such Mortgage Loan. Such
flood insurance shall be in an amount equal to the least of (i) the original
principal balance of the related Mortgage Loan, (ii) the replacement value of
the improvements which are part of such Mortgaged Property, and (iii) the
maximum amount of such insurance available for the related Mortgaged Property
under the national flood insurance program.
(ii) In the event that the Master Servicer shall obtain and
maintain a blanket policy insuring against hazard losses on all of the
Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section, it being
understood and agreed that such policy may contain a deductible clause on
terms substantially equivalent to those commercially available and maintained
by comparable servicers. If such policy contains a deductible clause, the
Master Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property a policy complying with the first sentence
of this Section, and there shall have been a loss that would have been
covered by such policy, deposit in the Collection Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
In connection with its activities as Master Servicer of the Mortgage Loans,
the Master Servicer agrees to present, on behalf of itself, Provident, and
the Trustee for the benefit of the Securityholders, claims under any such
blanket policy.
(iii) The Master Servicer shall not take any action which would
result in non-coverage under any applicable Primary Insurance Policy of any
loss which, but for the actions of the Master Servicer, would have been
covered thereunder. The Master Servicer shall not cancel or refuse to renew
any such Primary Insurance Policy that is in effect at the date of the
initial issuance of the Notes and the Certificates and is required to be kept
in force hereunder unless the replacement Primary Insurance Policy for such
canceled or non-renewed policy is maintained with a Qualified Insurer. The
Master Servicer shall not be required to maintain any Primary Insurance
Policy with respect to any Mortgage Loan with a Loan-to-Value Ratio less than
or equal to 80% as of any date of determination or, based on a new appraisal,
the principal balance of such Mortgage Loan represents 80% or less of the new
appraised value. The Master Servicer agrees to effect the timely payment of
the premiums on each Primary Insurance Policy, and such costs not otherwise
recoverable shall be recoverable by the Master Servicer from the related
liquidation proceeds.
(iv) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on behalf of itself,
the Trustee and Securityholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action as
shall be necessary to permit recovery under any Primary Insurance Policies
respecting defaulted Mortgage Loans. Any amounts collected by the Master
Servicer under any Primary Insurance Policies shall be deposited in the
Collection Account.
(m) Enforcement of Due-On-Sale Clauses; Assumption Agreements.
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(i) Except as otherwise provided in this Section, when any
property subject to a Mortgage has been conveyed by the Mortgagor, the Master
Servicer shall to the extent that it has knowledge of such conveyance,
enforce any due-on-sale clause contained in any Mortgage Note or Mortgage, to
the extent permitted under applicable law and governmental regulations, but
only to the extent that such enforcement will not adversely affect or
jeopardize coverage under any Required Insurance Policy. Notwithstanding the
foregoing, the Master Servicer is not required to exercise such rights with
respect to a Mortgage Loan if the Person to whom the related Mortgaged
Property has been conveyed or is proposed to be conveyed satisfies the terms
and conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a condition to
such transfer. In the event that the Master Servicer is prohibited by law
from enforcing any such due-on-sale clause, or if coverage under any Required
Insurance Policy would be adversely affected, or if nonenforcement is
otherwise permitted hereunder, the Master Servicer is authorized, subject to
Section 3(m)(ii), to take or enter into an assumption and modification
agreement from or with the person to whom such property has been or is about
to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, unless prohibited by applicable state law, the Mortgagor
remains liable thereon, provided that the Mortgage Loan shall continue to be
covered (if-so covered before the Master Servicer enters such agreement) by
the applicable Required Insurance Policies. The Master Servicer, subject to
Section 3(m)(ii), is also authorized with the prior approval of the insurers
under any Required Insurance Policies to enter into a substitution of
liability agreement with such Person, pursuant to which the original
Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the Mortgage Note. Notwithstanding the
foregoing, the Master Servicer shall not be deemed to be in default under
this Section by reason of any transfer or assumption which the Master
Servicer reasonably believes it is restricted by law from preventing, for any
reason whatsoever.
(ii) Subject to the Master Servicer's duty to enforce any
due-on-sale clause to the extent set forth in Section 3(m)(i) hereof, in any
case in which a Mortgaged Property has been conveyed to a Person by a
Mortgagor, and such Person is to enter into an assumption agreement or
modification agreement or supplement to the Mortgage Note or Mortgage that
requires the signature of the Trustee, or if an instrument of release signed
by the Trustee is required releasing the Mortgagor from liability on the
Mortgage Loan, the Master Servicer shall prepare and deliver or cause to be
prepared and delivered to the Trustee for signature and shall direct, in
writing, the Trustee to execute the assumption agreement with the Person to
whom the Mortgaged Property is to be conveyed and such modification agreement
or supplement to the Mortgage Note or Mortgage or other instruments as are
reasonable or necessary to carry out the terms of the Mortgage Note or
Mortgage or otherwise to comply with any applicable laws regarding
assumptions or the transfer of the Mortgaged Property to such Person. In
connection with any such assumption, no material term of the Mortgage Note
may be changed. In addition, the substitute Mortgagor and the Mortgaged
Property must be acceptable to the Master Servicer in accordance with its
underwriting standards as then in effect. Together with each such
substitution, assumption or other agreement or instrument delivered to the
Trustee for execution by it, the Master Servicer shall deliver an Officer's
Certificate signed by a Servicing Officer stating that the requirements of
this subsection have been met in connection therewith. The Master Servicer
shall notify the Trustee that any such substitution or assumption agreement
has been completed by forwarding to the Trustee the original of such
substitution or assumption agreement, which in the case of the original shall
be added to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. Any fee collected by
the Master Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer as additional
servicing compensation.
(n) Realization Upon Defaulted Mortgage Loans; Repurchase of
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Certain Mortgage Loans.
----------------------
The Master Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments.
In connection with such foreclosure or other conversion, the Master Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities and meet the requirements of the insurer under any Required
Insurance Policy; provided, however, that the Master Servicer shall not be
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required to expend its own funds in connection with any foreclosure or
towards the restoration of any property unless it shall determine (i) that
such restoration and/or foreclosure will increase the proceeds of liquidation
of the Mortgage Loan after reimbursement to itself of such expenses and (ii)
that such expenses will be recoverable to it through Liquidation Proceeds
(respecting which it shall have priority for purposes of withdrawals from the
Collection Account). The Master Servicer shall be responsible for all other
costs and expenses incurred by it in any such proceedings; provided, however,
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that it shall be entitled to reimbursement thereof from the liquidation
proceeds with respect to the related Mortgaged Property, as provided in the
definition of Liquidation Proceeds. If the Master Servicer has knowledge
that a Mortgaged Property which the Master Servicer is contemplating
acquiring in foreclosure or by deed in lieu of foreclosure is located within
a one mile radius of any site listed in the Expenditure Plan for the
Hazardous Substance Clean Up Bond Act of 1984 or other site with
environmental or hazardous waste risks known to the Master Servicer, the
Master Servicer will, prior to acquiring the Mortgaged Property, consider
such risks and only take action in accordance with its established
environmental review procedures.
With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trustee for the benefit of the Securityholders,
or its nominee, on behalf of the Securityholders. The Trustee's name shall
be placed on the title to such REO Property solely as the Trustee under the
Indenture and not in its individual capacity. The Master Servicer shall
ensure that the title to such REO Property references the Indenture and the
Trustee's capacity thereunder. Pursuant to its efforts to sell such REO
Property, the Master Servicer shall either itself or through an agent
selected by the Master Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of
the interests of the Securityholders, rent the same, or any part thereof, as
the Master Servicer deems to be in the best interest of the Securityholders
for the period prior to the sale of such REO Property. The Master Servicer
shall prepare for and deliver to the Trustee a statement with respect to each
REO Property that has been rented showing the aggregate rental income
received and all expenses incurred in connection with the management and
maintenance of such REO Property at such times as is necessary to enable the
Trustee to comply with the reporting requirements of the REMIC Provisions.
