-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AFopZA8p3Hf6ZkvydmNajQZXv4SDWjlE4Z+WZbbVUr23FX7RtLm47BVe01I4b2tB NzMiMxFByF63P5JSpPd1RA== 0000950123-98-008170.txt : 19980910 0000950123-98-008170.hdr.sgml : 19980910 ACCESSION NUMBER: 0000950123-98-008170 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980909 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANC ONE ABS CORP CENTRAL INDEX KEY: 0001013866 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 311467431 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-59845 FILM NUMBER: 98706269 BUSINESS ADDRESS: STREET 1: 201 NORTH CENTRAL AVE STREET 2: C/O BANK ONE ARIZONA N A CITY: PHOENIX STATE: AZ ZIP: 85004 BUSINESS PHONE: 6142486347 MAIL ADDRESS: STREET 1: 100 EAST BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43271-0133 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1998 REGISTRATION STATEMENT NO. 333-59845 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Banc One ABS Corporation (Depositor of the Trusts described herein) (Exact names of registrants as specified in governing instruments) Ohio (States or other jurisdictions of incorporation or organization) None Available (I.R.S. Employer Identification Number) 100 East Broad Street Columbus, Ohio 43271-0158 (614) 248-5700 (Address of principal executive offices) Steven Alan Bennett, Esq. BANC ONE CORPORATION 100 East Broad Street Columbus, Ohio 43271-0158 (614) 248-5700 (Name and address of agent for service) Copies to: Joshua E. Raff, Esq. Charles F. Andrews, Esq. Orrick, Herrington & Sutcliffe LLP BANC ONE CORPORATION 666 Fifth Avenue 100 East Broad Street New York, New York 10103 Columbus, Ohio 43271-0158 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable on or after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest plans, please check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ____________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ____________ If delivery of the prospectus is expected to be made pursuant to rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
Proposed maximum TITLE TO SECURITIES BEING Amount being offering per price per Propose maximum Amount of REGISTERED registered unit (1) aggregate offering price registration fee - ---------- ---------- -------- ------------------------ ---------------- Asset Backed Notes $ 700,000,000 100% $ 700,000,000 $ 206,500 Asset Backed Certificates 2,800,000,000 100% 2,800,000,000 826,000 ------------- ---- ------------- ------------ Total $3,500,000,000 $3,500,000,000 $1,032,500(2)
(1) Estimated solely for the purpose of calculating the registration fee. (2) Less $295.00 previously paid. The Registrant hereby amends this Registration Statement on such date or dates as maybe necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- 2 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold without the delivery of a final Prospectus Supplement and Prospectus. This Prospectus Supplement and the accompanying Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION DATED SEPTEMBER 9, 1998 PROSPECTUS SUPPLEMENT (To Prospectus dated ______________,_________) $_______________ Banc One Home Equity Loan Trust 199__-__ Revolving Home Equity Loan Asset-Backed Certificates, Series 199__-__ ___________________ ___________________ as Seller ----------- Bank One, N.A., as Servicer ----------- Banc One ABS Corporation, as Depositor ----------- Each Revolving Home Equity Loan Asset-Backed Certificate, Series 199_-_ (collectively, the "Certificates") will represent an undivided interest in the Banc One Home Equity Loan Trust 199_-_ (the "Trust") to be formed pursuant to a Pooling and Servicing Agreement among ____________, as Seller, Bank One, N.A. ("Bank One"), as Servicer, Banc One ABS Corporation, as Depositor, and _____________________, as Trustee. The property of the Trust will include a pool of adjustable rate home equity revolving credit line loans (sometimes referred to herein as "home equity loans") made or to be made in the future (the "Mortgage Loans") under certain home equity revolving credit line loan agreements. The Mortgage Loans are secured by first, second and third deeds of trust or mortgages on one- to four-family residential properties. The aggregate undivided interest in the Trust represented by the Certificates will, as of _________, 199_ (the "Cut-Off Date"), represent approximately ___% of the outstanding principal balances of the Mortgage Loans. The remaining undivided interest in the Trust not represented by the Certificates (the "Transferor Interest") will initially be equal to $_________, which as of the Cut-Off Date is approximately ___% of the outstanding principal balances of the Mortgage Loans. [The Transferor Interest will be initially retained by Bank One.] Only the Certificates are offered hereby. Distributions of principal and interest on the Certificates will be made on the [fifteenth] day of each month or, if such date is not a Business Day, then on the succeeding Business Day (each, a "Distribution Date"), commencing ___________, 199_. On each Distribution Date, holders of the Certificates will be entitled to receive, from and to the limited extent of funds available in the Collection Account (as defined herein), distributions with respect to interest and principal calculated as set forth herein. The Certificates are not guaranteed by the Depositor, Bank One or any affiliate thereof. [However, the Certificates will be unconditionally and irrevocably guaranteed as to the payment of the Guaranteed Distributions (as defined herein) on each Distribution Date pursuant to the terms of a financial guaranty insurance policy (the "Policy") to be issued by] There is currently no market for the Certificates offered hereby and there can be no assurance that such a market will develop or if it does develop that it will continue. See "RISK FACTORS" herein and in the Prospectus. ----------- Prospective investors should review the information set forth under "Risk Factors" beginning on page S-__ herein and on page __ in the accompanying Prospectus. ----------- THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR, BANK ONE, THE TRUSTEE OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT PROVIDED HEREIN. NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to the Public Discount (1) Depositor (2) Per Certificate............. % % % Total....................... $ $ $
(1) The Depositor has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (2) Before deducting expenses, estimated to be $ ----------- The Certificates are offered subject to prior sale and subject to the Underwriters' right to reject orders in whole or in part. It is expected that delivery of the Certificates will be made in book-entry form only through the facilities of The Depository Trust Company, Cedel Bank societe anonyme and the Euroclear System on or about ____________, 199__ (the "Closing Date"). ________________, 199__ 3 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Until ninety days after the date of this Prospectus Supplement, all dealers effecting transactions in the Certificates, whether or not participating in this distribution, may be required to deliver a Prospectus Supplement and Prospectus. This is in addition to the obligation of dealers acting as underwriters to deliver a Prospectus Supplement and Prospectus with respect to their unsold allotments or subscriptions. The Certificates offered hereby constitute part of a separate series of Revolving Home Equity Loan Asset Backed Certificates being offered by Banc One ABS Corporation from time to time pursuant to its Prospectus dated __________, 199__. This Prospectus Supplement does not contain complete information about the offering of the Certificates. Additional information is contained in the Prospectus and investors are urged to read both this Prospectus Supplement and the Prospectus in full. Sales of the Certificates may not be consummated unless the purchaser has received both this Prospectus Supplement and the Prospectus. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE There are incorporated herein by reference all documents filed by the Depositor with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act, on or subsequent to the date of this Prospectus and prior to the termination of the offering of the Certificates made by this Prospectus Supplement. The Depositor will provide without charge to each person to whom this Prospectus Supplement and Prospectus are delivered, on request of such person, a copy of any or all of the documents incorporated herein by reference other than the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Requests should be directed to Banc One ABS Corporation in writing at __________________, _______________ or by telephone at (___) ___-____. [In addition to the documents described above under "Incorporation of Certain Documents by Reference," the financial statements of the Certificate Insurer and subsidiaries included in, or as exhibits to, the following documents, which have been filed with the Securities and Exchange Commission by ___________________, are hereby incorporated by reference in this Prospectus Supplement: (a) Annual Report on Form 10-K for the period ended ___________, ____; and (b) Quarterly Report on Form IO-Q for the period ended ___________, ____. All financial statements of the Certificate Insurer included in documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus Supplement and prior to the termination of the offering of the Certificates shall be deemed to be incorporated by reference into this Prospectus Supplement and to be a part hereof from the respective dates of filing such documents.] S-2 4 [The Depositor hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the financial statements of the Certificate Insurer included in or as an exhibit to the documents of Holdings referred to above and filed pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference in the Registration Statement of which this Prospectus is a part shall be deemed to be a new registration statement relating to the Certificates offered hereby, and the offering of such Certificates at that time shall be deemed to be the initial bona fide offering thereof.] All reports and other documents filed by the Servicer, on behalf of the Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Certificates offered hereby shall be deemed incorporated by reference into this Prospectus and to be a part hereof. The Servicer will provide without charge to each person, including any beneficial owner of Certificates, to whom a copy of this Prospectus is delivered, on the written or oral request of any such person, a copy of any or all the documents incorporated herein by reference (other than exhibits to such documents). Written requests for such copies should be directed to BANC ONE CORPORATION, 100 East Broad Street, Columbus, Ohio 43271-0133, Attention: Structured Finance. Telephone requests for such copies should be directed to BANC ONE CORPORATION at (614) 248-6347. S-3 5 - -------------------------------------------------------------------------------- SUMMARY The following summary of certain pertinent information is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus Supplement and the accompanying Prospectus. Certain capitalized terms used in the Summary are defined elsewhere in the Prospectus Supplement or in the Prospectus. Reference is made to the Index of Defined Terms herein and the Glossary of Terms in the Prospectus for the definitions of certain capitalized terms. Trust...................... Banc One Home Equity Loan Trust 199_-_ (the "Trust") will be formed pursuant to a pooling and servicing agreement (the "Agreement") to be dated as of ______, 199_ (the "Cut-Off Date") among ___________, as Seller, Bank One, N.A. ("Bank One"), as servicer (together with any successor in such capacity, the "Servicer"), Banc One ABS Corporation, as depositor (the "Depositor"), and _____________, as trustee (the "Trustee"). The property of the Trust will include: a pool of adjustable rate home equity revolving credit line loans made or to be made in the future (the "Mortgage Loans"), under certain home equity revolving credit line loan agreements (the "Credit Line Agreements") and secured by either first, second or third mortgages on residential properties that are primarily one- to four-family properties (the "Mortgaged Properties"); the collections in respect of the Mortgage Loans received after the Cut-Off Date (exclusive of payments in respect of accrued interest due on or prior to the Cut-Off Date); property that secured a Mortgage Loan which has been acquired by foreclosure or deed in lieu of foreclosure; [an irrevocable and unconditional limited financial guaranty insurance policy (the "Policy")]; an assignment of the Depositor's rights under the Purchase Agreement (as defined herein); rights under certain hazard insurance policies covering the Mortgaged Properties; and certain other property, as described more fully herein. The Trust property will include the unpaid principal balance of each Mortgage Loan as of the Cut-Off Date (the "Cut-Off Date Principal Balance") plus any additions thereto as a result of new advances made pursuant to the applicable Credit Line Agreement (the "Additional Balances") during the life of the Trust. With respect to any date, the "Pool Balance" will be equal to the aggregate of the Principal Balances of all Mortgage Loans as of such date. The aggregate Cut-Off Date Principal Balance of the Mortgage Loans is $_____________ (the "Cut-Off Date - -------------------------------------------------------------------------------- S-4 6 - -------------------------------------------------------------------------------- Pool Balance"). The "Principal Balance" of a Mortgage Loan (other than a Liquidated Mortgage Loan) on any day is equal to its Cut-Off Date Principal Balance, plus (I) any Additional Balances in respect of such Mortgage Loan, minus (ii) all collections credited against the Principal Balance of such Mortgage Loan in accordance with the related Credit Line Agreement prior to such day. The Principal Balance of a Liquidated Mortgage Loan (as defined herein) after final recovery of related Liquidation Proceeds (as defined herein) shall be zero. Securities Offered......... Each of the Revolving Home Equity Loan Asset-Backed Certificates, Series 199_-_ offered hereby (the "Certificates") represents an undivided interest in the Trust. Each Certificate represents the right to receive payments of interest at the variable rate described below (the "Certificate Rate"), payable monthly, and payments of principal at such time and to the extent provided below. The aggregate undivided interest in the Trust represented by the Certificates as of the Closing Date will equal $____________ (the "Original Invested Amount"), which represents ___% of the Cut-Off Date Pool Balance. The "Original Certificate Principal Balance" will equal $____________. Following the Closing Date, the "Invested Amount" with respect to any date will be an amount equal to the Original Invested Amount minus (i) the amount of Investor Principal Collections (as defined herein) previously distributed to Certificateholders, and minus (ii) an amount equal to the product of the Investor Floating Allocation Percentage and the Liquidation Loss Amounts (each as defined herein). The Transferor (as described below) will own the remaining undivided interest (the "Transferor Interest") in the Mortgage Loans, which is equal to the Pool Balance minus the Invested Amount and will initially equal approximately __% of the Cut-Off Date Pool Balance. The Transferor (the "Transferor") as of any date is the owner of the Transferor Interest, which initially will be Bank One. The Certificates will be issued pursuant to the Agreement. The principal amount of the outstanding Certificates (the "Certificate Principal Balance") on any date is equal to the Original Certificate Principal Balance minus the aggregate of amounts actually distributed as principal to the Certificateholders. See "DESCRIPTION OF THE CERTIFICATES" herein. - -------------------------------------------------------------------------------- S-5 7 - -------------------------------------------------------------------------------- Removal of Certain Mortgage Loans; Additional Balances...... Subject to certain conditions, on any Distribution Date the Transferor may, but shall not be obligated to, remove from the Trust certain Mortgage Loans without notice to the Certificateholders. The Transferor is permitted to randomly designate the Mortgage Loans to be removed. Mortgage Loans so designated will only be removed upon satisfaction of certain conditions specified in the Agreement, including: (i) the Transferor Interest as of the Transfer Date (as defined herein) (after giving effect to such removal) exceeds the Minimum Transferor Interest (as defined below); (ii) the Transferor shall have delivered to the Trustee a "Mortgage Loan Schedule" containing a list of all Mortgage Loans remaining in the Trust after such removal; (iii) the Transferor shall represent and warrant that no selection procedures which are adverse to the interests of the Certificateholders or the Certificate Insurer were used by the Transferor in selecting such Mortgage Loans; (iv) in connection with any such retransfer of Mortgage Loans, the Rating Agencies (as defined herein) shall have been notified of the proposed transfer and prior to the Transfer Date the Rating Agencies shall have notified the Transferor in writing that such transfer will not result in a reduction or withdrawal of the ratings assigned to the Certificates without regard to the Policy; and (v) the Transferor shall have delivered to the Trustee and the Certificate Insurer an officer's certificate confirming the conditions set forth in clauses (i) through (iii) above. See "DESCRIPTION OF THE CERTIFICATES-Optional Transfers of Mortgage Loans to the Transferor." The "Minimum Transferor Interest" as of any date is an amount equal to the lesser of (a) __% of the Pool Balance on such date and (b) the Transferor Interest as of the Closing Date. During the term of the Trust, all Additional Balances will be transferred to and become property of the Trust. The Pool Balance at any time will generally fluctuate from day to day because the amount of Additional Balances and the amount of principal payments with respect to the Mortgage Loans will usually differ from day to day. Because the Transferor Interest is equal to the Pool Balance minus the Invested Amount, the amount of the Transferor Interest will fluctuate from day to day as draws are made with respect to the Mortgage - -------------------------------------------------------------------------------- S-6 8 - -------------------------------------------------------------------------------- Loans and as Principal Collections are received. The Mortgage Loans......... On the Closing Date, Bank One will sell the Mortgage Loans to the Depositor, pursuant to a purchase agreement (the "Purchase Agreement"). The Cut-Off Date Principal Balance of the Mortgage Loans was $____________. Weighted averages described below are weighted on the basis of the Cut-Off Date Principal Balance of all of the Mortgage Loans. The Mortgage Loans are secured by first, second or third mortgages on Mortgaged Properties located in ___ states and the District of Columbia. Approximately _____%, _____% and _____% of the Mortgage Loans are secured by Mortgaged Properties located in the states of _______, ________ and ________, respectively. The weighted average Combined Loan-to-Value Ratio of the Mortgage Loans was _____% as of the Cut-Off Date. The "Combined Loan-to-Value Ratio" or "CLTV" of each Mortgage Loan is the ratio, expressed as a percentage, of (a) the sum of (i) the greater of the Cut-Off Date Principal Balance or the Credit Limit and (ii) the principal balance of any senior mortgage loan as of the origination of such Mortgage Loan, over (b) the value (based on an appraisal or other acceptable valuation method) for the related Mortgaged Property determined at the origination of such Mortgage Loan. Interest accrues on each Mortgage Loan, payable monthly, on the daily outstanding Principal Balance thereof for each billing cycle at a variable rate per annum (the "Loan Rate") equal at any time to the sum of the applicable index, as described herein under "DESCRIPTION OF THE MORTGAGE LOANS Mortgage Loan Terms," as of the first day of each related billing cycle (each such date, an "Adjustment Date") plus a fixed percentage amount (the "Gross Margin") specified in the related Mortgage Note, computed on the basis of a 365 day year times actual days elapsed. The Gross Margins for the Mortgage Loans as of the Cut-off Date ranged from __% to ____%. The weighted average Gross Margins as of the Cut-Off Date for Mortgage Loans indexed to a "prime rate" and a "26 week T-Bill rate" were ____% and ____% respectively. All of the Mortgage Loans are subject to a maximum Loan Rate specified in the related Credit Line Agreements (each, a "Maximum Rate"). As of the Cut-off Date, the Maximum Rates ranged from _____% per annum to _____% per annum and the weighted average Maximum - -------------------------------------------------------------------------------- S-7 9 - -------------------------------------------------------------------------------- Rate was _____% per annum. As of the Cut-Off Date, _____% of the Mortgage Loans have a minimum Loan Rate of ____% per annum and _____% of the Mortgage Loans have a minimum Loan Rate of _____% per annum. The remaining Mortgage Loans do not have a minimum Loan Rate. As of the Cut-Off Date, the Loan Rates on the Mortgage Loans ranged from _____% per annum to _____% per annum and the weighted average Loan Rate was _____% per annum. The minimum Principal Balance of any Mortgage Loan as of the Cut-Off Date was $_____, the maximum Principal Balance of any Mortgage Loan as of the Cut-Off Date was $_________, and the average Principal Balance of any Mortgage Loan as of the Cut-Off Date was $_________. Approximately _____% of the Mortgage Loans were secured by first mortgages on the related Mortgaged Property, _____% were secured by second mortgages and _____% were secured by third mortgages. As of the Cut-Off Date, the Mortgage Loans had remaining terms to maturity ranging from ____ month to _____ months and the weighted average remaining term to scheduled maturity was ___ months. See "DESCRIPTION OF THE MORTGAGE LOANS" herein. Denominations.............. The Certificates will be offered for purchase in denominations of $1,000 and multiples of $1 in excess thereof. The interest in the Trust evidenced by a Certificate (the "Percentage Interest") will be equal to the percentage derived by dividing the denomination of such Certificate by the Original Certificate Principal Balance. Registration of Certificates............... The Certificates will initially be issued in book-entry form. Persons acquiring beneficial ownership interests in the Certificates ("Certificate Owners") may elect to hold their Certificate interests through The Depository Trust Company ("DTC"), in the United States, or Cedel Bank societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. So long as the Certificates are Book-Entry Certificates (as defined herein), such Certificates will be evidenced by one or more Certificates registered in the name of Cede & Co. ("Cede"), as the nominee of DTC or one of the relevant depositories (collectively, the "European Depositaries"). Cross-market transfers - -------------------------------------------------------------------------------- S-8 10 - -------------------------------------------------------------------------------- between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank N.A. ("Citibank") or Chemical Bank ("Chemical"), the relevant depositories of Cedel or Euroclear, respectively, and each a participating member of DTC. The Certificates will initially be registered in the name of Cede. The interests of the Certificateholders will be represented by book entries on the records of DTC and participating members thereof. No Certificate Owner will be entitled to receive a definitive certificate representing such person's interest, except in the event that Definitive Certificates (as defined herein) are issued under the limited circumstances described herein. All references in this Prospectus Supplement to any Certificates reflect the rights of Certificate Owners only as such rights may be exercised through DTC and its participating organizations for so long as such Certificates are held by DTC. See "RISK FACTORS-Book Entry Certificates," "DESCRIPTION OF THE CERTIFICATES-Book-Entry Certificates" and "ANNEX I" hereto. Depositor.................. Banc One ABS Corporation, a Delaware corporation. The principal executive offices of the Depositor are located at 100 East Broad Street, Columbus, Ohio 43271 (Telephone: (614) 248-5800). See "THE DEPOSITOR" in the Prospectus. Servicer of the Mortgage Loans...................... Bank One, N.A., a national banking association headquartered in Columbus, Ohio. The principal executive offices of the Servicer are located at 100 East Broad Street, Columbus, Ohio 43271 (Telephone: (614) 248-5800). See "SERVICING OF THE MORTGAGE LOANS-The Servicer" herein. Collections................ All collections on the Mortgage Loans will generally be allocated in accordance with the Credit Line Agreements between amounts collected in respect of interest and amounts collected in respect of principal. As to any Distribution Date, "Interest Collections" will be equal to (i) the amounts collected during the related Collection Period, including the portion of Net Liquidation Proceeds (as defined below) allocated to interest pursuant to the terms of the Credit Line Agreements less (ii) Servicing - -------------------------------------------------------------------------------- S-9 11 - -------------------------------------------------------------------------------- Fees for the related Collection Period. As to any Distribution Date, "Principal Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period, including the portion of Net Liquidation Proceeds allocated to principal pursuant to the terms of the Credit Line Agreements and (ii) any Transfer Deposit Amounts (as defined herein). "Net Liquidation Proceeds" with respect to a Mortgage Loan are the proceeds (excluding amounts drawn on the Policy) received in connection with the liquidation of any Mortgage Loan, whether through trustee's sale, foreclosure sale or otherwise, reduced by related expenses, but not including the portion, if any, of such amount that exceeds the Principal Balance of the Mortgage Loan plus any accrued and unpaid interest thereon to the end of the Collection Period during which such Mortgage Loan became a Liquidated Mortgage Loan. With respect to any Distribution Date, the portion of Interest Collections allocable to the Certificates ("Investor Interest Collections") will equal the product of (a) Interest Collections for such Distribution Date and (b) the Investor Floating Allocation Percentage. With respect to any Distribution Date, the "Investor Floating Allocation Percentage" is the percentage equivalent of a fraction determined by dividing the Invested Amount at the close of business on the preceding Distribution Date (or at the Closing Date in the case of the first Distribution Date) by the Pool Balance at the beginning of the related Collection Period. The remaining amount of Interest Collections will be allocated to the Transferor Interest as more fully described herein. On each Distribution Date, the Investor Interest Collections will be applied in the following order of priority: (i) as payment to the Trustee for its fee for services rendered pursuant to the Agreement; (ii) as payment for the premium for the Policy; (iii) as payment for the accrued interest due and any overdue accrued interest (with interest thereon) on the Certificate Principal Balance of the Certificates; (iv) as payment for any Investor Loss Amount (as defined herein) for such Distribution Date; (v) as payment for any Investor Loss Amount for a previous Distribution Date that was not - -------------------------------------------------------------------------------- S-10 12 - -------------------------------------------------------------------------------- previously (a) funded by Investor Interest Collections allocable to the Certificateholders, (b) absorbed by the Overcollateralization Amount, (c) funded by amounts on deposit in the Spread Account or (d) funded by draws on the Policy; (vi) to reimburse prior draws made from the Policy (with interest thereon); (vii) to pay principal on the Certificates until the Invested Amount exceeds the Certificate Principal Balance by the Required Overcollateralization Amount, each as defined herein (such amount, if any, paid pursuant to this clause (vii) being referred to herein as the "Accelerated Principal Distribution Amount"); (viii) any other amounts required to be deposited in an account for the benefit of the Certificate Insurer and Certificateholders pursuant to the Agreement or amounts owed to the Certificate Insurer pursuant to the Insurance Agreement; (ix) certain amounts that may be required to be paid to the Servicer pursuant to the Agreement; and (x) to the Transferor to the extent permitted as described herein. Investor Interest Collections available after the payment of interest on the Certificates may be insufficient to cover any Investor Loss Amount. If such insufficiency results in the Certificate Principal Balance exceeding the Invested Amount, a draw in an amount equal to such difference will be made on the Policy in accordance with the terms of the Policy. The "Overcollateralization Amount" on any date of determination is the amount, if any, by which the Invested Amount exceeds the Certificate Principal Balance on such day. Payments to Certificateholders pursuant to clause (iii) above will be interest payments on the Certificates. Payments to Certificateholders pursuant to clauses (iv), (v) and (vii) will be principal payments on the Certificates and will therefore reduce the Certificate Principal Balance, however, payments pursuant to clause (vii) will not reduce the Invested Amount. The Accelerated Principal Distribution Amount is not guaranteed by the Policy. "Liquidation Loss Amount" means with respect to any Liquidated Mortgage Loan, the unrecovered Principal Balance thereof at the end of the related Collection Period in which such Mortgage Loan became a Liquidated Mortgage Loan, after giving effect to the Net Liquidation Proceeds received in connection therewith. The "Investor - -------------------------------------------------------------------------------- S-11 13 - -------------------------------------------------------------------------------- Loss Amount" shall be the product of the Investor Floating Allocation Percentage and the aggregate of the Liquidation Loss Amounts for such Distribution Date. See "DESCRIPTION OF THE CERTIFICATES Distributions on the Certificates." Principal Collections will be allocated between the Certificateholders and the Transferor ("Investor Principal Collections" and "Transferor Principal Collections," respectively) in accordance with their percentage interests in the Mortgage Loans of ____% and ____%, respectively, as of the Cut-Off Date (the "Fixed Allocation Percentage"), but a lesser amount of Principal Collections may be distributed to Certificateholders during the Managed Amortization Period, as described below. The "Investor Fixed Allocation Percentage" shall be ____%. The Servicer will deposit Interest Collections and Principal Collections in respect of the Mortgage Loans in an account established for such purpose under the Agreement (the "Collection Account"). See "DESCRIPTION OF THE CERTIFICATES-Payments on Mortgage Loans; Deposits to Collection Account." Collection Period.......... As to any Distribution Date other than the first Distribution Date, the "Collection Period" is the calendar month preceding the month of such Distribution Date. As to the first Distribution Date, the "Collection Period" is the period beginning on the day immediately following the Cut-Off Date and ending on __________, 199_. Interest................... Interest on the Certificates will be distributed monthly on the [fifteenth] day of each month or, if such day is not a Business Day, then the next succeeding Business Day (each, a "Distribution Date"), commencing on ______ 15, 199_, at the Certificate Rate for the related Interest Period (as defined below). The "Certificate Rate" for an Interest Period will generally equal the sum of (a) the London Interbank Offered Rate for one-month Eurodollar deposits ("LIBOR") appearing on the Telerate Screen Page 3750, as of the second LIBOR Business Day (as defined herein) prior to the first day of such Interest Period (or as of two LIBOR Business Days prior to the Closing Date, in the case of the first Interest Period) and (b) %. Notwithstanding the foregoing, in no event will the amount of interest required to be distributed in respect of - -------------------------------------------------------------------------------- S-12 14 - -------------------------------------------------------------------------------- the Certificates on any Distribution Date exceed a rate equal to the weighted average of the Loan Rates (net of the Servicing Fee Rate, the fee payable to the Trustee and the rate at which the premium payable to the Certificate Insurer is calculated) weighted on the basis of the daily balance of each Mortgage Loan during the related billing cycle prior to the Collection Period relating to such Distribution Date or in the case of the first Distribution Date, the weighted average loan rate as of the Cut-Off Date. Interest on the Certificates in respect of any Distribution Date will accrue from the preceding Distribution Date (or in the case of the first Distribution Date, from the date of the initial issuance of the Certificates (the "Closing Date") through the day preceding such Distribution Date (each such period, an "Interest Period") on the basis of the actual number of days in the Interest Period and a 360-day year. Interest for any Distribution Date due but not paid on such Distribution Date will be due on the next succeeding Distribution Date together with additional interest on such amount at a rate equal to the sum of the applicable Certificate Rate and 2% per annum. Interest payments on the Certificates will be funded from Investor Interest Collections, any funds on deposit in the Spread Account and from draws on the Policy. See "DESCRIPTION OF THE CERTIFICATES" herein. Principal Payments from Principal Collections...... For the period beginning on the first Distribution Date and, unless a Rapid Amortization Event (as defined herein) shall have earlier occurred, ending immediately following the Distribution Date in ______ 200_ (the "Managed Amortization Period"), the amount of Principal Collections payable to Certificateholders as of each Distribution Date during the Managed Amortization Period will equal, to the extent funds are available therefor, the Scheduled Principal Collections Distribution Amount for such Distribution Date. On any Distribution Date during the Managed Amortization Period, the "Scheduled Principal Collections Distribution Amount" shall equal the lesser of (i) the Maximum Principal Payment (as defined herein) and (ii) the Alternative Principal Payment (as defined herein). With respect to any Distribution Date, the "Maximum Principal Payment" will equal the product of the Investor Fixed Allocation Percentage and Principal Collections for such Distribution Date. With respect to any Distribution - -------------------------------------------------------------------------------- S-13 15 - -------------------------------------------------------------------------------- Date, the "Alternative Principal Payment" will equal the amount, but not less than zero, of Principal Collections for such Distribution Date less the aggregate of Additional Balances created during the related Collection Period. Beginning with the first Distribution Date following the end of the Managed Amortization Period, the amount of Principal Collections payable. to Certificateholders on each Distribution Date will be equal to the Maximum Principal Payment. See "DESCRIPTION OF THE CERTIFICATES -- Distributions on the Certificates." In addition, to the extent funds are available therefor [(including funds available under the Policy)], on the Distribution Date in _____ 202_, Certificateholders will be entitled to receive as payment of principal an amount equal to the outstanding Certificate Principal Balance. Distributions of Principal Collections based upon the Investor Fixed Allocation Percentage may result in distributions of principal to Certificateholders in amounts that are greater relative to the declining Pool Balance than would be the case if the Investor Floating Allocation Percentage were used to determine the percentage of Principal Collections distributed in respect of the Invested Amount. The aggregate distributions of principal to Certificateholders will not exceed the Original Certificate Principal Balance. [The Certificate Insurer... _______________________ (the "Certificate Insurer") is a ______________ insurance company engaged exclusively in the business of writing financial guaranty insurance, principally in respect of securities offered in domestic and foreign markets. The Certificate Insurer's claims-paying ability is rated ___ by Moody's Investors Service, Inc. ("Moody's") and ___ by Standard & Poor's Ratings Services ("Standard & Poor's"), Nippon Investors Service, Inc. and Standard & Poor's (Australia) Pty. Ltd. See "THE CERTIFICATE INSURER" in this Prospectus Supplement.] [Policy.................... On or before the Closing Date, the Policy will be issued by the Certificate Insurer pursuant to the provisions of the Insurance and Indemnity Agreement (the "Insurance Agreement") to be dated as of ________, 199_, among Bank One, the Depositor, the Trustee and the Certificate - -------------------------------------------------------------------------------- S-14 16 - -------------------------------------------------------------------------------- Insurer. The Policy will irrevocably and unconditionally guarantee payment on each Distribution Date to the Trustee for the benefit of the Certificateholders the full and complete payment of (i) the Guaranteed Principal Distribution Amount (as defined herein) with respect to the Certificates for such Distribution Date and (ii) accrued and unpaid interest due on the Certificates (together, the "Guaranteed Distributions"), with such Guaranteed Distributions having been calculated in accordance with the original terms of the Certificates or the Agreement except for amendments or modifications to which the Certificate Insurer has given its prior written consent. The effect of the Policy is to guarantee the timely payment of interest on, and the ultimate payment of the principal amount of, all of the Certificates. The "Guaranteed Principal Distribution Amount" for any Distribution Date shall be the amount by which the Certificate Principal Balance (after giving effect to all other amounts distributable and allocable to principal on the Certificates on such Distribution Date) exceeds the Invested Amount for such Distribution Date. In addition, the Policy will guarantee the payment of the outstanding Certificate Principal Balance on the Distribution Date in _______ 202_, (after giving effect to all other amounts distributable and allocable to principal on such Distribution Date). In accordance with the Agreement, the Trustee will be required to establish and maintain an account (the "Spread Account") for the benefit of the Certificate Insurer and the Certificateholders. The Trustee shall deposit the amounts into the Spread Account as required by the Agreement. The amount required to be deposited therein may be reduced or eliminated without consent of the Certificateholders. In the absence of payments under the Policy, Certificateholders will directly bear the credit and other risks associated with their undivided interest in the Trust. See "DESCRIPTION OF THE CERTIFICATES-The Policy."] Overcollateralization - -------------------------------------------------------------------------------- S-15 17 - -------------------------------------------------------------------------------- Amount..................... The distribution of Accelerated Principal Distribution Amounts, if any, to Certificateholders may result in the Invested Amount being greater than the Certificate Principal Balance, thereby creating the Overcollateralization Amount. The Overcollateralization Amount, if any, will be available to absorb any Investor Loss Amount not covered by Investor Interest Collections. [Payments of Accelerated Principal Distribution Amounts are not covered by the Policy. Any Investor Loss Amounts not covered by such overcollateralization, amounts on deposit in the Spread Account or Investor Interest Collections will be covered by draws on the Policy to the extent provided therein.] Record Date................ The last day preceding a Distribution Date or, if the Certificates are no longer Book-Entry Certificates, the last day of the month preceding a Distribution Date. Servicing.................. The Servicer will be responsible for servicing, managing and making collections on the Mortgage Loans. The Servicer will deposit all collections in respect of the Mortgage Loans into the Collection Account as described herein. See "DESCRIPTION OF THE CERTIFICATES-Payments on Mortgage Loans; Deposits to Collection Account." On the third Business Day prior to each Distribution Date (the "Determination Date"), the Servicer will calculate, and instruct the Trustee regarding the amounts to be paid, as described herein, to the Certificateholders on such Distribution Date. See "DESCRIPTION OF THE CERTIFICATES-Distributions on the Certificates." With respect to each Collection Period, the Servicer will receive from collections in respect of interest on the Mortgage Loans, on behalf of itself, a portion of such collections as a monthly servicing fee (the "Servicing Fee") in the amount of approximately ____% per annum (the "Servicing Fee Rate") on the aggregate Principal Balances of the Mortgage Loans as of the first day of each such Collection Period. See "DESCRIPTION OF THE CERTIFICATES-Servicing Compensation and Payment of Expenses." In certain limited circumstances, the Servicer may resign or be removed, in which event either the Trustee or a third-party servicer will be appointed as a successor Servicer. See "DESCRIPTION OF THE CERTIFICATES-Certain Matters Regarding the Servicer and the Transferor." - -------------------------------------------------------------------------------- S-16 18 - -------------------------------------------------------------------------------- Final Payment of Principal; Termination..... The Trust will terminate on the Distribution Date following the later of (A) payment in full of all amounts owing to the Certificate Insurer and (B) the earliest of (i) the Distribution Date on which the Certificate Principal Balance has been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the optional retransfer to the Transferor of the Certificates, as described below and (iv) the Distribution Date in _____ 202_. The Certificates will be subject to optional retransfer to the Transferor on any Distribution Date after the Certificate Principal Balance is reduced to an amount less than or equal to $________ (____% of the Original Certificate Principal Balance) [and all amounts due and owing to the Certificate Insurer and unreimbursed draws on the Policy, together with interest thereon, as provided under the Insurance Agreement,] have been paid. The retransfer price will be equal to the sum of the outstanding Certificate Principal Balance and accrued and unpaid interest thereon at the Certificate Rate through the day preceding the final Distribution Date. See "DESCRIPTION OF THE CERTIFICATES-Termination; Retirement of the Certificates" herein and "DESCRIPTION OF THE SECURITIES-Optional Purchase or Termination" and "THE AGREEMENTS-Termination" in the Prospectus. In addition, the Trust may be liquidated as a result of certain events of bankruptcy, insolvency or receivership relating to the Transferor. See "DESCRIPTION OF THE CERTIFICATES-Rapid Amortization Events" herein. Trustee.................... _________________, a ______________ (the "Trustee"), will act as Trustee on behalf of the Certificateholders. Mandatory Retransfer of Certain Mortgage Loans..... The Seller will make certain representations and warranties in the Agreement with respect to the Mortgage Loans. If the Seller breaches certain of its representations and warranties with respect to any Mortgage Loan and such breach materially and adversely affects the interests of the Certificateholders or the Certificate Insurer and is not cured within the specified period, the Mortgage Loan will be removed from the Trust upon the expiration of a specified period from the date on which the Seller becomes aware or receives notice of such breach and will - -------------------------------------------------------------------------------- S-17 19 - -------------------------------------------------------------------------------- be reassigned to the Seller. See "DESCRIPTION OF THE CERTIFICATES-Assignment of Mortgage Loans" herein. Federal Tax Considerations............. [Subject to the qualifications set forth in "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein, special tax counsel to the Depositor is of the opinion that, under existing law, (i) a Certificate will be treated as a debt instrument for Federal income tax purposes as of the Closing Date and (ii) the Trust will not be characterized as an association (or publicly traded partnership) taxable as a corporation or as a taxable mortgage pool within the meaning of Section 7701 (i) of the Code. Under the Agreement, the Transferor, the Depositor and the Certificateholders will agree to treat the Certificates as indebtedness for Federal income tax purposes. See "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" [herein and] in the Prospectus for additional information concerning the application of Federal income tax laws.] ERISA Considerations....... [The Certificates may be purchased by or on behalf of an employee benefit plan or other retirement arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), as well as any entity whose source of funds for the purchase of the Certificates includes plan assets by reason of a plan or account investing in such entity (each, a "Plan"), subject to the considerations described herein. Any Plan fiduciary considering whether to purchase any Certificate on behalf of a Plan should consult with its counsel regarding the applicability of the provisions of ERISA and the Code. See "ERISA CONSIDERATIONS" [herein and] in the Prospectus.] Legal Investment Considerations............. The Certificates will not constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA"), because not all of the Mortgages securing the Mortgage Loans are first mortgages. Accordingly, many institutions with legal authority to invest in comparably rated securities based solely on first mortgages may not be legally authorized to invest in the Certificates. See "LEGAL INVESTMENT CONSIDERATIONS" herein and "LEGAL - -------------------------------------------------------------------------------- S-18 20 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- S-19 21 RISK FACTORS Book-Entry Certificates. Issuance of the Certificates in book-entry form may reduce the liquidity of such Certificates in the secondary trading market since investors may be unwilling to purchase Certificates for which they cannot obtain physical certificates. See "DESCRIPTION OF THE CERTIFICATES-Book-Entry Certificates" herein. Since transactions in the Certificates can be effected only through DTC, Cedel, Euroclear, participating organizations, indirect participants and certain banks, the ability of a Certificate Owner to pledge a Certificate to persons or entities that do not participate in the DTC, Cedel or Euroclear system or otherwise to take actions in respect of such Certificates, may be limited due to lack of a physical certificate representing the Certificates. See "DESCRIPTION OF THE CERTIFICATES-Book-Entry Certificates" herein. Certificate Owners may experience some delay in their receipt of distributions of interest and principal on the Certificates since such distributions will be forwarded by the Trustee to DTC and DTC will credit such distributions to the accounts of its Participants (as defined herein) which will thereafter credit them to the accounts of Certificate Owners either directly or indirectly through indirect participants. See "DESCRIPTION OF THE CERTIFICATES-Book-Entry Certificates" herein. Cash Flow Considerations. Minimum monthly payments on the Mortgage Loans may be limited to accrued interest. Although borrowers under certain of the Mortgage Loans may choose to pay down all or a part of their outstanding principal balance prior to maturity, such borrowers are under no obligation to do so and, in the event such balances have not been substantially paid down prior to maturity, some borrowers may be unable to pay the required final payment. Even assuming that the Mortgaged Properties provide adequate security for the Mortgage Loans, substantial delays could be encountered in connection with the liquidation of Mortgage Loans that are delinquent and resulting shortfalls in distributions to Certificateholders could occur [if the Certificate Insurer were unable to perform on its obligations under the Policy.] Further, liquidation expenses (such as legal fees, real estate taxes, and maintenance and preservation expenses) will reduce the proceeds payable to Certificateholders and thereby reduce the security for the Mortgage Loans. In the event any of the Mortgaged Properties fail to provide adequate security for the related Mortgage Loans, Certificateholders could experience a loss [if the Certificate Insurer were unable to perform its obligations under the Policy]. Prepayment Considerations. Substantially all of the Mortgage Loans may be prepaid in whole or in part at any time without penalty. Home equity loans, such as the Mortgage Loans, have been originated in significant volume only during the past few years and neither the Depositor nor the Servicer is aware of any publicly available studies or statistics on the rate of prepayment of such loans. Generally, home equity loans are not viewed by borrowers as permanent financing. Accordingly, the Mortgage Loans may experience a higher rate of prepayment than traditional mortgage loans. The Trust's prepayment experience may be affected by a wide variety of factors, including general economic conditions, interest rates, the availability of alternative financing and homeowner mobility. In addition, substantially all of the S-20 22 Mortgage Loans contain due-on-sale provisions and the Servicer intends to enforce such provisions unless (i) such enforcement is not permitted by applicable law or (ii) the Servicer, in a manner consistent with reasonable commercial practice, permits the purchaser of the related Mortgaged Property to assume the Mortgage Loan. To the extent permitted by applicable law, such assumption will not release the original borrower from its obligation under any such Mortgage Loan. See "DESCRIPTION OF THE CERTIFICATES" herein and "CERTAIN LEGAL ASPECTS OF LOANS-`Due-on-Sale' Clauses" in the Prospectus for a description of certain provisions of the Credit Line Agreements that may affect the prepayment experience on the Mortgage Loans. Certificate Rating. The rating of the Certificates will depend primarily on an assessment by the Rating Agencies of the Mortgage Loans and [upon the claims-paying ability of the Certificate Insurer]. [Any reduction in a rating assigned to the claims-paying ability of the Certificate Insurer below the rating initially given to the Certificates may result in a reduction in the rating of the Certificates.] The rating by the Rating Agencies of the Certificates is not a recommendation to purchase, hold or sell the Certificates, inasmuch as such rating does not comment as to the market price or suitability for a particular investor. There is no assurance that the ratings will remain in place for any given period of time or that the ratings will not be lowered or withdrawn by the Rating Agencies. In general, the ratings address credit risk and do not address the likelihood of prepayments. The ratings of the Certificates do not address the possibility of the imposition of United States withholding tax with respect to non-U.S. persons. Legal Considerations. The Mortgage Loans are secured by mortgages (which are first, second or third mortgages) on the Mortgaged Properties. With respect to Mortgage Loans that are secured by first mortgages, the Servicer has the power under certain circumstances to consent to a new mortgage lien on the Mortgaged Property having priority over such Mortgage Loan. Mortgage Loans secured by junior mortgages are entitled to proceeds that remain from the liquidation or similar sale of the related Mortgaged Property after payment of liquidation expenses (such as legal fees, real estate taxes, and maintenance and preservation expenses) and payments of any related senior mortgage lien and prior statutory liens. In the event that such proceeds are insufficient to satisfy such liquidation expenses, senior loans and prior liens in the aggregate and the Certificate Insurer is unable to perform its obligations under the Policy, the Certificateholders will bear (i) the risk of delay in distributions while a deficiency judgment against the borrower is obtained and (ii) the risk of loss if the deficiency judgment cannot be obtained or cannot be realized upon. In addition, a junior mortgagee may not foreclose on the property securing a junior mortgage unless it forecloses subject to all senior liens. See "CERTAIN LEGAL ASPECTS OF LOANS" in the Prospectus. Under the terms of the Agreement, so long as Bank One's long-term senior unsecured debt is rated at least "___" by ________ and "___" by ________, the Servicer will be entitled to maintain possession of the documentation relating to each Mortgage Loan sold by it, including the Credit Line Agreements and the Related Documents or other evidence of indebtedness signed by the borrower, and the assignments of the related mortgages to the Trust will not be required to be recorded. Failure to deliver the Related Documents to the Trustee will have the result in most, if not all, of the states in which the Related Documents will be held, and failure to record the assignments of the related mortgages to the Trustee will have the result in certain states in which the Mortgaged Properties are located, of making the sale of the Cut-Off Date Principal S-21 23 Balances, Additional Balances and Related Documents potentially ineffective against (i) any creditors of Bank One, who may have been fraudulently or inadvertently induced to rely on the Mortgage Loans as assets of Bank One or (ii) any purchaser of a Mortgage Loan who had no notice of the prior conveyance to the Trust Fund if such purchaser perfects his interest in the Mortgage Loan by taking possession of the Related Documents or other evidence of indebtedness or otherwise. Bank One warrants in the Purchase Agreement that the transfer by it of all of its right, title and interest in and to the Mortgage Loans subject to the Agreement is either a valid transfer and assignment of the Mortgage Loans or the grant to the Trust of a security interest in the Mortgage Loans. If the transfer of Mortgage Loans to the Trust is deemed to create a security interest therein under the Uniform Commercial Code (the "UCC") of an applicable state, any tax or governmental lien on property of Bank One arising before any Mortgage Loan comes into existence might have priority over the Trust's interest in such Mortgage Loan. In addition, if the FDIC were appointed receiver of Bank One, the receiver's administrative expenses might also have priority over the Trust's interest in such Mortgage Loan. If an Insolvency Event were to occur with respect to Bank One, then a Rapid Amortization Event would occur and, pursuant to the terms of the Agreement, new Additional Balances would not be transferred to the Trust by Bank One. In addition, if Bank One were to be dissolved as a result of an Insolvency Event (other than pursuant to a merger, consolidation or sale of substantially all of its assets), the Trustee, unless otherwise instructed by more than 50% of the Certificateholders, would sell the Mortgage Loans in a commercially reasonable manner as described below under "Description of the Certificates-Rapid Amortization Events," thereby causing early termination of the Trust and a loss to Certificateholders if the net proceeds of such sale allocable to the Certificateholders were insufficient to pay such Certificateholders in full. The proceeds from the sale, disposition or liquidation of the Mortgage Loans will first be paid to the Certificate Insurer to the extent of unreimbursed draws under the Policy and other amounts owing to the Certificate Insurer pursuant to the Insurance Agreement. The Federal Deposit Insurance Act (as amended, "FDIA") sets forth certain powers that the FDIC could exercise if it were appointed conservator or receiver of Bank One. To the extent (i) Bank One grants a security interest in the Mortgage Loans to the Trust, (ii) such security interest is validly perfected before the occurrence of an Insolvency Event and (iii) such security interest was not taken in contemplation of insolvency or with the intent to hinder, delay or defraud Bank One or its creditors, such security interest should not be subject to avoidance by the FDIC if the FDIC is appointed as a conservator or receiver of Bank One. Subject to clarification by regulations or interpretations, positions taken by the staff of the FDIC prior to the passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (as amended "FIRREA") do not suggest that the FDIC, as receiver or conservator for Bank One, would interfere with the timely transfer to the Trust of payments collected on the Mortgage Loans. If, however, the FDIC were to assert a contrary position, certain provisions of the FDIA which, at the request of the FDIC, have been applied in recent lawsuits to avoid security interest in collateral granted by depository institutions, may permit the FDIC to avoid such security interest, thereby resulting in possible delays and reduction in payments to the Certificateholders. Further, if the FDIC were to require the Trustee to comply with certain administrative claims procedures under the FDIA before the Trust could collect, sell, dispose of or otherwise liquidate the Mortgage Loans or if the conservator or receiver were to obtain a stay of proceedings with S-22 24 respect to Bank One as provided in the FDIA, delays in payment and possible reductions in the amount of those payments could occur. Upon the occurrence of an Insolvency Event, if no Rapid Amortization Event other than such Insolvency Event exists, the FDIC may have the power to continue to require the Seller to transfer new Additional Balances to the Trust and to prevent the early sale, liquidation or disposition of the Mortgage Loans and the commencement of the Rapid Amortization Period. In addition, such receiver may have the power to cause the early sale of the Mortgage Loans and the early retirement of the Certificates notwithstanding instructions from the Certificateholders instructing the Trust not to sell the Mortgage Loans. In the event of an Event of Servicing Termination if a conservator, receiver or liquidator is appointed for the Servicer and no Event of Servicing Termination other than such conservatorship, receivership, liquidation or insolvency of the Servicer exists, the conservator, receiver or liquidator may have the power to prevent either the Trust or the Certificateholders from appointing a successor Servicer. Geographic Concentration. As of the Cut-Off Date, approximately ____%, ____% and _____% (by Cut-Off Date Pool Balance) of the Mortgaged Properties are located in the States of _________, __________ and _________, respectively. An overall decline in the residential real estate markets in these states could adversely affect the values of the Mortgaged Properties securing such Mortgage Loans such that the Principal Balances of the related Mortgage Loans, together with any primary financing on such Mortgaged Properties, could equal or exceed the value of such Mortgaged Properties. As the residential real estate market is influenced by many factors, including the general condition of the economy and interest rates, no assurances may be given that the residential real estate markets in these states will not weaken. If these residential real estate markets should experience an overall decline in property values after the dates of origination of the Mortgage Loans, the rates of losses on the Mortgage Loans would be expected to increase, and could increase substantially. Servicer's Ability to Change the Terms of the Mortgage Loans. The Servicer may agree to changes in the terms of a Credit Line Agreement, provided that such changes (i) do not adversely affect the interest of the Certificateholders or the Certificate Insurer, and (ii) are consistent with prudent business practice. There can be no assurance that changes in applicable law or the marketplace for home equity loans or prudent business practice will not result in changes in the terms of the Mortgage Loans. In addition, the Agreement permits the Servicer, within certain limitations described therein, to increase the Credit Limit of the related Mortgage Loan or reduce the Margin for such Mortgage Loan. [Delinquent Mortgage Loans. The Trust will include Mortgage Loans which are 89 or fewer days delinquent as of the Cut-Off Date. The Cut-Off Date Principal Balance of Mortgage Loans which are between 30 days and 89 days delinquent as of the Cut-Off Date was $_________. If there are not sufficient funds from the Investor Interest Collections to cover the Investor Loss Amounts for any Distribution Date, the Overcollateralization Amount and the amount on deposit in the Spread Account have been reduced to zero, and the Certificate Insurer fails to perform its obligations under the Policy, the aggregate amount of principal returned to the Certificateholders may be less than the Certificate Principal Balance on the day the Certificates are issued.] S-23 25 For a discussion of additional risks pertaining to the Certificates, see "RISK FACTORS" in the Prospectus. S-24 26 [THE CERTIFICATE INSURER] The following information set forth in this section has been provided by the Certificate Insurer. Accordingly, neither the Depositor nor the Servicer makes any representation as to the accuracy and completeness of such information. [INSERT IF APPLICABLE] S-25 27 THE SERVICER General The Servicer will service the Mortgage Loans in accordance with the terms set forth in the Agreement. As of the Closing Date, the Servicer will service the Mortgage Loans without subservicing arrangements. The Servicer may perform any of its obligations under the Agreement through one or more subservicers and is permitted under the Agreement to transfer servicing to affiliates, provided such affiliate meets certain standards specified in the Agreement. See "DESCRIPTION OF THE CERTIFICATES-Certain Matters Regarding the Servicer and the Transferor." Notwithstanding any subservicing arrangements, the Servicer will remain liable for its servicing duties and obligations under the Agreement as if the Servicer alone were servicing the Mortgage Loans. [Additional information to be added, if applicable] The Servicer Bank One, N.A. ("Bank One" and, in its capacity as servicer, the "Servicer") is a national banking association and an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, an Ohio corporation. As of __________, 199_, Bank One had consolidated total assets of approximately $___ billion, total deposits of approximately $___ billion and total equity capital of approximately $___ million. The principal executive offices of Bank One are located at 100 East Broad Street, Columbus, Ohio. Servicing of the Mortgage Loans The Servicer has established standard policies for the servicing and collection of the home equity loans owned and serviced by it or serviced by it for others. Servicing includes: (a) the collection and aggregation of payments relating to the loans; (b) the supervision of delinquent loans, loss mitigation efforts, foreclosure proceedings and, if applicable, the disposition of mortgaged properties; and (c) the preparation of tax related information in connection with the loans. Billing statements are mailed monthly by the Servicer. The statement details all debits and credits and specifies the minimum payment due and the available credit line. Notice of changes in the applicable loan rate are provided by the Servicer to the borrower with such statements. Collections efforts are initiated once the loan becomes past due. Late fee notices are sent to borrowers within 16 days after the Due Date and a collector attempts to contact the borrower. It is the Servicer's policy to suspend drawing privileges on overdue loans until the borrower brings the loan current. Once the loan is 30 days delinquent, the Servicer reports the delinquency to credit reporting bureaus. During the period when the loan is 45 to 59 days delinquent, the S-26 28 Servicer sends a notice of default to the borrower informing the borrower of its intent to initiate foreclosure proceedings on the mortgaged property within 30 days. During this time, the Servicer contacts senior lienholders, if any, to determine the status of such liens. After a loan is 60 days past due, the Servicer orders a broker's price opinion and/or a drive-by appraisal and property inspection may be conducted. When the notice of default to the borrower expires (during the period 75 to 89 days after the loan has become due), the Servicer determines whether to initiate foreclosure proceedings on the mortgaged property after performing an equity position analysis on the borrower's loan to determine if there is sufficient equity in the underlying property to repay the senior mortgage, if any, the borrower's home equity loan and estimated foreclosure expenses. The general policy of the Servicer is to initiate foreclosure on the underlying property after the loan is ninety days or more delinquent if the Servicer has determined that no further action on its part will cause the default to be cured. The Servicer may terminate foreclosure proceedings if the delinquency is cured. Foreclosures initiated on a junior lien are subject to the payment of foreclosure expenses, the senior mortgage or mortgages and any outstanding property taxes and other statutory liens. Once foreclosure proceedings are initiated by the Servicer the loan is transferred to the Foreclosure Department. The Foreclosure Department uses a tracking system to monitor the progress of such proceedings. The tracking system includes parameters for each state in which mortgaged properties are located, which are used to monitor whether the foreclosure is progressing within a typical time frame for the state in which the mortgaged property is located. After foreclosure, if the loan is secured by a first mortgage lien, the Servicer may liquidate the mortgaged property and charge-off the home equity loan balance that was not recovered through proceeds of the liquidation, if any. If the mortgaged property was subject to a senior lien, the Servicer will either directly manage the foreclosure sale of the mortgaged property and satisfy such lien at the time of sale or take other action as it deems necessary to protect the interest in the mortgaged property. If, in the judgment of the Servicer, the cost of maintaining or purchasing the senior lien exceeds the economic benefit of such action, the Servicer will generally charge-off the entire unpaid principal amount of the loan, seek a judgment against the borrower and not pursue any recovery. At __________, 199_, the Servicer serviced a total portfolio of approximately ________ home equity loans having aggregate unpaid principal balances of approximately $____ billion. The foregoing figures include home equity loans that were originated or acquired by Bank One or its affiliates and are serviced on a contractual basis. Delinquency and Loss Experience. The following table summarizes the delinquency and loss experience of home equity loans owned by Bank One and its affiliates and serviced by the Servicer. The statistical information in such tables does not include home equity loans serviced by the Servicer for entities other than Bank One and its affiliates. The information in the tables below has not been adjusted to eliminate the effect of the unseasoned nature of the home equity loan portfolio during the period shown. Accordingly, loss and delinquency as percentages of aggregate principal S-27 29 balance of Mortgage Loans serviced for each period would be higher than those shown if a group of Mortgage Loans were artificially isolated at a point in time and the information showed the activity only in that isolated group. However, since most of the mortgage loans in Bank One's and its affiliates' home equity loan portfolio will not be fully seasoned and since the terms of most Mortgage Loans will not call for payment of principal in full prior to maturity, the delinquency and loss information for such an isolated group would also be distorted to some degree. The tables below present real estate revolving credit line loan data applicable to substantially all of the United States operations of Bank One and its affiliates, including loans managed in states which are not represented in the mortgage pool consisting of the Mortgage Loans currently serviced by Bank One and real estate acquired through foreclosure. Delinquency and Foreclosure Experience (Dollars in Thousands)
For the Four Year Ending ___________, Months -------------------------------------------------------------------- Ending _________, 199_ 199_ 199_ 199_ --------------------- --------------------- --------------------- --------------------- Principal Principal Principal Principal Balance Percentage Balance Percentage Balance Percentage Balance Percentage -------- ---------- -------- ---------- -------- ---------- -------- ---------- Portfolio(1) .......... Delinquency percentage(2) 30-59 days .......... 60-89 days .......... 90-119 days ......... 120 + days ......... Total (3).............. Foreclosure Rate (4)... REO properties (5).....
(1) [In 199_, the Servicer began servicing HELOC portfolios for _____ Bank One affiliates located in Ohio.] (2) The period of delinquency is based on the number of days payments are contractually past due. (3) Certain total percentages and dollar amounts may not equal the sum of the percentages and dollar amounts indicated in the columns due to differences in rounding. (4) "Foreclosure rate" is the dollar amount of mortgage loans in foreclosure as a percent of the total principal balance of mortgage loans outstanding as of the date indicated. (5) REO properties (i.e. "real estate owned" properties-properties related to mortgages foreclosed or for which deeds in lieu of foreclosure have been accepted) percentages are calculated using the total principal balance of mortgage loans. Loss Experience (Dollars in Thousands) S-28 30
For the Four Months Ending ____, Year Ending __________, ----------- -------------------------------- 199_ 199_ 199_ 199_ ----------- --------- --------- --------- Principal Principal Principal Principal Balance Balance Balance Balance ----------- --------- --------- --------- Average Amount Outstanding (1)(2) Net Losses(3) Net Losses as a percentage of average amount outstanding
- ---------- [(1) In 199_, the Servicer began servicing HELOC portfolios for seven Bank One affiliates located in Ohio.] (2) "Average Amount Outstanding" during the period is the arithmetic average of the principal balances of the mortgage loans outstanding on the last day of the period and on the first day of the period indicated. For 199_, the outstanding balance as of ___________, 199_ is used to calculate the Average Amount Outstanding. (3) "Net Losses" represents the difference between (i) the amounts which have been determined to be uncollectible relating to the mortgage loans for each respective period and (ii) recoveries from liquidation proceeds and deficiency judgments. (4) For the four month period ended ____________, 199_, Net Losses as a percentage of Average Amount Outstanding has been annualized. The delinquency and loss experience presented in the preceding tables represents the historical experience of the Servicer with respect to all home equity loans owned by Bank One and its affiliates and serviced by the Servicer. Such statistics are not indicative of the historical performance of the Mortgage Loans, which consist of home equity loans purchased by Bank One and its affiliates from third parties and which were not originated by Bank One utilizing its standard underwriting criteria, nor are such statistics indicative of the future performance of the Mortgage Loans or of all of the home equity loans serviced by the Servicer. The actual delinquency and loss experience with respect to the Mortgage Loans may be higher than the percentages indicated above and may be substantially higher, because historical experience may not be indicative of future performance and further, because a deterioration of the real estate market or a weakening of the economy in the regions in which the Mortgaged Properties are located may result in an increase in delinquencies of loans secured by real estate and a reduction in the value of real estate in such regions. S-29 31 DESCRIPTION OF THE MORTGAGE LOANS General All of the Mortgage Loans will be purchased on the Closing Date by the Depositor from the Seller, without recourse, pursuant to the Purchase Agreement. [The Seller acquired the Mortgage Loans from affiliated banks of the Seller.] All weighted averages described below are weighted on the basis of Cut-Off Date Principal Balance of the Mortgage Loans included in the Trust. The Mortgage Loans were originated between ____ and ____. The Cut-Off Date Principal Balance of the Mortgage Loans was $___________, which is equal to the aggregate Principal Balances of the Mortgage Loans as of the close of business on _________, 199_ (the "Cut-Off Date"). _____% of the Mortgage Loans were secured by a first Mortgage on the related Mortgaged Property, _____% of the Mortgage Loans were secured by second Mortgages and _____% of the Mortgage Loans were secured by third Mortgages. The minimum Principal Balance of the Mortgage Loans as of the Cut-Off Date was $____, the maximum Principal Balance of the Mortgage Loans as of the Cut-Off Date was $_________, and the average Principal Balance of the Mortgage Loans as of the Cut-Off Date was $__________. As of the Cut-Off Date, the Loan Rates on the Mortgage Loans ranged from _____% per annum to _____% per annum and the weighted average Loan Rate was _____% per annum. The weighted average (weighted by Credit Limit) Credit Limit Utilization Rate (defined below) of the Mortgage Loans was _____% as of the Cut-Off Date. The weighted average Combined Loan-to-Value Ratio (defined below) of the Mortgage Loans was _____% as of the Cut-Off Date and the weighted average junior mortgage ratio of the Mortgage Loans (computed by dividing the greater of the Credit Limit and the Cut-Off Date Principal Balance for each Mortgage Loan, provided such Mortgage Loan was in a junior lien position, by the sum of such Credit Limit or Cut-Off Date Principal Balance as applicable and the outstanding balances at the time such Mortgage Loan was originated of all senior mortgage loans affecting the Mortgaged Property) was approximately _____%. No Mortgage Loan had a Combined Loan-to-Value Ratio greater than ____%. The latest scheduled maturity of any Mortgage Loan is in ______ 20__. As of the Cut-Off Date, _____% of the Mortgage Loans were secured by Mortgaged Properties that are detached single-family residences, _____% of the Mortgage Loans were secured by Mortgage Properties that are two- to four-family residences, _____% of the Mortgage Loans are secured by Mortgaged Properties that are condominium units, and _____% of the Mortgage Loans are secured by Mortgaged Properties that are units in planned unit developments. As of the Cut-Off Date, _____% of the Mortgage Loans were secured by Mortgaged Properties that are owner-occupied, and _____% of the Mortgage Loans were secured by non-owner occupied Mortgaged Properties. Approximately _____%, _____% and _____% of the Mortgage Loans were secured by Mortgaged Properties in ____________, ___________ and __________, respectively. _____% of the Mortgage Loans were contractually delinquent 30 days or more. No Mortgage Loan was delinquent more than 89 days. The "Combined Loan-to-Value Ratio" or "CLTV" of each Mortgage Loan is the ratio, expressed as a percentage, of (a) the sum of (i) the greater of the Cut-Off Date Principal Balance S-30 32 or the Credit Limit and (ii) the principal balance of any senior mortgage loan as of the origination of such Mortgage Loan, over (b) the value (based on an appraised value or other acceptable valuation method) for the related Mortgaged Property determined in the origination of such Mortgage Loan. The "Credit Limit Utilization Rate" is determined by dividing the Cut-Off Date Principal Balance of a Mortgage Loan by the Credit Limit of such Mortgage Loan. Mortgage Loan Terms The Mortgage Loans were originated pursuant to loan agreements (the "Credit Line Agreements"). Under the Credit Line Agreements, the borrowers may receive advances (an "Additional Balance" or a "Draw") at any time either during the term of such Mortgage Loan or during a specified period (the "Draw Period"). Bank One does not require Draws be in a minimum amount. The maximum amount of each Draw with respect to any Mortgage Loan is equal to the excess, if any, of the Credit Limit over the Principal Balance outstanding under such Mortgage Note at the time of such Draw. The borrower's right to make a Draw under a Mortgage Loan may be suspended, or the Credit Limit may be reduced under a number of circumstances, including, but not limited to, a material adverse change in the borrower's financial circumstances, a significant decline in the Appraised Value of the Mortgaged Property or a non-payment default by the borrower. Generally, such suspension or reduction will not affect the payment terms for previously drawn balances. In the event of default under a Mortgage Loan, the right of the borrower to make a Draw may be terminated and the entire outstanding Principal Balance of such Mortgage Loan may be declared immediately due and payable. A "default" includes, but is not limited to, the borrower's failure to make any payment as required, any action or inaction by the borrower that adversely affects the Mortgaged Property or the rights in the Mortgaged Property or any fraud or material misrepresentation by a borrower in connection with the Mortgage Loan. The Credit Limit may also be increased, upon completion of satisfactory underwriting review, as described below. Interest (the "Finance Charge") accrues on each Mortgage Loan, payable monthly, on the related average daily outstanding Principal Balance for each Billing Cycle at a variable rate per annum (the "Loan Rate") equal at any time to the sum of the applicable Index (defined below) as of the first day of each related Billing Cycle (such date, the "Adjustment Date") as described below plus a fixed percentage amount (the "Gross Margin") specified in the related Mortgage Note, computed on the basis of a 365 day year times actual days elapsed. The "Billing Cycle" for each Mortgage Loan is the calendar month preceding each Due Date. The "Due Date" for payments under each Mortgage Loan is the twentieth day of each month. The Finance Charge accrued each month with respect to each Mortgage Loan adjusts based on an index (each, an "Index"). _____% of the Mortgage Loans bear interest at rates which adjust in accordance with the "prime rate" as published in the "Money Rates" table in The Wall Street Journal on the related Adjustment Date; _____% of the Mortgage Loans bear interest at rates which adjust in accordance with the rate announced by Citibank, N.A. as its "base rate" on the related Adjustment Date; _____% of the Mortgage Loans bear interest at rates which adjust based on the current coupon equivalent of the rate for 26-Week U.S. Treasury Bills in the calendar month immediately preceding the month in which the related Adjustment Date occurs, S-31 33 as published in The Wall Street Journal, and _____% of the Mortgage Loans bear interest at rates which adjust based on the current auction average of rates for 26-Week U.S. Treasury Bills as published in The Wall Street Journal. The Gross Margins for the Mortgage Loans as of the Cut-Off Date ranged from _____% to _____%. The weighted average Gross Margins as of the Cut-Off Date for Mortgage Loans indexed to a "prime rate" and a "26 week T-Bill rate" were _____% and _____% respectively. All of the Mortgage Loans are subject to a maximum Loan Rate specified in the related Credit Line Agreements (each, a "Maximum Rate"). As of the Cut-Off Date, the Maximum Rates ranged from _____% per annum to _____% per annum and the weighted average Maximum Rate was _____% per annum. As of the Cut-Off Date, _____% of the Mortgage Loans have a minimum Loan Rate of _____% per annum and _____% of the Mortgage Loans have a minimum Loan Rate of _____% per annum. The remaining Mortgage Loans do not have a minimum Loan Rate. No Mortgage Loan is subject to a periodic rate cap. The Mortgage Loans had original terms to maturity ranging from ____ years to ____ years. As of the Cut-Off Date, the Mortgage Loans had remaining terms to maturity ranging from ____ month to ____ months and a weighted average months remaining to scheduled maturity of ____ months. Payments made by or on behalf of the borrower for each Mortgage Loan are generally required to be applied, first, to any unpaid Finance Charges, second, to any other unpaid Additional Charges and third, to the Principal Balance outstanding with respect to such Mortgage Loan. With respect to certain of the Mortgage. Loans, payments are required to be applied to unpaid insurance premiums and late charges (in that order) prior to application to Finance Charges, as described above. The Mortgage Loans have various loan terms, draw periods, amortization periods and minimum monthly payment requirements as follows: S-32 34
Minimum Monthly Payment Loan Amortization Requirement Designation Loan Term Draw Period Period During Draw Period ----------- --------- ----------- ------ ------------------
- ---------- (1) Loan designation three has a maximum draw period of 20 years; however, after each five year period, the borrower's credit quality and recent payment history are reviewed to determine if Bank One will either renew the loan at the same rate and terms for an additional five years, (ii) convert the existing balance to a fixed term loan with regular monthly principal and interest payments sufficient to amortize the loan over the remaining period of the 20 year term, or (iii) to renew the note at a new rate, new index, and/or with such new terms that will be determined solely at the discretion of Bank One. (2) Following the 9.5 year draw period and subsequent three month interest-only period, loans originated under designation five will amortize monthly at the then applicable loan rate and remaining term to produce a payment sufficient to amortize the loan to zero over its remaining term. Additional Information with Respect to the mortgage Loans Set forth below is a description of certain characteristics of the Mortgage Loans. The sum of certain percentages set forth in the following tables may not equal exactly 100% due to differences in the rounding of percentages. COMBINED LOAN-TO-VALUE RATIOS(1)
Percent of Mortgage Pool Range of Combined Number of Cut-Off Date by Cut-Off Date Loan-to-Value Ratios Mortgage Loans Principal Balance Principal Balance - -------------------- -------------- ----------------- ----------------- 0.01% to 5.00%....... 5.01% to 10.00%....... 10.01% to 15.00%....... 15.01% to 20.00%....... 20.01% to 25.00%....... 25.01% to 30.00%....... 30.01% to 35.00%....... 35.01% to 40.00%....... 40.01% to 45.00%....... 45.01% to 50.00%....... 50.01% to 55.00%....... 55.01% to 60.00%....... 60.01% to 65.00%.......
S-33 35 65.01% to 70.00%....... 70.01% to 75.00%....... 75.01% to 80.00%....... 80.01% to 85.00%....... 85.01% to 90.00%....... 90.01% to 95.00%....... 95.01% to 100.00%....... Total ..............
- ---------- (1) The "Combined Loan-to-Value Ratio" or "CLTV" of each Mortgage Loan is the ratio, expressed as a percentage, of (a) the sum of (i) the greater of the Cut-Off Date Principal Balance or the Credit Limit and (ii) the principal balance of any senior mortgage loan as of the origination of such Mortgage Loan, over (b) the value (based on appraised value or other acceptable valuation method) for the related Mortgaged Property determined in the origination of such Mortgage Loan. LIEN PRIORITY
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Lien Priority Mortgage Loans Principal Balance Principal Balance - ------------- -------------- ----------------- ----------------- First Lien...................... Second Lien..................... Third Lien...................... Total........................
PROPERTY TYPE
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Property Type Mortgage Loans Principal Balance Principal Balance - ------------- -------------- ----------------- ----------------- Single Family................... Two to Four-Family.............. Condominium..................... PUD............................. Total........................
OWNER OCCUPANCY STATUS
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Owner Occupancy Status Mortgage Loans Principal Balance Principal Balance - ---------------------- -------------- ----------------- ----------------- Primary Home.................... Investment...................... Total........................
S-34 36 PRINCIPAL BALANCES
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Range of Principal Balances Mortgage Loans Principal Balance Principal Balance - --------------------------- -------------- ----------------- ----------------- $ 0.00 to $ 10,000.00 ... $ 10,000.01 to $ 20,000.00 ... $ 20,000.01 to $ 30,000.00 ... $ 30,000.01 to $ 40,000.00 ... $ 50,000.01 to $ 60,000.00 ... $ 60,000.01 to $ 70,000.00 ... $ 70,000.01 to $ 80,000.00 ... $ 80,000.01 to $ 90,000.00 ... $ 90,000.01 to $100,000.00 ... $100,000.01 to $125,000.00 ... $125,000.01 to $150,000.00 ... $150,000.01 to $175,000.00 ... $175,000.01 to $200,000.00 ... $200,000.01 to $225,000.00 ... $225,000.01 to $250,000.00 ... $250,000.01 and over.......... Total......................
CREDIT LIMITS
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Range of Credit Limits Mortgage Loans Principal Balance Principal Balance - ---------------------- -------------- ----------------- ----------------- $ 0.00 to $ 10,000.00 ... $ 10,000.01 to $ 20,000.00 ... $ 20,000.01 to $ 30,000.00 ... $ 30,000.01 to $ 40,000.00 ... $ 50,000.01 to $ 60,000.00 ... $ 60,000.01 to $ 70,000.00 ... $ 70,000.01 to $ 80,000.00 ... $ 80,000.01 to $ 90,000.00 ... $ 90,000.01 to $100,000.00 ... $100,000.01 to $125,000.00 ... $125,000.01 to $150,000.00 ... $150,000.01 to $175,000.00 ... $175,000.01 to $200,000.00 ... $200,000.01 to $225,000.00 ... $225,000.01 to $250,000.00 ... $250,000.01 and over.......... Total......................
S-35 37 CREDIT LIMIT UTILIZATION RATES
Percent of Mortgage Pool Range of Credit Limit Number of Cut-Off Date by Cut-Off Date Utilization Rates Mortgage Loans Principal Balance Principal Balance - --------------------- -------------- ----------------- ----------------- 0.00% to 5.00%......... 5.01% to 10.00%......... 10.01% to 15.00%......... 15.01% to 20.00%......... 20.01% to 25.00%......... 25.01% to 30.00%......... 30.01% to 35.00%......... 35.01% to 40.00%......... 40.01% to 45.00%......... 45.01% to 50.00%......... 50.01% to 55.00%......... 55.01% to 60.00%......... 60.01% to 65.00%......... 65.01% to 70.00%......... 70.01% to 75.00%......... 75.01% to 80.00%......... 80.01% to 85.00%......... 85.01% to 90.00%......... 90.01% to 95.00%......... 95.01% to 100.00%......... 100.01% to 105.00%......... 105.01% to 110.00%......... Total.....................
ORIGINAL TERM
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Original Term In Months Mortgage Loans Principal Balance Principal Balance - ----------------------- -------------- ----------------- ----------------- 120..................... 180..................... 240..................... 297..................... 360..................... Total................
S-36 38 MONTHS REMAINING TO SCHEDULED MATURITY
Percent of Mortgage Pool Range of Months Number of Cut-Off Date by Cut-Off Date Remaining to Scheduled Maturity Mortgage Loans Principal Balance Principal Balance - ------------------------------- -------------- ----------------- ----------------- 1 to 12..................... 13 to 24..................... 25 to 36..................... 36 to 48..................... 49 to 60..................... 61 to 72..................... 73 to 84..................... 85 to 96..................... 97 to 108..................... 109 to 120..................... 121 to 132..................... 133 to 144..................... 145 to 156..................... 157 to 168..................... 169 to 180..................... 181 to 192..................... 193 to 204..................... 205 to 216..................... 217 to 228..................... 229 to 240..................... 241 to 252..................... 253 to 264..................... 265 to 276..................... 277 to 288..................... Total.....................
LOAN DESIGNATION
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Loan Designation(1) Mortgage Loans Principal Balance Principal Balance - ------------------- -------------- ----------------- ----------------- 1 2.......................... 3.......................... 4.......................... 5.......................... 6.......................... Total...................
- ---------- (1) The Loan Designation numbers correspond to the loan designation table set forth on page S-25. S-37 39 LOAN RATES
Percent of Mortgage Pool Range of Number of Cut-Off Date by Cut-Off Date Loan Rates Mortgage Loans Principal Balance Principal Balance - ---------- -------------- ----------------- ----------------- 7.001% to 8.000%......... 8.001% to 8.250%......... 8.251% to 8.500%......... 8.501% to 8.750%......... 8.751% to 9.000%......... 9.001% to 9.250%......... 9.251% to 9.500%......... 9.501% to 9.750%......... 9.751% to 10.000%......... 10.001% to 10.250%......... 10.251% to 10.500%......... 10.501% to 10.750%......... 10.751% to 11.000%......... 11.001% to 11.250%......... 11.251% to 11.500%......... 11.501% to 11.750%......... 12.001% to 12.250%......... 12.501% to 12.750%......... 12.751% to 13.000%......... 13.001%+................... Total...................
GROSS MARGIN
Percent of Mortgage Pool Range of Number of Cut-Off Date by Cut-Off Date Gross Margins Mortgage Loans Principal Balance Principal Balance - ------------- -------------- ----------------- ----------------- 0.000% to 0.500%............. 0.501% to 1.000%............. 1.501% to 2.000%............. 2.001% to 2.500%............. 2.501% to 3.000%............. 3.501% to 4.000%............. 4.001% to 4.500%............. 4.501% to 5.000%............. 5.001% to 5.500%............. 5.501% to 6.000%............. 6.001% to 6.500%............. Total.....................
