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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 29, 1996
Advanta Mortgage Loan Trust 1996-2
(Exact name of registrant as specified in its charter)
New York 33-95006 Application Pending
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o Advanta Mortgage Conduit 92127
Services, Inc. (Zip Code)
Attention: Milton Riseman
16875 West Bernardo Drive
San Diego, California
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code (619) 674-1800
No Change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Advanta Mortgage Conduit Services, Inc. registered
issuances of up to $500,000,000 principal amount of Mortgage
Loan Asset-Backed Certificates on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933,
as amended (the "Act"), by the Registration Statements on
Form S-3 (Registration File No. 33-95006 (as amended, the
"Registration Statement"). Pursuant to the Registration
Statement, Advanta Mortgage Loan Trust 1996-2 (the
"Registrant" or the "Trust") issued approximately
$300,000,000 in aggregate principal amount of its Mortgage
Loan Asset-Backed Certificates, Series 1996-2 (the "Certifi-
cates"), on May 29, 1996. This Current Report on Form 8-K
is being filed to satisfy an undertaking to file copies of
certain agreements executed in connection with the issuance
of the Certificates, the forms of which were filed as
Exhibits to the Registration Statements.
The Certificates were issued pursuant to a Pooling
and Servicing Agreement (the "Pooling and Servicing
Agreement") attached hereto as Exhibit 4.1, dated as of May
1, 1996, between Advanta Mortgage Conduit Services, Inc.
(the "Company"), Advanta Mortgage Corp. USA, in its capacity
as master servicer (the "Master Servicer"), Bankers Trust
Company of California, N.A., in its capacity as Trustee (the
"Trustee"). The Certificates consist of six registered
classes, the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-6 (collectively, the "Class A
Certificates"), and the Class R Certificates (the "Class R
Certificates" and, together with the Class A Certificates,
the "Certificates"). The Certificates initially evidence,
in the aggregate, 100% of the undivided beneficial ownership
interests in the Trust.
The assets of the Trust initially will include two
investment pools (each, a "Mortgage Loan Group" or "Group")
of closed-end mortgage loans (the "Mortgage Loans") secured
by mortgages or deeds of trust (the "Mortgages") on one-to-
four family residential properties. The Class A-1 Group I
Certificates, the Class A-2 Group I Certificates, the Class
A-3 Group I Certificates, the Class A-4 Group I Certificates
and the Class A-5 Group I Certificates represent undivided
ownership interests in a pool of fixed-rate Mortgage Loans
secured by Mortgages which may be either in a first or in a
junior lien position. The Class A-6 Group II Certificates
represent undivided ownership interests in a group of
variable rate Mortgage Loans secured by Mortgages in a first
lien position.
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Interest distributions on the Class A Certificates
are based on the Certificate Principal Balance thereof and
the then applicable Pass-Through Rate thereof. The Pass-
Through Rate is 6.74% per annum for the Class A-1
Certificates, 7.03% per annum for the Class A-2
Certificates, 7.44% per annum for the Class A-3
Certificates, 7.75% per annum for the Class A-4
Certificates, 8.08% per annum for the Class A-5 Certificates
and Variable Rate for the Class A-6 Certificates.
The Class A-1 Certificates have an aggregate
principal amount of $92,819,000. The Class A-2 Certificates
have an aggregate principal amount of $56,572,000. The
Class A-3 Certificates have an aggregate principal amount of
$36,642,000. The Class A-4 Certificates have an aggregate
principal amount of $19,406,000. The Class A-5 Certificates
have an aggregate principal amount of $29,561,000. The
Class A-6 Certificates have an aggregate principal amount of
$65,000,000.
As of the Closing Date, the Mortgage Loans
possessed the characteristics described in the Prospectus
dated September 13, 1995 and the Prospectus Supplement dated
May 13, 1996 filed pursuant to Rule 424(b)(2) of the Act on
May 28, 1996.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated May 13, 1996
between Advanta Mortgage Conduit Services, Inc. and Lehman
Brothers Inc., as representative of the Underwriters (the
"Representative").
4.1 Pooling and Servicing Agreement, dated as of
May 1, 1996, between Advanta Mortgage Conduit Services,
Inc., as sponsor, Advanta Mortgage Corp. USA, as master
servicer, and Bankers Trust Company of California, N.A., as
Trustee.
4.2 Master Loan Transfer Agreement, dated as of
February 15, 1995, between Advanta Mortgage Conduit
Services, Inc., as sponsor, Colonial National Bank, USA,
Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp.
Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta
Mortgage Corp. of New Jersey, Advanta Mortgage Corp.
Northeast and Advanta Mortgage Corp. USA (collectively, the
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"Affiliated Originators"), and Bankers Trust Company, as
trustee.
4.3 Conveyance Agreement dated as of May 29, 1996
between the Affiliated Originators and Advanta Mortgage
Conduit Services, Inc.
4.4 Advanta Mortgage Holding Company Guaranty.
4.5 Certificate Insurance Policy.
24.1 Consent of KPMG Peat Marwick regarding
financial statements of the Certificate Insurer and its
reports.
28.1 Indemnification Agreement dated as of May
13, 1996, between Advanta Mortgage Conduit Services, Inc.,
Lehman Brothers Inc. and Financial Guaranty Insurance
Company in connection with the Underwriting Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANTA MORTGAGE LOAN TRUST 1996-2
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By: /s/ Mark Casale
------------------------
Name: Mark Casale
Title: Vice President
Dated: June 14, 1996
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EXHIBIT INDEX
Exhibit No. Description Page No.
1.1 Underwriting Agreement, dated May 13, 1996 7
between Advanta Mortgage Conduit Services,
Inc. and Lehman Brothers Inc.
4.1 Pooling and Servicing Agreement, dated as of 52
May 1, 1996, between Advanta Mortgage Conduit
Services, Inc., as sponsor, Advanta Mortgage
Corp. USA, as master servicer, Bankers
Trust Company of California, N.A., as Trustee.
4.2 Master Loan Transfer Agreement, dated as of 206
February 15, 1995, between Advanta Mortgage
Conduit Services, Inc., as sponsor, Colonial
National Bank, USA, Advanta Mortgage Corp.
Midatlantic, Advanta Mortgage Corp.
Midatlantic II, Advanta Mortgage Corp.
Midwest, Advanta Mortgage Corp. of New Jersey,
Advanta Mortgage Corp. Northeast and Advanta
Mortgage Corp. USA (collectively, the
"Affiliated Originators"), and Bankers Trust
Company, as trustee.
4.3 Conveyance Agreement dated as of May 29, 1996 232
between the Affiliated Originators and Advanta
Mortgage Conduit Services, Inc.
4.4 Advanta Mortgage Holding Company Guaranty. 237
4.5 Certificate Insurance Policy. 242
24.1 Consent of KPMG Peat Marwick regarding 249
financial statements of the Certificate
Insurer and its report.
28.1 Indemnification Agreement dated as of May 13, 253
1996, between Advanta Mortgage Conduit
Services, Inc., Lehman Brothers Inc. and
Financial Guaranty Insurance Company in
connection with the Underwriting Agreement.
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EXECUTION COPY
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Mortgage Loan Asset-Backed Certificates,
Series 1996-2, Class A Certificates
UNDERWRITING AGREEMENT
May 13, 1996
LEHMAN BROTHERS INC.