The net monthly rental income, if any, from such REO Property shall be
deposited in the Collection Account no later than the close of business on
each Determination Date. (The Master Servicer shall perform the tax
reporting and withholding required by Sections 1445 and 6050J of the Code
with respect to foreclosures and abandonments, the tax reporting required by
Section 6050H of the Code with respect to the receipt of mortgage interest
from individuals and any tax reporting required by Section 6050P of the Code
with respect to the cancellation of indebtedness by certain financial
entities, by preparing such tax and information returns as may be required,
in the form required, and delivering the same to the Trustee for filing.)
In the event that the Issuer acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to two years after its acquisition by the Issuer unless the Trustee
shall have been supplied with an Opinion of Counsel to the effect that the
holding by the Issuer of such Mortgaged Property subsequent to such two-year
period will not result in the imposition of taxes on "prohibited
transactions" of the REMIC defined in Section 860F of the Code or cause the
REMIC to fail to qualify as a REMIC at any time that any Notes or
Certificates are outstanding, in which case the Issuer may continue to hold
such Mortgaged Property (subject to any conditions contained in such Opinion
of Counsel). Notwithstanding any other provision of this Agreement, no
Mortgaged Property acquired by the Issuer shall be rented (or allowed to
continue to be rented) or otherwise used for the production of income by or
on behalf of the Issuer in such a manner or pursuant to any terms that would
(i) cause such Mortgaged Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or (ii)
subject the REMIC to the imposition of any federal, state or local income
taxes on the income earned from such Mortgaged Property under Section 860G(c)
of the Code or otherwise, unless the Master Servicer has agreed to indemnify
and hold harmless the Issuer with respect to the imposition of any such
taxes.
The decision of the Master Servicer to foreclose on a defaulted Mortgage
Loan shall be subject to a determination by the Master Servicer that the
proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any REO
Properties, net of reimbursement to the Master Servicer for expenses incurred
(including any property or other taxes) in connection with such management
and net of unreimbursed Master Servicing Fees, Advances and Servicing
Advances, shall be applied to the payment of principal of and interest on the
related defaulted Mortgage Loans (with interest accruing as though such
Mortgage Loans were still current) and all such income shall be deemed, for
all purposes in this Agreement, to be payments on account of principal and
interest on the related Mortgage Notes and shall be deposited into the
Collection Account. To the extent the net income received during any
calendar month is in excess of the amount attributable to amortizing
principal and accrued interest at the related Mortgage Rate on the related
Mortgage Loan for such calendar month, such excess shall be considered to be
a partial prepayment of principal of the related Mortgage Loan.
The proceeds from any liquidation of a Mortgage Loan, as well as any
income from an REO Property, will be applied in the following order of
priority: first, to reimburse the Master Servicer for any related
unreimbursed Servicing Advances and Master Servicing Fees; second, to
reimburse the Master Servicer for any unreimbursed Advances; third, to
reimburse the Collection Account for any Nonrecoverable Advances (or portions
thereof) that were previously withdrawn by the Master Servicer pursuant to
Section 3(k)(i)(C) that related to such Mortgage Loan; fourth, to accrued and
unpaid interest (to the extent no Advance has been made for such amount or
any such Advance has been reimbursed) on the Mortgage Loan or related REO
Property, at the Adjusted Net Mortgage Rate to the Due Date occurring in the
month in which such amounts are required to be distributed; and fifth, as a
recovery of principal of the Mortgage Loan. Excess Proceeds, if any, from
the liquidation of a Liquidated Mortgage Loan will be retained by the Master
Servicer as additional servicing compensation pursuant to Section 5.
The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Issuer any Mortgage Loan which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
Collection Account and the Trustee, upon receipt of a certificate from the
Master Servicer in the form of Exhibit D hereto, shall release or cause to be
released to the purchaser of such Mortgage Loan the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment prepared
by the purchaser of such Mortgage Loan, in each case without recourse, as
shall be necessary to vest in the purchaser of such Mortgage Loan any
Mortgage Loan released pursuant hereto and the purchaser of such Mortgage
Loan shall succeed to all the Trustee's right, title and interest in and to
such Mortgage Loan and all security and documents related thereto. Such
assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and
all security and documents, free of any further obligation to the Trustee or
the Securityholders with respect thereto.
(o) Access to Certain Documentation.
-------------------------------
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of subordinated Notes
or Certificates and the examiners and supervisory agents of the OTS, the FDIC
and such other authorities, access to the documentation regarding the
Mortgage Loans required by applicable regulations of the OTS and the FDIC.
Such access shall be afforded without charge, but only upon reasonable and
prior written request and during normal business hours at the offices
designated by the Master Servicer. Nothing in this Section shall limit the
obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the
Master Servicer to provide access as provided in this Section as a result of
such obligation shall not constitute a breach of this Section.
(p) Annual Statement as to Compliance.
---------------------------------
The Master Servicer shall deliver to Provident and the Trustees on or
before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 199_ fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master
Servicer during the preceding calendar year and of the
performance of the Master Servicer under this
Agreement has been made under such officer's supervision and (ii) to the best
of such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. The Trustee shall forward a copy of each such statement to each
Rating Agency.
(q) Annual Independent Public Accountants' Servicing Statement;
--------------------------------------
Financial Statements.
--------------------
On or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 199_ fiscal year, the Master Servicer at its
expense shall cause a nationally or regionally recognized firm of independent
public accountants (who may also render other services to the Master
Servicer, the Seller or any affiliate thereof) which is a member of the
American Institute of Certified Public Accountants to furnish a statement to
the Trustees and Provident to the effect that-such firm has examined certain
documents and records relating to the servicing of the Mortgage Loans under
this Agreement or of mortgage loans under pooling and servicing agreements
substantially similar to this Agreement (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby) and that, on the basis of such examination, conducted substantially
in compliance with the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FNMA and FHLMC, such
servicing has been conducted in compliance with such pooling and servicing
agreements except for such significant exceptions or errors in records that,
in the opinion of such firm, the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FNMA and
FHLMC requires it to report. In rendering such statement, such firm may
rely, as to matters relating to direct servicing of mortgage loans by
Subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Audit Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FNMA and
FHLMC (rendered within one year of such statement) of independent public
accountants with respect to the related Subservicer. Copies of such
statement shall be provided by the Trustee to any Securityholder upon request
at the Master Servicer's expense, provided such statement is delivered by the
Master Servicer to the Trustee.
(r) Errors and Omissions Insurance; Fidelity Bonds.
----------------------------------------------
The Master Servicer shall for so long as it acts as master servicer
under this Agreement, obtain and maintain in force (a) a policy or policies
of insurance covering errors and omissions in the performance of its
obligations as Master Servicer hereunder and (b) a fidelity bond in respect
of its officers, employees and agents. Each such policy or policies and bond
shall, together, comply with the requirements from time to time of FNMA or
FHLMC for persons performing servicing for mortgage loans purchased by FNMA
or FHLMC. In the event that any such policy or bond ceases to be in effect,
the Master Servicer shall obtain a comparable replacement policy or bond from
an insurer or issuer, meeting the requirements set forth above as of the date
of such replacement.
(s) Master Servicer Monthly Data.
----------------------------
On or before noon California time on the Determination Date, the Master
Servicer shall provide by modem to the Trustee with respect to the Mortgage
Loans, an electronic data file (accompanied by a hardcopy report) in a format
which is mutually agreed upon by the Master Servicer and the Trustee. The
Trustee shall be under no duty to recalculate, verify or recompute the
information provided to it by the Master Servicer hereunder.