S-38 40 MAXIMUM RATES
Percent of Mortgage Pool Range of Number of Cut-Off Date by Cut-Off Date Maximum Rates Mortgage Loans Principal Balance Principal Balance - ------------- -------------- ----------------- ----------------- 13.501% to 14.000%............. 14.001% to 14.500%............. 14.501% to 15.000%............. 15.001% to 15.500%............. 15.501% to 16.000%............. 16.001% to 16.500%............. 16.501% to 17.000%............. 17.001% to 17.500%............. 17.501% to 18.000%............. 18.001% to 18.500%............. 18.501% to 19.000%............. 19.001% to 19.500%............. 19.501% to 20.000%............. 20.001% to 20.500%............. 20.501% to 21.000%............. 21.501% to 25.000%............. Total.......................
INDEX
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Index Mortgage Loans Principal Balance Principal Balance - ----- -------------- ----------------- ----------------- Prime Rates......................... Based upon the Wall Street Journal....................... Based upon Citibank "base rate".. 26 week Treasury Bill Rate.......... Auction Average Rate............. Coupon Equivalent Rate........... Total............................
ORIGINATING INSTITUTION
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Originating Institution Mortgage Loans Principal Balance Principal Balance - ----------------------- -------------- ----------------- ----------------- Total........................
S-39 41 ORIGINATION YEAR
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Origination Year Mortgage Loans Principal Balance Principal Balance - ---------------- -------------- ----------------- ----------------- 19__....................... 19__....................... 19__....................... 19__....................... 19__....................... 19__....................... 19__....................... 19__....................... 19__....................... 19__....................... Total...................
GEOGRAPHIC DISTRIBUTION(1)
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date State Mortgage Loans Principal Balance Principal Balance - ----- -------------- ----------------- ----------------- Alabama......................... Arizona......................... California...................... Colorado........................ Connecticut..................... Delaware........................ Florida......................... Georgia......................... Illinois........................ Indiana......................... Iowa............................ Louisiana....................... Maine........................... Maryland........................ Massachusetts................... Michigan........................ Minnesota....................... Missouri........................ Montana......................... Nevada.......................... New Hampshire................... New Jersey...................... New Mexico...................... New York........................ North Carolina.................. North Dakota.................... Ohio............................ Oregon.......................... Pennsylvania....................
S-40 42
Percent of Number of Cut-Off Date Mortgage Pool Mortgage Principal by Cut-Off Date State Loans Balance Principal Balance - ----- --------- ------------ ----------------- Rhode Island.................... South Carolina.................. Tennessee....................... Texas........................... Utah............................ Vermont......................... Virginia........................ Washington...................... Washington, D.C................. Wisconsin....................... Total........................
- ---------- (1) Geographic location is determined by the address of the Mortgaged Property securing the related Mortgage Loan. DELINQUENCY STATUS
Percent of Mortgage Pool Number of Cut-Off Date by Cut-Off Date Number of Days Delinquent Mortgage Loans Principal Balance Principal Balance - ------------------------- -------------- ----------------- ----------------- Current......................... 30 to 59........................ 60 to 89........................ Total........................
S-41 43 UNDERWRITING [Insert to describe differences with respect to specific Pool] MATURITY AND PREPAYMENT CONSIDERATIONS The Agreement, except as otherwise described herein, provides that the Certificateholders will be entitled to receive on each Distribution Date distributions of principal, in the amounts described herein, until the Certificate Principal Balance is reduced to zero. During the Managed Amortization Period, Certificateholders will receive amounts from Principal Collections based upon their Fixed Allocation Percentage subject to reduction as described below. During the Rapid Amortization Period, Certificateholders will receive amounts from Principal Collections based solely upon their Fixed Allocation Percentage. Because prior distributions of Investor Principal Collections to Certificateholders reduce the Investor Floating Allocation Percentage but do not change the Fixed Allocation Percentage, allocations of Principal Collections based on the Fixed Allocation Percentage may result in distributions of principal to the Certificateholders in amounts that are, in most cases, greater relative to the declining balance of the Mortgage Loans than would be the case if the Investor Floating Allocation Percentage were used to determine the percentage of Principal Collections distributed to Certificateholders. This is especially true during the Rapid Amortization Period when the Certificateholders are entitled to receive Investor Principal Collections and not a lesser amount. In addition, Investor Interest Collections may be distributed as principal to Certificateholders in connection with the Accelerated Principal Distribution Amount, if any. Moreover, to the extent of losses allocable to the Certificateholders, Certificateholders may also receive as payment of principal the Floating Allocation Percentage of the amount of such losses either from Investor Interest Collections or, in some instances, draws under the Policy. The level of losses may therefore affect the rate of payment of principal on the Certificates. To the extent obligors make more Draws than principal payments, the Transferor Interest may grow. Because during the Rapid Amortization Period the Certificateholders share of Principal Collections is based upon its Fixed Allocation Percentage (without reduction), an increase in the Transferor Interest due to additional Draws may also result in Certificateholders receiving principal at a greater rate than would otherwise occur if the Investor Floating Allocation Percentage were used to determine the percentage of Principal Collections distributed to Certificateholders. The Agreement permits the Transferor, at its option, but subject to the satisfaction of certain conditions specified in the Agreement, including the conditions described below, to remove certain Mortgage Loans from the Trust at any time during the life of the Trust, so long as the Transferor Interest (after giving effect to such removal) is not less than the Minimum Transferor Interest. Such removals may affect the rate at which principal is distributed to Certificateholders by reducing the overall Pool Balance and thus the amount of Principal Collections. See "DESCRIPTION OF THE CERTIFICATES-Optional Retransfers of Mortgage Loans to the Transferor." S-42 44 All of the Mortgage Loans may be prepaid in full or in part at any time without penalty. The prepayment experience with respect to the Mortgage Loans will affect the weighted average life of the Certificates. The rate of prepayment on the Mortgage Loans cannot be predicted. Neither the Depositor nor the Servicer is aware of any publicly available studies or statistics on the rate of prepayment of mortgage loans such as the Mortgage Loans. Generally, home equity revolving credit lines are not viewed by borrowers as permanent financing. Accordingly, the Mortgage Loans may experience a higher rate of prepayment than traditional first mortgage loans. On the other hand, because the Mortgage Loans amortize as described herein, rates of principal payment on the Mortgage Loans will generally be slower than those of traditional fully-amortizing first mortgages in the absence of prepayments on such Mortgage Loans. The prepayment experience of the Trust with respect to the Mortgage Loans may be affected by a wide variety of factors, including general economic conditions, prevailing interest rate levels, the availability of alternative financing, homeowner mobility, the frequency and amount of any future draws on the Credit Line Agreements and changes affecting the deductibility for Federal income tax purposes of interest payments on home equity credit lines. Substantially all of the Mortgage Loans contain "due-on-sale" provisions, and the Servicer intends to enforce such provisions, unless such enforcement is not permitted by applicable law. The enforcement of a "due-on-sale" provision will have the same effect as a prepayment of the related Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF LOANS-'Due-on-Sale' Clauses" in the Prospectus. The yield to an investor who purchases the Certificates in the secondary market at a price other than par will vary from the anticipated yield if the rate of prepayment on the Mortgage Loans is actually different than the rate anticipated by such investor at the time such Certificates were purchased. Collections on the Mortgage Loans may vary because, among other things, borrowers may make payments during any month as low as the minimum monthly payment for such month or as high as the entire outstanding principal balance plus accrued interest and the fees and charges thereon. It is possible that borrowers may fail to make scheduled payments. Collections on the Mortgage Loans may vary due to seasonal purchasing and payment habits of borrowers. No assurance can be given as to the level of prepayments that will be experienced by the Trust and it can be expected that a portion of borrowers will not prepay their Mortgage Loans to any significant degree. See "DESCRIPTION OF THE SECURITIES-Weighted Average Life of the Certificates" in the Prospectus. POOL FACTOR AND TRADING INFORMATION The "Pool Factor" is a seven-digit decimal which the Servicer will compute monthly expressing the Certificate Principal Balance of the Certificates as of each Distribution Date (after giving effect to any distribution of principal on such Distribution Date) as a proportion of the Original Certificate Principal Balance. On the Closing Date, the Pool Factor will be 1.0000000. See "DESCRIPTION OF THE CERTIFICATES-Distributions on the Certificates." Thereafter, the Pool Factor will decline to reflect reductions in the related Certificate Principal Balance S-43 45 resulting from distributions of principal to the Certificates and the Invested Amount of any unreimbursed Liquidation Loss Amounts. Pursuant to the Agreement, monthly reports concerning the Invested Amount, the Pool Factor and various other items of information will be made available to the Certificateholders. In addition, within 60 days after the end of each calendar year, beginning with the ___ calendar year, information for tax reporting purposes will be made available to each person who has been a Certificateholder of record at any time during the preceding calendar year. See "DESCRIPTION OF THE CERTIFICATES-Book-Entry Certificates" and "-Reports to Certificateholders" herein. DESCRIPTION OF THE CERTIFICATES The Certificates will be issued pursuant to the Agreement. The form of the Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus Supplement and the Prospectus are a part. The following summaries describe certain provisions of the Agreement. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Agreement. General The Certificates will be issued in denominations of $1,000 and multiples of $1 in excess thereof and will evidence specified undivided interests in the Trust. The property of the Trust will consist of, to the extent provided in the Agreement: (i) each of the Mortgage Loans that from time to time are subject to the Agreement (including any Additional Balances arising after the Cut-Off Date); (ii) collections on the Mortgage Loans received after the Cut-Off Date (exclusive of payments in respect of accrued interest due on or prior to the Cut-Off Date); (iii) Mortgaged Properties relating to the Mortgage Loans that are acquired by foreclosure or deed in lieu of foreclosure; (iv) the Collection Account and the Distribution Account (excluding net earnings thereon); [(v) the Policy]; (vi) the Spread Account (for the benefit of the Certificate Insurer and the Certificateholders); and (vii) an assignment of the Depositor's rights under the Purchase Agreement. Definitive Certificates (as defined below), if issued, will be transferable and exchangeable at the corporate trust office of the Trustee, which will initially act as Certificate Registrar. See "-Book-Entry Certificates" below. No service charge will be made for any registration of exchange or transfer of Certificates, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge. The aggregate undivided interest in the Trust represented by the Certificates as of the Closing Date will equal $_________ (the "Original Invested Amount"), which represents _____% of the Cut-Off Date Pool Balance. The "Original Certificate Principal Balance" will equal $__________. Following the Closing Date, the "Invested Amount" with respect to any Distribution Date will be an amount equal to the Original Invested Amount minus (i) the amount of Investor Principal Collections previously distributed to Certificateholders, and minus (ii) an amount equal to the product of the Investor Floating Allocation Percentage and the Liquidation Loss Amounts (each as defined herein). The principal amount of the outstanding Certificates (the "Certificate Principal Balance") on any Distribution Date is equal to the Original Certificate S-44 46 Principal Balance minus the aggregate of amounts actually distributed as principal to the Certificateholders. See "-Distributions on the Certificates" below. Each Certificate represents the right to receive payments of interest at the Certificate Rate and payments of principal as described below. The Transferor will own the remaining undivided interest in the Mortgage Loans (the "Transferor Interest"), which is equal to the Pool Balance less the Invested Amount. The Transferor Interest will initially equal $_________, which represents approximately _____% of the Cut-Off Date Pool Balance. The Transferor as of any date is the owner of the Transferor Interest which initially will be the Seller. In general, the Pool Balance will vary each day as principal is paid on the Mortgage Loans, liquidation losses are incurred, Additional Balances are drawn down by borrowers and Mortgage Loans are transferred to the Trust. The Transferor has the right to sell or pledge the Transferor Interest at any time, provided (i) the Rating Agencies (as defined herein) have notified the Transferor and the Trustee in writing that such action will not result in the reduction or withdrawal of the ratings assigned to the Certificates, and (ii) certain other conditions specified in the Agreement are satisfied. Book-Entry Certificates The Certificates will be book-entry Certificates (the "Book-Entry Certificates"). Persons acquiring beneficial ownership interests in the Certificates ("Certificate Owners") may elect to hold their Certificates through the Depository Trust Company ("DTC") in the United States, or Cedel or Euroclear (in Europe) if they are participants of such systems, or indirectly through organizations which are participants in such systems. The Book-Entry Certificates will be issued in one or more certificates which equal the aggregate principal balance of the Certificates and will initially be registered in the name of Cede & Co., the nominee of DTC. Cedel and Euroclear will hold omnibus positions on behalf of their participants through customers' securities accounts in Cedel's and Euroclear's names on the books of their respective depositories which in turn will hold such positions in customers' securities accounts in the depositories' names on the books of DTC. Citibank will act as depositary for Cedel and Chemical will act as depositary for Euroclear (in such capacities, individually the "Relevant Depositary" and collectively the "European Depositaries"). Investors may hold such beneficial interests in the Book-Entry Certificates in minimum denominations representing Certificate Principal Balances of $1,000 and in multiples of $1 in excess thereof. Except as described below, no person acquiring a Book-Entry Certificate (each, a "beneficial owner") will be entitled to receive a physical certificate representing such Certificate (a "Definitive Certificate"). Unless and until Definitive Certificates are issued, it is anticipated that the only "Certificateholder" of the Certificates will be Cede & Co., as nominee of DTC. Certificate Owners will not be Certificateholders as that term is used in the Agreement. Certificate Owners are only permitted to exercise their rights indirectly through Participants and DTC. The beneficial owner's ownership of a Book-Entry Certificate will be recorded on the records of the brokerage firm, bank, thrift institution or other financial intermediary (each, a "Financial Intermediary") that maintains the beneficial owner's account for such purpose. In turn, the Financial Intermediary's ownership of such Book-Entry Certificate will be recorded on the records of DTC (or of a participating firm that acts as agent for the Financial Intermediary, S-45 47 whose interest will in turn be recorded on the records of DTC, if the beneficial owner's Financial Intermediary is not a DTC participant and on the records of Cedel or Euroclear, as appropriate). Certificate Owners will receive all distributions of principal of, and interest on, the Certificates from the Trustee through DTC and DTC participants. While the Certificates are outstanding (except under the circumstances described below), under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the Certificates and is required to receive and transmit distributions of principal of, and interest on, the Certificates. Participants and indirect participants with whom Certificate Owners have accounts with respect to Certificates are similarly required to make book-entry transfers and receive and transmit such distributions on behalf of their respective Certificate Owners. Accordingly, although Certificate Owners will not possess certificates, the Rules provide a mechanism by which Certificate Owners will receive distributions and will be able to transfer their interest. Certificate Owners will not receive or be entitled to receive certificates representing their respective interests in the Certificates, except under the limited circumstances described below. Unless and until Definitive Certificates are issued, Certificate Owners who are not Participants may transfer ownership of Certificates only through Participants and indirect participants by instructing such Participants and indirect participants to transfer Certificates, by book-entry transfer, through DTC for the account of the purchasers of such Certificates, which account is maintained with their respective Participants. Under the Rules and in accordance with DTC's normal procedures, transfers of ownership of Certificates will be executed through DTC and the accounts of the respective Participants at DTC will be debited and credited. Similarly, the Participants and indirect participants will make debits or credits, as the case may be, on their records on behalf of the selling and purchasing Certificate Owners. Because of time zone differences, credits of securities received in Cedel or Euroclear as a result of a transaction with a Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Such credits or any transactions in such securities settled during such processing will be reported to the relevant Euroclear or Cedel Participants on such business day. Cash received in Cedel or Euroclear as a result of sales of securities by or through a Cedel Participant (as defined below) or Euroclear Participant (as defined below) to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Cedel or Euroclear cash account only as of the business day following settlement in DTC. For information with respect to tax documentation procedures relating to the Certificates, see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES-Foreign Investors" and "Backup Withholding" herein and "GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES-Certain U.S. Federal Income Tax Documentation Requirements" in Annex I hereto. Transfers between Participants will occur in accordance with DTC rules. Transfers between Cedel Participants and Euroclear Participants will occur in accordance with their respective rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Cedel Participants or Euroclear Participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by the Relevant S-46 48 Depositary; however, such cross market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to the Relevant Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to DTC. Cedel Participants and Euroclear Participants may not deliver instructions directly to the European Depositaries. DTC which is a New York-chartered limited purpose trust company, performs services for its participants, some of which (and/or their representatives) own DTC. In accordance with its normal procedures, DTC is expected to record the positions held by each DTC participant in the Book-Entry Certificates, whether held for its own account or as a nominee for another person. In general, beneficial ownership of Book-Entry Certificates will be subject to the rules, regulations and procedures governing DTC and DTC participants as in effect from time to time. Cedel is incorporated under the laws of Luxembourg as a professional depository. Cedel holds securities for its participating organizations ("Cedel Participants") and facilitates the clearance and settlement of securities transactions between Cedel Participants through electronic book-entry changes in accounts of Cedel Participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled in Cedel in any of 28 currencies, including United States dollars. Cedel provides to its Cedel Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Cedel interfaces with domestic markets in several countries. As a professional depository, Cedel is subject to regulation by the Luxembourg Monetary Institute. Cedel participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Cedel is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Cedel Participant, either directly or indirectly. Euroclear was created in 1968 to hold securities for participants of Euroclear ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of 32 currencies, including United States dollars. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear S-47 49 is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. As such, it is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Distributions on the Book-Entry Certificates will be made on each Distribution Date by the Trustee to DTC. DTC will be responsible for crediting the amount of such payments to the accounts of the applicable DTC participants in accordance with DTC's normal procedures. Each DTC participant will be responsible for disbursing such payments to the beneficial owners of the Book-Entry Certificates that it represents and to each Financial Intermediary for which it acts as agent. Each such Financial Intermediary will be responsible for disbursing funds to the beneficial owners of the Book-Entry Certificates that it represents. Under a book-entry format, beneficial owners of the Book-Entry Certificates may experience some delay in their receipt of payments, since such payments will be forwarded by the Trustee to Cede. Distributions with respect to Certificates held through Cedel or Euroclear will be credited to the cash accounts of Cedel Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by the Relevant Depositary. Such distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES-Foreign Investors" and "-Backup Withholding" herein. Because DTC can only act on behalf of Financial Intermediaries, the ability of a beneficial owner to pledge Book-Entry Certificates to persons or entities that do not participate in the Depository system, or otherwise take actions in respect of such Book-Entry Certificates, may be limited due to the lack of physical certificates for such Book-Entry Certificates. In addition, issuance of the Book-Entry Certificates in book-entry form may reduce the liquidity of such Certificates in the secondary market since certain potential investors may be unwilling to purchase Certificates for which they cannot obtain physical certificates. Monthly and annual reports on the Trust provided by the Servicer to CEDE, as nominee of DTC, may be made available to beneficial owners upon request, in accordance with the rules, regulations and procedures creating and affecting the Depository, and to the Financial Intermediaries to whose DTC accounts the Book-Entry Certificates of such beneficial owners are credited. S-48 50 DTC has advised the Transferor and the Trustee that, unless and until Definitive Certificates are issued, DTC will take any action permitted to be taken by the holders of the Book-Entry Certificates under the Agreement only at the direction of one or more Financial Intermediaries to whose DTC accounts the Book-Entry Certificates are credited, to the extent that such actions are taken on behalf of Financial Intermediaries whose holdings include such Book-Entry Certificates. Cedel or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a Certificateholder under the Agreement on behalf of a Cedel Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to the ability of the Relevant Depositary to effect such actions on its behalf through DTC. DTC may take actions, at the direction of the related Participants, with respect to some Certificates which conflict with actions taken with respect to other Certificates. Definitive Certificates will be issued to beneficial owners of the Book-Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC or the Transferor advises the Trustee in writing that DTC is no longer willing, qualified or able to discharge properly its responsibilities as nominee and depository with respect to the Book-Entry Certificates and the Transferor or the Trustee is unable to locate a qualified successor, (b) the Transferor, at its sole option, elects to terminate a book-entry system through DTC or (c) after the occurrence of an Event of Servicing Termination (as defined herein), beneficial owners having Percentage Interests aggregating not less than 51 % of the Certificate Principal Balance of the Book-Entry Certificates advise the Trustee and DTC through the Financial Intermediaries and the DTC participants in writing that the continuation of a book-entry system through DTC (or a successor thereto) is no longer in the best interests of beneficial owners. Upon the occurrence of any of the events described in the immediately preceding paragraph, the Trustee will be required to notify all beneficial owners of the occurrence of such event and the availability through DTC of Definitive Certificates. Upon surrender by DTC of the global certificate or certificates representing the Book-Entry Certificates and instructions for re-registration, the Trustee will issue Definitive Certificates, and thereafter the Trustee will recognize the holders of such Definitive Certificates as Certificateholders under the Agreement. Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Certificates among participants of DTC, Cedel and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. Assignment of Mortgage Loans At the time of issuance of the Certificates, the Depositor will transfer to the Trust all of its right, title and interest in and to each Mortgage Loan (including any Additional Balances arising in the future), related Credit Line Agreements, mortgages and other related documents (collectively, the "Related Documents"), including all collections received on or with respect to each such Mortgage Loan after the Cut-Off Date (exclusive of payments in respect of accrued interest due on or prior to the Cut-Off Date). The Trustee, concurrently with such transfer, will deliver the Certificates to the Depositor and the Transferor Certificate (as defined in the Agreement) to the Transferor. Each Mortgage Loan transferred to the Trust will be identified on a schedule (the "Mortgage Loan Schedule") delivered to the Trustee pursuant to the Agreement. S-49 51 Such schedule will include information as to the Cut-Off Date Principal Balance of each Mortgage Loan, as well as information with respect to the Loan Rate. The Agreement will permit the Seller to maintain possession of the Related Documents and certain other documents relating to the Mortgage Loans (the "Mortgage Files") and assignments of the related mortgages to the Trustee will not be required to be recorded for so long as the long-term senior unsecured debt of Bank One is rated at least "____" by _________ and "____" by______. In the event that the Bank One long-term senior unsecured debt rating does not satisfy the above-described standards (an "Assignment Event"), Bank One will have 90 days to record assignments of the mortgages for each such Mortgage Loan in favor of the Trustee and will have 60 days to deliver the Mortgage File pertaining to each such Mortgage Loan to the Trustee (unless opinions of counsel satisfactory to the Rating Agencies and the Certificate Insurer to the effect that recordation of such assignments or delivery of such documentation is not required in the relevant jurisdiction to protect the interest of Bank One and the Trustee in the Mortgage Loans). In lieu of delivery of original documentation, Bank One may deliver documents which have been imaged optically upon delivery of an opinion of counsel that (i) such documents do not impair the enforceability of the transfer to the Trust of the Mortgage Loans and (ii) the optical image of such documents are enforceable in the relevant jurisdictions to the same extent as the original documents. Within 90 days of an Assignment Event, the Trustee will review the Mortgage Files and if any Related Document is found to be defective in any material respect and such defect is not cured within 90 days following notification thereof to the Seller and the Depositor by the Trustee, the Seller will be obligated to accept the transfer of such Mortgage Loan from the Trust. Upon such transfer, the Principal Balance of such Mortgage Loan will be deducted from the Pool Balance, thus reducing the amount of the Transferor Interest. If the deduction would cause the Transferor Interest to become less than the Minimum Transferor Interest at such time (a "Transfer Deficiency"), the Seller will be obligated to either substitute an Eligible Substitute Mortgage Loan or make a deposit into the Collection Account in the amount (the "Transfer Deposit Amount") equal to the amount by which the Transferor Interest would be reduced to less than the Minimum Transferor Interest at such time. Any such deduction, substitution or deposit, will be considered for the purposes of the Agreement a payment in full of such Mortgage Loan. Any Transfer Deposit Amount will be treated as a Principal Collection. No such transfer shall be considered to have occurred until the required deposit to the Collection Account is actually made. The obligation of the Seller to accept a transfer of a Defective Mortgage Loan is the sole remedy regarding any defects in the Mortgage File and Related Documents available to the Trustee or the Certificateholders. An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by the Depositor for a Defective Mortgage Loan which must, on the date of such substitution, (i) have an outstanding Principal Balance (or in the case of a substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an aggregate Principal Balance) that is approximately equal to the Transfer Deficiency relating to such Defective Mortgage Loan; (ii) have a Loan Rate not less than the Loan Rate of the Defective Mortgage Loan and not more than ____% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan Rate based on the same Index with adjustments to such Loan Rate made on the same Interest Rate Adjustment Date as that of the Defective Mortgage Loan; (iv) have a Margin that is not less than the Margin of the S-50 52 Defective Mortgage Loan and not more than ____ basis points higher than the Margin for the Defective Mortgage Loan; (v) have a mortgage of the same or higher level of priority as the mortgage relating to the Defective Mortgage Loan; (vi) have a remaining term to maturity not more than six months earlier and not more than ____ months later than the remaining term to maturity of the Defective Mortgage Loan; (vii) comply with each representation and warranty as to the Mortgage Loans set forth in the Agreement (deemed to be made as of the date of substitution); (viii) in general, have an original Combined Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan; and (ix) satisfy certain other conditions specified in the Agreement. To the extent the Principal Balance of an Eligible Substitute Mortgage Loan is less than the Principal Balance of the related Defective Mortgage Loan and to the extent that the Transferor Interest would be reduced below the Minimum Transferor Interest, the Seller will be required to make a deposit to the Collection Account equal to such difference. The Seller will make certain representations and warranties as to the accuracy in all material respects of certain information furnished to the Trustee with respect to each Mortgage Loan (e.g., Cut-Off Date Principal Balance and the Loan Rate). In addition, the Seller will represent and warrant on the Closing Date that at the time of transfer to the Depositor, the Seller has transferred or assigned all of its rights, title and interest in or granted a security interest in each Mortgage Loan and the Related Documents, free of any lien (subject to certain exceptions). Upon discovery of a breach of any such representation and warranty which materially and adversely affects the interests of the Certificateholders or the Certificate Insurer in the related Mortgage Loan and Related Documents, the Seller will have a period of 90 days after discovery or notice of the breach to effect a cure. If the breach cannot be cured within the 90-day period, the Seller will be obligated to accept a transfer of the Defective Mortgage Loan from the Trust. The same procedure and limitations that are set forth in the second preceding paragraph for the transfer of Defective Mortgage Loans will apply to the transfer of a Mortgage Loan that is required to be transferred because of such breach of a representation or warranty in the Agreement that materially and adversely affects the interests of the Certificateholders. Mortgage Loans required to be transferred to the Seller as described in the preceding paragraphs are referred to as "Defective Mortgage Loans." Pursuant to the Agreement, the Servicer will service and administer the Mortgage Loans as more fully set forth above. Amendments to Credit Line Agreements Subject to applicable law, the Servicer may change the terms of the Credit Line Agreements at any time provided that such changes (i) do not adversely affect the interest of the Certificateholders or the Certificate Insurer, and (ii) are consistent with prudent business practice. In addition, the Agreement permits the Servicer, within certain limitations described therein, to increase or reduce the Credit Limit of the related Mortgage Loan and increase or reduce the Margin for such Mortgage Loan. S-51 53 Optional Transfers of Mortgage Loans to the Transferor Subject to the conditions specified in the Agreement, on any Distribution Date the Transferor may, but shall not be obligated to, remove on such Distribution Date (the "Transfer Date") from the Trust, certain Mortgage Loans without notice to the Certificateholders. The Transferor is permitted to randomly designate the Mortgage Loans to be removed. Mortgage Loans so designated will only be removed upon satisfaction of certain conditions specified in the Agreement, including: (i) the Transferor Interest as of such Transfer Date (after giving effect to such removal) exceeds the Minimum Transferor Interest; (ii) the Transferor shall have delivered to the Trustee a "Mortgage Loan Schedule" containing a list of all Mortgage Loans remaining in the Trust after such removal; (iii) the Transferor shall represent and warrant that no selection procedures which the Transferor reasonably believes are adverse to the interests of the Certificateholders [or the Certificate Insurer] were used by the Transferor in selecting such Mortgage Loans; (iv) in connection with the first such retransfer of Mortgage Loans, the Rating Agencies shall have been notified of the proposed transfer and prior to the Transfer Date the Rating Agencies shall have notified the Transferor in writing that such transfer will not result in a reduction or withdrawal of the ratings assigned to the Certificates [without regard to the Policy;] and (v) the Transferor shall have delivered to the Trustee [and the Certificate Insurer] an officer's certificate confirming the conditions set forth in clauses (i) through (iii) above. (Section 2.06) As of any date of determination, the "Minimum Transferor Interest" is an amount equal to the lesser of (a) ____% of the Pool Balance on such date and (b) the Transferor Interest as of the Closing Date. Payments on Mortgage Loans; Deposits to Collection Account The Trustee shall establish and maintain on behalf of the Servicer an account (the "Collection Account") for the benefit of the Certificateholders and the Transferor, as their interests may appear. The Collection Account will be an Eligible Account (as defined herein). Subject to the investment provision described in the following paragraphs, within two days of receipt by the Servicer of amounts in respect of the Mortgage Loans (excluding amounts representing the Servicing Fee, administrative charges, annual fees, taxes, assessments, credit insurance charges, insurance proceeds to be applied to the restoration or repair of a Mortgaged Property or similar items), the Servicer will deposit such amounts in the Collection Account. Not later than the third Business Day prior to each Distribution Date (the "Determination Date"), the Servicer will notify the Trustee of the amount of such deposit to be included in funds available for the related Distribution Date. Notwithstanding the foregoing, under the terms of the Agreement, so long as Bank One's short-term obligations are rated at least "____" by Standard & Poor's and "____" by Moody's, all amounts collected in respect of the Mortgage Loans will be commingled with the general collections of the Servicer and amounts collected for a Collection Period will not be required to be deposited into the Collection Account until one Business Day prior to the related Distribution Date. Amounts so deposited may be invested in Eligible Investments (as described in the Agreement) maturing no later than one Business Day prior to the date on which the amount on deposit therein is required to be deposited in the S-52 54 Collection Account or on such Distribution Date if approved by the Rating Agencies and the Certificate Insurer. An "Eligible Account" is an account that is (i) maintained with a depository institution whose debt obligations at the time of any deposit therein have the highest short-term debt rating by the Rating Agencies, (ii) one or more accounts with a depository institution which accounts are fully insured by either the Savings Association Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation established by such fund with a minimum long-term unsecured debt rating of "____" by _____ and "____" by __________, (iii) a segregated trust account maintained with the Trustee or an Affiliate of the Trustee in its fiduciary capacity or (iv) otherwise acceptable to each Rating Agency and the Certificate Insurer as evidenced by a letter from each Rating Agency and the Certificate Insurer to the Trustee, without reduction or withdrawal of their then current ratings of the Certificates. Eligible Investments are specified in the Agreement and are limited to investments which meet the criteria of the Rating Agencies from time to time as being consistent with their then current ratings of the Certificates. Allocations and Collections All collections on the Mortgage Loans will generally be allocated in accordance with the Credit Line Agreements between amounts collected in respect of interest and amounts collected in respect of principal. As to any Distribution Date, "Interest Collections" will be equal to the amounts collected during the related Collection Period, including such portion of Net Liquidation Proceeds, allocated to interest pursuant to the terms of the Credit Line Agreements less Servicing Fees for the related Collection Period. As to any Distribution Date, "Principal Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period, including such portion of Net Liquidation Proceeds allocated to principal pursuant to the terms of the Credit Line Agreements and (ii) any Transfer Deposit Amounts. "Net Liquidation Proceeds" with respect to a Mortgage Loan are equal to the Liquidation Proceeds, reduced by related expenses, but not including the portion, if any, of such amount that exceeds the Principal Balance of the Mortgage Loan plus accrued and unpaid interest thereon to the end of the Collection Period during which such Mortgage Loan became a Liquidated Mortgage Loan. "Liquidation Proceeds" ire the proceeds (excluding any amounts drawn on the Policy) received in connection with the liquidation of any Mortgage Loan, whether through trustee's sale, foreclosure sale or otherwise. With respect to any Distribution Date, the portion of Interest Collections allocable to the Certificates ("Investor Interest Collections") will equal the product of (a) Interest Collections for such Distribution Date and (b) the Investor Floating Allocation Percentage. With respect to any Distribution Date, the "Investor Floating Allocation Percentage" is the percentage equivalent of a fraction determined by dividing the Invested Amount at the close of business on the preceding Distribution Date (or the Closing Date in the case of the first Distribution Date) by the Pool Balance at the beginning of the related Collection Period. The remaining amount of Interest Collections will be allocated to the Transferor Interest. S-53 55 Principal Collections will be allocated between the Certificateholders and the Transferor ("Investor Principal Collections" and "Transferor Principal Collections", respectively) as described herein. The Trustee will deposit any amounts drawn under the Policy into the Collection Account. With respect to any date, the "Pool Balance" will be equal to the aggregate of the Principal Balances of all Mortgage Loans as of such date. The Principal Balance of a Mortgage Loan (other than a Liquidated Mortgage Loan) on any day is equal to the Cut-Off Date Principal Balance thereof, plus (i) any Additional Balances in respect of such Mortgage Loan minus (ii) all collections credited against the Principal Balance of such Mortgage Loan in accordance with the related Credit Line Agreement prior to such day. The Principal Balance of a Liquidated Mortgage Loan after final recovery of related Liquidation Proceeds shall be zero. Distributions on the Certificates Beginning with the first Distribution Date (which will occur on _____ 15, 199_), distributions on the Certificates will be made by the Trustee or the Paying Agent on each Distribution Date to the persons in whose names such Certificates are registered at the close of business on the day prior to each Distribution Date or, if the Certificates are no longer Book-Entry Certificates, at the close of business on the last day of the month preceding such Distribution Date (the "Record Date"). The term "Distribution Date" means the fifteenth day of each month or, if such day is not a Business Day, then the next succeeding Business Day. Distributions will be made by check or money order mailed (or upon the request of a Certificateholder owning Certificates having denominations aggregating at least $1,000,000, by wire transfer or otherwise) to the address of the person entitled thereto (which, in the case of Book-Entry Certificates, will be DTC or its nominee) as it appears on the Certificate Register in amounts calculated as described herein on the Determination Date. However, the final distribution in respect of the Certificates will be made only upon presentation and surrender thereof at the office or the agency of the Trustee specified in the notice to Certificateholders of such final distribution. For purposes of the Agreement, a "Business Day" is any day other than (i) a Saturday or Sunday or (ii) a day on which banking institutions in the States of Ohio, _______ or _______ are required or authorized by law to be closed. Application of Interest Collections. On each Distribution Date, the Trustee or the Paying Agent will apply the Investor Interest Collections in the following manner and order of priority: (i) as payment to the Trustee for its fee for services rendered pursuant to the Agreement; (ii) as payment for the premium for the Policy; (iii) as payment for the accrued interest due and any overdue accrued interest (with interest thereon to the extent permitted by law) on the Certificate Principal Balance of the Certificates; S-54 56 (iv) to pay Certificateholders the Investor Loss Amount for such Distribution Date; (v) as payment for any Investor Loss Amount for a previous Distribution Date that was not previously (a) funded by Investor Interest Collections, (b) absorbed by the Overcollateralization Amount, (c) funded by amounts on deposit in the Spread Account or (d) funded by draws on the Policy; (vi) to reimburse prior draws made from the Policy (with interest thereon); (vii) to pay principal on the Certificates until the Invested Amount exceeds the Certificate Principal Balance by the Required Overcollateralization Amount (such amount so paid, the "Accelerated Principal Distribution Amount"); (viii)any other amounts required to be deposited in an account for the benefit of the Certificate Insurer and the Certificateholders or owed to the Certificate Insurer pursuant to the Insurance Agreement; (ix) certain amounts that may be required to be paid to the Servicer pursuant to the Agreement; and (x) to the Transferor to the extent permitted as described herein. Payments to Certificateholders pursuant to clause (iii) will be interest payments on the Certificates. Payments to Certificateholders pursuant to clauses (iv), (v) and (vii) will be principal payments on the Certificates and will reduce the Certificate Principal Balance; however, payments pursuant to clause (vii) will not reduce the Invested Amount. The Accelerated Principal Distribution Amount is not guaranteed by the Policy. To the extent that Investor Interest Collections are applied to pay the interest on the Certificates, Investor Interest Collections may be insufficient to cover Investor Loss Amounts. If such insufficiency results in the Certificate Principal Balance exceeding the Invested Amount, a draw will be made on the Policy in accordance with the terms of the Policy. The "Required Overcollateralization Amount" shall be an amount set forth in the Insurance Agreement. "Liquidation Loss Amount" means with respect to any Liquidated Mortgage Loan, the unrecovered Principal Balance thereof during the Collection Period in which such Mortgage Loan became a Liquidated Mortgage Loan, after giving effect to the Net Liquidation Proceeds received in connection therewith. The "Investor Loss Amount" shall be the product of the Investor Floating Allocation Percentage and the aggregate of the Liquidation Loss Amounts for such Distribution Date. A "Liquidated Mortgage Loan" means, as to any Distribution Date, any Mortgage Loan in respect of which the Servicer has determined, based on the servicing procedures specified in the Agreement, as of the end of the preceding Collection Period that all Liquidation Proceeds which it expects to recover with respect to the disposition of the related Mortgaged Property have been recovered. The Investor Loss Amount will be allocated to the Certificateholders. S-55 57 As to any Distribution Date other than the first Distribution Date, the "Collection Period" is the calendar month preceding each Distribution Date. As to the first Distribution Date, the "Collection Period" is the period beginning on the day after the Cut-Off Date and ending on __________, 199_. Interest will be distributed on each Distribution Date at the Certificate Rate for the related Interest Period (as defined below). The "Certificate Rate" for a Distribution Date will generally equal the sum of (a) LIBOR, determined as specified herein, as of the second LIBOR Business Day prior to the immediately preceding Distribution Date (or as of two LIBOR Business Days prior to the Closing Date, in the case of the first Distribution Date) plus (b) % per annum. Notwithstanding the foregoing, in no event will the amount of interest required to be distributed in respect of the Certificates on any Distribution Date exceed a rate equal to the weighted average of the Loan Rates (net of the Servicing Fee Rate, the fee payable to the Trustee and the rate at which the premium payable to the Certificate Insurer is calculated) weighted on the basis of the daily balance of each Mortgage Loan during the related billing cycle prior to the Collection Period relating to such Distribution Date or in the case of the first Distribution Date, the weighted average loan rate as of the Cut-Off Date. Interest on the Certificates in respect of any Distribution Date will accrue on the Certificate Principal Balance from the preceding Distribution Date (or in the case of the first Distribution Date, from the date of the initial issuance of the Certificates (the "Closing Date")) through the day preceding such Distribution Date (each such period, an "Interest Period") on the basis of the actual number of days in the Interest Period and a 360-day year. Interest payments on the Certificates will be funded from Investor Interest Collections [and, if necessary, from draws on the Policy]. Interest for any Distribution Date due but not paid on such Distribution Date will be due on the next succeeding Distribution Date together with additional interest on such amount at a rate equal to the sum of the applicable Certificate Rate and 2% per annum. Calculation of the LIBOR Rate. On each Distribution Date, LIBOR shall be established by the Trustee and as to any Interest Period, LIBOR will equal the rate for United States dollar deposits for one month which appears on the Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR Business Day prior to the first day of such Interest Period. "Telerate Screen Page 3750" means the display designated as page 3750 on the Telerate Service (or such other page as may replace page 3750 on that service for the purpose of displaying London interbank offered rates of major banks). If such rate does not appear on such page (or such other page as may replace that page on that service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates as may be selected by the Depositor after consultation with the Trustee), the rate will be the Reference Bank Rate. The "Reference Bank Rate" will be determined on the basis of the rates at which deposits in U.S. Dollars are offered by the reference banks (which shall be three major banks that are engaged in transactions in the London interbank market, selected by the Depositor after consultation with the Trustee) as of 11:00 A.M., London time, on the day that is two LIBOR Business Days prior to the immediately preceding Distribution Date to prime banks in the London interbank market for a period of one month in amounts approximately equal to the principal amount of the Certificates then outstanding. The Trustee will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations. If on such date fewer than two quotations S-56 58 are provided as requested, the rate will be the arithmetic mean of the rates quoted by one or more major banks in New York City, selected by the Depositor after consultation with the Trustee, as of 11:00 A.M., New York City time, on such date for loans in U.S. Dollars to leading European banks for a period of one month in amounts approximately equal to the principal amount of the Certificates then outstanding. If no such quotations can be obtained, the rate will be LIBOR for the prior Distribution Date. "LIBOR Business Day" means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State of New York or in the city of London, England are required or authorized by law to be closed. Transferor Collections. Collections allocable to the Transferor Interest will be distributed to the Transferor only to the extent that such distribution will not reduce the amount of the Transferor Interest as of the related Distribution Date below the Minimum Transferor Interest. Amounts not distributed to the Transferor because of such limitations will be retained in the Collection Account until the Transferor Interest exceeds the Minimum Transferor Interest, at which time such excess shall be released to the Transferor. Overcollateralization. The distribution of the aggregate Accelerated Principal Distribution Amount, if any, to Certificateholders may result in the Invested Amount being greater than the Certificate Principal Balance, thereby creating overcollateralization. The Overcollateralization Amount, if any, will be available to absorb any Investor Loss Amount that is not covered by Investor Interest Collections. Distributions of Principal Collections. For the period beginning on the first Distribution Date and, unless a Rapid Amortization Event shall have earlier occurred, ending immediately after the Distribution Date in _____ 200_ (the "Managed Amortization Period"), the amount of Principal Collections payable to Certificateholders as of each Distribution Date during the Managed Amortization Period will equal, to the extent funds are available therefor, the Scheduled Principal Collections Distribution Amount for such Distribution Date. On any Distribution Date during the Managed Amortization Period, the "Scheduled Principal Collections Distribution Amount" shall equal the lesser of (i) the Maximum Principal Payment (as defined below) and (ii) the Alternative Principal Payment (as defined herein). With respect to any Distribution Date, the "Maximum Principal Payment" will equal the product of the Investor Fixed Allocation Percentage and Principal Collections for such Distribution Date. With respect to any Distribution Date, the "Alternative Principal Payment" will equal the amount, but not less than zero, of Principal Collections for such Distribution Date less the aggregate of Additional Balances created during the related Collection Period. The "Rapid Amortization Period" is the period beginning at the earlier of (i) the occurrence of a Rapid Amortization Event and (ii) immediately following the _____ 200_ Distribution Date and continuing until the earlier of when (i) the Certificate Principal Balance has been reduced to zero and (ii) the Trust is terminated. See "-Termination; Retirement of the Certificates." Beginning with the first Distribution Date of the Rapid Amortization Period, the amount of Principal Collections payable to Certificateholders on each Distribution Date will be equal to the Maximum Principal Payment. Distributions of Principal Collections based upon the Investor Fixed Allocation Percentage may result in distributions of principal to Certificateholders in amounts that are S-57 59 greater relative to the declining Pool Balance than would be the case if the Investor Floating Allocation Percentage were used to determine the percentage of Principal Collections distributed in respect of the Invested Amount. Principal Collections not allocated to the Certificateholders will be allocated to the Transferor Interest. The aggregate distributions of principal to the Certificateholders will not exceed the Original Certificate Principal Balance. In addition, to the extent of funds available therefor (including funds available under the Policy), on the Distribution Date in _____ 20__, Certificateholders will be entitled to receive as a payment of principal an amount equal to the outstanding Certificate Principal Balance. The Paying Agent. The Paying Agent shall initially be the Trustee, together with any successor thereto in such capacity (the "Paying Agent"). The Paying Agent shall have the revocable power to withdraw funds from the Collection Account for the purpose of making distributions to the Certificateholders. Rapid Amortization Events As described above, the Rapid Amortization Period will commence if a Rapid Amortization Event occurs. "Rapid Amortization Event" refers to any of the following events: (a) failure on the part of the Seller (i) to make a payment or deposit required under the Agreement within three Business Days after the date such payment or deposit is required to be made or (ii) to observe or perform in any material respect any other covenants or agreements of the Seller set forth in the Agreement, which failure continues unremedied for a period of 60 days after written notice; (b) any representation or warranty made by the Seller in the Agreement proves to have been incorrect in any material respect when made and continues to be incorrect in any material respect for a period of 60 days after written notice and as a result of which the interests of the Certificateholders are materially and adversely affected; provided, however, that a Rapid Amortization Event shall not be deemed to occur if the Seller has purchased or made a substitution for the related Mortgage Loan or Mortgage Loans if applicable during such period (or within an additional 60 days with the consent of the Trustee) in accordance with the provisions of the Agreement; (c) the occurrence of certain events of bankruptcy, insolvency or receivership relating to the Transferor; (d) the Trust becomes subject to regulation by the Securities and Exchange Commission as an investment company within the meaning of the Investment Company Act of 1940, as amended; or (e) the aggregate of all draws under the Policy exceeds 1% of the Cut-Off Date Pool Balance. In the case of any event described in clause (a) or (b), a Rapid Amortization Event will be deemed to have occurred only if, after the applicable grace period, if any, described in such clauses, either the Trustee or Certificateholders holding Certificates evidencing more than 51% of the Percentage Interests [or the Certificate Insurer (so long as there is no default by the S-58 60 Certificate Insurer in the performance of its obligations under the Policy)], by written notice to the Depositor, the Transferor and the Servicer (and to the Trustee, if given by the Certificateholders) declare that a Rapid Amortization Event has occurred as of the date of such notice. In the case of any event described in clause (c), (d) or (e), a Rapid Amortization Event will be deemed to have occurred without any notice or other action on the part of the Trustee or the Certificateholders immediately upon the occurrence of such event. In addition to the consequences of a Rapid Amortization Event discussed above, if the Transferor voluntarily files a bankruptcy petition or goes into liquidation or any person is appointed a receiver or bankruptcy trustee of the Transferor, on the day of any such filing or appointment no further Additional Balances will be transferred to the Trust, the Transferor will immediately cease to transfer Additional Balances to the Trust and the Transferor will promptly give notice to the Trustee of any such filing or appointment. Within 15 days, the Trustee will publish a notice of the liquidation or the filing or appointment stating that the Trustee intends to sell, dispose of or otherwise liquidate the Mortgage Loans in a commercially reasonable manner and to the best of its ability. Unless otherwise instructed within a specified period by Certificateholders representing undivided interests aggregating more than 51% of the aggregate principal amount of the Certificates, the Trustee will sell, dispose of or otherwise liquidate the Mortgage Loans in a commercially reasonable manner and on commercially reasonable terms. Any proceeds will be treated as collections allocable to the Certificateholders and the Investor Fixed Allocation Percentage of such remaining proceeds and will be distributed to the Certificateholders on the date such proceeds are received (the "Dissolution Distribution Date"). If the portion of such proceeds allocable to the Certificateholders are not sufficient to pay in full the remaining amount due on the Certificates, the Policy will cover such shortfall. Notwithstanding the foregoing, if a conservator, receiver or trustee-in-bankruptcy is appointed for the Transferor and no Rapid Amortization Event exists other than such conservatorship, receivership or insolvency of the Transferor, the conservator, receiver or trustee-in-bankruptcy may have the power to prevent the commencement of the Rapid Amortization Period or the sale of Mortgage Loans described above. The Policy [describe Policy if applicable] On or before the Closing Date, the Policy will be issued by the Certificate Insurer pursuant to the provisions of the Agreement and the Insurance and Indemnity Agreement (the "Insurance Agreement") to be dated as of _________, 199_, among Bank One, the Depositor, the Trustee and the Certificate Insurer. Reports to Certificateholders Concurrently with each distribution to the Certificateholders, the Servicer will forward to the Trustee for mailing to such Certificateholder a statement setting forth among other items: (i) the Investor Floating Allocation Percentage for the preceding Collection Period; S-59 61 (ii) the amount being distributed to Certificateholders; (iii) the amount of interest included in such distribution and the related Certificate Rate; (iv) the amount, if any, of overdue accrued interest included in such distribution (and the amount of interest thereon); (v) the amount, if any, of the remaining overdue accrued interest after giving effect to such distribution; (vi) the amount, if any, of principal included in such distribution; (vii) the amount, if any, of the reimbursement of previous Liquidation Loss Amounts included in such distribution; (viii)the amount, if any, of the aggregate unreimbursed Liquidation Loss Amounts after giving effect to such distribution; (ix) the Servicing Fee for such Distribution Date; (x) the Invested Amount and the Certificate Principal Balance, each after giving effect to such distribution; (xi) the Pool Balance as of the end of the preceding Collection Period; (xii) the number and aggregate Principal Balances of the Mortgage Loans as to which the minimum monthly payment is delinquent for 30-59 days, 60-89 days and 90 or more days, respectively, as of the end of the preceding Collection Period; (xiii)the book value of any real estate which is acquired by the Trust through foreclosure or grant of deed in lieu of foreclosure; and (xiv) the amount of any draws on the Policy. In the case of information furnished pursuant to clauses (iii), (iv), (v), (vi), (vii) and (viii) above, the amounts shall be expressed as a dollar amount per Certificate with a $1,000 denomination. Each year commencing in 1997, the Servicer will be required to forward to the Trustee a statement containing the information set forth in clauses (iii) and (vi) above aggregated for such calendar year. Collection and Other Servicing Procedures on Mortgage Loans The Servicer will make reasonable efforts to collect all payments called for under the Mortgage Loans and will, consistent with the Agreement, follow such collection procedures as it follows from time to time with respect to the home equity loans in its servicing portfolio S-60 62 comparable to the Mortgage Loans. Consistent with the above, the Servicer may in its discretion waive any late payment charge or any assumption or other fee or charge that may be collected in the ordinary course of servicing the Mortgage Loans. With respect to the Mortgage Loans, the Servicer may arrange with a borrower a schedule for the payment of interest due and unpaid for a period, provided that any such arrangement is consistent with the Servicer's policies with respect to the home equity mortgage loans it owns or services. In accordance with the terms of the Agreement, the Servicer may consent under certain circumstances to the placing of a subsequent senior lien in respect of a Mortgage Loan. Hazard Insurance The Agreement provides that the Servicer maintain certain hazard insurance on the Mortgaged Properties relating to the Mortgage Loans. While the terms of the related Credit Line Agreements generally require borrowers to maintain certain hazard insurance, the Servicer will not monitor the maintenance of such insurance. The Agreement requires the Servicer to maintain for any Mortgaged Property relating to a Mortgage Loan acquired upon foreclosure of a Mortgage Loan, or by deed in lieu of such foreclosure, hazard insurance with extended coverage in an amount equal to the lesser of (a) the maximum insurable value of such Mortgaged Property or (b) the outstanding balance of such Mortgage Loan plus the outstanding balance on any mortgage loan senior to such Mortgage Loan at the time of foreclosure or deed in lieu of foreclosure, plus accrued interest and the Servicer's good faith estimate of the related liquidation expenses to be incurred in connection therewith. The Agreement provides that the Servicer may satisfy its obligation to cause hazard policies to be maintained by maintaining a blanket policy insuring against losses on such Mortgaged Properties. If such blanket policy contains a deductible clause, the Servicer will be obligated to deposit in the Collection Account the sums which would have been deposited therein but for such clause. (Section 3.04) The Servicer will initially satisfy these requirements by maintaining a blanket policy. As set forth above, all amounts collected by the Servicer (net of any reimbursements to the Servicer) under any hazard policy (except for amounts to be applied to the restoration or repair of the Mortgaged Property) will ultimately be deposited in the Collection Account. In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements on the property by fire, lightning, explosion, smoke, windstorm and hail, and the like, strike and civil commotion, subject to the conditions and exclusions specified in each policy. Although the policies relating to the Mortgage Loans will be underwritten by different insurers and therefore will not contain identical terms and conditions, the basic terms thereof are dictated by state laws and most of such policies typically do not cover any physical damage resulting from the following: war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic animals, theft and, in certain cases vandalism. The foregoing list is merely indicative of certain kinds of uninsured risks and is not intended to be all-inclusive or an exact description of the insurance policies relating to the Mortgaged Properties. S-61 63 Realization Upon Defaulted Mortgage Loans The Servicer will foreclose upon or otherwise comparably convert to ownership Mortgaged Properties securing such of the Mortgage Loans as come into default when, in accordance with applicable servicing procedures under the Agreement, no satisfactory arrangements can be made for the collection of delinquent payments. In connection with such foreclosure or other conversion, the Servicer will follow such practices as it deems necessary or advisable and as are in keeping with its general subordinate mortgage servicing activities, provided the Servicer will not be required to expend its own funds in connection with foreclosure or other conversion, correction of default on a related senior mortgage loan or restoration of any property unless, in its sole judgment, such foreclosure, correction or restoration will increase Net Liquidation Proceeds. The Servicer will be reimbursed out of Liquidation Proceeds for advances of its own funds as liquidation expenses before any Net Liquidation Proceeds are distributed to Certificateholders or the Transferor. Servicing Compensation and Payment of Expenses With respect to each Collection Period, the Servicer will receive from interest collections in respect of the Mortgage Loans a portion of such interest collections as a monthly Servicing Fee in the amount equal to approximately _____% per annum ("Servicing Fee Rate") on the aggregate Principal Balances of the Mortgage Loans as of the first day of the related Collection Period (or at the Cut-Off Date for the first Collection Period). All assumption fees, late payment charges and other fees and charges, to the extent collected from borrowers, will be retained by the Servicer as additional servicing compensation. The Servicer will pay certain ongoing expenses associated with the Trust and incurred by it in connection with its responsibilities under the Agreement. In addition, the Servicer will be entitled to reimbursement for certain expenses incurred by it in connection with defaulted Mortgage Loans and in connection with the restoration of Mortgaged Properties, such right of reimbursement being prior to the rights of Certificateholders to receive any related Net Liquidation Proceeds. Evidence as to Compliance The Agreement provides for delivery on or before May 31 in each year, beginning in May 31, 1997, to the Trustee of an annual statement signed by an officer of the Servicer to the effect that the Servicer has fulfilled its material obligations under the Agreement throughout the preceding fiscal year, except as specified in such statement. Certain Matters Regarding the Servicer and the Transferor The Agreement provides that the Servicer may not resign from its obligations and duties thereunder, except in connection with a permitted transfer of servicing, unless (i) such duties and obligations are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities of a type and nature presently carried on by it or its affiliate or (ii) upon the satisfaction of the following conditions: (a) the Servicer has proposed a S-62 64 successor servicer to the Trustee in writing and such proposed successor servicer is reasonably acceptable to the Trustee; (b) the Rating Agencies have confirmed to the Trustee that the appointment of such proposed successor servicer as the Servicer will not result in the reduction or withdrawal of the then current rating of the Certificates; and (c) such proposed successor servicer is reasonably acceptable to the Certificate Insurer. No such resignation will become effective until the Trustee or a successor servicer has assumed the Servicer's obligations and duties under the Agreement. Notwithstanding the foregoing, Bank One may transfer its servicing obligations to any other direct or indirect wholly-owned subsidiary of BANC ONE CORPORATION or another entity (which meets certain eligibility standards set forth in the Agreement) and be relieved of its obligations and duties under the Agreement and related agreements. The Servicer may perform any of its duties and obligations under the Agreement through one or more subservicers or delegates, which may be affiliates of the Servicer. Notwithstanding any such arrangement, the Servicer will remain liable and obligated to the Trustee and the Certificateholders for the Servicer's duties and obligations under the Agreement, without any diminution of such duties and obligations and as if the Servicer itself were performing such duties and obligations. Any person into which, in accordance with the Agreement, Bank One or the Servicer may be merged or consolidated or any person resulting from any merger or consolidation to which Bank One or the Servicer is a party, or any person succeeding to the business of Bank One or the Servicer, will be the successor to Bank One as servicer, or the Servicer, as the case may be, under the Agreement. The Agreement provides that the Servicer will indemnify the Trust and the Trustee from and against any loss, liability, expense, damage or injury suffered or sustained as a result of the Servicer's actions or omissions in connection with the servicing and administration of the Mortgage Loans which are not in accordance with the provisions of the Agreement. Under the Agreement, the Transferor will indemnify an injured party for the entire amount of any losses, claims, damages or liabilities arising out of or based on the Agreement (other than losses resulting from defaults under the Mortgage Loans). In the event of an Event of Servicing Termination (as defined below) resulting in the assumption of servicing obligations by a successor Servicer, the successor Servicer will indemnify the Transferor for any losses, claims, damages and liabilities of the Transferor as described in this paragraph arising from the successor Servicer's actions or omissions. The Agreement provides that neither the Depositor, the Transferor nor the Servicer nor their directors, officers, employees or agents will be under any other liability to the Trust, the Trustee, the Certificateholders or any other person for any action taken or for refraining from taking any action pursuant to the Agreement. However, neither the Depositor, the Transferor nor the Servicer will be protected against any liability which would otherwise be imposed by reason of willful misconduct, bad faith or gross negligence of the Depositor, the Transferor or the Servicer in the performance of its duties under the Agreement or by reason of reckless disregard of its obligations thereunder. In addition, the Agreement provides that the Servicer will not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its servicing responsibilities under the Agreement and which in its opinion may expose it to any expense or liability. The Servicer may, in its sole discretion, undertake any such legal action which it may deem necessary or desirable S-63 65 with respect to the Agreement and the rights and duties of the parties thereto and the interest of the Certificateholders thereunder. Any corporation into which the Servicer may be merged or consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Servicer shall be a party, or any corporation succeeding to the business of the Servicer shall be the successor of the Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything in the Agreement to the contrary notwithstanding. Events of Servicing Termination "Events of Servicing Termination" will consist of: (i) any failure by the Servicer to deposit in the Collection Account any deposit required to be made under the Agreement, which failure continues unremedied for five Business Days after the giving of written notice of such failure to the Servicer by the Trustee, or to the Servicer and the Trustee by the Certificate Insurer or Certificateholders evidencing an aggregate, undivided interest in the Trust of at least 25% of the Certificate Principal Balance; (ii) any failure by the Servicer duly to observe or perform in any material respect any other of its covenants or agreements in the Agreement which, in each case, materially and adversely affects the interests of the Certificateholders or the Certificate Insurer and continues unremedied for 60 days after the giving of written notice of such failure to the Servicer by the Trustee, or to the Servicer and the Trustee by the Certificate Insurer or Certificateholders evidencing an aggregate, undivided interest in the Trust of at least 25% of the Certificate Principal Balance; or (iii) certain events of insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings relating to the Servicer and certain actions by the Servicer indicating insolvency, reorganization or inability to pay its obligations. Under certain other circumstances, the Certificate Insurer with the consent of holders of Investor Certificates evidencing an aggregate, undivided interest in the Trust of at least 51% of the Certificate Principal Balance may deliver written notice to the Servicer terminating all the rights and obligations of the Servicer under the Agreement. Notwithstanding the foregoing, a delay in or failure of performance referred to under clause (i) above for a period of ten Business Days or referred to under clause (ii) above for a period of 60 Business Days, shall not constitute an Event of Servicing Termination if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or other similar occurrence. Upon the occurrence of any such event the Servicer shall not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of the Agreement and the Servicer shall provide the Trustee, the Depositor, the Transferor, the Certificate Insurer and the Certificateholders prompt notice of such failure or delay by it, together with a description of its efforts to so perform its obligations. Rights Upon an Event of Servicing Termination So long as an Event of Servicing Termination remains unremedied, either the Trustee, or Certificateholders evidencing an aggregate, undivided interest in the Trust of at least 51% of the Certificate Principal Balance [or the Certificate Insurer], may terminate all of the rights and S-64 66 obligations of the Servicer under the Agreement and in and to the Mortgage Loans, whereupon the Trustee will succeed to all the responsibilities, duties and liabilities of the Servicer under the Agreement and will be entitled to similar compensation arrangements. In the event that the Trustee would be obligated to succeed the Servicer but is unwilling or unable so to act, it may appoint, or petition a court of competent jurisdiction for the appointment of, a housing and home finance institution or other mortgage loan or home equity loan servicer with all licenses and permits required to perform its obligations under the Agreement and having a net worth of at least $__________ [and acceptable to the Certificate Insurer] to act as successor to the Servicer under the Agreement. Pending such appointment, the Trustee will be obligated to act in such capacity unless prohibited by law. Such successor will be entitled to receive the same compensation that the Servicer would otherwise have received (or such lesser compensation as the Trustee and such successor may agree). A receiver or conservator for the Servicer may be empowered to prevent the termination and replacement of the Servicer where the only Event of Servicing Termination that has occurred is an Insolvency Event. Amendment The Agreement may be amended from time to time by the Seller, the Transferor, the Servicer, the Depositor and the Trustee [and with the consent of the Certificate Insurer], but without the consent of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions therein which may be inconsistent with any other provisions of the Agreement, to add to the duties of the Depositor, the Seller, the Transferor or the Servicer or to add or amend any provisions of the Agreement as required by the Rating Agencies in order to maintain or improve any rating of the Certificates (it being understood that, after obtaining the ratings in effect on the Closing Date, neither the Transferor, the Trustee nor the Servicer is obligated to obtain, maintain, or improve any such rating) or to add any other provisions with respect to matters or questions arising under the Agreement which shall not be inconsistent with the provisions of the Agreement, provided that such action will not, as evidenced by an opinion of counsel, materially and adversely affect the interests of any Certificateholder [or the Certificate Insurer]; provided, that any such amendment will not be deemed to materially and adversely affect the Certificateholders and no such opinion will be required to be delivered if the person requesting such amendment obtains a letter from the Rating Agencies stating that such amendment would not result in a downgrading of the then current rating of the Certificates. The Agreement may also be amended from time to time by the Seller, the Servicer, the Depositor, and the Trustee, with the consent of Certificateholders evidencing an aggregate, undivided interest in the Trust of at least 51% of the Certificate Principal Balance [and the Certificate Insurer] for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of the Certificateholders, provided that no such amendment will (i) reduce in any manner the amount of, or delay the timing of, collections of payments on the Certificates or distributions or payments under the Policy which are required to be made on any Certificate without the consent of the holder of such Certificate or (ii) reduce the aforesaid percentage required to consent to any such amendment, without the consent of the holders of all Certificates then outstanding. S-65 67 Termination; Retirement of the Certificates The Trust will terminate on the Distribution Date following the later of (A) payment in full of all amounts owing to the Certificate Insurer and (B) the earliest of (i) the Distribution Date on which the Certificate Principal Balance has been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the optional transfer to the Transferor of the Certificates, as described below and (iv) the Distribution Date in _____ 20__. The Certificates will be subject to optional transfer to the Transferor on any Distribution Date after the Certificate Principal Balance is reduced to an amount less than or equal to _____% of the Original Certificate Principal Balance and all amounts due and owing to the Certificate Insurer and unreimbursed draws on the Policy, together with interest thereon, as provided under the Insurance Agreement, have been paid. The transfer price will be equal to the sum of the outstanding Certificate Principal Balance and accrued and unpaid interest thereon at the Certificate Rate through the day preceding the final Distribution Date. In no event, however, will the Trust created by the Agreement continue for more than 21 years after the death of certain individuals named in the Agreement. Written notice of termination of the Agreement will be given to each Certificateholder, and the final distribution will be made only upon surrender and cancellation of the Certificates at an office or agency appointed by the Trustee which will be specified in the notice of termination. In addition, the Trust may be liquidated as a result of certain events of bankruptcy, insolvency or receivership relating to the Transferor. See "-Rapid Amortization Events" herein. The Trustee ___________________________, a ______________________ with its principal place of business in ______________, has been named Trustee pursuant to the Agreement. The commercial bank or trust company serving as Trustee may own Certificates and have normal banking [and the Certificate Insurer] and/or their affiliates. relationships with the Depositor, the Servicer, the Seller [and the Certificate Insurer] and/or their affiliates. The Trustee may resign at any time, in which event the Depositor will be obligated to appoint a successor Trustee, as approved by the Certificate Insurer. The Depositor may also remove the Trustee if the Trustee ceases to be eligible to continue as such under the Agreement or if the Trustee becomes insolvent. Upon becoming aware of such circumstances, the Depositor will be obligated to appoint a successor Trustee, as approved by the Certificate Insurer. Any resignation or removal of the Trustee and appointment of a successor Trustee will not become effective until acceptance of the appointment by the successor Trustee. No holder of a Certificate will have any right under the Agreement to institute any proceeding with respect to the Agreement unless such holder previously has given to the Trustee written notice of default and unless Certificateholders evidencing an aggregate, undivided interest in the Trust of at least 51% of the Certificate Principal Balance have made written requests upon the Trustee to institute such proceeding in its own name as Trustee thereunder and have offered to the Trustee reasonable indemnity and the Trustee for 60 days has neglected or S-66 68 refused to institute any such proceeding. The Trustee will be under no obligation to exercise any of the trusts or powers vested in it by the Agreement or to make any investigation of matters arising thereunder or to institute, conduct or defend any litigation thereunder or in relation thereto at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which may be incurred therein or thereby. Certain Activities The Trust will not: (i) borrow money; (ii) make loans; (iii) invest in securities for the purpose of exercising control; (iv) underwrite securities; (v) except as provided in the Agreement, engage in the purchase and sale (or turnover) of investments; (vi) offer securities in exchange for property (except Certificates for the Mortgage Loans); or (vii) repurchase or otherwise reacquire its securities. See "-Evidence as to Compliance" above for information regarding reports as to the compliance by the Servicer with the terms of the Agreement. DESCRIPTION OF THE PURCHASE AGREEMENT The Mortgage Loans to be transferred to the Trust by the Depositor will be purchased by the Depositor from the Seller pursuant to the Purchase Agreement to be entered into between the Depositor, as purchaser of the Mortgage Loans, and ______________, as Seller of the Mortgage Loans. Under the Purchase Agreement, the Seller will agree to transfer the Mortgage Loans and related Additional Balances to the Depositor. Pursuant to the Agreement, the Mortgage Loans will be immediately transferred by the Depositor to the Trust, and the Depositor will assign its rights in, to and under the Purchase Agreement to the Trust. The following summary describes certain terms of the form of the Purchase Agreement and is qualified in its entirety by reference to the Purchase Agreement. Transfer of Mortgage Loans Pursuant to the Purchase Agreement, the Seller will transfer and assign to the Depositor, all of its right, title and interest in and to the Mortgage Loans and all of the Additional Balances thereafter created. The purchase price of the Mortgage Loans is a specified percentage of the face amount thereof as of the time of transfer. The purchase price of each Additional Balance comprising the Principal Balance of a Mortgage Loan is the amount of the related new advance. Representations and Warranties The Seller will represent and warrant to the Depositor that, among other things, as of the Closing Date, it is duly organized and in good standing and that it has the authority to consummate the transactions contemplated by the Purchase Agreement. The Seller will also represent and warrant to the Depositor that, among other things, immediately prior to the sale of the Mortgage Loans to the Depositor, the Seller was the sole owner and holder of the Mortgage Loans free and clear of any and all liens and security interests. The Seller will make similar representations and warranties in the Agreement. The Seller will also represent and warrant to the Depositor that, among other things, as of the Closing Date, (a) the Purchase Agreement S-67 69 constitutes a legal, valid and binding obligation of the Seller and (b) the Purchase Agreement constitutes a valid sale or security interest to the Depositor of all right, title and interest of the Seller in and to the Mortgage Loans and the proceeds thereof. Assignment to Trust The Seller expressly acknowledges and consents to the Depositor's transfer of its rights relating to the Mortgage Loans under the Agreement to the Trust. The Seller also agrees to perform its obligations under the Purchase Agreement for the benefit of the Trust. Termination The Purchase Agreement will terminate upon the termination of the Trust. USE OF PROCEEDS The net proceeds to be received from the sale of the Certificates will be applied by the Depositor towards the purchase of the Mortgage Loans. CERTAIN FEDERAL INCOME TAX CONSEQUENCES [Insert if applicable] STATE TAXES The Depositor makes no representations regarding the tax consequences of purchase, ownership or disposition of the Certificates under the tax laws of any state. Investors considering an investment in the Certificates should consult their own tax advisors regarding such tax consequences. All investors should consult their own tax advisors regarding the Federal, state, local or foreign income tax consequences of the purchase, ownership and disposition of the Certificates. ERISA CONSIDERATIONS [Insert as applicable] LEGAL INVESTMENT CONSIDERATIONS [Although, as a condition to their issuance, the Certificates will be rated in the highest rating category of the Rating Agencies,] the Certificates will not constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA"), because not all of the Mortgages securing the Mortgage Loans are first mortgages. S-68 70 Accordingly, many institutions with legal authority to invest in comparably rated securities based on first mortgage loans may not be legally authorized to invest in the Certificates, which because they evidence interests in a pool that includes junior mortgage loans are not "mortgage related securities" under SMMEA. See "LEGAL INVESTMENT" in the Prospectus. UNDERWRITING Subject to the terms and conditions set forth in the underwriting agreement, dated _____ 199_ (the "Underwriting Agreement"), among the Depositor and _______________________ (the "Underwriters"), the Depositor has agreed to sell to the Underwriters, and the Underwriters have agreed to purchase from the Depositor all the Certificates. In the Underwriting Agreement, the Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Certificates offered hereby if any of the Certificates are purchased. The Depositor has been advised by the Underwriters that it proposes initially to offer the Certificates to the public in Europe and the United States at the offering price set forth herein and to certain dealers at such price less a discount not in excess of % of the Certificate denominations. The Underwriters may allow and such dealers may reallow a discount not in excess of % of the Certificate denominations to certain other dealers. After the initial public offering, the public offering price, such concessions and such discounts may be changed. The Underwriting Agreement provides that the Depositor will indemnify the Underwriters against certain civil liabilities, including liabilities under the Act. LEGAL MATTERS Certain legal matters with respect to the Certificates will be passed upon for _______________________________, for the Depositor by ______________________ and for the Underwriters by _________________. EXPERTS [The consolidated balance sheets of __________________________________ as of ________________, ____ and ____ and the related consolidated statements of income, changes in shareholder's equity, and cash flows for each of the three years in the period ended _____________, ____, incorporated by reference in this Prospectus Supplement, have been incorporated herein in reliance on the report of _________________________, independent accountants, given on the authority of that firm as experts in accounting and auditing. RATINGS It is a condition to issuance that the Certificates be rated "____" by Standard & Poor's and "____" by Moody's. S-69 71 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. S-70 72 ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in certain limited circumstances, the globally offered Revolving Home Equity Loan Asset-Backed Certificates, Series 199_-_ (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold such Global Securities through any of The Depository Trust Company ("DTC"), Cedel or Euroclear. The Global Securities will be tradeable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Cedel and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations and prior Home Equity Loan Asset-Backed Certificates issues. Secondary cross-market trading between Cedel or Euroclear and DTC Participants holding Certificates will be effected on a delivery-against-payment basis through the respective Depositaries of Cedel and Euroclear (in such capacity) and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Initial Settlement All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Cedel and Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold such positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to prior Home Equity Loan Asset-Backed Certificates issues. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Cedel or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will I-1 73 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 S-2 74 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 S-3 75 (c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Cedel Participant or Euroclear Participant. Certain U.S. Federal Income Tax Documentation Requirements A beneficial owner of Global Securities holding securities through Cedel or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons, unless (i) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global Securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If the information shown on Form W-8 changes, a new Form W-8 must be filed within 30 days of such change. Exemption for non-U.S. Persons with effectively connected income (Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Exemption or reduced rate for non-U.S. Persons resident in treaty countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only for a reduced rate, withholding tax will be imposed at that rate unless the filer alternatively files Form W-8. Form 1001 may be filed by the Certificate Owners or his agent. Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8 and Form 1001 are effective for three calendar years and Form 4224 is effective for one calendar year. The term "U.S. Person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States or any political subdivision thereof or (iii) an estate or trust the income of which is includible in gross income for S-4 76 United States tax purposes, regardless of its source. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Global Securities. S-5 77 [This page intentionally left blank] 78 ================================================================================ No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this Prospectus Supplement or the Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or Lehman Brothers. This Prospectus Supplement and the Prospectus do not constitute an offer of any securities other than those to which they relate or an offer to sell, or a solicitation of an offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful.. Neither the delivery of this Prospectus Supplement and the Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to their respective dates. ------------------- TABLE OF CONTENTS Page ---- Prospectus Supplement Incorporation of Certain Documents By Reference Summary Risk Factors The Certificate Insurer The Servicer Description of the Mortgage Loans Underwriting Maturity and Prepayment Considerations Pool Factor and Trading Information Description of the Certificates Description of the Purchase Agreement Use of Proceeds Certain Federal Income Tax Consequences State Taxes ERISA Considerations Legal Investment Considerations Underwriting Legal Matters Experts Ratings Annex I Prospectus Prospectus Supplement Available Information Reports to Holders Summary of Terms Risk Factors Description of the Securities The Trust Funds Credit Enhancement The Depositor, The Servicer and The Originators Servicing of Mortgage Loans The Agreements Certain Legal Aspects of Mortgage Loans Use of Proceeds Certain Federal Income Tax Considerations State Tax Considerations Legal Investment Plan of Distribution Legal Matters Glossary of Terms ================================================================================ ================================================================================ Banc One Home Equity Loan Trust 199_-_ $___________ Revolving Home Equity Loan Asset-Backed Certificates Series 199_-_ ______________ Seller Bank One, N.A. Servicer Banc One ABS Corporation, As Depositor PROSPECTUS SUPPLEMENT ______, 199_ ================================================================================ 79 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification. SUBJECT TO COMPLETION DATED SEPTEMBER 9, 1998 PROSPECTUS BANC ONE ABS CORPORATION Asset-Backed Certificates Asset-Backed Notes (Issuable in Series) Banc One ABS Corporation (the "Depositor") may offer from time to time under this Prospectus and related Prospectus Supplements the Asset-Backed Notes (the "Notes") and the Asset-Backed Certificates (the "Certificates" and, together with the Notes, the "Securities") which may be sold from time to time in one or more series (each, a "Series"). A Series of Securities may consist of Notes, Certificates or both. As specified in the related Prospectus Supplement, the Certificates of a Series will evidence undivided interests in certain assets deposited into a trust (each, a "Trust Fund") by the Depositor pursuant to a Pooling and Servicing Agreement or a Trust Agreement, as described herein. As specified in the related Prospectus Supplement, the Notes of a Series will be issued and secured pursuant to an Indenture and will represent indebtedness of the related Trust Fund. The Trust Fund for a Series of Securities will include assets purchased from one or more bank or non-bank direct or indirect subsidiaries of BANC ONE CORPORATION ("BANC ONE") specified in the related Prospectus Supplement (each, a "Seller" and collectively, the "Sellers") composed of one or more pools of revolving home equity loans and lines of credit (collectively, the "Mortgage Loans"), secured by mortgages primarily on one- to four-family residential properties, (b) all monies due thereunder net, if and as provided in the related Prospectus Supplement, of certain amounts payable to Bank One, N.A., as servicer of the Mortgage Loans or other servicer specified in the related Prospectus Supplement (the "Servicer"), and (c) certain funds, Credit Enhancement (as defined herein) and other assets as described herein and in the related Prospectus Supplement. Each Series of Securities will be issued in one or more classes (each, a "Class"). Interest on and principal of the Securities of a Series will be payable on each Distribution Date specified in the related Prospectus Supplement, at the times, at the rates, in the amounts and in the order of priority set forth in the related Prospectus Supplement. If a Series includes multiple Classes, such Classes may vary with respect to the amount, percentage and timing of distributions of principal, interest or both and one or more Classes may be subordinated to other Classes with respect to distributions of principal, interest or both as described herein and in the related Prospectus Supplement. If so specified in the related Prospectus Supplement, the Mortgage Loans and other assets comprising the Trust Fund may be divided into one or more Asset Groups and each Class of the related Series will evidence beneficial ownership of the corresponding Asset Group, as applicable. The rate of reduction of the aggregate principal balance of each Class of a Series may depend principally upon the rate of payment (including prepayments) with respect to the Mortgage Loans. A rate of prepayment lower or higher than anticipated will affect the yield on the Securities of a Series in the manner described herein and in the related Prospectus Supplement. Under certain limited circumstances described herein and in the related Prospectus Supplement, a Series of Securities may be subject to termination or redemption under the circumstances described herein and in the related Prospectus Supplement. FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES, SEE "RISK FACTORS" ON PAGE 9. NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND CERTIFICATES OF A SERIES EVIDENCE BENEFICIAL INTERESTS IN, THE RELATED TRUST FUND ONLY AND ARE NOT DEPOSITS AND NEITHER THE NOTES OR THE CERTIFICATES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR BY THE DEPOSITOR, ANY SELLER, THE TRUSTEE, THE SERVICER OR BY ANY OF THEIR RESPECTIVE AFFILIATES OR, UNLESS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, BY ANY OTHER PERSON OR ENTITY. THE DEPOSITOR'S ONLY OBLIGATIONS WITH RESPECT TO ANY SERIES OF SECURITIES WILL BE PURSUANT TO CERTAIN REPRESENTATIONS AND WARRANTIES SET FORTH IN THE RELATED AGREEMENT AS DESCRIBED HEREIN OR IN THE RELATED PROSPECTUS SUPPLEMENT. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- The Securities offered by this Prospectus and by the related Prospectus Supplement are offered by the underwriters set forth in the related Prospectus Supplement, if any, subject to prior sale, to withdrawal cancellation or modification of the offer without notice, to delivery to and acceptance by such underwriters and certain further conditions. Retain this Prospectus for future reference. This Prospectus may not be used to consummate sales of the Securities offered hereby unless accompanied by a Prospectus Supplement. - -------------------------------------------------------------------------------- Prospectus dated , 199 80 PROSPECTUS SUPPLEMENT The Prospectus Supplement relating to a Series of Securities to be offered hereunder will, among other things, set forth with respect to such Series of Securities: (i) the aggregate principal amount, interest rate, and authorized denominations of each Class of such Securities; (ii) certain information concerning the Mortgage Loans, the Seller and any Servicer; (iii) the terms of any Credit Enhancement with respect to such Series; (iv) the terms of any insurance related to the Mortgage Loans; (v) information concerning any other assets in the related Trust Fund, including any Reserve Fund; (vi) the Final Scheduled Distribution Date of each Class of such Securities; (vii) the method to be used to calculate the amount of principal required to be applied to the Securities of each Class of such Series on each Distribution Date, the timing of the application of principal and the order of priority of the application of such principal to the respective Classes and the allocation of principal to be so applied; (viii) the Distribution Dates and any Assumed Reinvestment Rate (as defined herein); and (ix) additional information with respect to the plan of distribution of such Securities. To the extent that the terms of this Prospectus conflict or are otherwise inconsistent with the terms of any Prospectus Supplement, the terms of such Prospectus Supplement shall govern. AVAILABLE INFORMATION The Depositor has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement under the Securities Act of 1933, as amended, with respect to the Securities. This Prospectus, which forms a part of the Registration Statement, omits certain information contained in such Registration Statement pursuant to the Rules and Regulations of the Commission. The Registration Statement and the exhibits thereto may be inspected and copied at the public reference facilities maintained by the Commission at a 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional Offices located as follows: Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office, 7 World Trade Center, 3rd Floor, New York, New York 10007. Copies of such material may also be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a public access site on the Internet through the World Wide Web at which site reports, information statements and other information, including all electronic filings, regarding the Depositor may be viewed. The Internet address of such World Wide Web site is http://www.sec.gov. REPORTS TO HOLDERS Periodic and annual reports concerning the related Trust Fund for a Series of Securities are required under the related Agreement to be forwarded to Holders. Unless otherwise specified in the related Prospectus Supplement, such reports will not be examined and reported on by an independent public accountant. If so specified in the Prospectus Supplement for a Series of Securities, such Series or one or more Classes of such Series will be issued in book-entry form. In such event (i) owners of beneficial interests in such Securities will not be considered "Holders" under the Agreements and will not receive such reports directly from the related Trust Fund; rather, such reports will be furnished to such owners through the participants and indirect participants of the applicable book-entry system and (ii) references herein to the rights of "Holders" shall refer to the rights of such owners as they may be exercised indirectly through such participants. See "THE AGREEMENTS-Reports to Holders" herein. 81 SUMMARY OF TERMS The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus and by reference to the information with respect to each Series of Securities contained in the Prospectus Supplement to be prepared and delivered in connection with the offering of Securities of such Series. Capitalized terms used and not otherwise defined herein or in the related Prospectus Supplement shall have the meanings set forth in the "GLOSSARY OF TERMS". Securities Offered........... Asset-Backed Certificates (the "Certificates") and Asset-Backed Notes (the "Notes"). Certificates are issuable from time to time in Series pursuant to a Pooling and Servicing Agreement or Trust Agreement. Each Certificate of a Series will evidence an interest in the Trust Fund for such Series, or in an Asset Group specified in the related Prospectus Supplement. Notes are issuable from time to time in Series pursuant to an Indenture. Each Series of Securities will consist of one or more Classes, each of which may differ in, among other things, the amounts allocated to and the priority of principal and interest payments, Final Scheduled Distribution Dates, Distribution Dates and interest rates. The Securities of each Class will be issued in fully registered form in the denominations specified in the related Prospectus Supplement. If so specified in the related Prospectus Supplement, the Securities or certain Classes of such Securities offered thereby may be available in book-entry form only. Depositor.................... Banc One ABS Corporation (the "Depositor") was incorporated in the State of Ohio on May 7, 1996, and is a wholly-owned, special purpose subsidiary of BANC ONE CORPORATION ("BANC ONE"). None of BANC ONE, nor any other affiliate of the Depositor, the Servicer, the Trustee or any Seller has guaranteed or is otherwise obligated with respect to the Securities of any Series. See "THE DEPOSITOR." Sellers...................... One or more bank or non-bank, direct or indirect, subsidiaries of BANC ONE identified in the Prospectus Supplement for a Series of Securities, each of which is an affiliate of the Depositor (each, a "Seller" and together, the "Sellers"). Servicer..................... Bank One, N.A. ("Bank One"), an affiliate of the Depositor, or such other servicer as specified in the related Prospectus Supplement. Trustee...................... The Trustee for a Series of Securities identified in the related Prospectus Supplement. Interest Payments............ Interest payments on the Securities of a Series entitled by their terms to receive interest will be made on each Distribution Date, to the extent set forth in, and at the applicable rate specified in (or determined in the manner set forth in), the related Prospectus Supplement. The interest rate on Securities of a Series may be fixed or may be variable or change with changes in the rates of interest on the related Mortgage Loans and/or as prepayments occur with respect to such Mortgage Loans. Interest Only Securities may be assigned a "Notional Amount" set forth in the related Prospectus Supplement which is used solely for convenience in expressing the calculation of interest and for certain other purposes and does not represent the right to receive any distributions allocable to principal. Principal Only Securities may not be entitled to receive any interest payments or may be entitled to receive only nominal interest payments. Interest payable on the Securities of a Series on a Distribution Date will include all interest accrued during the period specified in the related Prospectus Supplement. See "DESCRIPTION OF THE SECURITIES--Payments of Interest." 3 82 Principal Payments........... All payments of principal of a Series of Securities will be made in an aggregate amount determined as set forth in the related Prospectus Supplement and will be paid at the times and will be allocated among the Classes of such Series in the order and amounts, and will be applied either on a pro rata or a random lot basis among all Securities of any such Class, all as specified in the related Prospectus Supplement. A Series of Securities may provide for a period during which no or only specified payments of principal are made except upon the occurrence of certain conditions, all as specified in the related Prospectus Supplement. Final Scheduled Distribution Date of the Securities.......... The Final Scheduled Distribution Date with respect to each Class of Notes is the date on or before which principal thereof will be fully paid and, with respect to each Class of Certificates, is the date after which no Certificates of such Class are expected to remain outstanding, in each case calculated on the basis of the assumptions applicable to such Series described in the related Prospectus Supplement. The Final Scheduled Distribution Date of a Class may equal the maturity date of the Mortgage Loan in the related Trust Fund which has the latest stated maturity or will be determined as described herein and in the related Prospectus Supplement. The actual final Distribution Date of the Securities of a Series will depend primarily upon the rate of payment (including prepayments, liquidations due to default, the receipt of proceeds from casualty insurance policies and repurchases) of the Mortgage Loans in the related Trust Fund. Unless otherwise specified in the related Prospectus Supplement, the actual final Distribution Date of any Security is likely to occur earlier and may occur substantially earlier or may occur later than its Final Scheduled Distribution Date as a result of the application of prepayments to the reduction of the principal balances of the Securities and as a result of defaults on the Mortgage Loans. The rate of payments on the Mortgage Loans in the Trust Fund for a Series will depend on a variety of factors, including certain characteristics of such Mortgage Loans and the prevailing level of interest rates from time to time, as well as on a variety of economic, demographic, tax, legal, social and other factors. No assurance can be given as to the actual prepayment experience with respect to a Series. See "RISK FACTORS-Prepayment and Yield Considerations" and "DESCRIPTION OF THE SECURITIES - Weighted Average Life of the Securities" herein. Optional Termination......... One or more Classes of Securities of any Series may be redeemed or repurchased in whole or in part, at the Depositor's or the Servicer's option, at such time and under the circumstances specified in the related Prospectus Supplement, at the price set forth therein. If so specified in the related Prospectus Supplement for a Series of Securities, the Depositor, the Servicer, or such other entity that is specified in the related Prospectus Supplement, may, at its option, cause an early termination of the related Trust Fund by repurchasing all of the Mortgage Loans remaining in the Trust Fund on or after a specified date, or on or after such time as the aggregate principal balance of the Securities of the Series or the Mortgage Loans relating to such Series, as specified in the related Prospectus Supplement, is less than the amount or percentage specified in the related Prospectus Supplement. See "DESCRIPTION OF THE SECURITIES-Optional Purchase or Termination." 4 83 In addition, the Prospectus Supplement may provide other circumstances under which Holders of Securities of a Series could be fully paid significantly earlier than would otherwise be the case if payments or distributions were solely based on the activity of the related Mortgage Loans. The Transferor Interest...... If so specified in the related Prospectus Supplement, interests in a Trust Fund not represented by the related Series of Securities may be represented by a Transferor Interest, which initially will be retained by the related Seller or an affiliate thereof and which will not be offered hereby. If so specified in the related Prospectus Supplement, the principal amount of the Transferor Interest will fluctuate as draws are made with respect to the Mortgage Loans and as Principal Collections are received. The related Prospectus Supplement may specify a minimum interest (the "Minimum Transferor Interest") required to be maintained with respect to a Trust Fund; provided that unless otherwise specified in the related Prospectus Supplement, the Minimum Transferor Interest may be reduced or eliminated without the consent of the Holders of the Securities of the applicable Series. The Trust Fund............... The Trust Fund for a Series of Securities will consist of one or more of the assets described below, as described in the related Prospectus Supplement. A. Mortgage Loans......... The Mortgage Loans for a Series will consist of revolving home equity loans and lines of credit originated or purchased by the Seller or Sellers specified in the related Prospectus Supplement, each of which is an affiliate of the Depositor, and sold each such Seller to the Depositor. Mortgage Loans may, as specified in the related Prospectus Supplement, have various payment characteristics, including balloon or other irregular payment features, and may accrue interest at a fixed rate or an adjustable rate. To the extent provided in the related Prospectus Supplement, additional Mortgage Loans may be periodically added to the Trust Fund, or may be removed from time to time if certain conditions are met, as described in the related Prospectus Supplement. If so specified in the related Prospectus Supplement, during the term of a Trust Fund, all Additional Balances will be transferred to and become Mortgaged Property of the Trust Fund. As a result, the Pool Balance of a Trust Fund may fluctuate from day to day because the amount of Additional Balances and the amount of principal payments with respect to the Mortgage Loans will usually differ from day to day. The Mortgage Loans will be secured by mortgages or deeds of trust or other similar security instruments creating a lien on a Mortgaged Property, which may be subordinated to one or more senior liens on the Mortgaged Property, as described in the related Prospectus Supplement. The related Prospectus Supplement will describe certain characteristics of the Mortgage Loans for a Series, including, without limitation, and to the extent relevant: (a) the aggregate unpaid principal balance of the Mortgage Loans (or the aggregate unpaid principal balance included in the Trust Fund for the related Series) and the average outstanding principal balance of the Mortgage Loans; (b) the weighted average Loan Rate on the Mortgage Loans as of the Cut-off Date; (c) the Combined Loan-to-Value Ratios or Loan-to-Value Ratios, as applicable, of the Mortgage Loans, computed in the manner described in the related Prospectus Supplement; (d) the percentage (by principal balance as of the Cut-off Date) of Mortgage Loans that accrue interest at adjustable or fixed interest rates; (e) any Credit Enhancement relating to the Mortgage Loans; (f) the geographic distribution of any 5 84 Mortgaged Properties securing the Mortgage Loans; (g) the lien priority of the Mortgage Loans; (h) the credit limit utilization rates of the Mortgage Loans; and (i) the delinquency status and year of origination of the Mortgage Loans. B. Collection and Distribution Accounts.............. Unless otherwise provided in the related Prospectus Supplement, all payments on or with respect to the Mortgage Loans for a Series will be remitted directly to an account (the "Collection Account") to be established for such Series with the Trustee or the Servicer, in the name of the Trustee. Unless otherwise provided in the related Prospectus Supplement, the Trustee shall be required to apply a portion of the amount in the Collection Account, together with reinvestment earnings from eligible investments specified in the related Prospectus Supplement, to the payment of certain amounts payable to the Servicer under the related Agreement and any other person specified in the Prospectus Supplement, and to deposit a portion of the amount in the Collection Account into a separate account (the "Distribution Account") to be established for such Series, each in the manner and at the times established in the related Prospectus Supplement. All amounts deposited in the Distribution Account will be available, unless otherwise specified in the related Prospectus Supplement, for (i) application to the payment of principal of and interest on such Series of Securities on the next Distribution Date, (ii) the making of adequate provision for future payments on certain Classes of Securities and (iii) any other purpose specified in the related Prospectus Supplement. After applying the funds in the Collection Account as described above, any funds remaining in the Collection Account may be paid over to the Servicer, the Depositor, any provider of Credit Enhancement with respect to such Series (a "Credit Enhancer") or any other person entitled thereto in the manner and at the times established in the related Prospectus Supplement. Credit Enhancement........... If specified in the Prospectus Supplement relating to a Series, the Depositor may obtain an irrevocable letter of credit, surety bond, securities insurance policy, pool or special hazard insurance policy or other form of credit support or will provide for overcollateralization or one or more classes of subordinate securities or reserve funds funded by an initial deposit and/or application of all or a part of excess cash flow for such Series (collectively, "Credit Enhancement") in favor of the Trustee on behalf of the Holders of such Series and any other person specified in such Prospectus Supplement from an institution acceptable to the rating agency or agencies identified in the related Prospectus Supplement as rating such Series of Securities (collectively, the "Rating Agency") for the purposes specified in such Prospectus Supplement. Credit Enhancement will support the payments on the Securities and may be used for other purposes, to the extent and under the conditions specified in such Prospectus Supplement. See "CREDIT ENHANCEMENT". Servicing.................... The Servicer will be responsible for servicing, managing and making collections on the Mortgage Loans for a Series. In addition, the Servicer, if so specified in the related Prospectus Supplement, will act as custodian and will be responsible for maintaining custody of the Mortgage Loans and related documentation on behalf of the Trustee. Advances with respect to delinquent payments of principal or interest on a Mortgage Loan will be made by the Servicer only to the extent described in the related Prospectus Supplement. Such advances will be 6 85 intended to provide liquidity only and, if required with respect to a Series, will generally be made only if the Servicer determines such Advances to be recoverable. Unless otherwise specified in the related Prospectus Supplement, will be reimbursable to the Servicer from scheduled payments of principal and interest, late collections, or from the proceeds of liquidation of the related Mortgage Loans or from other recoveries relating to such Mortgage Loans (including any insurance proceeds or payments from other credit support). Under certain limited circumstances, the Servicer may resign or be removed, in which event either the Trustee or a third-party servicer will be appointed as successor servicer. The Servicer will receive a periodic fee as servicing compensation (the "Servicing Fee") and may, as specified herein and in the related Prospectus Supplement, receive certain additional compensation. See "SERVICING OF LOANS--Servicing Compensation and Payment of Expenses". Federal Income Tax Considerations A. Debt Securities........ If so described in the related Prospectus Supplement, a Series of Securities will include one or more Classes of taxable debt obligations under the Internal Revenue Code of 1986, as amended (the "Code"). Stated interest with respect to such Classes of Securities will be reported by a Holder in accordance with the Holder's method of accounting. Certain Classes of Securities may, if specified in the related Prospectus Supplement, be issued with original issue discount that is not de minimis. In such cases, the Holder will be required to include original issue discount in gross income as it accrues, which may be prior to the receipt of cash attributable to such income. If a Security is issued at a premium, the Holder may be entitled to make an election to amortize such premium on a constant yield method. See "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS." B. Grantor Trust.......... If so specified in the Prospectus Supplement, the Trust Fund will be treated as a grantor trust for federal income tax purposes. A Certificateholder, by its acceptance of a Certificate, will agree to treat the related Trust as a grantor trust in which such Certificateholder is a grantor for federal income tax purposes. C. Owner Trust Securities............. If so specified in the Prospectus Supplement, the Trust Fund will be treated as a partnership for purposes of federal income tax. Each Noteholder, by the acceptance of a Note of a given series, will agree to treat such Note as indebtedness, and each Certificateholder, by the acceptance of a Certificate of a given series, will agree to treat the related Trust as a partnership in which such Certificateholder is a partner for federal income tax purposes. In the event the Trust Fund will be treated as a partnership, the Certificates may not be transferred to non-U.S. holders, and any such transfer shall be void. Alternative characterizations of such Trust and such Certificates are possible. See "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS." ERISA Considerations......... A fiduciary of any employee benefit or other plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code should carefully review with its own legal advisors whether the purchase or holding of Securities could give rise to a transaction prohibited or otherwise impermissible under ERISA or the Code. See "ERISA CONSIDERATIONS." Legal Investment............. Unless otherwise specified in the related Prospectus Supplement, Securities of each Series offered by this Prospectus and the related Prospectus Supplement will not constitute "mortgage related securities" 7 86 under the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA"). Investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether and to what extent the Securities constitute legal investments for them. See "LEGAL INVESTMENT." Use of Proceeds.............. The Depositor will use the net proceeds from the sale of each Series for one or more of the following purposes: (i) to purchase the related Mortgage Loans, (ii) to repay indebtedness which has been incurred to obtain funds to acquire such Mortgage Loans, (iii) to establish any Reserve Funds described in the related Prospectus Supplement and (iv) to pay costs of structuring and issuing such Securities, including the costs of obtaining Credit Enhancement, if any. If so specified in the related Prospectus Supplement, the purchase of the Mortgage Loans for a Series may be effected by an exchange of Securities with the Seller of such Mortgage Loans. See "USE OF PROCEEDS." Ratings...................... It will be a requirement for issuance of any Series that the Securities offered by this Prospectus and the related Prospectus Supplement be rated by at least one Rating Agency in one of its four highest applicable rating categories. The rating or ratings applicable to Securities of each Series offered hereby and by the related Prospectus Supplement will be as set forth in the related Prospectus Supplement. A securities rating should be evaluated independently of similar ratings on different types of securities. A securities rating does not address the effect that the rate of prepayments on Mortgage Loans for a Series may have on the yield to investors in the Securities of such Series. See "RISK FACTORS-Rating of Securities." 8 87 RISK FACTORS Investors should consider, among other things, the following factors in connection with the purchase of the Securities. Securities Limited Liquidity. There will be no market for the Securities of any Series prior to the issuance thereof, and there can be no assurance that a secondary market will develop or, if it does develop, that it will provide Holders with liquidity of investment or will continue for the life of the Securities of such Series. If so specified in the related Prospectus Supplement, the underwriters for a Series specified in the related Prospectus Supplement, may make a secondary market in the Securities, but have no obligation to do so. None of the Securities will be listed on any securities exchange. Issuance of any of the Securities in book-entry form may reduce the liquidity of such Securities in the secondary trading market because investors may be unwilling to purchase Securities for which they cannot obtain physical certificates. In addition, because transactions in Securities of a Series in book-entry form may be effected only through a depositary and its direct and indirect participants, the ability of a Holder to pledge Securities to persons or entities that do not participate in the depositary system may be limited. Limited Obligations. The Securities of a Series will not represent an interest in or an obligation of the Depositor, BANC ONE, any Seller, the Servicer or any of their affiliates and will be payable solely from the assets of the Trust Fund for such Securities. There will be no recourse to the Depositor or any other person for any default on the Notes or any failure to receive distributions on the Certificates. Consequently, Holders of Securities of each Series must rely solely upon payments with respect to the Mortgage Loans and the other assets constituting the Trust Fund for a Series of Securities, including, if applicable, any amounts available pursuant to any Credit Enhancement for such Series, for the payment of principal of and interest on the Securities of such Series. The Depositor does not have, nor is it expected to have, any significant assets. Holders of Notes will be required under the Indenture to proceed only against the Mortgage Loans and other assets constituting the related Trust Fund in the case of a default with respect to such Notes and may not proceed against any assets of the Depositor. If payments with respect to the Mortgage Loans and such other assets securing a Series of Notes, including any Credit Enhancement, were to become insufficient to make payments on such Notes, no other assets would be available for payment of the deficiency. The only obligations, if any, of the Depositor with respect to the Securities of any Series will be to purchase, or substitute substantially similar mortgage loans for, or cause the related Seller to purchase or substitute, any Mortgage Loans as to which there is defective documentation or a breach of certain representations and warranties. See "THE AGREEMENTS-Assignment of Mortgage Loans". The Depositor does not have, and is not expected in the future to have, any significant assets with which to meet any obligation to repurchase Mortgage Loans with respect to which there has been a breach of any representation or warranty. Credit Enhancement. Although Credit Enhancement, if any, with respect to a Series of Securities is intended to reduce the risk of delinquent payments or losses to Holders of the Class or Classes of Securities entitled to the benefit thereof, the amount of such Credit Enhancement will be limited, as set forth in the related Prospectus Supplement, and will decline and could be depleted under certain circumstances prior to the payment in full of the related Series of Securities, and as a result Holders may suffer losses. See "CREDIT ENHANCEMENT." Prepayment and Yield Considerations. The yield to maturity experienced by a Holder of Securities may be affected by the rate of payment of principal of the Mortgage Loans. The timing of principal payments of the Securities of a Series will be affected by a number of factors, including the following: (i) the extent of prepayments of the Mortgage Loans, which prepayments may be influenced by a variety of factors, (ii) the manner of allocating principal payments among the Classes of Securities of a Series as specified in the related Prospectus Supplement and (iii) the exercise by the party entitled thereto of any right of optional termination. See "DESCRIPTION OF THE SECURITIES- Weighted Average Life of Securities; Prepayment and Yield Considerations." Prepayments may also result from repurchases of loans due to material breaches of the Seller's or the Depositor's warranties. The effective yield to Holders will also be affected by the timing of interest accrual and payments and other factors specific to the Mortgage Loans underlying a Series or the structural characteristics of the Securities of a Series, all as more particularly described in the related Prospectus Supplement. The Depositor is not aware of any publicly available studies or statistics on the rate of prepayment of mortgage loans such as the Mortgage Loans. Generally, home equity loans and lines of credit are not viewed by 9 88 mortgagors as permanent financing. Accordingly, the Mortgage Loans may experience higher rates of prepayment than traditional mortgage loans. On the other hand, it may be expected that a portion of the borrowers will not prepay their Mortgage Loans to any significant degree. Rating of the Securities. It will be a condition to the issuance of a Series of Securities that they be rated in one of the four highest rating categories by one or more Rating Agencies identified in the related Prospectus Supplement. Any such rating would be based on, among other things, the adequacy of the value of the Mortgage Loans and any Credit Enhancement with respect to such Series. Such rating should not be deemed a recommendation to purchase, hold or sell Securities, inasmuch as it does not address market price or suitability for a particular investor. There is also no assurance that any such rating will remain in effect for any given period of time or may not be lowered or withdrawn entirely by the applicable Rating Agency if in its judgment circumstances in the future so warrant. In addition to being lowered or withdrawn due to any erosion in the adequacy of the value of the Mortgage Loans, such rating might also be lowered or withdrawn, among other reasons, because of an adverse change in the financial or other condition of an Enhancer or a change in the rating of such Enhancer's long term debt. Risks of the Mortgage Loans Nature of Mortgage Loans and Mortgaged Properties. The Mortgage Loans are expected to be secured by Mortgages which consist primarily of junior liens subordinate to the rights of the mortgagee under the related senior mortgage or mortgages. As a result, the proceeds from any liquidation, insurance or condemnation proceedings will be available to satisfy the outstanding balance of such Mortgage only to the extent that the claims of such senior mortgagees have been satisfied in full, including any related foreclosure costs. In addition, a junior mortgagee may not foreclose on the Mortgaged Property securing a junior mortgage unless it forecloses subject to the senior mortgages, in which case it must either pay the entire amount due on the senior mortgages to the senior mortgagees at or prior to the foreclosure sale or undertake the obligation to make payments on the senior mortgages in the event the mortgagor is in default thereunder. The Trust Fund will not have any source of funds to satisfy the senior mortgages or make payments due to the senior mortgagees. There are several factors that could adversely affect the value of Mortgaged Properties such that the outstanding balance of the related Mortgage Loan, together with any senior financing on the Mortgaged Properties, would equal or exceed the value of the Mortgaged Properties. Among such factors are an overall decline in the residential real estate market in the areas in which the Mortgaged Properties are located or a decline in the general condition of the Mortgaged Properties as a result of failure of borrowers to maintain adequately the Mortgaged Properties or of natural disasters that are not necessarily covered by insurance, such as earthquakes and floods. Any such decline could extinguish the value of a junior interest in a Mortgaged Property before having any effect on the related senior interest therein. If such a decline occurs, the actual rates of delinquencies, foreclosure and losses on the junior Mortgage Loans could be higher than those currently experienced in the mortgage lending industry in general. Minimum monthly payments on the Mortgage Loans may be limited to accrued interest. Although borrowers under certain of the Mortgage Loans may choose to pay down all or a part of their outstanding principal balance prior to maturity, such borrowers are under no obligation to do so and, if such balances have not been substantially paid down prior to maturity, some borrowers may be unable to pay the required final payment. Environmental Risks. Real Mortgaged Property pledged as security to a lender may be subject to certain environmental risks. Under the laws of certain states, contamination of a Mortgaged Property may give rise to a lien on the Mortgaged Property to assure the costs of clean-up. In several states, such a lien has priority over the lien of an existing mortgage or owner's interest against such Mortgaged Property. In addition, under the laws of some states and under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), a lender may be liable, as an "owner" or "operator," for costs of addressing releases or threatened releases of hazardous substances that require remedy at a Mortgaged Property, if agents or employees of the lender have become sufficiently involved in the operations of the borrower, regardless of whether or not the environmental damage or threat was caused by a prior owner. A lender also risks such liability on foreclosure of the Mortgaged Property. Certain Other Legal Considerations Regarding the Mortgage Loans. Applicable state laws generally regulate interest rates and other charges and require certain disclosures. In addition, other state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt 10 89 collection practices may apply to the origination, servicing and collection of the Mortgage Loans. Depending on the provisions of the applicable law and the specific facts and circumstances involved, violations of these laws, policies and principles may limit the ability of the Servicer to collect all or part of the principal of or interest on the Mortgage Loans, may entitle the borrower to a refund of amounts previously paid and, in addition, could subject the owner of the Mortgage Loan to damages and administrative enforcement. The Mortgage Loans are also subject to Federal laws, including: (i) the Federal Truth in Lending Act and Regulation Z promulgated thereunder, which require certain disclosures to the borrowers regarding the terms of the Mortgage Loans; (ii) the Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the extension of credit; and (iii) the Americans with Disabilities Act, which, among other things, prohibits discrimination on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of any place of public accommodation; (iv) the Fair Credit Reporting Act, which regulates the use and reporting of information related to the borrower's credit experience. Violations of certain provisions of these Federal laws may limit the ability of the Servicer to collect all or part of the principal of or interest on the Mortgage Loans and in addition could subject the Trust Fund to damages and administrative enforcement. The Mortgage Loans may be subject to the Home Ownership and Equity Protection Act of 1994 (the "Act") which amended the Truth in Lending Act as it applies to mortgages subject to the Act. The Act requires certain additional disclosures, specifies the timing of such disclosures and limits or prohibits inclusion of certain provisions in mortgages subject to the Act. The Act also provides that any purchaser or assignee of a mortgage covered by the Act is subject to all of the claims and defenses which the borrower could assert against the original lender. The maximum damages that may be recovered under the Act from an assignee is the remaining amount of indebtedness plus the total amount paid by the borrower in connection with the Mortgage Loan. If the Trust Fund includes Mortgage Loans subject to the Act, it will be subject to all of the claims and defenses which the borrower could assert against the Seller. Any violation of the Act which would result in such liability would be a breach of the Seller's representations and warranties, and the Seller would be obligated to cure, repurchase or, if permitted by the Agreement, substitute for the Mortgage Loan in question. In addition, numerous other federal and state statutory provisions, including the federal bankruptcy laws, the Soldiers' and Sailors' civil Relief Act of 1940 and state debtor relief laws, also may adversely affect the Servicer's ability to collect the principal of or interest on the Mortgage Loans and also would affect the interests of the Holders in such Mortgage Loans if such laws result in the Mortgage Loans being uncollectible. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS". Transfer of Mortgage Loans. If so specified in the related Prospectus Supplement, the Servicer may be entitled to maintain possession of the documentation relating to each Mortgage Loan, including the Credit Line Agreements and related documents or other evidence of indebtedness signed by the borrower, and assignments of the related mortgage to the Trust Fund may not be required to be recorded, in each case until the occurrence of the events (generally related to the rating assigned to unsecured debt of the Servicer) specified in the related Prospectus Supplement. Failure to deliver such documents to the related Trustee (or a third-party custodian on behalf of the Trustee) will have the result in most, if not all, states, and failure to record the assignments of the related mortgages to the related Trustee will have the result in certain states in which the Mortgaged Properties are located, of making the sale of the Principal Balances as of the Cut-off Date, Additional Balances and related documents potentially ineffective against certain creditors of the related Seller or the purchaser of a Mortgage Loan who had no notice of the prior conveyance to the Trust Fund if such purchaser perfects his interest by taking possession of the evidence of indebtedness. Each Seller will be required to represent in the related Purchase Agreement that the transfer by it of all of its right, title and interest in the Mortgage Loans underlying a Series of Securities is either a valid transfer and assignment of such Mortgage Loans or the grant to the Trust Fund of a security interest in the Mortgage Loans. If the transfer of the related Mortgage Loans to the Trust Fund is deemed to create a security interest under the applicable Uniform Commercial Code ("UCC"), tax or other governmental liens on the Mortgaged Property of the Seller arising before any Mortgage Loan comes into existence may have priority over the Trust's interest in such 11 90 Mortgage Loan. In addition, if the FDIC were appointed receiver of a Seller, the receiver's administrative expenses might also have priority over the Trust Fund's interest in the Mortgage Loans, but under the Federal Deposit Insurance Act, to the extent such Seller grants a security interest in the related Mortgage Loans to the Trust Fund, such security interest is perfected prior to the insolvency of such Seller and such security interest was not taken in contemplation of insolvency or with the intent to hinder, delay or defraud creditors, such security interest should not be subject to avoidance by the FDIC, as conservator or receiver. The insolvency of a Seller may also have other potential consequences described in the related Prospectus Supplement, including, for example, an early termination of the related Trust Fund. Geographic Concentration and Local Real Estate Markets. The Prospectus Supplement related to a Series of Securities will contain information with respect to the geographic concentration of Mortgaged Properties securing the related Mortgage Loans. Any concentration of the Mortgage Loans relating to any Series of Securities in a particular region may present risk considerations in addition to those generally present for similar securities without such concentration. Certain geographic regions of the United States from time to time will experience weaker regional economic conditions and housing markets and consequently will experience higher rates of loss and delinquency on mortgage loans generally. Declines in values of the Mortgaged Properties in any region may particularly affect the position of a junior mortgagee, and could extinguish the interest of the holder of such junior lien. In many cases, home equity revolving credit line borrowers have primary residences with above average values, and those properties may experience greater relative declines in value than other properties with lower values. A rise in interest rates over a period of time and the general condition of the Mortgaged Property as well as other factors may have the effect of reducing the value of the Mortgaged Property from the appraised value at the time the Mortgage Loan was originated. Such reduction may reduce the likelihood of liquidation or other proceeds being sufficient to satisfy the related Mortgage Loan after satisfaction of any senior liens. In addition, if the borrower has an adjustable rate first mortgage loan, any increase in the interest rate thereon may adversely affect the borrower's ability to make payments on the related Mortgage Loan. Servicer's Ability to Change the Terms of the Mortgage Loans. If and under the terms specified in the related Prospectus Supplement, the Servicer may have the ability to agree to changes in the terms of a Credit Line Agreement or other document evidencing the Mortgage Loan indebtedness. No assurance can be given that changes in applicable law or the market for home equity loans or prudent business practice will not result in changes in the terms of the Mortgage Loans after transfer to the related Trust Fund. Other Considerations. There is no assurance that the market value of the Mortgage Loans or any other assets for a Series will at any time be equal to or greater than the aggregate principal amount of the Securities of such Series then outstanding, plus accrued interest thereon. Moreover, upon an event of default under the Indenture for a Series of Notes and a sale of the assets in the Trust Fund or upon a sale of the assets of a Trust Fund for a Series of Certificates, the Trustee, the Servicer, any Enhancer and any other service provider specified in the related Prospectus Supplement generally will be entitled to receive the proceeds of any such sale to the extent of unpaid fees and other amounts owing to such persons under the related Agreement prior to distributions to holders of Securities. Upon any such sale, the proceeds thereof may be insufficient to pay in full the principal of and interest on the Securities of such Series. Liquidation expenses with respect to defaulted loans do not vary directly with the outstanding principal balance of the loan at the time of default. Therefore, assuming that a servicer took the same steps in realizing upon a defaulted loan having a small remaining principal balance as it would in the case of a defaulted loan having a larger principal balance, the amount realized after expenses of liquidation would be smaller as a percentage of the outstanding principal balance of the smaller loan than would be the case with a larger loan. Because the average outstanding principal balances of the Mortgage Loans are small relative to the size of the loans in a typical pool of first mortgages, realizations net of liquidation expenses on defaulted Mortgage Loans may also be smaller as a percentage of the principal amount of the Mortgage Loans than would such net realizations in the case of a typical pool of first mortgage loans. 12 91 Further, foreclosure and similar actions are subject to delays and may take several years to complete, resulting in delays in the receipt of proceeds available for distribution to Holders of the related Securities. Such delays may depend upon, among other things, the required procedures for foreclosure in the jurisdiction in which the related Mortgaged Property is located, the availability of defenses to such action, the timing of the foreclosure action and other factors. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Foreclosure on Mortgages". 13 92 DESCRIPTION OF THE SECURITIES General Each Series of Notes will be issued pursuant to an indenture (the "Indenture") between the related Trust Fund and the entity named in the related Prospectus Supplement as trustee (the "Trustee") with respect to such Series. A form of Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Certificates will also be issued in Series pursuant to separate agreements (each, a "Pooling and Servicing Agreement" or a "Trust Agreement") among the Depositor, the Servicer and the Trustee. A form of Pooling and Servicing Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. A Series may consist of Notes, Certificates or both. The applicable Seller or Sellers may agree to reimburse the Depositor for certain fees and expenses of the Depositor incurred in connection with the offering of the Securities. The following summaries describe certain provisions in the Agreements common to each Series of Securities. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the Agreements and the Prospectus Supplement relating to each Series of Securities. Where particular provisions or terms used in the Agreements are referred to, the actual provisions (including definitions of terms) are incorporated herein by reference as part of such summaries. Each Series of Securities will consist of one or more Classes of Securities, one or more of which may be Subordinate Securities. The Securities of each Series will be issued only in fully registered form, without coupons, in the authorized denominations for each Class specified in the related Prospectus Supplement. Upon satisfaction of the conditions, if any, applicable to a Class of a Series, as described in the related Prospectus Supplement, the transfer of the Securities may be registered and the Securities may be exchanged at the office of the Trustee specified in the Prospectus Supplement without the payment of any service charge other than any tax or governmental charge payable in connection with such registration of transfer or exchange. If specified in the related Prospectus Supplement, one or more Classes of a Series may be available in book-entry form only. Unless otherwise provided in the related Prospectus Supplement, payments of principal of and interest on a Series of Securities will be made on the Distribution Dates specified in the Prospectus Supplement relating to such Series by check mailed to Holders of such Series, registered as such at the close of business on the record date specified in the related Prospectus Supplement applicable to such Distribution Dates at their addresses appearing on the security register, except that (a) payments may be made by wire transfer (at the expense of the Holder requesting payment by wire transfer) in certain circumstances described in the related Prospectus Supplement and (b) final payments of principal in retirement of each Security will be made only upon presentation and surrender of such Security at the office of the Trustee specified in the Prospectus Supplement. Notice of the final payment on a Security will be mailed to the Holder of such Security before the Distribution Date on which the final principal payment on any Security is expected to be made to the Holder of such Security. Payments of principal of and interest on the Securities will be made by the Trustee, or a paying agent on behalf of the Trustee, as specified in the related Prospectus Supplement. Unless otherwise provided in the related Prospectus Supplement, all payments with respect to the Mortgage Loans for a Series, together with reinvestment income thereon, amounts withdrawn from any Reserve Fund, and amounts available pursuant to any other Credit Enhancement will be deposited directly into the Collection Account and, net, if and as provided in the related Prospectus Supplement, of certain amounts payable to the related Servicer and any other person specified in the Prospectus Supplement will thereafter be deposited into the Distribution Account and will be available to make payments on Securities of such Series on the next Distribution Date, as the case may be. See "THE TRUST FUNDS-Collection and Distribution Accounts." Valuation of the Mortgage Loans If specified in the related Prospectus Supplement for a Series of Notes, each Mortgage Loan included in the related Trust Fund for a Series may be assigned an initial "Asset Value." Unless otherwise specified in the related Prospectus Supplement, at any time the Asset Value of the Mortgage Loans will be equal to the product of the Asset Value Percentage as set forth in the Indenture and the lesser of (a) the stream of remaining regularly scheduled payments on the Mortgage Loans, net, unless otherwise provided in the related Prospectus Supplement, of certain 14 93 amounts payable as expenses, together with income earned on each such scheduled payment received through the day preceding the next Distribution Date at the Assumed Reinvestment Rate, if any, discounted to present value at the highest interest rate on the Notes of such Series over periods equal to the interval between payments on the Notes, and (b) the then principal balance of the Mortgage Loans. Unless otherwise specified in the related Prospectus Supplement, the initial Asset Value of the Mortgage Loans will be at least equal to the principal amount of the Notes of the related Series at the date of issuance thereof. The "Assumed Reinvestment Rate", if any, for a Series will be the highest rate permitted by the Rating Agency or a rate insured by means of a surety bond, guaranteed investment contract, Deposit Agreement or other arrangement satisfactory to the Rating Agency. If the Assumed Reinvestment Rate is so insured, the related Prospectus Supplement will set forth the terms of such arrangement. The Transferor Interest If so specified in the related Prospectus Supplement, interests in a Trust Fund not represented by the related Series of Certificates may be represented by the Transferor Interest, which initially will be retained by the related Sellers or one or more affiliates thereof and which will not be offered hereby. If so specified in the related Prospectus Supplement, the principal amount of the Transferor Interest will fluctuate as draws are made with respect to the Mortgage Loans and as Principal Collections are received. The related Prospectus Supplement may specify a minimum interest (the "Minimum Transferor Interest") required to be maintained with respect to a Trust Fund. If so specified in the related Prospectus Supplement, the holder of the Transferor Interest may have the right to remove Mortgage Loans from the related Trust Fund, under the circumstances described therein. Allocations; Application of Collections The related Prospectus Supplement will describe the allocation or means of allocation of collections on the Mortgage Loans available to pay interest on and principal of a Series of Securities. In general, except as otherwise described in the related Prospectus Supplement, collections will generally be allocated in accordance with the related Credit Line Agreements or other Loan Documents between amounts collected in respect of interest ("Interest Collections") and amounts collected with respect to principal ("Principal Collections" and, with Interest Collections, "Collections"). With respect to a Series of Securities in which a Transferor Interest represents the interests in the related Trust Fund not represented by such Series of Securities, Collections will be allocated between the Transferor Interest and the Classes of such Series of Securities as specified in the related Prospectus Supplement. The related Prospectus Supplement will also describe the allocation or means of allocation of losses, if any, on the related Mortgage Loans, among the Classes of Securities and, if applicable, the Transferor Interest. Unless otherwise specified in the related Prospectus Supplement, the Transferor Interest in a Trust Fund will not be subordinated to the related Series of Securities. Interest Collections and Principal Collections on Mortgage Loans underlying a Series of Securities will each be applied in the manner and priority described in the related Prospectus Supplement. Certain fees and expenses of the Trust Fund or the Servicer may be payable prior to payments due on one or more Classes of a Series of Securities, as specified in the related Prospectus Supplement. Payments of Interest The Securities of each Class by their terms entitled to receive interest will bear interest (generally calculated as specified in the related Prospectus Supplement on the basis of a 360-day year of twelve 30-day months or a 360-day year and actual days elapsed) from the date and at the rate per annum specified, or calculated in the method described, in the related Prospectus Supplement. Interest on such Securities of a Series will be payable on the Distribution Date specified in the related Prospectus Supplement. The rate of interest on Securities of a Series may be fixed or may be variable or may change with changes in the annual percentage rates of the Mortgage Loans included in the related Trust Fund and/or as prepayments occur with respect to such Mortgage Loans. A Class of Securities may be entitled to receive interest distributions only, may not be entitled to receive any interest distributions or may be entitled to receive only nominal interest distributions, as specified in the related Prospectus Supplement. A Series of Securities may provide for a period during which no or a specified amount of principal is payable except upon the occurrence of certain events, as specified in the related Prospectus Supplement. Interest payable on the Securities on a Distribution Date will include all interest accrued during the period specified in the related Prospectus Supplement. In the event interest accrues during the calendar month preceding a 15 94 Distribution Date, the effective yield to Holders will be reduced from the yield that would otherwise be obtainable if interest payable on the Securities were to accrue through the day immediately preceding such Distribution Date. Payments of Principal On each Distribution Date for a Series, principal payments will be made to the Holders of the Securities of such Series on which principal is then payable, to the extent set forth in the related Prospectus Supplement. Such payments will be made in an aggregate amount determined as specified in the related Prospectus Supplement and will be allocated among the respective Classes of a Series in the manner, at the times and in the priority (which may, in certain cases, include allocation by random lot) set forth in the related Prospectus Supplement. Final Scheduled Distribution Date The Final Scheduled Distribution Date with respect to each Class of Notes of a Series is the date no later than which principal thereof will be fully paid and, with respect to each Class of a Series of Certificates, will be the date on which the entire aggregate principal balance of such Class is expected to be reduced to zero, in each case calculated on the- basis of the assumptions applicable to such Series described in the related Prospectus Supplement. The Final Scheduled Distribution Date for each Class of a Series will be specified in the related Prospectus Supplement. Since payments on the Mortgage Loans will be used to make distributions in reduction of the outstanding principal amount of the Securities, it is likely that the actual final Distribution Date of any such Class will occur earlier, and may occur substantially earlier, than its Final Scheduled Distribution Date. Furthermore, with respect to a Series of Certificates, unless otherwise specified in the related Prospectus Supplement, as a result of delinquencies, defaults and liquidations of the Mortgage Loans in the Trust Fund, the actual final Distribution Date of any Certificate may occur later than its Final Scheduled Distribution Date. No assurance can be given as to the actual prepayment experience with respect to a Series. See "--Weighted Average Life of the Securities; Maturity and Prepayment Considerations". Special Redemption If so specified in the Prospectus Supplement relating to a Series of Securities having other than monthly Distribution Dates, one or more Classes of Securities of such Series may be subject to special redemption, in whole or in part, on the day specified in the related Prospectus Supplement (a "Special Redemption Date") if, as a consequence of prepayments on the Mortgage Loans relating to such Securities or low yields then available for reinvestment, the entity specified in the related Prospectus Supplement determines, based on assumptions specified in the applicable Agreement, that the amount available for the payment of interest that will have accrued on such Securities (the "Available Interest Amount") through the designated interest accrual date specified in the related Prospectus Supplement is less than the amount of interest that will have accrued on such Securities to such date. In such event and as further described in the related Prospectus Supplement, the Trustee will redeem a principal amount of outstanding Securities of such Series as will cause the Available Interest Amount to equal the amount of interest that will have accrued through such designated interest accrual date for such Series of Securities outstanding immediately after such redemption. Optional Redemption, Purchase or Termination The Depositor or the Servicer may, at its option, redeem, in whole or in part, one or more Classes of Notes or purchase one or more Classes of Certificates of any Series, on any Distribution Date under the circumstances, if any, specified in the Prospectus Supplement relating to such Series. Alternatively, if so specified in the related Prospectus Supplement for a Series of Certificates, the Depositor, the Servicer, or another entity designated in the related Prospectus Supplement may, at its option, cause an early termination of a Trust Fund by repurchasing all of the Mortgage Loans from such Trust Fund on or after a date specified in the related Prospectus Supplement, or on or after such time as the aggregate outstanding principal amount of the Certificates or Mortgage Loans, as specified in the related Prospectus Supplement, is less than the amount or percentage specified in the related Prospectus Supplement. Notice of such redemption, purchase or termination must be given by the Depositor or the Trustee prior to the related date. The redemption, purchase or repurchase price will be set forth in the related Prospectus Supplement. 16 95 In addition, the Prospectus Supplement may provide other circumstances under which Holders of Securities of a Series could be fully paid significantly earlier than would otherwise be the case if payments or distributions were solely based on the activity of the related Mortgage Loans. Weighted Average Life of the Securities; Maturity and Prepayment Considerations Weighted average life refers to the average amount of time that will elapse from the date of issue of a security until each dollar of principal of such security will be repaid to the investor. Unless otherwise specified in the related Prospectus Supplement, the weighted average life of the Securities of a Class will be influenced by the rate at which the amount financed under the Mortgage Loans included in the Trust Fund for a Series is paid, which may be in the form of scheduled amortization or prepayments. Prepayments on loans and other receivables can be measured relative to a prepayment standard or model. The Prospectus Supplement for a Series of Securities will describe the prepayment standard or model, if any, used therein and may contain tables setting forth the projected weighted average life of each Class of Securities of such Series and the percentage of the original principal amount of each Class of Securities of such Series that would be outstanding on specified Distribution Dates for such Series based on the assumptions stated in such Prospectus Supplement, including assumptions that prepayments on the Mortgage Loans included in the related Trust Fund are made at rates corresponding to various percentages of the prepayment standard or model specified in such Prospectus Supplement. There is, however, no assurance that prepayment of the Mortgage Loans included in the related Trust Fund will conform to any level of any prepayment standard or model specified in the related Prospectus Supplement. The rate of principal prepayments on pools of loans is influenced by a variety of economic, demographic, geographic, legal, tax, social and other factors. The rate of prepayments of conventional housing loans and other receivables has fluctuated significantly in recent years. In general, however, if prevailing interest rates fall significantly below the interest rates on the Mortgage Loans for a Series, such loans are likely to prepay at rates higher than if prevailing interest rates remain at or above the interest rates home by such loans. In this regard, it should be noted that the Mortgage Loans for a Series may have different interest rates. In addition, the weighted average life of the Securities may be affected by the varying maturities of the Mortgage Loans. If any Mortgage Loans for a Series have actual terms-to-stated maturity of less than those assumed in calculating the Final Scheduled Distribution Date of the related Securities, one or more Classes of the Series may be fully paid prior to their respective Final Scheduled Distribution Dates, even in the absence of prepayments and a reinvestment return higher than the Assumed Reinvestment Rate. The related Prospectus Supplement may describe additional prepayment and yield considerations with respect to the characteristics of the Mortgage Loans included in the related Trust Fund and the Classes of Securities of the related Series offered thereby. 17 96 THE TRUST FUNDS General The Notes of each Series will be secured by the pledge of the assets of the related Trust Fund, and the Certificates of each Series will represent interests in the assets of the related Trust Fund. The Trust Fund of each Series will include assets purchased from the Seller composed of (i) the Mortgage Loans, (ii) amounts available from the reinvestment of payments on such Mortgage Loans at the Assumed Reinvestment Rate, if any, specified in the related Prospectus Supplement, (iii) any Credit Enhancement, (iv) any Mortgaged Property that secured a Mortgage Loan but which is acquired by foreclosure or deed in lieu of foreclosure or repossession and (v) the amount, if any, initially deposited in the Collection Account or Distribution Account for a Series as specified in the related Prospectus Supplement. The Securities will be non-recourse obligations of the related Trust Fund. The assets of the Trust Fund specified in the related Prospectus Supplement for a Series of Securities, unless otherwise specified in the related Prospectus Supplement, will serve as collateral only for that Series of Securities. Holders of a Series of Notes may only proceed against such collateral securing such Series of Notes in the case of a default with respect to such Series of Notes and may not proceed against any assets of the Depositor or the related Trust Fund not pledged to secure such Notes. The Mortgage Loans for a Series will be sold to the Depositor by one or more bank or non-bank direct or indirect subsidiaries of BANC ONE CORPORATION ("BANC ONE") specified in the related Prospectus Supplement (each, a "Seller" and collectively, the "Sellers") and will be transferred by the Depositor to the Trust Fund. The Mortgage Loans will be originated by the related Seller or purchased by such Seller in the open market or in privately negotiated transactions. Mortgage Loans relating to a Series will be serviced by Bank One, N.A. or other servicer, which may be the related Seller, specified in the related Prospectus Supplement (the "Servicer"), pursuant to a Pooling and Servicing Agreement, with respect to a Series of Certificates or a servicing agreement (each, a "Servicing Agreement") between the Trust Fund and Servicer, with respect to a Series of Notes. As used herein, "Agreement" means, with respect to a Series of Certificates, the Pooling and Servicing Agreement or Trust Agreement, and with respect to a Series of Notes, the Indenture and the Servicing Agreement, as the context requires. If so specified in the related Prospectus Supplement, a Trust Fund relating to a Series of Securities may be a business trust formed under the laws of the state specified in the related Prospectus Supplement pursuant to a trust agreement (each, a "Trust Agreement") between the Depositor and the trustee of such Trust Fund specified in the related Prospectus Supplement. With respect to each Trust Fund, prior to the initial offering of the related Series of Securities, the Trust Fund will have no assets or liabilities. No Trust Fund is expected to engage in any activities other than acquiring, managing and holding the related Mortgage Loans and other assets contemplated herein and in the related Prospectus Supplement and the proceeds thereof, issuing Securities and making payments and distributions thereon and certain related activities. No Trust Fund is expected to have any source of capital other than its assets and any related Credit Enhancement. The Mortgage Loans The Mortgage Loans for a Series will consist of revolving home equity loans and lines of credit (the "Mortgage Loans") secured by mortgages primarily on single family properties (the "Mortgaged Properties") which may be subordinated to other mortgages on the same Mortgaged Property. The Mortgage Loans may have fixed interest rates or adjustable interest rates and may provide for other payment characteristics, as described below and in the related Prospectus Supplement. As more fully described in the related Prospectus Supplement, interest on each Mortgage Loan, excluding introductory rates offered from time to time during promotional periods, may be computed and payable monthly on the average daily outstanding principal balance of such loan. Principal amounts on the Mortgage Loans may be drawn down (up to a maximum amount as set forth in the related Prospectus Supplement) or repaid under each Mortgage Loan from time to time. If so specified in the related Prospectus Supplement, new draws by borrowers under the Mortgage Loans will automatically become part of the Trust Fund for a Series. As a result, the aggregate 18 97 balance of the Mortgage Loans will fluctuate from day to day as new draws by borrowers are added to the Trust Fund and principal payments are applied to such balances and such amounts will usually differ each day, as more specifically described in the related Prospectus Supplement. Under certain circumstances, a borrower may choose an interest only payment option and is obligated to pay only the amount of interest which accrues on the loan during the billing cycle. An interest only payment option may be available for a specified period before the borrower must begin paying at least the minimum monthly payment of a specified percentage of the average outstanding balance of the loan or, if so specified in the related Prospectus Supplement, such interest only period may be extended for one or more additional periods. The Mortgaged Properties will include primarily one- to four-family residential housing, including Condominium Units and Cooperative Dwellings and may consist of detached individual dwellings, individual condominiums, townhouses, duplexes, row houses, individual units in planned unit developments and other attached dwelling units. Each Mortgaged Property will be located on land owned in fee simple by the borrower or on land leased by the borrower for a term at least ten years (unless otherwise provided in the related Prospectus Supplement) longer than the term of the related Mortgage Loan. Attached dwellings may include owner-occupied structures where each borrower owns the land upon which the unit is built, with the remaining adjacent land owned in common or dwelling units subject to a proprietary lease or occupancy agreement in a cooperatively owned apartment building. Unless otherwise specified in the related Prospectus Supplement, Mortgages on Cooperative Dwellings consist of a lien on the shares issued by such Cooperative Dwelling and the proprietary lease or occupancy agreement relating to such Cooperative Dwelling. The aggregate principal balance of Mortgage Loans secured by Mortgaged Properties that are owner-occupied will be disclosed in the related Prospectus Supplement. Unless otherwise specified in the Prospectus Supplement, the sole basis for a representation that a given percentage of the Mortgage Loans are secured by Mortgaged Property that is owner-occupied will be either (i) the making of a representation by the Mortgagor at origination of the Mortgage Loan either that the underlying Mortgaged Property will be used by the Mortgagor for a period of at least six months every year or that the Mortgagor intends to use the Mortgaged Property as a primary residence, or (ii) a finding that the address of the underlying Mortgaged Property is the Mortgagor's mailing address as reflected in the Servicer's records. To the extent specified in the related Prospectus Supplement, the Mortgaged Properties may include non-owner occupied investment properties and vacation and second homes. Unless otherwise specified in the related Prospectus Supplement, the initial Combined Loan-to-Value Ratio of a Mortgage Loan is computed in the manner described in the related Prospectus Supplement, taking into account the amounts of any related senior mortgage loans. Additional Information. The selection criteria which shall apply with respect to the Mortgage Loans for a Series, including, but not limited to, the Combined Loan-to-Value Ratios or Loan-to-Value Ratios, as applicable, original terms to maturity and delinquency information, will be specified in the related Prospectus Supplement. The Mortgage Loans for a Series may include Mortgage Loans that do not amortize their entire principal balance by their stated maturity in accordance with their terms and require a balloon payment of the remaining principal balance at maturity, as specified in the related Prospectus Supplement. As further described in the related Prospectus Supplement, the Mortgage Loans for a Series may include Mortgage Loans that do not have a specified stated maturity. The related Prospectus Supplement for each Series will provide information with respect to the Mortgage Loans as of the Cut-off Date, including, among other things, (a) the aggregate unpaid principal balance of the Mortgage Loans; (b) the range and weighted average Loan Rate on the Mortgage Loans and, in the case of adjustable rate Mortgage Loans, the range and weighted average of the current Loan Rates and the Lifetime Rate Caps, if any; (c) the range and average outstanding principal balance of the Mortgage Loans; (d) the weighted average original and remaining term-to-stated maturity of the Mortgage Loans and the range of original and remaining terms-to-stated maturity, if applicable; (e) the range and weighted average of Combined Loan-to-Value Ratios or Loan-to-Value Ratios for the Mortgage Loans, as applicable; (f) the percentage (by outstanding principal balance as of the Cut-off Date) of Mortgage Loans that accrue interest at adjustable or fixed interest rates; (g) any special hazard insurance policy or bankruptcy bond or other enhancement relating to the Mortgage Loans; (h) the geographic distribution of the Mortgaged Properties securing the Mortgage Loans; (i) the lien priority of the Mortgage Loans; (j) the credit limit utilization rate of the Mortgage Loans; and (k) the delinquency status and year 19 98 of origination of the Mortgage Loans. The related Prospectus Supplement will also specify any other limitations on the types or characteristics of Mortgage Loans for a Series. If information of the nature described above respecting the Mortgage Loans is not known to the Depositor at the time the Securities are initially offered, approximate or more general information of the nature described above will be provided in the Prospectus Supplement and additional information will be set forth in a Current Report on Form 8-K to be available to investors on the date of issuance of the related Series and to be filed with the Commission within 15 days after the initial issuance of such Securities. Collection and Distribution Accounts A separate Collection Account will be established by the Trustee or the Servicer, in the name of the Trustee, for each Series of Securities for receipt of the amount of cash, if any, specified in the related Prospectus Supplement to be initially deposited therein by the Depositor, all amounts received on or with respect to the Mortgage Loans and, unless otherwise specified in the related Prospectus Supplement, income earned thereon. Certain amounts on deposit in such Collection Account and certain amounts available pursuant to any Credit Enhancement, as provided in the related Prospectus Supplement, will be deposited in a related Distribution Account, which will also be established by the Trustee for each such Series of Securities, for distribution to the related Holders. Unless otherwise specified in the related Prospectus Supplement, the Trustee will invest the funds in the Collection and Distribution Accounts in Eligible Investments maturing, with certain exceptions, not later, in the case of funds in the Collection Account, than the day preceding the date such funds are due to be deposited in the Distribution Account or otherwise distributed and, in the case of funds in the Distribution Account, than the day preceding the next Distribution Date for the related Series of Securities. Eligible Investments include, among other investments, obligations of the United States and certain agencies thereof, federal funds, certificates of deposit, commercial paper, demand and time deposits and banker's acceptances, certain repurchase agreements of United States government securities and certain guaranteed investment contracts, in each case, acceptable to the Rating Agency. 20 99 CREDIT ENHANCEMENT If stated in the Prospectus Supplement relating to a Series of Securities, simultaneously with the assignment by the Depositor of the Mortgage Loans to the Trustee, the Depositor will obtain an irrevocable letter of credit, surety bond or insurance policy, issue Subordinate Securities or obtain any other form of enhancement or combination thereof (collectively, "Credit Enhancement") in favor of the Trustee on behalf of the holders of the related Series or designated Classes of such Series from an institution or by other means acceptable to the Rating Agency. The Credit Enhancement will support the payment of principal and interest on the Securities, and may be applied for certain other purposes to the extent and under the conditions set forth in such Prospectus Supplement. Credit Enhancement for a Series may include one or more of the following forms, or such other form as may be specified in the related Prospectus Supplement. If so specified in the related Prospectus Supplement, any of such Credit Enhancement may be structured so as to protect against losses relating to more than one Trust Fund, in the manner described therein. Subordinate Securities If specified in the related Prospectus Supplement, Credit Enhancement for a Series may consist of one or more Classes of Subordinate Securities. The rights of Holders of such Subordinate Securities to receive distributions on any Distribution Date will be subordinate in right and priority to the rights of Holders of Senior Securities of the Series, but only to the extent described in the related Prospectus Supplement. Financial Guaranty Insurance Policy If so specified in the related Prospectus Supplement, a financial guaranty insurance policy or surety bond (a "Securities Insurance Policy") may be obtained and maintained for a Class or Series of Securities. The issuer of the Securities Insurance Policy (the "Insurer") will be described in the related Prospectus Supplement and a copy of the form of Securities Insurance Policy will be filed with the related Current Report on Form 8-K. Unless otherwise specified in the related Prospectus Supplement, a Securities Insurance Policy will be unconditional and irrevocable and will guarantee to Holders of the applicable Securities that an amount equal to the full amount of distributions due to such Holders will be received by the Trustee or its agent on behalf of such Holders for distribution on each Payment Date. The specific terms of any Securities Insurance Policy will be set forth in the related Prospectus Supplement. A Securities Insurance Policy may have limitations and generally will not insure the obligation of the Depositors or any Originator to purchase or substitute for a defective Mortgage Loan and will not guarantee any specific rate of principal prepayments. Unless otherwise specified in the related Prospectus Supplement, the Insurer will be subrogated to the rights of each Holder to the extent the Insurer makes payments under the Securities Insurance Policy. Insurance If stated in the related Prospectus Supplement, Credit Enhancement for a Series may consist of special hazard insurance policies, bankruptcy bonds and other types of insurance relating to the Mortgage Loans, as described below and in the related Prospectus Supplement. Pool Insurance Policy. If so specified in the Prospectus Supplement relating to a Series of Securities, the Depositor will obtain a pool insurance policy for the Mortgage Loans in the related Trust Fund. The pool insurance policy will cover any loss (subject to the limitations described in a related Prospectus Supplement) by reason of default, but will not cover the portion of the principal balance of any Mortgage Loan that is required to be covered by any primary mortgage insurance policy. The amount and terms of any such coverage will be set forth in the related Prospectus Supplement. Special Hazard Insurance Policy. If so specified in the Prospectus Supplement relating to a Series of Securities, the Depositor will obtain a special hazard insurance policy for the Mortgage Loans in the related Trust Fund. Although the terms of such policies vary to some degree, a special hazard insurance policy typically provides that, where there has been damage to the Mortgaged Property securing a defaulted or foreclosed Mortgage Loan (title to which has been acquired by the insured) and to the extent such damage is not covered by the standard hazard 21 100 insurance policy or any flood insurance policy, if applicable, required to be maintained with respect to such Mortgaged Property, or in connection with partial loss resulting from the application of the coinsurance clause in a standard hazard insurance policy, the special hazard insurer will pay the lesser of (i) the cost of repair or replacement of such Mortgaged Property or (ii) upon transfer of such Mortgaged Property to the special hazard insurer, the unpaid principal balance of such Mortgage Loan at the time of acquisition of such Mortgaged Property by foreclosure or deed in lieu of foreclosure, plus accrued interest to the date of claim settlement and certain expenses incurred by the Servicer with respect to such Mortgaged Property. If the unpaid principal balance plus accrued interest and certain expenses is paid by the special hazard insurer, the amount of further coverage under the special hazard insurance policy will be reduced by such amount less any net proceeds from the sale of such Mortgaged Property. Any amount paid as the cost of repair of such Mortgaged Property will reduce coverage by such amount. Special hazard insurance policies typically do not cover losses occasioned by war, civil insurrection, certain governmental actions, errors in design, faulty workmanship or materials (except under certain circumstances), nuclear reaction, flood (if the Mortgaged Property is in a federally designated flood area), chemical contamination and certain other risks. Restoration of the Mortgaged Property with the proceeds described under (i) above is expected to satisfy the condition under any pool insurance policy that such Mortgaged Property be restored before a claim under such pool insurance policy may be validly presented with respect to the defaulted Mortgage Loan secured by such Mortgaged Property. The payment described under (ii) above will render unnecessary presentation of a claim in respect of such Mortgage Loan under any pool insurance policy. Therefore, so long as such pool insurance policy remains in effect, the payment by the special hazard insurer of the cost of repair or of the unpaid principal balance of the related Mortgage Loan plus accrued interest and certain expenses will not affect the total insurance proceeds paid to Holders of the Securities, but will affect the relative amounts of coverage remaining under the special hazard insurance policy and pool insurance policy. Bankruptcy Bond. In the event of a bankruptcy of a borrower, the bankruptcy court may establish the value of the Mortgaged Property securing the related Mortgage Loan at an amount less than the then outstanding principal balance of such Mortgage Loan. The amount of the secured debt could be reduced to such value, and the holder of such Mortgage Loan thus would become an unsecured creditor to the extent the outstanding principal balance of such Mortgage Loan exceeds the value so assigned to the Mortgaged Property by the bankruptcy court. In addition, certain other modifications of the terms of a Mortgage Loan can result from a bankruptcy proceeding. See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS." If so provided in the related Prospectus Supplement, the Depositor or other entity, specified in the related Prospectus Supplement will obtain a bankruptcy bond or similar insurance contract (the "bankruptcy bond") covering losses resulting from proceedings with respect to borrowers under the Bankruptcy Code. The bankruptcy bond will cover certain losses resulting from a reduction by a bankruptcy court of scheduled payments of principal of and interest on a Mortgage Loan or a reduction by such court of the principal amount of a Mortgage Loan and will cover certain unpaid interest on the amount of such a principal reduction from the date of the filing of a bankruptcy petition. The bankruptcy bond will provide coverage in the aggregate amount specified in the related Prospectus Supplement for all Mortgage Loans in the Trust Fund for such Series. Such amount will be reduced by payments made under such bankruptcy bond in respect of such Mortgage Loans, unless otherwise specified in the related Prospectus Supplement, and will not be restored. Reserve Funds If so specified in the Prospectus Supplement relating to a Series of Securities, the Depositor will deposit into one or more funds to be established with the Trustee as part of the Trust Fund for such Series or for the benefit of any Enhancer with respect to such Series (the "Reserve Funds") cash, a letter or letters of credit, cash collateral accounts, Eligible Investments, or other instruments meeting the criteria of each Rating Agency rating any Series of the Securities in the amount specified in such Prospectus Supplement. In the alternative or in addition to such deposit, a Reserve Fund for a Series may be funded over time through application of all or a portion of the excess cash flow from the Mortgage Loans for such Series, to the extent described in the related Prospectus Supplement. If applicable, the initial amount of the Reserve Fund and the Reserve Fund maintenance requirements for a Series of Securities will be described in the related Prospectus Supplement. 22 101 Amounts withdrawn from any Reserve Fund will be applied by the Trustee to make payments on the Securities of a Series, to pay expenses, to reimburse any Enhancer or for any other purpose, in the manner and to the extent specified in the related Prospectus Supplement. Amounts deposited in a Reserve Fund will be invested by the Trustee, in Eligible Investments maturing no later than the day specified in the related Prospectus Supplement. Overcollateralization If so specified in the related Prospectus Supplement, Credit Enhancement may be provided by overcollateralization created by the application of a portion of interest collections to the payment of principal of the related Securities or otherwise. The reduction of the principal balance of the Securities relative to the outstanding balance of the underlying Mortgage Loans creates overcollateralization and provides additional protection to the Holders of such Securities. Other Credit Enhancement Credit enhancement may also be provided for a Series of Securities in the form of overcollateralization, surety bond, insurance policy or other type of credit enhancement approved by the applicable Rating Agencies to cover one or more risks with respect to the Mortgage Loans or the Securities, as specified in the related Prospectus Supplement. THE DEPOSITOR, THE SERVICER AND THE ORIGINATORS General The Depositor was incorporated in the State of Ohio on May 7, 1996 for the limited purpose of purchasing mortgage loans, automobile loans and other receivables, transferring such loans or receivables to third parties, forming trusts and engaging in related activities. All of the outstanding common stock of the Depositor is owned by BANC ONE. The Banc One Consumer Lending Division Home Equity Program BANC ONE, through its affiliated Banks, has originated variable rate home equity revolving lines of credit since the early 1980's. During the past several years BANC ONE has undertaken a transition from managing its business activities at the affiliate (legal entity) level to centralized management of such business activities by nationally focused lines of business. As part of this transition, all home equity lending originated directly with consumers was centralized in early 1997 and is currently managed by the Banc One Retail Group's Consumer Lending Division ("Consumer Lending"). Consumer Lending has created national business units including marketing, product management, risk management, credit underwriting, loan servicing and collections to manage its credit related activities. To the extent material, the related Prospectus Supplement will specify the amount of outstanding home equity revolving lines of credit and home equity loans managed by Consumer Lending. Home Equity Lines of Credit Home equity lines of credit ("HELOCs") consist of variable or fixed rate, open-ended, revolving lines of credit secured by a lien position against the available equity of a borrower's related residential real estate Mortgaged Property. A borrower may draw on a HELOC by writing a check, telephoning a customer service representative and requesting funds to be transferred to a pre-authorized depository account, requesting a cashier's check at a BANC ONE banking center, or, with respect to certain HELOCs, credit card purchase authorization. HELOCs originated by Consumer Lending are secured by a lien on the related Mortgaged Property subject to maximum loan-to-value ("LTV") limitations. Currently, Consumer Lending offers its customers credit lines that allow them to borrow against the value of the real estate up to either an 80% LTV (Option 1) or a 100% LTV (Option 2) limit. The contractual term of a HELOC consists of a revolving open-ended period (the "Draw Period"), during which borrowings may be made periodically, and a period during which the contract converts to a fixed payment, variable rate, amortizing closed-ended loan (the "Repayment Period"). The contractual term of the Draw Period is based upon the LTV provided by the HELOC loan agreement. For Mortgage Loans with LTVs equal to or 23 102 less than 80%, the Draw and Repayment Periods are 10 years and 10 years, respectively. For Mortgage Loans with LTVs greater than 80% and less than or equal to 100%, the Draw and Repayment Periods are 5 years and 10 years, respectively. Draw periods may, at the election of Consumer Lending, be extended. During the Draw Period, the required minimum monthly payment is equal to the greater of: i) 1% of the outstanding balance; ii) $100.00; or iii) the interest accrued plus any annual fee assessments, late charges, administrative charges, and credit or other insurance charges ("Assessed Fees"). At the beginning of the Repayment Period, the required monthly payment is calculated based on principal, interest, and Assessed Fees related to the amortization of the outstanding balance due using the APR. Although the monthly amount due will remain constant throughout the repayment period, the number of monthly payments can either increase or decrease according to fluctuations in the variable annual percentage rate and Assessed Fees. Payments are applied to a customer's account first to interest, then to principal due, and then to Assessed Fees. Accounts are generally identified as delinquent when less than 90% of the required payment is remitted to the servicing agent. Consumer Lending customers have several channels through which payments can be made to their account including i) payment by check to lockbox remittance processing centers, ii) payments by check submitted to tellers at the local BANC ONE banking center, iii) automated debits to pre-authorized depository accounts, and iv) automated teller machines. Interest rates for HELOCs are established at a product level and are the responsibility of a national pricing committee of Consumer Lending. Factors considered in the price setting process include, among other things, targeted product profitability and related returns, market competition, market penetration, trends in market interest rates, and potential credit losses. Pricing tiers are based on credit/bureau scoring techniques and the balance size of the account being originated. This accommodates setting prices based on credit risk characteristics ("risk-adjusted pricing") and the cost to acquire new customers. Consistent with industry practice, Consumer Lending utilizes introductory offerings including interest rates ("Promo Rates") and waiving closing costs to acquire new accounts. Promo rates are occasionally offered by Consumer Lending, which may either be a variable introductory discount or fixed introductory rate. The term of a Promo Rate may range from 1 to 12 months; however, the majority of Promo Rates are offered for 6 months beginning at the inception of the Mortgage Loan. In general, HELOCs bear interest at a variable rate and generally are subject to a maximum per annum interest rate of between 18% to 25%, depending upon governing state laws. The interest rate on all HELOCs originated after April 1,1997 adjusts monthly. The daily periodic rate is 1/365th (1/366th in the case of leap years) of the APR, which represents the sum of a contractual defined index (the "Index") plus a fixed percentage specified in the related Agreement (the "Gross Margin"). Interest is calculated at a rate applied to the daily balance of the account for each day of the billing cycle (the "Loan Rate"). The index for all loans originated after April 1, 1997 is the average weekly Bank Prime Loan Rate as published by the Board of Governors of the Federal Reserve System (the "Index"). When a variable introductory discount ("Promo Discount") is offered, the Promo Rate is equal to the Loan Rate less the Promo Discount. The HELOCs may permit the customer to convert either the entire outstanding balance due or any portion thereof, to a fixed rate closed-end loan ("Lock Feature"). The Lock Feature, if any, may be exercised during the Draw Period, subject to certain limitations. The Lock Feature allows for a repayment schedule of up to but not exceeding 10 years. When the Lock Feature is exercised, the utilized portion of the HELOC credit line is equal to the amortizing "locked" principal balance plus the revolving principal balance, the combination of which can not exceed the established credit limit under the loan. Product Management & Marketing Activities The Mortgage Loans were or will be originated by one or more of the Sellers (managed by Consumer Lending) utilizing a variety of marketing strategies and product delivery channels. Product management and marketing activities are conducted on a national level, with adjustments in response to local market competitive offerings and pricing practices as reported by field marketing managers and the banking center network. Marketing strategies are developed on an annual basis and may include a combination of television, radio, newspaper and outdoor media, direct mailings to existing and prospective customers, banking center merchandising and other sales supporting tools. Consumer Lending also develops various types of promotions to activate accounts or increase utilization, including special balance transfer offers, sweepstakes, promotional Lock Feature rates and related 24 103 programs. Loans may be originated through BANC ONE's banking center distribution network or Consumer Lending's Loan-by-Phone ("LBP") call centers. LBP centers are located in Milwaukee, Wisconsin, Houston, Texas, and Tempe, Arizona, and are intended to provide sales and service to Consumer Lending's customers, utilizing technology and scoring techniques to reduce turnaround time to approve applications, expedite processing and provide convenient customer-oriented closings. Additionally, Consumer Lending may originate HELOCs within the banking center distribution network or as part of a national equity lending program throughout the United States. Additionally, Consumer Lending may utilize a variety of brand names to promote its HELOC products, including Bank One or First USA. Underwriting HELOCs originated through Consumer Lending are subject to standardized underwriting criteria and approval processes. HELOCs are underwritten at a minimum of $5,001 up to $250,000, with LTVs up to 100%. Single family residences may be financed up to 100% LTV; attached single family (condo, townhouse, patio homes) residences may be financed up to 70% LTV; mobile homes and lots may be financed up to 80% LTV if the mobile homes are permanently affixed to the Mortgaged Property; and second homes may be financed up to 70% LTV. HELOCs are not available on any non-owner occupied properties or owner-occupied 2-4 family properties. Generally all HELOCs are in a second lien position; however, some non-purchase first position liens and third positions may exist. All third lien positions are reviewed by a senior lender. Each applicant for a HELOC is required to complete an application, which generally lists the applicant's mortgage liabilities, income, employment history and other demographic and personal information. A customer may submit an application through one of several distribution channels such as with a relationship banker at a local banking center, telephoning a LBP call center, or telephoning a customer service representative at a teleservicing center. If the application indicates sufficient income and equity in the related real estate Mortgaged Property to justify extending a HELOC, a further credit investigation will be conducted. This investigation is part of Consumer Lending's underwriting activities managed by Consumer Lending's Credit Services unit and performed at one of three processing sites located in Milwaukee, Wisconsin, Houston, Texas, or Tempe, Arizona, utilizing policies developed and monitored jointly with Consumer Lending's Risk Management group. The credit approval process utilizes credit scoring and related techniques and subjective assessments by experienced underwriters. Underwriters analyze the equity position of the requested loan (including both the priority of the lien and the combined loan-to-value ratio) and the applicant's creditworthiness. The evaluation of creditworthiness is designed to assess the applicant's ability and willingness to repay the loan. This evaluation primarily consists of (i) reviewing and verifying customer and demographic information; (ii) obtaining and reviewing an independent credit bureau report; (iii) reviewing the applicant's credit bureau score and, if applicable, a BANC ONE proprietary custom credit score; (iv) reviewing and verifying the applicant's employment and reported income through a review of recent W-2's, pay stubs or telephone verification by the applicant's current employer or assessments of tax returns and financial statements; (v) evaluating the applicant's gross debt to income ratio; (vi) reviewing the title status either by a written title search or insured title policy to ensure that all liens (including Mortgaged Property taxes), except for senior liens, are paid off prior to or at time of settlement of the loan; (vii) obtaining and evaluating the value of the real estate through independent appraisals or valuations; and (viii) evaluating flood risk and verifying flood insurance coverage, if applicable. Credit bureau information is reviewed for minimum acceptable credit scores and consistent record of timely payments and to identify any major negative events such as bankruptcy, repossession, foreclosure or a delinquency of greater than 90 days, that have occurred within the past 5 years. Minimum acceptable credit bureau scores are established by state through an on-going risk management and credit scoring process. Applicants with a recent negative event may be eligible for an exception, but any loans made pursuant to such exception are limited to a maximum LTV of 80%. In some regions, a custom scorecard is used in addition to credit bureau reports. Each area or region may have different cutoffs based on specific data or market indicators determined through risk analysis. The existing credit scoring process and related scorecards are reviewed on a regular basis. Beginning in April 1998 and staggered in phases thereafter, a national scorecard will be implemented, standardizing the data gathering and assigning scores. Each applicant is assigned a grade or tier based on their score(s) and associated risk. Most policies are linked to the tiers as a risk factor. Beginning in 1998, Consumer Lending implemented processes allowing certain applicants to receive final loan approval through expedited real estate appraisal, income, title searches and other related verifications 25 104 ("FASTRAC"). FASTRAC applications are identified during the initial process based on the completeness of documentation provided with the application. Although subject to all of the policies, procedures and authorization controls required by Consumer Lending underwriting standards, the process is intended to improve turnaround and overall customer service. The extent of required income verification is determined based on an applicant's assessed credit risk, loan amount, whether or not self-employed, and the extent of unearned income. If salaried, income is verified through W-2's or current pay stubs. For applicants with superior credit risk assessments (Tier A1), income is verified if the requested amount exceeds $250,000. Income verification is required for requests greater than $50,000 when an applicant's credit risk assessment meets pre-defined score cutoffs (Tier A2 or A3). Income for all other applicants is verified (Tier A4 or below). If unearned income is greater than 50% of declared income or if the source of income is self-employment and the requested loan amount exceeds $20,000, current year-to-date and two previous year's financial statements, accompanied by federal tax returns, are required. A gross debt to income ratio test is applied to each applicant by dividing the applicant's monthly payments on all existing obligations, including the proposed HELOC payment (based on a fully funded balance), by the applicant's gross monthly income. Maximum ratios are assigned by tier as follows: 55% (Tier A1); 50% (Tier A2); 45% (Tier A3); and 40% (Tier A4). Valuation methods are based upon the amount requested by the applicant and the expected loan-to-value ratio ("LTV"). Appraisal values are generally determined in one of several methods: (i) an appraisal completed on Fannie Mae ("FNMA") form 1004 ("Uniform Residential Appraisal Request" or "URAR"), consisting of a complete inspection by a qualified appraiser which is usually performed if the amount of the HELOC requested by the applicant is greater than $ 100,000 with an LTV of greater than 80% or for any HELOC if the amount requested is greater than $250,000 or is secured by certain types of Mortgaged Property, (ii) by reference to the assessed value of the related real estate Mortgaged Property shown on the tax records of applicable governing units, if the Mortgaged Property is located in a county and State in which Consumer Lending, in its discretion, has determined is a reliable indicator of the appraised value of the Mortgaged Property, (iii) a "drive-by" appraisal, completed on Freddie Mac ("FHLMC") form 704, consisting of an evaluation of comparable properties on the basis of a visual inspection of the exterior of the related real estate Mortgaged Property, (iv) a broker's opinion of value or HUD-1 Settlement Statement that are less than 12 months old; or (v) through automated appraisal techniques utilizing pre-approved national vendors to validate and verify valuations of the related real estate properties. To qualify for automated appraisals, the requested loan amount must be less than $100,000 and meet certain criteria, including Mortgaged Property type classification. A title search is performed covering at least the period from the conveyance of the related real estate Mortgaged Property to the applicant from the last owner before the applicant. A full title search may be requested depending upon the size of the amount requested by the applicant. Title insurance is not required to be obtained by the borrower unless title defects are identified or the requested loan amount exceeds $150,000. An insured title policy (ALTA policy or its equivalent) which insures title for both lender and owner is required on newly constructed homes less than six months old on which the lien will be in first position and on all purchase money transactions. Consumer Lending requires a flood determination on all improved Mortgaged Property. Flood insurance, with the appropriate Affiliated Bank named as loss payee, is required on all properties located in a Special Flood Hazard Area as determined by the Federal Emergency Management Agency (FEMA), in an amount at least equal to the lesser of the total encumbrances up to the maximum allowed under the National Flood Insurance Program (NFIP), or replacement coverage or value of the dwelling and improvements as defined by the evaluation method used. Proof of flood insurance is required by providing either a copy of the existing flood insurance policy or a copy of the application for flood insurance and related proof of payment. Any Mortgaged Property located in a flood zone is monitored until maturity. In addition, adequate fire and casualty insurance coverage is required on all dwellings and structural improvements with the appropriate Affiliated Bank named as loss payee on all policies. The minimum coverage is the lesser of total encumbrances or replacement coverage, or value of the dwelling and improvements. No HELOC may close without a properly completed agreement to provide insurance coverage. Verbal confirmation from the agent is required. Once verification has taken place, no additional monitoring or forced placement is performed. 