As Representative of the Underwriters
named in Schedule I
3 World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. (the "Company") has authorized the
issuance and sale of Mortgage Loan Asset-Backed Certificates, Series 1996-2,
(the "Certificates") consisting of the Class A-1 Group I Certificates ("Class
A-1 Certificates"), the Class A-2 Group I Certificates ("Class A-2
Certificates"), the Class A-3 Group I Certificates (the "Class A-3
Certificates"), the Class A-4 Group I Certificates (the "Class A-4
Certificates"), the Class A-5 Group I Certificates (the "Class A-5 Certificates"
together with the Class A-1 Certificates, the Class A-2 Certificates, the Class
A-3 Certificates, and the Class A-4 Certificates, the "Group I Certificates"),
and the Class A-6 Group II Certificates ("Class A-6 Certificates," or "Group II
Certificates" together with the Group I Certificates, the "Offered
Certificates") and of an additional class of subordinate certificates (the
"Subordinate Certificates" or the "Class R Certificates"). The Certificates will
be issued by the Advanta Mortgage Loan Trust 1996-2 (the "Trust"), and will
evidence in the aggregate the entire beneficial interest in a trust estate (the
"Trust Estate") consisting primarily of two segregated pools (the "Mortgage
Pools") of closed-end mortgage loans (the "Mortgage Loans"), and certain related
property. The Mortgage Loans shall have, as of the opening of business on May 1,
1996 (the "Cut-off Date"), an aggregate principal balance of approximately
$300,000,000. The certificates are to be issued under a pooling and servicing
agreement, to be dated as of May 1, 1996 (the "Pooling and Servicing
Agreement"), among the Company, as sponsor, Advanta
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Mortgage Corp. USA, as master servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee").
On or prior to the date of issuance of the Certificates, the Company will
obtain a guaranty insurance policy (the "Policy") issued by Financial Guaranty
Insurance Company (the "Insurer") which will unconditionally and irrevocably
guarantee to the Trustee for the benefit of the holders of the Offered
Certificates the amount by which the sum of the related Group Interest
Distribution Amount and the related Subordination Deficit, if any, exceeds the
related Total Available Funds.
Only the Offered Certificates are being purchased by the Underwriters.
The Certificates are more fully described in a Registration Statement which
the Company has furnished to the Underwriters. Capitalized terms used but not
defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
Simultaneously with the execution of the Pooling and Servicing Agreement,
the Company will enter into a conveyance agreement pursuant to the Master Loan
Transfer Agreement dated as of February 15, 1995 among the Trustee, and the
Affiliated Originators named thereon (together, the "Purchase Agreement"),
pursuant to which the Affiliated Originators will transfer to the Company all of
their right, title and interest in and to the Mortgage Loans as of the Cut-Off
Date.
The Company will also enter into an Indemnification Agreement (the
"Indemnification Agreement") dated as of May 13, 1996, among the Underwriters,
the Company and the Certificate Insurer, governing the liability of the several
parties with respect to the losses resulting from material misstatements or
omissions contained in the Prospectus Supplement.
SECTION I. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the Underwriters that:
A. Registration Statements on Form S-3, as amended by Post-Effective
Amendments thereto, have (i) been prepared by the Company in conformity
with the requirements of the Securities Act of 1933 (the "Securities Act")
and the rules and regulations (the "Rules and Regulations") of the United
States Securities and Exchange Commission (the "Commission") thereunder,
(ii) been filed with the Commission under the Securities Act and (iii)
become effective under the Securities Act. Copies
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of such Registration Statements have been delivered by the Company to the
Underwriters. As used in this Agreement, "Effective Time" means the date
and the time as of which such Registration Statements, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such
Registration Statements, or amendments thereof, including a preliminary
prospectus supplement which, as completed, is proposed to be used in
connection with the sale of the Offered Certificates and any prospectus
filed with the Commission by the Company with the consent of the
Underwriters pursuant to Rule 424(a) of the Rules and Regulations;
"Registration Statement" means such registration statements, as amended by
all Post-Effective Amendments thereto heretofore filed with the Commission,
at the Effective Time, including any documents incorporated by reference
therein at such time; and "Prospectus" means such final prospectus, as
first supplemented by a prospectus supplement (the "Prospectus Supplement")
relating to the Offered Certificates, as first filed with the Commission
pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and
Regulations. Reference made herein to any Preliminary Prospectus or to the
Prospectus shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Securities Act, as of the date of such Preliminary Prospectus or the
Prospectus, as the case may be, and any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include any document filed under the Securities Exchange
Act of 1934 (the "Exchange Act") after the date of such Preliminary
Prospectus or the Prospectus, as the case may be, and incorporated by
reference in such Preliminary Prospectus or the Prospectus, as the case may
be; and any reference to any amendment to the Registration Statement shall
be deemed to include any report of the Company filed with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act after the Effective
Time that is incorporated by reference in the Registration Statement. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus. There are no contracts or documents of the Company
which are required to be filed as exhibits to the Registration Statement
pursuant to the Securities Act or the Rules and Regulations
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which have not been so filed or incorporated by reference therein on or
prior to the Effective Date of the Registration Statements. The conditions
for use of Form S-3, as set forth in the General Instructions thereto, have
been satisfied.
To the extent that any Underwriter (i) has provided to the Company
Collateral term sheets (as hereinafter defined) that such Underwriter has
provided to a prospective investor, the Company has filed such Collateral
term sheets as an exhibit to a report on Form 8-K within two business days
of its receipt thereof, or (ii) has provided to the Company Structural term
sheets or Computational Materials (each as defined below) that such
Underwriter has provided to a prospective investor, the Company will file
or cause to be filed with the Commission a report on Form 8-K containing
such Structural term sheet and Computational Materials, as soon as
reasonably practicable after the date of this Agreement, but in any event,
not later than the date on which the Prospectus is filed with the
Commission pursuant to Rule 424 of the Rules and Regulations.
B. The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the requirements
of the Securities Act and the Rules and Regulations. The Registration
Statement, as of the Effective Date thereof and of any amendment thereto,
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus as of its date, and as
amended or supplemented as of the Closing Date (as hereinafter defined)
does not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information
furnished to the Company in writing by the Underwriters expressly for use
therein.
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C. The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
D. Since the respective dates as of which information is given in the
Prospectus, there has not been any material adverse change in the general
affairs, management, financial condition, or results of operations of the
Company, otherwise than as set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
E. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which its ownership or lease
of property or the conduct of its business requires such qualification, and
has all power and authority necessary to own or hold its properties, to
conduct the business in which it is engaged and to enter into and perform
its obligations under this Agreement, the Pooling and Servicing Agreement,
the Purchase Agreement, the Indemnification Agreement and the Insurance
Agreement, and to cause the Certificates to be issued.
F. There are no actions, proceedings or investigations pending before
or threatened by any court, administrative agency or other tribunal to
which the Company is a party or of which any of its properties is the
subject (a) which if determined adversely to the Company would have a
material
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adverse effect on the business or financial condition of the Company, (b)
asserting the invalidity of this Agreement, the Pooling and Servicing
Agreement, the Insurance Agreement, the Purchase Agreement, the
Indemnification Agreement or the Certificates, (c) seeking to prevent the
issuance of the Certificates or the consummation by the Company of any of
the transactions contemplated by the Pooling and Servicing Agreement, the
Purchase Agreement, the Insurance Agreement, the Indemnification Agreement
or this Agreement, as the case may be, or (d) which might materially and
adversely affect the performance by the Company of its obligations under,
or the validity or enforceability of, the Pooling and Servicing Agreement,
the Insurance Agreement, the Purchase Agreement, this Agreement, the
Indemnification Agreement or the Certificates.
G. This Agreement has been, and the Pooling and Servicing Agreement,
the Purchase Agreement, the Indemnification Agreement and the Insurance
Agreement when executed and delivered as contemplated hereby and thereby
will have been, duly authorized, executed and delivered by the Company, and
this Agreement constitutes, and the Pooling and Servicing Agreement, the
Purchase Agreement, the Indemnification Agreement and the Insurance
Agreement, when executed and delivered as contemplated herein, will
constitute, legal, valid and binding instruments enforceable against the
Company in accordance with their respective terms, subject as to
enforceability to (x) applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditors' rights generally, (y)
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law), and (z) with respect to rights of
indemnity under this Agreement, the Indemnification Agreement and the
Insurance Agreement, limitations of public policy under applicable
securities laws.