4. Advances.
--------
The Master Servicer shall determine on or before each Master Servicer
Advance Date whether it is required to make an Advance pursuant to the
definition thereof. If the Master Servicer determines it is required to make
an Advance, it shall, on or before the Master Servicer Advance Date, deposit
into the Collection Account an amount equal to the Advance. The Master
Servicer shall be entitled to be reimbursed from the Collection Account for
all Advances of its own funds made pursuant to this Section as provided in
Section 3(k). The obligation to make Advances with respect to any Mortgage
Loan shall continue if such Mortgage Loan has been foreclosed or otherwise
terminated and the related Mortgaged Property has not been liquidated.
5. Servicing Compensation.
----------------------
As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain or withdraw from the Collection Account an amount equal
to the Master Servicing Fee for each Mortgage Loan, provided that the
aggregate Master Servicing Fee with respect to any Distribution Date shall be
reduced (i) by an amount equal to the aggregate of the Prepayment Interest
Shortfalls, if any, with respect to such Distribution Date, but not below an
amount equal to one-half of the aggregate Master Servicing Fee for
such Distribution Date before reduction thereof in
respect of such Prepayment Interest Shortfalls, and (ii) with respect to the
first Distribution Date, an amount equal to any amount to be deposited into
the Payment Account by Provident pursuant to Section 2(a)(i) and not so
deposited.
Additional servicing compensation in the form of Excess Proceeds,
Prepayment Interest Excess, prepayment penalties, assumption fees, late
payment charges and all income and gain net of any losses realized from
Permitted Investments shall be retained by the Master Servicer to the extent
not required to be deposited in the Collection Account pursuant to Section
3(h) hereof. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder
(including payment of any premiums for hazard insurance and any Primary
Insurance Policy and maintenance of the other forms of insurance coverage
required by this Agreement) and shall not be entitled to reimbursement
therefor except as specifically provided in this Agreement.
6. The Master Servicer.
-------------------
(a) Respective Liabilities of Provident and the Master Servicer.
-----------------------------------------------------------
The Master Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by it
herein.
(b) Merger or Consolidation of Provident or the Master Servicer.
-----------------------------------------------------------
Provident and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation under the laws of the
United States or under the laws of one of the states thereof and will each
obtain and preserve its qualification to do business as a foreign corporation
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
Any Person into which Provident or the Master Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to
which Provident or the Master Servicer shall be a party, or any person
succeeding to the business of Provident or the Master Servicer, shall be the
successor of Provident or the Master Servicer, as the case may be, hereunder,
without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that the successor or surviving Person to the Master
- -------- -------
Servicer shall be qualified to sell mortgage loans to, and to service
mortgage loans on behalf of, FNMA or FHLMC.
(c) Limitation on Liability of Provident, the Seller, Master
--------------------------------------------------------
Servicer and Others.
-------------------
None of Provident, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of Provident, the Seller or the
Master Servicer shall be under any liability to the Securityholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however,
-------- -------
that this provision shall not protect Provident, the Seller, the Master
Servicer or any such Person against any breach of representations or
warranties made by it herein or protect Provident, the Seller, the Master
Servicer or any such Person from any liability which would otherwise be
imposed by reasons of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations
and duties hereunder. Provident, the Seller, the Master Servicer and any
director, officer, employee or agent of Provident, the Seller or the Master
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. Provident, the Seller, the Master Servicer and any director,
officer, employee or agent of Provident, the Seller or the Master Servicer
shall be indemnified by the Issuer and held harmless against any loss,
liability or expense incurred in connection with any audit, controversy or
judicial proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement, the Notes or the Certificates, other than
any loss, liability or expense related to any specific Mortgage Loan or
Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negli-
gence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. None of Provident, the Seller
or the Master Servicer shall be under any obligation to appear in, prosecute
or defend any legal action that is not incidental to its respective duties
hereunder and which in its opinion may involve it in any expense or
liability; provided, however, that any of Provident, the Seller or the Master
-------- -------
Servicer may in its 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 interests of the Trustees and the Securityholders
hereunder. In such event, the legal expenses and costs of such action and
any liability resulting therefrom shall be expenses, costs and liabilities
of the Issuer, and Provident, the Seller and the Master Servicer shall be
entitled to be reimbursed therefor out of the Collection Account.
(d) Limitation on Resignation of the Master Servicer.
------------------------------------------------
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) upon appointment of a successor servicer and
receipt by the Trustee of a letter from each Rating Agency that such a
resignation and appointment will not result in a downgrading of the rating of
any of the Certificates, or (b) upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination under
clause (b) permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee.
No such resignation shall become effective until the Trustee or a successor
master servicer shall have assumed the Master Servicer's responsibilities,
duties, liabilities and obligations hereunder.
7. Default.
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(a) Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the following
events:
(i) any failure by the Master Servicer to deposit in the
Collection Account or remit to the Trustee any payment (other than
a payment required to be made under Section 4 hereof) required to
be made with respect to any Class of Certificates under the terms
of this Agreement, which failure shall continue unremedied for five
days after the date upon which written notice of such failure shall
have been given to the Master Servicer by the Trustee or Provident
or to the Master Servicer, Provident and the Trustee by the Holders
of Notes or Certificates of such Class evidencing not less than 25%
of the total distributions allocated to such Class; or
(ii) any failure by the Master Servicer duly to observe or
perform in any material respect any other of the covenants or
agreements on the part of the Master Servicer contained in this
Agreement, which failure shall continue unremedied for a period of
thirty days after the date on which written notice of such failure
shall have been given to the Master Servicer by the Trustee or
Provident, or to the Master Servicer, Provident and the Trustee by
the Holders of Notes or Certificates of any Class evidencing not
less than 25% of the total distributions allocated to such Class; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment
of a receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceeding,
or for the winding-up or liquidation of its affairs, shall have
been entered against the Master Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period
of 60 consecutive days; or
(iv) the Master Servicer shall consent to the appointment of
a receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or all or substantially all of the
property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of, or commence a voluntary case under,
any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations; or
((vi) so long as the Master Servicer is the Seller, any
failure by the Seller to observe or perform in any material respect
any other of the covenants or agreements on the part of the Seller
contained in this Agreement, which failure shall continue
unremedied for a period of 60 days after the date on which written
notice of such failure shall have been given to the Seller by the
Trustee or Provident, or to the Seller and the Trustee by the
Holders of Notes or Certificates of any Class evidencing not less
than 25% of the total distributions allocated to such Class; or)
(vii) any failure of the Master Servicer to make any Advance
in the manner and at the time required to be made pursuant to
Section 4 which continues unremedied for a period of one Business
Day after the date of such failure.
If an Event of Default described in clauses (i) to (vi) of this Section
shall occur, then, and in each and every such case, so long as such Event of
Default shall not have been remedied, the Trustee may, or at the direction of
the Holders of Notes or Certificates of any Class evidencing not less than
25% of the total distributions allocated to such Class, the Trustee shall by
notice in writing to the Master Servicer (with a copy to each Rating Agency),
terminate all of the rights and obligations of the Master Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof, other
than its rights as a Securityholder. If an Event of Default described in
clause (vii) hereof shall occur, the Trustee shall, by notice in writing to
the Master Servicer and Provident, terminate all of the rights and
obligations of the Master Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, other than its rights as a
Securityholder. On and after the receipt by the Master Servicer of such
written notice, all authority and power of the Master Servicer hereunder,
whether with respect to the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee. (The Trustee shall thereupon make any Advance
described in clause (vii) hereof subject to Section 3(g) hereof.) The
Trustee is hereby authorized and empowered to execute and deliver, on behalf
of the Master 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 or assignment
of the Mortgage Loans and related documents, or otherwise. Unless expressly
provided in such written notice, no such termination shall affect any
obligation of the Master Servicer to pay amounts owed pursuant to Article
VIII. The Master Servicer agrees to cooperate with the Trustee in effecting
the termination of the Master Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the Trustee of all
cash amounts which shall at the time be credited to the Collection Account,
or thereafter be received with respect to the Mortgage Loans.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to
the notice terminating such Master Servicer's rights and obligations as
Master Servicer hereunder and received after such notice, that portion
thereof to which such Master Servicer would have been entitled pursuant to
Sections 3(k)(i)(A) through (H),and any other amounts payable to such Master
Servicer hereunder the entitlement to which arose prior to the termination of
its activities hereunder.