26 105 Consumer Lending has implemented an internal quality control process to ensure adherence to policies and underwriting standards. The quality control process includes self-audits of underwriting decisions, real estate verification processes, documentation and other activities on samples of applications and approved loans. Credit policy exceptions are monitored regularly by senior management of Credit Services and Consumer Lending, as appropriate. Mortgage Loan Servicing As part of BANC ONE's transition from managing its business activities on an Affiliate (legal entity) level to centralized, nationally focused, lines of business, loan servicing activities were consolidated and centralized. Consumer Lending continues to standardize and redesign operational processes to improve customer service and internal controls. HELOCs are serviced by one of four regional processing centers operated by Banc One Services Corporation ("BOSC"), a wholly-owned subsidiary of BANC ONE, and located in Louisville and Lexington, Kentucky; Fort Worth, Texas; and Mesa, Arizona. BOSC carries out loan servicing operations for most BANC ONE subsidiaries under various servicing contracts between BOSC and the applicable subsidiary. Consumer Lending's Loan Servicing unit ("Custodial Operations") is currently responsible for management of the processing centers. Custodial Operations has established practices and procedures governing the servicing of owned and serviced accounts related to: funding and recordation of originated loans, note and collateral documentation, filing verification and control, statement and payment processing and preparation of tax related information. Billing statements are mailed monthly which detail an account credit limit, loan balance, interest rate applied, payment due date, minimum payment amount, past due amounts, interest rate changes, and the available credit line. Customers may utilize several payment methods such as by submitting checks to a lock-box located at one of the loan processing centers; submitting checks to a teller at a local banking center; pre-authorized automated debit from a depository account; wire transfers; or automated teller machines. Collections/Portfolio Management Collections of HELOCs originated by Consumer Lending through the Affiliated Banks is centrally managed by Consumer Lending's Portfolio Asset Management unit ("PAM") at three collection sites located in Akron, Ohio, Waukesha, Wisconsin and Tempe, Arizona. While the collection sites are managed by Consumer Lending, they are currently owned by each of Bank One, N.A., Bank One Wisconsin, and Bank One, Arizona, N.A., respectively. Collection management for receivables originated by Bank One, N.A. and its predecessor banks located in the state of Ohio are provided by Bank One, N.A. During the period from mid-1995 through early-1997, the collections functions for HELOCs originated by the Ohio banks was transferred to Bank One, N.A. Bank One, Wisconsin currently performs collections functions for HELOCs originated by Bank One, Wisconsin and its predecessor banks located in the state of Wisconsin, HELOCs originated by Bank One, Indiana, N.A. and its predecessor banks located in the state of Indiana, HELOCs originated by Bank One, Illinois, N.A. and its predecessor banks located in the state of Illinois, HELOCs originated by Bank One, Kentucky, N.A. and its predecessor banks located in the state of Kentucky and HELOCs originated by Bank One, Louisiana, N.A. and its predecessor banks located in the state of Louisiana. During the period from late 1995 through early 1998, the collections functions of the HELOCs originated by these Wisconsin, Indiana, Illinois, Kentucky and Louisiana banks was transferred to Bank One, Wisconsin. Bank One, Arizona, N.A. currently performs collections functions for HELOCs originated by Bank One, Arizona, N.A. and its predecessor banks located in the state of Arizona, HELOCs originated by Bank One, Oklahoma, N.A. and its predecessor banks located in the state of Oklahoma, HELOCs originated by Bank One, Utah, N.A. and its predecessor banks located in the state of Utah, HELOCs originated by Bank One, Colorado, N.A. and its predecessor banks located in the state of Colorado, and HELOCs originated by Bank One, Texas, N.A. and its predecessor banks located in the State of Texas. During 1997, the collections functions of HELOCs originated by the Arizona, Oklahoma, Utah, Colorado and Texas banks was transferred to Bank One, Arizona, N.A. The transfers of collection management functions are substantially complete. In addition, BANC ONE and its affiliates from time to time may acquire portfolios, which may be serviced by one of these affiliates. Although Consumer Lending does not contemplate any servicing disruptions developing as a result of these acquisitions, there can be no assurance that such interruptions will not occur. 27 106 The PAM has established standard policies governing the collection of owned and serviced loans. Collections management primarily includes the supervision of delinquent loans, loss mitigation efforts, foreclosure proceedings and, if applicable, the disposition of mortgaged properties. The PAM utilizes a variety of collections management programs and tools to monitor and collect delinquent accounts, mitigate account losses, and recover assets previously written off. Account monitoring begins once an account becomes past due. Collection efforts for delinquent accounts are initiated based on behavioral and credit risk scoring. PAM uses the Triad Collection Activity Prioritization System (the "Triad System") to manage the timing and extent of collection efforts. The Triad System uses customer and account information to define a variety of effective and efficient collection strategies by stratifying delinquent accounts as low, medium or high risk based on payment history, product type, and other account characteristics. Consumer Lending's policy is to suspend drawing privileges on overdue loans when collection efforts are initiated. Draw privileges are permanently suspended once an account becomes 60 days delinquent. Permanently suspended draw privileges may be reinstated with management approval. In accordance with industry practice, the Custodial Operations reports accounts that are 30 days past due to the credit reporting bureaus. During the period when the loan is 45 to 59 days delinquent, Consumer Lending sends notice of default informing the borrower of intent to initiate foreclosure proceedings on the Mortgaged Property within certain timeframes as allowed by law. Senior lien holders, if any, may be contacted to determine the status of those liens. Broker's price opinions, appraisals, and Mortgaged Property inspections may be conducted once an account reaches 60 days past due. When the notice of default to the borrower expires, the PAM determines whether to initiate foreclosure proceedings. Analyses are performed and, at 90 days past due, foreclosure proceedings are initiated, if appropriate. If accounts are determined to be collectable, collection managers may delay foreclosure proceedings. 28 107 SERVICING OF MORTGAGE LOANS General Customary servicing functions with respect to Mortgage Loans comprising the Mortgage Loans in the Trust Fund will be provided by the Servicer directly pursuant to the related Servicing Agreement or Pooling and Servicing Agreement, as the case may be, with respect to a Series of Securities. Collection Procedures; Escrow Accounts The Servicer will make reasonable efforts to collect all payments required to be made under the Mortgage Loans and will, consistent with the terms of the related Agreement for a Series and any applicable Credit Enhancement, follow such collection procedures as it follows with respect to comparable loans held in its own portfolio. Consistent with the above, the Servicer may, in its discretion, (i) waive any assumption fee, late payment charge, or other charge in connection with a Mortgage Loan and (ii) to the extent provided in the related HELOC agreement, arrange with an obligor a schedule for the liquidation of delinquencies by extending the Due Dates for Scheduled Payments on such Mortgage Loan. If specified in the related Prospectus Supplement, the Servicer, to the extent permitted by law, will establish and maintain escrow or impound accounts ("Escrow Accounts") with respect to Mortgage Loans in which payments by obligors to pay taxes, assessments, mortgage and hazard insurance premiums, and other comparable items will be deposited. Mortgage Loans may not require such payments under the loan related documents, in which case the Servicer would not be required to establish any Escrow Account with respect to such Mortgage Loans. Withdrawals from the Escrow Accounts are to be made to effect timely payment of taxes, assessments and mortgage and hazard insurance, to refund to obligors amounts determined to be overages, to pay interest to obligors on balances in the Escrow Account to the extent required by law, to repair or otherwise protect the Mortgaged Property securing the related Mortgage Loan and to clear and terminate such Escrow Account. The Servicer will be responsible for the administration of the Escrow Accounts and generally will make advances to such account when a deficiency exists therein. Deposits to and Withdrawals from the Collection Account Unless otherwise specified in the related Prospectus Supplement, the Trustee or the Servicer will establish a separate account (the "Collection Account") in the name of the Trustee. Unless otherwise indicated in the related Prospectus Supplement, the Collection Account will be an account maintained (i) at a depository institution, the unsecured debt obligations of which at the time of any deposit therein are rated by each Rating Agency rating the Securities of such Series at levels satisfactory to each Rating Agency or (ii) in an account or accounts the deposits in which are insured to the maximum extent available by the FDIC or which are secured in a manner meeting requirements established by each Rating Agency. Unless otherwise specified in the related Prospectus Supplement, the funds held in the Collection Account may be invested, pending remittance to the Trustee, in Eligible Investments. If so specified in the related Prospectus Supplement, the Servicer will be entitled to receive as additional compensation any interest or other income earned on funds in the Collection Account. Unless otherwise specified in the related Prospectus Supplement, the Servicer, the Depositor, the Trustee or the applicable Seller, as appropriate, will deposit into the Collection Account for each Series on the Business Day following the Closing Date any amounts representing Scheduled Payments due after the related Cut-off Date but received by the Servicer on or before the Closing Date, and thereafter, within two business days after the date of receipt thereof, the following payments and collections received or made by it (other than, unless otherwise provided in the related Prospectus Supplement, in respect of principal of and interest on the related Mortgage Loans due on or before such Cut-off Date): (i) All payments on account of principal, including prepayments, on such Mortgage Loans; (ii) All payments on account of interest on such Mortgage Loans after deducting therefrom, at the discretion of the Servicer but only to the extent of the amount permitted to be withdrawn or withheld 29 108 from the Collection Account in accordance with the related Agreement, the Servicing Fee in respect of such Mortgage Loans; (iii) All amounts received by the Servicer in connection with the liquidation of Mortgage Loans or Mortgaged Property acquired in respect thereof, whether through foreclosure sale, repossession or otherwise, including payments in connection with such Mortgage Loans received from the obligor, other than amounts required to be paid or refunded to the obligor pursuant to the terms of the applicable loan documents or otherwise pursuant to law ("Liquidation Proceeds"), exclusive of, in the discretion of the Servicer, but only to the extent of the amount permitted to be withdrawn from the Collection Account in accordance with the related Agreement, the Servicing Fee, if any, in respect of the related Primary Asset; (iv) All proceeds under any title insurance, hazard insurance or other insurance policy covering any Mortgage Loan, other than proceeds to be applied to the restoration or repair of the related Mortgaged Property or released to the obligor in accordance with the related Agreement; (v) All amounts required to be deposited therein from any applicable Reserve Fund for such Series pursuant to the related Agreement; (vi) All Advances made by the Servicer required pursuant to the related Agreement; and (vii) All repurchase prices of any such Mortgage Loans purchased or repurchased by the Depositor, the Servicer or the Seller pursuant to the related Agreement. Unless otherwise specified in the related Prospectus Supplement, the Servicer is permitted, from time to time, to make withdrawals from the Collection Account for each Series for the following purposes: (i) to reimburse itself for Advances for such Series made by it pursuant to the related Agreement; the Servicer's right to reimburse itself is limited to amounts received on or in respect of particular Mortgage Loans (including, for this purpose, Liquidation Proceeds and amounts representing proceeds of insurance policies covering the related Mortgaged Property) which represent late recoveries of Scheduled Payments respecting which any such Advance was made; (ii) to the extent provided in the related Agreement, to reimburse itself for any Advances for such Series that the Servicer determines in good faith it will be unable to recover from amounts representing late recoveries of Scheduled Payments respecting which such Advance was made or from Liquidation Proceeds or the proceeds of insurance policies; (iii) to reimburse itself from Liquidation Proceeds for liquidation expenses and for amounts expended by it in good faith in connection with the restoration of damaged Mortgaged Property and, in the event deposited in the Collection Account and not previously withheld, and to the extent that Liquidation Proceeds after such reimbursement exceed the outstanding principal balance of the related Mortgage Loan, together with accrued and unpaid interest thereon to the Due Date for such Mortgage Loan next succeeding the date of its receipt of such Liquidation Proceeds, to pay to itself out of such excess the amount of any unpaid Servicing Fee and any assumption fees, late payment charges, or other charges on the related Mortgage Loan; (iv) if it has elected not to pay itself the Servicing Fee out of the interest component of any Scheduled Payment, late payment or other recovery with respect to a particular Mortgage Loan prior to the deposit of such Scheduled Payment, late payment or recovery into the Collection Account, to pay to itself the Servicing Fee, as adjusted pursuant to the related Agreement, from any such Scheduled Payment, late payment or such other recovery, to the extent permitted by the related Agreement; (v) to reimburse itself for expenses incurred by and recoverable by or reimbursable to it pursuant to the related Agreement; (vi) to pay to the applicable person with respect to each Mortgage Loan or REO Mortgaged Property acquired in respect thereof that has been repurchased or removed from the Trust Fund by the Depositor, the Servicer or the Seller pursuant to the related Agreement, all amounts received thereon and not distributed as of the date on which the related repurchase price was determined; 30 109 (vii) to make payments to the Trustee of such Series for deposit into the Distribution Account, if any, or for remittance to the Holders of such Series in the amounts and in the manner provided for in the related Agreement; and (viii) to clear and terminate the Collection Account pursuant to the related Agreement. In addition, if the Servicer deposits in the Collection Account for a Series any amount not required to be deposited therein, it may, at any time, withdraw such amount from such Collection Account. Advances and Limitations Thereon The related Prospectus Supplement will describe the circumstances, if any, under which the Servicer will make Advances with respect to delinquent payments on Mortgage Loans. If specified in the related Prospectus Supplement, the Servicer will be obligated to make Advances, and such obligations may be limited in amount, or may not be activated until a certain portion of a specified Reserve Fund is depleted. Advances are intended to provide liquidity and, except to the extent specified in the related Prospectus Supplement, not to guarantee or insure against losses. Accordingly, any funds advanced are recoverable by the Servicer out of amounts received on particular Mortgage Loans which represent late recoveries of principal or interest, proceeds of insurance policies or Liquidation Proceeds respecting which any such Advance was made. If an Advance is made and subsequently determined to be nonrecoverable from late collections, proceeds of insurance policies, or Liquidation Proceeds from the related Mortgage Loan, the Servicer may be entitled to reimbursement from other funds in the Collection Account or Distribution Account, as the case may be, or from a specified Reserve Fund, as applicable, to the extent specified in the related Prospectus Supplement. Maintenance of Insurance Policies and Other Servicing Procedures Standard Hazard Insurance; Flood Insurance. Except as otherwise specified in the related Prospectus Supplement, the Servicer will be required to maintain or to cause the obligor on each Mortgage Loan to maintain a standard hazard insurance policy providing coverage of the standard form of fire insurance with extended coverage for certain other hazards as is customary in the state in which the related Mortgaged Property is located. The standard hazard insurance policies will provide for coverage at least equal to the applicable state standard form of fire insurance policy with extended coverage for Mortgaged Property of the type securing the related Mortgage Loans. In general, the standard form of fire and extended coverage policy will cover physical damage to, or destruction of, the related Mortgaged Property caused by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion, subject to the conditions and exclusions particularized in each policy. Because the standard hazard insurance policies relating to the Mortgage Loans will be underwritten by different hazard insurers and will cover Properties located in various states, such policies will not contain identical terms and conditions. The basic terms, however, generally will be determined by state law and generally will be similar. Most such policies typically will not cover any physical damage resulting from war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides, and mudflows), nuclear reaction, wet or dry rot, vermin, rodents, insects or domestic animals, theft and, in certain cases, vandalism. The foregoing list is merely indicative of certain kinds of uninsured risks and is not intended to be all inclusive. Uninsured risks not covered by a special hazard insurance policy or other form of Credit Enhancement may adversely affect distributions to Holders. When a Mortgaged Property securing a Mortgage Loan is located in a flood area identified by HUD pursuant to the Flood Disaster Protection Act of 1973, as amended, the Servicer will be required to cause flood insurance to be maintained with respect to such Mortgaged Property, to the extent available. The standard hazard insurance policies covering Properties securing Mortgage Loans typically will contain a coinsurance clause which, in effect, will require the insured at all times to carry hazard insurance of a specified percentage (generally 80% to 90%) of the full replacement value of the Mortgaged Property, including the improvements on any Mortgaged Property, in order to recover the full amount of any partial loss. If the insured's coverage falls below this specified percentage, such clause will provide that the hazard insurer's liability in the event of partial loss will not exceed the greater of (i) the actual cash value (the replacement cost less physical depreciation) of the Mortgaged Property, including the improvements, if any, damaged or destroyed or (ii) such proportion of the loss, without deduction for depreciation, as the amount of insurance carried bears to the specified percentage of the full replacement cost of such Mortgaged Property and improvements. Since the amount of hazard insurance to be maintained on the improvements securing the Mortgage Loans declines as the principal balances owing thereon decrease, and since the value of the Properties will fluctuate in value over time, the effect of this requirement in the 31 110 event of partial loss may be that hazard insurance proceeds will be insufficient to restore fully the damage to the affected Mortgaged Property. Unless otherwise specified in the related Prospectus Supplement, coverage will be in an amount at least equal to the greater of (i) the amount necessary to avoid the enforcement of any co-insurance clause contained in the policy or (ii) the outstanding principal balance of the related Mortgage Loan. Unless otherwise specified in the related Prospectus Supplement, the Servicer will also maintain on REO Mortgaged Property that secured a defaulted Mortgage Loan and that has been acquired upon foreclosure, deed in lieu of foreclosure, or repossession, a standard hazard insurance policy in an amount that is at least equal to the maximum insurable value of such REO Mortgaged Property. No earthquake or other additional insurance will be required of any obligor or will be maintained on REO Mortgaged Property acquired in respect of a defaulted Mortgage Loan, other than pursuant to such applicable laws and regulations as shall at any time be in force and shall require such additional insurance. Any amounts collected by the Servicer under any such policies of insurance (other than amounts to be applied to the restoration or repair of the Mortgaged Property, released to the obligor in accordance with normal servicing procedures or used to reimburse the Servicer for amounts to which it is entitled to reimbursement) will be deposited in the Collection Account. In the event that the Servicer obtains and maintains a blanket policy insuring against hazard losses on all of the Mortgage Loans, written by an insurer then acceptable to each Rating Agency which assigns a rating to such Series, it will conclusively be deemed to have satisfied its obligations to cause to be maintained a standard hazard insurance policy for each Mortgage Loan or related REO Mortgaged Property. This blanket policy may contain a deductible clause, in which case the Servicer will, in the event that there has been a loss that would have been covered by such policy absent such deductible clause, deposit in the Collection Account the amount not otherwise payable under the blanket policy because of the application of such deductible clause. Realization Upon Defaulted Mortgage Loans The Servicer will use its reasonable best efforts to foreclose upon, repossess or otherwise comparably convert the ownership of the Properties securing the related Mortgage Loans as come into and continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments. In connection with such foreclosure or other conversion, the Servicer will follow such practices and procedures as it deems necessary or advisable and as are normal and usual in its servicing activities with respect to comparable loans serviced by it. However, the Servicer will not be required to expend its own funds in connection with any foreclosure or towards the restoration of any Mortgaged Property unless it determines that: (i) such restoration or foreclosure will increase the Liquidation Proceeds in respect of the related Mortgage Loan available to the Holders after reimbursement to itself for such expenses and (ii) such expenses will be recoverable by it either through Liquidation Proceeds or the proceeds of insurance. While the holder of a Mortgaged Property acquired through foreclosure can often maximize its recovery by providing financing to a new purchaser, the Trust Fund, if applicable, will have no ability to do so and neither the Servicer nor the Depositor will be required to do so. The Servicer may arrange with the obligor on a defaulted Mortgage Loan, a modification of such Mortgage Loan (a "Modification") to the extent provided in the related Prospectus Supplement. Such Modifications may only be entered into if they meet the underwriting policies and procedures employed by the Servicer in servicing receivables for its own account and meet the other conditions set forth in the related Prospectus Supplement. Enforcement of Due-On-Sale Clauses Unless otherwise specified in the related Prospectus Supplement for a Series, when any Mortgaged Property is about to be conveyed by the obligor, the Servicer will, to the extent it has knowledge of such prospective conveyance and prior to the time of the consummation of such conveyance, exercise its rights to accelerate the maturity of the related Mortgage Loan under the applicable "due-on-sale" clause, if any, unless it reasonably believes that such clause is not enforceable under applicable law or if the enforcement of such clause would result in loss of coverage under any primary mortgage insurance policy. In such event, the Servicer is authorized to accept from or enter into an assumption agreement with the person to whom such Mortgaged Property has been or is about to be conveyed, pursuant to which such person becomes liable under the Mortgage Loan and pursuant to which the original obligor is released from liability and such person is substituted as the obligor and becomes liable under the Mortgage Loan. Any fee collected in connection with an assumption will be retained by the Servicer as additional servicing compensation. The terms of a Mortgage Loan may not be changed in connection with an assumption. 32 111 Servicing Compensation and Payment of Expenses Except as otherwise provided in the related Prospectus Supplement, the Servicer will be entitled to a periodic fee as servicing compensation (the "Servicing Fee") in an amount to be determined as specified in the related Prospectus Supplement. The Servicing Fee may be fixed or variable, as specified in the related Prospectus Supplement. In addition, unless otherwise specified in the related Prospectus Supplement, the Servicer will be entitled to servicing compensation in the form of assumption fees, late payment charges and similar items, or excess proceeds following disposition of Mortgaged Property in connection with defaulted Mortgage Loans. Unless otherwise specified in the related Prospectus Supplement, the Servicer will pay certain expenses incurred in connection with the servicing of the Mortgage Loans, including, without limitation, the payment of the fees and expenses of the Trustee and independent accountants, payment of insurance policy premiums and the cost of credit support, if any, and payment of expenses incurred in preparation of reports to Holders. When an obligor makes a principal prepayment in full between Due Dates on the related Mortgage Loan, the obligor will generally be required to pay interest on the amount prepaid only to the date of prepayment. If and to the extent provided in the related Prospectus Supplement, in order that one or more Classes of the Holders of a Series will not be adversely affected by any resulting shortfall in interest, the amount of the Servicing Fee may be reduced to the extent necessary to include in the Servicer's remittance to the Trustee for deposit into the Distribution Account an amount equal to one month's interest on the related Mortgage Loan (less the Servicing Fee). If the aggregate amount of such shortfalls in a month exceeds the Servicing Fee for such month, a shortfall to Holders may occur. Unless otherwise specified in the related Prospectus Supplement, the Servicer will be entitled to reimbursement for certain expenses incurred by it in connection with the liquidation of defaulted Mortgage Loans. The related Holders will suffer no loss by reason of such expenses to the extent expenses are covered under related insurance policies or from excess Liquidation Proceeds. If claims are either not made or paid under the applicable insurance policies or if coverage thereunder has been exhausted, the related Holders will suffer a loss to the extent that Liquidation Proceeds, after reimbursement of the Servicer's expenses, are less than the outstanding principal balance of and unpaid interest on the related Mortgage Loan which would be distributable to Holders. In addition, the Servicer will be entitled to reimbursement of expenditures incurred by it in connection with the restoration of Mortgaged Property securing a defaulted Mortgage Loan, such right of reimbursement being prior to the rights of the Holders to receive any related proceeds of insurance policies, Liquidation Proceeds or amounts derived from other Credit Enhancement. The Servicer is generally also entitled to reimbursement from the Collection Account for Advances. Unless otherwise specified in the related Prospectus Supplement, the rights of the Servicer to receive funds from the Collection Account for a Series, whether as the Servicing Fee or other compensation, or for the reimbursement of Advances, expenses or otherwise, are not subordinate to the rights of Holders of such Series. Evidence as to Compliance If so specified in the related Prospectus Supplement, the applicable Agreement for each Series will provide that each year a firm of independent public accountants will furnish a statement to the Trustee to the effect that such firm has examined certain documents and records relating to the servicing of the Mortgage Loans by the Servicer and that, on the basis of such examination, such firm is of the opinion that the servicing has been conducted in compliance with such Agreement, except for (i) such exceptions as such firm believes to be immaterial and (ii) such other exceptions as are set forth in such statement. If so specified in the related Prospectus Supplement, the applicable Agreement for each Series will also provide for delivery to the Trustee for such Series of an annual statement signed by an officer of the Servicer to the effect that the Servicer has fulfilled its obligations under such Agreement, throughout the preceding calendar year. Certain Matters Regarding the Servicer The Agreement provides that the Servicer may resign from its obligations and duties thereunder, except in connection with a permitted transfer of servicing, unless (i) such duties and obligations are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities of a type and nature presently carried on by it or its affiliate or (ii) upon the satisfaction of the following conditions: (a) the Servicer has proposed a successor servicer to the Trustee in writing and such proposed successor servicer is 33 112 reasonably acceptable to the Trustee; (b) the Rating Agencies have confirmed to the Trustee that the appointment of such proposed successor servicer as the Servicer will not result in the reduction or withdrawal of the then current rating of the Certificates; and (c) such proposed successor servicer is reasonably acceptable to the Enhancer, if any. No such resignation will become effective until the Trustee or a successor servicer has assumed the Servicer's obligations and duties under the Agreement. Notwithstanding the foregoing, Bank One may transfer its servicing obligations to any other direct or indirect wholly-owned subsidiary of BANC ONE or another entity (which meets certain eligibility standards set forth in the Agreement) and be relieved of its obligations and duties under the Agreement and related agreements. The Servicer may perform any of its duties and obligations under the Agreement through one or more subservicers or delegates, which may be affiliates of the Servicer. Notwithstanding any such arrangement, the Servicer will remain liable and obligated to the Trustee and the Certificateholders for the Servicer's duties and obligations under the Agreement, without any diminution of such duties and obligations and as if the Servicer itself were performing such duties and obligations. Any person into which, in accordance with the Agreement, the Servicer may be merged or consolidated or any person resulting from any merger or consolidation to which the Servicer is a party, or any person succeeding to the business of the Servicer, will be the successor to Bank One as servicer, under the Agreement. The Agreement provides that the Servicer will indemnify the Trust and the Trustee from and against any loss, liability, expense, damage or injury suffered or sustained as a result of the Servicer's actions or omissions in connection with the servicing and administration of the Mortgage Loans which are not in accordance with the provisions of the Agreement. Under the Agreement, the applicable Seller will indemnify an injured party for the entire amount of any losses, claims, damages or liabilities arising out of or based on the Agreement (other than losses resulting from defaults under the Mortgage Loans). The Agreement provides that neither the Depositor, any Seller nor the Servicer nor their directors, officers, employees or agents will be under any other liability to the Trust, the Trustee, the Certificateholders or any other person for any action taken or for refraining from taking any action pursuant to the Agreement. However, neither the Depositor, any Seller nor the Servicer will be protected against any liability which would otherwise be imposed by reason of willful misconduct, bad faith or gross negligence of the Depositor, such Seller or the Servicer in the performance of its duties under the Agreement or by reason of reckless disregard of its obligations thereunder. In addition, the Agreement provides that the Servicer will not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its servicing responsibilities under the Agreement and which in its opinion may expose it to any expense or liability. The Servicer may, in its sole discretion, undertake any such legal action which it may deem necessary or desirable with respect to the Agreement and the rights and duties of the parties thereto and the interest of the Certificateholders thereunder. Any corporation into which the Servicer may be merged or consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Servicer shall be a party, or any corporation succeeding to the business of the Servicer shall be the successor of the Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties. Events of Servicing Termination Unless otherwise specified in the related Prospectus Supplement, "Events of Servicing Termination" with respect to a Series will consist of (i) any failure by the Servicer to deposit in the Collection Account any deposit required to be made under the Agreement, which failure continues unremedied for five Business Days after the giving of written notice of such failure to the Servicer by the Trustee, or to the Servicer and the Trustee by the Enhancer, if any, or Holders owning in the aggregate at least 25% of the Principal Balance of all outstanding Securities; (ii) any failure by the Servicer duly to observe or perform in any material respect any other of its covenants or agreements in the Agreement which, in each case, materially and adversely affects the interests of the Holders or the Enhancer, if any, and continues unremedied for 60 days after the giving of written notice of such failure to the Servicer by the Trustee, or to the Servicer and the Trustee by the Enhancer, if any, or Holders owning in the aggregate at least 25% of the Principal Balance of all outstanding Securities; or (iii) certain events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings relating to the Servicer and certain actions by the Servicer indicating insolvency, reorganization or inability to pay its obligations. Under certain other circumstances, the Enhancer, if any, with the consent of Holders owning in the aggregate at least 51% of the Principal Balance of all outstanding Securities may deliver written notice to the Servicer terminating all the rights and obligations of the Servicer under the Agreement. 34 113 Notwithstanding the foregoing, the Agreement provides that a delay in or failure of performance referred to under clause (i) above for a period of ten Business Days or referred to under clause (ii) above for a period of 60 Business Days, will not constitute an Event of Servicing Termination if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer or such delay or failure was caused by an act of God or other similar occurrence. Under the Agreement, upon the occurrence of any such event, the Servicer will not be relieved from using reasonable efforts to perform its obligations in a timely manner in accordance with the terms of the Agreement and the Servicer will provide the Trustee, the Depositor, the applicable Sellers, any Enhancer and the Holders prompt notice of such failure or delay by it, together with a description of its efforts to so perform its obligations. Rights Upon an Event of Servicing Termination Unless otherwise specified in the related Prospectus Supplement, so long as an Event of Servicing Termination remains unremedied, either the Trustee, or Holders owning in the aggregate at least 51% of the Principal Balance of all outstanding Securities or any Credit Enhancer, may terminate all of the rights and obligations of the Servicer under the Agreement and in and to the Mortgage Loans, whereupon the Trustee will succeed to all the responsibilities, duties and liabilities of the Servicer under the Agreement and will be entitled to similar compensation arrangements. If the Trustee would be obligated to succeed the Servicer but is unwilling or unable so to act, it may appoint, or petition a court of competent jurisdiction for the appointment of, a housing and home finance institution or other mortgage loan or home equity servicer with all licenses and permits required to perform its obligations under the Agreement and having a net worth of at least $15,000,000 and acceptable to any Credit Enhancer to act as successor to the Servicer under the Agreement. Pending such appointment, the Trustee will be obligated to act in such capacity unless prohibited by law. Such successor will be entitled to receive the same compensation that the Servicer would otherwise have received (or such lesser compensation as the Trustee and such successor may agree). A receiver or conservator for the Servicer may be empowered to prevent the termination and replacement of the Servicer where the only Event of Servicing Termination that has occurred is an Insolvency Event. 35 114 THE AGREEMENTS The following summaries describe certain provisions of the Agreements. The summaries do not purport to be complete and are subject to, and qualified in their entirety by reference to, the provisions of the Agreements. Where particular provisions or terms used in the Agreements are referred to, such provisions or terms are as specified in the related Agreements. Assignment of Mortgage Loans At the time of issuance of the Certificates, the Depositor will transfer to the Trust all of its right, title and interest in and to each Mortgage Loan (including any Additional Balances arising in the future), related Credit Line Agreements, mortgages and other related documents (collectively, the "Related Documents"), including all collections received on or with respect to each such Mortgage Loan after the Cut-off Date (exclusive of payments in respect of accrued interest due on or prior to the Cut-off Date). The Trustee, concurrently with such transfer, will deliver the Securities to the Depositor and any Transferor Certificate (as defined in the Agreement) to the related Seller or Sellers. Each Mortgage Loan transferred to the Trust will be identified on a schedule (the "Mortgage Loan Schedule") delivered to the Trustee pursuant to the Agreement. Such schedule will include information as to the Cut-off Date Principal Balance of each Mortgage Loan, as well as information with respect to the Loan Rate. Unless otherwise specified in the related Prospectus Supplement, the Agreement will permit the applicable Seller to maintain possession of the Related Documents and certain other documents relating to the Mortgage Loans (the "Mortgage Files") and assignments of the related mortgages to the Trustee will not be required to be recorded for so long as the senior unsecured debt of Bank One is rated at levels satisfactory to each Rating Agency rating the related Securities. If such rating does not satisfy such standards (an "Assignment Event"), Bank One will have 90 days to record assignments of the mortgages for each such Mortgage Loan in favor of the Trustee and will have 60 days to deliver the Mortgage File pertaining to each such Mortgage Loan to the Trustee (unless opinions of counsel satisfactory to the Rating Agencies and any Enhancer to the effect that recordation of such assignments or delivery of such documentation is not required in the relevant jurisdiction to protect the interest of the Trustee in the Mortgage Loans). In lieu of delivery of original documentation, Bank One may deliver documents which have been imaged optically upon delivery of an opinion of counsel that (i) such documents do not impair the enforceability of the transfer to the Trust of the Mortgage Loans and (ii) the optical image of such documents are enforceable in the relevant jurisdictions to the same extent as the original documents. Within 90 days of an Assignment Event, the Trustee will review the Mortgage Files and if any Related Document is found to be defective in any material respect and such defect is not cured within 90 days following notification thereof to the applicable Seller and the Depositor by the Trustee, the applicable Seller will be obligated to accept the transfer of such Mortgage Loan from the Trust. Upon such transfer, the Principal Balance of such Mortgage Loan will be deducted from the Pool Balance. If the related Series includes a Transferor Interest, such deduction would reduce the Transferor Interest. If the deduction would cause the Transferor Interest to become less than the Minimum Transferor Interest at such time (a "Transfer Deficiency"), the Seller will be obligated to either substitute an Eligible Substitute Mortgage Loan or make a deposit into the Collection Account in the amount (the "Transfer Deposit Amount") equal to the amount by which the Transferor Interest would be reduced to less than the Minimum Transferor Interest at such time. Any such deduction, substitution or deposit, will be considered for the purposes of the Agreement a payment in full of such Mortgage Loan. Any Transfer Deposit Amount will be treated as a Principal Collection. No such transfer shall be considered to have occurred until the required deposit to the Collection Account is actually made. The obligation of a Seller to accept a transfer of a Defective Mortgage Loan is the sole remedy regarding any defects in the Mortgage File and Related Documents available to the Trustee or the Certificateholders. Unless otherwise specified in the related Prospectus Supplement, an "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by the Depositor for a Defective Mortgage Loan which must, on the date of such substitution, (i) have an outstanding Principal Balance (or in the case of a substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an aggregate principal Balance) that is approximately equal to the Transfer Deficiency relating to such Defective Mortgage Loan: (ii) have a Loan Rate not less than the Loan Rate of the Defective Mortgage Loan and not more than 1% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan Rate based on the same Index with adjustments to such Loan Rate made on the same Interest Rate Adjustment Date as that of the Defective Mortgage Loan; (iv) have a Margin that is not less than the Margin of the 36 115 Defective Mortgage Loan and not more than 100 basis points higher than the Margin for the Defective Mortgage Loan; (v) have a mortgage of the same or higher level of priority as the mortgage relating to the Defective Mortgage Loan; (vi) have a remaining term to maturity not more than six months earlier and not more than 60 months later than the remaining term to maturity of the Defective Mortgage Loan; (vii) comply with each representation and warranty as to the Mortgage Loans set forth in the Agreement (deemed to be made as of the date of substitution); (viii) in general, have an original Combined Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan; and (ix) satisfy certain other conditions specified in the Agreement. To the extent the Principal Balance of an Eligible Substitute Mortgage Loan is less than the Principal Balance of the related Defective Mortgage Loan and to the extent that the Transferor Interest, if any, would be reduced below the Minimum Transferor Interest, the applicable Seller will be required to make a deposit to the Collection Account equal to such difference. The applicable Seller will make certain representations and warranties as to the accuracy in all material respects of certain information furnished to the Trustee with respect to each Mortgage Loan. In addition, the applicable Seller will represent and warrant on the Closing Date that at the time of transfer to the Depositor, such Seller has transferred or assigned all of its rights, title and interest in or granted a security interest in each Mortgage Loan sold by it and the Related Documents, free of any lien (subject to certain exceptions). Upon discovery of a breach of any such representation and warranty which materially and adversely affects the interests of the Holders or any Credit Enhancer in the related Mortgage Loan and Related Documents, the applicable Seller will have a period of 90 days after discovery or notice of the breach to effect a cure. If the breach cannot be cured within the 90-day period, such Seller will be obligated to accept a transfer of the Defective Mortgage Loan from the Trust. The same procedure and limitations that are set forth in the second preceding paragraph for the transfer of Defective Mortgage Loans will apply to the transfer of a Mortgage Loan that is required to be transferred because of such breach of a representation or warranty in the Agreement that materially and adversely affects the interests of the Certificateholders. Mortgage Loans required to be transferred to the Seller as described in the preceding paragraphs are referred to as "Defective Mortgage Loans." Reports to Holders The Trustee or other entity specified in the related Prospectus Supplement will prepare and forward to each Holder on each Distribution Date, or as soon thereafter as is practicable, a statement setting forth, to the extent applicable to any Series, among other things: (i) the amount of principal distributed to Holders of the related Securities and the outstanding principal balance of such Securities following such distribution; (ii) the amount of interest distributed to Holders of the related Securities and the current interest on such Securities; (iii) the amounts of (a) any overdue accrued interest included in such distribution, (b) any remaining overdue accrued interest with respect to such Securities or (c) any current shortfall in amounts to be distributed as accrued interest to holders of such Securities; (iv) the amounts of (a) any overdue payments of scheduled principal included in such distribution, (b) any remaining overdue principal amounts with respect to such Securities, (c) any current shortfall in receipt of scheduled principal payments on the related Mortgage Loans or (d) any realized losses or Liquidation Proceeds to be allocated as reductions in the outstanding principal balances of such Securities; (v) the amount received under any related Credit Enhancement, and the remaining amount available under such Credit Enhancement; (vi) the amount of any delinquencies with respect to payments on the related Mortgage Loans; (vii) the book value of any REO Mortgaged Property acquired by the related Trust Fund; and (viii) such other information as specified in the related Agreement. 37 116 In addition, within a reasonable period of time after the end of each calendar year the Trustee, unless otherwise specified in the related Prospectus Supplement, will furnish to each Holder of record at any time during such calendar year: (a) the aggregate of amounts reported pursuant to clauses (i), (ii), and (iv)(d) above for such calendar year and (b) such information specified in the related Agreement to enable Holders to prepare their tax returns including, without limitation, the amount of original issue discount accrued on the Securities, if applicable. Information in the Distribution Date and annual statements provided to the Holders will not have been examined and reported upon by an independent public accountant. However, the Servicer will provide to the Trustee a report by independent public accountants with respect to the Servicer's servicing of the Mortgage Loans. See "SERVICING OF LOANS--Evidence as to Compliance". Events of Default; Rights Upon Event of Default Pooling and Servicing Agreement; Servicing Agreement. Unless otherwise specified in the related Prospectus Supplement, Events of Default under the Pooling and Servicing Agreement or Servicing Agreement for each Series of Certificates are limited to the Events of Servicing Termination described under "Servicing of the Mortgage Loans-Events of Servicing Termination." Indenture. Unless otherwise specified in the related Prospectus Supplement, Events of Default under the Indenture for each Series of Notes include: (i) a default for thirty (30) days or more in the payment of any principal of or interest on any Note of such Series; (ii) failure to perform any other covenant of the Depositor or the Trust Fund in the Indenture which continues for a period of sixty (60) days after notice thereof is given in accordance with the procedures described in the related Prospectus Supplement; (iii) any representation or warranty made by the Depositor in the Indenture or in any certificate or other writing delivered pursuant thereto or in connection therewith with respect to or affecting such Series having been incorrect in a material respect of the time made, and such breach is not cured within sixty (60) days after notice thereof is given in accordance with the procedures described in the related Prospectus Supplement; (iv) certain events of bankruptcy, insolvency, receivership or liquidation of the Depositor or the Trust Fund; or (v) any other Event of Default provided with respect to Notes of that Series. If an Event of Default with respect to the Notes of any Series at the time outstanding occurs and is continuing, either the Trustee or the holders of a majority of the then aggregate outstanding amount of the Notes of such Series may declare the principal amount (or, if the Notes of that Series are Zero Coupon Securities, such portion of the principal amount as may be specified in the terms of that Series, as provided in the related Prospectus Supplement) of all the Notes of such Series to be due and payable immediately. Such declaration may, under certain circumstances, be rescinded and annulled by the Holders of a majority in aggregate outstanding amount of the Notes of such Series. If, following an Event of Default with respect to any Series of Notes, the Notes of such Series have been declared to be due and payable, the Trustee may, in its discretion, notwithstanding such acceleration, elect to maintain possession of the collateral securing the Notes of such Series and to continue to apply distributions on such collateral as if there had been no declaration of acceleration if such collateral continues to provide sufficient funds for the payment of principal of and interest on the Notes of such Series as they would have become due if there had not been such a declaration. In addition, the Trustee may not sell or otherwise liquidate the collateral securing the Notes of a Series following an Event of Default, other than a default in the payment of any principal or interest on any Note of such Series for thirty (30) days or more, unless (a) the Holders of 100% of the then aggregate outstanding amount of the Notes of such Series consent to such sale, (b) the proceeds of such sale or liquidation are sufficient to pay in full the principal of and accrued interest, due and unpaid, on the outstanding Notes of such Series at the date of such sale or (c) the Trustee determines that such collateral would not be sufficient on an ongoing basis to make all payments on such Notes as such payments would have become due if such Notes had not been declared due and payable, and the Trustee obtains the consent of the Holders of 66% of the then aggregate outstanding amount of the Notes of such Series. In the event that the Trustee liquidates the collateral in connection with an Event of Default involving a default for thirty (30) days or more in the payment of principal of or interest on the Notes of a Series, the Indenture provides that the Trustee will have a prior lien on the proceeds of any such liquidation for unpaid fees and expenses. As a result, upon the occurrence of such an Event of Default, the amount available for distribution to the Noteholders would be less than would otherwise be the case. However, the Trustee may not institute a proceeding for the enforcement of its lien except in connection with a proceeding for the enforcement of the lien of the Indenture for the benefit of the Noteholders after the occurrence of such an Event of Default. 38 117 Unless otherwise specified in the related Prospectus Supplement, in the event the principal of the Notes of a Series is declared due and payable, as described above, the holders of any such Notes issued at a discount from par may be entitled to receive no more than an amount equal to the unpaid principal amount thereof less the amount of such discount which is unamortized. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing with respect to a Series of Notes, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders of Notes of such Series, unless such Holders offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in complying with such request or direction. Subject to such provisions for indemnification and certain limitations contained in the Indenture, the Holders of a majority of the then aggregate outstanding amount of the Notes of such Series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Notes of such Series, and the Holders of a majority of the then aggregate outstanding amount of the Notes of such Series may, in certain cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the Indenture that cannot be modified without the waiver or consent of all the Holders of the outstanding Notes of such Series affected thereby. The Trustee The identity of the commercial bank, savings and loan association or trust company named as the Trustee for each Series of Securities will be set forth in the related Prospectus Supplement. The entity serving as Trustee may have normal banking relationships with the Depositor or the Servicer. In addition, for the purpose of meeting the legal requirements of certain local jurisdictions, the Trustee will have the power to appoint co-trustees or separate trustees of all or any part of the Trust Fund relating to a Series of Securities. In the event of such appointment, all rights, powers, duties and obligations conferred or imposed upon the Trustee by the Agreement relating to such Series will be conferred or imposed upon the Trustee and each such separate trustee or co-trustee jointly, or, in any jurisdiction in which the Trustee shall be incompetent or unqualified to perform certain acts, singly upon such separate trustee or co-trustee who shall exercise and perform such rights, powers, duties and obligations solely at the direction of the Trustee. The Trustee may also appoint agents to perform any of the responsibilities of the Trustee, which agents shall have any or all of the rights, powers, duties and obligations of the Trustee conferred on them by such appointment; provided that the Trustee shall continue to be responsible for its duties and obligations under the Agreement. Duties of the Trustee The Trustee will make no representations as to the validity or sufficiency of the Agreement, the Securities or of any Mortgage Loan or related documents. If no Event of Default (as defined in the related Agreement) has occurred, the Trustee is required to perform only those duties specifically required of it under the Agreement. Upon receipt of the various certificates, statements, reports or other instruments required to be furnished to it, the Trustee is required to examine them to determine whether they are in the form required by the related Agreement; however, the Trustee will not be responsible for the accuracy or content of any such documents furnished by it or the Holders to the Servicer under the Agreement. The Trustee may be held liable for its own negligent action or failure to act, or for its own misconduct; provided, however, that the Trustee will not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Holders in an Event of Default. The Trustee is not required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Agreement, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Resignation of Trustee The Trustee may, upon written notice to the Depositor, resign at any time, in which event the Depositor will be obligated to use its best efforts to appoint a successor Trustee. If no successor Trustee has been appointed and has accepted the appointment within 30 days after giving such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for appointment of a successor Trustee. The Trustee may also be 39 118 removed at any time (i) if the Trustee ceases to be eligible to continue as such under the Agreement, (ii) if the Trustee becomes insolvent or (iii) by the Holders of Securities evidencing over 50% of the aggregate voting rights of the Securities in the Trust Fund upon written notice to the Trustee and to the Depositor. Any resignation or removal of the Trustee and appointment of a successor Trustee will not become effective until acceptance of the appointment by the successor Trustee. Amendment of Agreement Unless otherwise specified in the Prospectus Supplement, the Agreement for each Series of Securities may be amended by the Depositor, the Servicer (with respect to a Series relating to Mortgage Loans), and the Trustee with respect to such Series, without notice to or consent of the Holders (i) to cure any ambiguity, (ii) to correct any defective provisions or to correct or supplement any provision therein, (iii) to add to the duties of the Depositor, the Trust Fund or Servicer, (iv) to add any other provisions with respect to matters or questions arising under such Agreement or related Credit Enhancement, (v) to add or amend any provisions of such Agreement as required by a Rating Agency in order to maintain or improve the rating of the Securities, or (vi) to comply with any requirements imposed by the Code; provided that any such amendment except pursuant to clause (vi) above will not adversely affect in any material respect the interests of any Holders of such Series, as evidenced by an opinion of counsel. Any such amendment except pursuant to clause (vi) of the preceding sentence shall be deemed not to adversely affect in any material respect the interests of any Holder if the Trustee receives written confirmation from each Rating Agency rating such Securities that such amendment will not cause such Rating Agency to reduce the then current rating of each Class thereof. Unless otherwise specified in the Prospectus Supplement, the Agreement for each Series may also be amended by the Trustee, the Servicer, if applicable, and the Depositor with respect to such Series with the consent of the Holders possessing not less than 662/3% of the aggregate outstanding principal amount of the Securities of such Series or, if only certain Classes of such Series are affected by such amendment, 662/3% of the aggregate outstanding principal amount of the Securities of each Class of such Series affected thereby, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Agreement or modifying in any manner the rights of Holders of such Series; provided, however, that no such amendment may (a) reduce the amount or delay the timing of payments on any Security without the consent of the Holder of such Security; or (b) reduce the aforesaid percentage of the aggregate outstanding principal amount of Securities of each Class, the Holders of which are required to consent to any such amendment without the consent of the Holders of 100% of the aggregate outstanding principal amount of each Class of Securities affected thereby. Voting Rights The related Prospectus Supplement will set forth the method of determining allocation of voting rights with respect to a Series. List of Holders Upon written request of three or more Holders of record of a Series for purposes of communicating with other Holders with respect to their rights under the Agreement, which request is accompanied by a copy of the communication which such Holders propose to transmit, the Trustee will afford such Holders access during business hours to the most recent list of Holders of that Series held by the Trustee. No Agreement will provide for the holding of any annual or other meeting of Holders. Termination Pooling and Servicing Agreement; Trust Agreement. The obligations created by the Pooling and Servicing Agreement or Trust Agreement for a Series will terminate upon the distribution to Holders of all amounts distributable to them pursuant to such Agreement after the earlier of (i) the later of (a) the final payment or other liquidation of the last Mortgage Loan remaining in the Trust Fund for such Series and (b) the disposition of all Mortgaged Property acquired upon foreclosure or deed in lieu of foreclosure or repossession in respect of any Mortgage Loan or (ii) the repurchase, as described below, by the Servicer or other entity specified in the related Prospectus Supplement from the Trustee for such Series of all Mortgage Loans and other Mortgaged Property at that time subject to such Agreement. The Agreement for each Series permits, but does not require, the Servicer or other entity specified in the related Prospectus Supplement to purchase from the Trust Fund for such Series all remaining Mortgage Loans at a price equal to, unless otherwise specified in the related Prospectus Supplement, 100% of the 40 119 aggregate Principal Balance of such Mortgage Loans plus, with respect to any Mortgaged Property acquired in respect of a Mortgage Loan, if any, the outstanding Principal Balance of the related Mortgage Loan at the time of foreclosure, less, in either case, related unreimbursed Advances (in the case of the Mortgage Loans, only to the extent not already reflected in the computation of the aggregate Principal Balance of such Mortgage Loans) and unreimbursed expenses (that are reimbursable pursuant to the terms of the Pooling and Servicing Agreement) plus, in either case, accrued interest thereon at the weighted average rate on the related Mortgage Loans through the last day of the Due Period in which such repurchase occurs. The exercise of such right will effect early retirement of the Securities of such Series, but such entity's right to so purchase is subject to the aggregate Principal Balance of the Mortgage Loans at the time of repurchase being less than a fixed percentage, to be set forth in the related Prospectus Supplement, of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date. In no event, however, will the trust created by the Agreement continue beyond the expiration of 21 years from the death of the last survivor of certain persons identified therein. For each Series, the Servicer or the Trustee, as applicable, will give written notice of termination of the Agreement to each Holder, and the final distribution will be made only upon surrender and cancellation of the Securities at an office or agency specified in the notice of termination. If so provided in the related Prospectus Supplement for a Series, the Depositor or another entity may effect an optional termination of the Trust Fund under the circumstances described in such Prospectus Supplement. See "DESCRIPTION OF THE SECURITIES--Optional Purchase or Termination". Indenture. The Indenture will be discharged with respect to a Series of Notes (except with respect to certain continuing rights specified in the Indenture) upon the delivery to the Trustee for cancellation of all the Notes of such Series or, with certain limitations, upon deposit with the Trustee of funds sufficient for the payment in full of all of the Notes of such Series. In addition to such discharge with certain limitations, the Indenture will provide that, if so specified with respect to the Notes of any Series, the related Trust Fund will be discharged from any and all obligations in respect of the Notes of such Series (except for certain obligations relating to temporary Notes and exchange of Notes, to register the transfer of or exchange Notes of such Series, to replace stolen, lost or mutilated Notes of such Series, to maintain paying agencies and to-hold monies for payment in trust) upon the deposit with the Trustee, in trust, of money and/or direct obligations of or obligations guaranteed by the United States of America which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of and each installment of interest on the Notes of such Series on the Last Scheduled Distribution Date for such Notes and any installment of interest on such Notes in accordance with the terms of the Indenture and the Notes of such Series. In the event of any such defeasance and discharge of Notes of such Series, holders of Notes of such Series would be able to look only to such money and/or direct obligations for payment of principal and interest, if any, on their Notes until maturity. 41 120 CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS The following discussion contains summaries of certain legal aspects of mortgage loans which are general in nature. Because certain of such legal aspects are governed by applicable state law (which laws may differ substantially), the summaries do not purport to be complete nor reflect the laws of any particular state, nor encompass the laws of all states in which the properties securing the Mortgage Loans are situated. The summaries are qualified in their entirety by reference to the applicable federal and state laws governing the Mortgage Loans. Mortgages The Mortgage Loans for a Series will be secured by either mortgages or deeds of trust or deeds to secure debt, depending upon the prevailing practice in the state in which the Mortgaged Property subject to a mortgage loan is located. The filing of a mortgage, deed of trust or deed to secure debt creates a lien or title interest upon the real Mortgaged Property covered by such instrument and represents the security for the repayment of an obligation that is customarily evidenced by a promissory note. It is not prior to the lien for real estate taxes and assessments or other charges imposed under governmental police powers and may also be subject to other liens pursuant to the laws of the jurisdiction in which the Mortgaged Property is located. Priority with respect to such instruments depends on their terms, the knowledge of the parties to the mortgage and generally on the order of recording with the applicable state, county or municipal office. There are two parties to a mortgage, the mortgagor, who is the borrower/Mortgaged Property owner or the land trustee (as described below), and the mortgagee, who is the lender. Under the mortgage instrument, the mortgagor delivers to the mortgagee a note or bond and the mortgage. In the case of a land trust, there are three parties because title to the Mortgaged Property is held by a land trustee under a land trust agreement of which the borrower/Mortgaged Property owner is the beneficiary; at origination of a mortgage loan, the borrower executes a separate undertaking to make payments on the mortgage note. A deed of trust transaction normally has three parties, the trustor, who is the borrower/Mortgaged Property owner; the beneficiary, who is the lender, and the trustee, a third-party grantee. Under a deed of trust, the trustor grants the Mortgaged Property, irrevocably until the debt is paid, in trust, generally with a power of sale, to the trustee to secure payment of the obligation. The mortgagee's authority under a mortgage and the trustee's authority under a deed of trust are governed by the law of the state in which the real Mortgaged Property is located, the express provisions of the mortgage or deed of trust, and, in some cases, in deed of trust transactions, the directions of the beneficiary. Foreclosure on Mortgages Foreclosure of a mortgage is generally accomplished by judicial action. Generally, the action is initiated by the service of legal pleadings upon all parties having an interest of record in the real Mortgaged Property. Delays in completion of the foreclosure occasionally may result from difficulties in locating necessary parties defendant. When the mortgagee's right to foreclosure is contested, the legal proceedings necessary to resolve the issue can be time-consuming and expensive. After the completion of a judicial foreclosure proceeding, the court may issue a judgment of foreclosure and appoint a receiver or other officer to conduct the sale of the Mortgaged Property. In some states, mortgages may also be foreclosed by advertisement, pursuant to a power of sale provided in the mortgage. Foreclosure of a mortgage by advertisement is essentially similar to foreclosure of a deed of trust by non-judicial power of sale. Foreclosure of a deed of trust is generally accomplished by a non-judicial trustee's sale under a specific provision in the deed of trust which authorizes the trustee to sell the Mortgaged Property upon any default by the borrower under the terms of the note or deed of trust. In certain states, such foreclosure also may be accomplished by judicial action in the manner provided for foreclosure of mortgages. In some states, the trustee must record a notice of default and send a copy to the borrower-trustor and to any person who has recorded a request for a copy of the notice of sale. In addition, the trustee in some states must provide notice of default to any other individual having an interest in the real Mortgaged Property, including any junior lienholders. If the deed of trust is not reinstated within any applicable cure period, a notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers. In addition, some state laws require that a copy of the notice of sale be posted on the Mortgaged Property and sent to all parties having an interest of record in the Mortgaged Property. The trustor, borrower, or any person having a junior encumbrance on the real estate, may, during a reinstatement period, cure the default by paying the entire amount in arrears plus costs and expenses incurred in enforcing the obligation. Generally, state law controls the amount of foreclosure expenses and costs, 42 121 including attorney's fees, which may be recovered by a lender. If the deed of trust is not reinstated, a notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers. In addition, some state laws require that a copy of the notice of sale be posted on the Mortgaged Property, recorded and sent to all parties having an interest in the real Mortgaged Property. An action to foreclose a mortgage is an action to recover the mortgage debt by enforcing the mortgagee's rights under the mortgage. It is regulated by statutes and rules and subject throughout to the court's equitable powers. Generally, a mortgagor is bound by the terms of the related mortgage note and the mortgage as made and cannot be relieved from his default if the mortgagee has exercised his rights in a commercially reasonable manner. However, since a foreclosure action historically was equitable in nature, the court may exercise equitable powers to relieve a mortgagor of a default and deny the mortgagee foreclosure on proof that either the mortgagor's default was neither willful nor in bad faith or the mortgagee's action established a waiver, fraud, bad faith, or oppressive or unconscionable conduct such as to warrant a court of equity to refuse affirmative relief to the mortgagee. Under certain circumstances a court of equity may relieve the mortgagor from an entirely technical default where such default was not willful. A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses or counterclaims are interposed, sometimes requiring up to several years to complete. Moreover, a non-collusive, regularly conducted foreclosure sale may be challenged as a fraudulent conveyance, regardless of the parties' intent, if a court determines that the sale was for less than fair consideration and such sale occurred while the mortgagor was insolvent and within one year (or within the state statute of limitations if the trustee in bankruptcy elects to proceed under state fraudulent conveyance law) of the filing of bankruptcy. Similarly, a suit against the debtor on the related mortgage note may take several years and, generally, is a remedy alternative to foreclosure, the mortgagee being precluded from pursuing both at the same time. In the case of foreclosure under either a mortgage or a deed of trust, the sale by the referee or other designated officer or by the trustee is a public sale. However, because of the difficulty potential third party purchasers at the sale have in determining the exact status of title and because the physical condition of the Mortgaged Property may have deteriorated during the foreclosure proceedings, it is uncommon for a third party to purchase the Mortgaged Property at a foreclosure sale. Rather, it is common for the lender to purchase the Mortgaged Property from the trustee or referee for an amount which may be equal to the unpaid principal amount of the mortgage note secured by the mortgage or deed of trust plus accrued and unpaid interest and the expenses of foreclosure, in which event the mortgagor's debt will be extinguished or the lender may purchase for a lesser amount in order to preserve its right against a borrower to seek a deficiency judgment in states where such a judgment is available. Thereafter, subject to the right of the borrower in some states to remain in possession during the redemption period, the lender will assume the burdens of ownership, including obtaining hazard insurance, paying taxes and making such repairs at its own expense as are necessary to render the Mortgaged Property suitable for sale. The lender will commonly obtain the services of a real estate broker and pay the broker's commission in connection with the sale of the Mortgaged Property. Depending upon market conditions, the ultimate proceeds of the sale of the Mortgaged Property may not equal the lender's investment in the Mortgaged Property. Any loss may be reduced by the receipt of any mortgage guaranty insurance proceeds. Rights of Redemption In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the trustor or mortgagor and foreclosed junior lienors are given a statutory period in which to redeem the Mortgaged Property from the foreclosure sale. The right of redemption should be distinguished from the equity of redemption, which is a non-statutory right that must be exercised prior to the foreclosure sale. In some states, redemption may occur only upon payment of the entire principal balance of the loan, accrued interest and expenses of foreclosure. In other states, redemption may be authorized if the former borrower pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed Mortgaged Property. The exercise of a right of redemption would defeat the title of any purchaser at a foreclosure sale, or of any purchaser from the lender subsequent to foreclosure or sale under a deed of trust. Consequently, the practical effect of a right of redemption is to force the lender to retain the Mortgaged Property and pay the expenses of ownership until the redemption period has run. In some states, there is no right to redeem Mortgaged Property after a trustee's sale under a deed of trust. 43 122 Junior Mortgages; Rights of Senior Mortgages The mortgage loans included in the Trust Fund for a Series will be secured by mortgages or deeds of trust which may be second or more junior mortgages to other mortgages held by other lenders or institutional investors. The rights of the Trust Fund (and therefore the Holders), as mortgagee under a junior mortgage, are subordinate to those of the mortgagee under the senior mortgage, including the prior rights of the senior mortgagee to receive hazard insurance and condemnation proceeds and to cause the Mortgaged Property securing the mortgage loan to be sold upon default of the mortgagor, thereby extinguishing the junior mortgagee's lien unless the junior mortgagee asserts its subordinate interest in the Mortgaged Property in foreclosure litigation and, possibly, satisfies the defaulted senior mortgage. A junior mortgagee may satisfy a defaulted senior loan in full and, in some states, may cure such default and bring the senior loan current, in either event adding the amounts expended to the balance due on the junior loan. In most states, absent a provision in the mortgage or deed of trust, no notice of default is required to be given to a junior mortgagee. The standard form of the mortgage used by most institutional lenders confers on the mortgagee the right both to receive all proceeds collected under any hazard insurance policy and all awards made in connection with condemnation proceedings, and to apply such proceeds and awards to any indebtedness secured by the mortgage, in such order as the mortgagee may determine. Thus, in the event improvements on the Mortgaged Property are damaged or destroyed by fire or other casualty, or in the event the Mortgaged Property is taken by condemnation, the mortgagee or beneficiary under underlying senior mortgages will have the prior right to collect any insurance proceeds payable under a hazard insurance policy and any award of damages in connection with the condemnation and to apply the same to the indebtedness secured by the senior mortgages. Proceeds in excess of the amount of senior mortgage indebtedness, in most cases, may be applied to the indebtedness of a junior mortgage. Another provision sometimes found in the form of the mortgage or deed of trust used by institutional lenders obligates the mortgagor to pay before delinquency all taxes and assessments on the Mortgaged Property and, when due, all encumbrances, charges and liens on the Mortgaged Property which appear prior to the mortgage or deed of trust, to provide and maintain fire insurance on the Mortgaged Property, to maintain and repair the Mortgaged Property and not to commit or permit any waste thereof, and to appear in and defend any action or proceeding purporting to affect the Mortgaged Property or the rights of the mortgagee under the mortgage. Upon a failure of the mortgagor to perform any of these obligations, the mortgagee is given the right under certain mortgages to perform the obligation itself, at its election, with the mortgagor agreeing to reimburse the mortgagee for any sums expended by the mortgagee on behalf of the mortgagor. All sums so expended by the mortgagee become part of the indebtedness secured by the mortgage. The form of credit line trust deed or mortgage used by most institutional lenders which make revolving home equity loans typically contains a "future advance" clause, which provides, in essence, that additional amounts advanced to or on behalf of the borrower by the beneficiary or lender are to be secured by the deed of trust or mortgage. The priority of the lien securing any advance made under the clause may depend in most states on whether the deed of trust or mortgage is called and recorded as a credit line deed of trust or mortgage. If the beneficiary or lender advances additional amounts, the advance is entitled to receive the same priority as amounts initially advanced under the trust deed or mortgage, notwithstanding the fact that there may be junior trust deeds or mortgages and other liens which intervene between the date of recording of the trust deed or mortgage and the date of the future advance, and notwithstanding that the beneficiary or lender had actual knowledge of such intervening junior trust deeds or mortgages and other liens at the time of the advance. In most states, the trust deed or mortgage lien securing mortgage loans of the type which includes revolving home equity credit lines applies retroactively to the date of the original recording of the trust deed or mortgage, provided that the total amount of advances under the home equity credit line does not exceed the maximum specified principal amount of the recorded trust deed or mortgage, except as to advances made after receipt by the lender of a written notice of lien from a judgment lien creditor of the trustor. Anti-Deficiency Legislation and Other Limitations on Lenders Certain states have imposed statutory prohibitions which limit the remedies of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some states, statutes limit the right of the beneficiary or mortgagee to obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust. A deficiency judgment is a personal judgment against the former borrower equal in most cases to the difference between the net amount realized upon the public sale of the real Mortgaged Property and the amount due to the lender. Other 44 123 statutes require the beneficiary or mortgagee to exhaust the security afforded under a deed of trust or mortgage by foreclosure in an attempt to satisfy the full debt before bringing a personal action against the borrower. In certain other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting such security; however, in some of these states, the lender, following judgment on such personal action, may be deemed to have elected a remedy and may be precluded from exercising remedies with respect to the security. Consequently, the practical effect of the election requirement, when applicable, is that lenders will usually proceed first against the security rather than bringing a personal action against the borrower. Finally, other statutory provisions limit any deficiency judgment against the former borrower following a foreclosure sale to the excess of the outstanding debt over the fair market value of the Mortgaged Property at the time of the public sale. The purpose of these statutes is generally to prevent a beneficiary or a mortgagee from obtaining a large deficiency judgment against the former borrower as a result of low or no bids at the foreclosure sale. In addition to laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including the federal bankruptcy laws, the Federal Soldiers' and Sailors' Civil Relief Act, and state laws affording relief to debtors, may interfere with or affect the ability of the secured lender to realize upon collateral and/or enforce a deficiency judgment. For example, with respect to federal bankruptcy law, the filing of a petition acts as a stay against the enforcement of remedies for collection of a debt. Moreover, a court with federal bankruptcy jurisdiction may permit a debtor through a Chapter 13 Bankruptcy Code rehabilitative plan to cure a monetary default with respect to a loan on a debtor's residence by paying arrearages within a reasonable time period and reinstating the original loan payment schedule even though the lender accelerated the loan and the lender has taken all steps to realize upon his security (provided no sale of the Mortgaged Property has yet occurred) prior to the filing of the debtor's Chapter 13 petition. Some courts with federal bankruptcy jurisdiction have approved plans, based on the particular facts of the reorganization case, that effected the curing of a loan default by permitting the obligor to pay arrearages over a number of years. Courts with federal bankruptcy jurisdiction have also indicated that the terms of a mortgage loan may be modified if the borrower has filed a petition under Chapter 13. These courts have suggested that such modifications may include reducing the amount of each monthly payment, changing the rate of interest, altering the repayment schedule and reducing the lender's security interest to the value of the residence, thus leaving the lender a general unsecured creditor for the difference between the value of the residence and the outstanding balance of the loan. Federal bankruptcy law and limited case law indicate that the foregoing modifications could not be applied to the terms of a loan secured by Mortgaged Property that is the principal residence of the debtor. In all cases, the secured creditor is entitled to the value of its security plus post-petition interest, attorney's fees and costs to the extent the value of the security exceeds the debt. In a Chapter 11 case under the Bankruptcy Code, the lender is precluded from foreclosing without authorization from the bankruptcy court. The lender's lien may be transferred to other collateral and/or be limited in amount to the value of the lender's interest in the collateral as of the date of the bankruptcy. The loan term may be extended, the interest rate may be adjusted to market rates and the priority of the loan may be subordinated to bankruptcy court-approved financing. The bankruptcy court can, in effect, invalidate due-on-sale clauses through confirmed Chapter 11 plans of reorganization. The Bankruptcy Code provides priority to certain tax liens over the lender's security. This may delay or interfere with the enforcement of rights in respect of a defaulted Mortgage Loan. In addition, substantive requirements are imposed upon lenders in connection with the organization and the servicing of mortgage loans by numerous federal and some state consumer protection laws. The laws include the federal Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and related statutes and regulations. These federal laws impose specific statutory liabilities upon lenders who originate loans and who fail to comply with the provisions of the law. In some cases, this liability may affect assignees of the loans. Due-on-Sale Clauses in Mortgage Loans Due-on-sale clauses permit the lender to accelerate the maturity of the loan if the borrower sells or transfers, whether voluntarily or involuntarily, all or part of the real Mortgaged Property securing the loan without the lender's prior written consent. The enforceability of these clauses has been the subject of legislation or litigation in many states, and in some cases, typically involving single family residential mortgage transactions, their enforceability has been limited or denied. In any event, the Garn-St. Germain Depository Institutions Act of 1982 45 124 (the "Garn-St. Germain Act") preempts state constitutional, statutory and case law that prohibits the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to certain exceptions. As a result, due-on-sale clauses have become generally enforceable except in those states whose legislatures exercised their authority to regulate the enforceability of such clauses with respect to mortgage loans that were (i) originated or assumed during the "window period" under the Garn-St. Germain Act which ended in all cases not later than October 15, 1982, and (ii) originated by lenders other than national banks, federal savings institutions and federal credit unions. FHLMC has taken the position in its published mortgage servicing standards that, out of a total of eleven "window period states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah) have enacted statutes extending, on various terms and for varying periods, the prohibition on enforcement of due-on-sale clauses with respect to certain categories of window period loans. Also, the Garn-St. Germain Act does "encourage" lenders to permit assumption of loans at the original rate of interest or at some other rate less than the average of the original rate and the market rate. In addition, under federal bankruptcy law, due-on-sale clauses may not be enforceable in bankruptcy proceedings and may, under certain circumstances, be eliminated in any modified mortgage resulting from such bankruptcy proceeding. Enforceability of Prepayment and Late Payment Fees Forms of notes, mortgages and deeds of trust used by lenders may contain provisions obligating the borrower to pay a late charge if payments are not timely made, and in some circumstances may provide for prepayment fees or penalties if the obligation is paid prior to maturity. In certain states, there are or may be specific limitations upon the late charges which a lender may collect from a borrower for delinquent payments. Certain states also limit the amounts that a lender may collect from a borrower as an additional charge if the loan is prepaid. Late charges and prepayment fees are typically retained by servicers as additional servicing compensation. Equitable Limitations on Remedies In connection with lenders' attempts to realize upon their security, courts have invoked general equitable principles. The equitable principles are generally designed to relieve the borrower from the legal effect of his defaults under the loan documents. Examples of judicial remedies that have been fashioned include judicial requirements that the lender undertake affirmative and expensive actions to determine the causes of the borrower's default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender's judgment and have required that lenders reinstate loans or recast payment schedules in order to accommodate borrowers who are suffering from temporary financial disability. In other cases, courts have limited the right of a lender to realize upon his security if the default under the security agreement is not monetary, such as the borrower's failure to adequately maintain the Mortgaged Property or the borrower's execution of secondary financing affecting the Mortgaged Property. Finally, some courts have been faced with the issue of whether or not federal or state constitutional provisions reflecting due process concerns for adequate notice require that borrowers under security agreements receive notices in addition to the statutorily-prescribed minimums. For the most part, these cases have upheld the notice provisions as being reasonable or have found that, in cases involving the sale by a trustee under a deed of trust or by a mortgagee under a mortgage having a power of sale, there is insufficient state action to afford constitutional protections to the borrower. Most conventional single-family mortgage loans may be prepaid in full or in part without penalty. The regulations of the Federal Home Loan Bank Board prohibit the imposition of a prepayment penalty or equivalent fee for or in connection with the acceleration of a loan by exercise of a due-on-sale clause. A mortgagee to whom a prepayment in full has been tendered may be compelled to give either a release of the mortgage or an instrument assigning the existing mortgage. The absence of a restraint on prepayment, particularly with respect to mortgage loans having higher mortgage rates, may increase the likelihood of refinancing or other early retirements of such mortgage loans. Applicability of Usury Laws Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980, enacted in March 1980 ("Title V"), provides that state usury limitations shall not apply to certain types of residential first mortgage loans originated by certain lenders after March 31, 1980. Similar federal statutes were in effect with respect to mortgage loans made during the first three months of 1980. The Federal Home Loan Bank Board is authorized to 46 125 issue rules and regulations and to publish interpretations governing implementation of Title V. Title V authorizes any state to reimpose interest rate limits by adopting, before April 1, 1983, a state law, or by certifying that the voters of such state have voted in favor of any provision, constitutional or otherwise, which expressly rejects an application of the federal law. Fifteen states adopted such a law prior to the April 1, 1983 deadline. In addition, even where Title V is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. Soldiers' and Sailors' Civil Relief Act of 1940 Under the Soldiers' and Sailors' Civil Relief Act of 1940, members of all branches of the military on active duty, including draftees and reservists in military service, (i) are entitled to have interest rates reduced and capped at 6% per annum, on obligations (including Mortgage Loans) incurred prior to the commencement of military service for the duration of military service, (ii) may be entitled to a stay of proceedings on any kind of foreclosure or repossession action in the case of defaults on such obligations entered into prior to military service for the duration of military service and (iii) may have the maturity of such obligations incurred prior to military service extended, the payments lowered and the payment schedule readjusted for a period of time after the completion of military service. However, the benefits of (i), (ii), or (iii) above are subject to challenge by creditors and if, in the opinion of the court, the ability of a person to comply with such obligations is not materially impaired by military service, the court may apply equitable principles accordingly. If a borrower's obligation to repay amounts otherwise due on a Mortgage Loan included in a Trust Fund for a Series is relieved pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, none of the Trust Fund, the Servicer, the Depositor nor the Trustee will be required to advance such amounts, and any loss in respect thereof may reduce the amounts available to be paid to the Holders of the Securities of such Series. Unless otherwise specified in the related Prospectus Supplement, any shortfalls in interest collections on Mortgage Loans included in a Trust Fund for a Series resulting from application of the Soldiers' and Sailors' Civil Relief Act of 1940 will be allocated to each Class of Securities of such Series that is entitled to receive interest in respect of such Mortgage Loans in proportion to the interest that each such Class of Securities would have otherwise been entitled to receive in respect of such Mortgage Loans had such interest shortfall not occurred. 