H. The execution, delivery and performance of this Agreement, the
Pooling and Servicing Agreement, the Purchase Agreement, the
Indemnification Agreement and the Insurance Agreement by the Company and
the consummation of the transactions contemplated hereby and thereby, and
the issuance and delivery of the Certificates do not and will not conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any
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indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party, by which the Company is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such actions result in any violation of
the provisions of the articles of incorporation or by-laws of the Company
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its properties or assets.
I. Arthur Andersen LLP are independent public accountants with respect
to the Company as required by the Securities Act and the Rules and
Regulations.
J. The direction by the Company to the Trustee to execute,
authenticate, issue and deliver the Certificates has been duly authorized
by the Company, and assuming the Trustee has been duly authorized to do so,
when executed, authenticated, issued and delivered by the Trustee in
accordance with the Pooling and Servicing Agreement, the Certificates will
be validly issued and outstanding and will be entitled to the benefits
provided by the Pooling and Servicing Agreement.
K. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States is required for the issuance of the Certificates and the sale
of the Offered Certificates to the Underwriters, or the consummation by the
Company of the other transactions contemplated by this Agreement, the
Pooling and Servicing Agreement, the Purchase Agreement, the
Indemnification Agreement and the Insurance Agreement, except such
consents, approvals, authorizations, registrations or qualifications as may
be required under State securities or Blue Sky laws in connection with the
purchase and distribution of the Offered Certificates by the Underwriters
or as have been obtained.
L. The Company possesses all material licenses, certificates,
authorities or permits issued by the appropriate State, Federal or foreign
regulatory agencies or bodies necessary to conduct the business now
conducted by it and as described in the Prospectus, and the Company has not
received notice of any proceedings relating to the
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revocation or modification of any such license, certificate, authority or
permit which if decided adversely to the Company would, singly or in the
aggregate, materially and adversely affect the conduct of its business,
operations or financial condition.
M. At the time of execution and delivery of the Pooling and Servicing
Agreement, the Company will: (i) have good title to the interest in the
Mortgage Loans conveyed by the Affiliated Originators, free and clear of
any lien, mortgage, pledge, charge, encumbrance, adverse claim or other
security interest (collectively, "Liens"); (ii) not have assigned to any
person any of its right, title or interest in the Mortgage Loans, in the
Purchase Agreement, in the Pooling and Servicing Agreement or in the
Offered Certificates being issued pursuant thereto; and (iii) have the
power and authority to sell its interest in the Mortgage Loans to the
Trustee and to sell the Offered Certificates to the Underwriters. Upon
execution and delivery of the Pooling and Servicing Agreement by the
Trustee, the Trustee will have acquired beneficial ownership of all of the
Company's right, title and interest in and to the Mortgage Loans. Upon
delivery to the Underwriters of the Offered Certificates, the Underwriters
will have good title to the Offered Certificates, free of any Liens.
N. As of the Cut-off Date, each of the Mortgage Loans will meet the
eligibility criteria described in the Prospectus and will conform to the
descriptions thereof contained in the Prospectus.
O. Neither the Company nor the Trust created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of such
term under the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations of the Commission thereunder.
P. At the Closing Date, the Certificates and the Pooling and Servicing
Agreement will conform in all material respects to the descriptions thereof
contained in the Prospectus.
Q. At the Closing Date, the Offered Certificates shall have been rated
in the highest rating category by at least two nationally recognized rating
agencies.
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R. Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Agreement, the Pooling and
Servicing Agreement, the Purchase Agreement, the Insurance Agreement, the
Indemnification Agreement and the Certificates have been paid or will be
paid at or prior to the Closing Date.
S. At the Closing Date, each of the representations and warranties of
the Company set forth in the Pooling and Servicing Agreement and the
Insurance Agreement will be true and correct in all material respects.
Any certificate signed by an officer of the Company and delivered to the
Representative or counsel for the Underwriters in connection with an offering of
the Offered Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section I are made.
SECTION II. Purchase and Sale. The commitment of the Underwriters to
purchase the Offered Certificates pursuant to this Agreement shall be deemed to
have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth. The
Company agrees to instruct the Trustee to issue and agrees to sell to the
Underwriters, and the Underwriters agree (except as provided in Sections X and
XI hereof) to purchase from the Company the aggregate initial principal amounts
of Offered Certificates set forth on Schedule A, at the purchase price or prices
set forth in Schedule A.
The obligations of the Underwriters hereunder to purchase the Offered
Certificates of each Class shall be several and not joint. Each Underwriter's
obligation shall be to purchase the aggregate principal amount of Offered
Certificates of the related Class as is indicated with respect to each
Underwriter under the caption "Underwriting" in the Prospectus. The right of the
Company and a non-defaulting Underwriter shall be as set forth in Section XIII
hereof.
SECTION III. Delivery and Payment. Delivery of and payment for the Offered
Certificates to be purchased by the Underwriters shall be made at the offices of
Dewey Ballantine, 1301 Sixth Avenue, New York, New York 10019, or at such other
place as shall be agreed upon by the Representative and the Company at 10:00
A.M. New York City time on May 29, 1996 or at such other time or date as shall
be agreed upon in writing by the Representative and the Company (such date being
referred to as the "Closing Date"). Payment shall be made to the Company by wire
transfer of same day funds payable to the
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account of the Company. Delivery of the Offered Certificates shall be made to
the Representative for the accounts of the Underwriters against payment of the
purchase price thereof. The Offered Certificates shall be in such denominations
and registered in such names as the Representative may request in writing at
least two business days prior to the Closing Date. The Offered Certificates will
be made available for examination by the Representative no later than 2:00 p.m.
New York City time on the first business day prior to the Closing Date.
SECTION IV. Offering by the Underwriters. It is understood that, subject to
the terms and conditions hereof, the Underwriters proposes to offer the Offered
Certificates for sale to the public as set forth in the Prospectus.
SECTION V. Covenants of the Company. The Company agrees as follows:
A. To prepare the Prospectus in a form approved by the Representative
and to file such Prospectus pursuant to Rule 424(b) under the Securities
Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement; to
make no further amendment or any supplement to the Registration Statement
or to the Prospectus prior to the Closing Date except as permitted herein;
to advise the Representative, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representative with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of the Prospectus and, for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Offered Certificates, to promptly advise the Representative of
its receipt of notice of the issuance by the Commission of any stop order
or of: (i) any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus; (ii) the suspension of the qualification of
the Offered Certificates for offering or sale in any jurisdiction; (iii)
the initiation of or threat of any proceeding for any such purpose; (iv)
any request by the Commission for the amending or supplementing of the
Registration Statement or the
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Prospectus or for additional information. In the event of the issuance of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, the Company promptly shall use its best efforts to obtain
the withdrawal of such order or suspension.
B. To furnish promptly to the Representative and to counsel for the
Underwriters a signed copy of the Registration Statement as originally
filed with the Commission, and of each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith.
C. To deliver promptly to the Representative such number of the
following documents as the Representative shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case including exhibits);
(ii) each Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus; and (iii) any document incorporated by reference
in the Prospectus (including exhibits thereto). If the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the Effective Time in connection with the offering or sale of the
Offered Certificates, and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the Securities Act or the Exchange
Act, the Company shall notify the Representative and, upon the
Representative's request, shall file such document and prepare and furnish
without charge to the Underwriters and to any dealer in securities as many
copies as the Representative may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case any of the
Underwriters are required to deliver a Prospectus in connection with sales
of any of the
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Offered Certificates at any time nine months or more after the Effective
Time, upon the request of the Representative but at the expense of such
Underwriter, the Company shall prepare and deliver to such Underwriter as
many copies as such Underwriter may reasonably request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Securities
Act.