(b) Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7(a) hereof, the Trustee shall, subject to
and to the extent provided in Section 3(g), be the successor to the Master
Servicer in its capacity as master 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
Master Servicer by the terms and provisions hereof and applicable law
including the obligation to make Advances pursuant to Section 4. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Master Servicer would have been entitled to
charge to the Collection Account or Payment Account if the Master Servicer
had continued to act hereunder. Notwithstanding the foregoing, if the
Trustee has become the successor to the Master Servicer in accordance with
Section 7(a) hereof, the Trustee may, if it shall be unwilling to so act, or
shall, if it is prohibited by applicable law from making Advances pursuant to
Section 4 hereof or if it is otherwise unable to so act, appoint, or petition
a court of competent jurisdiction to appoint, any established mortgage loan
servicing institution the appointment of which does not adversely affect the
then current rating of the Securities by each Rating Agency as the successor
to the Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder.
Any successor to the Master Servicer shall be an institution which is a FNMA
and FHLMC approved seller/servicer in good standing, which has a net worth of
at least $10,000,000, and which is willing to service the Mortgage Loans and
executes and delivers to Provident and the Trustees an agreement accepting
such delegation and assignment, which contains an assumption by such Person
of the rights, powers, duties, responsibilities, obligations and liabilities
of the Master Servicer (other than liabilities of the Master Servicer under
Section 6(c) hereof incurred prior to termination of the Master Servicer
under Section 7(a)), with like effect as if originally named as a party to
this Agreement; and provided further that each Rating Agency acknowledges
that its rating of the Securities in effect immediately prior to such
assignment and delegation will not be qualified or reduced as a result of
such assignment and delegation. Pending appointment of a successor to the
Master Servicer hereunder, the Trustee, unless the Trustee is prohibited by
law from so acting, shall, subject to Section 3(g) hereof, 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 Mortgage Loans as it and such successor
shall agree; provided, however, that
-------- -------
no such compensation shall be in excess of the Master Servicing Fee permitted
the Master Servicer hereunder. The Trustee and such successor shall take
such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. Neither the Trustee nor any other successor
master servicer shall be deemed to be in default hereunder by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof or any failure to perform, or any delay in performing, any
duties or responsibilities hereunder, in either case caused by the failure of
the Master Servicer to deliver or provide, or any delay in delivering or
providing, any cash, information, documents or records to it.
Any successor to the Master Servicer as master servicer shall give
notice to the Mortgagors of such change of servicer and shall, during the
term of its service as master servicer maintain in force the policy or
policies that the Master Servicer is required to maintain pursuant to 3(r).
(c) Notification to Securityholders.
-------------------------------
(i) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Securityholders and to each Rating Agency.
(ii) Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Securityholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
8. Miscellaneous.
-------------
(a) Term of Master Servicing Agreement.
----------------------------------
The obligations to be performed by the Master Servicer under this
Agreement shall commence on and as of the date on which the Issuer issues the
Securities and shall terminate as to each Mortgage Loan upon (i) the payment
in full of all principal and interest due under such Mortgage Loan or other
liquidation of such Mortgage Loan as contemplated by this Agreement, (ii) the
termination of the Master Servicer's rights and powers under this Agreement
by the Trustee as provided in Section 7(a) of this Agreement, or (iii) the
release by the Trustee of its security interest in any Mortgage Loan.
(b) Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6(b), this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Provident.
(c) Notices.
-------
(i) The Trustee shall use its best efforts to promptly provide
notice to each Rating Agency with respect to each of the following of which
it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not been cured;
3. The resignation or termination of the Master Servicer or the
Trustee and the appointment of any successor;
4. The repurchase or substitution of Mortgage Loans pursuant to
Section 2(d); and
5. The final payment to Securityholders.
In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:
1. Each report to Securityholders described in the Indenture;
2. Each annual statement as to compliance described in Section
3(p);
3. Each annual independent public accountants' servicing report
described in Section 3(q); and
4. Any notice of a purchase of a Mortgage Loan pursuant to Section
2(c)(ii), 2(d) or 3(n).
(ii) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in
the case of Provident, The Provident Bank, ___________________, Attention:
_______________, (b) in the case of the Master Servicer,
_____________________________________________, Attention: _________________
or such other address as may be hereafter furnished to Provident and the
Trustees by the Master Servicer in writing, (c) in the case of the Trustees,
_______________________________________________________, Attention:
__________________________________________________, or such other address as
the Trustee may hereafter furnish to Provident or Master Servicer and (d) in
the case of the Rating Agencies, the address specified therefor in the
definition corresponding to the name of such Rating Agency. Notices to
Securityholders shall be deemed given when mailed, first class
postage prepaid, to their respective addresses appearing in the Certificate
Register.
(d) Inspection and Audit Rights.
---------------------------
The Master Servicer agrees that, on reasonable prior notice, it will
permit and will cause each Subservicer to permit any representative of
Provident or the Trustee during the Master Servicer's normal business hours,
to examine all the books of account, records, reports and other papers of the
Master Servicer relating to the Mortgage Loans, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants selected by Provident or the Trustee and to discuss its affairs,
finances and accounts relating to the Mortgage Loans with its officers,
employees and independent public accountants (and by this provision the
Master Servicer hereby authorizes said accountants to discuss with such
representative such affairs, finances and accounts), all at such reasonable
times and as often as may be reasonably requested. Any out-of-pocket expense
incident to the exercise by Provident or the Trustee of any right under this
Section 8(d) shall be borne by the party requesting such inspection; all
other such expenses shall be borne by the Master Servicer or the related
Subservicer.
(e) Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE SECURITYHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
(f) Amendment.
---------
This Agreement may be amended from time to time by the Issuer, the
Master Servicer and the Trustee without the consent of any of the
Securityholders to cure any ambiguity, or to correct or supplement any
provisions herein, or to make such other provisions with respect to matters
or questions arising under this Agreement as shall not be inconsistent with
any other provisions herein; provided that such action shall not, as
--------
evidenced by an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee or the Issuer), adversely affect in any material
respect the interests of any Securityholder; provided, however, that the
-------- -------
amendment shall not be deemed to adversely affect in any material respect the
interests of the Securityholders if the Person requesting the amendment
obtains a letter from each Rating Agency stating that the amendment would not
result in the downgrading or withdrawal of the respective ratings then
assigned to the Securities; it being understood and agreed that any such
letter in and of itself will not represent a determination as to the
materiality of any such amendment and will represent a determination only as
to the credit issues affecting any such rating. The Trustee, Provident and
the Master Servicer also may at any time and from time to time amend this
Agreement without the consent of the Securityholders to modify, eliminate or
add to any of its provisions to such extent as shall be necessary or helpful
to maintain the qualification of the Issuer as a REMIC under the Code or to
avoid or minimize the risk of the imposition of any tax on the REMIC pursuant
to the Code that would be a claim at any time prior to the final redemption
of the Securities, provided that the Trustee has been provided an Opinion of
Counsel, which opinion shall be an expense of the party requesting such
opinion but in any case shall not be an expense of the Trustee or the Issuer,
to the effect that such action is necessary or helpful to maintain such
qualification or to avoid or minimize the risk of the imposition of such a
tax.