47 126 USE OF PROCEEDS The Depositor will apply all or substantially all of the net proceeds from the sale of each Series of Securities for one or more of the following purposes: (i) to purchase the related Mortgage Loans, (ii) to repay indebtedness which has been incurred to obtain funds to acquire such Mortgage Loans, (iii) to establish any Reserve Funds described in the related Prospectus Supplement and (iv) to pay costs of structuring and issuing such Securities, including the costs of obtaining Credit Enhancement, if any. If so specified in the related Prospectus Supplement, the purchase of the Mortgage Loans for a Series may be effected by an exchange of Securities with the Seller of such Mortgage Loans. 48 127 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS General The following is a summary of certain United States federal income tax consequences of an investment in the Securities by Holders that acquire their Securities in their initial offering. This summary is based on the Internal Revenue Code of 1986 (the "Code") as well as Treasury regulations and administrative and judicial rulings and practice. Legislative, judicial and administrative changes may occur, possibly with retroactive effect, that could alter or modify the continued validity of the statements and conclusions set forth herein. This summary does not purport to address all federal income tax matters that may be relevant to particular holders. For example, it generally is addressed only to original purchasers of the Securities that are U.S. holders" (as defined below), deals only with Securities held as capital assets within the meaning of Section 1221 of the Code, and does not address tax consequences to holders that may be relevant to investors subject to special rules, such as non-U.S. investors, banks, insurance companies, tax-exempt organizations, dealers in securities or currencies, electing large partnerships, mutual funds, REITs, RICs, natural persons, cash method taxpayers, S corporations, estates and trusts, investors that hold the Securities as part of a hedge, straddle or integrated or conversion transaction, or holders whose "functional currency" is not the United States dollar. Further, it does not address alternative minimum tax consequences or the indirect effects on the holders of equity interests in a Holder of Securities. Investors should consult their own tax advisors to determine the United States federal, state, local and other tax consequences of the purchase, ownership and disposition of the Securities. For these purposes, a U.S. holder is (i) a citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States, any state thereof or the District of Columbia (except, in the case of a partnership, to the extent provided in Treasury regulations) or (iii) an estate or trust defined in Section 7701(a)(30)(D) or (E) of the Code, respectively. "Non-U.S. holder" means any holder that is not a United States holder. Prospective investors should note that no rulings have been or will be sought from the Internal Revenue Service ("IRS") with respect to any of the U.S. federal income tax consequences discussed herein and opinions of counsel are not binding on the IRS or the courts. Thus, no assurance can be given that the IRS will not take positions contrary to those described below. The opinions of Orrick, Herrington & Sutcliffe LLP, special counsel to the Depositor, described herein will be based upon certain representations and assumptions, including, but not limited to, the assumption that all relevant parties will comply with the terms of the Trust Agreement and related documents. This summary is intended as an explanatory discussion of the possible effects of the classification of the securities as debt or equity and of the Trust as a grantor trust or as a partnership for U.S. federal income tax purposes on investors generally and related tax matters affecting investors generally, but does not purport to furnish information in the level of detail or with the attention to the investor's specific tax circumstances that would be provided by an investor's own tax adviser. Accordingly, each investor is advised to consult its own advisers with regard to the tax consequences to it of investing in the Securities. For purposes of the following discussion, except as otherwise provided herein, the terms "Holder," "Noteholder" and "Certificateholder" refer, respectively, to the beneficial owner of a Note or Certificate. The federal income tax consequences to Holders will vary depending on whether (i) the Securities of a Series are classified as indebtedness; (ii) the Securities represent an ownership interest in some or all of the assets included in the Trust Fund for a Series; or (iii) the Trust Fund relating to a particular Series of Certificates is treated as a partnership. The Prospectus Supplement for each Series of Securities will specify how the Securities will be treated for federal income tax purposes. Pass-Through Debt Certificates The related Prospectus Supplement may provide that the Transferor will express in the Pooling and Servicing Agreement the intent that for federal, state and local income and franchise tax purposes, the Certificates will be debt secured by the Receivables. Any such Certificates are referred to as "Pass-Through Debt Certificates." The Transferor, by entering into the Pooling and Servicing Agreement, and each Holder, by the acceptance of a beneficial interest in a Pass-Through Debt Certificate, will agree to treat Pass-Through Debt Certificates as debt for federal, state and local income and franchise tax purposes. However, the Pooling and Servicing Agreement generally refers to the transfer of Receivables as a "transfer" and "sale," and because different criteria are used in determining the non-tax accounting treatment of the transaction, the Transferor will treat the Pooling and Servicing Agreement for certain non-tax accounting purposes as causing a transfer of an ownership interest in the Receivables and not as creating a debt obligation. A basic premise of federal income tax law is that the economic substance of a transaction generally determines its tax consequences. The form of a transaction, while a relevant factor, is not conclusive evidence of its economic substance. In appropriate circumstances, the courts have allowed taxpayers as well as the Internal Revenue Service (the "IRS") to treat a transaction in accordance with its economic substance, as determined under federal income tax law, even through the participants in the transaction have characterized it differently for non-tax purposes. The determination of whether the economic substance of a purchase of an interest in property is instead a loan secured by the transferred property has been made by the IRS and the courts on the basis of numerous factors designed to determine whether the transferor has relinquished (and the purchaser has obtained) substantial incidents of ownership in the property. Among those factors, the primary ones examined are whether the purchaser has the opportunity to gain if the property increases in value, and has the risk of loss if the property decreases in value. The related Prospectus Supplement may indicate that Orrick, Herrington & Sutcliffe LLP, special federal income tax counsel to the Transferors ("Tax Counsel") is of the opinion that, under current law, although no transaction closely comparable to that contemplated herein has been the subject of any Treasury regulation, revenue ruling or judicial decision, for federal income tax purposes the Pass-Through Debt Certificates offered hereunder will properly be characterized as debt. Assuming that such securities are characterized as debt for federal income tax purposes, the discussion below under "Taxation of Debt Securities" will apply. Assuming that the Pass-Through Debt Certificates are characterized as debt, the Trust would be disregarded for federal income tax purposes. Alternatively, if there is more than one Holder of Transferor's Interest, the Trust might be characterized as a separate entity owning the Receivables, issuing its own debt, and jointly owned by the holders of the Transferor's Interest. However, Tax Counsel is of the opinion that any such entity constituted by the Trust will not be an association or publicly traded partnership taxable as a corporation. Possible Treatment of the Trust as a Partnership or a Publicly Traded Partnership. Although as described above, Tax Counsel is of the opinion that the Certificates will properly be treated as debt for federal income tax purposes and that the Trust will not be treated as an association or publicly traded partnership taxable as a corporation, such opinion does not bind the IRS or the courts and thus no assurance can be given that such treatment will prevail. Further, such opinion is made with respect to current law, which is subject to change. If the IRS were to contend successfully that the Pass-Through Debt Certificates were equity in the Trust for federal income tax purposes, the Trust could be classified as a partnership or as a publicly traded partnership taxable as a corporation for such purposes. Because Tax Counsel is of the opinion that the Pass-Through Debt Certificates will be characterized as debt for federal income tax purposes and because any holder of an interest in a Pass-Through Debt Certificate will agree to treat that interest as debt for such purposes, no attempt will be made to comply with any tax reporting requirements that would apply as a result of such alternative characterizations. If the Trust were treated in whole or in part as a partnership in which some or all holders of interests in the publicly offered Pass-Through Debt Certificates were partners, that partnership could be classified as a publicly traded partnership, and so could be treated as a corporation. If the Trust were classified as a publicly traded partnership it would avoid treatment as a corporation if its income was not derived in the conduct of a "financial business"; however, whether the income of the Trust would be so classified is unclear. If the arrangement created by the Pooling and Servicing Agreement were treated in whole or in part as a publicly traded partnership treated as a corporation, that entity would be subject to federal income tax at corporate tax rates on its taxable income generated by ownership of the Receivables. That tax could result in reduced distributions to Holders. No distributions from the Trust would be deductible in computing the taxable income of the corporation, except to the extent that any Certificates were treated as debt of the corporation and distributions to the related Certificate Holders were treated as payments of interest thereon. In addition, distributions to Certificate Holders not treated as holding debt would be dividend income to the extent of the current and accumulated earnings and profits of the corporation and Certificate Holders may not be entitled to any dividends received deduction in respect of such income and non-U.S. persons would be subject to withholding tax on such dividend. If the Trust were treated as a partnership other than a publicly traded partnership treated as a corporation, the Holders would be taxed in a manner similar to that described below under "Tax Consequences to Holders of the Certificates." Taxation of Debt Securities Interest and Acquisition Discount. Interest (other than original issue discount) on Securities that are characterized as indebtedness for federal income tax purposes, including those denominated as Certificates (as described above under "Pass-Through Debt Certificates"), will be includible in income by holders thereof in accordance with their usual methods of accounting. Securities characterized as debt for federal income tax purposes will be referred to hereinafter collectively as "Debt Securities." 49 128 Debt Securities that are Compound Interest Securities will, and certain of the other Debt Securities may, be issued with "original issue discount" ("OID"). The following discussion is based in part on the rules governing OID which are set forth in Sections 1271-1275 of the Code and the Treasury regulations issued thereunder (the "OID Regulations"). A Holder should be aware, however, that the OID Regulations do not adequately address certain issues relevant to, and in some instances provide that they are not applicable to, prepayable securities such as the Debt Securities. In general, OID, if any, will equal the difference between the stated redemption price at maturity of a Debt Security and its issue price. A holder of a Debt Security must include such OID in gross income as ordinary interest income as it accrues. In general, OID is included in income in advance of (or concurrent with) the receipt of the cash representing that income. The amount of OID on a Debt Security will be considered to be zero if it is less than a de minimis amount determined under the Code. The issue price of a Debt Security is the first price at which a substantial amount of Debt Securities of that class are sold to the public (excluding sales to bond houses, brokers, underwriters or wholesalers). If less than a substantial amount of a particular class of Debt Securities is sold for cash on or prior to the Closing Date, the issue price for such class will be treated as the fair market value of such class on the Closing Date. The issue price of a Debt Security will also include the amount paid by an initial Debt Security holder for accrued interest that relates to a period prior to the issue date of the Debt Security. The stated redemption price at maturity of a Debt Security is equal to the total of all payments to be made on such Debt Security other than "qualified stated interest." In addition, that portion of the first interest payment in excess of interest accrued from the Closing Date to the first Distribution Date will be treated for federal income tax reporting purposes as includible in the stated redemption price at maturity, and as excludible from income when received as a payment of interest on the first Distribution Date (except to the extent of any accrued market discount as of that date). The OID Regulations suggest, however, that some or all of this pre-issuance accrued interest may be treated as a separate asset (and hence not includible in a Debt Securities' issue price or stated redemption price at maturity), whose cost is recovered entirely out of interest paid on the first Distribution Date. It is unclear how an election to do so would be made under the OID Regulations and whether such election could be unilaterally made by a Holder. Under the OID Regulations, qualified stated interest generally means interest payable at a single fixed rate that appropriately takes into account the length of the interval between payments or certain qualified variable rates provided that such interest payments are unconditionally payable at intervals of one year or less during the entire term of the Debt Security. In the case of Compound Interest Securities, certain Interest Weighted Securities, and certain of the other Debt Securities, none of the payments under the instrument will be considered qualified stated interest, and thus the aggregate amount of all payments will be included in the stated redemption price at maturity. Under the de minimis rule, OID on a Debt Security will be considered to be zero if such OID is less an 0.25% of the stated redemption price at maturity of the Debt Security multiplied by the weighted average maturity of the Debt Security. For this purpose, the weighted average maturity of the Debt Security is computed as the sum of the amounts determined by multiplying the number of full years (i.e., rounding down partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each distribution included in the stated redemption price at maturity of the Debt Security and the denominator of which is the stated redemption price at maturity of the Debt Security. The IRS may take the position that this rule should be applied taking into account the Prepayment Assumption (defined below). Under the OID Regulations, Debt Securities bearing only qualified stated interest except for any "teaser" rate, interest holiday or other similar provision are treated as subject to the de minimis rule if the greater of the foregone interest (as described in such regulations) or any excess of the Debt Securities' stated principal amount over their issue price is less than such de minimis amount. Holders generally must report de minimis OID pro rata as principal payments are received, and such income will be capital gain if the Debt Security is held as a capital asset. However, accrual method holders may elect to accrue all de minimis OID as well as market discount under a constant interest method. The holder of a Debt Security issued with OID must include in gross income, for all days during its taxable year on which it holds such Debt Security, the sum of the "daily portions" of such original issue discount. The amount of OID includible in income by a holder will be computed by allocating to each day during a taxable year a pro rata portion of the original issue discount that accrued during the relevant accrual period. In the case of a Debt Security the principal payments on which are not subject to acceleration resulting from prepayments on the Mortgage Loans, the amount of OID includible in income of a Holder for an accrual period (generally the period 50 129 over which interest accrues on the debt instrument) will equal the product of the yield to maturity of the Debt Security and the adjusted issue price of the Debt Security, reduced by any payments of qualified stated interest. The adjusted issue price is the sum of its issue price plus prior accruals or OID, reduced by the total payments made with respect to such Debt Security in all prior periods, other than qualified stated interest payments. The amount of OID to be included in income by a holder of a debt instrument, such as certain Classes of the Debt Securities, that is subject to acceleration due to prepayments on other debt obligations securing such instruments (a "Pay-Through Security"), is computed by taking into account the anticipated rate of prepayments assumed in pricing the debt instrument (the "Prepayment Assumption"). The amount of OID that will accrue during an accrual period on a Pay-Through Security is the excess (if any) of (i) the sum of (a) the present value of all payments remaining to be made on the Pay-Through Security as of the close of the accrual period and (b) the payments during the accrual period of amounts included in the stated redemption price of the Pay-Through Security, over (ii) the adjusted issue price of the Pay-Through Security at the beginning of the accrual period. The present value of the remaining payments referred to in the preceding sentence will be determined on the basis of three factors: (i) the original yield to maturity (giving effect to the Prepayment Assumption) of the Pay-Through Security (determined on the basis of compounding at the end of each accrual period and properly adjusted for the length of the accrual period), (ii) events (including actual prepayments) that have occurred before the end of the accrual period and (iii) the assumption that the remaining payments will be made in accordance with the original Prepayment Assumption. The effect of this method is to increase the portions of OID required to be included in income by a Holder to take into account prepayments with respect to the Mortgage Loans at a rate that exceeds the Prepayment Assumption, and to decrease (but not below zero for any period) the portions of original issue discount required to be included in income by a Holder of a Pay-Through Security to take into account prepayments with respect to the Mortgage Loans at a rate that is slower than the Prepayment Assumption. Although original issue discount will be reported to Holders of Pay-Through Securities based on the Prepayment Assumption, no representation is made to Holders that Mortgage Loans will be prepaid at that rate or at any other rate. A subsequent holder of a Debt Security will also be required to include OID in gross income, but such a holder who purchases a Debt Security for an amount that exceeds its adjusted issue price will be entitled (as will an initial holder who pays more than a Debt Security's issue price) to offset such OID by comparable economic accruals of portions of such excess. Effects of Defaults and Delinquencies. Holders will be required to report income with respect to the related Securities under an accrual method without giving effect to delays and reductions in distributions attributable to a default or delinquency on the Mortgage Loans, except possibly to the extent that it can be established that such amounts are uncollectible. As a result, the amount of income (including OID) reported by a holder of a Debt Security in any period could significantly exceed the amount of cash distributed to such holder in that period. The holder will eventually be allowed a loss (or will be allowed to report a lesser amount of income) to the extent that the aggregate amount of distributions on the Securities is reduced as a result of a Mortgage Loan default. However, the timing and character of such losses or reductions in income are uncertain and, accordingly, holders of Securities should consult their own tax advisors on this point. Interest Weighted Securities. It is not clear how income should be accrued with respect to Stripped Securities (as defined under "-Tax Status as a Grantor Trust; General" herein) the payments on which consist solely or primarily of a specified portion of the interest payments on mortgages held by the Trust Fund ("Interest Weighted Securities"). The Depositor intends to take the position that all of the income derived from an Interest Weighted Security should be treated as OID and that the amount and rate of accrual of such OID should be calculated by treating the Interest Weighted Security as a Compound Interest Security. Alternatively, the IRS could assert that an Interest Weighted Security should be taxable under the rules governing bonds issued with contingent payments. Variable Rate Debt Securities. In the case of Debt Securities bearing interest at a rate that varies directly, according to a fixed formula, with an objective index, it appears that (i) the yield to maturity of such Debt Securities and (ii) in the case of Pay-Through Securities, the present value of all payments remaining to be made on such Debt Securities, should be calculated as if the interest index remained at its value as of the issue date of such Securities. Because the proper method of adjusting accruals of OID on a variable rate Debt Security is uncertain, holders of variable rate Debt Securities should consult their own tax advisers regarding the appropriate treatment of such Securities for federal income tax purposes. Market Discount. A purchaser of a Security may be subject to the market discount rules of Sections 1276-1278 of the Code. A Holder that acquires a Debt Security with more than a prescribed de minimis amount of 51 130 "market discount" (generally, the excess of the principal amount of the Debt Security or, in the case of a Debt security issued with OID, the Debt Securities' adjusted issue price, over the purchaser's purchase price) will be required to include accrued market discount in income as ordinary income in each month, but limited to an amount not exceeding the principal payments on the Debt Security received in that month and, if the Securities are sold, the gain realized. Such market discount would accrue in a manner to be provided in Treasury regulations but, until such regulations are issued, such market discount would, in general, accrue either (i) on the basis of a constant yield, or (ii) in the ratio of (a) in the case of Securities (or in the case of a Pass-Through Security, as set forth below, the Mortgage Loans underlying such Security) not originally issued with original issue discount, stated interest payable in the relevant period to total stated interest remaining to be paid at the beginning of the period or (b) in the case of Securities (or, in the case of a Pass-Through Security, as described below, the Mortgage Loans underlying such Security) originally issued with original issue discount, OID in the relevant period to total OID remaining to be paid as of the beginning of such period. The Prepayment Assumption, if any, used in calculating the accrual of OID is to be used in calculating the accrual of market discount under any of the above methods. Section 1277 of the Code provides that the excess of interest paid or accrued to purchase or carry a Security (or, in the case of a Pass-Through Security, as described below, the underlying Mortgage Loans) with market discount over interest received on such Security is allowed as a current deduction only to the extent such excess is greater than the market discount that accrued during the taxable year in which such interest expense was incurred. In general, the deferred portion of any interest expense will be deductible when such market discount is included in income, including upon the sale, disposition, or repayment of the Security (or in the case of a Pass-Through Security, an underlying Mortgage Loan). A holder may elect to include market discount in income currently as it accrues, on all market discount obligations acquired by such holder during the taxable year such election is made and thereafter, in which case the interest deferral rule will not apply. Any such election is irrevocable without the consent of the IRS. Premium. A holder who purchases a Debt Security (other than an Interest Weighted Security at a cost greater than its stated redemption price at maturity, generally will be considered to have purchased the Security at a premium, which it may elect to amortize as an offset to interest income on such Security (and not as a separate deduction item) on a constant yield method. Although no regulations addressing the computation of premium accrual on securities similar to the Securities have been issued, the legislative history of the 1986 Act indicates that premium is to be accrued in the same manner as market discount. Accordingly, it appears that the accrual of premium on a Class of Pay-Through Securities will be calculated using the prepayment assumption (if any) used in pricing such Class. If a holder makes an election to amortize premium on a Debt Security, such election will apply to all taxable debt instruments (including all REMIC regular interests and all pass-through certificates representing ownership interests in a trust holding debt obligations) held by the holder at the beginning of the taxable year in which the election is made, and to all taxable debt instruments acquired thereafter by such holder, and will be irrevocable without the consent of the IRS. Purchasers who pay a premium for the Securities should consult their tax advisers regarding the election to amortize premium and the method to be employed. Election to Treat All Interest as Original Issue Discount. The OID Regulations permit a holder of a Debt Security to elect to accrue all interest, discount (including de minimis market or original issue discount) and premium in income as interest, based on a constant yield method. If such an election were to be made with respect to a Debt Security with market discount, the holder of the Debt Security would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that such holder of the Debt Security acquires during the year of the election or thereafter. Similarly, a holder of a Debt Security that makes this election for a Debt Security that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such holder owns or acquires. The election to accrue interest, discount and premium on a constant yield method with respect to a Debt Security is irrevocable without the consent of the IRS. Tax Status as a Grantor Trust General. The related Prospectus Supplement may provide that Orrick, Herrington & Sutcliffe LLP, special counsel to the Depositor, will deliver an opinion generally to the effect that the Trust Fund relating to a Series of Securities will be classified for federal income tax purposes as a grantor trust under Subpart E, Part 1 of Subchapter J of the Code and not as an association taxable as (or a publicly traded partnership treated as) a corporation (the Securities of such Series, "Pass-Through Securities"). In some Series there will be no separation of the principal and interest payments on the Mortgage Loans. In such circumstances, a Holder will be considered to have 52 131 purchased a pro rata undivided interest in each of the Mortgage Loans. In other cases ("Stripped Securities"), sale of the Securities will produce a separation in the interest payments on the ownership of all or a portion of the principal payments from all or a portion of Mortgage Loans. Each Holder must report on its federal income tax return its share of the gross income derived from the Mortgage Loans (not reduced by the amount payable as fees to the Trustee and the Servicer and similar fees (collectively, the "Servicing Fee")), at the same time and in the same manner as such items would have been reported under the Holder's tax accounting method had it held its interest in the Mortgage Loans directly, received directly its share of the amounts received with respect to the Mortgage Loans, and paid directly its share of the Servicing Fees. In the case of Pass-Through Securities other than Stripped Securities, such income will consist of a pro rata share of all of the income derived from all of the Mortgage Loans and, in the case of Stripped Securities, such income will consist of a pro rata share of the income derived from each stripped bond or stripped coupon in which the Holder owns an interest. The holder of a Security will generally be entitled to deduct such Servicing Fees under Section 162 or Section 212 of the Code to the extent that such Servicing Fees represent "reasonable" compensation for the services rendered by the Trustee and the Servicer (or third parties that are compensated for the performance of services). In the case of a noncorporate holder, however, Servicing Fees (to the extent not otherwise disallowed, e.g., because they exceed reasonable compensation) will be deductible in computing such holder's regular tax liability only to the extent that such fees, when added to other miscellaneous itemized deductions, exceed 2% of adjusted gross income and may not be deductible to any extent in computing such holder's alternative minimum tax liability. Discount or Premium on Pass-Through Securities. The holder's purchase price of a Pass-Through Security is to be allocated among the Mortgage Loans in proportion to their fair market values, determined as of the time of purchase of the Securities. In the typical case, the Trustee (to the extent necessary to fulfill its reporting obligations) will treat each Mortgage Loan as having a fair market value proportional to the share of the aggregate principal balances of all of the Mortgage Loans that it represents, since the Securities, unless otherwise specified in the applicable Prospectus Supplement, will have a relatively uniform interest rate and other common characteristics. To the extent that the portion of the purchase price of a Pass-Through Security allocated to a Mortgage Loan (other than to a right to receive any accrued interest thereon and any undistributed principal payments) is less than or greater than the principal balance of the Mortgage Loan, the interest in the Mortgage Loan allocable to the Pass-Through Security will be deemed to have been acquired at a discount or premium, respectively. The treatment of any discount will depend on whether the discount represents OID or market discount. In the case of a Mortgage Loan with OID in excess of a prescribed de minimis amount or a Stripped Security (see below), a holder of a Security will be required to report as interest income in each taxable year its share of the amount of OID that accrues during that year in the manner described above. OID with respect to a Mortgage Loan could arise, for example, by virtue of the financing of points by the originator of the Mortgage Loan, or by virtue of the charging of points by the originator of the Mortgage Loan in an amount greater than a statutory de minimis exception, in circumstances under which the points are not currently deductible pursuant to applicable Code provisions. Any market discount or premium on a Mortgage Loan will be includible in income, generally in the manner described above, except that in the case of Pass-Through Securities, market discount is calculated with respect to the Mortgage Loans underlying the Certificate, rather than with respect to the Security. Stripped Securities. A Stripped Security may represent a right to receive only a portion of the interest payments on the Mortgage Loans, a right to receive only principal payments on the Mortgage Loans, or a right to receive certain payments of both interest and principal. Certain Stripped Securities ("Ratio Strip Securities") may represent a right to receive differing percentages of both the interest and principal on each Loan. Pursuant to Section 1286 of the Code, the separation of ownership of the right to receive some or all of the interest payments on an obligation from ownership of the right to receive some or all of the principal payments results in the creation of "stripped bonds" with respect to principal payments and "stripped coupons" with respect to interest payments. Section 1286 of the Code applies the OID rules to stripped bonds and stripped coupons. For purposes of computing original issue discount, a stripped bond or a stripped coupon is treated as a debt instrument issued on the date that such stripped interest is purchased with an issue price equal to its purchase price or, if more than one stripped interest is purchased, the ratable share of the purchase price allocable to such stripped interest. Servicing fees in excess of reasonable servicing fees ("excess servicing") will be treated under the stripped bond rules. Under such rules, excess servicing will be treated as a stripped coupon. If the excess servicing fee is no more than 100 basis points (i.e. 1% interest on the Mortgage Loan principal balance) or the Securities are initially 53 132 sold with a de minimis discount (assuming no prepayment assumption is required), any non-de minimis discount arising from a subsequent transfer of the Securities should be treated as market discount. The IRS appears to require that reasonable servicing fees be calculated on a Loan by Loan basis, which could result in some Mortgage Loans being treated as having more than 100 basis points of interest stripped off. The Code, OID Regulations and judicial decisions provide no direct guidance as to how the interest and original issue discount rules are to apply to Stripped Securities and other Pass-Through Securities. Under the method described above for Pay-Through Securities (the "Cash Flow Bond Method"), a prepayment assumption is used and periodic recalculations are made which take into account with respect to each accrual period the effect of prepayments during such period. It is believed, however, that the Cash Flow Bond Method is a reasonable method of reporting income for such Securities, and it is expected that OID will be reported on that basis unless otherwise specified in the related Prospectus Supplement. In applying the calculation to Pass-Through Securities, the Trustee will treat all payments to be received by a holder with respect to the underlying Mortgage Loans as payments on a single installment obligation. The IRS could, however, assert that original issue discount must be calculated separately for each Mortgage Loan underlying a Security. Under certain circumstances, if the Mortgage Loans prepay at a rate faster than the Prepayment Assumption, the use of the Cash Flow Bond Method may accelerate a Holder's recognition of income. If, however, the Mortgage Loans prepay at a rate slower than the Prepayment Assumption, the use of this method may decelerate a Holder's recognition of income. In the case of a Stripped Security that is an Interest Weighted Security, the Trustee intends, absent contrary authority, to report income to Security holders as OID, in the manner described above for Interest Weighted Securities. Possible Alternative Characterizations. The characterizations of the Stripped Securities described above are not the only possible interpretations of the applicable Code provisions. Given the variety of alternatives for treatment of the Stripped Securities and the different federal income tax consequences that result from each alternative, potential purchasers are urged to consult their own tax advisers regarding the proper, treatment of the Securities for federal income tax purposes. Sale or Exchange Subject to the discussion below with respect to Trust Funds treated as a partnership, a Holder's tax basis in its Security is the price such holder pays for a Security, plus amounts of original issue or market discount included in income and reduced by any payments received (other than qualified stated interest payments), and any amortized premium. Gain or loss recognized on a sale, exchange, or redemption of a Security, measured by the difference between the amount realized and the Security's basis as so adjusted, will generally be capital gain or loss, assuming that the Security is held as a capital asset. Tax Treatment of Foreign Investors Subject to the discussion below with respect to Trust Funds treated as a partnership, unless interest (including OID) paid on a Security is considered to be "effectively connected" with a trade or business conducted in the United States by a nonresident alien individual, foreign partnership or foreign corporation ("Nonresidents"), such interest will normally qualify as portfolio interest (except where (i) the recipient is a holder, directly or by attribution, of 10% or more of the capital or profits interest in the issuer or any of the beneficial owners of the issuer (or, with respect to any beneficial owner that is a corporation, 10% or more of the total combined voting power of all classes of stock entitled to vote), or (ii) the recipient is a controlled foreign corporation to which the issuer is a related person) and will be exempt from federal income tax. Upon receipt of appropriate ownership statements, the issuer normally will be relieved of obligations to withhold tax from such interest payments. These provisions supersede the generally applicable provisions of United States law that would otherwise require the issuer to withhold at a 30% rate (unless such rate were reduced or eliminated by an applicable tax treaty) on, among other things, interest and other fixed or determinable, annual or periodic income paid to Nonresidents. Interest and OID of Holders who are foreign persons are not subject to withholding if they are effectively connected with a United States business conducted by the Holder. They will, however, generally be subject to the regular United States income tax. 54 133 Tax Characterization of the Trust as a Partnership The related Prospectus Supplement may provide that Orrick, Herrington & Sutcliffe LLP, special counsel to the Depositor, will deliver its opinion generally to the effect that the Trust Fund relating to a specific Series of Securities will be a partnership (or possibly a grantor trust) and not an association (or publicly traded partnership) taxable as a corporation for federal income tax purposes. This opinion will be based on the assumption that the terms of the Trust Agreement and related documents will be complied with, and on counsel's conclusions that either the nature of the income of the Trust Fund will exempt it from the rule that certain publicly traded partnerships are taxable as corporations or the issuance of the Certificates has been structured as a private placement under an IRS safe harbor, so that the Trust Fund will not be characterized as a publicly traded partnership taxable as a corporation. If the Trust Fund were taxable as a corporation for federal income tax purposes, the Trust Fund would be subject to corporate income tax on its taxable income. The Trust Fund's taxable income would include all its income, possibly reduced by its interest expense on the Notes. Any such corporate income tax could materially reduce cash available to make payments on the Notes and distributions on the Certificates, and Certificateholders could be liable for any such tax that is unpaid by the Trust Fund. Tax Consequences to Holders of the Notes Treatment of the Notes as Indebtedness. The Trust Fund will agree, and the Noteholders will agree by their purchase of Notes, to treat the Notes as debt for federal income tax purposes. Special counsel to the Depositor will, except as otherwise provided in the related Prospectus Supplement, advise the Depositor that the Notes will be classified as debt for federal income tax purposes. The discussion below assumes this characterization of the Notes is correct. OID, Stripped Securities, etc. The discussion below assumes that all payments on the Notes are denominated in U.S. dollars, and that the Notes are not Stripped Securities. Moreover, the discussion assumes that the interest formula for the Notes meets the requirements for "qualified stated interest" under the OID regulations, and that any OID on the Notes does not exceed a de minimis amount, all within the meaning of the OID regulations. If these conditions are not satisfied with respect to any given series of Notes, additional tax considerations with respect to such Notes will be disclosed in the applicable Prospectus Supplement. Interest Income on the Notes. Based on the above assumptions, except as discussed in the following paragraph, the Notes will not be considered issued with OID. The stated interest thereon will be taxable to a Noteholder as ordinary interest income when received or accrued in accordance with such Noteholder's method of tax accounting. Under the OID regulations, a holder of a Note issued with a de minimis amount of OID must include such OID in income, on a pro rata basis, as principal payments are made on the Note. A purchaser who buys a Note for more or less than its principal amount will generally be subject, respectively, to the premium amortization or market discount rules of the Code. Sale or Other Disposition. If a Noteholder sells a Note, the holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale and the holder's adjusted tax basis in the Note. The adjusted tax basis of a Note to a particular Noteholder will equal the holder's cost for the Note, increased by any market discount, acquisition discount, OID and gain previously included by such Noteholder in income with respect to the Note and decreased by the amount of bond premium (if any) previously amortized and by the amount of principal payments previously received by such Noteholder with respect to such Note. Any such gain or loss will be capital gain or loss if the Note was held as a capital asset, except for gain representing accrued interest and accrued market discount not previously included in income. Capital losses generally may be used only to offset capital gains. Foreign Holders. Interest payments made (or accrued) to a Noteholder who is a nonresident alien, foreign corporation or other non-United States person (a "foreign person") generally will be considered "portfolio interest", and generally will not be subject to United States federal income tax and withholding tax, if the interest is not effectively connected with the conduct of a trade or business within the United States by the foreign person and the foreign person (i) is not actually or constructively a "10% shareholder" (within the meaning of Section 871(h)(3)(B) of the Code) of the Trust or of any beneficial owner therein or a "controlled foreign corporation" with respect to which the Trust or any beneficial owner is a "related person" within the meaning of the Code and (ii) provides the proper certifications. If such interest is not portfolio interest, then it will be subject to United States federal income and withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant to an applicable tax treaty. 55 134 Any capital gain realized on the- sale, redemption, retirement or other taxable disposition of a Note by a foreign person will be exempt from United States federal income and withholding tax, provided that (i) such gain is not effectively connected with the conduct of a trade or business in the United States by the foreign person and (ii) in the case of an individual foreign person, the foreign person is not present in the United States for 183 days or more in the taxable year. Possible Alternative Treatments of the Notes. If, contrary to the opinion of special counsel to the Depositor, the IRS successfully asserted that one or more of the Notes did not represent debt for federal income tax purposes, the Notes might be treated as equity interests in the Trust Fund. If so treated, the Trust Fund might be a publicly traded partnership treated as a corporation, with the adverse consequences described above (and the publicly traded partnership would not be able to reduce its taxable income by deductions for interest expense on Notes recharacterized as equity). Further, treatment of the Notes as equity interests in such a publicly traded partnership could have adverse tax consequences to certain holders. For example, income to certain tax-exempt entities (including pension funds) would be "unrelated business taxable income", income to foreign holders generally would be subject to U.S. tax and U.S. tax return filing and withholding requirements, and individual holders might be subject to certain limitations on their ability to deduct their share of the Trust Fund's expenses. Tax Consequences to Holders of the Certificates Treatment of the Trust Fund as a Partnership. The Trust Fund and the Servicer will agree, and the Certificateholders will agree by their purchase of Certificates, to treat the Trust Fund as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Trust Fund, the partners of the partnership being the Certificateholders, and the Notes being debt of the partnership. However, the proper characterization of the arrangement involving the Trust Fund, the Certificates, the Notes and the Servicer is not clear because there is no authority on transactions closely comparable to that contemplated herein. A variety of alternative characterizations are possible. For example, because the Certificates have certain features characteristic of debt, the Certificates (while unlikely) might be considered debt of the Trust Fund. The following discussion assumes that the Certificates represent equity interests in a partnership. Stripped Securities, etc. The following discussion assumes that all payments on the Certificates are denominated in U.S. dollars, none of the Certificates are Stripped Securities, and that a Series of Securities includes a single class of Certificates. If these conditions are not satisfied with respect to any given Series of Certificates, additional tax considerations with respect to such Certificates will be disclosed in the applicable Prospectus Supplement. Partnership Taxation. As a partnership, the Trust Fund will not be subject to federal income tax. Rather, each Certificateholder will be required to separately take into account such holder's allocated share of income, gains, losses, deductions and credits of the Trust Fund. Such items generally will have the same character (ordinary or capital, short-term or long-term) and source in the hands of each Certificateholder as they have in the hands of the Trust Fund. The Trust Fund's income will consist primarily of interest and finance charges earned on the Mortgage Loans (including appropriate adjustments for market discount, OID and bond premium) and any gain upon collection or disposition of Mortgage Loans. The Trust Fund's deductions will consist primarily of interest accruing with respect to the Notes, servicing and other fees, and losses or deductions upon collection or disposition of Mortgage Loans. The tax items of a partnership are allocable to the partners in accordance with the Code, Treasury regulations and the partnership agreement (here, the Trust Agreement and related documents). The Trust Agreement will provide, in general, that the Certificateholders will be allocated taxable income of the Trust Fund for each month equal to the sum of (i) the interest that accrues on the Certificates in accordance with their terms for such month, including interest accruing at the Pass Through Rate for such month and interest on amounts previously due on the Certificates but not yet distributed; (ii) any Trust Fund income attributable to discount on the Mortgage Loans that corresponds to any excess of the principal amount of the Certificates over their initial issue price; (iii) prepayment premium payable to the Certificateholders for such month; and (iv) any other amounts of income payable to the Certificateholders for such month. Such allocation will be reduced by any amortization by the Trust Fund of premium on Mortgage Loans that corresponds to any excess of the issue price of Certificates over their principal amount. All remaining taxable income of the Trust Fund may be allocated to the Depositor or may be allocated pro rata among the Certificateholders. Based on the economic arrangement of the parties, this approach 56 135 for allocating Trust Fund income should be permissible under applicable Treasury regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to the Certificateholders. Moreover, even under the foregoing method of allocation, Certificateholders may be allocated income equal to the entire Pass Through Rate plus the other items described above even though the Trust Fund might not have sufficient cash to make current cash distributions of such amount. Thus, cash basis holders will in effect be required to report income from the Certificates on the accrual basis and Certificateholders may become liable for taxes on Trust Fund income even if they have not received cash from the Trust Fund to pay such taxes. In addition, because tax allocations and tax reporting will be done on a uniform basis for all Certificateholders, but Certificateholders may be purchasing Certificates at different times and at different prices, Certificateholders may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the Trust Fund. In addition, if the Trust Fund's payments on the Certificates is payable to the Certificateholders without regard to the income of the Trust Fund, the Trust Fund's payment of such amounts to Certificateholders may be treated as "guaranteed payments" within the meaning of Section 707(c) of the Code, and not as a distributive share of the Trust Fund's income. Such guaranteed payments will constitute ordinary income to a Certificateholder but may not be considered interest income for U.S. federal income tax purposes. All of the taxable income allocated to a Certificateholder that is a pension, profit sharing or employee benefit plan or other tax-exempt entity (including an individual retirement account) will constitute "unrelated business taxable income generally taxable to such a holder under the Code. An individual taxpayer's share of expenses of the Trust Fund (including fees to the Servicer but not interest expense) would be miscellaneous itemized deductions. Such deductions might be disallowed to the individual in whole or in part and might result in such holder being taxed on an amount of income that exceeds the amount of cash actually distributed to such holder over the life of the Trust Fund. The Trust Fund intends to make all tax calculations relating to income and allocations to Certificateholders on an aggregate basis. If the IRS were to require that such calculations be made separately for each Mortgage Loan, the Trust Fund might be required to incur additional expense but it is believed that there would not be a material adverse effect on Certificateholders. Discount and Premium. The trust may have OID income, since the Mortgage Loans may have been issued with OID. In addition, the purchase price paid by the Trust Fund for the Mortgage Loans may be greater or less than the remaining principal balance of the Mortgage Loans at the time of purchase. If so, the Mortgage Loan will have been acquired at a premium or discount, as the case may be. (As indicated above, the Trust Fund will make this calculation on an aggregate basis, but might be required to recompute it on a Loan by Loan basis.) If the Trust Fund acquires the Mortgage Loans at a market discount or premium, the Trust Fund will elect to include any such discount in income currently as it accrues over the life of the Mortgage Loans or to offset any such premium against interest income on the Mortgage Loans. As indicated above, a portion of such market discount income or premium deduction may be allocated to Certificateholders. Section 708 Termination. Under Section 708 of the Code, the Trust Fund will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in the Trust Fund are sold or exchanged within a 12-month period. If such a termination occurs, the Trust Fund will be considered to have transferred all of its assets and liabilities to a new partnership and then to have immediately liquidated and distributed the interests in the new partnership to the continuing Certificateholders. The Trust Fund will not comply with certain technical requirements that might apply when such a constructive termination occurs. As a result, the Trust Fund may be subject to certain tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, the Trust Fund might not be able to comply due to lack of data. Disposition of Certificates. Generally, capital gain or loss will be recognized on a sale of Certificates in an amount equal to the difference between the amount realized and the seller's tax basis in the Certificates sold. A Certificateholder's tax basis in a Certificate will generally equal the holder's cost increased by the holder's share of Trust Fund income and decreased by any distributions received with respect to such Certificate. In addition, both the tax basis in the Certificates and the amount realized on a sale of a Certificate would include the holder's share of the Notes and other liabilities of the Trust Fund. A holder acquiring Certificates at different prices may be required to maintain a single aggregate adjusted tax basis in such Certificates, and, upon sale or other disposition of some of the Certificates, allocate a portion of such aggregate tax basis to the Certificates sold (rather than maintaining a separate tax basis in each Certificate for purposes of computing gain or loss on a sale of that Certificate). 57 136 Any gain on the sale of a Certificate attributable to the holder's share of unrecognized accrued market discount on the Mortgage Loans would generally be treated as ordinary income to the holder and would give rise to special tax reporting requirements. The Trust Fund does not expect to have any other assets that would give rise to such special reporting requirements. Thus, to avoid those special reporting requirements, the Trust Fund will elect to include market discount in income as it accrues. If a Certificateholder is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the Certificates that exceeds the aggregate cash distributions with respect thereto, such excess will generally give rise to a capital loss upon the retirement of the Certificates. Allocations Between Transferors and Transferees. In general, the Trust Fund's taxable income and losses will be determined monthly and the tax items for a particular calendar month will be apportioned among the Certificateholders in proportion to the principal amount of Certificates owned by them as of the close of the last day of such month. As a result, a holder purchasing Certificates may be allocated tax items (which will affect its tax liability and tax basis) attributable to periods before it purchased its Certificates. The use of such a monthly convention may not be permitted by existing regulations. If a monthly convention is not allowed (or only applies to transfers of less than all of the partner's interest), taxable income or losses of the Trust Fund might be reallocated among the Certificateholders. The Trust Fund's method of allocation between transferors and transferees may be revised to conform to a method permitted by future regulations. Section 754 Election. In the event that a Certificateholder sells its Certificates at a profit (loss), the purchasing Certificateholder will have a higher (lower) basis in the Certificates than the selling Certificateholder had. The tax basis of the Trust Fund's assets will not be adjusted to reflect that higher (or lower) basis unless the Trust Fund were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the Trust Fund will not make such election. As a result, Certificateholders might be allocated a greater or lesser amount of Trust Fund income than would be appropriate based on their own purchase price for Certificates. Administrative Matters. The Owner Trustee is required to keep or have kept complete and accurate books of the Trust Fund. Such books will be maintained for financial reporting and tax purposes on an accrual basis and the fiscal year of the Trust will be the calendar year. The Trustee will file a partnership information return (IRS Form 1065) with the IRS for each taxable year of the Trust Fund and will report each Certificateholder's allocable share of items of Trust Fund income and expense to holders and the IRS on Schedule K-1. The Trust Fund will provide the Schedule K-1 information to nominees that fail to provide the Trust Fund with the information statement described below and such nominees will be required to forward such information to the beneficial owners of the Certificates. Generally, holders must file tax returns that are consistent with the information return filed by the Trust Fund or be subject to penalties unless the holder notifies the IRS of all such inconsistencies. Under Section 6031 of the Code, any person that holds Certificates as a nominee at any time during a calendar year is required to furnish the Trust Fund with a statement containing certain information on the nominee, the beneficial owners and the Certificates so held. Such information includes (i) the name, address and taxpayer identification number of the nominee and (ii) as to each beneficial owner (x) the name, address and identification number of such person, (y) whether such person is a United States person, a tax-exempt entity or a foreign government, an international organization, or any wholly owned agency or instrumentality of either of the foregoing, and (z) certain information on Certificates that were held, bought or sold on behalf of such person throughout the year. In addition, brokers and financial institutions that hold Certificates through a nominee are required to furnish directly to the Trust Fund information as to themselves and their ownership of Certificates. A clearing agency registered under Section 17A of the Exchange Act is not required to furnish any such information statement to the Trust Fund. The information referred to above for any calendar year must be furnished to the Trust Fund on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the Trust Fund with the information described above may be subject to penalties. It is expected that the Depositor will be designated as (or the attorney-in-fact for) the tax matters partner in the related Trust Agreement and, as such, will be responsible for representing the Certificateholders in any dispute with the IRS. The Code provides for administrative examination of a partnership as if the partnership was a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before three years 58 137 after the date on which the partnership information return is filed. Any adverse determination following an audit of the return of the Trust Fund by the appropriate taxing authorities could result in an adjustment of the returns of the Certificateholders, and, under certain circumstances, a Certificateholder may be precluded from separately litigating a proposed adjustment to the items of the Trust Fund. An adjustment could also result in an audit of a Certificateholder's returns and adjustments of items not related to the income and losses of the Trust Fund. If and to the extent that the recognition of a Certificateholder's distributive share of the partnership's losses reduces the Certificateholder's adjusted tax basis in its Certificate below zero, the recognition of such losses by the Certificateholder will be deferred until such time as the recognition of such losses will not reduce its basis below zero. To the extent that the partnership's cash distributions (or constructive cash distributions, as described above) reduce a Certificateholder's adjusted tax basis in its Certificate below zero, such distributions will constitute income to such holder and will be treated as gain derived from the sale or exchange of the holder's interest in the partnership. Tax Consequences to Foreign Certificateholders. Under the terms of the Trust Agreement, the Certificates may not be acquired by or for the account of an individual or entity that is not a U.S. person as defined in Section 7701(a)(30) of the Code, and any transfer of a Certificate to a person that is not a U.S. person shall be void. STATE TAX CONSIDERATIONS In addition to the federal income tax consequences described in "Certain Federal Income Tax Considerations," potential investors should consider the state and local income tax consequences of the acquisition, ownership, and disposition of the Securities. State and local income tax law may differ substantially from the corresponding federal law, and this discussion does not purport to describe any aspect of the income tax laws of any state or locality. Therefore, potential investors should consult their own tax advisors with respect to the various state and local tax consequences of an investment in the Securities. ERISA CONSIDERATIONS The Employee Retirement Income Security Act of 1974, as amended ("ERISA") and Section 4975 of the Code impose certain restrictions on employee benefit plans subject to ERISA and on plans and other arrangements subject to Section 4975 of the Code ("Plans"), and on persons who are parties in interest or disqualified persons ("parties in interest") with respect to such Plans. Certain employee benefit plans, such as governmental plans and church plans (if no election has been made under Section 410(d) of the Code), are not subject to the restrictions of ERISA or Section 4975 of the Code , and assets of such plans may be invested in the Securities without regard to the ERISA considerations described below, subject to other applicable federal and state law. However, any such governmental or church plan which is qualified under Section 401(a) of the Code and exempt from taxation under Section 501(a) of the Code is subject to the prohibited transaction rules set forth in Section 503 of the Code. Investments by most Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that a Plan's investments be made in accordance with the documents governing the Plan. Section 406 of ERISA prohibits parties in interest with respect to a Plan from engaging in certain transactions ("prohibited transactions") involving a Plan and its assets unless a statutory or administrative exemption applies to the transaction. Section 4975 of the Code imposes certain excise taxes (or, in some cases, a civil penalty may be assessed pursuant to Section 502(i) of ERISA) on parties in interest which engage in nonexempt prohibited transactions. The United States Department of Labor ("DOL") has issued a final regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what constitutes the assets of a Plan. This regulation provides that, as a general rule, the underlying assets and properties of corporations, partnerships, trusts and certain other entities in which a Plan makes an investment in an "equity interest" will be deemed, for purposes of ERISA and Section 4975 of the Code to be assets of the Plan ("plan assets") unless certain exceptions apply. Under the terms of the DOL regulation, the Trust Fund may be deemed to hold plan assets by reason of a Plan's investment in a Security; such plan assets would include an undivided interest in the Mortgage Loans and any other assets held by the Trust Fund. In such an event, persons providing services with respect to the assets of the Trust Fund may be parties in interest, subject to the fiduciary responsibility provisions of ERISA, including the 59 138 prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code, with respect to transactions involving such assets unless such transactions are subject to a statutory or administrative exemption. One such exception applies if the interest acquired by a Plan is treated as indebtedness under applicable local law and has no substantial equity features. Generally, a profits interest in a partnership, an undivided ownership interest in Mortgaged Property and a beneficial ownership interest in a trust are deemed to be "equity interests" under the DOL regulation. If Notes of a particular Series were deemed to be indebtedness under applicable local law without any substantial equity features, an investing Plan's assets would include such Notes, but not, by reason of the Plan's investment, the underlying assets of the Trust Fund. Another such exception applies if the class of equity interests in question is: (i) "widely held" (held by 100 or more investors who are independent of the Depositor and each other); (ii) freely transferable; and (iii) sold as part of an offering pursuant to (A) an effective registration statement under the Securities Act of 1933, and then subsequently registered under the Securities Exchange Act of 1934 or (B) an effective registration statement under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 ("Publicly Offered Securities"). In addition, the DOL regulation provides that if at all times more than 75% of the value of each class of equity interests in the Trust Fund are held by investors other than benefit plan investors (which is defined as including Plans, government, church and foreign plans and individual retirement accounts), the investing Plan's assets will not include any of the underlying assets of the Depositor or the Trust Fund. An additional exemption may also be available. The DOL has granted to many underwriters substantially similar administrative exemptions from certain of the prohibited transaction rules of ERISA and Section 4975 of the Code with respect to the initial purchase, the holding and the subsequent resale by Plans of securities representing interests in asset-backed pass-through trusts that consist of certain receivables, loans and other obligations that meet the conditions and requirements of the exemption. These securities may include the Certificates of a Series, and depending upon the particular characteristics of a Series, may include the Notes. The obligations covered by such exemptions include obligations such as the Mortgage Loans. The exemptions may apply to the acquisition, holding and resale of the Securities by a Plan, provided that certain conditions (certain of which are described below) are met. Among the conditions which must be satisfied for the exemptions to apply are the following: (i) The acquisition of the Securities by a Plan is on terms (including the price for the Securities) that are at least as favorable to the Plan as they would be in an arm's-length transaction with an unrelated party; (ii) The rights and interests evidenced by the Securities acquired by the Plan are not subordinated to the rights and interests evidenced by other securities of the Trust Fund; (iii) The Securities acquired by the Plan have received a rating at the time of such acquisition that is in one of the three highest generic rating categories from either Standard & Poor's Ratings Services ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("D&P") or Fitch IBCA, Inc. ("Fitch"); (iv) The sum of all payments made to the underwriter in connection with the distribution of the Securities represents not more than reasonable compensation for underwriting the Securities. The sum of all payments made to and retained by the Seller pursuant to the sale of the obligations to the Trust represents not more than the fair market value of such obligations. The sum of all payments made to and retained by the Servicer represents not more than reasonable compensation for the Servicer's services under the related servicing agreement and reimbursement of the Servicer's reasonable expenses in connection therewith; (v) The Trustee must not be an affiliate of any other member of the Restricted Group (as defined below); and (vi) The Plan investing in the Securities is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933. In order for the exemptions to apply, the Trust Fund also must meet the following requirements: (i) the corpus of the Trust Fund must consist solely of assets of the type which have been included in other investment pools; 60 139 (ii) securities in such other investment pools must have been rated in one of the three highest rating categories of Standard & Poor's, Moody's, D&P or Fitch for at least one year prior to the Plan's acquisition of securities; and (iii) securities evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to any Plan's acquisition of Securities. Moreover, the exemptions provide relief from certain self-dealing/conflict of interest prohibited transactions that may occur when the Plan fiduciary causes a Plan to acquire securities in a trust in which the fiduciary (or its affiliate) is an obligor on the receivables held in the trust, provided that, among other requirements, (i) in the case of an acquisition in connection with the initial issuance of Securities, at least fifty (50) percent of each Class of Securities in which Plans have invested is acquired by persons independent of the Restricted Group and at least fifty (50) percent of the aggregate interest in the trust is acquired by persons independent of the Restricted Group; (ii) such fiduciary (or its affiliate) is an obligor with respect to five (5) percent or less of the fair market value of the obligations contained in the trust; (iii) the Plan's investment in Securities does not exceed twenty-five (25) percent of all of the Securities issued by the Trust Fund outstanding after the acquisition; and (iv) no more than twenty-five (25) percent of the assets of the Plan are invested in securities representing an interest in one or more trusts containing assets sold or serviced by the same entity. The Exemption does not apply to Plans sponsored by the Depositor, the underwriters of the Securities, the Trustee, the Servicer, any obligor with respect to obligations included in a Trust Fund constituting more than five (5) percent of the aggregate unamortized principal balance of the assets in a Trust Fund, or any affiliate of such parties (the "Restricted Group"). Prospective Plan investors should consult with their legal advisors concerning the impact of ERISA and the Code, the potential application of the exemptions described above to the purchase and holding of the Securities, and the potential consequences to their specific circumstances, prior to making an investment in the Securities. Moreover, each Plan fiduciary should determine whether, under the general fiduciary standards of investment procedure and diversification, an investment in the Securities is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan's investment portfolio. LEGAL INVESTMENT Unless otherwise specified in the related Prospectus Supplement, the Securities will not constitute "mortgage-related securities" within the meaning of SMMEA. Accordingly, investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether and to what extent the Securities constitute legal investments for them. PLAN OF DISTRIBUTION The Depositor may offer each Series of Securities through one or more firms (including, if so specified, certain affiliates of Banc One Corporation) designated at the time of each offering of such Securities and identified in the related Prospectus Supplement. The Prospectus Supplement relating to each Series of Securities will set forth the specific terms of the offering of such Series of Securities and of each Class within such Series, the names of the underwriters, the purchase price of the Securities, the proceeds to the Depositor from such sale, any securities exchange on which the Securities may be listed, and, if applicable, the initial public offering prices, the discounts and commissions to the underwriters and any discounts and concessions allowed or reallowed to certain dealers. The place and time of delivery of each Series of Securities will also be set forth in the Prospectus Supplement relating to such Series. LEGAL MATTERS Unless otherwise specified in the related Prospectus Supplement, certain legal matters in connection with the Securities will be passed upon for the Company by Orrick, Herrington & Sutcliffe LLP, New York, New York. GLOSSARY OF TERMS The following are abbreviated definitions of certain capitalized terms used in this Prospectus. Unless otherwise provided in a "Supplemental Glossary" in the Prospectus Supplement for a Series, such definitions shall apply to capitalized terms used in such Prospectus Supplement. The definitions may vary from those in the related 61 140 Agreement for a Series and the related Agreement for a Series generally provides a more complete definition of certain of the terms. Reference should be made to the related Agreement for a Series for a more compete definition of such terms. "Advance" means cash advanced by the Servicer in respect of delinquent payments of principal of and interest on a Mortgage Loan, and for any other purposes specified in the related Prospectus Supplement. "Agreement" means, with respect to a Series of Certificates, the Pooling and Servicing Agreement or Trust Agreement, and, with respect to a Series of Notes, the Indenture and the Servicing Agreement, as the context requires. "Appraised Value" means, with respect to Mortgaged Property securing a Mortgage Loan, the lesser of the appraised value determined in an appraisal obtained at origination of the Mortgage Loan or sales price of such Mortgaged Property at such time. "Assumed Reinvestment Rate" means, with respect to a Series, the per annum rate or rates specified in the related Prospectus Supplement for a particular period or periods as the "Assumed Reinvestment Rate" for funds held in any fund or account for the Series. "Available Distribution Amount" means the amount in the Distribution Account (including amounts deposited therein from any reserve fund or other fund or account) eligible for distribution to Holders on a Distribution Date. "Bankruptcy Code" means the federal bankruptcy code, 11 United States Code 101 et seq., and related rules and regulations promulgated thereunder. "Business Day" means a day that, in the City of New York or in the city or cities in which the corporate trust office of the Trustee are located, is neither a legal holiday nor a day on which banking institutions are authorized or obligated by law, regulations or executive order to be closed. "Certificate" means the Asset-Backed Certificates. "Class" means a Class of Securities of a Series. "Closing Date" means, with respect to a Series, the date specified in the related Prospectus Supplement as the date on which Securities of such Series are first issued. "Code" means the Internal Revenue Code of 1986. "Collection Account" means, with respect to a Series, the account established in the name of the Servicer for the deposit by the Servicer of payments received from the Mortgage Loans. "Combined Loan-to-Value Ratio" means, with respect to a Mortgage Loan, the ratio determined as set forth in the related Prospectus Supplement taking into account the amounts of any related senior mortgage loans on the related Mortgaged Property. "Commission" means the Securities and Exchange Commission. "Condominium" means a form of ownership of real Mortgaged Property wherein each owner is entitled to the exclusive ownership and possession of his or her individual Condominium Unit and also owns a proportionate undivided interest in all parts of the Condominium Building (other than the individual Condominium Units) and all areas or facilities, if any, for the common use of the Condominium Units. "Condominium Association" means the person(s) appointed or elected by the Condominium Unit owners to govern the affairs of the Condominium. "Condominium Building" means a multi-unit building or buildings, or a group of buildings whether or not attached to each other, located on Mortgaged Property subject to Condominium ownership. "Condominium Loan" means a Loan secured by a Mortgage on a Condominium Unit (together with its appurtenant interest in the common elements). "Condominium Unit" means an individual housing unit in a Condominium Building. 62 141 "Cooperative" means a corporation owned by tenant-stockholders who, through the ownership of stock, shares or membership securities in the corporation, receive proprietary leases or occupancy agreements which confer exclusive rights to occupy specific units and which is described in Section 216 of the Code. "Cooperative Dwelling" means an individual housing unit in a building owned by a Cooperative. "Cooperative Loan" means a housing loan made with respect to a Cooperative Dwelling and secured by an assignment by the borrower (tenant-stockholder) or security interest in shares issued by the applicable Cooperative. "Credit Enhancement" means the enhancement for a Series, if any, specified in the related Prospectus Supplement. "Cut-off Date" means the date designated as such in the related Prospectus Supplement for a Series. "Debt Securities" means Securities characterized as indebtedness for federal income tax purposes, and Regular Interest Securities. "Deferred Interest" means the excess of the interest accrued on the outstanding principal balance of a Mortgage Loan during a specified period over the amount of interest required to be paid by an obligor on such Mortgage Loan on the related Due Date. "Depositor" means Banc One ABS Corporation. "Distribution Account" means, with respect to a Series, the account established in the name of the Trustee for the deposit of remittances received from the Servicer with respect to the Mortgage Loans. "Distribution Date" means, with respect to a Series or Class of Securities, each date specified as a distribution date for such Series or Class in the related Prospectus Supplement. "Due Date" means each date, as specified in the related Prospectus Supplement for a Series, on which any payment of principal or interest is due and payable by the obligor on any Primary Asset pursuant to the terms thereof. "Eligible Investments" means any one or more of the obligations or securities described as such in the related Agreement. "Enhancer" means the provider of the Credit Enhancement for a Series specified in the related Prospectus Supplement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Escrow Account" means an account, established and maintained by the Servicer for a Mortgage Loan, into which payments by borrowers to pay taxes, assessments, mortgage and hazard insurance premiums and other comparable items required to be paid to the mortgagee are deposited. "FHLMC" means the Federal Home Loan Mortgage Corporation. "Final Scheduled Distribution Date" means, with respect to a Class of Notes of a Series, the date no later than which principal thereof will be fully paid and with respect to a Class of Certificates of a Series, the date after which no Certificates of such Class will remain outstanding, in each case based on the assumptions set forth in the related Prospectus Supplement. "FNMA" means the Federal National Mortgage Association. "Holder" means the person or entity in whose name a Security is registered. "HUD" means the United States Department of Housing and Urban Development. "Indenture" means the indenture relating to a Series of Notes between the Trust Fund and the Trustee. "Index" means the index applicable to any adjustments in the Mortgage Loan Rates of any adjustable rate Mortgage Loans. "Insurance Policies" means certain mortgage insurance, hazard insurance and other insurance policies required to be maintained with respect to Mortgage Loans. 63 142 "Insurance Proceeds" means amounts paid by the insurer under any of the Insurance Policies covering any Mortgage Loan or Mortgaged Property. "Interest Only Securities" means a Class of Securities entitled solely or primarily to distributions of interest and which is identified as such in the related Prospectus Supplement. "IRS" means the Internal Revenue Service. "Lifetime Rate Cap" means the lifetime limit, if any, on the Mortgage Loan Rate during the life of each adjustable rate Mortgage Loan. "Liquidation Proceeds" means amounts received by the Servicer in connection with the liquidation of a Mortgage Loan, net of liquidation expenses. "Loan Rate" means, unless otherwise indicated herein or in the Prospectus Supplement, the interest rate borne by a Mortgage Loan. "Loan-to-Value Ratio" means, with respect to a Mortgage Loan, the ratio determined as set forth in the related Prospectus Supplement. "Minimum Rate" means the lifetime minimum Loan Rate during the life of each adjustable rate Mortgage Loan. "Modification" means a change in any term of a Mortgage Loan. "Mortgage" means the mortgage, deed of trust or other similar security instrument securing a Mortgage Note. "Mortgage Loan" means a revolving home equity loan or line of credit secured by a Mortgaged Property. "Mortgage Loan Group" means, with respect to the Mortgage Loans and other assets comprising the Trust Fund of a Series, a group of such Mortgage Loans and other assets having the characteristics described in the related Prospectus Supplement. "Mortgage Note" means the note or other evidence of indebtedness of a Mortgagor under the Mortgage Loan. "Mortgaged Property" means a Mortgaged Property securing a Mortgage Loan. "Mortgagor" means the obligor on a Mortgage Note. "1986 Act" means the Tax Reform Act of 1986. "Notes" means the Asset-Backed Notes. "Notional Amount" means the amount set forth in the related Prospectus Supplement for a Class of Interest Only Securities. "Participating Securities" means Securities entitled to receive payments of principal and interest and an additional return on investment as described in the related Prospectus Supplement. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization, or government or any agency or political subdivision thereof. "Pooling and Servicing Agreement" means the pooling and servicing agreement relating to a Series of Certificates among the Depositor, the Servicer and the Trustee. "Principal Balance" means, with respect to a Mortgage Loan and as of a Due Date, the original principal amount of the Mortgage Loan, plus the amount of any Deferred Interest added to such principal amount, reduced by all payments, both scheduled or otherwise, received on such Mortgage Loan prior to such Due Date and applied to principal in accordance with the terms of the Mortgage Loan. "Principal Only Securities" means a Class of Securities entitled solely or primarily to distributions of principal and identified as such in the Prospectus Supplement. 64 143 "Qualified Insurer" means a mortgage guarantee or insurance company duly qualified as such under the laws of the states in which the Mortgaged Properties are located duly authorized and licensed in such states to transact the applicable insurance business and to write the insurance provided. "Rating Agency" means the nationally recognized statistical rating organization (or organizations) which was (or were) requested by the Depositor to rate the Securities upon the original issuance thereof. "REO Mortgaged Property" means real Mortgaged Property which secured a defaulted Mortgage Loan, beneficial ownership of which has been acquired upon foreclosure, deed in lieu of foreclosure, repossession or otherwise. "Reserve Fund" means, with respect to a Series, any Reserve Fund established pursuant to the related Agreement. "Retained Interest" means, with respect to a Mortgage Loan, the amount or percentage specified in the related Prospectus Supplement which is not included in the Trust Fund for the related Series. "Scheduled Payments" means the scheduled payments of principal and interest to be made by the borrower on a Mortgage Loan. "Securities" means the Notes or the Certificates. "Seller" means the seller of the Mortgage Loans to the Depositor identified in the related Prospectus Supplement for a Series. "Senior Securityholder" means a holder of a Senior Security. "Senior Securities" means a Class of Securities as to which the Holders' rights to receive distributions of principal and interest are senior to the rights of Holders of Subordinate Securities, to the extent specified in the related Prospectus Supplement. "Series" means a separate series of Securities sold pursuant to this Prospectus and the related Prospectus Supplement. "Servicer" means, with respect to a Series, the Person if any, designated in the related Prospectus Supplement to service Mortgage Loans for that Series, or the successors or assigns of such Person. "Single Family Mortgaged Property" means Mortgaged Property securing a Mortgage Loan consisting of one- to four-family attached or detached residential housing, including Cooperative Dwellings. "Subordinate Securityholder" means a Holder of a Subordinate Security. "Subordinated Securities" means a Class of Securities as to which the rights of holders to receive distributions of principal, interest or both is subordinated to the rights of holders of Senior Securities, and may be allocated losses and shortfalls prior to the allocation thereof to other Classes of Securities, to the extent and under the circumstances specified in the related Prospectus Supplement. "Trustee" means the trustee under the applicable Agreement and its successors. "Trust Fund" means, with respect to any Series of Securities, the trust holding all money, instruments, securities and other Mortgaged Property, including all proceeds thereof, which are, with respect to a Series of Certificates, held for the benefit of the Holders by the Trustee under the Pooling and Servicing Agreement or Trust Agreement, or, with respect to a Series of Notes, pledged to the Trustee under the Indenture as a security for such Notes, including, without limitation, the Mortgage Loans (except any Retained Interests), all amounts in the Distribution Account, Collection Account or Reserve Funds, distributions on the Mortgage Loans (net of servicing fees), and reinvestment earnings on such net distributions and any Credit Enhancement and all other Mortgaged Property and interests held by or pledged to the Trustee pursuant to the related Agreement for such Series. "UCC" means the Uniform Commercial Code. "Zero Coupon Security" means a Security entitled to receive payments of principal only. 65 144 [This page intentionally left blank] 66 145 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Set forth below are the expenses expected to be incurred by Banc One ABS Corporation (the "Registrant") in connection with the issuance and distribution of the securities being registered other than underwriting discounts and commissions and costs represented by the salaries and wages of regular employees and officers of the Registrants. All such expenses, other than the Filing Fee, are estimated expenses. Filing Fee for Registration Statement..........................$1,032,500 Legal Fees and Expenses..........................................$500,000 Accounting Fees and Expenses.....................................$200,000 Trustees' Fees and Expenses (including counsel fees)..............$75,000 Printing and Engraving Fees......................................$100,000 Rating Agency Fees...............................................$250,000 Blue Sky and legal investment fees and expenses...................$25,000 Miscellaneous.....................................................$50,000 Total...................................................$2,232,500 ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Neither any Pooling and Servicing Agreement to be entered into among any of the trusts to be formed, the Registrant, Bank One, N.A. as Servicer and the Trustee hereunder (the "Pooling and Servicing Agreement"), relating to the securities being registered, will provide for the indemnification of any director, officer, employee or agents of the Registrant or Bank One, N.A., in its capacity as Servicer thereunder, or in connection with any loss, liability or expense incurred in connection with legal action relating to the Pooling and Servicing Agreement and the securities issued pursuant thereto or related thereto. The Pooling and Servicing Agreement will provide that any director, officer, employee or agent of Bank One, N.A., in its capacity as Servicer thereunder, may rely on any document of any kind which it in good faith reasonably believes to be genuine and to have been adopted or signed by the proper authorities respecting any matters arising thereunder. Section 1701.13(E) of the Ohio General Corporation Law sets forth provisions which define the extent which a corporation may indemnify directors, officers and employees. Those provisions have been adopted by the Registrant in Article VI of Registrant's Code of Regulations, which provides as follows: The Corporation may indemnify any director or officer, any former director or officer of the Corporation and any person who is or has served at the request of the Corporation as a director, officer or trustee of any other corporation, partnership, joint venture, trust or other enterprise (and his heirs, executors and administrators) against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by him by reason of the fact that he is or was such director, officer or trustee in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to the full extent and according to the procedures and requirements set forth in the Ohio General Corporation Law as the same may be in effect from time to time. The indemnification provided for herein shall not be deemed to restrict the right of the Corporation to (i) indemnify employees, agents and others permitted by such Law, (ii) purchase and maintain insurance or provide similar protection on behalf of directors, officers or such other persons against liabilities asserted against them or expenses incurred by them arising out of their service to the Corporation as contemplated herein, and (iii) enter into agreements with such directors, officers, employees, agents or others indemnifying them against any and all liabilities (or such lesser indemnification as may be provided in such agreement) asserted against them or incurred by them arising out of their service to the Corporation as contemplated herein. 146 The Registrant's parent, BANC ONE CORPORATION, has entered into indemnification agreements with certain directors and executive officers of the Registrant that provide for indemnification unless the indemnitee's conduct is finally adjudged by a court be knowingly fraudulent, deliberately dishonest or willful misconduct. ITEM 16. FINANCIAL STATEMENTS AND EXHIBITS. A list of exhibits included as part of this Registration Statement is set forth in the Exhibit Index which immediately precedes such exhibits and is hereby incorporated by reference herein. ITEM 17. UNDERTAKINGS. (A) UNDERTAKING PURSUANT TO RULE 415: The Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or event arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrants pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (B) UNDERTAKING IN RESPECT OF DOCUMENTS SUBSEQUENTLY FILED THAT ARE INCORPORATED BY REFERENCE: The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 2 147 (C) UNDERTAKING IN RESPECT OF INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 3 148 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Banc One ABS Corporation certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbus, State of Ohio, on the 2nd day of September 1998. BANC ONE ABS CORPORATION By: * ------------------------------- POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective Amendment No. 1 to the Registration Statement has been signed below by the following person(s) in the capacities and on the dates indicated:
Name Title Date * Director and President September 2, 1998 ---------------------- Peter W. Atwater (Principal Executive, Financial and Accounting Officer) /s/Suzanne Bachman Director September 2, 1998 ---------------------- Suzanne Bachman * Director September 2, 1998 ---------------------- Ted R. Schindler *By: /s/Suzanne Bachman ------------------ Attorney-in-Fact
4 149 INDEX TO EXHIBITS
Sequentially Exhibit Number Numbered Page 1.1 - Form of Underwriting Agreement 3.1* - Articles of Incorporation of Banc One ABS Corporation 3.2* - Code of Regulations of Banc One ABS Corporation 4.1* - Form of Pooling and Servicing Agreement 4.2 - Form of Trust Agreement 4.3 - Form of Indenture 5.1* - Opinion of Orrick, Herrington & Sutcliffe LLP With Respect to Legality 8.1* - Opinion of Orrick, Herrington & Sutcliffe LLP With Respect to Certain Tax Matters 10.1 - Form of Purchase Agreement 23.1* - Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinions filed as part of Exhibit 5.1 and Exhibit 8.1) 24.1* - Power of Attorney of Directors and Officers of Banc One ABS Corporation (included on signature page)