D. To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Representative,
be required by the Securities Act or requested by the Commission.
E. Prior to filing with the Commission any (i) Preliminary Prospectus,
(ii) amendment to the Registration Statement or supplement to the
Prospectus, or document incorporated by reference in the Prospectus, or
(iii) Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Representative and counsel for the
Underwriters and obtain the consent of the Representative to the filing.
F. To make generally available to holders of the Offered Certificates
as soon as practicable, but in any event not later than 90 days after the
close of the period covered thereby, a statement of earnings of the Trust
(which need not be audited) complying with Section 11(a) of the Securities
Act and the Rules and Regulations (including, at the option of the Company,
Rule 158) and covering a period of at least twelve consecutive months
beginning not later than the first day of the first fiscal quarter
following the Closing Date.
G. To use its best efforts, in cooperation with the Representative, to
qualify the Offered Certificates for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States
as the Representative may designate, and maintain or cause to be maintained
such qualifications in effect for as long as may be required for the
distribution of the Offered Certificates. The Company will file or cause
the filing of such statements and reports as may be required by the laws of
each jurisdiction in which the Offered Certificates have been so qualified.
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H. Not, without the Representative's prior written consent, to
publicly offer or sell or contract to sell any mortgage pass-through
securities, collateralized mortgage obligations or other similar securities
representing interests in or secured by other mortgage-related assets
originated or owned by the Company for a period of 5 business days
following the commencement of the offering of the Offered Certificates to
the public.
I. So long as the Offered Certificates shall be outstanding, to
deliver to the Representative as soon as such statements are furnished to
the Trustee: (i) the annual statement as to compliance delivered to the
Trustee pursuant to Section 8.16 of the Pooling and Servicing Agreement;
(ii) the annual statement of a firm of independent public accountants
furnished to the Trustee pursuant to Section 8.17 of the Pooling and
Servicing Agreement; and (iii) the Monthly Statement furnished to the
Certificateholders pursuant to Section 7.8 of the Pooling and Servicing
Agreement.
J. To apply the net proceeds from the sale of the Offered Certificates
in the manner set forth in the Prospectus.
SECTION VI. Conditions to the Underwriters' Obligations. The obligations of
the Underwriters to purchase the Offered Certificates pursuant to this Agreement
are subject to: (i) the accuracy on and as of the Closing Date of the
representations and warranties on the part of the Company herein contained; (ii)
the performance by the Company of all of their respective obligations hereunder;
and (iii) the following conditions as of the Closing Date:
A. The Representative shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission. Any request of the Commission for inclusion
of additional information in the Registration Statement or the Prospectus
shall have been complied with.
B. None of the Underwriters shall have discovered and disclosed to the
Company on or prior to the Closing Date that the Registration Statement or
the Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact or
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omits to state a fact which, in the opinion of Dewey Ballantine, counsel
for the Underwriters, is material and is required to be stated therein or
is necessary to make the statements therein not misleading.
C. All corporate proceedings and other legal matters relating to the
authorization, form and validity of this Agreement, the Pooling and
Servicing Agreement, the Purchase Agreement, the Indemnification Agreement,
the Offered Certificates, the Registration Statement and the Prospectus,
and all other legal matters relating to this Agreement and the transactions
contemplated hereby shall be satisfactory in all respects to counsel for
the Underwriters, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters.
D. The Representative shall have received the favorable opinion of
Dewey Ballantine, special counsel to the Company with respect to the
following items, dated the Closing Date, to the effect that:
1. The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, and
is qualified to do business in each state necessary to enable it to perform
its obligations as Sponsor under the Pooling and Servicing Agreement. The
Company has the requisite power and authority to execute and deliver,
engage in the transactions contemplated by, and perform and observe the
conditions of, this Agreement, the Pooling and Servicing Agreement, the
Insurance Agreement, the Purchase Agreement and the Indemnification
Agreement.
2. This Agreement, the Certificates, the Pooling and Servicing
Agreement, the Insurance Agreement, the Purchase Agreement and the
Indemnification Agreement have been duly and validly authorized, executed
and delivered by the Company, all requisite corporate action having been
taken with respect thereto, and each (other than the Certificates)
constitutes the valid, legal and binding agreement of the Company.
3. Neither the transfer of the Mortgage Loans to the Trust, the
issuance or sale of the Certificates nor the execution, delivery or
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performance by the Company of the Pooling and Servicing Agreement, this
Agreement, the Insurance Agreement, the Purchase Agreement or the
Indemnification Agreement (A) conflicts or will conflict with or results or
will result in a breach of, or constitutes or will constitute a default
under, (i) any term or provision of the certificate of incorporation or
bylaws of the Company; (ii) any term or provision of any material
agreement, contract, instrument or indenture, to which the Company is a
party or is bound and known to such counsel; or (iii) any order, judgment,
writ, injunction or decree of any court or governmental agency or body or
other tribunal having jurisdiction over the Company and known to such
counsel; or (B) results in, or will result in the creation or imposition of
any lien, charge or encumbrance upon the Trust Estate or upon the
Certificates, except as otherwise contemplated by the Pooling and Servicing
Agreement.
4. The endorsement and delivery of each Note, and the preparation,
delivery and recording of an Assignment with respect to each Mortgage is
sufficient to fully transfer to the Trustee for the benefit of the Owners
all right, title and interest of the Company in the Note and Mortgage, as
noteholder and mortgagee or assignee thereof, subject to any exceptions set
forth in such opinion, and will be sufficient to permit the Trustee to
avail itself of all protection available under applicable law against the
claims of any present or future creditors of the Company and to prevent any
other sale, transfer, assignment, pledge or other encumbrance of the
Mortgage Loans by the Company from being enforceable.
5. No consent, approval, authorization or order of, registration or
filing with, or notice to, courts, governmental agency or body or other
tribunal is required under the laws of the State of New York, for the
execution, delivery and performance of the Pooling and Servicing Agreement,
the Insurance Agreement, this Agreement, the Indemnification Agreement, the
Purchase Agreement or the offer, issuance, sale or delivery of the
Certificates or the consummation of any other transaction contemplated
thereby by the Company, except such which have been obtained.
6. There are no actions, proceedings or investigations, to such
counsel's knowledge, pending or threatened against the Company before
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any court, governmental agency or body or other tribunal (i) asserting the
invalidity of the Pooling and Servicing Agreement, the Insurance Agreement,
this Agreement, the Indemnification Agreement, the Purchase Agreement or
the Certificates (ii) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by the Pooling
and Servicing Agreement, the Indemnification Agreement, the Insurance
Agreement or this Agreement, (iii) which would materially and adversely
affect the performance by the Company of obligations under, or the validity
or enforceability of, the Pooling and Servicing Agreement, the
Certificates, the Indemnification Agreement, the Insurance Agreement, the
Purchase Agreement or this Agreement or (iv) that would adversely affect
the status of the Group I Mortgages as a "real estate mortgage investment
conduit" ("REMIC") as such term is defined in the Internal Revenue Code of
1986, as amended.
7. To the best of the knowledge of such counsel, the Commission has
not issued any stop order suspending the effectiveness of the Registration
Statement or any order directed to any prospectus relating to the
Certificates (including the Prospectus), and has not initiated or
threatened any proceeding for that purpose.
8. The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which such counsel
need express no opinion), including the Incorporated Documents, as of the
date on which the Registration Statement was declared effective and as of
the date hereof, comply as to form in all material respects with the
requirements of the 1933 Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder, and such counsel
does not know of any amendment to the Registration Statement required to be
filed, or of any contracts, indentures or other documents of a character
required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement which has not been
filed or described as required.
9. Neither the qualification of the Pooling and Servicing Agreement
under the Trust Indenture Act of 1939 nor the registration of the Trust
created by such Agreement under the Investment Company Act of 1940 is
presently required.