This Agreement may also be amended from time to time by Provident, the
Master Servicer and the Trustee with the consent of the Holders of a Majority
in Interest of each Class of Notes or Certificates affected thereby for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the
rights of the Holders of Notes or Certificates; provided, however, that no
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such amendment shall (i) reduce in any manner the amount of, or delay the
timing of, payments required to be distributed on any Certificate without the
consent of the Holder of such Note or Certificate, (ii) adversely affect in
any material respect the interests of the Holders of any Class of Notes or
Certificates in a manner other than as described in (i), without the consent
of the Holders of Notes or Certificates of such Class evidencing, as to such
Class, Percentage Interests aggregating 66%, or (iii) reduce the aforesaid
percentages of Notes or Certificates the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all such
Notes or Certificates then outstanding.
(Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have
first received an Opinion of Counsel, which opinion shall not be an expense
of the Trustee or the Issuer, to the effect that such amendment will not
cause the imposition of any tax on the REMIC or the Securityholders or cause
the Issuer to fail to qualify as a REMIC at any time that any Certificates
are outstanding.)
Promptly after the execution of any amendment to this Agreement
requiring the consent of Securityholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Securityholder and each Rating Agency.
It shall not be necessary for the consent of Securityholders under this
Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Securityholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be
an expense of the Trustee or the Issuer, satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that
all requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material
respect the interests of any Securityholder or (B) the conclusion set forth
in the immediately preceding clause (A) is not required to be reached
pursuant to this Section 8(f).
(g) 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.
(h) No Joint Venture.
----------------
The Master Servicer and the Issuer are not partners or joint venturers
with each other and nothing herein shall be construed to make them such
partners or joint venturers or impose any liability as such of either of
them.
(i) Recordation of Agreement; Counterparts.
--------------------------------------
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer at its
expense, but only upon direction by the Trustee accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially
affects the interests of the Securityholders.
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.
(j) Limitation of Liability of (owner trustee).
------------------------------------------
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by (owner trustee), not individually
or personally but solely as owner trustee of (Provident) Home Equity Loan
Trust 199_ under the Trust Agreement, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
(owner trustee) but is made and intended for the purpose for binding only the
Issuer, (c) nothing herein contained shall be construed as creating any
liability on (owner trustee), other than any liability arising out of its
gross negligence, bad faith or willful misconduct, and (d) under no
circumstances shall (owner trustee) be personally liable for the payment of
any indebtedness or expenses of the Issuer or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Agreement or the other Operative
Documents.
(k) Nonpetition Covenants.
---------------------
Notwithstanding any prior termination of this Agreement, the Master
Servicer shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or Provident,
acquiesce, petition or otherwise invoke or cause the Issuer or Provident (or
any assignee) to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer or
Provident under any federal or state bankruptcy, insolvency or similar law,
or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or Provident or any
substantial part of its property, or ordering the winding up or liquidation
of the affairs of the Issuer or Provident.
IN WITNESS WHEREOF, each party has caused this Master Servicing
Agreement to be executed by its duly authorized officer or officers as of the
day and year first above written.
(Provident) Home Equity Loan Trust 199_,
as Issuer
By: (owner trustee)
not in its
individual capacity
but solely as
Owner Trustee
By:
--------------------------------
Its:
-------------------------------
(THE PROVIDENT BANK)
as Seller and Master Servicer
By:
--------------------------------
Its:
-------------------------------
( )
as Trustee
By:
--------------------------------
Its:
-------------------------------
SCHEDULE I
Mortgage Loan Schedule
SCHEDULE II
(Provident) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties of the Master Servicer
-----------------------------------------------------
____________________________ ("Seller-Master Servicer") hereby makes the
representations and warranties set forth in this Schedule II to the Issuer,
Provident and the Trustees, as of the Closing Date, or if so specified
herein, as of the Cut-off Date. Capitalized terms used but not otherwise
defined in this Schedule II shall have the meanings ascribed thereto in the
Indenture (the "Indenture") relating to the above-referenced Series, among
Seller-Master Servicer, as seller and master servicer, and
_____________________, as trustee.
(i) The Master Servicer is a (n Ohio banking) corporation,
validly existing and in good standing under the laws of the State of
(Ohio), and has the corporate power to own its assets and to transact
the business in which it is currently engaged. The Master Servicer is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or any properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or condi-
tion (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute
the legal, valid and binding obligation of the Master Servicer enforce-
able in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(iii) The Master Servicer is not required to obtain the consent of
any other party or any consent, license, approval or authorization from,
or registration or declaration with, any governmental authority, bureau
or agency in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, except for such consent,
license, approval or authorization, or registration or declaration,
as shall have been obtained or filed, as the case may be, prior to
the Closing Date;
(iv) The execution, delivery and performance of this Agreement by
the Master Servicer will not violate any provision of any existing law
or regulation or any order or decree of any court applicable to the
Master Servicer or any provision of the Certificate of Incorporation or
Bylaws of the Master Servicer, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master Servicer may be bound; and
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Master Servicer threatened, against the Master Servicer
or any of its properties or with respect to this Agreement or the
Certificates which in the opinion of the Master Servicer has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
SCHEDULE III
(Provident) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties as to the Mortgage Loans
-------------------------------------------------------
____________________________ ("Seller") hereby makes the
representations and warranties set forth in this Schedule III to Provident
and the Trustee, as of the Closing Date, or if so specified herein, as of the
Cut-off Date. Capitalized terms used but not otherwise defined in this
Schedule III shall have the meanings ascribed thereto in the Indenture (the
"Indenture") relating to the above-referenced Series, among Seller, as seller
and master servicer, and ________________________, as trustee.