- ------------------ * Previously filed with the Banc One ABS Corporation Form S-3 Registration Statement. EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 Exhibit 1.1 BANC ONE HELOC TRUST 199[__-_] $__________ HELOC ASSET-BACKED CERTIFICATES BANC ONE ABS CORPORATION (DEPOSITOR) UNDERWRITING AGREEMENT [________ __], 199[_] [___________________] as Representative (the "Representative") of the Several Underwriters named herein [___________________] [___________________] Ladies and Gentlemen: 1. Introductory. Banc One ABS Corporation, an Ohio corporation (the "Depositor") and a wholly-owned limited purpose finance subsidiary of Banc One ABS Corporation, proposes to cause Banc One HELOC Trust 199[_-_] (the "Trust") to issue and sell $___________ principal amount of its HELOC Asset-Backed Certificates (the "Certificates") to the several underwriters named in Schedule I attached hereto (the "Underwriters"), for whom you (the "Representative") are acting as representative. The assets of the Trust include, among other things, a pool of [adjustable] rate home equity revolving credit line loans made or to be made in the future (the "Mortgage Loans"), under certain home equity revolving credit line loan agreements (the "Credit Line Agreements") and secured by either first or second deeds of trust or mortgages on one- to four-family residential properties (the "Mortgaged Properties"); the collections in respect of the Mortgage Loans due after _____________, 1998 (the "Cut-off Date") [(exclusive of payments in respect of accrued interest due on or prior to the Cut-off Date)]; property that secured a Mortgage Loan which has been acquired by foreclosure or deed in lieu of foreclosure[; and an irrevocable and unconditional certificate guaranty insurance policy (the "Policy") to be issued by [_____________] (the "Insurer")]. The Trust will be formed, and the Certificates will be issued, pursuant to a Pooling and Servicing Agreement to be dated as of [_____ __], 199[_] (the "Pooling and Servicing Agreement") among the Depositor, Bank One, N.A., a national banking association, as servicer (the "Servicer") and [_____________], a [_____________] as trustee (the "Trustee"). The Mortgage Loans and certain other assets of the Trust Fund will be sold by each of [_____________],[_____________] and [_____________] (each, a "Seller" and together the EX-4.2 3 FORM OF TRUST AGREEMENT 1 EXHIBIT 4.2 TRUST AGREEMENT AMONG BANC ONE ABS CORPORATION DEPOSITOR AND [ ] OWNER TRUSTEE DATED AS OF [__________ __], 199[_] 2 TRUST AGREEMENT, dated as of [____________ __,] 199[__], among BANC ONE ABS CORPORATION, (the "Depositor"), and [___________________], a [_____________________], not in its individual capacity but solely as Owner Trustee (the "Owner Trustee"). The Depositor and the Owner Trustee hereby agree as follows: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. Certain capitalized terms used in this Agreement shall have the respective meanings assigned them in Article I to the Pooling and Servicing Agreement, of even date herewith (the "Pooling and Servicing Agreement"), among the Depositor, Bank One, N.A., as Servicer, and the Trust formed under this Agreement. All references herein to "the Agreement" or "this Agreement" are to the Trust Agreement, and all references herein to Articles, Sections and subsections are to Articles, Sections and subsections of this Agreement unless otherwise specified. ARTICLE II ORGANIZATION SECTION 2.1 Name. The Trust created hereby shall be known as "Banc One HELOC Trust 199[__-__]", in which name the Owner Trustee may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued on behalf of the Trust. SECTION 2.2 Office. The office of the Trust shall be in care of the Owner Trustee at its Corporate Trust Office or at such other address in Delaware as the Owner Trustee may designate by written notice to the Certificateholders and the Depositor. SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is to engage in the following activities: (i) to accept the transfer of, manage and hold or, pursuant to the Pooling and Servicing Agreement, cause the Servicer to manage, the Mortgage Loans; (ii) to issue the Notes pursuant to the Indenture and the Certificates pursuant to this Agreement, and to sell the Notes pursuant to the Underwriting Agreement dated as of [_____________ __,] 199[__] among the Trust, the Depositor, [_________________] and [_____________________________] (hereinafter the "Underwriting Agreement"), and to register the transfer of or exchange the Notes and the Certificates; (iii) to acquire certain property and assets from the Depositor pursuant to the Pooling and Servicing Agreement, to make payments to the Noteholders and the 3 Certificateholders and to pay the organizational, start-up and transactional expenses of the Trust; (iv) to assign, grant, transfer, pledge, mortgage and convey the Collateral pursuant to the terms of the Indenture and to hold, manage and distribute to the Certificateholders pursuant to the terms of this Agreement and the Pooling and Servicing Agreement any portion of the assets of the Trust released from the lien of, and remitted to the Trust pursuant to, the Indenture; (v) to enter into and perform its obligations under the Basic Documents (as defined in the Indenture) to which it is to be a party and the Underwriting Agreement; (vi) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and (vii) subject to compliance with the Basic Documents, to engage in such other activities as may be required in connection with conservation of the assets of the Trust and the making of distributions to the Certificateholders and the Noteholders. The Trust is hereby authorized to engage in the foregoing activities and shall not engage in any activity other than in connection with the foregoing or other than as required or authorized by the terms of this Agreement or the Basic Documents. SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby appoints the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein. The Owner Trustee hereby accepts its appointment subject to the terms and conditions hereof. SECTION 2.5 Initial Capital Contribution of Assets of the Trust. Pursuant to the Organizational Trust Agreement, the Depositor transferred to the Owner Trustee, as of the date hereof, the sum of $1.00. The Owner Trustee hereby acknowledges receipt in trust from the Depositor, as of the date hereof, of the foregoing contributions which shall constitute the initial assets of the Trust and shall be deposited in the Certificate Distribution Account. The Depositor shall pay organizational expenses of the Trust as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares that it shall hold the assets of the Trust in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders, subject to the obligations of the Trust under the Basic Documents. The Owner Trustee has, pursuant to authority in the Organizational Trust Agreement, filed the Certificate of Trust. The Trust shall constitute a business trust under the Business Trust Statute and this Agreement shall constitute the governing instrument of such business trust. Solely for United States federal and state income tax purposes, the Depositor's contribution of $1.00 to the Trust in exchange for an interest in the Trust and the relations created by the arrangements between the Trust, the Servicer and the Depositor is intended to constitute the formation of a partnership. The sale by the Depositor of Class [__] Certificates is 2 4 intended to effect a termination of that partnership under Code Section 708 and the creation of a new tax partnership (the "Tax Partnership") whose partners are the Class[__] Certificateholders and the Class [__] Certificateholders. The Tax Partnership shall be governed as set forth in the Tax Partnership Agreement attached hereto as Annex A. SECTION 2.7 Liability of the Depositor and the Certificateholders. (a) The Depositor shall be liable directly to and shall indemnify an injured party for all losses, claims, damages, liabilities and expenses of the Trust (including Expenses (as defined in Section 6.9(b)), to the extent not paid out of the assets of the Trust) to the extent that the Depositor would be liable if the Trust were a partnership under the Uniform Limited Partnership Act in which the Depositor were a general partner; provided, however, that the Depositor shall not be liable for (i) any losses incurred by a Certificateholder or a Certificate Owner in its capacity as an investor in the Certificates or by a Noteholder in its capacity as an investor in the Notes or (ii) any losses, claims, damages, liabilities and expenses arising out of the imposition by any taxing authority of any federal, state or local income or franchise taxes or any other taxes imposed on or measured by gross or net income, gross or net receipts, capital, net worth and similar items (including any interest, penalties or additions with respect thereto) upon the Certificateholders, the Certificate Owners, the Noteholders, the Owner Trustee or the Indenture Trustee (including any liabilities, costs or expenses with respect thereto) with respect to the Mortgage Loans not specifically indemnified against or represented to hereunder. In addition, any third party creditors of the Trust (other than in connection with the obligations described in the preceding sentence for which the Depositors shall not be liable) shall be deemed third party beneficiaries of this subsection 2.7(a). The obligations of the Depositor under this subsection 2.7(a) shall be evidenced by the Class [__] Certificates. (b) No Certificate Owner or Certificateholder, other than to the extent set forth in subsection 2.7(a) with respect to the Depositor, shall have any personal liability for any liability or obligation of the Trust. SECTION 2.8 Title to Trust Property. Legal title to all of the assets of the Trust shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the assets of the Trust to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be. SECTION 2.9 Situs of Trust. The Trust shall be located and administered in the State of Delaware. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of Delaware or the State of New York. The Trust shall not have any employees in any state other than Delaware; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having employees within or without the State of Delaware. Payments shall be received by the Trust only in Delaware or New York, and payments will be made by the Trust only from Delaware or New York. The only office of the Trust shall be the Corporate Trust Office in Delaware. SECTION 2.10 Representations and Warranties of the Depositor. The Depositor hereby represents and warrants to the Owner Trustee that: 3 5 (a) The Depositor has been duly organized and is validly existing as a corporation in good standing under the laws of the State of [___________], with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted and had at all relevant times, and now has, power, authority and legal right to acquire and own the Mortgage Loans. (b) The Depositor is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualifications. (c) The Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms, the Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Issuer as part of the Trust, and the Depositor has duly authorized such sale and assignment to the Issuer by all necessary corporate action; and the execution, delivery and performance of this Agreement have been duly authorized by the Depositor by all necessary corporate action. (d) The consummation of the transactions contemplated by this Agreement and the other Basic Documents to which it is a party and the fulfillment of the terms of this Agreement do not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice or lapse of time) a default under, the certificate of incorporation or by-laws of the Depositor, or any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents) or violate any law or, to the best of the Depositor's knowledge, any order, rule or regulation applicable to the Depositor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or any of its properties. SECTION 2.11 Pledge by Class[__] Certificateholders of Spread Account. (a) The Class [__] Certificateholder, by accepting the Class [__] Certificate, acknowledges that it has pledged all of its right, title and interest in and to the Spread Account to the Indenture Trustee, for the benefit of the Noteholders and the Class [__] Certificateholders and as security for certain of the Trust's obligations under the Basic Documents, as set forth in Section [____] of the Pooling and Servicing Agreement. The pledge contained herein shall be binding upon the Class [__] Certificateholder, and its successors and assigns. (b) The Class [__] Certificateholder, by accepting the Class [__] Certificate, agrees to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments (including, without limitation, any UCC financing statements or this Agreement), as may be determined by the Indenture Trustee or the Credit Enhancer, in order to perfect the interests created by this Section 2.11 and otherwise fully to effectuate the purposes, terms and conditions of this Section 2.11. In furtherance of this, the Class [__] Certificateholders shall promptly execute, deliver and file any financing statements, amendments, continuation statements, assignments, certificates and other documents with respect to such interests and perform all other acts as the Indenture Trustee or 4 6 the Credit Enhancer may deem necessary in order to perfect or to maintain the perfection of the Indenture Trustee's security interest in the Spread Account. ARTICLE III THE CERTIFICATES SECTION 3.1 Initial Certificate Ownership. Upon the formation of the Trust by the contribution by the Depositor pursuant to Section 2.5, the Depositor shall be the initial beneficiary of the Trust. Upon the execution and the initial delivery of Certificates pursuant to Section 3.3 below, the Depositor shall be the only Certificateholder. SECTION 3.2 Form of the Certificates. (a) The Class [__] Certificates and the Class [__] Certificate shall be substantially in the form set forth in Exhibits A-1 and A-2, respectively, and the Class [__] Certificates shall be issued in minimum denominations of $1,000 and in integral multiples thereof. The Certificates shall be executed on behalf of the Trust by manual or facsimile signature of an authorized signatory of the Owner Trustee. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be valid and binding obligations of the Trust, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of authentication and delivery of such Certificates. (b) The Definitive Certificates shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders) all as determined by the authorized signatory of the Owner Trustee or the Owner Trustee's authenticating agent executing such Certificates, as evidenced by their execution of such Certificates. (c) The terms of the Certificates set forth in Exhibits A-1 and A-2 shall form part of this Agreement. SECTION 3.3 Execution, Authentication and Delivery. Concurrently with the transfer of the Mortgage Loans to the Trust pursuant to the Pooling and Servicing Agreement, the Owner Trustee shall execute, or cause its authenticating agent to execute, (i) the Class [__] Certificates in an aggregate principal amount equal to the Original Class [__] Principal Balance and (ii) one Class [__] Certificate, to be executed on behalf of the Trust, authenticated and delivered to or upon the written order of the Depositor, signed by a Responsible Officer of the Depositor, without further corporate action by the Depositor, in Authorized Denominations. No Certificate shall entitle its holder to any benefit under this Agreement, or shall be valid for any purpose, unless there shall appear on such Certificate a certificate of authentication substantially in the form set forth in Exhibits A-1 and A-2, executed by the Owner Trustee or [______________], as the Owner Trustee's authenticating agent, by manual signature. Such authentication shall constitute conclusive evidence that such Certificate shall have been duly 5 7 authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. SECTION 3.4 Registration; Registration of Transfer and Exchange of Certificates. (a) The Certificate Registrar shall cause to be kept at its office or agency in New York, New York, or at its designated agent, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, it shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. Upon any resignation of a Certificate Registrar, the Owner Trustee shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of the Certificate Registrar. [_________________] shall be the initial Certificate Registrar. (b) The Class [___] Certificate has not been registered or qualified under the Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws or "Blue Sky" laws. No transfer, sale, pledge or other disposition of the Class [__] Certificate shall be made unless such disposition is made pursuant to the proviso set forth in Section 3.10. None of the Servicer, the Depositor, the Certificate Registrar nor the Owner Trustee is obligated under this Agreement to register the Class [__] Certificate under the 1933 Act or any other securities law or to take any action not otherwise required under this Agreement to permit the transfer or registration of transfer of the Class [__] Certificate without such registration or qualification. Any Class [__] Certificateholder desiring to effect such transfer shall, and does hereby agree to, promptly reimburse the Owner Trustee, the Depositor, the Certificate Registrar and the Servicer for costs and expenses incurred in connection with any liability that results if the transfer is not so exempt or is not made in accordance with such applicable federal and state laws. In addition to the restrictions set forth in Section 9.11, none of the Trust, the Servicer, the Depositor, the Administrator or any Seller shall be a Class [__] Certificateholder; provided, however, that the Depositor may hold Class [__] Certificates upon receipt thereof until such Class [__] Certificates are sold pursuant to the Underwriting Agreement. Any attempted or purported transfer in violation of the preceding sentence shall be absolutely null and void and shall vest no rights in the purported transferee. If any purported transferee shall become a Holder of a Class [__]Certificate in violation of such sentence, then the last preceding Holder shall be restored to all rights as Holder thereof retroactive to the date of registration of transfer of such Certificate. The Owner Trustee shall notify the Servicer of any transfer in violation of this paragraph upon receipt of written notice thereof. None of the Owner Trustee, the Certificate Registrar or any Paying Agent shall be liable to any Person for any registration of transfer of a Class [__] Certificate not permitted by this paragraph or for making any payments due on such Class [__] Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the transfer was registered without such receipt. The Owner Trustee shall be entitled, but not obligated, to recover from any Holder of a Class [__] Certificate that was in fact not a permitted Holder under this paragraph, all payments made on such Class [__] Certificate at and after such time. Any such payments so recovered by 6 8 the Owner Trustee shall be paid and delivered by the Owner Trustee to the last preceding Holder of such Class [__] Certificate. Subject to the preceding paragraphs, upon surrender for registration of transfer of any Certificate at the office or agency of the Owner Trustee maintained pursuant to Section 3.8, the Owner Trustee shall execute, and the Owner Trustee or its authenticating agent shall authenticate and deliver in the name of the designated transferee or transferees, a new Certificate of the same Class and Percentage Interest and dated the date of authentication by the Owner Trustee or such authenticating agent. At the option of the Certificateholders, Certificates may be exchanged for other Certificates of Authorized Denominations of a like aggregate Percentage Interest, upon surrender of the Certificates to be exchanged at such office. Whenever any Certificates are so surrendered for exchange, the Owner Trustee or its Authenticating Agent shall execute, authenticate and deliver the Certificates which the Certificateholder making the exchange is entitled to receive. No service charge shall be made for any registration of transfer or exchange of Certificates, but the Owner Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any registration of transfer or exchange of Certificates. All Certificates surrendered for registration of transfer or exchange shall be marked "canceled" by the Owner Trustee. SECTION 3.5 Mutilated; Destroyed; Lost or Stolen Certificates. (a) If (i) any mutilated Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (ii) there is delivered to the Certificate Registrar, the Owner Trustee and the Trust such security or indemnity as may be required by them to hold each of them harmless, then, in the absence of notice to the Certificate Registrar or the Owner Trustee that such Certificate has been acquired by a bona fide purchaser, the Owner Trustee shall execute on behalf of the Trust and the Owner Trustee or the Owner Trustee's Authenticating Agent shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a replacement Certificate of a like class and aggregate principal amount; provided, however, that if any such destroyed, lost or stolen Certificate, but not a mutilated Certificate, shall have become or within seven days shall be due and payable, then, instead of issuing a replacement Certificate, the Owner Trustee may pay such destroyed, lost or stolen Certificate when so due or payable. (b) If, after the delivery of a replacement Certificate or payment in respect of a destroyed, lost or stolen Certificate pursuant to subsection 3.5(a), a bona fide purchaser of the original Certificate in lieu of which such replacement Certificate was issued presents for payment such original Certificate, the Owner Trustee shall be entitled to recover such replacement Certificate (or such payment) from the Person to whom it was delivered or any Person taking such replacement Certificate from such Person to whom such replacement Certificate was delivered or any assignee of such Person, except a bona fide purchaser, and shall 7 9 be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Owner Trustee in connection therewith. (c) In connection with the issuance of any replacement Certificate under this Section 3.5, the Owner Trustee or the Certificate Registrar may require the payment by the Holder of such Certificate of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Owner Trustee and the Certificate Registrar) connected therewith. (d) Any duplicate Certificate issued pursuant to this Section 3.5 in replacement of any mutilated, destroyed, lost or stolen Certificate shall constitute an original additional contractual obligation of the Trust, whether or not the mutilated, destroyed, lost or stolen Certificate shall be found at any time or be enforced by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Certificates duly issued hereunder. (e) The provisions of this Section 3.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. SECTION 3.6 Persons Deemed Certificateholders. Prior to due presentation of a Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar or any Paying Agent may treat the Person in whose name any Certificate shall be registered in the Certificate Register as the Certificateholder of such Certificate for the purpose of receiving distributions pursuant to Article V and for all other purposes whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be affected by any notice to the contrary. SECTION 3.7 Access to List of Certificateholders' Names and Addresses. The Certificate Registrar shall furnish or cause to be furnished to the Credit Enhancer, the Servicer or the Depositor, within 15 days after receipt by the Certificate Registrar of a request therefor from the Credit Enhancer, the Servicer or the Depositor in writing, as the case may be, a list, in such form as the Credit Enhancer, the Servicer or the Depositor may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. Each Holder, by receiving and holding a Certificate, shall be deemed to have agreed not to hold any of the Credit Enhancer, the Servicer, the Depositor, the Certificate Registrar or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 3.8 Maintenance of Office For Surrenders. The Owner Trustee shall maintain in the Borough of Manhattan, the City of New York, an office or offices or agency or agencies where Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Certificates and the Basic Documents may be served. The Owner Trustee initially designates the offices of [_______________],as its principal office for such purposes. The Owner Trustee shall give prompt written notice to the Depositor and to the Certificateholders of any change in the location of the Certificate Register or any such office or agency. 8 10 SECTION 3.9 Appointment of Paying Agent. The Paying Agent shall make distributions to Certificateholders from the Certificate Distribution Account pursuant to Section 5.2 and shall report the amounts of such distributions to the Owner Trustee and the Servicer. Any Paying Agent shall have the revocable power to withdraw funds from the Certificate Distribution Account for the purpose of making the distributions referred to above. The Owner Trustee may revoke such power and remove the Paying Agent if the Owner Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent shall initially be [_____________], and any co-paying agent chosen by [__________________], and acceptable to the Owner Trustee. [________________] shall be permitted to resign as Paying Agent upon 30 days' written notice to the Owner Trustee and the Credit Enhancer. If [________________] shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent (which shall be a bank or trust company acceptable to the Credit Enhancer and the Rating Agencies). The Owner Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Owner Trustee that as Paying Agent, such successor Paying Agent or additional Paying Agent shall hold all sums, if any, held by it for payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. The Paying Agent shall return all unclaimed funds to the Owner Trustee, and upon removal of a Paying Agent, such Paying Agent shall also return all funds in its possession to the Owner Trustee. The provisions of Article VI shall apply to the Owner Trustee also in its role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 3.10 Restriction on Transfers by Class [__] Certificateholder. The Class [__] Certificateholder shall not sell, transfer, assign or dispose of all or any portion of the Class [__] Certificate; provided, that the Class [__] Certificateholder may, within ten Business Days of the Closing Date, make a one-time transfer to a wholly-owned subsidiary of such Class [__] Certificateholder; provided, that the Depositor shall retain at least [two] percent of its original holdings in the Class [__] Certificate; and provided, further, if the transferee is a wholly-owned subsidiary, the transferee shall obtain no rights as a result of the transfer other than rights to distributions and tax allocations. Upon completion of such transfer, the Depositor shall certify to the Owner Trustee as to compliance with this Section 3.10. SECTION 3.11 Book-Entry Certificates. The Class [__] Certificates, upon original issuance, shall be issued in the form of a typewritten Certificate or Certificates representing Book-Entry Certificates, to be delivered to the Depository. Such Class [__] Certificate or Certificates shall initially be registered on the Certificate Register in the name of Cede & Co., the nominee of the initial Depository, and no Certificate Owner of a Class [__] Certificate or Certificates shall receive a definitive Class [__] Certificate representing such Certificate Owner's interest in such Class [__] Certificate, except as provided in Section 3.13. Unless and until definitive fully registered Class [__] Certificates (the "Definitive Certificates") shall have been issued to Certificate Owners pursuant to Section 3.13: (a) the provisions of this Section 3.11 shall be in full force and effect; 9 11 (b) the Certificate Registrar and the Owner Trustee shall be entitled to deal with the Depository for all purposes of this Agreement (including the payment of principal of and interest on the Certificates and the giving of instructions or directions hereunder) as the sole Holder of the Class [__] Certificates, and shall have no obligation to the Certificate Owners with respect thereto; (c) to the extent that the provisions of this Section 3.11 conflict with any other provisions of this Agreement, the provisions of this Section 3.11 shall control; (d) the rights of the Certificate Owners with respect to the Class [__] Certificate or Certificates shall be exercised only through the Depository and shall be limited to those established by law and agreements between such Certificate Owners and the Depository and/or the Depository Participants. Pursuant to the Certificate Depository Agreement in the form attached as Exhibit C, unless and until Definitive Certificates are issued pursuant to Section 3.13, the initial Depository will make book-entry transfers among the Depository Participants and receive and transmit payments of principal of and interest on the Class [__] Certificates to such Depository Participants; (e) whenever this Agreement requires or permits actions to be taken based upon instructions or directions of Holders of Certificates evidencing a specified aggregate Percentage Interest, the Depository shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificate Owners and/or Depository Participants owning or representing, respectively, such required aggregate Percentage Interest of Class [__] Certificates (taking into account the proviso contained in the definition of "Certificateholder" contained in the Pooling and Servicing Agreement) and has delivered such instructions to the Owner Trustee; provided, however, that the provisions of this Section 3.11 shall not be applicable in respect of Class [__] Certificates issued to the Depositor. The Depositor or the Owner Trustee may set a record date for the purpose of determining the identity of Holders of Class [__] Certificates entitled to vote or to consent to any action by vote as provided in this Agreement. SECTION 3.12 Notices to Depository. Whenever a notice or other communication to the Class [__] Certificateholders is required under this Agreement, the Indenture or the Pooling and Servicing Agreement, unless and until Definitive Certificates shall have been issued to Certificate Owners pursuant to Section 3.13, the Owner Trustee shall give all such notices and communications specified herein to be given to Class [__] Certificateholders to the Depository and shall have no further obligation to the Certificate Owners of the Class [__] Certificates. SECTION 3.13 Definitive Certificates. (a) The Class [__] Certificate shall be issued in the form of Definitive Certificates and (b) with respect to the Class [__] Certificates, if (i) the Administrator advises the Owner Trustee in writing that the Depository is no longer willing or able to properly discharge its responsibilities with respect to the Class [__] Certificates, and the Administrator is unable to locate a qualified successor; (ii) the Administrator at its option advises the Owner Trustee in writing that it elects to terminate the book-entry system through the Depository; or (iii) after the occurrence of a Servicer Default under the Pooling and Servicing Agreement, a Majority in Voting Interest of the Class [__] 10 12 Certificates advise the Depository in writing that the continuation of a book-entry system through the Depository is no longer in the best interest of the Certificate Owners of the Class [__] Certificates, then the Depository shall notify all Certificate Owners and the Owner Trustee of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender to the Owner Trustee of the typewritten Certificate or Certificates representing the Book-Entry Certificates by the Depository, accompanied by registration instructions, the Owner Trustee shall execute and authenticate the Definitive Certificates in accordance with the instructions of the Depository. Neither the Certificate Registrar nor the Owner Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Certificates, the Owner Trustee shall recognize the Holders of the Definitive Certificates as Certificateholders. SECTION 3.14 Appointment of Authenticating Agent. At any time when any of the Certificates remain outstanding the Owner Trustee may appoint an authenticating agent or agents with respect to the Certificates which shall be authorized to act on behalf of the Owner Trustee to authenticate Certificates issued upon original issuance, exchange or registration of transfer. The Owner Trustee may revoke such power and remove any authenticating agent at any time. Chemical Bank shall initially be an authenticating agent hereunder. If any authenticating agent is appointed hereunder, the Certificates may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Certificates referred to in the within-mentioned Trust Agreement. [ ], not in ----------------------- its individual capacity but solely as Owner Trustee By: ------------------------------- As Authenticating Agent By: ------------------------------- Authorized Signatory ARTICLE IV ACTIONS BY OWNER TRUSTEE SECTION 4.1 Prior Notice to Certificateholders with Respect to Certain Matters. The Owner Trustee shall not take action with respect to the following matters, unless (i) the Owner Trustee shall have notified the Certificateholders and the Credit Enhancer in writing of the proposed action at least 30 days before the taking of such action, and (ii) the Majority in Voting Interest of Class [__] Certificateholders or the Credit Enhancer shall not have notified the 11 13 Owner Trustee in writing prior to the 30th day after such notice is given that such Certificateholders or the Credit Enhancer have withheld consent or provided alternative direction: (a) the initiation of any claim or lawsuit by the Trust or the compromise of any action, claim or lawsuit brought by or against the Trust; (b) the election by the Trust to file an amendment to the Certificate of Trust, a conformed copy of which is attached hereto as Exhibit B; provided, however, that the Owner Trustee may, without consent of any Certificateholder or the Credit Enhancer, amend the Certificate of Trust to the extent it is required to do so under the Business Trust Statute; (c) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is required; (d) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is not required and such amendment materially adversely affects the interest of the Certificateholders; (e) the amendment, change or modification of the Administration Agreement, except to cure any ambiguity or to amend or supplement any provision in a manner that would not materially adversely affect the interests of the Certificateholders; or (f) the appointment pursuant to the Indenture of a successor Note Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a successor Certificate Registrar or Paying Agent, or the consent to the assignment by the Note Registrar, Paying Agent, Indenture Trustee or Certificate Registrar of its obligations under the Indenture or this Agreement, as applicable. SECTION 4.2 Action by Certificateholders with Respect to Certain Matters. The Owner Trustee shall not have the power, except upon the written direction of (i) the Majority in Voting Interest of the Class [__] Certificates (with the written consent of the Credit Enhancer) or (ii) the Credit Enhancer, to (a) remove the Administrator under the Administration Agreement pursuant to Section 10 thereof, (b) appoint a successor Administrator pursuant to Section 10 of the Administration Agreement, (c) remove the Servicer under the Pooling and Servicing Agreement pursuant to Section 9.01 thereof or (d) except as expressly provided in the Basic Documents, sell the Mortgage Loans or any interest therein after the termination of the Indenture. The Owner Trustee shall take the actions referred to in the preceding sentence only upon written instructions signed by (i) the Majority in Voting Interest of the Class [__] Certificates (with the written consent of the Credit Enhancer) or (ii) the Credit Enhancer. SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy. The Owner Trustee shall not have the power to commence a voluntary proceeding in bankruptcy relating to the Trust without the unanimous prior approval of all Class [__] Certificateholders and the delivery to the Owner Trustee by each such Certificateholder of a certificate certifying that such Certificateholder reasonably believes that the Trust is insolvent. 12 14 SECTION 4.4 Restrictions on Certificateholders' Power. The Certificateholders shall not direct the Owner Trustee to take or refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Owner Trustee under this Agreement or any of the Basic Documents or would be contrary to Section 2.3, nor shall the Owner Trustee be obligated to follow any such direction, if given. SECTION 4.5 Majority Control. Except as expressly provided herein, any action that may be taken or consent that may be given or withheld by the Class [__] Certificateholders under this Agreement or the Pooling and Servicing Agreement may be taken, given or withheld by not less than a Majority in Voting Interest of Class [__] Certificates. Except as expressly provided herein, any written notice of the Class [__] Certificateholders delivered pursuant to this Agreement shall be effective if signed by a Majority in Voting Interest of Class [__] Certificates. ARTICLE V APPLICATION OF ASSETS OF THE TRUST; CERTAIN DUTIES SECTION 5.1 Establishment of Certificate Distribution Account. (a) The Owner Trustee, for the benefit of the Certificateholders, shall establish and maintain in the name of the Owner Trustee an Eligible Account known as the "Banc One HELOC Trust 199[__]-[__] Certificate Distribution Account" (the "Certificate Distribution Account"), bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. (b) The Owner Trustee (and the Credit Enhancer as subrogee) on behalf of the Trust shall possess all right, title and interest in and to all funds on deposit from time to time in the Certificate Distribution Account and in all proceeds thereof. Except as otherwise provided herein or in the Pooling and Servicing Agreement, the Certificate Distribution Account shall be under the sole dominion and control of the Owner Trustee for the benefit of the Certificateholders. If, at any time, the Certificate Distribution Account ceases to be an Eligible Account, the Owner Trustee (or the Administrator on behalf of the Owner Trustee, if the Certificate Distribution Account is not then held by the Owner Trustee or an Affiliate thereof) shall within 5 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency and the Credit Enhancer may consent) notify the Credit Enhancer, establish a new Certificate Distribution Account as an Eligible Account and transfer any cash and/or any investments to such new Certificate Distribution Account. SECTION 5.2 Application of Funds. (a) (i) On each Monthly Deposit Date, the Owner Trustee shall, based upon the information delivered on the related Determination Date pursuant to Section 5.03 of the Pooling and Servicing Agreement, distribute to the Class [__] Certificateholders all amounts deposited into the Certificate Distribution Account on or before such Monthly Deposit Date (and not previously distributed to the Class [__] Certificateholders) pursuant to Sections [________], [______________] and [___________] of the Pooling and Servicing Agreement; and 13 15 (ii) on each Payment Date, the Owner Trustee shall, based upon the information contained in the Remittance Report delivered on the related Determination Date pursuant to Section 5.03 of the Pooling and Servicing Agreement, distribute: (A) to the Class [___] Certificateholders, all amounts deposited into the Certificate Distribution Account on or before such Payment Date (and not previously distributed to the Class [___] Certificateholders) constituting the Class [__] Remittance Amount; and (B) to the Class [___] Certificateholders, all amounts deposited into the Certificate Distribution Account on or before such Payment Date (and not previously distributed to the Class [___] Certificateholders) pursuant to Sections[_________] and [___________], [__________] and [_________] of the Pooling and Servicing Agreement. (b) If the Owner Trustee on any Determination Date (other than a Determination Date with respect to a Payment Date) receives written notice from the Indenture Trustee pursuant to Section [____] of the Pooling and Servicing Agreement that a Special Remittance shall occur on the following Monthly Deposit Date (which shall be a "Special Remittance Date"), notice of such remittance shall be given by the Owner Trustee by first-class mail, postage prepaid, mailed not later than the Business Day following such Determination Date, to each Class [__] Certificateholder of record on the related Special Record Date at such Class [__] Certificateholder's address appearing in the Certificate Register. Each such notice by the Indenture Trustee to the Owner Trustee and by the Owner Trustee to the Class [__] Certificateholders shall set forth: (i) the applicable Special Remittance Date; and (ii) the Special Remittance Amount and the Special Remittance Amount per $1,000 original denomination of Class [__] Certificates. Notice of such Special Remittance shall be given by the Owner Trustee at the expense of the Administrator. Failure to give notice of any Special Remittance, or any defect therein, to any Class [__] Certificateholder shall not impair or affect the validity of such Special Remittance. (c) On each Special Remittance Date, the Owner Trustee shall, based upon the information contained in the notice given to the Owner Trustee by the Indenture Trustee pursuant to Section 5.2(b), distribute to the Class [__] Certificateholders all amounts deposited into the Certificate Distribution Account constituting the Special Remittance Amount on or before such Special Payment Date pursuant to Section [_________] the Pooling and Servicing Agreement. (d) On each Payment Date, the Owner Trustee shall send to each Certificateholder the statement provided to the Owner Trustee by the Indenture Trustee pursuant to Section [____] of the Pooling and Servicing Agreement with respect to such Payment Date. (e) If the Indenture Trustee holds escheated funds for payment to the Trust pursuant to Section 3.3(e) of the Indenture, the Administrator shall, upon notice from the Indenture Trustee that such funds exist, submit on behalf of the Trust an Issuer Order to the 14 16 Indenture Trustee pursuant to Section 3.3(e) of the Indenture instructing the Indenture Trustee to pay such funds to or at the order of the Depositor. SECTION 5.3 Method of Payment. Subject to Section 7.1(c), distributions required to be made to Class [___] Certificateholders on any Payment Date or Special Payment Date shall be made to the applicable Class [__] Certificateholders of record on the immediately preceding Record Date or Special Record Date, as the case may be, (i) by wire transfer, in immediately available funds, to each Class [__] Certificateholder owning of record Certificates which in the aggregate evidence a denomination of not less than $1,000,000, to the account of such Holder at a bank or other entity having appropriate facilities therefor, if such Class [__] Certificateholder shall have provided to the Certificate Registrar appropriate written instructions at least five Business Days prior to such Record Date or Special Record Date, as the case may be, or, otherwise, (ii) by check mailed to such Class [__] Certificateholder at the address of such Holder appearing in the Certificate Register. Such distributions will be made on a pro rata basis among the Class [__] Certificateholders based on the Percentage Interest represented by their respective Class [__] Certificates. Subject to subsection 7.1(c), distributions required to be made to the Class [__] Certificateholders on any Monthly Deposit Date and Payment Date shall be made to the Class [__] Certificateholder of record on the immediately preceding Record Date by wire transfer, in immediately available funds, to the account of each such Holder at a bank or other entity having appropriate facilities thereof. ARTICLE VI THE OWNER TRUSTEE SECTION 6.1 Duties of Owner Trustee. (a) The Owner Trustee undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement and the other Basic Documents, including the administration of the Trust in the interest of the Certificateholders, subject to the Basic Documents and in accordance with the provisions of this Agreement. No implied covenants or obligations shall be read into this Agreement against the Owner Trustee. (b) Notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the Basic Documents to the extent the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee hereunder or under any Basic Document, and the Owner Trustee shall not be liable for the default or failure of the Administrator to carry out its obligations under the Administration Agreement. (c) In the absence of bad faith on its part, the Owner Trustee may conclusively rely upon certificates or opinions furnished to the Owner Trustee and conforming to the requirements of this Agreement in determining the truth of the statements and the correctness of the opinions contained therein; provided, however, that the Owner Trustee shall have examined such certificates or opinions so as to determine compliance of the same with the requirements of this Agreement. 15 17 (d) The Owner Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own bad faith or wilful misconduct, except that: (i) this subsection 6.1(d) shall not limit the effect of subsection 6.1(a) or (b); (ii) the Owner Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Owner Trustee was negligent in ascertaining the pertinent facts; and (iii) the Owner Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 4.1, 4.2 or 6.4. (e) Subject to Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not be segregated in any manner except to the extent required by law and may be deposited under such general conditions as may be prescribed by law, and the Owner Trustee shall not be liable for any interest thereon. (f) The Owner Trustee shall not take any action that (i) is inconsistent with the purposes of the Trust set forth in Section 2.3 or (ii) would, to the actual knowledge of a Responsible Officer of the Owner Trustee, result in the Trust's becoming taxable as a corporation for federal, state or local income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section 6.1. SECTION 6.2 Additional Duties of Owner Trustee. The Owner Trustee is authorized and directed to execute and deliver the Basic Documents to which it or the Trust is a party, each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which it or the Trust is to be a party and the Underwriting Agreement, in each case in such form as the Depositor shall approve as evidenced conclusively by the Owner Trustee's or the Depositor's execution thereof. In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Trust pursuant to the Basic Documents. The Owner Trustee is further authorized from time to time to take such action as the Administrator recommends with respect to the Basic Documents and the Underwriting Agreement. SECTION 6.3 Acceptance of Trusts and Duties. Except as expressly provided in this Article VI, in accepting the trusts hereby created [_________________] acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any Basic Document shall look only to the assets of the Trust for payment or satisfaction thereof. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts but only upon the terms of this Agreement. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the assets of the Trust upon the terms of the Basic Documents and this Agreement. The Owner Trustee shall not be liable or accountable hereunder or under any Basic Document under any circumstances, except (i) for its own negligent action, its own negligent failure to act or its own willful misconduct or 16 18 (ii) in the case of the inaccuracy of any representation or warranty contained in Section 6.6 and expressly made by the Owner Trustee. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) the Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage Loan, or the perfection and priority of any security interest created by any Mortgage Loan in any Mortgaged Property or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the assets of the Trust or their ability to generate the payments to be distributed to Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation: the existence, condition and ownership of any Mortgaged Property; the existence and enforceability of any insurance thereon; the existence and contents of any Mortgage Loan on any computer or other record thereof; the validity of the assignment of any Mortgage Loan to the Trust or of any intervening assignment; the completeness of any Mortgage Loan; the performance or enforcement of any Mortgage Loan; the compliance by the Depositor or the Servicer with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation or any action of the Administrator, the Indenture Trustee, the Custodian or the Servicer taken in the name of the Owner Trustee. (b) the Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Administrator, the Credit Enhancer or any Certificateholder; (c) no provision of this Agreement or any Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any Basic Document, if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (d) under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Basic Documents, including the Note Principal Balance and the interest on the Notes, the Class [__] Principal Balance and interest on the Class [__] Certificates or amounts payable with respect to the Class [__] Certificate; (e) the Owner Trustee shall not be responsible for or in respect of and makes no representation as to the validity or sufficiency of any provision of this Agreement or for the due execution hereof by the Depositor or for the form, character, genuineness, sufficiency, value or validity of any of the assets of the Trust or for or in respect of the validity or sufficiency of the Basic Documents, the Underwriting Agreement, the Notes, the Certificates (other than the certificate of authentication on the Certificates) or of any Mortgage Loans or any related documents, and the Owner Trustee shall in no event assume or incur any liability, duty or obligation to any Noteholder or to any Certificateholder, other than as expressly provided for herein and in the Basic Documents; (f) the Owner Trustee shall not be liable for the default or misconduct of the Administrator, the Indenture Trustee, the Custodian, the Depositor or the Servicer under any of 17 19 the Basic Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Trust under this Agreement or the Basic Documents that are required to be performed by the Administrator under the Administration Agreement, the Indenture Trustee under the Indenture, the Custodian under the Custodial Agreement or the Servicer under the Pooling and Servicing Agreement; (g) the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement, the Underwriting Agreement or any Basic Document, at the request, order or direction of any of the Credit Enhancer or any of the Certificateholders, unless the Credit Enhancer or such Certificateholders have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any Basic Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of any such act; (h) The Owner Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to prepare, execute or file any Securities and Exchange Commission filing or tax return for the Trust or to record this Agreement or any Basic Document. SECTION 6.4 Action upon Instruction by Certificateholders. (a) Subject to Section 4.4, the Certificateholders may by written instruction direct the Owner Trustee in the management of the Trust. Such direction may be exercised at any time by written instruction of the Certificateholders pursuant to Section 4.5. (b) Notwithstanding the foregoing, the Owner Trustee shall not be required to take any action hereunder or under any Basic Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any Basic Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or any Basic Document, or is unsure as to the application, intent, interpretation or meaning of any provision of this Agreement or the Basic Documents, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Credit Enhancer and the Certificateholders requesting instruction as to the course of action to be adopted, and, to the extent the Owner Trustee acts in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instructions within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action which is consistent, in its view, with this Agreement or the Basic Documents, and as it shall 18 20 deem to be in the best interests of the Certificateholders, and the Owner Trustee shall have no liability to any Person for any such action or inaction. SECTION 6.5 Furnishing of Documents. The Owner Trustee shall furnish (a) to the Certificateholders, promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Basic Documents, and (b) to the Credit Enhancer, copies of any reports, notices, requests, demands, certificates, financial statements, and any other instruments relating to the Trust, the Certificates or the Notes in the possession of the Owner Trustee, that the Credit Enhancer shall request in writing. SECTION 6.6 Representations and Warranties of Owner Trustee. The Owner Trustee hereby represents and warrants to the Depositor, for the benefit of the Certificateholders and the Credit Enhancer, that: (a) It is a [banking corporation] duly organized, validly existing and in good standing under the laws of the state of its incorporation. (b) It has full power, authority and legal right to execute, deliver and perform its obligations under this Agreement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement. (c) The execution, delivery and performance by it of this Agreement (i) shall not violate any provision of any law or regulation governing the banking and trust powers of the Owner Trustee or any order, writ, judgment or decree of any court, arbitrator or governmental authority applicable to the Owner Trustee or any of its assets, (ii) shall not violate any provision of the corporate charter or by-laws of the Owner Trustee, or (iii) shall not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have a materially adverse effect on the Owner Trustee's performance or ability to perform its duties as Owner Trustee under this Agreement or on the transactions contemplated in this Agreement. (d) This Agreement has been duly executed and delivered by the Owner Trustee and constitutes the legal, valid and binding agreement of the Owner Trustee, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. SECTION 6.7 Reliance; Advice of Counsel. (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties and need not investigate any fact or matter in any such document. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other 19 21 governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the Basic Documents, the Owner Trustee: (i) may act directly or through its agents, attorneys, custodians or nominees (including the granting of a power of attorney (x) to officers of [_________________] to execute and deliver any Basic Document, Certificate, Note or other documents related thereto on behalf of the Owner Trustee or (y) to the Administrator to execute any tax return of the Trust or any document, report or other instrument to be filed with the Securities and Exchange Commission or any state securities commission or administration) pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents, attorneys, custodians or nominees if such agents, attorneys, custodians or nominees shall have been selected by the Owner Trustee with reasonable care and (ii) may consult with counsel, accountants and other skilled professionals to be selected with reasonable care and employed by it. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the opinion or advice of any such counsel, accountants or other such Persons. SECTION 6.8 Owner Trustee May Own Certificates and Notes. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Certificates or Notes and may deal with either Depositor, the Administrator, the Custodian, the Indenture Trustee and the Servicer in transactions in the same manner and with the same rights as it would have if it were not the Owner Trustee. SECTION 6.9 Compensation and Indemnity. (a) The Owner Trustee shall receive from the Depositor as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Depositor and the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Depositor for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, custodians, nominees, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder. The Servicer shall indemnify the Owner Trustee and its successors, assigns, agents and servants in accordance with the provisions of Section 8.01 of the Pooling and Servicing Agreement. (a) The Depositor shall be liable as primary obligor for, and shall indemnify the Owner Trustee and its successors, assigns, agents and servants (collectively, the "Indemnified Parties") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses") which may at any time be imposed on, incurred by, or asserted against the Owner Trustee or any Indemnified Party in any way relating to or arising out of this Agreement, the 20 22 Basic Documents, the assets of the Trust, the administration of the Trust or the action or inaction of the Owner Trustee hereunder, except only that the Depositor shall not be liable for or required to indemnify the Owner Trustee from and against Expenses arising or resulting from the negligence or willful misconduct of the Owner Trustee. The indemnities contained in this Section 6.9 shall survive the resignation of the Owner Trustee, termination of the Trust or the termination of this Agreement. Any amounts paid to the Owner Trustee pursuant to this Article VI shall be deemed not to be a part of the assets of the Trust immediately after such payment. SECTION 6.10 Replacement of Owner Trustee. (a) The Owner Trustee may resign at any time and be discharged from the trusts hereby created by giving 30 days' prior written notice thereof to the Credit Enhancer and the Administrator. The Administrator shall appoint a successor Owner Trustee with the consent of the Credit Enhancer by delivering a written instrument, in duplicate, to the resigning Owner Trustee and the successor Owner Trustee. If no successor Owner Trustee shall have been appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. The Administrator shall remove the Owner Trustee if: (i) the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 6.13 and shall fail to resign after written request therefor by the Administrator; (ii) the Owner Trustee shall be adjudged bankrupt or insolvent; (iii) a receiver or other public officer shall be appointed or take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; or (iv) the Owner Trustee shall otherwise be legally incapable of acting. (b) If the Owner Trustee resigns or is removed or if a vacancy exists in the office of Owner Trustee for any reason the Administrator shall promptly appoint a successor Owner Trustee, with the consent of the Credit Enhancer, by written instrument, in duplicate (one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee) and shall pay all fees and other amounts owed to the outgoing Owner Trustee. (c) Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section 6.10 shall not become effective until a written acceptance of appointment is delivered by the successor Owner Trustee to the outgoing Owner Trustee and the Administrator and all fees and expenses due to the outgoing Owner Trustee are paid. Any successor Owner Trustee appointed pursuant to this Section 6.10 shall be eligible to act in such capacity in accordance with Section 6.13 and, following compliance with the preceding sentence, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with like effect as if 21 23 originally named as Owner Trustee. The Administrator shall provide notice of such resignation or removal of the Owner Trustee to the Credit Enhancer and each of the Rating Agencies. (d) The predecessor Owner Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and monies held by it under this Agreement. The Administrator and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties and obligations. (e) Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section 6.10, the Administrator (or if the Administrator fails to so notify, the successor Owner Trustee, at the expense of the Administrator) shall mail notice of the successor of such Owner Trustee to all Certificateholders, the Indenture Trustee, the Noteholders, the Credit Enhancer and each of the Rating Agencies. SECTION 6.11 Merger or Consolidation of Owner Trustee. Any corporation into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such corporation shall be eligible pursuant to Section 6.13, and without the execution or filing of any instrument or any further act on the part of any of the parties hereto; provided, however, that the Owner Trustee shall mail notice of such merger or consolidation to the Credit Enhancer and each of the Rating Agencies. SECTION 6.12 Appointment of Co-Trustee or Separate Trustee. (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the assets of the Trust or any Mortgaged Property may at the time be located, the Administrator and the Owner Trustee (with the consent of the Credit Enhancer) acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee and the Credit Enhancer to act as co-trustee, jointly with the Owner Trustee, or as separate trustee or trustees, of all or any part of the assets of the Trust, and to vest in such Person, in such capacity, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 6.12, such powers, duties, obligations, rights and trusts as the Administrator and the Owner Trustee may consider necessary or desirable. If the Administrator shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Owner Trustee (with the consent of the Credit Enhancer) shall have the power to make such appointment. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 6.13 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 6.10. (b) Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: 22 24 (i) all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee, and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; (ii) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and (iii) the Administrator and the Owner Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee; provided, however, that if the Administrator is in default under the Administration Agreement, the Owner Trustee acting alone may accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a copy thereof given to the Administrator and the Credit Enhancer. (d) Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.13 Eligibility Requirements for Owner Trustee. The Owner Trustee shall at all times: (a) be a corporation satisfying the provisions of Section 3807(a) of the Business Trust Statute; (b) be authorized to exercise corporate trust powers; (c) have a combined capital and surplus of at least $50,000,000 and be subject to supervision or examination by federal or state authorities; (d) have (or have a parent which has) a long-term unsecured debt rating of at least [BBB] by [Standard & Poor's Corporation] and at least [Baa2] by the [Moody's Investors Service, Inc.]; and (e) be acceptable to the Credit Enhancer. If such corporation shall publish reports of condition at least annually, pursuant to law or to the requirements of the 23 25 aforesaid supervising or examining authority, then for the purpose of this Section 6.13, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section 6.13, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 6.10. SECTION 6.14 Underwriting Agreement. For purposes of this Article VI, the term "Basic Document" shall be deemed to include the Underwriting Agreement. ARTICLE VII TERMINATION OF TRUST AGREEMENT SECTION 7.1 Termination of Trust Agreement. (a) This Agreement (other than Article VI) and the Trust shall terminate and be of no further force or effect on the earlier of: (i) the final distribution by the Owner Trustee of all moneys or other property or proceeds of the assets of the Trust in accordance with the terms of the Indenture, the Pooling and Servicing Agreement (including the exercise of the Class [__] Certificateholder of its option to purchase the Mortgage Loans pursuant to Section 10.01 of the Pooling and Servicing Agreement) and Article V, (ii) at the time provided in Section 7.2 or (iii) the expiration of 21 years from the death of the last survivor of Joseph P. Kennedy, former Ambassador to the Court of St. James, living on the date of this Trust Agreement. The bankruptcy, liquidation, dissolution, death or incapacity of any Certificateholder, other than the Depositor as described in Section 7.2, shall not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of all or any part of the Trust or the assets of the Trust or (z) otherwise affect the rights, obligations and liabilities of the parties hereto. (b) Except as provided in Section 7.1(a), neither the Depositor nor any Certificateholder shall be entitled to revoke or terminate the Trust. (c) Notice of any termination of the Trust, specifying the Payment Date upon which the Certificateholders shall surrender their Certificates to the Paying Agent for payment of the final distribution and cancellation, shall be given by the Owner Trustee by letter to the Credit Enhancer and the Certificateholders mailed within five Business Days of receipt of notice of such termination from the Servicer given pursuant to subsection 10.01 of the Pooling and Servicing Agreement, stating: (i) the Payment Date upon or with respect to which final payment of the Certificates shall be made upon presentation and surrender of the Certificates at the office of the Paying Agent therein designated; (ii) the amount of any such final payment; and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office of the Paying Agent therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at the time such notice is given to 24 26 Certificateholders. Upon presentation and surrender of the Certificates, the Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Payment Date pursuant to Section 5.2. (d) If all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Certificates shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Subject to applicable laws with respect to escheat of funds, any funds remaining in the Trust after exhaustion of such remedies in the preceding sentence shall be deemed property of the Depositor and distributed by the Owner Trustee to the Depositor. (e) Each Certificateholder is required, and hereby agrees, to return to the Owner Trustee, any Certificate with respect to which the Owner Trustee has made the final distribution due thereon. Any such Certificate as to which the Owner Trustee has made the final distribution thereon shall be deemed canceled and shall no longer be outstanding for any purpose of this Agreement, whether or not such Certificate is ever returned to the Owner Trustee. (f) Upon the winding up of the Trust and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Business Trust Statute. SECTION 7.2 Dissolution upon Bankruptcy of the Depositor. This Agreement shall be terminated in accordance with Section 7.1 90 days after the occurrence of an Insolvency Event with respect to the Depositor, unless, before the end of such 90 day period, the Owner Trustee shall have received written instructions from (a) each of the Certificateholders (other than the Depositor) and (b) each of the Noteholders, to the effect that each such party disapproves of the liquidation of the Mortgage Loans and termination of the Trust. Promptly after the occurrence of any Insolvency Event with respect to either Depositor: (i) the Depositor shall give the Credit Enhancer, the Indenture Trustee, the Rating Agencies and the Owner Trustee written notice of such Insolvency Event; (ii) the Owner Trustee shall, upon the receipt of such written notice from the Depositor, give prompt written notice to the Certificateholders and the Indenture Trustee of the occurrence of such event and (iii) the Indenture Trustee shall, upon receipt of written notice of such Insolvency Event from the Owner Trustee or the Depositor, give prompt written notice to the Noteholders of the occurrence of such event pursuant to Section 6.12 of the Indenture; provided, however, that any failure to give a notice required by this sentence shall not prevent or delay in any manner a termination of the Trust pursuant to the first sentence of this Section 7.2. Upon a termination pursuant to this Section 7.2, the Owner Trustee shall direct the Indenture Trustee promptly to sell the assets of the Trust (other than the Accounts and the Certificate Distribution Account) in a commercially reasonable manner and on commercially reasonable terms. The proceeds of any such sale, disposition or liquidation of the assets of the Trust shall be treated as collections on the Mortgage Loans and deposited in the 25 27 Principal and Interest Account pursuant to Section [___] of the Pooling and Servicing Agreement. ARTICLE VIII AMENDMENTS SECTION 8.1 Amendments Without Consent of Certificateholders or Noteholders. This Agreement may be amended by the Depositor and the Owner Trustee without the consent of any of the Noteholders or the Certificateholders (but with the prior written consent of the Credit Enhancer and prior notice to each of the Rating Agencies and the Administrator), to (i) cure any ambiguity, (ii) correct or supplement any provision in this Agreement that may be defective or inconsistent with any other provision in this Agreement, (iii) add or supplement any credit enhancement for the benefit of the Noteholders or the Certificateholders (provided that if any such addition shall affect any class of Certificateholders differently than any other class of Certificateholders, then such addition shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any class of Certificateholders), (iv) add to the covenants, restrictions or obligations of the Depositor or the Owner Trustee, (v) evidence and provide for the acceptance of the appointment of a successor trustee with respect to the assets of the Trust and add to or change any provisions as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee pursuant to Article VI, and (vi) add, change or eliminate any other provision of this Agreement in any manner that shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of the Noteholders or the Certificateholders. SECTION 8.2 Amendments With Consent of Certificateholders and Noteholders. This Agreement may be amended from time to time by the Depositor and the Owner Trustee with the consent of the Credit Enhancer, a Majority in Voting Interest of Outstanding Notes and a Majority in Voting Interest of Class [__] Certificates (which consent, whether given pursuant to this Section 8.2 or pursuant to any other provision of this Agreement, shall be conclusive and binding on such Person and on all future holders of such Notes or Certificates and of any Notes or Certificates issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Notes or Certificates) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Mortgage Loans or distributions that shall be required to be made on any Note or Certificate, the Note Interest Rate or the Class [__] Pass-Through Rate or (b) reduce the aforesaid percentage required to consent to any such amendment, without the consent of the Holders of all Outstanding Notes and all of the Certificates then outstanding; provided, further, that Annex A hereto may only be amended pursuant to Section 11 thereof. The Depositor shall furnish written notice to each of the Rating Agencies prior to obtaining consent to any proposed amendment under this Section 8.2. 26 28 SECTION 8.3 Form of Amendments. (a) Promptly after the execution of any amendment, supplement or consent pursuant to Section 8.1 or 8.2, the Depositor shall furnish written notification of the substance of such amendment or consent to each Certificateholder, the Indenture Trustee, the Credit Enhancer and each Rating Agency. (b) It shall not be necessary for the consent of Certificateholders, the Noteholders or the Indenture Trustee pursuant to Section 8.2 to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe. (c) Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. (d) Prior to the execution of any amendment to this Agreement or the Certificate of Trust, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent to the execution and delivery of such amendment have been satisfied. The Owner Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee's own rights, duties or immunities under this Agreement or otherwise. ARTICLE IX MISCELLANEOUS SECTION 9.1 No Legal Title to Trust Assets. The Certificateholders shall not have legal title to any part of the assets of the Trust. The Certificateholders shall be entitled to receive distributions with respect to their undivided ownership interest therein only in accordance with Articles V and VII. No transfer, by operation of law or otherwise, of any right, title, and interest of the Certificateholders to and in their ownership interest in the assets of the Trust shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the assets of the Trust. SECTION 9.2 Limitations on Rights of Others. Except for Section 2.7, the provisions of this Agreement are solely for the benefit of the Credit Enhancer, the Owner Trustee, the Depositor, the Certificateholders, the Administrator and, to the extent expressly provided herein, the Indenture Trustee and the Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the assets of the Trust or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. 27 29 SECTION 9.3 Notices. (a) All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by overnight mail, certified mail or registered mail, postage prepaid, to (i) in the case of the Servicer and the Administrator, [______________________],Attention: [_________________], such other addresses as may hereafter be furnished to the Certificateholders and the Noteholders in writing by the Administrator or the Servicer, as the case may be, (ii) in the case of the Depositor, 100 East Broad Street, Columbus, Ohio 43271-0138, Attention: [__________________], or such other addresses as may hereafter be furnished to the Certificateholders and the Noteholders in writing by the Depositor, (iii) in the case of the Issuer, [__________________________], Attention: [________________], or such other addresses as may hereafter be furnished to the Noteholders and the Certificateholders in writing by the Issuer, (iv) in the case of the Owner Trustee, [___________________________], Attention: Banc One HELOC Trust 199[__]-[__], (v) in the case of the Certificateholders, as set forth in the Certificate Register, (vi) in the case of the Indenture Trustee, [_________________________________], Attention: [________________________], (vii) in the case of the Noteholders, as set forth in the Note Register, (viii) in the case of [Moody's, 99 Church Street, New York, New York 10007, Attention: Home Equity Monitoring Group], (ix) in the case of [S&P, 26 Broadway, New York, New York 10004], Attention: [_____________________], (x) in the case of [Fitch, IBCA Investors Service, Inc., One State Street Plaza, New York, New York 10004], Attention: BANC ONE HELOC Trust 199[__]-[__], (xi) in the case of the Credit Enhancer, [_____________________], , Attention: [____________________] and (xii) in the case of each Account Party, at the address specified by such Account Party. Any such notices shall be deemed to be effective with respect to any party hereto upon the receipt of such notice by such party, except that notices to the Certificateholders or Noteholders shall be effective upon mailing or personal delivery. (b) Any notice required or permitted to be given to a Certificateholder or Noteholder shall be given by first-class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register or Note Register, as the case may be. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. SECTION 9.4 Severability. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the holders thereof. SECTION 9.5 Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. SECTION 9.6 Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the Depositor, the Owner 28 30 Trustee and each Certificateholder and their respective successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder. SECTION 9.7 No Petition Covenant. Notwithstanding any prior termination of this Agreement, the Trust (or the Owner Trustee on behalf of the Trust), each Certificateholder or Certificate Owner, the Indenture Trustee and each Noteholder or Note Owner shall not acquiesce, petition or otherwise invoke or cause the Depositor or the Trust to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Depositor or the Trust under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Depositor or the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Depositor or the Trust. SECTION 9.8 No Recourse. Each Certificateholder by accepting a Certificate acknowledges that such Certificateholder's Certificates represent beneficial interests in the Trust only and do not represent interests in or obligations of the Depositor, the Servicer, the Representative, the Administrator, the Owner Trustee, the Indenture Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Certificates or the Basic Documents. SECTION 9.9 Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 9.10 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 9.11 Certificate Transfer Restrictions. None of the Class [__] Certificates or the Class [__] Certificate may be acquired by or for the account of (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code (other than a Plan described in Section 4975(g)(2) or (3) of the Code), or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). By accepting and holding a Certificate, the Holder thereof and the Certificate Owner shall each be deemed to have represented and warranted that it is not a Benefit Plan and, if requested in writing to do so by the Depositor, with a copy to the Certificate Registrar and the Owner Trustee, the Certificateholder and the Certificate Owner shall execute and deliver to the Certificate Registrar an Undertaking Letter in the form set forth in Exhibit D. SECTION 9.12 The Credit Enhancer. Any right conferred to the Credit Enhancer hereunder shall be suspended during any period in which the Credit Enhancer is in default in its payment obligations under the Insurance Policy, and its rights hereunder during 29 31 such period shall vest in the Majority in Voting Interest of the Class [__] Certificates. The Servicer shall give the Owner Trustee notice of such event. At such time as the Notes are no longer outstanding under the Indenture and the Class [__] Certificates are no longer outstanding hereunder, and no amounts owned to the Credit Enhancer under any Basic Document remain unpaid, the Credit Enhancer's rights hereunder shall terminate. The Credit Enhancer is an intended third party beneficiary of this Agreement. 30 32 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written. [ ] -------------------------- , as Owner Trustee By: ------------------------------ Name: Title: DEPOSITOR BANC ONE ABS CORPORATION By: ------------------------------ Name: Title: Acknowledged and Accepted: [BANK ONE, N.A.], as Servicer and Administrator By: ------------------------------ Name: Title: 31 33 EXHIBIT A-1 [FORM OF CLASS [__] CERTIFICATE] Class [__] Certificate $_____________ NUMBER CUSIP NO. [________] [___-]___ SEE REVERSE FOR CERTAIN DEFINITIONS UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF (i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OTHER THAN A PLAN DESCRIBED IN SECTION 4975(g)(2) OR (3) OF THE CODE), OR (iii) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY. BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF AND THE CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT SUCH A PLAN AND NO ASSETS OF SUCH A PLAN WERE USED TO ACQUIRE THE CERTIFICATE. THE PRINCIPAL AMOUNT OF THIS CERTIFICATE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. A-1-1 34 BANC ONE HELOC ASSET BACKED CERTIFICATES Series 199[__]-[__] Original Class [__] Principal Amount: Class [__] $[_____________] Class[__] Pass-Through Original Dollar Amount as of the Rate: [___]% Cut-off Date Represented by this Certificate: $__________________ Date of Trust Agreement and Percentage Interest of this Cut-off Date: as of Certificate: ______% [____________ __], 199[__] Servicer: [Bank One, N.A.] Original Pool Principal Balance: $[________________] First Payment Date: [______________ __,] 199[__] Closing Date: Owner Trustee: [_______________] [________________,] 199[__] Cusip:
BANC ONE HELOC TRUST 1993-3 BANC ONE HELOC ASSET BACKED CERTIFICATE SERIES 199[__]-[__], CLASS [__] [__]% PASS THROUGH RATE evidencing a fractional undivided interest in the Trust, as defined below, the property of which includes a pool of certain residential first and second mortgage loans master serviced by [Bank One, N.A.] (hereinafter called the "Servicer", in its capacity as Servicer, which term includes any successors thereto). (This Certificate does not represent an interest in or obligation of Banc One Corporation, Banc One ABS Corporation, [Bank One, N.A.] or any of their respective affiliates, except to the extent described below.) THIS CERTIFIES THAT ____________ is the registered owner of a nonassessable, fully-paid, fractional undivided interest in Banc One Trust 199[__]-[__] (the "Trust") formed by Banc One ABS Corporation (the "Depositor"). A-1-2 35 The Trust was created pursuant to a Trust Agreement, dated as of [____________ __], 199[__] (as amended and supplemented from time to time, the "Trust Agreement"), among the Depositor and [_________________________], as owner trustee (the "Owner Trustee"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Trust Agreement. This Certificate is one of the duly authorized Certificates designated as "Banc One HELOC Asset Backed Certificates Series 199[__]-[__], Class [__] [___]% Pass Through Rate" (the "Class [__] Certificates"), and "Banc One HELOC Asset Backed Certificates Series 199[__]-[__], Class [__]" (the "Class [__] Certificates", and together with the Class [__] Certificates, the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of this Certificate by virtue of the acceptance hereof assents and by which such holder is bound. Concurrently with the issuance of the Certificates, the Issuer is issuing its [___]% Banc One HELOC Asset Backed Notes, Series 199[__]-[__], due [___________ __], 200[___] (the "Notes") in the original aggregate principal amount of $[__________] pursuant to an Indenture dated as of [___________ __], 199[__] (the "Indenture") between the [______________________], National Association, as Trustee (the "Indenture Trustee"). The property of the Trust includes a pool of certain residential first and second mortgage loans (the "Mortgage Loans"). The Mortgage Loans were originated or acquired by the Sellers and transferred from the Sellers to the Depositor pursuant to a Mortgage Loan Purchase Agreement dated as of [_________ __], 199[__] (the "Purchase Agreement"). The Mortgage Loans have been transferred to the Trust and will be serviced by the Servicer pursuant to the terms and conditions of a Pooling and Servicing Agreement dated as of [___________ __], 199[__] (the "Pooling and Servicing Agreement") among the Depositor, the Trust and the Servicer, a summary of certain of the pertinent provisions of which are set forth herein. The Mortgage Loans in the Mortgage Pool have aggregate outstanding principal balances, at the close of business on the Cut-Off Date herein referred to, after application of payments received by the Servicer on or before such date, of $[____________]. The rights of the holders of the Certificates are subordinated to the rights of the holders of the Notes and the rights of the holders of the Class [__] Certificates are subordinate to the rights of holders of the Class [__] Certificates, as set forth in the Pooling and Servicing Agreement and the Indenture. Under the Trust Agreement, there shall be distributed on the 15th day of each March, June, September and December or, if such 15th day is not a Business Day, the next Business Day (each, a "Payment Date"), commencing on [____________ __, 199[__]], to the Person in whose name this Certificate is registered at the close of business on the Record Date (as defined below), such Class [__] Certificateholder's Percentage Interest in the Class [__] Remittance Amount to be distributed to Class [__] Certificateholders on such Payment Date; provided, however, Class [__] Certificateholders shall not receive payments in respect of the Class [__] Certificates if an Event of Default exists under the Indenture. The "Record Date", with respect to any Payment Date, means the close of business on the calendar day immediately preceding such Payment Date, or if Definitive Certificates are issued, the last day of the calendar month preceding the month in which the Payment Date occurs. A-1-3 36 The distributions in respect of the Class [__] Remittance Amount on this Certificate are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Trust on each Payment Date with respect to this Certificate shall be applied first to interest due and payable on this Certificate as provided above and then to the unpaid distributions in respect of the Class [__] Principal Balance of this Certificate. The holder of this Certificate acknowledges and agrees that its rights to receive distributions in respect of this Certificate are subordinated to the rights of the Noteholders as and to the extent described in the Pooling and Servicing Agreement and the Indenture. Each Certificateholder or Certificate Owner, by its acceptance of a Class [__] Certificate or, in the case of a Certificate Owner, a beneficial interest in a Class [__] Certificate, covenants and agrees that such Certificateholder or Certificate Owner, as the case may be, shall not, prior to the date which is one year and one day after the termination of the Trust Agreement, acquiesce, petition or otherwise invoke or cause the Depositor or the Trust to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Depositor or the Trust under any federal or state bankruptcy, insolvency, reorganization or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Depositor or the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Depositor or the Trust. Distributions on this Certificate shall be made as provided in the Trust Agreement by the Owner Trustee by wire transfer (as permitted by the Trust Agreement) or check mailed to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Certificate or the making of any notation hereon, except that with respect to Certificates registered on the Record Date in the name of the nominee of the Depository (initially, such nominee to be Cede & Co.), payments shall be made by wire transfer in immediately available funds to the account designated by such nominee. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Certificate shall be made after due notice by the Owner Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office maintained for such purpose by the Owner Trustee in the Borough of Manhattan, the City of New York. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon shall have been executed by an authorized signatory of the Owner Trustee by manual signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or the Pooling and Servicing Agreement or be valid for any purpose. THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND A-1-4 37 REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Certificate to be duly executed. BANC ONE HELOC TRUST 199[__]-[__] By: [________________________], not in its individual capacity but solely as Owner Trustee Dated: __________ __, 199[__] By: __________________________ Authorized Signatory A-1-5 38 OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Trust Agreement. [___________________________], OR [__________________________], not in its individual capacity not in its individual capacity but but solely as Owner Trustee solely as Owner Trustee by [___________________], as Authenticating Agent By: ___________________________ By: ___________________________ Authorized Signatory Authorized Signatory A-1-6 39 [Reverse of Certificate] The Certificates do not represent an obligation, or an interest in, the Depositor, the Servicer, any Seller, the Indenture Trustee, the Owner Trustee or any Affiliates of any of them and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated herein or in the Trust Agreement or in the Basic Documents. In addition, this Certificate is not guaranteed by any governmental agency or instrumentality and is limited in right of payment to certain collections and recoveries with respect to the Mortgage Loans and amounts withdrawable from the Spread Account (and certain other amounts), all as more specifically set forth herein and in the Trust Agreement and the Pooling and Servicing Agreement. A copy of each of the Pooling and Servicing Agreement and the Trust Agreement may be examined during normal business hours at the principal office of the Administrator, and at such other places, if any, designated by the Administrator, by any Certificateholder upon written request. [_________________________] has issued a guaranty surety bond with respect to the Notes and the Class [__] Certificates, a copy of which is attached as Exhibit I to the Pooling and Servicing Agreement. Pursuant to the Pooling and Servicing Agreement and the Trust Agreement, the Class [__] Certificateholder has pledged all of its right, title and interest in the Spread Account to the Indenture Trustee to secure the Trust's payment obligations under the Pooling and Servicing Agreement and the Indenture. As provided in the Pooling and Servicing Agreement, deposits and withdrawals from the Principal and Interest Account, the Collection Account, the Spread Account, the Letter of Credit Fee Account and the Insurance Account may be made by the Indenture Trustee from time to time for purposes other than distributions to Noteholders and Certificateholders, such purposes including reimbursement of certain expenses incurred by the Servicer and investment in Permitted Investments. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor and the rights of the Certificateholders under the Trust Agreement at any time by the Depositor and the Owner Trustee with the consent of the Credit Enhancer and the Majority in Voting Interest of Outstanding Notes and the Majority in Voting Interest of Class [__] Certificates. Any such consent by the Holder of this Certificate shall be conclusive and binding on such holder and on all future Holders of this Certificate and of any Certificate issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Trust Agreement also permits the amendment thereof, in certain circumstances, without the consent of the Holders of any of the Certificates or the Notes. It is the intent of the Depositor, the Servicer, their Affiliates, the Noteholders and the Certificateholders to treat the Trust as a partnership with the assets of the partnership being the assets held by the Trust, the partners of the partnership being the Class [__] Certificateholders and the Class [__]Certificateholder and the Notes being the debt of the partnership, in each case for purposes of Federal and state income tax, franchise tax, and any other tax measured in whole or in part by income. Except as otherwise required by appropriate taxing authorities, the Depositor, the Servicer, their Affiliates, the Noteholders, and the A-1-7 40 Certificateholders by acceptance of a Certificate, agree to treat, and to take no action inconsistent with the treatment of, the Certificates for tax purposes as interests in such partnership. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Owner Trustee in the City of New York, accompanied by (i) a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder hereof or such Holder's attorney duly authorized in writing and (ii) if requested by the Depositor, the Undertaking Letter required by Section 9.11 of the Trust Agreement, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate interest in the Trust will be issued to the designated transferee. The initial Certificate Registrar appointed under the Trust Agreement is [_______________________]. The Class [__] Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and in integral multiples thereof. As provided in the Trust Agreement and subject to certain limitations therein set forth, Class [__] Certificates are exchangeable for new Class [__] Certificates of authorized denominations evidencing the same aggregate denomination, as requested by the Holder surrendering the same; provided, however, that no Class [__] Certificate may be subdivided such that the denomination of any resulting Class [__] Certificate is less than $1,000. No service charge shall be made for any such registration of transfer or exchange, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Registrar or any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Trust Agreement and the Trust created thereby shall terminate upon the payment to Certificateholders of all amounts required to be paid to them pursuant to the Trust Agreement and the Pooling and Servicing Agreement and the disposition of all property held as part of the Trust. The Class [__] Certificateholder may at its option cause the Mortgage Loans and REO Properties to be sold at a minimum price specified in the Pooling and Servicing Agreement, and the proceeds of such sale of the Mortgage Loans and REO Property shall effect early retirement of the Certificates; provided, however, that such right of purchase is exercisable only following the Payment Date as of which the Pool Principal Balance is 10% or less of the Original Pool Principal Balance. Unless the certificate of authentication hereon has been executed by the Owner Trustee by manual signature, this Certificate shall not be entitled to any benefit under the Trust Agreement or be valid for any purpose. A-1-8 41 EXHIBIT A-2 [FORM OF CLASS [__] CERTIFICATE] Class [__] Certificate NUMBER ________ % [___-]___ THIS CERTIFICATE IS NOT TRANSFERABLE SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF (i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")), THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OTHER THAN AS DESCRIBED IN SECTION 4975(g)(2) or (3) OF THE CODE), OR (iii) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY. BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF AND THE CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN AND NO ASSETS OF SUCH A PLAN WERE USED TO ACQUIRE THE CERTIFICATE. BY ACCEPTING THIS CERTIFICATE THE HOLDER HEREOF AGREES TO PLEDGE ALL OF ITS RIGHT, TITLE AND INTEREST IN AND TO THE SPREAD ACCOUNT (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN) TO THE INDENTURE TRUSTEE FOR THE BENEFIT OF THE HOLDERS OF THE [__]% BANC ONE HELOC ASSET BACKED NOTES, SERIES 199[__]-[__], DUE [_____________ ___, 200[__] AND OF THE BANC ONE HELOC ASSET BACKED CERTIFICATES, SERIES 199[__]-[__], CLASS [__], [___]% CLASS [__] PASS THROUGH RATE. A-2-1 42 BANC ONE HELOC ASSET BACKED CERTIFICATES Series 199[__]-[__] Class [__] No. [___-] Date of Trust Agreement and Cut-off Date: as of [_____________ __], Percentage Interest of this 199[__] Certificate: 100% Servicer: [Bank One, N.A.] Original Pool Principal Balance: $[______________] First Payment Date: [_____________ __], 199[__] Closing Date: [____________ __,] Owner Trustee: [_______________] 199[___]
BANK ONE, N.A.TRUST 199[__]-[__] BANK ONE, N.A. ASSET BACKED CERTIFICATE SERIES 199[__]-[__], CLASS [__] evidencing a fractional undivided interest in the Trust, as defined below, the property of which includes a pool of certain residential first and second mortgage loans master serviced by [Bank One, N.A.] (hereinafter called the "Servicer", in its capacity as Servicer, which term includes any successors thereto). (This Certificate does not represent an interest in or obligation of Banc One Corporation, Banc One ABS Corporation, [Bank One, N.A.] or any of their respective affiliates, except to the extent described below.) THIS CERTIFIES THAT ________________________ is the registered owner of a nonassessable, fully-paid, fractional undivided interest in Banc One HELOC Trust 199[__]-[__] (the "Trust") formed by Banc One ABS Corporation (the "Depositor"). The Trust was created pursuant to a Trust Agreement, dated as of [_____________ __], 199[__] (as amended and supplemented from time to time, the "Trust Agreement"), among the Depositor and [__________________], as owner trustee (the "Owner Trustee"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Trust Agreement. This Certificate is one of the duly authorized Certificates designated as "Banc One HELOC Asset Backed Certificates Series 199[__]-[__], Class [__] [___]% Pass Through A-2-2 43 Rate" (the "Class [__] Certificates") and "Banc One HELOC Loan Asset Backed Certificates Series 199[__]-[__], Class [__]" (the "Class [__] Certificates", and together with the Class [__] Certificates, the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of this Certificate by virtue of the acceptance hereof assents and by which such holder is bound. Concurrently with the issuance of the Certificates, the Issuer is issuing its [____]% Banc One HELOC Asset Backed Notes, Series 199[__]-[__], due [__________ __], 200[__] (the "Notes") in the original aggregate principal amount of $[____________] pursuant to an Indenture dated as of [_________ __], 199[__] (the "Indenture") between the Trust and [___________________], as Trustee (the "Indenture Trustee"). The property of the Trust includes a pool of certain revolving home equity loans and lines of credit (the "Mortgage Loans"). The Mortgage Loans were originated or acquired by the Sellers and transferred from the Sellers to the Depositor pursuant to a Purchase Agreement dated as of [____________ __, 199[__] (the "Purchase Agreement"). The Mortgage Loans have been transferred to the Trust and will be serviced by the Servicer pursuant to the terms and conditions of a Pooling and Servicing Agreement dated as of [__________ __, 199[__] (the "Pooling and Servicing Agreement") among the Depositor, the Trust and the Servicer, a summary of certain of the pertinent provisions of which are set forth herein. The Mortgage Loans in the Mortgage Pool have aggregate outstanding principal balances, at the close of business on the Cut-Off Date herein referred to, after application of payments received by the Servicer on or before such date, of $[__________________]. The rights of the holders of the Certificates are subordinated to the rights of the holders of the Notes and the rights of the holders of the Class [__] Certificates are subordinated to the rights of the holders of the Class [__] Certificates, as set forth in the Pooling and Servicing Agreement and the Indenture. Under the Trust Agreement, there shall be distributed on the 15th day of each month or, if such 15th day is not a Business Day, the next Business Day (each, a "Payment Date" if such month is March, June, September or December, or a "Monthly Deposit Date" otherwise), commencing on [____________ __], 199[__], to the Person in whose name this Certificate is registered at the close of business on the Record Date (as defined below), the amounts to be distributed to Class [__] Certificateholders on such Payment Date or Monthly Deposit Date pursuant to Sections [____] and [____] of the Pooling and Servicing Agreement; provided, however, Class [__] Certificateholder shall not receive payments in respect of the Class [__] Certificate if an Event of Default exists under the Indenture. The "Record Date", with respect to any Payment Date or Monthly Deposit Date, means the last day of the calendar month preceding the month in which the Payment Date occurs. The distributions on this Certificate are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The holder of this Certificate acknowledges and agrees that its rights to receive distributions in respect of this Certificate are subordinated to the rights of the Noteholders and the Class [__] Certificateholders as and to the extent described in the Pooling and Servicing Agreement and the Indenture. In addition, by acceptance of this Certificate the holder of this Certificate agrees to pledge all of its right, title and interest in the Spread Amount to the A-2-3 44 Indenture Trustee for the benefit of the Noteholders and Class [__] Certificateholders pursuant to the terms of the Trust Agreement and the Pooling and Servicing Agreement. The Class [__] Certificateholder by its acceptance of the Class [__] Certificate covenants and agrees that such Certificateholder shall not, prior to the date which is one year and one day after the termination of the Trust Agreement, acquiesce, petition or otherwise invoke or cause the Depositor or the Trust to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Depositor or the Trust under any federal or state bankruptcy, insolvency, reorganization or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Depositor or the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Depositor or the Trust. Distributions on this Certificate shall be made as provided in the Trust Agreement by the Owner Trustee by wire transfer to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Certificate shall be made after due notice by the Owner Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office maintained for such purpose by the Owner Trustee in the Borough of Manhattan, the City of New York. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon shall have been executed by an authorized signatory of the Owner Trustee by manual signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or the Pooling and Servicing Agreement or be valid for any purpose. THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. A-2-4 45 IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Certificate to be duly executed. BANC ONE HELOC TRUST 199[__]-[__] By: [________________________], not in its individual capacity but solely as Owner Trustee Dated:_______________, 199[__] By: __________________________ Authorized Signatory A-2-5 46 OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Trust Agreement. [ ], OR [ ], ---------------------------- ------------------------ not in its individual capacity not in its individual but solely as Owner Trustee capacity but solely as Owner Trustee by [ ], -------------- as Authenticating Agent By: By: --------------------------- ------------------------- Authorized Signatory Authorized Signatory A-2-6 47 [Reverse of Certificate] The Certificates do not represent an obligation, or an interest in, the Depositor, the Servicer, any Seller, the Indenture Trustee, the Owner Trustee or any Affiliates of any of them and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated herein or in the Trust Agreement or in the Basic Documents. In addition, this Certificate is not guaranteed by any governmental agency or instrumentality and is limited in right of payment to certain collections and recoveries with respect to the Mortgage Loans and amounts withdrawable from the Spread Account (and certain other amounts), all as more specifically set forth herein and in the Trust Agreement and the Pooling and Servicing Agreement. A copy of each of the Pooling and Servicing Agreement and the Trust Agreement may be examined during normal business hours at the principal office of the Administrator, and at such other places, if any, designated by the Administrator, by any Certificateholder upon written request. [_________________________] has issued a guaranty surety bond with respect to the Notes and the Class [__] Certificates, a copy of which is attached as Exhibit I to the Pooling and Servicing Agreement. Pursuant to the Pooling and Servicing Agreement and the Trust Agreement, the Class [__] Certificateholders have pledged all of their right, title and interest in the Spread Account to the Indenture Trustee to secure the Trust's payment obligations under the Pooling and Servicing Agreement and the Indenture. As provided in the Pooling and Servicing Agreement, deposits and withdrawals from the Principal and Interest Account, the Collection Account, the Spread Account, the Letter of Credit Fee Account and the Insurance Account may be made by the Indenture Trustee from time to time for purposes other than distributions to Noteholders and Certificateholders, such purposes including reimbursement of certain expenses incurred by the Servicer and investment in Permitted Investments. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Depositor and the rights of the Certificateholders under the Trust Agreement at any time by the Depositor and the Owner Trustee with the consent of the Credit Enhancer and the Majority in Voting Interest of Notes and the Majority in Voting Interest of Class [__] Certificates. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and on all future Holders of this Certificate and of any Certificate issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Trust Agreement also permits the amendment thereof, in certain circumstances, without the consent of the Holders of any of the Certificates or the Notes. It is the intent of the Depositor, the Servicer, their Affiliates, the Noteholders and the Certificateholders to treat the Trust as a partnership with the assets of the partnership being the assets held by the Trust, the partners of the partnership being the Class [__] Certificateholders and Class [__] Certificateholders and the Notes being the debt of the partnership, in each case for purposes of Federal and state income tax, franchise tax, and any other tax measured in whole or in part by income. Except as otherwise required by appropriate taxing authorities, the Depositor, the Servicer, their Affiliates, the Noteholders, and the A-2-7 48 Certificateholders by acceptance of a Certificate, agree to treat, and to take no action inconsistent with the treatment of the Certificates for tax purposes as interests in such partnership. The Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Registrar or any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Trust Agreement and the Trust created thereby shall terminate upon the payment to Certificateholders of all amounts required to be paid to them pursuant to the Trust Agreement and the Pooling and Servicing Agreement and the disposition of all property held as part of the Trust. The Class [__] Certificateholder may at their option cause the Mortgage Loans and REO Properties to be sold at a minimum price specified in the Pooling and Servicing Agreement, and the proceeds of such sale of the Mortgage Loans and REO Property shall effect early retirement of the Certificates; provided, however, that such right of purchase is exercisable only following the Payment Date as of which the Pool Principal Balance is 10% or less of the Original Pool Principal Balance. Unless the certificate of authentication hereon has been executed by the Owner Trustee by manual signature, this Certificate shall not be entitled to any benefit under the Trust Agreement or be valid for any purpose. A-2-8 49 EXHIBIT B CERTIFICATE OF TRUST OF BANC ONE HELOC TRUST 199[__]-[__] THIS Certificate of Trust of BANC ONE HELOC TRUST 199[__]-[__] (the "Trust") dated as of [_____________ __], 199[__], is being duly executed and filed by [_________________], a [______________] banking corporation, as trustee, to form a business trust under the Delaware Business Trust Act (12 Del., Section 3801 et seq.). 1. Name. The name of the business trust formed hereby is Banc One HELOC Trust 199[__]-[__]. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is [______________________], [____________________], Attention: [__________________________]. 3. This Certificate of Trust shall be effective as of its filing. IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first above written. [________________________], not in its individual capacity but solely as Owner Trustee By: _________________________________ Name: Title: B-1 50 EXHIBIT C [Form of Certificate Depository Agreement] C-1 51 EXHIBIT D [Form of Undertaking Letter] [Certificate Registrar] [Owner Trustee] Ladies and Gentlemen: We hereby represent and warrant that, as a holder or owner of Banc One HELOC Asset Backed Certificates, Series 199[__]-[__][, Class [__],] [, Class [__]] we are not (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (other than a plan described in Section 4975(g)(2) or (3) of the Code), or (iii) an entity whose underlying assets include plan assets by reason of a plan's investment in the entity. [Certificate Owner/Holder] By: ___________________________________ Name: Title: D-1 52 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.................................................1 Section 1.1 Definitions...........................................................................1 ARTICLE II ORGANIZATION...............................................................................1 Section 2.1 Name..................................................................................1 Section 2.2 Office................................................................................1 Section 2.3 Purposes and Powers...................................................................1 Section 2.4 Appointment of Owner Trustee..........................................................2 Section 2.5 Initial Capital Contribution of Assets of the Trust...................................2 Section 2.6 Declaration of Trust..................................................................2 Section 2.7 Liability of the Depositor and the Certificateholders.................................3 Section 2.8 Title to Trust Property...............................................................3 Section 2.9 Situs of Trust........................................................................3 Section 2.10 Representations and Warranties of the Depositor.......................................3 Section 2.11 Pledge by Class[__] Certificateholders of Spread Account..............................4 ARTICLE III THE CERTIFICATES...........................................................................5 Section 3.1 Initial Certificate Ownership.........................................................5 Section 3.2 Form of the Certificates..............................................................5 Section 3.3 Execution, Authentication and Delivery................................................5 Section 3.4 Registration; Registration of Transfer and Exchange of Certificates...................6 Section 3.5 Mutilated; Destroyed; Lost or Stolen Certificates.....................................7 Section 3.6 Persons Deemed Certificateholders.....................................................8 Section 3.7 Access to List of Certificateholders' Names and Addresses.............................8 Section 3.8 Maintenance of Office For Surrenders..................................................8 Section 3.9 Appointment of Paying Agent...........................................................8 Section 3.10 Restriction on Transfers by Class [__] Certificateholder..............................9 Section 3.11 Book-Entry Certificates...............................................................9 Section 3.12 Notices to Depository................................................................10 Section 3.13 Definitive Certificates..............................................................10 Section 3.14 Appointment of Authenticating Agent..................................................11