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10. The statements in the Prospectus set forth under the captions
"DESCRIPTION OF THE SECURITIES," "THE POOLING AND SERVICING AGREEMENT" and
the statements in the Prospectus Supplement set forth under the caption,
"DESCRIPTION OF THE CERTIFICATES" to the extent such statements purport to
summarize certain provisions of the Certificates or of the Pooling and
Servicing Agreement, are fair and accurate in all material respects.
11. The statements in the Prospectus and Prospectus Supplement set
forth under the captions "ERISA CONSIDERATIONS," "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES," and the statements in the Prospectus set forth under the
caption, "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND RELATED MATTERS"
to the extent that they constitute matters of federal, New York or
California law, or federal, New York or California legal conclusions
provide a fair and accurate summary of such law or conclusions.
12. Assuming that (a) the Trustee causes the Trust created under the
Pooling and Servicing Agreement to elect, as the Trustee has covenanted to
do in the Pooling and Servicing Agreement, to be treated as a REMIC and (b)
the parties to the Pooling and Servicing Agreement comply with the terms
thereof, the Trust will be treated as a REMIC, the Class A-1, A-2, A-3,
A-4, A-5 and A-6 Certificates issued pursuant to the Pooling and Servicing
Agreement will be treated as the "regular interests" in the REMIC and the
Class R Certificates issued pursuant to the Pooling and Servicing Agreement
will be treated as the sole "residual interest" in the REMIC. The Trust
will not be subject to tax upon its income or assets by any taxing
authority of the State of New York or New York City or of the State of
California (except that no opinion need be expressed with respect to any
minimum tax).
13. Such opinion shall also relate to comparable matters with respect
to the Affiliated Originators and Advanta Mortgage Holding Company.
14. No information has come to such counsel's attention which causes
them to believe that the Prospectus (other than the financial statement and
other financial and statistical data contained therein, as to which such
counsel need express no opinion), as of the date thereof, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the
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statements therein, in light of the circumstances under which they were
made, not misleading.
15. Such other matters as the Representative may reasonably request.
In rendering its opinions, the counsel described above may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinions may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Company.
E. The Representative shall have received letters, including
bring-down letters, from Arthur Andersen LLP, dated on or before the
Closing Date, in form and substance satisfactory to the Representative and
counsel for the Underwriters, to the effect that they have performed
certain specified procedures requested by the Representative with respect
to the information set forth in the Prospectus and certain matters relating
to the Company.
F. The Offered Certificates shall have been rated in the highest
rating category by Standard & Poor's Ratings Group and by Moody's Investors
Service, Inc., and such ratings shall not have been rescinded or
downgraded. The Representative and counsel for the Underwriters shall have
received copies of any opinions of counsel supplied to the rating
organizations relating to any matters with respect to the Certificates. Any
such opinions shall be dated the Closing Date and addressed to the
Underwriters or accompanied by reliance letters to the Underwriters or
shall state that the Underwriters may rely upon them.
G. The Representative shall have received from the Company a
certificate, signed by the president, a senior vice president or a vice
president of the Company, dated the Closing Date, to the effect that the
signer of such certificate has carefully examined the Registration
Statement, the Pooling and Servicing Agreement and this Agreement and that,
to the best of his or her knowledge based upon reasonable investigation:
1. the representations and warranties of the Company in this Agreement
and in the Indemnification Agreement, as of the Closing Date, and in the
Pooling and Servicing Agreement, the
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Insurance Agreement, the Purchase Agreement and in all related agreements,
as of the date specified in such agreements, are true and correct, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
2. there are no actions, suits or proceedings pending, or to the best
of such officer's knowledge, threatened against or affecting the Company
which if adversely determined, individually or in the aggregate, would be
reasonably likely to adversely affect the Company's obligations under the
Pooling and Servicing Agreement, the Insurance Agreement, this Agreement,
the Purchase Agreement or under the Indemnification Agreement in any
material way; and no merger, liquidation, dissolution or bankruptcy of the
Company is pending or contemplated;
3. the information contained in the Registration Statement and the
Prospectus relating to the Company, the Mortgage Loans or the servicing
procedures of it or its affiliates or subservicer is true and accurate in
all material respects and nothing has come to his or her attention that
would lead such officer to believe that the Registration Statement or
Prospectus includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein not
misleading;
4. the information set forth in the Schedule of Mortgage Loans
required to be furnished pursuant to the Pooling and Servicing Agreement is
true and correct in all material respects;
5. there has been no amendment or other document filed affecting the
articles of incorporation or bylaws of the Company since March 31, 1995,
and no such amendment has been authorized. No event has occurred since
March 31, 1995, which has affected the good standing of the Company under
the laws of the State of Delaware;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
March 31, 1995;
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7. on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or
(B) any review or possible changes in rating the direction of which has not
been indicated, in the rating, if any, accorded the Company or in any
rating accorded any securities of the Company, if any, by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of the 1933 Act; and
8. each person who, as an officer or representative of the Company,
signed or signs the Registration Statement, the Pooling and Servicing
Agreement, this Agreement, the Indemnification Agreement, the Insurance
Agreement, or any other document delivered pursuant hereto, on the date of
such execution, or on the Closing Date, as the case may be, in connection
with the transactions described in the Pooling and Servicing Agreement, the
Indemnification Agreement, the Insurance Agreement, the Purchase Agreement
and this Agreement was, at the respective times of such signing and
delivery, and is now, duly elected or appointed, qualified and acting as
such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
The Company shall attach to such certificate a true and correct copy of its
certificate or articles of incorporation, as appropriate, and bylaws which are
in full force and effect on the date of such certificate and a certified true
copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
H. The Representative shall have received a favorable opinion of
counsel to the Trustee, dated the Closing Date and in form and substance
satisfactory to the Representative, to the effect that:
1. the Trustee is a national banking association duly organized,
validly existing and in good standing under the laws of the United States
and has the power and authority to enter into and to take all actions
required of it under the Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee and the Pooling and Servicing
Agreement
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constitutes the legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms, except as
enforceability thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally, as such laws would apply in the event of a
bankruptcy, insolvency or reorganization or similar occurrence affecting
the Trustee, and (B) general principles of equity regardless of whether
such enforcement is sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of
the Trustee in connection with its execution and delivery of the Pooling
and Servicing Agreement or the performance of its obligations thereunder;
4. the Certificates have been duly executed, authenticated and
delivered by the Trustee; and
5. the execution and delivery of, and performance by the Trustee of
its obligations under, the Pooling and Servicing Agreement do not conflict
with or result in a violation of any statute or regulation applicable to
the Trustee, or the charter or bylaws of the Trustee, or to the best
knowledge of such counsel, any governmental authority having jurisdiction
over the Trustee or the terms of any indenture or other agreement or
instrument to which the Trustee is a party or by which it is bound.
In rendering such opinion, such counsel may rely, as to matters of fact, on
certificates of responsible officers of the Company, the Trustee and public
officials. Such opinion may also assume the due authorization, execution and
delivery of the instruments and documents referred to therein by the parties
thereto other than the Trustee.
I. The Representative shall have received from the Trustee a
certificate, signed by the President, a senior vice president or a vice
president of the Trustee, dated the Closing Date, to the effect that each
person who, as an officer or representative of the Trustee, signed or signs
the Certificates, the Pooling and Servicing Agreement or any other document
delivered pursuant hereto, on the date hereof or on the Closing Date, in
connection with the transactions described in the Pooling and Servicing
Agreement was, at the
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respective times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their genuine
signatures.
J. The Policy relating to the Certificates shall have been duly
executed and issued at or prior to the Closing Date and shall conform in
all material respects to the description thereof in the Prospectus.