(i) As of the Closing Date, this Agreement constitutes a legal,
valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies;
(ii) As of the Closing Date with respect to the Mortgage Loans and
as of the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, either (A) the Purchase Agreement constitutes
a valid transfer and assignment to Provident of all right, title and
interest of the Seller in and to the Cut-off Date Asset Balances with
respect to the applicable Mortgage Loans, all monies due or to become
due with respect thereto (excluding payments in respect of accrued
interest due prior to the Cut-off Date or due in the month of
_________), and all proceeds of such Cut-off Date Asset Balances with
respect to the Mortgage Loans and such funds as are from time to time
deposited in the Collection Account (excluding any investment earnings
thereon) and all other property specified in the definition of "Asset"
as being part of the corpus of the Trust conveyed to the Trust by the
Seller, and upon payment for the Additional Balances, will constitute a
valid transfer and assignment to the Trustee of all right, title and
interest of the Seller in and to the Additional Balances, all monies due
or to become due with respect thereto, and all proceeds of such
Additional Balances and all other property specified in the definition
of "Asset" relating to the Additional Balances or (B) the Purchase
Agreement or this Agreement, as appropriate, constitutes a grant of a
security interest (as defined in the UCC as in effect in California) in
such property to the Trustee on behalf of the Trust. If this Agreement
constitutes the grant of a security interest to the Trust in such
property, and if the Trustee obtains and maintains possession of the
Mortgage File for each Mortgage Loan, the Trust shall have a first
priority perfected security interest in such property, subject to the
effect of Section 9-306 of the UCC with respect to collections on the
Mortgage Loans that are deposited in the Collection Account in
accordance with the next to last paragraph of Section _______; provided,
--------
however, that nothing in this clause (ii) shall be construed to obligate
-------
the Master Servicer to deliver any Mortgage Files other than as set forth
in Section 2(a) hereof;
(iii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan and as of the date any Additional Balance is created, the
information set forth in the Mortgage Loan Schedule for such Mortgage
Loans is true and correct in all material respects;
(iv) The applicable Cut-off Date Asset Balance has not been
assigned or pledged, and the Seller is the sole owner and holder of such
Cut-off Date Asset Balance free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loan, to sell, assign or
transfer the same pursuant to the Purchase Agreement;
(v) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage Note and the Mortgage with respect
to each Mortgage Loan have not been assigned or pledged, and the Seller
is the sole owner and holder of the Mortgage Loan free and clear of any
and all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full right
and authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the applicable Mortgage Loans, to
sell and assign the same pursuant to the Purchase Agreement;
(vi) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage is a valid and subsisting first or
second lien, as set forth on the Mortgage Loan Schedule with respect to
each related Mortgage Loan, on the property therein described, and as of
the applicable Cut-off Date the related Mortgaged Property is free and
clear of all encumbrances and liens having priority over the first or
second lien, as applicable, of such Mortgage except for liens for (i)
real estate taxes and special assessments not yet delinquent; (ii) any
first mortgage loan secured by such Mortgaged Property and specified on
the Mortgage Loan Schedule; (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording that are acceptable to mortgage
lending institutions generally; and (iv) 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;
(vii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no valid offset, defense or counterclaim of any
obligor under any Credit Line Agreement or Mortgage;
(viii) To the best knowledge of the Seller, as of the Closing Date
with respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there is no delinquent
recording or other tax or fee or assessment lien against any related
Mortgaged Property;
(ix) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no proceeding pending or, to the best knowledge
of the Seller, threatened for the total or partial condemnation of the
related Mortgaged Property, and such property is free of material
damage;
(x) To the best knowledge of the Seller, as of the Closing Date
with respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there are no
mechanics' or similar liens or claims which have been filed for work,
labor or material affecting the related Mortgaged Property which are, or
may be, liens prior or equal to the lien of the related Mortgage, except
liens which are fully insured against by the title insurance policy
referred to in clause (xiv);
(xi) No Minimum Monthly Payment is more than 89 days delinquent
(measured on a contractual basis); and with respect to the Mortgage
Loans no more than _____% (by Cut-off Date Pool Balance) were 30-59
days delinquent (measured on a contractual basis) and no more than
_____% (by Cut-off Date Pool Balance) were 60-89 days delinquent
(measured on a contractual basis);
(xii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, for each Mortgage Loan, the related Mortgage File
contains each of the documents and instruments specified to be included
therein;
(xiii) The related Mortgage Note and the related Mortgage at
origination complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan;
(xiv) Either a lender's title insurance policy or binder was
issued on the date of origination of the Mortgage Loan and each such
policy is valid and remains in full force and effect, or a title search
or guaranty of title customary in the relevant jurisdiction was obtained
with respect to a Mortgage Loan as to which no title insurance policy or
binder was issued;
(xv) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, none of the Mortgaged Properties is a mobile home or a
manufactured housing unit that is not considered or classified as part
of the real estate under the laws of the jurisdiction in which it is
located;
(xvi) As of the Cut-off Date for the Mortgage Loans no more than
_____% of such Mortgage Loans, by aggregate principal balance, are
secured by Mortgaged Properties located in one United States postal zip
code;
(xvii) The Combined Loan-to-Value Ratio for each Mortgage Loan was
not in excess of 100%;
(xviii) No selection procedure reasonably believed by the Seller
to be adverse to the interests of the Securityholders or the Credit
Enhancer was utilized in selecting the Mortgage Loans;
(xix) The Seller has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay or defraud any of its creditors;
(xx) The Minimum Monthly Payment with respect to any Mortgage Loan
is not less than the interest accrued at the applicable Loan Rate on the
average daily Asset Balance during the interest period relating to the
date on which such Minimum Monthly Payment is due;
(xxi) Within 90 days of the Closing Date with respect to the
Mortgage Loans and, to the extent not already included in such filing
with respect to the Mortgage Loans, the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, the Seller will file
UCC-1 financing statements with respect to the Mortgage Loans;
(xxii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Credit Line Agreement and each Mortgage Loan is an
enforceable obligation of the related Mortgagor, except as the
enforceability thereof may be limited by the bankruptcy, insolvency or
similar laws affecting creditors' rights generally;
(xxiii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the Seller has not received a notice of default of any
senior mortgage loan related to a Mortgaged Property that has not been
cured by a party other than the Master Servicer;
(xxiv) The definition of Prime Rate in each Credit Line Agreement
relating to a Mortgage Loan does not differ materially from the
definition in the form of Credit Line Agreement in _________________;
(xxv) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cut-off Date for the
Mortgage Loans is approximately ___ months. On each date that the Loan
Rates have been adjusted, interest rate adjustments on the Mortgage
Loans were made in compliance with the related Mortgage and Mortgage
Note and applicable law. Over the term of each Mortgage Loan, the Loan
Rate may not exceed the related Loan Rate Cap, if any. The Loan Rate
Caps range between ____% and ____%. The Margins range between ____%
and ____% and the weighted average Margin is approximately ____% as of
the Cut-off Date for the Mortgage Loans. The Loan Rates on such Mort-
gage Loans range between ____% and _____% and the weighted average Loan
Rate is approximately _____%.
(xxvi) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Mortgaged Property consists of a single parcel of
real property with a one-to-four unit single family residence erected
thereon, or an individual condominium unit, planned unit development
unit or townhouse;
(xxvii) No more than _____% (by Cut-off Date Pool Balance) of the
Mortgage Loans are secured by real property improved by individual
condominium units, planned development units, townhouses or two-to-four
family residences erected thereon, and at least _____% (by Cut-off Date
Pool Balance) of the Mortgage Loans are secured by real property with a
detached one-family residence erected thereon;
(xxviii) The Credit Limits on the Mortgage Loans range between
$________ and $__________ with an average of $_________. As of the Cut-
off Date for the Mortgage Loans, no Mortgage Loan had a principal
balance in excess of approximately $__________ and the average principal
balance of the Mortgage Loans is equal to approximately $_________; and
(xxix) Approximately ____% and _____% of the Mortgage Loans, by
aggregate principal balance as of the Cut-off Date for the Mortgage
Loans, are first and second liens, respectively.
SCHEDULE IV
(Provident) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties of the Issuer.
--------------------------------------------
(Provident) Home Equity Loan Trust 199_ (the "Issuer") hereby makes the
representations and warranties set forth in this Schedule IV to the Master
Servicer and the Trustee, as of the Closing Date. Capitalized terms used but
not otherwise defined in this Schedule IV shall have the meanings ascribed
thereto in the Master Servicing Agreement (the "Master Servicing Agreement")
relating to the above-referenced Series, among (The Provident Bank), as
Master Servicer, (Provident) Home Equity Loan Trust 199_, as Issuer, and ( ),
as Trustee.
(1) The Issuer is a statutory business trust duly organized,
validly existing and in good standing under the laws of the State of
(Delaware), and possesses all requisite authority, power, licenses,
permits and franchises to conduct any and all business contemplated by
the Master Servicing Agreement and to comply with its obligations under
the terms of this Agreement, the performance of which have been duly
authorized by all necessary action.