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Page ---- ARTICLE IV ACTIONS BY OWNER TRUSTEE..................................................................11 Section 4.1 Prior Notice to Certificateholders with Respect to Certain Matters...................11 Section 4.2 Action by Certificateholders with Respect to Certain Matters.........................12 Section 4.3 Action by Certificateholders with Respect to Bankruptcy..............................12 Section 4.4 Restrictions on Certificateholders' Power............................................13 Section 4.5 Majority Control.....................................................................13 ARTICLE V APPLICATION OF ASSETS OF THE TRUST; CERTAIN DUTIES........................................13 Section 5.1 Establishment of Certificate Distribution Account....................................13 Section 5.2 Application of Funds.................................................................13 Section 5.3 Method of Payment....................................................................15 ARTICLE VI THE OWNER TRUSTEE.........................................................................15 Section 6.1 Duties of Owner Trustee..............................................................15 Section 6.2 Additional Duties of Owner Trustee...................................................16 Section 6.3 Acceptance of Trusts and Duties......................................................16 Section 6.4 Action upon Instruction by Certificateholders........................................18 Section 6.5 Furnishing of Documents..............................................................19 Section 6.6 Representations and Warranties of Owner Trustee......................................19 Section 6.7 Reliance; Advice of Counsel..........................................................19 Section 6.8 Owner Trustee May Own Certificates and Notes.........................................20 Section 6.9 Compensation and Indemnity...........................................................20 Section 6.10 Replacement of Owner Trustee.........................................................21 Section 6.11 Merger or Consolidation of Owner Trustee.............................................22 Section 6.12 Appointment of Co-Trustee or Separate Trustee........................................22 Section 6.13 Eligibility Requirements for Owner Trustee...........................................23 Section 6.14 Underwriting Agreement...............................................................24 ARTICLE VII TERMINATION OF TRUST AGREEMENT............................................................24 Section 7.1 Termination of Trust Agreement.......................................................24 Section 7.2 Dissolution upon Bankruptcy of the Depositor.........................................25 ARTICLE VIII AMENDMENTS................................................................................26 Section 8.1 Amendments Without Consent of Certificateholders or Noteholders......................26 Section 8.2 Amendments With Consent of Certificateholders and Noteholders........................26
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Page ---- Section 8.3 Form of Amendments...................................................................27 ARTICLE IX MISCELLANEOUS.............................................................................27 Section 9.1 No Legal Title to Trust Assets.......................................................27 Section 9.2 Limitations on Rights of Others......................................................27 Section 9.3 Notices..............................................................................28 Section 9.4 Severability.........................................................................28 Section 9.5 Counterparts.........................................................................28 Section 9.6 Successors and Assigns...............................................................29 Section 9.7 No Petition Covenant.................................................................29 Section 9.8 No Recourse..........................................................................29 Section 9.9 Headings.............................................................................29 Section 9.10 Governing Law........................................................................29 Section 9.11 Certificate Transfer Restrictions....................................................29 Section 9.12 The Credit Enhancer..................................................................30
Exhibit A-1 Form of Class [__] Certificate Exhibit A-2 Form of Class [__] Certificate Exhibit B Form of Certificate of Trust Exhibit C Form of Certificate Depository Agreement Exhibit D Form of Undertaking Letter Annex A Tax Partnership Agreement iii EX-4.3 4 FORM OF INDENTURE 1 Page 1 EXHIBIT 4.3 BANC ONE HELOC TRUST 199_-_ _____% HELOC ASSET BACKED NOTES DUE _____ __, ____ ___________________ INDENTURE Dated as of _____ 1, 199_ _____________________ ____________________________ Indenture Trustee 2 Page 2
TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions -2- SECTION 1.2 Incorporation by Reference of Trust Indenture Act -2- ARTICLE II THE NOTES SECTION 2.1 Form -3- SECTION 2.2 Execution, Authentication and Delivery -3- SECTION 2.3 Temporary Notes -4- SECTION 2.4 Registration; Registration of Transfer and Exchange of Notes -5- SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes -6- SECTION 2.6 Persons Deemed Noteholders -7- SECTION 2.7 Payment of Principal and Interest -7- SECTION 2.8 Cancellation of Notes -9- SECTION 2.9 Release of Collateral -9- SECTION 2.10 Book-Entry Notes -10- SECTION 2.11 Notices to Depository -10- SECTION 2.12 Definitive Notes -11- SECTION 2.13 Depositors or Affiliates as Noteholder -11- SECTION 2.14 Tax Treatment -12- ARTICLE III COVENANTS SECTION 3.1 Note Payment Account; Payment of Principal and Interest -12- SECTION 3.2 Maintenance of Agency Office -12- SECTION 3.3 Money for Payments To Be Held in Trust -13- SECTION 3.4 Existence -14- SECTION 3.5 Protection of the Assets of the Trust: Acknowledgment of Pledge of Spread Account -15- SECTION 3.6 Opinions as to Trust Assets -15- SECTION 3.7 Performance of Obligations; Servicing of Mortgage Loans -16- SECTION 3.8 Negative Covenants -17- SECTION 3.9 Annual Statement as to Compliance -18- SECTION 3.10 Consolidation, Merger, etc., of Issuer; Disposition of Trust Assets -19- SECTION 3.11 Successor or Transferee -21- SECTION 3.12 No Other Business -21- SECTION 3.13 No Borrowing -21- SECTION 3.14 Guarantees, Loans, Advances and Other Liabilities -21- SECTION 3.15 Servicer's Obligations -21- SECTION 3.16 Capital Expenditures -22- SECTION 3.17 Removal of Administrator -22- SECTION 3.18 Restricted Payments -22- SECTION 3.19 Notice of Events of Default and Other Events -22-
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SECTION 3.20 Further Instruments and Acts -23- SECTION 3.21 Representations and Warranties by the Issuer to the Indenture Trustee -23- ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1 Satisfaction and Discharge of Indenture -23- SECTION 4.2 Application of Trust Money -24- SECTION 4.3 Repayment of Moneys Held by Paying Agent -25- SECTION 4.4 Duration of Appointment of Indenture Trustee -25- ARTICLE V DEFAULT AND REMEDIES SECTION 5.1 Events of Default -25- SECTION 5.2 Acceleration of Maturity; Rescission and Annulment -27- SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Indenture Trustee -27- SECTION 5.4 Remedies: Priorities -30- SECTION 5.5 Optional Preservation of the Assets of the Trust -31- SECTION 5.6 Limitation of Suits -32- SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal and Interest -33- SECTION 5.8 Restoration of Rights and Remedies -33- SECTION 5.9 Rights and Remedies Cumulative -33- SECTION 5.10 Delay or Omission Not a Waiver -33- SECTION 5.11 Control by the Insurer -34- SECTION 5.12 Waiver of Past Defaults -34- SECTION 5.13 Undertaking for Costs -35- SECTION 5.14 Waiver of Stay or Extension Laws -35- SECTION 5.15 Action on Notes -36- SECTION 5.16 Performance and Enforcement of Certain Obligations -36- ARTICLE VI THE INDENTURE TRUSTEE SECTION 6.1 Duties of Indenture Trustee. -37- SECTION 6.2 Certain Matters Affecting the Indenture Trustee -40- SECTION 6.3 Indenture Trustee Not Liable for Notes or Mortgage Loans -41- SECTION 6.4 Indenture Trustee May Own Notes -42- SECTION 6.5 Indenture Trustee's Fees and Expenses -42- SECTION 6.6 Eligibility; Disqualification -42- SECTION 6.7 Resignation and Removal of the Indenture Trustee -43- SECTION 6.8 Successor Trustee -44- SECTION 6.9 Merger or Consolidation of Indenture Trustee -45- SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee -45- SECTION 6.11 Protection of Trust Assets -46- SECTION 6.12 Notice of Defaults -47- SECTION 6.13 Reports to Holders -47- SECTION 6.14 Preferential Collection of Claims Against Issuer -47- SECTION 6.15 Representations and Warranties of
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Indenture Trustee -48- SECTION 6.16 Indenture Trustee May Enforce Claims Without Possession of Notes -48- SECTION 6.17 Suit for Enforcement -49- SECTION 6.18 Appointment of Custodians. -49- ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders -49- SECTION 7.2 Preservation of Information, Communications to Noteholders -50- SECTION 7.3 Reports by Issuer -50- SECTION 7.4 Reports by Trustee -51- ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.1 Collection of Money -51- SECTION 8.2 Accounts -51- SECTION 8.3 General Provisions Regarding Accounts -52- SECTION 8.4 Release of Trust Assets -53- ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1 Supplemental Indentures Without Consent of Noteholders -54- SECTION 9.2 Supplemental Indentures With Consent of the Noteholders -55- SECTION 9.3 Execution of Supplemental Indentures -57- SECTION 9.4 Effect of Supplemental Indenture -57- SECTION 9.5 Conformity with Trust Indenture Act -58- SECTION 9.6 Reference in Notes to Supplemental Indentures -58- ARTICLE X REDEMPTION OF NOTES SECTION 10.1 Redemption -58- SECTION 10.2 Form of Redemption Notice -59- SECTION 10.3 Notes Payable on Payment Date -59- ARTICLE XI MISCELLANEOUS SECTION 11.1 Compliance Certificates and Opinions, etc -60- SECTION 11.2 Form of Documents Delivered to Indenture Trustee -62- SECTION 11.3 Acts of Noteholders -63- SECTION 11.4 Notices -63- SECTION 11.5 Notices to Noteholders; Waiver -64- SECTION 11.6 Alternate Payment and Notice Provisions -65- SECTION 11.7 Conflict with Trust Indenture Act -65- SECTION 11.8 Effect of Headings and Table of Contents -66- SECTION 11.9 Successors and Assigns -66-
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SECTION 11.10 Separability -66- SECTION 11.11 Benefits of Indenture -66- SECTION 11.12 Legal Holidays -66- SECTION 11.13 GOVERNING LAW -66- SECTION 11.14 Counterparts -67- SECTION 11.15 Recording of Indenture -67- SECTION 11.16 No Recourse -67- SECTION 11.17 No Petition -68- SECTION 11.18 Inspection -68-
Exhibit A Form of Note Depositary Agreement Exhibit B Form of Note Exhibit C Mortgage Loan Schedule 6 Page 6 CROSS-REFERENCE TABLE TIA INDENTURE SECTION SECTION 310 (a)(1) 6.6 (a)(2) 6.6 (a)(3) 6.10 (a)(4) 6.14 (b) 6.11 (c) N.A. 311 (a) 6.14 (b) 6.14 (c) N.A. 312 (a) 7.1, 7.2 (b) 7.2 (c) 7.2 313 (a) 7.4(a), 7.4(b) (b)(1) 7.4(a) (b)(2) 7.4(a) (c) 7.4(a) (d) 7.4(a) 314 (a) 7.3(a), 3.9 (b) 3.6 (c)(1) 2.2, 2.9, 4.1, 11.1(a) (c)(2) 2.9, 11.1(a) (c)(3) 2.9, 11.1(a) (d) 2.9, 11.1(b) (e) 11.1(a) (f) 11.1(a) 315 (a) 6.1 (b) 6.12 (c) 6.1 (d) 6.2, 6.1 (e) 5.13 316 (a) last sentence 1.1 (a)(1)(A) 5.11 (a)(1)(B) 5.12 (a)(2) Omitted 316 (b), (c) 5.7, 5.12 317 (a)(1) 5.3(b) (a)(2) 5.3(d) (b) 3.3 318 (a) 11.7 N.A. means Not Applicable. Note: This Cross-Reference Table shall not, for any purpose, be deemed part of this Indenture. 7 Page 7 INDENTURE, dated as of _____ 1, 199_, between BANC ONE HELOC TRUST 199_-_, a Delaware business trust (the "Issuer"), and _________________________, a national banking association, as trustee and not in its individual capacity (the "Indenture Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer's _____% HELOC Asset Backed Notes due _____ __, ____ (the "Notes"): GRANTING CLAUSE The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as trustee for the benefit of the Noteholders and (only to the extent expressly provided herein) the Certificateholders, all of the Issuer's right, title and interest in, to and under: (a) the Mortgage Loans listed on the Mortgage Loan Schedule attached hereto as Exhibit C, together with the Mortgage Files relating thereto and all monies received with respect thereto on and after the Cut-Off Date [(other than amounts received on and after the Cut-Off Date in respect of interest accrued on the Mortgage Loans prior to the Cut-Off Date)], (b) all REO, (c) the Principal and Interest Account, [Letter of Credit Fee Account, Insurance Account] and Collection Account, including amounts on deposit in such accounts and (except with respect to the Principal and Interest Account) all earnings thereon, Eligible Investments relating thereto and proceeds thereof, (d) all of the Issuer's rights under all insurance policies with respect to the Mortgage Loans required to be maintained pursuant to the Pooling and Servicing Agreement and any Insurance Proceeds, (e) the Policy, (f) Liquidation Proceeds, (g) the Purchase Agreement, including the rights assigned to the Issuer to cause the Sellers to purchase a Mortgage Loan as to which a breach of representation or warranty has occurred, (h) the Pooling and Servicing Agreement (including all rights of the Depositor under the Purchase Agreement assigned to the Issuer pursuant to the Pooling and Servicing Agreement) and (i) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing (collectively, the "Collateral"). The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. The Indenture Trustee, as trustee on behalf of the Noteholders, acknowledges such Grant and the pledge and assignment to it of the Spread Account pursuant to Section 2.11 of the Trust Agreement, and hereby accepts the trusts under this Indenture in accordance with the provisions of this Indenture. In furtherance of such Grant, the Indenture Trustee acknowledges transfer of the Mortgage Files, including each of the Mortgage Loan documents (subject to such exceptions, if any, as are noted on the exception report attached to the Indenture Trustee Initial Certification referred to in the immediately succeeding sentence) set forth in Section 2.01 of the Pooling and Servicing Agreement, which provisions are incorporated by reference as if more particularly set forth herein. The Indenture Trustee shall execute and deliver on the Closing Date an acknowledgement of receipt of, for each Mortgage Loan, the items listed in Section 2.01(b)(i), 8 Page 8 (ii), and (iii) of the Pooling and Servicing Agreement, in the form attached as Exhibit C to the Pooling and Servicing Agreement, and declares that it will hold such documents and any amendments, replacements or supplements thereto, as well as any other assets delivered to it in trust upon and subject to the conditions of the Indenture for the benefit of the Noteholders and, to the extent set forth in the Pooling and Servicing Agreement and herein, for the benefit of the Certificateholders. ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. Certain capitalized terms used in this Indenture shall have the respective meanings assigned them in Article 1 of the Pooling and Servicing Agreement dated as of _____ 1, 199_ (the "Pooling and Servicing Agreement") among the Issuer, Banc One ABS Corporation, as Depositor (the "Depositor") and Bank One, N.A., as Servicer (the "Servicer"). All references in this Indenture to Articles, Sections, subsections and exhibits are to the same contained in or attached to this Indenture unless otherwise specified. All terms defined in this Indenture shall have the defined meanings when used in any certificate, notice, Note or other document made or delivered pursuant hereto unless otherwise defined therein. SECTION 1.2 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the Securities and Exchange Commission. "indenture securities" means the Notes. "indenture trustee" means the Indenture Trustee. "obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a Commission rule have the respective meanings assigned to them by such definitions. ARTICLE II THE NOTES SECTION 2.1 Form. (a) The Notes with the Indenture Trustee's certificate of authentication, shall be in substantially the form set forth in Exhibit B, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. (b) The Definitive Notes shall be typewritten, printed, lithographed or engraved or 9 Page 9 produced by any combination of these methods (with or without steel engraved borders) all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. (c) The terms of the Notes set forth in Exhibit B are part of the terms of this Indenture. SECTION 2.2 Execution, Authentication and Delivery. (a) The Notes shall be dated the date of their authentication, and shall be issuable as registered Notes in minimum denominations of $1,000 and in integral multiples thereof. (b) The Notes shall be executed on behalf of the Issuer by any of its Responsible Officers. The signature of any such Responsible Officer on the Notes may be manual or facsimile. (c) Notes bearing the manual or facsimile signature of individuals who were at any time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such office prior to the authentication and delivery of such Notes or did not hold such office at the date of such Notes. (d) The Indenture Trustee, in exchange for the pledge and assignment to it of (i) the Mortgage Loans and the other components of the Trust by the Issuer and (ii) the pledge and assignment to it of the Spread Account by the Class ___ Certificateholders, simultaneously with the assignment and transfer to the Indenture Trustee of the Mortgage Loans, and the delivery to the Indenture Trustee of the Mortgage Files and the other components and assets of the Trust and the Spread Account, together with an Opinion of Counsel to the Issuer (which may be counsel to the Depositor) relating to the issuance of the Notes and the lien of the Indenture Trustee hereunder and an Officer's Certificate relating to the same, shall, upon the order of the Issuer cause the Notes to be authenticated and delivered for original issue in an aggregate principal amount equal to the Original Note Principal Balance. The aggregate principal amount of Notes outstanding at any time may not exceed that amount except as provided in Section 2.5. (e) No Notes shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form set forth in Exhibit B hereto, executed by the Indenture Trustee by the manual signature of one of its Responsible Officers, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.3 Temporary Notes. (a) Pending the preparation of Definitive Notes, if any, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, Temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Notes in lieu of which they are issued and with such variations as are consistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. (b) If Temporary Notes are issued, the Issuer shall cause Definitive Notes to be prepared without unreasonable delay. After the preparation of Definitive Notes, the Temporary Notes shall be exchangeable for Definitive Notes upon surrender of the Temporary Notes at the Agency Office of the Issuer to be maintained as provided in Section 3.2, without charge to the 10 Page 10 Noteholder. Upon surrender for cancellation of any one or more Temporary Notes, the Issuer shall execute and the Indenture Trustee shall, at the Administrator's cost and expense, authenticate and deliver in exchange therefor a like principal amount of Definitive Notes of authorized denominations. Until so delivered in exchange, the Temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes. SECTION 2.4 Registration; Registration of Transfer and Exchange of Notes. (a) The Issuer shall cause to be kept the Note Register, in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of the Notes. The Indenture Trustee shall initially be the Note Registrar for the purpose of registering the Notes and transfers of the Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment assume the duties of the Note Registrar. (b) If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee and the Insurer prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register. The Indenture Trustee and the Insurer shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof. The Indenture Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by a Responsible Officer thereof as to the names and addresses of the Noteholders and the principal amounts and number of such Notes. (c) Upon surrender for registration of transfer of any Note at the Corporate Trust Office of the Indenture Trustee or the Agency Office of the Issuer (and following the delivery, in the former case, of such Notes to the Issuer by the Indenture Trustee) the Issuer shall execute, the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes in any authorized denominations, of a like aggregate principal amount. (d) At the option of the Noteholder, Notes may be exchanged for other Notes in any authorized denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at the Corporate Trust Office of the Indenture Trustee or the Agency Office; provided, however, that in the latter case the Issuer agrees that such surrendered Notes shall be promptly delivered to the Indenture Trustee. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Indenture Trustee shall, at the Administrator's cost and expense, authenticate, and the Noteholder shall obtain from the Indenture Trustee, the Notes which the Noteholder making the exchange is entitled to receive. (e) All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. (f) Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee and the Note Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in the City of New York or the city in which the Corporate Trust Office of the Indenture Trustee is located, or by a member firm of a national securities exchange, and such other documents as the Indenture Trustee may require. 11 Page 11 (g) No service charge shall be made to a Noteholder for any registration of transfer or exchange of Notes, but the Issuer or Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Sections 2.3 or 9.6 not involving any transfer. (h) The preceding provisions of this Section 2.4 notwithstanding, the Issuer shall not be required to transfer or make exchanges, and the Note Registrar need not register transfers or exchanges, of Notes that: (i) have been selected for redemption pursuant to Article X; or (ii) are due for repayment within 15 days of submission to the Corporate Trust Office or the Agency Office. SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes. (a) If (i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer, the Insurer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon the Issuer's request the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note of a like aggregate principal amount; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay to the Holder of such destroyed, lost or stolen Note when so due or payable or upon the Payment Date or Special Redemption Date without surrender thereof. (b) If, after the delivery of a replacement Note or payment in respect of a destroyed, lost or stolen Note pursuant to subsection (a), a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer, the Credit Enhancer and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from (i) any Person to whom it was delivered, (ii) the Person taking such replacement Note from the Person to whom such replacement Note was delivered; or (iii) any assignee of such Person, except a bona fide purchaser, and the Issuer, the Credit Enhancer and the Indenture Trustee shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer, the Credit Enhancer or the Indenture Trustee in connection therewith. (c) In connection with the issuance of any replacement Note under this Section 2.5, the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including all fees and expenses of the Indenture Trustee) connected therewith. (d) Any duplicate Note issued pursuant to this Section 2.5 in replacement for any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be found at any time or be enforced by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. (e) The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of 12 Page 12 mutilated, destroyed, lost or stolen Notes. SECTION 2.6 Persons Deemed Noteholders. Prior to due presentment for registration of transfer of any Note, the Issuer, the Credit Enhancer, the Indenture Trustee and any agent of the Issuer, the Credit Enhancer or the Indenture Trustee may treat the Person in whose name any Note is registered (as of the day of determination) as the Noteholder for the purpose of receiving payments of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Issuer, the Indenture Trustee nor any agent of the Issuer, the Credit Enhancer, or the Indenture Trustee shall be affected by notice to the contrary. SECTION 2.7 Payment of Principal and Interest. (a) Interest on the Notes shall accrue at the Note Interest Rate as provided in the form of such Note set forth in Exhibit B and such interest shall be payable on each Payment Date as specified therein. Any installment of interest payable on any Note which is punctually paid or duly provided for by a deposit by or at the direction of the Issuer into the Note Payment Account on the applicable Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the applicable Record Date, by check mailed first-class, postage prepaid to such Person's address as it appears on the Note Register on such Record Date or, in the case of a Holder owning Notes in aggregate denominations of at least $1,000,000, by wire transfer in immediately available funds to the account notified by such Holder to the Indenture Trustee at least five days prior to such Record Date; provided, however, that, unless and until Definitive Notes have been issued pursuant to Section 2.12, with respect to Notes registered on the applicable Record Date in the name of the Depository, payment shall be made by wire transfer in immediately available funds to the account designated by the Depository. (b) (i) Prior to the occurrence of an Event of Default and a declaration in accordance with Section 5.2 that the Notes have become immediately due and payable, the principal of each Note unless earlier redeemed as set forth herein, shall be payable in installments on each Payment Date, as provided in the form of Note set forth in Exhibit B, until paid in full. All principal payments (including by redemption) shall be made pro rata to the Noteholders entitled thereto. Any installment of principal payable on, or any Special Redemption Price of any Note which is punctually paid or duly provided for by a deposit by or at the direction of the Issuer into the Note Payment Account on the applicable Payment Date or Special Payment Date, as applicable, shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the applicable Record Date or Special Record Date, by check mailed first-class, postage prepaid to such Person's address as it appears on the Note Register on such Record Date or Special Record Date; or, in the case of a Holder owning Notes in aggregate denominations of at least $1,000,000, by wire transfer in immediately available funds to the account notified by such Holder to the Indenture Trustee at least five days prior to such Record Date or Special Record Date; provided, however, that, unless and until Definitive Notes have been issued pursuant to Section 2.12, with respect to Notes registered on the Record Date or Special Record Date in the name of the Depository, payment shall be made by wire transfer in immediately available funds to the account designated by the Depository, except for the final installment of principal with respect to a Note on the Maturity Date or earlier redemption, which shall be payable as provided herein. The funds represented by any such checks in respect of interest or principal returned undelivered shall be held in accordance with Section 3.3. (c) The entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, if: (i) an Event of Default shall have occurred and be continuing; and 13 Page 13 (ii) the Indenture Trustee, at the direction or with the consent of the Credit Enhancer, or at the direction of Noteholders representing not less than a Majority in Voting Interest of the Notes, with the consent of the Credit Enhancer, have declared the Notes to be immediately due and payable in the manner provided in Section 5.2. (d) Following an Event of Default and the acceleration of the Notes as aforesaid, all principal payments shall be allocated among the Holders of all of the Notes pro rata on basis of their respective unpaid principal balances. (e) The Indenture Trustee shall notify each Noteholder of record as of the Record Date for a Payment Date of the fact that the final installment of principal of and interest on such Note is to be paid on such Payment Date. Such notice shall be sent (i) on such Record Date by facsimile, if Book-Entry Notes are outstanding; or (ii) not later than three Business Days after such Record Date in accordance with Section 11.5(a) if Definitive Notes are outstanding, and shall specify that such final installment shall be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.2. SECTION 2.8 Cancellation of Notes. All Notes surrendered for payment, redemption, exchange or registration of transfer shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.8, except as expressly permitted by this Indenture. All canceled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be destroyed or returned to it; provided, however, that such Issuer Order is timely and the Notes have not been previously disposed of by the Indenture Trustee. SECTION 2.9 Release of Collateral. Subject to Section 11.1, the Indenture Trustee shall release property from the lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officers' Certificate, an Opinion of Counsel and Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates to the effect that the TIA does not require any such Independent Certificates. SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, shall be issued in the form of a typewritten Note or Notes representing the Book-Entry Notes, to be delivered to the Depository. Such Note or Notes shall be registered on the Note Register in the name of the Depository, and no Note Owner shall receive a Definitive Note representing such Note Owner's interest in such Note, except as provided in Section 2.12. Unless and until the Definitive Notes have been issued to Note Owners pursuant to Section 2.12: (a) the provisions of this Section 2.10 shall be in full force and effect; (b) the Note Registrar and the Indenture Trustee shall be entitled to deal with the Depository for all purposes of this Indenture (including the payment of principal of and interest on the Notes and the giving of instructions or directions hereunder) as the sole holder of the Notes and shall have no obligation to the Note Owners; 14 Page 14 (c) to the extent that the provisions of this Section 2.10 conflict with any other provisions of this Indenture, the provisions of this Section 2.10 shall control; (d) the rights of the Note Owners shall be exercised only through the Depository and shall be limited to those established by law and agreements between such Note Owners and the Depository and/or the Depository Participants. Unless and until Definitive Notes are issued pursuant to Section 2.12, the initial Depository shall make book-entry transfers between the Depository Participants and receive and transmit payments of principal of and interest on the Notes to such Depository Participants, pursuant to the Note Depository Agreement; and (e) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Holders of Outstanding Notes evidencing a specified Percentage Interest of the Notes, the Depository shall be deemed to represent such percentage only to the extent that it has (i) received instructions to such effect from Note Owners and/or Depository Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes; and (ii) has delivered such instructions to the Indenture Trustee. SECTION 2.11 Notices to Depository. Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Notes shall have been issued to Note Owners pursuant to Section 2.12, the Indenture Trustee shall give all such notices and communications specified herein to be given to Noteholders to the Depository and shall have no obligation to the Note Owners. SECTION 2.12 Definitive Notes. If (i) the Servicer or the Depository advises the Indenture Trustee in writing that the Depository is no longer willing or able to properly discharge its responsibilities with respect to the Notes and the Issuer is unable to locate a qualified successor; (ii) the Servicer, at its option, advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Depository; or (iii) after the occurrence of a Servicer Default, Note Owners representing beneficial interests aggregating at least a Majority in Voting Interest of the Notes advise the Depository in writing that the continuation of a book-entry system through the Depository is no longer in the best interests of the Note Owners, then the Depository shall notify all Note Owners and the Indenture Trustee of the occurrence of any such event and of the availability of Definitive Notes to Note Owners requesting the same. Upon surrender to the Indenture Trustee of the typewritten Note or Notes representing the Book-Entry Notes by the Depository, accompanied by registration instructions, the Issuer shall, at the Administrator's cost and expense, execute and the Indenture Trustee shall authenticate the Definitive Notes in accordance with the instructions of the Depository. None of the Issuer, the Note Registrar or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes as Noteholders. SECTION 2.13 Depositor or Affiliates as Noteholder. None of the Issuer, the Servicer, the Administrator, any Originator or the Depositor shall be a Noteholder. Any attempted or purported transfer in violation of the preceding sentence shall be absolutely null and void and shall vest no rights in the purported transferee. If any purported transferee shall become a Noteholder in violation of such sentence, then the last preceding Noteholder shall be restored to all rights as Holder thereof retroactive to the date of registration of transfer of such Note. The Indenture Trustee shall notify the Administrator of any violation of this Section 2.13 upon receipt of 15 Page 15 written notice thereof. The Indenture Trustee shall be under no liability to any Person for any registration of transfer of a Note not permitted in this Section 2.13 or for making payments due on such Note to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Indenture so long as the transfer was registered without receipt. The Indenture Trustee shall be entitled, but not obligated, to recover from any holder of a Note that was in fact not a permitted Holder under this Section 2.13, all payments made on such Note at and after such time. Any such payments so recovered by the Indenture Trustee shall be paid and delivered by the Indenture Trustee to the last preceding Holder of such Note. SECTION 2.14 Tax Treatment. The Issuer and the Indenture Trustee, by entering into this Indenture, and the Noteholders, by acquiring any Note or interest therein, (i) express their intention that the Notes qualify under applicable tax law as indebtedness secured by the Collateral, and (ii) unless otherwise required by appropriate taxing authorities, agree to treat the Notes as indebtedness secured by the Collateral for the purpose of federal income taxes, state and local income and franchise taxes and any other taxes imposed upon, measured by or based upon gross or net income. ARTICLE III COVENANTS SECTION 3.1 Note Payment Account; Payment of Principal and Interest. (a) The Indenture Trustee, for the benefit of the Noteholders, shall establish and maintain in the name of the Indenture Trustee an Eligible Account known as the "Banc One HELOC Trust 199_-_ Note Payment Account" (the "Note Payment Account"), bearing an additional designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders. (b) The Issuer shall duly and punctually pay the principal of and interest on the Notes in accordance with the terms of the Notes and this Indenture. On each Payment Date and on each Special Redemption Date, the Issuer shall cause all amounts on deposit in the Note Payment Account to be distributed to the Noteholders in accordance with Section 8.2, less amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal. Any amounts so withheld shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 3.2 Maintenance of Agency Office. As long as any of the Notes remains outstanding, the Issuer shall maintain in the borough of Manhattan, the City of New York, an office (the "Agency Office"), being an office or agency where Notes may be surrendered to the Issuer for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints [___________________________] to serve as its agent for the foregoing purposes. The Issuer shall give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands. SECTION 3.3 Money for Payments To Be Held in Trust. (a) As provided in Section 8.2(a) and (b), all payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Note Payment Account pursuant to Section 8.2(c) shall be made on behalf of the Issuer by the 16 Page 16 Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Note Payment Account for payments of Notes shall be paid over to the Issuer except as provided in this Section 3.3. (b) On each Payment Date and Special Redemption Date, the Issuer shall deposit or cause to be deposited in the Note Payment Account an aggregate sum sufficient to pay the amounts then becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall promptly notify the Indenture Trustee of its action or failure so to act. (c) The Issuer shall cause each Paying Agent other than the Indenture Trustee, to execute and deliver to the Indenture Trustee (with a copy to the Credit Enhancer) an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.3, that such Paying Agent shall: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such persons as herein provided; (ii) give the Indenture Trustee and the Credit Enhancer notice of any default by the Issuer of which it has actual knowledge (or any other obligor upon the Notes) in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Indenture Trustee or the Credit Enhancer, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent in effect at the time of determination; and (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. (d) The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. (e) Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for one year after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer on Issuer Request; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer) and all liability of the Indenture Trustee, the Credit Enhancer or such Paying Agent with respect to such trust 17 Page 17 money shall thereupon cease; provided, however, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining shall be repaid to the Issuer. The Indenture Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder). SECTION 3.4 Existence. The Issuer shall keep in full effect its existence, rights and franchises as a business trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer shall keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and shall obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the assets of the Trust. SECTION 3.5 Protection of the Assets of the Trust: Acknowledgment of Pledge of Spread Account. (a) The Issuer shall from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action necessary or advisable to: (i) maintain or preserve the lien and security interest (and the priority thereof) of this Indenture or carry out more effectively the purposes hereof; (ii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (iii) enforce any of the Collateral; or (iv) preserve and defend title to the assets of the Trust and the rights of the Indenture Trustee and the Noteholders in such assets of the Trust and in the Spread Account against the claims of all persons and parties, and the Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to execute any financing statement, continuation statement or other instrument required by the Indenture Trustee pursuant to this Section 3.5. (b) The Indenture Trustee acknowledges the pledge by the Class __ Certificateholders to the Indenture Trustee pursuant to Section 2.11 of the Trust Agreement of all of the Class __ Certificateholder's right, title and interest in and to the Spread Account and all proceeds of the foregoing, including, without limitation, all other accounts and investments held from time to time in the Spread Account (whether in the form of deposit accounts, physical property, book-entry securities, uncertificated securities or otherwise) in order to provide for the prompt payment to the Noteholders, the Certificateholders and the Servicer in accordance with 5.01 of the Pooling and Servicing Agreement, to assure availability of the amounts maintained 18 Page 18 therein for the benefit of the Noteholders, the Certificateholders and the Servicer, and as security for the performance by the Issuer of its obligations under this Agreement, the Trust Agreement and the Pooling and Servicing Agreement (collectively, the "Basic Documents"). SECTION 3.6 Opinions as to Trust Assets. (a) On the Closing Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto and any other requisite documents, and with respect to the execution and filing or recording of any financing statements and continuation statements and other documents as are necessary to perfect and make effective the lien and security interest of this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such lien and security interest effective. (b) On or before the last day of the fourth month following the end of the Issuer's fiscal year, which currently ends on [December 31], in each calendar year, beginning with the fiscal year ending [December 31], 199_, the Issuer shall furnish to the Indenture Trustee and the Credit Enhancer an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing or recording of any financing statements, continuation statements and other documents as is necessary to maintain the lien and security interest created by this Indenture and reciting the details of such action or stating that in the opinion of such counsel no such action is necessary to maintain the lien and security interest created by this Indenture. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the lien and security interest of this Indenture until the last day of the fourth month following the end of the Issuer's next fiscal year. SECTION 3.7 Performance of Obligations; Servicing of Mortgage Loans. (a) The Issuer shall not take any action and shall use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the assets of the Trust or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or any other Basic Document. (b) The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee in an Officers' Certificate of the Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture. (c) The Issuer shall punctually perform and observe all of its obligations and agreements contained in this Indenture, the Basic Documents and in the instruments and agreements included in the assets of the Trust, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed by the terms of this Indenture and the Pooling and Servicing Agreement in accordance with and within the time periods provided for herein and therein. 19 Page 19 (d) If the Issuer shall have knowledge of the occurrence of a Servicer Default or of an Event of Default hereunder, the Issuer shall promptly notify the Indenture Trustee, the Credit Enhancer and the Rating Agencies thereof, and shall specify in such notice the response or action, if any, the Issuer has taken or is taking with respect of such default. If a Servicer Default or an Event of Default shall arise from the failure of the Servicer to perform any of its duties or obligations under the Pooling and Servicing Agreement with respect to the Mortgage Loans, the Issuer and the Indenture Trustee shall take all reasonable steps available to them pursuant to the Pooling and Servicing Agreement to remedy such failure. (e) Without derogating from the absolute nature of the assignment granted to the Indenture Trustee under this Indenture or the rights of the Indenture Trustee hereunder, the Issuer agrees that, except as set forth in the Pooling and Servicing Agreement, it shall not, without the prior written consent of the Credit Enhancer and the Indenture Trustee or a Majority in Voting Interest of the Notes, amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the terms of any Collateral or the Basic Documents, or waive timely performance or observance by the Servicer or the Depositor under the Pooling and Servicing Agreement, the Administrator under the Administration Agreement or the Originators under the Purchase Agreement. If any such amendment, modification, supplement or waiver shall be so consented to by the Credit Enhancer and the Indenture Trustee or such Holders, as applicable, the Issuer agrees, promptly following a request by the Indenture Trustee or the Credit Enhancer to do so, to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as the Indenture Trustee or the Credit Enhancer may deem necessary or appropriate in the circumstances. SECTION 3.8 Negative Covenants. So long as any Notes are outstanding, the Issuer shall not (except as expressly permitted herein or in the Pooling and Servicing Agreement): (a) sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, except in accordance with Section 3.10(b) or Section 10.1(a) of this Indenture or Section 10.01 of the Pooling and Servicing Agreement; (b) claim any credit on, or make any deduction from, the principal or interest payable in respect of the Notes (other than amounts properly withheld from such payments under the Code or applicable state law) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the assets of the Trust; (c) voluntarily commence any insolvency, readjustment of debt, marshalling of assets and liabilities or other proceeding, or apply for an order by a court or agency or supervisory authority for the winding-up or liquidation of its affairs or any other event specified in Section 5.1(e); or (d) either (i) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby; (ii) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the assets of the Trust or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise by operation of law, in each case on a Mortgaged Property and arising solely as a result of an action or omission of the related Obligor); or (iii) permit the lien of this 20 Page 20 Indenture not to constitute a valid first priority security interest in the assets of the Trust. SECTION 3.9 Annual Statement as to Compliance. The Issuer shall deliver to the Indenture Trustee and the Credit Enhancer, on or before the last day of the fourth month following the end of the Issuer's fiscal year, which currently ends on [December 31], beginning with the fiscal year ending on [December 31], 199_, an Officer's Certificate signed by a Responsible Officer of the Issuer, dated as of the last day of such fiscal year, stating that: (a) a review of the activities of the Issuer during such fiscal year and of performance under this Indenture has been made under such Responsible Officer's supervision; and (b) to the best of such Responsible Officer's knowledge, based on such review, the Issuer has fulfilled all of its obligations under this Indenture throughout such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such Responsible Officer and the nature and status thereof. A copy of such certificate may be obtained by any Noteholder by a request in writing to the Issuer addressed to the Corporate Trust Office of the Indenture Trustee. SECTION 3.10 Consolidation, Merger, etc., of Issuer; Disposition of Trust Assets. (a) The Issuer shall not consolidate or merge with or into any other Person, unless: (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such merger or consolidation, no Default or Event of Default shall have occurred and be continuing; (iii) the Credit Enhancer shall have consented to such transaction; (iv) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (v) the Issuer shall have delivered to the Indenture Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Issuer, each stating: (A) that such consolidation or merger and such supplemental indenture comply with this Section 3.10; (B) that such consolidation or merger and such supplemental indenture shall have no material adverse tax consequence to the Trust or any Noteholder or Certificateholder; and (C) that all conditions precedent herein provided for relating 21 Page 21 to such transaction have been complied with (including any filing required by the Exchange Act). (b) Except as expressly permitted by this Indenture or the other Basic Documents, the Issuer shall not sell, convey, exchange, transfer or otherwise dispose of any of its properties or assets, including those included in the assets of the Trust, to any Person, unless: (i) the Person that acquires such properties or assets of the Issuer (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State and (B) by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee: (1) expressly assumes the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein; (2) expressly agrees that all right, title and interest so sold, conveyed, exchanged, transferred or otherwise disposed of shall be subject and subordinate to the rights of Noteholders; (3) unless otherwise provided in such supplemental indenture, expressly agrees to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes; and (4) expressly agrees that such Person (or if a group of Persons, then one specified Person) shall make all filings with the Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Credit Enhancer shall have consented to such transaction; (iv) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (v) the Issuer shall have delivered to the Indenture Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Issuer, each stating that: (A) such sale, conveyance, exchange, transfer or disposition and such supplemental indenture comply with this Section 3.10; (B) such sale, conveyance, exchange, transfer or disposition and such supplemental indenture has no material adverse tax consequence to the Trust or to any Noteholders or Certificateholders; and (C) that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act). 22 Page 22 SECTION 3.11 Successor or Transferee. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. (b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.10(b), the Issuer shall be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Indenture Trustee from the Person acquiring such assets and properties stating that the Issuer is to be so released. SECTION 3.12 No Other Business. The Issuer shall not engage in any business or activity other than (i) acquiring, holding and managing the Mortgage Loans and the other assets of the Trust and the proceeds therefrom in the manner contemplated by the Basic Documents, (ii) issuing the Notes and the Certificates, (iii) making payments on the Notes and the Certificates and (iv) such other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto, as set forth in Section 2.3 of the Trust Agreement. SECTION 3.13 No Borrowing. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness for money borrowed other than indebtedness for money borrowed in respect of the Notes or in accordance with the Basic Documents. SECTION 3.14 Guarantees, Loans, Advances and Other Liabilities. Except as expressly permitted by this Indenture or the other Basic Documents, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing or otherwise) endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person. SECTION 3.15 Servicer's Obligations. The Issuer shall use its best efforts to cause the Servicer to comply with its obligations under the Pooling and Servicing Agreement. SECTION 3.16 Capital Expenditures. The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). SECTION 3.17 Removal of Administrator. So long as any Notes are Outstanding, the Issuer shall not remove the Administrator without cause unless the Credit Enhancer shall have consented to such removal. SECTION 3.18 Restricted Payments. Except for payments of principal or interest on or redemption of the Notes, so long as any Notes are Outstanding, the Issuer shall not, directly or indirectly: (a) pay any dividend or make any distribution (by reduction of capital or otherwise) whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise, in each case with 23 Page 23 respect to any ownership or equity interest or similar security in or of the Issuer or to the Servicer; (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security (other than investments of funds in the Accounts in Permitted Investments); or (c) set aside or otherwise segregate any amounts for any such purpose; provided, however, that the Issuer may make, or cause to be made, (i) distributions to the Servicer, the Owner Trustee, the Indenture Trustee and the Certificateholders as permitted by, and to the extent funds are available for such purpose under, the Pooling and Servicing Agreement or the Trust Agreement (including without limitation proceeds from initial sale of the Notes distributed to the Class __ Certificateholders pursuant to Section [___] of the Pooling and Servicing Agreement), and (ii) payments to the Indenture Trustee pursuant to the Administration Agreement. The Issuer shall not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with the Basic Documents. SECTION 3.19 Notice of Events of Default and Other Events. The Issuer agrees to give the Indenture Trustee, the Credit Enhancer and the Rating Agencies prompt written notice of each Event of Default hereunder, each Servicer Default, any Insolvency Event with respect to the Depositor, each default on the part of the Depositor of its obligations under the Pooling and Servicing Agreement and each default on the part of the Originators of their respective obligations under the Purchase Agreement and the other Basic Documents. SECTION 3.20 Further Instruments and Acts. Upon request of the Indenture Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 3.21 Representations and Warranties by the Issuer to the Indenture Trustee. The Issuer hereby represents and warrants to the Indenture Trustee and the Credit Enhancer as follows: (a) Good Title. No Mortgage Loan has been sold, transferred, assigned or pledged by the Trust to any Person other than the Indenture Trustee; immediately prior to the conveyance of the Mortgage Loans pursuant to this Indenture, the Trust had good and marketable title thereto, free of any Lien; and, upon execution and delivery of this Indenture by the Trust, and the endorsement of the Mortgage Notes to the order of and the delivery of the Mortgage Notes to the Indenture Trustee, as set forth in Section 2.01 of the Pooling and Servicing Agreement, the Indenture Trustee shall have all of the right, title and interest of the Trust in, to and under the Mortgage Loans, the unpaid indebtedness evidenced thereby and the collateral security therefor, free of any Lien; and (b) All Filings Made. All filings, recordings or other actions necessary in any jurisdiction to give the Indenture Trustee a first perfected security interest in the Mortgage Loans, the other assets of the Trust and the Spread Account shall have been made. 24 Page 24 ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect with respect to the Notes except as to: (i) rights of registration of transfer and exchange; (ii) substitution of mutilated, destroyed, lost or stolen Notes; (iii) rights of Noteholders to receive payments of principal thereof and interest thereon; (iv) Sections 2.14, 3.3, 3.4, 3.5, 3.8, 3.10, 3.12, 3.13, 3.19 and 3.21; (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.5 and the obligations of the Indenture Trustee under Sections 4.2 and 4.4); (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them and (vii) the rights of the Credit Enhancer to subrogation in respect of any Insured Payments, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, if: (a) either: (1) all Notes theretofore authenticated and delivered (other than (A) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.5 and (B) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.3) have been delivered to the Indenture Trustee for cancellation; or (2) all Notes not theretofore delivered to the Indenture Trustee for cancellation: (A) have become due and payable, (B) shall become due and payable on the Maturity Date, within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer, and the Credit Enhancer has been reimbursed for all amounts owed to it in respect of Monthly Premiums and Insured Payments, and the Issuer, in the case of (A), (B) or (C) of subsection 4.1(a)(2) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient (as evidenced by an Independent certificate) to pay and discharge the entire unpaid principal and accrued interest on such Notes not theretofore delivered to the Indenture Trustee for cancellation when due to the Maturity Date or Payment Date on which the Notes shall have been called for redemption pursuant to Section 10.1(a), as the case may be; (b) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and (c) the Issuer has delivered to the Indenture Trustee an Officer's Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.1(a) and each stating that all conditions precedent herein provided for relating to the 25 Page 25 satisfaction and discharge of this Indenture have been complied with. SECTION 4.2 Application of Trust Money. All moneys deposited with the Indenture Trustee pursuant to Section 4.1 shall be held in trust in a segregated account and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest. SECTION 4.3 Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.3 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 4.4 Duration of Appointment of Indenture Trustee. Notwithstanding the earlier payment in full of all principal and interest due to the Noteholders under the terms of the Notes and the cancellation of the Notes pursuant to Section 3.1, the Indenture Trustee shall continue to act in the capacity as Indenture Trustee hereunder and, for the benefit of the Certificateholders, shall comply with all of its obligations under the Pooling and Servicing Agreement, as appropriate, until such time as all payments allocable to principal of the Certificates and interest due to the Certificateholders have been paid in full. ARTICLE V DEFAULT AND REMEDIES SECTION 5.1 Events of Default. For the purposes of this Indenture, "Event of Default" wherever used herein, means any one of the following events: (a) failure to pay any interest on any Note as and when the same becomes due and payable, and such default shall continue for a period of five (5) days; or (b) except as set forth in Section 5.1(c), failure to pay any installment of the principal of any Note as and when the same becomes due and payable, and such default shall continue for a period of thirty (30) days after there shall have been given, by registered or certified mail, to the Credit Enhancer, the Depositor and the Servicer by the Credit Enhancer or the Indenture Trustee (with the consent of the Credit Enhancer) or to the Issuer, the Depositor and the Servicer and the Indenture Trustee by the Holders representing an aggregate Percentage Interest of at least 25% of Outstanding Notes (with the consent of the Credit Enhancer); or (c) failure to pay in full the outstanding Note Principal Balance on the Maturity Date; or (d) default in the observance or performance in any material respect of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere specifically addressed in this Section 5.1) which failure materially and adversely affects the rights of the Noteholders, and such default shall continue or not be cured for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer and the 26 Page 26 Depositor (or the Servicer, as applicable) by the Credit Enhancer or by the Indenture Trustee (with the consent of the Credit Enhancer) or to the Issuer, the Depositor and the Servicer and the Indenture Trustee by the Holders representing aggregate Percentage Interest of at least 25% of Outstanding Notes (with the consent of the Credit Enhancer), a written notice specifying such default and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the assets of the Trust in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the assets of the Trust, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (f) the commencement by the Issuer of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the assets of the Trust, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing. The Issuer shall deliver to the Indenture Trustee and the Credit Enhancer, within five Business Days after learning of the occurrence thereof, written notice in the form of an Officer's Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under Section 5.1(b), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. (a) If an Event of Default should occur and be continuing hereunder, then and in every such case, unless the principal amount of the Notes shall have already become due and payable, the Indenture Trustee at the direction of the Credit Enhancer, or either the Indenture Trustee or the Majority in Voting Interest of Notes, in each case with the consent of the Credit Enhancer, may declare all the Notes to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee and the Credit Enhancer if given by the Noteholders) setting forth the Event or Events of Default, and upon any such declaration the unpaid principal amount of such Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. (b) At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter provided in this Article V, the Indenture Trustee, at the direction of the Credit Enhancer or the Majority in Voting Interest of Notes, in each case with the consent of the Credit Enhancer, by written notice to the Issuer and the Indenture Trustee, may waive all Defaults set forth in the notice delivered pursuant to Section 5.2(a), and rescind and annul such declaration and its consequences; provided, however, that no such rescission and annulment shall extend to or affect any subsequent default or impair any right consequent thereto; and provided, further, that if the Indenture Trustee shall have proceeded to enforce any right under this 27 Page 27 Indenture and such proceedings shall have been discontinued or abandoned because of such rescission and annulment or for any other reason, or shall have been determined adversely to the Indenture Trustee, then and in every such case, the Indenture Trustee, the Issuer and the Noteholders, as the case may be, shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Indenture Trustee, the Issuer and the Noteholders, as the case may be, shall continue as though no such proceedings had been taken. SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Indenture Trustee. (a) The Issuer covenants that if: (i) default is made in the payment of any installment of interest on any Note when the same becomes due and payable, and such default continues unremedied for a period of five days after receipt by the Servicer of notice thereof from the Credit Enhancer or the Indenture Trustee or receipt by the Servicer and the Indenture Trustee of notice thereof from the Credit Enhancer or the Holders representing an aggregate Percentage Interest of at least 25% of Outstanding Notes (with the consent of the Credit Enhancer); or (ii) default is made in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable, and such default continues unremedied for a period of thirty (30) days after receipt by the Servicer of notice thereof from the Credit Enhancer or the Indenture Trustee or receipt by the Servicer and the Indenture Trustee of notice thereof from the Credit Enhancer or the Holders representing an aggregate Percentage Interest of at least 25% of Outstanding Notes (with the consent of the Credit Enhancer); then the Issuer shall, upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the ratable benefit of the Noteholders, the whole amount then due and payable on such Notes for principal and interest, with interest upon the overdue principal at the rate borne by the Notes, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel. (b) If the Issuer shall fail forthwith to pay such amounts upon such demand, the Credit Enhancer or the Indenture Trustee (with the consent of the Credit Enhancer), in its own name and as trustee of an express trust, shall, at the direction of the Credit Enhancer, or may, with the consent of the Credit Enhancer, institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon such Notes and collect in the manner provided by law out of the property of the Issuer or other obligor upon such Notes, wherever situated, the moneys adjudged or decreed to be payable. (c) If an Event of Default occurs and is continuing, the Indenture Trustee shall, at the direction of the Credit Enhancer, or may, with the consent of the Credit Enhancer, as more particularly provided in Section 5.4, in its discretion, proceed to protect and enforce the rights of the Indenture Trustee, the Credit Enhancer, and the Noteholders, by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Credit Enhancer or the Indenture Trustee by this Indenture or by law. (d) If there shall be pending, relative to the Issuer or any other obligor upon the 28 Page 28 Notes or any Person having or claiming an ownership interest in the assets of the Trust, proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or if a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, then the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered to (and shall at the direction of the Credit Enhancer), by intervention in such Proceedings or otherwise: (i) file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Credit Enhancer (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee or the Credit Enhancer, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, vote on behalf of the Noteholders in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings; (iii) collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders, the Credit Enhancer and of the Indenture Trustee on their behalf; and (iv) file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee, the Credit Enhancer or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Indenture Trustee or the Credit Enhancer, as applicable, and, if the Indenture Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (f) All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the 29 Page 29 Notes or the production thereof in any trial or other Proceedings relative thereto, and any such Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee, the Credit Enhancer and their respective agents and attorneys, shall be for the ratable benefit of the Noteholders. (g) In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Noteholders, and it shall not be necessary to make any Noteholder a party to any such Proceedings. SECTION 5.4 Remedies: Priorities. (a) If an Event of Default shall have occurred and be continuing, the Indenture Trustee shall, at the direction of the Credit Enhancer and may, with the consent of the Credit Enhancer, do one or more of the following (subject to Section 5.5): (i) institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes moneys adjudged due; (ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the assets of the Trust; (iii) exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee, the Credit Enhancer and the Noteholders; and (iv) sell the assets of the Trust or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; provided, however, that the Indenture Trustee may not sell or otherwise liquidate the assets of the Trust following an Event of Default, unless (A)(1) the Holders of all of the Outstanding Notes consent thereto, (2) the proceeds of such sale or liquidation distributable to the Noteholders are sufficient to discharge in full the principal of and the accrued interest on the Notes at the date of such sale or liquidation or (3) the Indenture Trustee determines that the assets of the Trust will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared due and payable and (B) the Indenture Trustee obtains the consent of the Credit Enhancer. In determining such sufficiency or insufficiency with respect to clauses (A)(2) and (A)(3) of this proviso, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the assets of the Issuer for such purpose. (b) If the Indenture Trustee collects any money or property pursuant to this Article V, it shall pay out the money or property in the following order: FIRST: to the Indenture Trustee for amounts due under Section 6.5; SECOND: to Noteholders (including the Credit Enhancer as subrogee) for amounts due and unpaid on the Notes for interest, ratably among all Noteholders, without 30 Page 30 preference or priority of any kind, according to the amounts due and payable on all the Notes for interest; THIRD: to Noteholders (including the Credit Enhancer as subrogee) for amounts due and unpaid on the Notes for principal, ratably among all Noteholders, without preference or priority of any kind, according to the amounts due and payable on all the Notes for principal; and FOURTH: to the Owner Trustee for deposit to the Certificate Distribution Account for distribution to the Certificateholders (including the Credit Enhancer as subrogee). The Indenture Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section 5.4. At least 15 days before such record date, the Indenture Trustee shall mail to each Noteholder, the Credit Enhancer and the Indenture Trustee a notice that states the record date, the payment date and the amount to be paid. SECTION 5.5 Optional Preservation of the Assets of the Trust. If the Notes have been declared to be due and payable under Section 5.2 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may (with the consent of the Issuer), but need not, unless directed to do so by the Credit Enhancer, elect to take and maintain possession of the assets of the Issuer. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Indenture Trustee shall take such desire into account when determining whether or not to take and maintain possession of the assets of the Issuer. In determining whether to take and maintain possession of the assets of the Issuer, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the assets of the Issuer for such purpose. SECTION 5.6 Limitation of Suits. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given written notice to the Indenture Trustee and the Credit Enhancer of a continuing Event of Default; (ii) the Holders of Outstanding Notes representing an aggregate Percentage Interest of at least 25% (with the consent of the Credit Enhancer) or the Credit Enhancer have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder; (iii) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request; (iv) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and (v) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders, Credit Enhancer or by the Majority in Voting Interest of the Notes; and 31 Page 31 (vi) such Holder has obtained the written consent of the Credit Enhancer. it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of Notes or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Notes. For the protection and enforcement of the provisions of this Section 5.6, each and every Noteholder shall be entitled to such relief as can be given either at law or in equity. If the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from the Credit Enhancer and one or more groups of Holders of Notes, each representing less than a Majority in Voting Interest of the Notes, the directions of the Credit Enhancer shall prevail notwithstanding any other provisions of this Indenture. SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal and Interest. Notwithstanding any other provisions in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Special Payment Date or the applicable Payment Date pursuant to Section 10.01 of the Pooling and Servicing Agreement) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 5.8 Restoration of Rights and Remedies. If the Indenture Trustee, the Credit Enhancer or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee, the Credit Enhancer or to such Noteholder, then and in every such case the Issuer, the Indenture Trustee, the Credit Enhancer and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee, the Credit Enhancer and the Noteholders shall continue as though no such Proceeding had been instituted. SECTION 5.9 Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee, the Credit Enhancer or the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of the Indenture Trustee, the Credit Enhancer or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee, the Credit Enhancer or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee, the Credit Enhancer or by the Noteholders, as the case may be. SECTION 5.11 Control by the Credit Enhancer. The Credit Enhancer or the Majority in Voting Interest of the Notes (with the consent of the Credit Enhancer) shall, subject to provision being made for indemnification against costs, expenses and liabilities in a form 32 Page 32 satisfactory to the Indenture Trustee, have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided, however, that: (i) such direction shall not be in conflict with any rule of law or with this Indenture; (ii) subject to the express terms of Section 5.4, any direction to the Indenture Trustee to sell or liquidate the assets of the Trust shall be by the Credit Enhancer, or by the Holders representing an aggregate Percentage Interest of at least 100% of Outstanding Notes (with the consent of the Credit Enhancer); (iii) if the conditions set forth in Section 5.5 have been satisfied and the Indenture Trustee elects to retain the assets of the Trust pursuant to Section 5.5, then any direction to the Indenture Trustee by Holders representing an aggregate Percentage Interest less than 100% of Outstanding Notes without the consent of the Credit Enhancer to sell or liquidate the assets of the Trust shall be of no force and effect; and (iv) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction; provided, however, that, subject to Section 6.1, the Indenture Trustee need not take any action that it determines might cause it to incur any liability or might materially adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.12 Waiver of Past Defaults. (a) Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.2, the Credit Enhancer or not less than a Majority in Voting Interest of the Notes (with the consent of the Credit Enhancer) may waive any past Default or Event of Default and its consequences except a Default (i) in the payment of principal of or interest on any of the Notes or (ii) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note. In the case of any such waiver, the Issuer, the Indenture Trustee and the Noteholders shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. (b) Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.13 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any Proceeding for the enforcement of any right or remedy under this Indenture, or in any Proceeding against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such proceeding of an undertaking to pay the costs of such proceeding, and that such court may in its discretion assess reasonable costs, including reasonable attorneys fees, against any party litigant in such proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to: 33 Page 33 (a) any proceeding instituted by the Indenture Trustee or the Credit Enhancer; (b) any proceeding instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate Notes representing an aggregate Percentage Interest of at least 10% of Outstanding Notes; or (c) any proceeding instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Special Payment Date or the applicable Payment Date pursuant to Section 10.01 of the Pooling and Servicing Agreement). SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture. The Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee or the Credit Enhancer, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee, the Credit Enhancer or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the assets of the Trust or upon any of the assets of the Issuer. SECTION 5.16 Performance and Enforcement of Certain Obligations. (a) Promptly following a request from the Indenture Trustee or the Credit Enhancer to do so and at the Administrator's expense, the Issuer agrees to take all such lawful action as the Indenture Trustee or the Credit Enhancer may request to compel or secure the performance and observance by the Depositor and the Servicer, as applicable, of their respective obligations under or in connection with the Pooling and Servicing Agreement or by the Originators of their obligations under or in connection with the Purchase Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Pooling and Servicing Agreement to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of default on the part of the Depositor or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Depositor or the Servicer of each of their obligations under the Pooling and Servicing Agreement. (b) If an Event of Default has occurred and is continuing, the Indenture Trustee may, and shall, at the direction (which direction shall be in writing or by telephone (confirmed in writing promptly thereafter)) of (i) the Credit Enhancer or (ii) the Holders representing an aggregate Percentage Interest of at least 66-2/3% of Outstanding Notes (with the consent of the Credit Enhancer), exercise all rights, remedies, powers, privileges and claims of the Issuer against the Depositor or the Issuer under or in connection with the Pooling and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by 34 Page 34 the Depositor or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Pooling and Servicing Agreement, and any right of the Issuer to take such action shall be suspended. (c) Promptly following a request from the Indenture Trustee (with the consent of the Credit Enhancer) or the Credit Enhancer to do so and at the Administrator's expense, the Issuer agrees to take all such lawful action as the Indenture Trustee may request to compel or secure the performance and observance by the Originators of each of their respective obligations to the Depositor under or in connection with the Purchase Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Purchase Agreement to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of default on the part of the Depositor thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Originators of each of their respective obligations under the Purchase Agreement. (d) If an Event of Default has occurred and is continuing, the Indenture Trustee may, and, at the direction (which direction shall be in writing or by telephone (confirmed in writing promptly thereafter)) of (i) the Credit Enhancer or (ii) Holders representing an aggregate Percentage Interest of at least 66-2/3% of Outstanding Notes (with the consent of the Credit Enhancer) shall, exercise all rights, remedies, powers, privileges and claims of the Depositor against the Originators under or in connection with the Purchase Agreement, including the right or power to take any action to compel or secure performance or observance by the Originators of each of their respective obligations to the Depositor thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Purchase Agreement, and any right of the Depositor to take such action shall be suspended. ARTICLE VI THE INDENTURE TRUSTEE SECTION 6.1 Duties of Indenture Trustee. The Indenture Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties to be performed by it as are specifically set forth in this Indenture. If an Event of Default has occurred and has not been cured or waived, the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. The Indenture Trustee is hereby authorized to acknowledge and accept the Pooling and Servicing Agreement, and by so doing the Indenture Trustee undertakes to perform the duties to be performed by the Indenture Trustee as set forth therein. The Indenture Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Indenture Trustee which are specifically required to be furnished pursuant to any provision of this Indenture, shall examine them to determine whether they conform to the requirements of this Indenture; provided, however that the Indenture Trustee shall not be responsible for the accuracy or content of any resolution, certificate, statement, opinion, report, document, order or other instrument furnished by the Issuer, the Servicer, the Administrator, the Depositor or any Originator hereunder or under any other Basic Document. If any such instrument is found not to conform to the requirements of this Indenture or thereunder, the Indenture Trustee shall notify the Credit Enhancer and request 35 Page 35 written instructions as to the action it deems appropriate to have the instrument corrected, and if the instrument is not so corrected, the Indenture Trustee will provide notice thereof to the Credit Enhancer who shall then direct the Indenture Trustee as to the action, if any, to be taken. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that: (i) Prior to the occurrence of an Event of Default, and after the curing of all such Events of Default which may have occurred, the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee and, in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; (ii) The Indenture Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or other officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; (iii) The Indenture Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Credit Enhancer or the Noteholders, relating to the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture; (iv) The Indenture Trustee shall not be required to take notice or be deemed to have notice or knowledge of any Default or Event of Default unless a Responsible Officer of the Indenture Trustee shall have received notice thereof. In the absence of receipt of such notice, the Indenture Trustee may conclusively assume that there is no Default or Event of Default; (v) The Indenture Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability for the performance of any of its duties hereunder or the exercise of any of its rights or powers if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it and none of the provisions contained in this Indenture shall in any event require the Indenture Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Issuer under this Indenture or the Servicer under the Pooling and Servicing Agreement, except during such time, if any, as the Indenture Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Issuer in accordance with the terms of this Indenture or the Servicer in accordance with the terms of the Pooling and Servicing Agreement; (vi) Subject to the other provisions of this Indenture and without limiting the generality of this Section, the Indenture Trustee shall have no duty (A) to see to any recording, filing, or depositing of this Indenture or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any rerecording, refiling or 36 Page 36 redepositing of any thereof, (B) to see to any insurance, (C) to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the assets of the Trust, (D) to confirm or verify the contents of any reports or certificates of the Issuer delivered to the Indenture Trustee pursuant to this Indenture believed by the Indenture Trustee to be genuine and to have been signed or presented by the proper party or parties; (vii) The Indenture Trustee shall not be deemed a fiduciary for the Credit Enhancer in its capacity as such, except to the extent the Credit Enhancer has made an Insured Payment and is thereby subrogated to the rights of the Noteholders with respect thereto; and (viii) Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture, the Pooling and Servicing Agreement or the Trust Agreement. (ix) Every provision of this Indenture relating to the Indenture Trustee shall be subject to this Section 6.1 and to the provisions of the TIA. SECTION 6.2 Certain Matters Affecting the Indenture Trustee. Except as otherwise provided in Section 6.1: (i) The Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate, Opinion of Counsel, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (ii) The Indenture Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith, in the absence of negligence, and in accordance with such Opinion of Counsel; (iii) The Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture or to institute, conduct or defend by litigation hereunder or in relation hereto at the request, order or direction of the Credit Enhancer or any of the Noteholders, pursuant to the provisions of this Indenture, unless such Noteholders or the Credit Enhancer, as applicable, shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Indenture Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured), to exercise such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs; (iv) The Indenture Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith, in the absence of negligence, and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (v) Prior to the occurrence of an Event of Default hereunder and after the curing 37 Page 37 of all Events of Default which may have occurred, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Credit Enhancer or Holders evidencing a Percentage Interest aggregating not less than 25% of Outstanding Notes or any Account Party; provided, however, that if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expense or liability as a condition to taking any such action. The reasonable expense of every such examination shall be paid by the Administrator or, if paid by the Indenture Trustee, shall be repaid by the Administrator upon demand from the Administrator's own funds; (vi) The right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty, and the Indenture Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act; (vii) The Indenture Trustee shall not be required to give any bond or surety in respect of the execution of the Trust created hereby or the powers granted hereunder; and (viii) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys. SECTION 6.3 Indenture Trustee Not Liable for Notes or Mortgage Loans. The recitals contained herein and in the Notes (other than the certificate of authentication on the Notes) shall be taken as the statements of the Issuer, and the Indenture Trustee assumes no responsibility for their correctness. The Indenture Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes or of any Mortgage Loan or any other Basic Document. The Indenture Trustee shall not be accountable for the use or application by the Issuer of any of the Notes or of the proceeds of such Notes, or for the use or application of any funds paid to the Issuer in respect of the Pooling and Servicing Agreement or deposited in or withdrawn from the Principal and Interest Account by the Issuer. In the absence of bad faith, negligence or willful misconduct, the Indenture Trustee shall not be responsible for the legality or validity of the Indenture or the validity, priority, perfection or sufficiency of the security for the Notes issued or intended to be issued hereunder. SECTION 6.4 Indenture Trustee May Own Notes. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes with the same rights it would have if it were not Indenture Trustee, and may otherwise deal with the parties hereto. SECTION 6.5 Indenture Trustee's Fees and Expenses. The Issuer has caused the Servicer under the Pooling and Servicing Agreement to covenant and agree to pay to the Indenture Trustee from time to time, and the Indenture Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the 38 Page 38 powers and duties hereunder of the Indenture Trustee, and the Servicer will pay or reimburse the Indenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Indenture Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation, expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith, provided that the Indenture Trustee shall have no lien on the assets of the Trust for the payment of its fees and expenses. Failure by the Issuer to cause any such fees or other expenses to be paid shall not relieve the Indenture Trustee of its obligations hereunder. The Indenture Trustee and any director, officer, employee or agent of the Indenture Trustee caused to be indemnified by the Servicer and held harmless against any loss, liability or expense (i) incurred in connection with any legal action relating to this Indenture or the Notes, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of duties hereunder or by reason of reckless disregard of obligations and duties hereunder, and (ii) resulting from any error in any tax or information return prepared by or on behalf of the Servicer. The obligations of the Issuer and the Servicer under this Section 6.5 shall survive payment of the Notes, and shall extend to any co-trustee appointed pursuant to this Article VI. The compensation due to the Indenture Trustee pursuant to this Section 6.5 shall be paid by the Servicer from its own funds. SECTION 6.6 Eligibility; Disqualification. The Indenture Trustee shall at all times satisfy the requirements of TIA Section 310(a) and be reasonably acceptable to the Credit Enhancer. The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and it shall have a long term deposit rating of at least "[BBB]" by [S&P] and "[Baa2]" by [Moody's]. The Indenture Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. If such banking association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.6 its combined capital and surplus shall be deemed to be as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section 6.6, the Indenture Trustee shall give notice of such ineligibility to the Credit Enhancer and any Account Party and shall resign, upon the request of the Credit Enhancer or the Majority in Voting Interest of the Notes (with the consent of the Credit Enhancer), in the manner and with the effect specified in Section 6.7. SECTION 6.7 Resignation and Removal of the Indenture Trustee. The Indenture Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Issuer, the Credit Enhancer, each Account Party, the Owner Trustee, the Servicer and to all Noteholders. Upon receiving such notice of resignation, the Issuer (or the Administrator on behalf of the Issuer) shall, with the consent of the Credit Enhancer, promptly appoint a successor trustee who satisfies the requirements of Section 6.6 by written instrument, in duplicate, which instrument shall be delivered to the resigning Indenture Trustee and to the successor trustee. A copy of such instrument shall be delivered to the Noteholders by the Issuer. Unless a successor trustee shall have been so appointed and have accepted appointment within 60 days after the giving of such notice of resignation, the resigning Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. If at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 6.6 and shall fail to resign after written request therefor by the Administrator, the Credit Enhancer or the Majority in Voting Interest of the Notes, or if at any time 39 Page 39 the Indenture Trustee shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Servicer may remove the Indenture Trustee and shall, within 30 days after such removal, appoint, subject to the approval of the Credit Enhancer, which approval shall not be unreasonably withheld, a successor trustee by written instrument, in duplicate, which instrument shall be delivered to the Indenture Trustee so removed and to the successor trustee. A copy of such instrument shall be delivered to the Credit Enhancer, the Noteholders, the Owner Trustee and each Account Party by the Issuer. The Majority in Voting Interest of the Notes (with the consent of the Credit Enhancer) or, if the Indenture Trustee fails to perform in accordance with this Indenture, the Credit Enhancer, may remove the Indenture Trustee and appoint a successor trustee by written instrument or instruments, in triplicate, signed by such Noteholders or their attorneys-in-fact duly authorized, or by the Credit Enhancer, as the case may be, one complete set of such instruments shall be delivered to the Issuer, one complete set to the Indenture Trustee so removed and one complete set to the successor Indenture Trustee so appointed. A copy of such instruments shall also be provided to the Credit Enhancer, the Owner Trustee, the Administrator and the Servicer. Any resignation or removal of the Indenture Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.8. SECTION 6.8 Successor Trustee. Any successor trustee appointed as provided in Section 6.7 shall execute, acknowledge and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect as if originally named as trustee herein. The predecessor trustee shall deliver to the successor trustee all Trustee's Mortgage Files and related documents and statements held by it hereunder, and the Issuer and the predecessor trustee shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. No successor trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 6.6. Upon acceptance of appointment by a successor trustee as provided in this Section, the Issuer shall mail notice of the succession of such trustee hereunder to all Noteholders, to the Credit Enhancer and to the Rating Agencies. If the Issuer fails to mail such notices within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Issuer. SECTION 6.9 Merger or Consolidation of Indenture Trustee. Any Person into which the Indenture Trustee may be merged or converted or with which it may be consolidated or any corporation or national banking association resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation or national banking association succeeding to the business of the Indenture Trustee, 40 Page 40 shall be the successor of the Indenture Trustee hereunder, provided such corporation or national banking association shall be eligible under the provisions of Section 6.6, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee. Notwithstanding any other provisions hereof, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the assets of the Trust or property securing the same may at the time be located, the Issuer and the Indenture Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Indenture Trustee and the Credit Enhancer to act as co-trustee or co-trustees, jointly with the Indenture Trustee, or separate trustee or separate trustees, of all or any part of the assets of the Trust, and to vest in such Person or Persons, in such capacity, such title to the assets of the Trust, or any part thereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Issuer and the Indenture Trustee may consider necessary or desirable. If the Issuer shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in case an Event of Default shall have occurred and be continuing, the Indenture Trustee alone (with the consent of the Credit Enhancer) shall have the power to make such appointment. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.6 hereunder and no notice to Holders of Notes of the appointment of co-trustee(s) or separate trustee(s) shall be required under Section 6.8 hereof. In the case of any appointment of a co-trustee or separate trustee pursuant to this Section 6.10, all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Indenture Trustee hereunder or as successor to the Issuer hereunder), the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the assets of the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed by such separate trustee or co-trustee at the direction of the Indenture Trustee. Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee. Any separate trustee or co-trustee may, at any time, constitute the Indenture Trustee, its agent or attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. The Indenture Trustee shall not be responsible for any action or inaction of any such separate trustee or co-trustee. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a 41 Page 41 new or successor trustee. SECTION 6.11 Protection of Trust Assets. (a) The Indenture Trustee will hold the assets of the Trust and the Spread Account in trust for the benefit of the Noteholders, the Certificateholders (to the extent set forth in the Pooling and Servicing Agreement) and the Credit Enhancer and, upon request of the Credit Enhancer, or, with the consent of the Credit Enhancer, at the request of the Issuer or any Account Party, will from time to time execute and deliver all such supplements and amendments hereto pursuant to Section 9.1 and all instruments of further assurance and other instruments, and will take such other action upon such request to: (i) more effectively hold in trust all or any portion of the assets of the Trust and the Spread Account; (ii) perfect, publish notice of, or protect the validity of any grant made or to be made by this Indenture; (iii) enforce any of the Mortgage Loans; or (iv) preserve and defend title to the assets of the Trust, the lien on the Spread Account and the rights of the Indenture Trustee, and the interests of the Noteholders represented thereby, in such Trust and the Spread Account against the claims of all Persons and parties. The Indenture Trustee shall send copies of any request received from any Account Party, the Credit Enhancer, the Owner Trustee or the Issuer to take any action pursuant to this Section 6.11 to the others. (b) Subject to Article V hereof, the Indenture Trustee shall have the power to enforce, and shall enforce, the obligations of the other parties to this Indenture, of any Letter of Credit Bank and of the Credit Enhancer, by action, suit or proceeding at law or equity, and shall also have the power to enjoin, by action or suit in equity, any acts or occurrences which may be unlawful or in violation of the rights of the Noteholders; provided, however, that nothing in this Section 6.11 shall require any action by the Indenture Trustee unless the Indenture Trustee shall first (i) have been furnished indemnity satisfactory to it and second (ii) when required by this Indenture, have been requested to take such action by the Majority in Voting Interest of the Notes, the Credit Enhancer, the Issuer or any Account Party in accordance with the terms of this Indenture. (c) The Indenture Trustee shall execute any instrument required pursuant to this Section 6.11 so long as such instrument does not conflict with this Indenture or with the Indenture Trustee's fiduciary duties. SECTION 6.12 Notice of Defaults. If an Default occurs and is continuing and if it is known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to each Noteholder notice of the Default within 90 days after it occurs. Except in the case of an Default in payment of principal of or interest on any Note (including payments pursuant to the mandatory redemption provisions of such Note), the Indenture Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 6.13 Reports to Holders. The Indenture Trustee shall deliver to each 42 Page 42 Noteholder the information and documents set forth in Article VII, and, in addition, the Indenture Trustee shall deliver to each Noteholder all such information with respect to the Notes supplied to it by the Servicer pursuant to Section 5.03 of the Pooling and Servicing Agreement as may be required to enable such holder to prepare its federal and state income tax returns. SECTION 6.14 Preferential Collection of Claims Against Issuer. The Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A trustee who has resigned or been removed shall be subject to TIA 311(a) to the extent indicated. SECTION 6.15 Representations and Warranties of Indenture Trustee. The Indenture Trustee represents and warrants as of the Closing Date that: (a) the Indenture Trustee is a national association duly organized, validly existing and in good standing under the laws of the United States of America; (b) the Indenture Trustee has full power, authority and legal right to execute, deliver and perform this Indenture, and has taken all necessary action to authorize the execution, delivery and performance by it of this Indenture; (c) the execution, delivery and performance by the Indenture Trustee of this Indenture (i) shall not violate any provision of any law or regulation governing the banking and trust powers of the Indenture Trustee or any order, writ, judgment or decree of any court, arbitrator, or governmental authority applicable to the Indenture Trustee or any of its assets, (ii) shall not violate any provision of the corporate charter or by-laws of the Indenture Trustee, or (iii) shall not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have a materially adverse effect on the Indenture Trustee's performance or ability to perform its duties under this Indenture or on the transactions contemplated in this Indenture; (d) the execution, delivery and performance by the Indenture Trustee of this Indenture shall not require the authorization, consent or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency regulating the banking and corporate trust activities of the Indenture Trustee; and (e) this Indenture has been duly executed and delivered by the Indenture Trustee and constitutes the legal, valid and binding agreement of the Indenture Trustee, enforceable in accordance with its terms. SECTION 6.16 Indenture Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Indenture Trustee shall be brought in its own name as Indenture Trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, be for the ratable benefit of the Noteholders in respect of which such judgment has been obtained. SECTION 6.17 Suit for Enforcement. If an Event of Default shall occur and be continuing, the Indenture Trustee, in its discretion may, subject to the provisions of Section 6.1, proceed to protect and enforce its rights and the rights of the Noteholders under this Indenture by proceeding whether for the specific performance of any covenant or agreement contained in this 43 Page 43 Indenture or in aid of the execution of any power granted in this Indenture or for the enforcement of any other legal, equitable or other remedy as the Indenture Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Indenture Trustee or the Noteholders. SECTION 6.18. Appointment of Custodians. The Indenture Trustee may, with the consent of the Servicer and notice to the Credit Enhancer and the Rating Agencies, appoint one or more Custodians acceptable to the Credit Enhancer to hold all or a portion of the Mortgage Files as agent for the Indenture Trustee, by entering into a Custodial Agreement. [__________________] is initially appointed as Custodian. Subject to this Article VI, the Indenture Trustee agrees to comply with the terms of each Custodial Agreement and to enforce the terms and provisions thereof against the Custodian for the benefit of the Noteholders and the Credit Enhancer. The Servicer shall be liable for the fees of any Custodian appointed hereunder. Each Custodian shall be a deposit institution subject to supervision by federal or state authorities and shall be qualified to do business in the jurisdiction in which it holds any Mortgage File. ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders. The Issuer shall furnish or cause to be furnished by the Servicer to the Indenture Trustee (a) not more than five days before each Payment Date or Special Payment Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Holders of Notes as of the close of business on the immediately preceding Record Date or Special Record Date, as the case may be, and (b) at such other times as the Indenture Trustee may request in writing, within 14 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished. SECTION 7.2 Preservation of Information, Communications to Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.1 and the names and addresses of Holders of Notes received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in such Section 7.1 upon receipt of a new list so furnished. (b) Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. (c) The Issuer, the Indenture Trustee and the Note Registrar shall have the protection of TIA Section 312(c). SECTION 7.3 Reports by Issuer. (a) The Issuer shall: (i) file with the Indenture Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the 44 Page 44 Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; (ii) file with the Indenture Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Noteholders described in TIA Section 313(c)) such summaries of any information, documents and reports required to be filed by the Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be required by rules and regulations prescribed from time to time by the Commission. (iv) supply copies of each of the foregoing to the Indenture Trustee and the Credit Enhancer. (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on [December 31] of each year. SECTION 7.4 Reports by Trustee. (a) If required by TIA Section 313(a), within 60 days after each [March 1], beginning with [March 1], 199_, the Indenture Trustee shall mail to each Noteholder, in the manner required by TIA Section 313(c), a brief report dated as of such date that complies with TIA Section 313(a). The Indenture Trustee also shall comply with TIA Section 313(b). A copy of any report delivered pursuant to this Section 7.4(a) shall, at the time of its mailing to Noteholders, be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuer shall notify the Indenture Trustee if and when the Notes are listed on any stock exchange and provided to the Credit Enhancer. (b) On each Payment Date, the Indenture Trustee shall include with each payment to each Noteholder a copy of the statement for the Due Period applicable to such Payment Date as required pursuant to Section 5.03 of the Pooling and Servicing Agreement. ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.1 Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply all such money received by it as provided in this Indenture and in the Pooling and Servicing Agreement. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the assets of the Trust, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or an Event of Default under this Indenture and any right to proceed thereafter as provided in Article V. 45 Page 45 SECTION 8.2 Accounts. (a) On or prior to the Closing Date, the Indenture Trustee shall establish and maintain, in the name of the Indenture Trustee, for the benefit of the Noteholders and the Certificateholders, the Accounts as provided in Article V of the Pooling and Servicing Agreement. (b) (i) On or before each Monthly Deposit Date, the applicable amounts set forth in Section 3.02(b) of the Pooling and Servicing Agreement shall be deposited into the Collection Account. On or before each Monthly Deposit Date that is a Special Redemption Date, the Special Redemption Price with respect to such Special Redemption Date shall be transferred from the Collection Account to the Note Payment Account as provided in Section 5.02(a)(iv) of the Pooling and Servicing Agreement. (ii) On each Monthly Deposit Date that is a Special Redemption Date, the Indenture Trustee shall call for the redemption of Notes in an amount equal to the Special Redemption Price and shall pay to Noteholders such Special Redemption Price, until the Note Principal Balance is paid in full. (c) (i) On or before each Payment Date, (i) the applicable amounts set forth in Section 5.01 of the Pooling and Servicing Agreement shall be deposited into the Collection Account. On or before each Payment Date, the Note Payment Amount shall be transferred from the Collection Account to the Note Payment Account as provided in Section 3.03 of the Pooling and Servicing Agreement. (ii) On each Payment Date, the Indenture Trustee shall pay to Noteholders all amounts on deposit in the Note Payment Account in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal and interest in the following order of priority: (i) to accrued and unpaid interest on the Notes; provided, however, that if there are not sufficient funds in the Note Payment Account to pay the entire amount of accrued and unpaid interest then due on the Notes, the amount in the Note Payment Account shall be applied to the payment of such interest on the Notes pro rata on the basis of the total such interest due on the Notes; (ii) to principal of the Notes until the Note Principal Balance is paid in full. SECTION 8.3 General Provisions Regarding Accounts. (a) Pursuant and subject to the provisions of Section [____] of the Pooling and Servicing Agreement, all or a portion of the funds in the Accounts shall be invested in Equitable Investments and reinvested by the Indenture Trustee as directed in writing by the Servicer. The Servicer shall not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any of the Accounts unless the security interest granted and perfected in such account shall continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such effect. (b) Subject to Section 6.1, the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any of the Accounts resulting from any loss on any Permitted Instrument included therein except for losses attributable to the Indenture Trustee's 46 Page 46 failure to make payments on such Equitable Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms. (c) If (i) the Servicer, on behalf of the Issuer, shall have failed to give investment directions for any funds on deposit in the Accounts to the Indenture Trustee by 11:00 a.m., New York City Time (or such other time as may be agreed by the Issuer and the Indenture Trustee) on any Business Day; or (ii) an Default or Event of Default shall have occurred and be continuing with respect to the Notes but the Notes shall not have been declared due and payable pursuant to Section 5.2, or, if such Notes shall have been declared due and payable following an Event of Default, amounts collected or receivable from the assets of the Trust are being applied in accordance with Section 5.5 as if there had not been such a declaration; then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in the Accounts in one or more Equitable Investments selected by the Indenture Trustee. SECTION 8.4 Release of Trust Assets. (a) Subject to the payment of its fees and expenses pursuant to Section 6.5 and the provisions of Section 8.5, the Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are consistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article VIII shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) The Indenture Trustee shall, at such time as there are no Notes Outstanding and all sums due to the Indenture Trustee pursuant to Section 6.5 have been paid, release any remaining portion of the assets of the Trust that secured the Notes from the lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds then on deposit in the Accounts. The Indenture Trustee shall release property from the lien of this Indenture pursuant to this Section 8.4(b) only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA) Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable requirements of Section 11.1. SECTION 8.5 Opinion of Counsel. The Indenture Trustee shall receive at least seven days' notice when requested by the Issuer to take any action pursuant to Section 8.4(a), accompanied by copies of any instruments involved, and the Indenture Trustee shall also require as a condition to such action, an Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action shall not materially and adversely impair the security for the Notes or the rights of the Noteholders in contravention of the provisions of this Indenture; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the assets of the Trust. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1 Supplemental Indentures Without Consent of Noteholders. 47 Page 47 (a) Without the consent of the Holders of any Notes but with the prior written consent of the Credit Enhancer and upon prior notice to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof) in form satisfactory to the Indenture Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to additional property to the lien of this Indenture; (ii) to evidence the succession, in compliance with Section 3.10 and the applicable provisions hereof, of another person to the Issuer, and the assumption by any such successor of the covenants of the Issuer contained herein and in the Notes contained; (iii) to add to the covenants of the Issuer, for the benefit of the Noteholders, or to surrender any right or power herein conferred upon the Issuer; (iv) other than in connection with the substitution of Mortgage Loans pursuant to Section 2.04 of the Pooling and Servicing Agreement, to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture which may be inconsistent with any other provision herein or in any supplemental indenture; (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI; or (vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA, and the Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. (b) When authorized by an Issuer Order, the Issuer and the Indenture Trustee may also, without the consent of any of the Noteholders but with the prior written consent of the Credit Enhancer and upon prior notice to the Rating Agencies, at any time and from time to time enter into one or more indentures supplemental hereto for the purpose of adding any provisions to, changing in any manner, or eliminating any of the provisions of, this Indenture or modifying in any manner the rights of the Noteholders under this Indenture; provided, however, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder. SECTION 9.2 Supplemental Indentures With Consent of the Noteholders. (a) When authorized by an Issuer Order, the Issuer and the Indenture Trustee also may, with the prior written consent of the Credit Enhancer and upon prior notice to the Rating Agencies and with the consent of the Holders of not less than a Majority in Voting Interest of the 48 Page 48 Notes, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, changing in any manner, or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Noteholders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate applicable thereto, the Special Redemption Price, or the Termination Price, the provision of this Indenture relating to the application of collections on, or the proceeds of the sale of, the assets of the Trust to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of a redemption, on or after the Special Redemption Date or Termination Date, as applicable); (ii) reduce the percentage of the Outstanding Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or alter the provisions of the proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Notes required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the assets of the Trust pursuant to Section 5.4 if the proceeds of such sale would be insufficient to pay the principal amount of and accrued but unpaid interest on the Outstanding Notes; (v) modify any provision of this Section 9.2 except to increase any percentage specified herein in favor of the Noteholders, or to provide that certain additional provisions of this Indenture or the Basic Documents cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby; (vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the mandatory redemption of the Notes contained herein or in Article X of the Pooling and Servicing Agreement; or (vii) permit the creation of any Lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the assets of the Trust or, except as otherwise permitted or contemplated herein, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien of this Indenture or by the Policy. (b) The Indenture Trustee may in its discretion determine whether or not any Notes would be affected (such that the consent of each would be required) by any supplemental indenture proposed pursuant to this Section 9.2 and any such determination shall be conclusive 49 Page 49 upon the Holders of all Notes, whether authenticated and delivered thereunder before or after the date upon which such supplemental indenture become effective. The Indenture Trustee shall not be liable for any such determination made in good faith. (c) It shall be sufficient if a Majority in Voting Interest of the Notes approves the substance, but not the form, of any proposed supplemental indenture. (d) Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.2, the Indenture Trustee shall mail to the Noteholders to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.3 Execution of Supplemental Indentures. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be, and be deemed to be, modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Noteholders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the TIA as then in effect so long as this Indenture shall then be qualified under the TIA. SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. ARTICLE X REDEMPTION OF NOTES SECTION 10.1 Redemption. (a) The Notes are subject to redemption in whole, but not in part, upon the 50 Page 50 exercise by the Holders of the Class __ Certificates of their option to cause the Issuer to sell the Mortgage Loans pursuant to Section 10.1 of the Pooling and Servicing Agreement. Such redemption shall occur on the applicable Payment Date as specified in Section 10.01 of the Pooling and Servicing Agreement. Upon such redemption, the Noteholders shall receive an amount equal to 100% of the Note Principal Balance plus accrued interest thereon to the date of redemption. The Issuer shall furnish the Credit Enhancer and the Rating Agencies notice of such redemption on the date the Mortgage Loans are sold. If the Notes are to be redeemed pursuant to this Section 10.1(a), the Issuer shall furnish notice thereof to the Indenture Trustee not later than the Determination Date with respect to the Payment Date on which the Notes are to be redeemed and the Issuer shall deposit into the Collection Account, on or before three Business Days prior to the applicable Payment Date, the Termination Price, whereupon all Notes shall be due and payable on such Payment Date. (b) If, in accordance with the provisions of Section [____] of the Pooling and Servicing Agreement, the Indenture Trustee determines that a Special Redemption shall be made on a Monthly Deposit Date (which shall be a "Special Redemption Date"), the Indenture Trustee shall notify the Noteholders thereof no later than the Business Day following the Determination Date prior to such Special Redemption Date pursuant to Section 10.2. The Indenture Trustee shall withdraw the Special Redemption Price from the Collection Account on or before the applicable Special Redemption Date pursuant to Section [____] of the Pooling and Servicing Agreement and, on such Special Redemption Date, the Notes shall be redeemed, pro rata in accordance with their respective Percentage Interests, pursuant to Section 8.2(c) hereof and Section [____] of the Pooling and Servicing Agreement. Payment of the Special Redemption Price shall be made to Noteholders of record as of the related Special Record Date. (c) If the assets of the Trust are sold pursuant to Section 7.2 of the Trust Agreement, all amounts on deposit in the Note Payment Account shall be paid to the Noteholders. If amounts are to be paid to Noteholders pursuant to this Section 10.1(c), the Servicer or the Issuer shall, to the extent practicable, furnish notice of such event to the Indenture Trustee and the Credit Enhancer pursuant to Section 10.2. SECTION 10.2 Form of Redemption Notice. (a) Notice of redemption under Sections 10.1(a), (b) and (c) shall be given by the Indenture Trustee by first-class mail, postage prepaid, mailed not less than five days prior to the applicable Payment Date or Special Redemption Date to each Noteholder of record on the related Record Date or Special Record Date, as applicable, at such Noteholder's address appearing in the Note Register. (b) All notices of redemption shall state: (i) the applicable Payment Date or Special Redemption Date; (ii) the principal amount of Notes to be redeemed and the principal amount of Notes per $1,000 original denomination to be redeemed; and (iii) in the case of a redemption pursuant to Section 10.1(a) hereof, the place where such Notes are to be surrendered for final payment (which shall be the Agency Office of the Indenture Trustee to be maintained as provided in Section 3.2). (c) Notice of redemption of the Notes shall be given by the Indenture Trustee in the name and at the expense of the Administrator. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of 51 Page 51 any other Note. SECTION 10.3 Notes Payable on Payment Date and Special Redemption Date. The Notes or portions thereof to be redeemed shall, following notice of redemption as required by Section 10.2 (in the case of redemption pursuant to Sections 10.1(a) or 10.1(b)) on the applicable Payment Date or Special Redemption Date, as the case may be, cease to be Outstanding for purposes of this Indenture and shall thereafter represent only the right to receive the redemption price, and (unless the Issuer shall default in the payment of the principal amount of Notes to be redeemed) no interest shall accrue on the redemption price, for any period after the date to which accrued interest is calculated for purposes of calculating the redemption price, as the case may be. ARTICLE XI MISCELLANEOUS SECTION 11.1 Compliance Certificates and Opinions, etc. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee: (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with and (iii) (if required by the TIA) an Independent Certificate from a firm of certified public accountants meeting the applicable requirements of this Section 11.1; provided, however, that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the judgment of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with. (b) (i) Prior to the deposit with the Indenture Trustee of any Collateral or other property or securities that is to be made the basis for the release of any property or securities subject to the lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officers' Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited. 52 Page 52 (ii) Whenever the Issuer is required to furnish to the Indenture Trustee an Officers' Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (b)(i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (b)(ii) is 10% or more of the Note Principal Balance then outstanding, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officers' Certificate is less than $25,000 or less than one percent of the Note Principal Balance then outstanding. (iii) Other than with respect to the release of any Mortgage Loans to be purchased pursuant to Sections 2.05 and 3.03 of the Pooling and Servicing Agreement, whenever any property or securities are to be released from the lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each Person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof. (iv) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signatory thereof as to the matters described in clause (b)(iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property, other than Mortgage Loans to be purchased pursuant to Sections 2.05 and 3.03 of the Pooling and Servicing Agreement, or securities released from the lien of this Indenture since the commencement of the then current calendar year, as set forth in the certificates required by clause (b)(iii) above and this clause (b)(iv), equals 10% or more of the Note Principal Balance then outstanding, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the Note Principal Balance then outstanding. (v) Notwithstanding Section 2.9 or any other provision of this Section 11.1, the Issuer may (A) collect, liquidate, sell or otherwise dispose of Mortgage Loans as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Accounts as and to the extent permitted or required by the Basic Documents. SECTION 11.2 Form of Documents Delivered to Indenture Trustee. (a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. (b) Any certificate or opinion of a Responsible Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or 53 Page 53 opinion is based are erroneous. Any such certificate of an Responsible Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Depositor, the Issuer or the Administrator, stating that the information with respect to such factual matters is in the possession of the Servicer, the Depositor, the Issuer or the Administrator, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. (c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. (d) Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI. SECTION 11.3 Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture or the Pooling and Servicing Agreement to be given or taken by Noteholders or a class of Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 11.3. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.4 Notices. Subject to Section 11.5, all demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by overnight mail, certified mail or registered mail, postage prepaid, to (i) in the case of the Servicer and the Administrator 54 Page 54 [______________________________] Attention: [_______________], or such other addresses as may hereafter be furnished to the Certificateholders and the Noteholders in writing by the Administrator or the Servicer, as the case may be, (ii) in the case of the Depositor, [_____________________] Attention: [_________________], or such other addresses as may hereafter be furnished to the Certificateholders and the Noteholders in writing by the Depositor, (iii) in the case of the Issuer, [_________________________], Attention: [_________________], or such other addresses as may hereafter be furnished to the Noteholders and the Certificateholders in writing by the Issuer, (iv) in the case of the Owner Trustee, ______________________, ____________________, _________, _________________________ Attention: Banc One HELOC Trust 199_-_, (v) in the case of the Certificateholders, as set forth in the Certificate Register, (vi) in the case of the Indenture Trustee, _________________________, _________________ ______, _________, _______________________, Attention: Banc One HELOC Trust 199_-_, (vii) in the case of the Noteholders, as set forth in Section 11.5(a), (viii) in the case of [Moody's, 99 Church Street, New York, New York 10007, Attention: Home Equity Monitoring Group], (ix) in the case of [S&P, 26 Broadway, New York, New York 10004, Attention: ______________], (x) in the case of [Fitch, Fitch IBCA, One State Street Plaza, New York, New York 10004], Attention: Banc One HELOC Trust 199_-_, (xi) in the case of the Credit Enhancer, [__________________________________] Attention: Banc One HELOC Trust 199_-_ and (xi) in the case of the Account Party, at the address specified by such Account Party. Any such notices shall be deemed to be effective with respect to any party hereto upon the receipt of such notice by such party, except that notices to the Certificateholders or Noteholders shall be effective upon mailing or personal delivery. SECTION 11.5 Notices to Noteholders; Waiver. (a) Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if it is in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at such Person's address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. If notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given regardless of whether such notice is in fact actually received. (b) Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. (c) In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. (d) Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute an Event of Default. SECTION 11.6 Alternate Payment and Notice Provisions. 55 Page 55 Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer shall furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee shall cause payments to be made and notices to be given in accordance with such agreements. SECTION 11.7 Conflict with Trust Indenture Act. (a) If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the TIA, such required provision shall control. (b) The provisions of TIA Sections 310 through 317 that impose duties on any Person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. SECTION 11.8 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.9 Successors and Assigns. (a) All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. (b) All covenants and agreements of the Indenture Trustee in this Indenture shall bind its successors and assigns, whether so expressed or not. SECTION 11.10 Separability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the Credit Enhancer, the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the assets of the Trust, any benefit or any legal or equitable right, remedy or claim under this Indenture. The Credit Enhancer is an intended third-party beneficiary under the Indenture. SECTION 11.12 Legal Holidays. If the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date. 56 Page 56 SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.14 Counterparts. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.15 Recording of Indenture. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture. SECTION 11.16 No Recourse. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against: (i) the Indenture Trustee or the Owner Trustee in its individual capacity; (ii) any Certificateholder or other owner of a beneficial interest in the Issuer; or (iii) any Certificateholder or other partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement. SECTION 11.17 No Petition. The Indenture Trustee, by entering into this Indenture, and each Noteholder, by accepting a Note issued hereunder, hereby covenant and agree that they shall not, prior to the date which is one year and one day after the termination of this Indenture with respect to the Trust pursuant to Section 4.1, acquiesce, petition or otherwise invoke or cause the Depositor or the Trust to invoke the process of any court or government authority for the purpose of commencing 57 Page 57 or sustaining a case against the Depositor or the Trust under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Depositor or the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Depositor or the Trust. SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior notice, it shall permit any representative of the Indenture Trustee or the Credit Enhancer, during the Issuer's normal business hours, to examine all the books of account, records, reports, and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and Independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. SECTION 11.19 The Credit Enhancer. Any right conferred to the Credit Enhancer hereunder shall be suspended during any period in which the Credit Enhancer is in default in its payment obligations under the Policy, and its rights during such period shall vest in the Majority in Voting Interest of the Notes. At such time as the Notes are no longer outstanding under the Indenture and neither the Class ___ Certificates nor the Class ___ Certificates are outstanding under the Trust Agreement, and no amounts owed to the Credit Enhancer hereunder remain unpaid, the Credit Enhancer's rights hereunder shall terminate. The Indenture Trustee shall receive, as attorney-in-fact of each Holder of a Note, any Insured Payment from the Credit Enhancer and disburse the same to each Holder of a Note in accordance with the provisions of Article VIII. Insured Payments disbursed by the Indenture Trustee from proceeds of the Policy shall not be considered payment by the Trust nor shall such payments discharge the obligation of the Trust with respect to such Notes, and the Credit Enhancer shall become the owner of such unpaid amounts due from the Trust in respect of Notes. The Indenture Trustee hereby agrees on behalf of each Holder of a Note for the benefit of the Credit Enhancer that it recognizes that to the extent the Credit Enhancer makes Insured Payments, either directly or indirectly (as by paying through the Indenture Trustee), to the Noteholders, the Credit Enhancer will be subrogated to the rights of the Noteholders with respect to such Insured Payment, shall be deemed to the extent of payments so made to be a registered Noteholder and shall receive all future distributions until all such Insured Payments by the Credit Enhancer, together with interest thereon at the interest rate borne by the Notes, have been duly reimbursed. To evidence such subrogation, the Indenture Trustee shall, or shall cause the Note Registrar to, note the Credit Enhancer's rights as subrogee on the registration books maintained by the Indenture Trustee or the Note Registrar upon receipt from the Credit Enhancer of proof of payment of any Insured Payment. 58 Page 58 IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized and duly attested, all as of the day and year first above written. BANC ONE HELOC TRUST 199_-_ _______________________________, as Owner Trustee, By:____________________________ Name: Title: _______________________________ ___________, as Indenture Trustee, By:____________________________ Name: Title: ACKNOWLEDGED AND ACCEPTED: [BANC ONE, N.A.] as Servicer and Administrator By: ______________________________ Name: Title: 59 Page 59 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) BEFORE ME, the undersigned authority, a Notary Public in and for said county and state, on this day personally appeared ______________, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said BANC ONE HELOC TRUST 199_-_, a Delaware business trust, and that he executed the same as the act of said business trust for the purpose and consideration therein expressed, and in the capacities therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ___th day of __________ 199__. ________________________________ Notary Public in and for the State of New York. [Seal] My commission expires: 60 Page 60 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) BEFORE ME, the undersigned authority, a Notary Public in and for said county and state, on this day personally appeared ___________, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said ______________________, a national banking association, and that he executed the same as the act of said corporation for the purpose and consideration therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___th day of ___________, 199__. ________________________________ Notary Public in and for the State of New York. [Seal] My commission expires: 61 Page 61 EXHIBIT A FORM OF NOTE DEPOSITORY AGREEMENT See Attached 62 Page 62 EXHIBIT B [FORM OF NOTE] REGISTERED$______________ No. R-___ SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP NO. ___________ UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE WAS ISSUED ON ____ __, ____. IT IS POSSIBLE THAT APPLICABLE LAW AND PROPOSED TREASURY REGULATIONS COULD BE INTERPRETED TO PROVIDE THAT ALL INTEREST PAYMENTS ON THIS NOTE ARE TO BE TREATED AS PART OF THE STATED REDEMPTION PRICE AT MATURITY OF THIS NOTE (I.E., PRINCIPAL) THEREBY CAUSING THIS NOTE TO BE TREATED AS HAVING BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES. IN SUCH CASE, THE FOLLOWING INFORMATION WOULD BE APPLICABLE, ASSUMING THAT THIS NOTE PAYS IN ACCORDANCE WITH PROJECTED CASH FLOWS BASED ON CERTAIN ASSUMPTIONS USED IN PRICING THE NOTES: (I) THE AMOUNT OF OID AS A PERCENTAGE OF THE ORIGINAL PRINCIPAL AMOUNT OF THIS NOTE WOULD BE APPROXIMATELY ________%; AND (II) THE ANNUAL YIELD OF THIS NOTE FOR PURPOSES OF COMPUTING OID WOULD BE APPROXIMATELY _______% PER ANNUM. THE ACTUAL YIELD TO MATURITY AND OID ON THIS CERTIFICATE MAY DIFFER FROM THE PROJECTED AMOUNTS. THE PREPAYMENT ASSUMPTION USED IN DETERMINING THE ANNUAL YIELD FOR FEDERAL INCOME TAX PURPOSES IS 25% OF CPR. THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. 63 Page 63 BANC ONE HELOC TRUST 199_-_ ______% HELOC ASSET BACKED NOTES DUE ____, __, ____ BANC ONE HELOC TRUST 199_-_, a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer") for value received, hereby promises to pay to __________, or registered assigns, the principal sum of ______________________________________________ ($___________) payable in accordance with the Indenture, prior to the occurrence of an Event of Default and a declaration that the Notes are due and payable, on each Payment Date in an amount equal to the result obtained by multiplying (i) a fraction, the numerator of which is $___________ and the denominator of which is $___________ by (ii) the aggregate amount, if any, payable from the Note Payment Account in respect of principal on the Notes pursuant to Section 3.1 of the Indenture; provided, however, that the entire unpaid principal amount of this Note shall be due and payable on _____ __, ____ (the "Maturity Date"). The Issuer shall pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note from time to time is paid or made available for payment on the principal amount of this Note from time to time outstanding as of the preceding Payment Date (after giving effect to all payments of principal made on such preceding Payment Date and taking into account all Special Redemptions of the Notes since the preceding Payment Date), as more particularly set forth in the Indenture and the Pooling and Servicing Agreement (each as defined herein). Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from ____ __, ____. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America which, at the time of payment, is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Responsible Officer. Date: _____________ BANC ONE HELOC TRUST 199_-_, BY: ______________________________, not in its individual capacity but solely as Owner Trustee under the Trust Agreement 64 Page 64 By: ___________________________ Name: Title: 65 Page 65 INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. ____________________________________ __________________, not in its individual capacity but solely as Indenture Trustee By: ________________________ Name: Title: 66 Page 66 [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its _____% Banc One HELOC Asset Backed Notes, Series 199_-_, due _____ __, ____ (the "Notes"), all issued under an Indenture, dated as of _____ 1, 199_ (as may be supplemented or amended, the "Indenture") between the Issuer and _________________________, a national banking association, as trustee (the "Indenture Trustee", which term includes any successor trustee under the Indenture) to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Noteholders. The Notes are subject to all terms of the Indenture. All terms used and not otherwise defined in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture. The Notes issued pursuant to the Indenture are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture. [_____________________________________] has issued a guaranty surety bond with respect to the Notes, the Class ___ Certificates and the Class ___ Certificates, a copy of which is attached as Exhibit I to the Pooling and Servicing Agreement. Pursuant to the Pooling and Servicing Agreement and the Trust Agreement, the Class C Certificateholders have pledged all of their right, title and interest in the Spread Account to the Indenture Trustee to secure the Trust's payment obligations under the Pooling and Servicing Agreement and the Indenture. Principal of the Notes will be payable on each Payment Date in an amount generally equal to approximately ____% of the "Basic Principal Amount" (as defined in the Pooling and Servicing Agreement dated as of _____ 1, 199_ (the "Pooling and Servicing Agreement") among the Issuer, the Depositor named therein and Old Stone Credit Corporation, as servicer (the "Servicer"). "Payment Date" means the fifteenth day of March, June, September and December, or, if any such date is not a Business Day, the next succeeding Business Day, commencing _________ 15, 199_. In addition, as described in the Indenture, upon the receipt of a certain level of Principal Prepayments and Curtailments on the Mortgage Loans during a calendar month other than a month immediately preceding a month in which a Payment Date occurs, the Notes will be subject to special redemption on the related Special Payment Date in an amount generally equal to approximately ____% of the "Special Payment Amount" (as defined in the Pooling and Servicing Agreement). "Special Payment Date" means the fifteenth day of each month other than a month in which a Payment Date occurs or if any such date is not a Business Day, the next succeeding Business Day. As described above, the entire unpaid principal amount of this Note shall be due and payable on the Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount of this Note shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Majority in Voting Interest of Notes (in each case with the consent of the Credit Enhancer) have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture. All principal payments on the Notes shall be made pro rata to the Noteholders. Payments of interest on this Note at the rate of _____% per annum shall be due and payable on each Payment Date, together with the installment of principal described above, if any, if not in full payment of this Note, and shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, or if the Holder hereof owns in 67 Page 67 the aggregate Notes having aggregate denominations of at least $1,000,000, by wire transfer in immediately available funds to the account designated by the Holder to the Indenture Trustee at least five Business Days prior to the related Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Depository (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. The Record Date, with respect to any Payment Date, means the close of business on the day prior to such Payment Date, or if Definitive Notes are issued, the last day of the preceding calendar month. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, shall notify the Person who is the Registered Holder hereof as of the Record Date preceding such Payment Date by notice sent in accordance with Section 2.7(e) of the Indenture, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of New York. Payments of the Special Redemption Price shall be due and payable on each Special Payment Date pursuant to the terms of the Indenture. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in the City of New York or the city in which the Corporate Trust Office is located, or a member firm of a national securities exchange, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed, and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. 68 Page 68 Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that by accepting the benefits of the Indenture such Noteholder will not, prior to the date which is one year and one day after the termination of the Indenture with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the Depositor or the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Depositor or the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Depositor or the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Depositor or the Issuer. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note shall be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Notes are issuable only as registered Notes without coupons in denominations of $1,000 and in integral multiples thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for new Notes of authorized denominations evidencing the same aggregate denomination, as requested by the Holder surrendering the same; provided, however, that no Note may be subdivided such that the denomination of any resulting Note is less than $1,000. No service charge shall be made for any such registration of transfer or exchange, but the Indenture Trustee or the Note Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Notes under the Indenture at any time by the Issuer with the consent of the Credit Enhancer and a Majority in Voting Interest of Notes. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Note Principal Balance (with the consent of the Credit Enhancer), on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one of more predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture with the consent of the Credit Enhancer but without the consent of the Noteholders. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. 69 Page 69 This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, neither the Depositor, the Servicer, the Indenture Trustee nor the Owner Trustee in their respective individual capacities, any owner of a beneficial interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns, shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and indemnifications have been made by the Owner Trustee solely as the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. 70 Page 70 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee ____________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto______________________________ ________________________________________________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________________________________, as attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated:___________________ _______________________________ Signature Guaranteed: _______________________________ _________________________ 71 Page 71 EXHIBIT C MORTGAGE LOAN SCHEDULE EX-10.1 5 FORM OF PURCHASE AGREEMENT 1 EXHIBIT 10.1 MORTGAGE LOAN PURCHASE AGREEMENT AMONG [--------------------------] [--------------------------] [--------------------------] SELLERS AND BANC ONE ABS CORPORATION PURCHASER DATED AS OF , 199 --------- --- -- BANC ONE HELOC TRUST 199 - -- -- 2 THIS MORTGAGE LOAN PURCHASE AGREEMENT is made as of _________ ___, 199__, by and among THE SELLERS LISTED ON THE SIGNATURE PAGE HERETO (the "Sellers"), and BANC ONE ABS CORPORATION (the "Purchaser"). WHEREAS, the Sellers and the Purchaser wish to set forth the terms pursuant to which the Mortgage Loans are to be sold by the Sellers to the Purchaser and purchased by the Purchaser from the Sellers; NOW, THEREFORE, in consideration of the foregoing, the other good and valuable consideration and the mutual terms and covenants contained herein, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS SECTION 1.01 Certain capitalized terms used in this Agreement are defined in and shall have the respective meanings assigned them in Article I to the Pooling and Servicing Agreement, dated as of _________ __, 199__, among the Purchaser, as Depositor, Bank One, N.A., as Servicer and [_________________], as Trustee (the "Pooling and Servicing Agreement"). All references herein to "the Agreement" or "this Agreement" are to this Mortgage Loan Purchase Agreement, and all references herein to Articles, Sections and subsections are to Articles, Sections or subsections of this Mortgage Loan Purchase Agreement unless otherwise specified. ARTICLE II CONVEYANCE OF THE MORTGAGE LOANS SECTION 2.01 Conveyance of Mortgage Loans (a) Immediately prior to consummation on the Closing Date of the transactions contemplated by the Pooling and Servicing Agreement, in consideration of the Purchaser's delivery of the amount of cash and other consideration to or to the order of the applicable Seller as set forth on Exhibit A hereto, each Seller does hereby transfer, assign, set over and convey to the Purchaser without recourse, all of the right, title and interest of such Seller in and to each Mortgage Loan, including its Asset Balance (including all Additional Balances) set forth in the applicable Mortgage Loan Schedules attached hereto as Exhibit B-1, B-2 and B-3, together with the Mortgage Files relating thereto and all proceeds thereof [(other than amounts received on and after the Cut-off Date in respect of interest accrued on such Mortgage Loans prior to the Cut-off Date)]. 3 SECTION 2.02 Possession of Mortgage Files. (a) Upon the delivery to each Seller of the consideration set forth in Section 2.01, the ownership of each Seller's Mortgage Notes, related Mortgages and the contents of the related Mortgage Files are vested in the Purchaser. (b) Pursuant to Section 2.04, each Seller has delivered or caused to be delivered each Mortgage File with respect to its Mortgage Loans to the Purchaser. SECTION 2.03 Books and Records. The transfer of each Mortgage Loan to the Purchaser shall be reflected on the related Seller's balance sheets and other financial statements as a sale of assets by such Seller. Each Seller shall be responsible for maintaining, and shall maintain, a complete set of books and records for each Mortgage Loan which shall be clearly marked to reflect the ownership of each Mortgage Loan by the Purchaser. SECTION 2.04 Delivery of Mortgage Loan Documents. Each Seller has delivered or caused to be delivered to the Purchaser or its designee, in accordance with the instructions of the Purchaser, each of the documents referred to in Section 2.01 of the Pooling and Servicing Agreement, as follows: [(a) the original Mortgage Note; (b) the original recorded Mortgage or, if, in connection with any Mortgage Loan, the original recorded Mortgage with evidence of recording thereon cannot be delivered on or prior to the Closing Date because of a delay caused by the public recording office where such original Mortgage has been delivered for recordation or because such original Mortgage has been lost, the related Seller shall deliver or cause to be delivered, at the direction of the Purchaser, a true and correct copy of such Mortgage, together with an officer's Certificate of such Seller stating that such original Mortgage has been dispatched to the appropriate public recording official or has been lost; (c) if applicable, the original intervening assignments, if any ("Intervening Assignments"), with evidence of recording thereon, showing a complete chain of title to the Mortgage from the originator to the related Seller or, if any such original Intervening Assignment has not been returned from the applicable recording office or has been lost, a true and correct copy thereof, together with an Officer's Certificate of such Seller stating that such original Intervening Assignment has been dispatched to the appropriate public recording official for recordation or has been lost; 3 4 (d) for each Mortgage Loan either a title insurance policy or a title search or guaranty of title with respect to the related Mortgaged Property to the extent in possession of the related Seller or its Affiliates; (e) the original of any guaranty executed in connection with the Mortgage Note; (f) the original of each assumption, modification, consolidation or substitution agreement, if any, relating to the Mortgage Loan; and (g) any security agreement, chattel mortgage or equivalent instrument executed in connection with the Mortgage.] Each Seller hereby confirms to the Trustee that it has caused the portions of the Electronic Ledgers relating to the Mortgage Loans to be clearly and unambiguously marked, and has made the appropriate entries in its general accounting records, to indicate that such Mortgage Loans have been transferred to or at the direction of the Purchaser. Each Seller agrees not to notify the obligors on the Mortgage Loans of the transfer of the Mortgage Loans to the Purchaser, unless required by the terms of the Mortgage Loans or applicable law. SECTION 2.05 Acceptance by Purchaser of the Mortgage Loans; Certain Substitutions; Certification by the Trustee. (a) The Purchaser agrees to execute and deliver on the Closing Date for each Mortgage Loan an acknowledgment of receipt of the items listed in Section 2.04 (a), (b) and (c) above, in the form attached as Exhibit C hereto, and declare that it will hold such documents and any amendments, replacements or supplements thereto, as well as any other assets transferred pursuant to the terms hereof. Pursuant to the Pooling and Servicing Agreement, the Custodial Agreement and this Agreement, the Trustee will, for the benefit of the Purchaser and the Credit Enhancer, review (or cause to be reviewed) each of the documents set forth in Section 2.04 within 90 days after the Closing Date to ascertain that all required documents set forth in this Section 2.04 have been executed and received, and that such documents related to the Mortgage Loans identified on the Mortgage Loan Schedule and in so doing the Trustee may rely on the purported due execution and genuineness of any signature thereon. (b) If the Trustee during the process of reviewing the Mortgage Files finds any document constituting a part of a Mortgage File which is not executed, has not been received, is unrelated to the Mortgage Loan identified in the Mortgage Loan Schedule, or does not conform to the requirements of Section 2.04 or substantively to the description thereof as set forth in the Mortgage Loan Schedule, the Trustee is required by the Pooling and Servicing Agreement to promptly give notice of the same. It 4 5 is understood that the scope of the Trustee's review of the Mortgage Files is limited solely to confirming that the documents listed in Section 2.04 (other than those described in Section 2.04(f)) have been executed and received and relate to the Mortgage Files identified in the Mortgage Loan Schedule. The applicable Seller agrees to use its reasonable efforts to cause to be remedied a material defect in a document constituting part of a Mortgage File of which such Seller is so notified by the Trustee or the Credit Enhancer. If, however, within 90 days after notice to it respecting such defect, the applicable Seller has not caused to be remedied the defect or if at any time any loss is suffered by the Trustee on behalf of the Certificateholders or the Credit Enhancer, in respect of any Mortgage Loan as a result of (i) a defect in any document constituting a part of its Mortgage File or (ii) an Assignment of Mortgage to the Trustee not having been recorded as required by Section 2.04, then on the next succeeding Business Day upon the deposit to the Collection Account of the Transfer Deposit Amount, if any, and upon satisfaction of the applicable conditions described herein, all right, title and interest of the Trust in and to such Mortgage Loan shall be deemed to be retransferred, reassigned and otherwise reconveyed, without recourse, representation or warranty, to the Seller on such Business Day and the Asset Balance of such Mortgage Loan shall be deducted from the Pool Balance; provided, however, that interest accrued on the Asset Balance of such Mortgage Loan to the end of the related Collection Period shall be the property of the Trust. If the Trustee determines pursuant to the Pooling and Servicing Agreement that the reduction of such Asset Balance from the Pool Balance in accordance with the preceding sentence would cause the Transferor Principal Balance to be less than the Minimum Transferor Interest (a "Transfer Deficiency")and delivers written notice of such deficiency to the Seller, then within five Business Days after the Business Day of such retransfer the Seller shall either (i) substitute an Eligible Substitute Mortgage Loan or (ii) deposit into the Collection Account an amount (the "Transfer Deposit Amount") in immediately available funds equal to the Transfer Deficiency or a combination of both (i) and (ii) above. Such reduction or substitution and the actual payment of any Transfer Deposit Amount, if any, shall be deemed to be payment in full for such Mortgage Loan. It is understood and agreed that the obligation of the Seller to accept a transfer of a Defective Mortgage Loan and to either convey an Eligible Substitute Mortgage Loan or to make a deposit of any related Transfer Deposit Amount into the Collection Account shall constitute the sole remedy respecting such defect available to Certificateholders, the Trustee and the Credit Enhancer against the Seller. The Seller, promptly following the transfer of a Defective Mortgage Loan from or the transfer of an Eligible Substitute Mortgage Loan pursuant to this Section 2.05(b), shall appropriately mark its Electronic Ledger and make appropriate entries in its general account records to reflect such retransfer. 5 6 Notwithstanding any other provision of this Section 2.05(b), a retransfer of a Defective Mortgage Loan to the Seller pursuant to this Section 2.05(b) that would cause the Transferor Principal Balance to be less than the Minimum Transferor Interest shall not occur if either the Seller fails to convey an Eligible Substitute Mortgage Loan or to deposit into the Collection Account any related Transfer Deposit Amount required by this Section 2.05(b) with respect to the transfer of such Defective Mortgage Loan. (c) As to any Eligible Substitute Mortgage Loan or Loans, the Seller shall deliver at the direction of the Purchaser (or, if a Delivery Event has occurred, deliver to the Trustee) with respect to such Eligible Substitute Mortgage Loan or Loans such documents and agreements as are required to be held by the Trustee in accordance with Section 2.04. For any Collection Period during which the Seller substitutes one or more Eligible Substitute Mortgage Loans, the Transfer Deposit Amount (as determined by the Servicer pursuant to the Pooling and Servicing Agreement) shall be deposited by the Seller in the Collection Account at the time of substitution. Any amounts received in respect of the Eligible Substitute Mortgage Loan or Loans during the Collection Period in which the circumstances giving rise to such substitution occur shall not be a part of the Trust Fund and shall not be deposited by the Seller in the Collection Account. All amounts received by the Servicer during the Collection Period in which the circumstances giving rise to such substitution occur in respect of any Defective Mortgage Loan so removed by the Trust Fund shall be deposited by the Servicer in the Collection Account. Upon such substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects, and the Seller shall be deemed to have made with respect to such Eligible Substitute Mortgage Loan or Loans, as of the date of substitution, the covenants, representations and warranties set forth in Section 3.02. The procedures applied by the Seller in selecting each Eligible Substitute Mortgage Loan shall not be materially adverse to the interests of the Trustee, the Certificateholders and the Credit Enhancer. SECTION 2.06 Acceptance by the Purchasers. The Purchaser acknowledges the assignment to it of the Mortgage Loans being transferred hereby by the related Sellers and the delivery of the Mortgage Files to it or upon its order and, concurrently with such delivery, has executed, authenticated and delivered to or upon the order of the related Sellers, in exchange for such Mortgage Loans and the related Mortgage Files, cash and other consideration as set forth in Section 2.01. SECTION 2.07 The Closing. The conveyance of the Mortgage Loans shall take place at the offices of [Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103], on the Closing Date, immediately prior to the closing of the transactions contemplated 6 7 by the Pooling and Servicing Agreement and the Underwriting Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01 Representations and Warranties of the Sellers. Each Seller hereby represents and warrants to the Purchaser as of the Closing Date: (a) Such Seller is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization and has all licenses necessary to carry on its business as now being conducted and is licensed, qualified and in good standing in each State in which a Mortgaged Property is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by such Seller and perform its obligations as a Seller hereunder; such Seller has the power and authority to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement (including all instruments of transfer to be delivered pursuant to this Agreement) by such Seller and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action; this Agreement is the valid, binding and enforceable obligation of such Seller; and all requisite action has been taken by such Seller to make this Agreement valid, binding and enforceable upon such Seller in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally or the application of equitable principles in any proceeding, whether at law or in equity; (b) All actions, approvals, consents, waivers, exemptions, variances, franchises, orders, permits, authorizations, rights and licenses required to be taken, given or obtained, as the case may be, by or from any federal, state or other governmental authority or agency (other than any such actions, approvals, etc. under any state securities laws, real estate syndication or "Blue Sky" statutes, as to which such Seller makes no such representation or warranty), that are necessary in connection with the execution and delivery by such Seller of this Agreement, have been duly taken, given or obtained, as the case may be, are in full force and effect, are not subject to any pending proceedings or appeals (administrative, judicial or otherwise) and either the time within which any appeal therefrom may be taken or review thereof may be obtained has expired or no review thereof may be obtained or appeal therefrom taken, and are adequate to authorize the consummation of the transactions con templated by this Agreement and the other documents on the part of such Seller and the 7 8 performance by such Seller of its obligations as a Seller under this Agreement; (c) The consummation of the transactions contemplated by this Agreement will not result in the breach of any terms or provisions of the bylaws of such Seller or result in the breach of any term or provision of, or conflict with or constitute a default under or result in the acceleration of any obligation under, any material agreement, indenture or loan or credit agreement or other material instrument to which such Seller or its property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which such Seller or its property is subject; (d) There is no action, suit, proceeding or investigation pending or, to the best of such Seller's knowledge, threatened against such Seller which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of such Seller or in any material impairment of the right or ability of such Seller to carry on its business substantially as now conducted, or in any material liability on the part of such Seller or which would draw into question the validity of this Agreement or the Mortgage Loans or of any action taken or to be taken in connection with the obligations of such Seller contemplated herein, or which would be likely to impair materially the ability of the Seller to perform under the terms of this Agreement; (e) Such Seller is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of such Seller or its properties or might have consequences that would materially and adversely affect its performance hereunder; (f) The transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by such Seller pursuant to this Agreement are not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction; (g) Such Seller is solvent and such Seller will not be rendered insolvent as a result of the transfer of the Mortgage Loans to the Purchaser; and (h) The origination and collection practices used by such Seller with respect to each Mortgage Note and Mortgage have been in all material respects legal, proper, prudent and customary in the second mortgage origination and servicing business. 8 9 SECTION 3.02 Representations and Warranties as to the Mortgage Loans. Each Seller hereby represents and warrants to the Purchaser, with respect to each Mortgage Loan sold by it pursuant to this Agreement that, as of the Cut-Off Date: (a) As of the Closing Date with respect to the Mortgage Loans and as of the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, this Agreement constitutes a valid transfer and assignment to the Purchaser of all right, title and interest of such Seller in and to each related Mortgage Loan (including its Cut-Off Date Asset Balance), all monies due or to become due with respect thereto, and all proceeds of such Cut-Off Date Asset Balances with respect to the Mortgage Loans and such funds as are from time to time deposited in the Collection Account (excluding any investment earnings thereon) and all other property specified in Section 2.01(a) of this Agreement as being conveyed to the Purchaser by such Seller, and (upon payment for the Additional Balances), will constitute a valid transfer and assignment to the Trustee of all right, title and interest of the Seller in and to the Additional Balances, all monies due or to become due with respect thereto, and all proceeds of such Additional Balances and all other property specified in Section 2.01(a) of this Agreement relating to the Additional Balances. (b) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan and as of the date any Additional Balance is created, the information set forth in the Mortgage Loan Schedule for such Mortgage Loans is true and correct in all material respects; (c) The applicable Cut-Off Date Asset Balance has not been assigned or pledged, and such Seller is the sole owner and holder of such Cut-Off Date Asset Balance free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature, and has full right and authority, under all governmental and regulatory bodies having jurisdiction over the ownership of the applicable Mortgage Loan, to sell, assign or transfer the same pursuant to this Agreement; (d) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, the related Mortgage Note and the Mortgage with respect to each Mortgage Loan have not been assigned or pledged, and such Seller is the sole owner and holder of the Mortgage Loan free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature, and has full right and authority, under all governmental and regulatory bodies having jurisdiction over the ownership of the applicable Mortgage Loans, to sell, assign or transfer the same pursuant to this Agreement; 9 10 (e) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, the related Mortgage is a valid and subsisting first, second or more junior lien, as set forth on the Mortgage Loan Schedule with respect to each related Mortgage Loan, on the property therein described, and as of the applicable Cut-off Date the related Mortgaged Property is free and clear of all encumbrances and liens having priority over the first, second or more junior lien, as applicable, of such Mortgage except for liens for (i) real estate taxes and special assessments not yet delinquent; (ii) income taxes, (iii) any first or similar mortgage loan secured by such Mortgaged Property and specified on the Mortgage Loan Schedule; (iv) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording that are acceptable to mortgage lending institutions generally; and (v) other matters to which like properties are commonly subject that do not materially interfere with the benefits of the security intended to be provided by such Mortgage; (f) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, there is no valid offset, defense or counterclaim of any obligor under any Credit Line Agreement or Mortgage that has been asserted or threatened; (g) To the best knowledge of such Seller, as of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, there are no delinquent recordings or other tax or fee or assessment liens against any related Mortgaged Property; (h) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, there is no proceeding pending nor has the Seller received notice of such proceeding being threatened for the total or partial condemnation of the related Mortgaged Property, and to the best knowledge of the Seller, such property is free of material damage; (i) To the best knowledge of such Seller, as of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, there are no mechanics' or similar liens or claims which have been filed for work, labor or material affecting the related Mortgaged Property which are, or may be, liens prior or equal to the lien of the related Mortgage, except liens which are fully insured against by the title insurance policy; (j) No Minimum Monthly Payment is more than [89] days delinquent (measured on a contractual basis); and with respect to the Mortgage Loans no more than _____% (by Cut-Off Date Pool Balance) were [30-59] days delinquent (measured on contractual basis) and no more than ____% (by Cut-Off Date Pool Balance) were [60-89] days delinquent (measured on a contractual basis); 10 11 (k) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, for each Mortgage Loan, the related Mortgage File contains each of the documents and instruments specified to be included therein; (l) To the best knowledge of such Seller, the related Mortgage at origination complied in all material respects with applicable state and federal laws, including, without limitation, usury, truth in lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan; (m) To the best knowledge of such Seller, either a lender's title insurance policy or binder was issued on the date of origination of the Mortgage Loan and each such policy is valid and remains in full force and effect, or a title search or guaranty of title customary in the relevant jurisdiction was obtained with respect to a Mortgage Loan and to which no title insurance policy or binder was issued; (n) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, none of the Mortgaged Properties is a mobile home or a manufactured housing unit that is not considered or classified as part of the real estate under the laws of the jurisdiction in which it is located; (o) No more than ____% of the Mortgage Loans, by aggregate principal balance, are secured by Mortgaged Properties located in one United States postal zip code; (p) The Combined Loan-to-Value Ratio for each Mortgage Loan was not in excess of 100%; (q) No selection procedure reasonably believed by such Seller to be adverse to the interests of the Certificateholders or the Credit Enhancer was utilized in selecting the Mortgage Loans; (r) Such Seller has not transferred the Mortgage Loans to the Trust with any intent to hinder, delay or defraud any of its creditors; (s) The Minimum Monthly Payment with respect to any Mortgage Loan is not less than the interest accrued at the applicable Loan Rate on the daily Asset Balance during the interest period relating to the date on which such Minimum Monthly Payment is due; (t) Within 90 days of the Closing Date with respect to the Mortgage Loans and, to the extent not already included in such filing with respect to the Mortgage Loans, the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, such Seller will file UCC-1 financing statements with 11 12 respect to the Mortgage Loans; (u) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, each Credit Line Agreement and each Mortgage Loan is an enforceable obligation of the related Mortgagor, except as the enforceability thereof may be limited by the bankruptcy, insolvency or similar laws affecting creditors' rights generally; (v) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, such Seller has not received a notice of default of any senior mortgage loan related to a Mortgaged Property that has not been cured by any party other than the Servicer; (w) The definition of the applicable index in each Credit Line Agreement relating to each Mortgage Loan does not differ materially from the Index as set forth on Exhibit C; (x) The weighted average remaining term to maturity of the Mortgage Loans on a contractual basis for the Mortgage Loans is approximately ___ months and no Mortgage Loan will mature according to its terms later than____ _____. Over the term of each Mortgage Loan, the Loan Rate may not exceed the related Loan Rate Cap, if any. The Loan Rate Caps range between _____% and __% per annum. The Margins range between ___% and _____%. The Loan Rates on such Mortgage Loans range between ____% and _____% per annum and the weighted average Loan Rate is approximately ____% per annum; (y) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan, each Mortgaged Property consists of a single parcel of real property with a one-to-four unit single family residence erected thereon, an individual condominium unit, planned unit development unit or townhouse; (z) No more than ____% (by Cut-Off Date Pool Balance) of the Mortgage Loans are secured by real property improved by individual condominium units, planned development units, townhouses or two-to-four family residences erected thereon, and at least _____% (by Cut-Off Date Pool Balance) of the Mortgage Loans are secured by real property with a detached one-family residence erected thereon; (aa) The Credit Limits on the Mortgage Loans range between $______ and $_______ with an average Credit Limit of approximately $________. No Mortgage Loan had a principal balance in excess of approximately $__________ and the average principal balance of the Mortgage Loans is equal to approximately $__________; and (bb) Approximately ________%, _______% and ______% of the Mortgage Loans, by aggregate principal balance as of the Cut- 12 13 Off Date for the Mortgage Loans, are first, second or more junior liens, respectively. With respect to the representations and warranties set forth in this Section 3.02 that are made to the best knowledge of a Seller, if it is discovered by such Seller, the Purchaser, the Servicer or a Responsible Officer of the Trustee that the substance of such representation and warranty is inaccurate and such inaccuracy materially and adversely affects the value of the related Mortgage Loan then, notwithstanding such Seller's lack of knowledge with respect to the substance of such representation and warranty being inaccurate at the time the representation or warranty was made, such inaccuracy shall be deemed a breach of the applicable representation or warranty and subject such Seller to the obligations set forth in Section 3.03. SECTION 3.03 Purchase and Substitution. It is understood and agreed that the representations and warranties set forth in Sections 3.01 and 3.02 shall survive delivery of the Mortgage Loans to the Purchaser. Upon discovery by a Seller, the Purchaser, the Servicer or a Responsible Officer of the Trustee of a breach of any of such representations and warranties which materially and adversely affects the interests of the Trust or the Investor Certificateholders or the Credit Enhancer in the related Mortgage Loan, the party discovering such breach shall give prompt written notice to the other parties and the Credit Enhancer. Within 90 days of the earlier of its discovery or its receipt of notice of any breach of a representation or warranty, the Seller shall cure, such breach in all material respects, or shall, not later than the Business Day next preceding the Distribution Date in the month following the Collection Period in which any such cure period expired (or such later date that is acceptable to the Trustee and the Credit Enhancer as evidenced by their written consents), either (a) accept a transfer of such Mortgage Loan from the Trust or (b) substitute an Eligible Substitute Mortgage Loan in the same manner and subject to the same conditions as set forth in Section 2.05; provided, however, that the cure for any breach of a representation and warranty relating to the characteristics of the Mortgage Loans in the aggregate shall be a repurchase of or substitution for only the Mortgage Loans necessary to cause such characteristics to be in compliance with the related representation and warranty. Upon accepting such transfer and making any required deposit into the Collection Account or substitution of an Eligible Substitute Mortgage Loan, as the case may be, the Seller shall be entitled to receive an instrument of assignment or transfer from the Trustee to the same extent as set forth in Section 2.05 with respect to the transfer of Mortgage Loans under that Section. It is understood and agreed that the obligations of any Seller to accept a transfer of a Mortgage Loan as to which a breach has occurred and is continuing and to make any required deposit in the Collection Account or to substitute an Eligible Substitute Mortgage Loan, as the case may be, shall constitute 13 14 the sole remedy against such Seller respecting such breach available to Investor Certificateholders, the Trustee on behalf of Investor Certificateholders and the Credit Enhancer. Notwithstanding the foregoing, with regard to any breach of the representation and warranty set forth in Section 3.02(d), the sale and assignment of the affected Mortgage Loans to the Trust shall be deemed void and the Seller shall pay to the Trust the sum of the amount of the related Asset Balances, plus unpaid accrued interest on each such Asset Balance at the applicable Loan Rate to the date of payment. ARTICLE IV CONDITIONS SECTION 4.01 Conditions to Obligation of the Purchaser. The obligation of the Purchaser to purchase the Mortgage Loans is subject to the satisfaction of the following conditions: (a) Representations and Warranties True. The representations and warranties of the Sellers hereunder shall be true and correct on the Closing Date with the same effect as if then made, and the Sellers shall have performed all obligations to be performed by them hereunder on or prior to the Closing Date. (b) Documents to be Delivered By the Sellers at the Closing. (i) The Mortgage Loan Schedule specifying the Mortgage Loans to be transferred hereunder, one copy to be attached to each counterpart of the Pooling and Servicing Agreement as the Mortgage Loan Schedule thereto; (ii) An Officer's Certificate with respect to each Seller, dated as of the Closing Date, in the form attached to the Underwriting Agreement and with the resolutions of such Seller, authorizing the transactions contemplated by this Agreement attached thereto, together with copies of the charter, by-laws and a Certificate of Good Standing dated as of recent date (acceptable to the Purchaser and its counsel) of such Seller; (iii) An Opinion of Counsel to each Seller dated as of the Closing Date in the form attached to the Underwriting Agreement and any Opinion of Counsel required to be delivered to any Rating Agency or the Credit Enhancer; (iv) [A certificate or other evidence of merger or change of name, signed or stamped by the applicable regulatory authority, if any of the Mortgage Loans were acquired by the applicable Seller by merger or acquired 14 15 or originated by the applicable Seller while conducting business under a name other than its present name.] (c) Other Documents. At the Closing, Sellers shall provide such other documents as the Purchaser may reasonably request. (d) Other Transactions. The transactions contemplated by the Pooling and Servicing Agreement shall be consummated on the Closing Date. SECTION 4.02 Conditions To Obligation of each Seller. The obligation of the Sellers to transfer the Mortgage Loans to the Purchaser is subject to the satisfaction of the condition that at the Closing Date, the Purchaser shall deliver to each Seller the consideration set forth on Exhibit A hereto, as provided in Section 2.01. ARTICLE V THE SELLERS [SECTION 5.01 Third Party Servicers. As of the Closing Date, the Sellers have represented to the Purchaser that the Mortgage Loans are serviced by the Servicer or the Sellers and are not subject to servicing agreements with third parties. It is understood and agreed between the Sellers and the Purchaser that the Mortgage Loans which are the subject of this Agreement are to be delivered free and clear of any servicing agreements with third party servicers. Each Seller, without reimbursement from the Purchaser, shall pay any fees or penalties required by any third party servicer for releasing the Mortgage Loans from any such servicing agreement and shall arrange for the orderly transfer of such servicing from any such third party servicer to the Purchasers.] SECTION 5.02 Enforceability; Merger or Consolidation of the Sellers. (a) Each Seller will keep in full effect its respective existence, rights and franchises as a [national bank], and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Pooling and Servicing Agreement, and any of the Mortgage Loans and to perform its duties under such agreements. (b) Any Person into which any Seller may be merged or consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Seller shall be a party, or any Person succeeding to the business of any Seller, shall be the successor of any Seller hereunder, without the execution or filing of any paper or any further act on the part of any of the 15 16 parties hereto, anything herein to the contrary notwithstanding. SECTION 5.03 Mandatory Sale; Grant of Security Interest. The sale on the Closing Date by each Seller of its Mortgage Loans is mandatory, it being specifically understood and agreed that each Mortgage Loan is unique and identifiable on the date hereof and that an award of money damages would be insufficient to compensate the Purchaser for the loss and damages incurred by the Purchaser (including damages to prospective purchasers of the Certificates) in the event of such Seller's failure to deliver the Mortgage Loans on or before the Closing Date. Each Seller hereby grants to the Purchaser a lien on and continuing security interest in each Mortgage Loan and each document and instrument evidencing such Mortgage Loan to secure the performance by such Seller of its obligations hereunder, and each such Seller agrees that it holds each Mortgage Loan in custody for the Purchaser subject to the Purchaser's (i) right to reject any Mortgage Loan under the terms of this Agreement and (ii) obligation to deliver cash and other consideration as set forth in Section 2.01 for the Mortgage Loans. All rights and remedies of the Purchaser under this Agreement are distinct from, and cumulative with, any other rights or remedies under this Agreement or afforded by law or equity, and all such rights and remedies may be exercised concurrently, independently or successively. ARTICLE VI ADDITIONAL AGREEMENTS The Sellers agree with the Purchaser as follows: SECTION 6.01 Conflicts With Pooling and Servicing Agreement. To the extent that any provision of Sections 6.02 through 6.04 of this Agreement conflicts with any provision of the Pooling and Servicing Agreement, the Pooling and Servicing Agreement shall govern. SECTION 6.02 Protection of Title to Trust. (a) The Sellers shall from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action necessary or advisable to: (i) maintain or preserve the transfer evidenced by this Agreement or carry out more effectively the purposes hereof; or (ii) preserve and defend the Purchaser's title to the Mortgage Loans and the rights of the Purchaser in such 16 17 assets against the claims of all persons and parties, and the Sellers hereby designate the Purchaser its agent and attorney-in-fact to execute any financing statement, continuation statement or other instrument required by the Purchaser pursuant to this Section 6.02. SECTION 6.03 Other Liens or Interests. Except for the conveyances hereunder and pursuant to this Agreement, the Sellers shall not sell, pledge, assign or transfer the Mortgage Loans to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any interest therein, and the Sellers shall defend the right, title and interest of the Purchaser in, to and under such Mortgage Loans against all claims of third parties claiming through or under the Sellers. SECTION 6.04 Purchase Events. The Sellers acknowledge that the Purchaser have assigned all of their right, title and interest in, to and under this Agreement, including the Purchaser's right to cause the Sellers to purchase the Mortgage Loans from the Purchaser under certain circumstances, to the Trust pursuant to Section 2.01 of the Pooling and Servicing Agreement and has assigned to the Trustee its right, title and interest in this Agreement; provided, however, the neither the Trustee nor the Trust assumes the obligation under any Credit Line Agreement that provides for the funding of future advances to the Mortgagor thereunder, and neither the Trust nor the Trustee shall be obligated or permitted to fund any such future advances. The Sellers hereby covenant and agree with the Purchaser for the benefit of the Purchaser, the Trustee, the Certificateholders and the Credit Enhancer that the occurrence of a breach of any of the Sellers' representations and warranties contained in Section 3.02 hereof shall constitute events obligating the Seller, to the extent specified in Section 2.04 of the Pooling and Servicing Agreement, and without further notice from the Purchaser hereunder, to purchase an Mortgage Loan from the Trustee. It is understood and agreed that the obligation of any Seller to purchase any Mortgage Loan as to which a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against such Seller for such breach available to the Trustee, the Certificateholders or the Credit Enhancer. SECTION 6.05 Indemnification. The Sellers shall indemnify the Purchaser for any liability as a result of the failure of an Mortgage Loan to be originated in compliance with all requirements of law. This indemnity obligation shall be in addition to any obligation that the Sellers may otherwise have. 17 18 SECTION 6.06 Trust. The Sellers acknowledge that the Purchaser shall, pursuant to the Pooling and Servicing Agreement, transfer the Mortgage Loans to the Trustee (for the benefit of the Certificateholders), and the Purchaser assign their rights hereunder to the Trustee (for the benefit of the Certificateholders) as set forth in the Pooling and Servicing Agreement. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.01 Amendment. This Agreement may be amended from time to time (upon prior notice to each of the Rating Agencies and with the prior written consent of the Credit Enhancer) by a written amendment duly executed and delivered by the Sellers and the Purchaser, provided, however, that any such amendment that materially adversely affects the rights of the Certificateholders under the Pooling and Servicing Agreement must be consented to by a majority of the Certificateholders. SECTION 7.02 Waivers. No failure or delay on the part of the Purchaser in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. SECTION 7.03 Costs and Expenses. The Sellers agree to pay all reasonable out-of-pocket costs and expenses of the Purchaser, including fees and expenses of counsel, in connection with the perfection as against third parties of the Purchaser's right, title and interest in, to and under the Mortgage Loans and the enforcement of any obligation of the Sellers hereunder. SECTION 7.04 Survival. The representations, warranties and covenants of the Seller set forth in Sections 3.01 and 3.02 and Article V of this Agreement shall remain in full force and effect and shall survive the closing under Section 2.07 and the transfers contemplated by Sections 6.04 and 6.06. 18 19 SECTION 7.05 Confidential Information. The Purchaser agrees that it shall neither use nor disclose to any person the names and addresses of the Mortgagors, except in connection with the enforcement of the Purchaser's rights (i) hereunder, (ii) under the Mortgage Loans or (iii) as required by law. SECTION 7.06 Severability Clause. Any part, provision, representation or warranty of this Agreement which is prohibited or which is held to be void or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any part, provision, representation or warranty of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 7.07 Headings and Cross-References. The various headings in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. SECTION 7.08 Recordation of Agreement. To the extent permitted by applicable law, the Agreement is subject to recordation in all appropriate public offices for real property records in all the counties or other comparable jurisdictions in which any or all of the properties subject to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Sellers at the Sellers' expense on direction of the Purchaser accompanied by an Opinion of Counsel to the effect that such recordation materially and beneficially affects the interests of the Purchaser. SECTION 7.09 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 19 20 SECTION 7.10 Notices. All demands, notices and communications under this Agreement shall be in writing, personally delivered or mailed by certified mail with return receipt requested, and shall be deemed to have been duly given upon receipt at the appropriate address set forth in the Pooling and Servicing Agreement. SECTION 7.11 Counterparts. This Agreement may be executed in two or more counterparts and by different parties on separate counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 7.12 The Credit Enhancer. Any right conferred to the Credit Enhancer hereunder shall be suspended during any period in which the Credit Enhancer is in default in its payment obligations under the Policy. At such time as the Certificates are no longer outstanding under the Pooling and Servicing Agreement, and no amounts owed to the Credit Enhancer with respect to the Certificates remain unpaid, the Credit Enhancer's rights hereunder shall terminate. The Credit Enhancer is an intended third-party beneficiary of this Agreement. 20 21 IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date and year first above written. PURCHASER BANC ONE ABS CORPORATION By:_______________________________ Name: Title: SELLERS [_______________________________] By:_______________________________ Name: Title: [_______________________________] By:_______________________________ Name: Title: [_______________________________] By:_______________________________ Name: Title: 22 EXHIBIT A AMOUNTS TRANSFERRED BY PURCHASER TO SELLERS BANC ONE ABS CORPORATION HAS TRANSFERRED THE FOLLOWING AMOUNTS: a) $____________ to [_________________________________] b) $____________ to [_________________________________] c) $____________ to [_________________________________] d) $____________ to [_________________________________] A-1 23 EXHIBIT B-1 MORTGAGE LOANS TRANSFERRED BY [_______________________________] B-1-1 24 EXHIBIT B-2 MORTGAGE LOANS TRANSFERRED BY [_______________________________] B-2-1 25 EXHIBIT B-3 MORTGAGE LOANS TRANSFERRED BY [_______________________________] B-3-1 26 TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS SECTION 1.01 ........................................................................................1 ARTICLE II CONVEYANCE OF THE MORTGAGE LOANS SECTION 2.01 Conveyance of Mortgage Loans............................................................1 SECTION 2.02 Possession of Mortgage Files............................................................2 SECTION 2.03 Books and Records.......................................................................2 SECTION 2.04 Delivery of Mortgage Loan Documents.....................................................2 SECTION 2.05 Acceptance by Purchaser of the Mortgage Loans; Certain Substitutions; Certification by the Trustee..........................................................................3 SECTION 2.06 Acceptance by the Purchasers............................................................5 SECTION 2.07 The Closing.............................................................................5 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01 Representations and Warranties of the Sellers...........................................6 SECTION 3.02 Representations and Warranties as to the Mortgage Loans..........................................................................8 SECTION 3.03 Purchase and Substitution..............................................................12 ARTICLE IV CONDITIONS SECTION 4.01 Conditions to Obligation of the Purchaser..............................................13 SECTION 4.02 Conditions To Obligation of each Seller................................................14 ARTICLE V THE SELLERS SECTION 5.01 Third Party Servicers..................................................................14 SECTION 5.02 Enforceability; Merger or Consolidation of the Sellers................................................................................15 SECTION 5.03 Mandatory Sale; Grant of Security Interest.............................................15 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01 Conflicts With Pooling and Servicing Agreement.........................................16 SECTION 6.02 Protection of Title to Trust...........................................................16 SECTION 6.03 Other Liens or Interests...............................................................16 SECTION 6.04 Purchase Events........................................................................17 SECTION 6.05 Indemnification........................................................................17 SECTION 6.06 Trust..................................................................................17
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ARTICLE VII MISCELLANEOUS PROVISIONS PAGE SECTION 7.01 Amendment..............................................................................18 SECTION 7.02 Waivers................................................................................18 SECTION 7.03 Costs and Expenses.....................................................................18 SECTION 7.04 Survival...............................................................................18 SECTION 7.05 Confidential Information...............................................................18 SECTION 7.06 Severability Clause....................................................................19 SECTION 7.07 Headings and Cross-References..........................................................19 SECTION 7.08 Recordation of Agreement...............................................................19 SECTION 7.09 Governing Law..........................................................................19 SECTION 7.10 Notices................................................................................19 SECTION 7.11 Counterparts...........................................................................20 SECTION 7.12 The Credit Enhancer....................................................................20
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