K. The Representative shall have received a favorable opinion of
in-house counsel to the Insurer, dated the Closing Date and in form and
substance satisfactory to counsel for the Underwriters, to the effect that:
1. The Insurer is a stock insurance corporation, duly incorporated and
validly existing under the laws of the State of New York. The Insurer is
validly licensed and authorized to issue the Policy and perform its
obligations under the Policy in accordance with the terms thereof, under
the laws of the State of New York.
2. The execution and delivery by the Insurer of the Policy, the
Insurance Agreement and the Indemnification Agreement are within the
corporate power of the Insurer and have been authorized by all necessary
corporate action on the part of the Insurer; the Policy has been duly
executed and is the valid and binding obligation of the Insurer enforceable
in accordance with its terms except that the enforcement of the Policy may
be limited by laws relating to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity.
3. The Insurer is authorized to deliver the Insurance Agreement and
the Indemnification Agreement, and such agreements have been duly executed
and delivered and constitute the legal, valid and binding obligations of
the Insurer enforceable in accordance with its terms except that the
enforcement of the Insurance Agreement and the Indemnification Agreement
may be limited by laws relating to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and by public
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policy considerations relating to indemnification for securities law
violations.
4. No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part of the
Insurer, the lack of which would adversely affect the validity or
enforceability of the Policy; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the
Policy, the form of the Policy has been filed with, and approved by, all
governmental authorities having jurisdiction over the Insurer in connection
with the Policy.
5. The Certificate Insurance Policy is not required to be registered
under the Securities Act.
6. The information set forth under the caption "THE CERTIFICATE
INSURANCE POLICY" and "THE CERTIFICATE INSURER" in the Prospectus forming a
part of the Registration Statement, insofar as such statements constitute a
description of the Policy, accurately summarizes the Policy.
In rendering this opinion, such counsel may rely, as to matters of fact, on
certificates of responsible officers of the Company, the Trustee, the Insurer
and public officials. Such opinion may assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Insurer.
L. On or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or
(B) any review or possible changes in rating the direction of which has not
been indicated, in the rating, if any, accorded the Company or in any
rating accorded any securities of the Company, if any, by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of the 1933 Act.
M. On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the
Insurer's claims paying ability by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the 1933 Act.
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N. There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since December 31, 1995, of (A) the
Company and its subsidiaries or (B) the Insurer, that is in the
Representative's judgment material and adverse and that makes it in the
Representative's judgment impracticable to market the Offered Certificates
on the terms and in the manner contemplated in the Prospectus.
O. The Representative shall have received from the Insurer a
certificate, signed by the President, a senior vice president or a vice
president of the Insurer, dated the Closing Date, to the effect that the
signer of such certificate has carefully examined the Policy, the Insurance
Agreement, the Indemnification Agreement and the related documents and
that, to the best of his or her knowledge based on reasonable
investigation:
1. there are no actions, suits or proceedings pending or threatened
against or affecting the Insurer which, if adversely determined,
individually or in the aggregate, would adversely affect the Insurer's
performance under the Policy, the Insurance Agreement or the
Indemnification Agreement;
2. each person who as an officer or representative of the Insurer,
signed or signs the Policy, the Insurance Agreement, the Indemnification
Agreement or any other document delivered pursuant hereto, on the date
thereof, or on the Closing Date, in connection with the transactions
described in this Agreement was, at the respective times of such signing
and delivery, and is now, duly elected or appointed, qualified and acting
as such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures;
3. the information contained in the Prospectus under the captions "THE
CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" is true and
correct in all material respects and does not omit to state a material fact
with respect to the description of the Policy or the ability of the Insurer
to meet its payment obligations under the Policy;
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4. the tables regarding the Insurer's capitalization set forth under
the heading "THE CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE
INSURER" presents fairly the capitalization of the Insurer as of March 31,
1996;
5. on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or
(B) any review or possible changes in rating the direction of which has not
been indicated, in the rating accorded the claims paying ability of the
Insurer by any "nationally recognized statistical rating organization," as
such term is defined for purposes of the 1933 Act;
6. the audited balance sheet of the Insurer as of December 31, 1995
and the related statement of income and retained earnings for the fiscal
year then ended, and the accompanying footnotes, together with opinion
dated January 20, 1995 of KPMG Peat Marwick, an independent certificated
public accountant, copies of which are included in the Prospectus, fairly
present in all material respects the financial condition of the Insurer as
of such date and for the period covered by such statements in accordance
with generally accepted accounting principles consistently applied; the
unaudited balance sheet of the Insurer as of March 31, 1996 and the related
statement of income and retained earnings for the three-month period then
ended, copies of which are included in the Prospectus, fairly present in
all material respects the financial condition of the Insurer as of such
date and for the period covered by such statements in accordance with
generally accepted accounting principles applied consistently with those
principles applied in preparing the December 31, 1995 audited statements.
7. to the best knowledge of such officer, since March 31, 1996, no
material adverse change has occurred in the financial position of the
Insurer other than as set forth in the Prospectus.
The officer of the Insurer certifying to items 5-7 shall be an officer in
charge of a principal financial function.
The Insurer shall attach to such certificate a true and correct copy of its
certificate or articles of incorporation, as appropriate, and its bylaws, all of
which are in full force and effect on the date of such certificate.
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P. The Representative shall have received from Dewey Ballantine,
special counsel to the Company, a survey in form and substance satisfactory
to the Representative, indicating the requirements of applicable local law
which must be complied with in order to transfer and service the Mortgage
Loans pursuant to the Pooling and Servicing Agreement and the Company shall
have complied with all such requirements.
Q. The Representative shall have received from Dewey Ballantine,
special counsel to the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Certificates,
the Prospectus and such other related matters as the Representative shall
reasonably require.
R. The Representative and counsel for the Underwriters shall have
received copies of any opinions of counsel to the Company or the Insurer
supplied to the Trustee relating to matters with respect to the
Certificates or the Policy. Any such opinions shall be dated the Closing
Date and addressed to the Underwriters or accompanied by reliance letters
to the Underwriters or shall state the Underwriters may rely thereon.
S. The Representative shall have received such further information,
certificates and documents as the Representative may reasonably have
requested not fewer than three (3) full business days prior to the Closing
Date.
T. There shall have been executed and delivered by Advanta Mortgage
Holding Company, the corporate parent of the Company ("AMHC"), a letter
agreement with the Trustee and the Insurer, pursuant to which AMHC agrees
to become jointly and severally liable with the Company and Advanta
Mortgage Corp. USA for the payment of the Joint and Several Obligations (as
defined in such letter agreement).
U. There shall have been executed and delivered by AMHC, the corporate
parent of the Company, a letter agreement with the Underwriters
substantially in the form of Exhibit A hereto.
V. Prior to the Closing Date, counsel for the Underwriters shall have
been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass
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upon the issuance and sale of the Offered Certificates as herein
contemplated and related proceedings or in order to evidence the accuracy
and completeness of any of the representations and warranties, or the
fulfillment of any of the conditions, herein contained, and all proceedings
taken by the Company in connection with the issuance and sale of the
Certificates as herein contemplated shall be satisfactory in form and
substance to the Representative and counsel for the Underwriters.
W. Subsequent to the execution and delivery of this Agreement none of
the following shall have occurred: (i) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or minimum prices shall
have been established on either of such exchanges or such market by the
Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction; (ii) a banking moratorium shall
have been declared by Federal or state authorities; (iii) the United States
shall have become engaged in hostilities, there shall have been an
escalation of hostilities involving the United States or there shall have
been a declaration of a national emergency or war by the United States; or
(iv) there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of international
conditions on the financial markets of the United States shall be such) as
to make it, in the judgment of the Representative, impractical or
inadvisable to proceed with the public offering or delivery of the
Certificates on the terms and in the manner contemplated in the Prospectus.