(2) Neither the execution and delivery of the Master Servicing
Agreement by the Issuer, nor the performance and compliance with the
terms thereof by the Issuer will (A) result in a material breach of any
term or provision of the instruments creating the Issuer or governing
its operations, or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to which
the Issuer is a party or by which it may be bound, or (C) constitute a
material violation of any statute, order or regulation applicable to the
Issuer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Issuer; and the Issuer is
not in breach or violation of any material indenture or other material
agreement or instrument, or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it which breach or violation
may materially impair the Issuer's ability to perform or meet any of its
obligations under the Master Servicing Agreement.
(3) This Agreement, and all documents and instruments contemplated
hereby, which are executed and delivered by the Issuer, will, assuming
due authorization, execution by and delivery to the other parties hereto
and thereto, constitute valid, legal and binding obligations of the
Issuer, enforceable in accordance with their respective terms, except
that (a) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(4) No litigation is pending or, to the best of the Issuer's
knowledge, threatened against the Issuer that would materially and
adversely affect the execution, delivery or enforceability of the Master
Servicing Agreement or the ability of the Issuer to perform its
obligations thereunder.
(5) Immediately prior to the transfer and assignment of the
Mortgage Loans to the Trustee, the Issuer had good title to, and was the
sole owner of, each Mortgage Loan free and clear of any liens, charges
or encumbrances or any ownership or participation interests in favor of
any other Person.
EXHIBIT A
FORM OF INITIAL CERTIFICATION OF TRUSTEE
(date)
(Master Servicer)
(Issuer)
_____________________
_____________________
Re: Master Servicing Agreement among (Provident) Home Equity
Loan Trust 199_, as Issuer, (The Provident Bank), as
Master Servicer, and ( ), as Trustee, Asset Backed Notes
and Asset Backed Certificates, Series 199_
---------------------------------------------------------
Gentlemen:
In accordance with Section 2(b) of the above-captioned Master Servicing
Agreement (the "Master Servicing Agreement"), the undersigned, as Trustee,
hereby certifies that, as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan listed in the attached schedule), it
has received:
(i) the original Mortgage Note, endorsed as provided in the following
form: "Pay to the order of ________, without recourse"; and
(ii) a duly executed assignment of the Mortgage (which may be included
in a blanket assignment or assignments).
Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in
the Master Servicing Agreement. The Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any
of the documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan or (iii)
the correctness of any information set forth in the Mortgage Loan Schedule,
other than the information specified in items (i) through (iv) and (vi)
thereof.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Master Servicing Agreement.
( )
as Trustee
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
EXHIBIT B
FORM OF FINAL CERTIFICATION OF TRUSTEE
(date)
(Master Servicer)
(Issuer)
_____________________
_____________________
Re: Master Servicing Agreement among (Provident) Home Equity Loan
Trust 199_, as Issuer, (The Provident Bank), as Master
Servicer, and ( ), as Trustee, Asset Backed
Notes and Asset Backed Certificates, Series 199_
------------------------------------------------
Gentlemen:
In accordance with Section 2(b) of the above-captioned Master Servicing
Agreement (the "Master Servicing Agreement"), the undersigned, as Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or listed on the attached
Document Exception Report) it has received:
(i) The original Mortgage Note, endorsed in the form provided in
Section 2(a) of the Master Servicing Agreement, with all intervening
endorsements showing a complete chain of endorsement from the originator to
the Issuer.
(ii) The original recorded Mortgage.
(iii) A duly executed assignment of the Mortgage in the form provided in
Section 2(a) of the Master Servicing Agreement, or, if the Master Servicer
has certified or the Trustee otherwise knows that the related Mortgage has
not been returned from the applicable recording office, a copy of the
assignment of the Mortgage (excluding information to be provided by the
recording office).
(iv) The original or duplicate original recorded assignment or
assignments of the Mortgage showing a complete chain of assignment from the
originator to the Issuer.
(v) The original or duplicate original lender's title policy and all
riders thereto or, any one of an original title binder, an original
preliminary title report or an original title commitment, or a copy thereof
certified by the title company.
Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to
such Mortgage Loan, and (b) the information set forth in items (i), (ii),
(iii), (iv), (vi) and (xi) of the definition of the "Mortgage Loan Schedule"
in Section 1 of the Master Servicing Agreement accurately reflects
information set forth in the Trustee Mortgage File.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in
the Master Servicing Agreement. The Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any
of the documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Notwithstanding anything herein to the contrary, the Trustee has made no
determination and makes no representations as to whether (i) any endorsement
is sufficient to transfer all right, title and interest of the party so
endorsing, as noteholder or assignee thereof, in and to that Mortgage Note or
(ii) any assignment is in recordable form or sufficient to effect the
assignment of and transfer to the assignee thereof, under the Mortgage to
which the assignment relates.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Master Servicing Agreement.
( ),
as Trustee
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
EXHIBIT C
REQUEST FOR RELEASE
(for Trustee)
(Provident) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Loan Information
- ----------------
Name of Mortgagor:
------------------------------
Servicer
Loan No.:
------------------------------
Trustee
- -------
Name:
------------------------------
Address:
------------------------------
------------------------------
Trustee
Mortgage File No.:
------------------------------
The undersigned Master Servicer hereby acknowledges that it has received
from ( ), as Trustee for the Holders of Notes of the above-referenced Series,
the documents referred to below (the "Documents"). All capitalized terms not
otherwise defined in this Request for Release shall have the meanings given
them in the Master Servicing Agreement (the "Master Servicing Agreement")
relating to the above-referenced Series among the Trustee, (The Provident
Bank), as Master Servicer, and (Provident) Home Equity Loan Trust 199_, as
Issuer.
( ) Mortgage Note dated , 19 , in the original principal sum
------------ --
$ , made by . payable to, or endorsed to the
-------- ----------------
order of, the Trustee.
( ) Mortgage recorded on as instrument no.
----------------- ----
in the County Recorder's Office of the County of ,
___________________
State of in book/reel/docket of
---------------- ----------------
official records at page/image .
----------------
( ) Deed of Trust recorded on as instrument no.
------------------ -------
in the County Recorder's Office of the County of ,
----------------
State of in
--------------- ------------------------------------
book/reel/docket of official records at page/image
---------------.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
as instrument no. in the County
----------------- -------------
Recorder's Office of the County of , State of
----------- ------------
in book/reel/docket of official records at page/image.
---------------
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( )
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( )
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( )
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( )
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The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or knowingly permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of attachment or other impositions nor
shall the Master Servicer assert or seek to assert any claims or rights
of setoff to or against the Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been
remitted to the Note Account and except as expressly provided in the
Master Servicing Agreement.
(4) The Documents and any proceeds thereof, including any proceeds
of proceeds, coming into the possession or control of the Master
Servicer shall at all times be earmarked for the account of the Trustee,
and the Master Servicer shall keep the Documents and any proceeds
separate and distinct from all other property in the Master Servicer's
possession, custody or control.
(THE PROVIDENT BANK)
By
------------------------
Its
------------------------
Date: , 19
----------------- --
EXHIBIT D
REQUEST FOR RELEASE OF DOCUMENTS
To: (Trustee) Attn: Mortgage Custody
Services
Re: The Master Servicing Agreement dated ( ) among (The Provident Bank)
("(Provident)"), as Master Servicer, (Provident) Home Equity Loan Trust 199_,
as Issuer, and ( ), as Trustee
Ladies and Gentlemen:
In connection with the administration of the Mortgage Loans held by you as
Trustee for (Provident) Home Equity Loan Trust 199_, as Issuer, we request
the release of the Mortgage File for the Mortgage Loan(s) described below,
for the reason indicated.
FT Account#: Pool #:
Mortgagor's Name, Address and Zip Code:
- --------------------------------------
Mortgage Loan Number:
- --------------------
Reason for Requesting Documents (check one)
- -------------------------------
_______1. Mortgage Loan paid in full ((Provident) hereby certifies that all
amounts have been received.)
_______2. Mortgage Loan Liquidated ((Provident) hereby certifies that all
proceeds of foreclosure, insurance, or other liquidation have been
finally received.)
_______3. Mortgage Loan in Foreclosure.
_______4. Other (explain): ____________________________________
If item 1 or 2 above is checked, and if all or part of the Trustee Mortgage
File was previously released to us, please release to us our previous receipt
on file with you, as well as an additional documents in your possession
relating to the above-specified Mortgage Loan. If item 3 or 4 is checked,
upon return of all of the above documents to you as Trustee, please
acknowledge your receipt by signing in the space indicated below, and
returning this form.
(THE PROVIDENT BANK) (address)
By:________________________
Name:______________________
Title:____________________
Date:______________________
TRUSTEE CONSENT TO RELEASE AND
ACKNOWLEDGEMENT OF RECEIPT
By:________________________
Name:______________________
Title:____________________
Date:______________________
EXHIBIT 5.1
KEATING, MUETHING & KLEKAMP, P.L.L.
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Telephone (513) 579-6400
Facsimile (513) 579-6457
May 15, 1997
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
RE: Registration Statement No. 333-18897
------------------------------------
Ladies and Gentlemen:
We have acted as counsel for The Provident Bank, an Ohio banking
corporation ("Provident"), in connection with the preparation of the
referenced registration statement on Form S-3 (the "Registration Statement")
relating to the Securities (defined below) and with the authorization and
issuance from time to time in one or more series (each a "Series") of up to
$500,000,000 aggregate principal amount of asset-backed securities (the
"Securities"). As set forth in the Registration Statement, each Series of
Securities will be issued under and pursuant to the conditions of a separate
pooling and servicing agreement, trust agreement or indenture (each, an
"Agreement") among Provident, a trustee (the "Trustee") and where
appropriate, a servicer (the "Servicer"), each to be identified in the
prospectus supplement for such Series of Securities.
We have examined copies of Provident's Amended Articles of Incorporation
and Code of Regulations. We have also examined forms of each Agreement, as
filed or incorporated by reference as exhibits to the Registration Statement,
and the forms of Securities included in any Agreement so filed or
incorporated by reference in the Registration Statement and such other
records, documents and statutes as we have deemed necessary for purposes of
this opinion.
Based upon the foregoing, we are of the opinion that:
1. When any Agreement relating to a Series of Securities has been duly
and validly authorized by all necessary action on the part of Provident and
has been duly executed and delivered by Provident, the Servicer, if any, the
Trustee and any other party thereto, such Agreement will constitute a legal,
valid and binding agreement of Provident, enforceable against Provident in
accordance with its terms, except as enforcement thereof may be
limited by insolvency or other laws applicable to banks relating to or
affecting creditors' rights or by general equity principles.
2. When a Series of Securities has been duly authorized by all
necessary action on the part of Provident (subject to the terms thereof being
otherwise in compliance with applicable law at such time), duly executed and
authenticated by the trustee for such Series in accordance with the terms of
the related Agreement and issued and delivered against payment therefor as
described in the Registration statement, such Series of Securities will be
legally and validly issued, fully paid and nonassessable, and the holders
thereof will be entitled to the benefits of the related Agreement.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the laws of the States of Ohio and New
York (excluding choice of law principles therein) and the federal laws of the
United States of America, although we point out to you that we are not
licensed to practice law in the State of New York.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the references to this firm under the heading
"Legal Matters" in each Prospectus forming a part of the Registration
Statement, without admitting that we are "experts" within the meaning of the
Securities Act of 1933, as amended, or the Rules and Regulations of the
Commission issued thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
KEATING, MUETHING & KLEKAMP, P.L.L.
By: /s/James R. Whitaker
---------------------
James R. Whitaker
EXHIBIT 8.1
BROWN & WOOD LLP
One World Trade Center
New York, New York 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
May 15, 1997
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Re: The Provident Bank
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel for The Provident Bank, an Ohio
banking corporation (the "Company"), in connection with the preparation of
the registration statement on Form S-3 (the "Registration Statement")
relating to the Securities (defined below) and with the authorization and
issuance from time to time in one or more series (each, a "Series") of up to
$500,000,000 aggregate principal amount of asset-backed securities (the
"Securities"). The Registration Statement is being filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended. As set
forth in the Registration Statement, each Series of Securities will be issued
under and pursuant to the conditions of a separate pooling and servicing
agreement, master pooling and servicing agreement, pooling agreement, trust
agreement or indenture (each an "Agreement") among the Company, a trustee
(the "Trustee") and, where appropriate, a servicer (the "Servicer"), each to
be identified in the prospectus supplement for such Series of Securities.
We have examined the prospectus and forms of prospectus supplement
related thereto contained in the Registration Statement (each, a
"Prospectus") and such other documents, records and instruments as we have
deemed necessary for the purposes of this opinion (the "Documents").
In arriving at the opinion expressed below, we have assumed that each
Agreement will be duly authorized by all necessary corporate action on the
part of the Company, the Trustee, the Servicer (where applicable) and any
other party thereto for such Series of Securities and will be duly executed
and delivered by the Company, the Trustee, the Servicer and any other
party thereto substantially in the applicable form filed or incorporated
by reference as an exhibit to the Registration Statement, that each Series
of Securities will be duly executed and delivered in substantially the forms
set forth in the related Agreement filed or incorporated by reference
as an exhibit to the Registration Statement, and that Securities will be
sold as described in the Registration Statement.
In addition, in rendering the opinions set forth below, we have made
such investigations of such matters of law as we deemed appropriate as a
basis for the opinions expressed below. Further, we have assumed the
genuineness of all signatures and the authenticity of all Documents submitted
to us as originals. Our opinions are also based on the assumption that there
are no agreements or understandings with respect to the transactions
contemplated in the documents relating to the above-mentioned transaction
other than those contained in the Documents. Furthermore, our opinions are
based on the assumption that all parties to the Documents will comply with
the terms thereof, including all tax reporting requirements contained
therein.
As special tax counsel to the Company, we have advised the Company with
respect to certain material federal income tax aspects of the proposed
issuance of each Series of Securities pursuant to the related Agreement.
Such advice has formed the basis for the description of selected federal
income tax consequences for holders of such Securities that appear under the
heading "Federal Income Tax Consequences" in each Prospectus forming a part
of the Registration Statement. Such description does not purport to discuss
all possible federal income tax ramifications of the proposed issuance of the
Securities, but with respect to those federal income tax consequences
described therein, such description is accurate in all material respects.
The opinions expressed herein are limited as described above, and we do
not express an opinion with respect to any other federal or state law or the
law of any other jurisdiction, except as expressly stated herein. This
opinion is rendered as of the date hereof and we undertake no obligation to
update this opinion or advise you of any changes in the event there is any
change in legal authorities, facts, assumptions or documents on which this
opinion is based (including the taking of any action by any party to the
Documents pursuant to any opinion of counsel or a waiver), or any inaccuracy
in any of the representations, warranties or assumptions upon which we have
relied in rendering this opinion unless we are specifically engaged to do so.
Because the Prospectuses contemplate Series of Securities with numerous
different characteristics, you should be aware that the
particular characteristics of each Series of Securities must be considered in
determining the applicability of this opinion to a particular Series of
Securities.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the references to this firm under the heading
"Certain Material Federal Income Tax Considerations" in each Prospectus
forming a part of the Registration Statement, without admitting that we are
"experts" within the meaning of the 1933 Act or the Rules and Regulations of
the Commission issued thereunder, with respect to any part of the
Registration Statement, including this exhibit.
Very truly yours
/s/BROWN & WOOD LLP