If any condition specified in this Section VI shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Representative by notice to the Company at any time at or prior to the Closing
Date, and such termination shall be without liability of any party to any other
party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
SECTION VII. Payment of Expenses. The Company agrees to pay: (a) the costs
incident to the authorization,
27
<PAGE>
issuance, sale and delivery of the Offered Certificates and any taxes payable in
connection therewith; (b) the costs incident to the preparation, printing and
filing under the Securities Act of the Registration Statement and any amendments
and exhibits thereto; (c) the costs of distributing the Registration Statement
as originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), the Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus or any document
incorporated by reference therein, all as provided in this Agreement; (d) the
costs of reproducing and distributing this Agreement; (e) the fees and expenses
of qualifying the Offered Certificates under the securities laws of the several
jurisdictions as provided in Section V(G) hereof and of preparing, printing and
distributing a Blue Sky Memorandum and a Legal Investment Survey (including
related fees and expenses of counsel to the Underwriters); (f) any fees charged
by securities rating services for rating the Offered Certificates; and (g) all
other costs and expenses incident to the performance of the obligations of the
Company (including costs and expenses of your counsel); provided that, except as
provided in this Section VII, the Underwriters shall pay their own costs and
expenses, including the costs and expenses of Dewey Ballantine, any transfer
taxes on the Offered Certificates which they may sell and the expenses of
advertising any offering of the Offered Certificates made by the Underwriters.
If this Agreement is terminated by the Representative, in accordance with
the provisions of Section VI or Section X, the Company shall reimburse the
Underwriters for their respective reasonable out-of-pocket expenses, including
fees and disbursements of Dewey Ballantine, counsel for the Underwriters.
SECTION VIII. Indemnification and Contribution. A. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of the
Offered Certificates), to which such Underwriter or any such controlling person
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue statement
of a material fact contained in
28
<PAGE>
the Prospectus or (iv) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading and shall reimburse such Underwriter and each such controlling person
promptly upon demand for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Prospectus or the Registration Statement in
reliance upon and in conformity with written information (including any Derived
Information) furnished to the Company through the Representative specifically
for inclusion therein; and provided further that as to any Preliminary
Prospectus this indemnity shall not inure to the benefit of any Underwriter or
any controlling person on account of any loss, claim, damage, liability or
action arising from the sale of the Offered Certificates to any person by such
Underwriter if such Underwriter failed to send or give a copy of the Prospectus,
as amended or supplemented, to that person within the time required by the
Securities Act, and the untrue statement or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact in
the Preliminary Prospectus was corrected in the Prospectus, unless such failure
resulted from non-compliance by the Company with Section V(C). For purposes of
the last proviso to the immediately preceding sentence, the term "Prospectus"
shall not be deemed to include the documents incorporated therein by reference,
and none of the Underwriters shall be obligated to send or give any supplement
or amendment to any document incorporated therein by reference to any person
other than a person to whom such Underwriter had delivered such incorporated
document or documents in response to a written request therefor. The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to any Underwriters or any controlling person of such
Underwriter.
B. Each Underwriter agrees severally, and not jointly to indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act against any and all loss, claim,
damage or liability, or any action in respect thereof, to which the Company or
any such director, officer or controlling person may become subject, under the
Securities Act or otherwise, insofar as
29
<PAGE>
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, (iii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus or (iv)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Underwriter
specifically for inclusion therein, and shall reimburse the Company and any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by the Company or any director, officer or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Underwriter may otherwise have to the Company or any such director,
officer or controlling person.
C. Promptly after receipt by any indemnified party under this Section VIII
of notice of any claim or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section VIII, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section VIII except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify any
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section VIII.
If any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section VIII for any legal or other
expenses subsequently
30
<PAGE>
incurred by the indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriters, if the indemnified
parties under this Section VIII consist of the Underwriters or any of their
controlling persons, or by the Company, if the indemnified parties under this
Section VIII consist of the Company or any of the Company's directors, officers
or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section VIII(A) and (B), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without
31
<PAGE>
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
D. Each Underwriter agrees to deliver to the Company no later than the
date on which the Prospectus Supplement is required to be filed pursuant to
Rule 424 with a copy of its Derived Information (defined below) for filing
with the Commission on Form 8-K.
E. Each Underwriter agrees, assuming all Company-Provided Information
(defined below) is accurate and complete in all material respects, to
severally and not jointly indemnify and hold harmless the Company, each of
the Company's officers and directors and each person who controls the
Company within the meaning of Section 15 of the Securities Act against any
and all losses, claims, damages or liabilities, joint or several, to which
they may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement of a material fact
contained in the Derived Information provided by such Underwriter, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party
for any legal or other expenses reasonably incurred by him, her or it in
connection with investigating or defending or preparing to defend any such
loss, claim, damage, liability or action as such expenses are incurred. The
obligations of each of the Underwriters under this Section VIII(E) shall be
in addition to any liability which such Underwriter may otherwise have.
The procedures set forth in Section VIII(C) shall be equally
applicable to this Section VIII(E).
F. For purposes of this Section VIII, the term "Derived Information"
means such portion, if any, of the information delivered to the Company
pursuant to Section VIII(D) for filing with the Commission on Form 8-K as:
32
<PAGE>
(i) is not contained in the Prospectus without taking into account
information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
(iii) is of the type of information defined as Collateral term sheets,
Structural term sheets or Computational Materials (as such terms
are interpreted in the No-Action Letters).
"Company-Provided Information" means any computer tape furnished to the
Underwriters by the Company concerning the Mortgage Loans comprising the
Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995
letter (the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf
of the Public Securities Association (which letter, and the SEC staff's
response thereto, were publicly available February 17, 1995). The term
"Collateral term sheet" as used herein includes any subsequent Collateral
term sheet that reflects a substantive change in the information presented.
The term "Computational Materials" has the meaning assigned to it in the
May 17, 1994 letter (the "Kidder letter" and together with the PSA Letter,
the "No-Action Letters") of Brown & Wood on behalf of Kidder, Peabody &
Co., Inc. (which letter, and the SEC staff's response thereto, were
publicly available May 20, 1994).
G. If the indemnification provided for in this Section VIII shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section VIII(A) or (B) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Company on the one hand
and the Underwriters on the other from the offering of the Offered
Certificates or (ii) if
33
<PAGE>
the allocation provided by clause (i) above is not permitted by applicable
law or if the indemnified party failed to give the notice required under
Section VIII(C), in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations.
The relative benefits of the Underwriters and the Company shall be deemed
to be in such proportion so that the Underwriters are responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the public offering price appearing
on the cover page of the Prospectus.
The relative fault of the Underwriters and the Company shall be determined
by reference to whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by one of the Underwriters, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission and other equitable
considerations.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section VIII(G) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section VIII(G) shall be deemed to include, for purposes of this Section
VIII(G), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
In no case shall any Underwriter be responsible for any amount in excess of
the underwriting discount applicable to the Certificates purchased by such
Underwriter hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
H. The Underwriters severally confirm that the information set forth
(i) in the Prospectus
34
<PAGE>
Supplement relating to market making and (ii) in the fourth paragraph under
the caption "Underwriting" in the Prospectus Supplement, together with the
Derived Information, is correct and constitutes the only information
furnished in writing to the Company by or on behalf of the Underwriters
specifically for inclusion in the Registration Statement and the
Prospectus.
SECTION IX. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Underwriters or controlling persons
thereof, or by or on behalf of the Company and shall survive delivery of any
Offered Certificates to the Underwriters.
SECTION X. Termination of Agreement. The Representative may terminate this
Agreement immediately upon notice to the Company, at any time at or prior to the
Closing Date if any of the events or conditions described in Section VI(Y) of
this Agreement shall occur and be continuing. In the event of any such
termination, the covenant set forth in Section V(G), the provisions of Section
VII, the indemnity agreement set forth in Section VIII, and the provisions of
Sections IX and XIII shall remain in effect.
SECTION XI. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A. if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Lehman Brothers Inc., as Representative of the
Underwriters, 3 World Financial Center, New York, New York, 10285-1100,
Attention: Syndicate Registration Department (Fax: 212-528-8822);
B. if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to Advanta Mortgage Conduit Services, Inc. 16875
West Bernardo Drive, San Diego, California 92127 Attention: General Counsel
(Fax: 619-674-3592).
SECTION XII. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriters and
the Company, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the representations, warranties, indemnities and agreements contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
35
<PAGE>
if any, who control the Underwriters within the meaning of Section 15 of the
Securities Act, and for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section XII, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
SECTION XIII. Default by One of the Underwriters. If one of the
Underwriters shall fail on the Closing Date to purchase the Offered Certificates
which it is obligated to purchase hereunder (the "Defaulted Certificates"), the
remaining Underwriters (the "Non-Defaulting Underwriter"), shall have the right,
but not the obligation within one (1) Business Day thereafter, to make
arrangements to purchase all, but not less than all, of the Defaulted
Certificates upon the terms herein set forth; if, however, the Non-Defaulting
Underwriter shall not have completed such arrangements within such one (1)
Business Day period, then this Agreement shall terminate without liability on
the part of the Non-Defaulting Underwriter.
No action taken pursuant to this Section XIII shall relieve the defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Non-Defaulting Underwriter or the Company shall have
the right to postpone the Closing Date for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements.
SECTION XIV. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement, or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Certificates and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
SECTION XV. Definition of the Term "Business Day". For purposes of this
Agreement, "Business Day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
SECTION XVI. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF
36
<PAGE>
THE STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH SUCH LAWS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, SPECIFIED TIMES OF DAY REFER
TO NEW YORK CITY TIME.
SECTION XVII. Counterparts. This Agreement may be executed in counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
SECTION XVIII. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
SECTION XIX. Representations of Underwriters. The Representative will act
for the several Underwriters in connection with the transactions contemplated by
this Agreement, and any action under this Agreement taken by the Representative
will be binding upon all of the Underwriters.
37
<PAGE>
If the foregoing correctly sets forth the agreement between the Company and
the Underwriters, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By:______________________
Mark Casale
Vice President
CONFIRMED AND ACCEPTED, as of
the date first above written:
LEHMAN BROTHERS INC.,
as Representative of the Underwriters
By:______________________
[Underwriting Agreement]
38
<PAGE>
================================================================================
SCHEDULE A
- --------------------------------------------------------------------------------
Purchase Price
Initial Principal Amount to Underwriters
of Offered Certificates disregarding
Class Purchased by Underwriters accrued interest
- --------------------------------------------------------------------------------
Class A-1 $92,819,000 99.700000%
- --------------------------------------------------------------------------------
Class A-2 $56,572,000 99.966875%
- --------------------------------------------------------------------------------
Class A-3 $36,642,000 99.684375%
- --------------------------------------------------------------------------------
Class A-4 $19,406,000 99.653125%
- --------------------------------------------------------------------------------
Class A-5 $29,561,000 99.653125%
- --------------------------------------------------------------------------------
Class A-6 $65,000,000 99.700000%
================================================================================
39
<PAGE>
EXHIBIT A
As of _______, 1996
Lehman Brothers Inc.
As Representative of the Underwriters
named in Schedule I
Three World Financial Center
New York, New York 10285-1200
Re: Underwriting Agreement dated May 13, 1996 (the
"Underwriting Agreement") between Advanta
Mortgage Conduit Services, Inc. ("Advanta") and
Lehman Brothers Inc. (the "Representative") and
Indemnification Agreement dated as of May
1, 1996 (the "Indemnification Agreement") among
Financial Guaranty Insurance Company (the
"Certificate Insurer"), Advanta and the
Representative
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement and the Indemnification Agreement
(together, the "Designated Agreements"), Advanta has undertaken certain
financial obligations with respect to the indemnification of the Underwriters
and of the Certificate Insurer with respect to the Registration Statement, the
Prospectus and the Prospectus Supplement described in the Designated Agreements.
Any financial obligations of Advanta under the Designated Agreements, whether or
not specifically enumerated in this paragraph, are hereinafter referred to as
the "Joint and Several Obligations"; provided, however, that "Joint and Several
Obligations" shall mean only the financial obligations of Advanta under the
Designated Agreements (including the payment of money damages for a breach of
any of Advanta's obligations under the Designated Agreements, whether financial
or otherwise) but shall not include any obligations not relating to the payment
of money.
As a condition of their respective executions of the Underwriting Agreement
and of the Indemnification Agreement, the Underwriters and the Certificate
Insurer have required the undersigned, Advanta Mortgage Holding Company
("AMHC"), the parent corporation of Advanta, to acknowledge its joint-and-
<PAGE>
several liability with Advanta for the payment of the Joint and Several
Obligations under the Designated Agreements.
Now, therefore, the Underwriters, the Certificate Insurer and AMHC do
hereby agree that:
(i) AMHC hereby agrees to be absolutely and unconditionally jointly and
severally liable with Advanta to the Underwriters for the payment of
the Joint and Several Obligations under the Underwriting Agreement.
(ii) AMHC hereby agrees to be absolutely and unconditionally jointly and
severally liable with Advanta to the Certificate Insurer for the
payment of the Joint and Several Obligations under the Indemnification
Agreement.
(iii) AMHC may honor its obligations hereunder either by direct payment of
any Joint and Several Obligations or by causing any Joint and Several
Obligations to be paid to the Underwriters or to the Certificate
Insurer, as applicable, by Advanta or another affiliate of AMHC.
2
<PAGE>
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:_____________________________
Authorized Signatory
CONFIRMED AND ACCEPTED, as of
the date first above written:
FINANCIAL GUARANTY INSURANCE COMPANY
By:_____________________________
Authorized Signatory
LEHMAN BROTHERS INC.,
as Representative of the Underwriters
By:_____________________________
Authorized Signatory
3
<PAGE>
SCHEDULE I
Lehman Brothers Inc.
Salomon Brothers Inc
Prudential Securities Incorporated
4
<PAGE>
POOLING AND SERVICING AGREEMENT
Relating to
ADVANTA MORTGAGE LOAN TRUST
1996-2
Among
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
Dated as of May 1, 1996
<PAGE>
TABLE OF CONTENTS
(Not a Part of this Agreement)
Page
Parties............................................................. 1
Recitals............................................................ 1
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION.................. 2
1.1. Definitions.............................................. 2
Account............................................. 2
Advanta Mortgage Files.............................. 2
Advanta Servicing Fee............................... 2
Affiliated Originators.............................. 2
Agreement........................................... 3
AMHC................................................ 3
Appraised Value..................................... 3
Authorized Officer.................................. 3
Available Funds..................................... 3
Balloon Loan........................................ 3
Bulk Acquisition Loan............................... 3
Business Day........................................ 3
Certificate......................................... 3
Certificate Account................................. 4
Certificate Insurance Policy........................ 4
Certificate Insurer................................. 4
Certificate Insurer Default......................... 4
Certificate Insurer Premium Rate.................... 4
Certificate Principal Balance....................... 4
Class............................................... 4
Class A Certificate................................. 4
Class A-1 Certificate............................... 4
Class A-1 Certificate Principal Balance............. 5
Class A-1 Certificate Termination Date.............. 5
Class A-1 Distribution Amount....................... 5
Class A-1 Formula Distribution Amount............... 5
Class A-1 Interest Carry-Forward Amount............. 5
Class A-1 Interest Distribution Amount.............. 5
Class A-1 Pass-Through Rate......................... 6
Class A-1 Principal Distribution Amount............. 6
Class A-2 Certificate............................... 6
Class A-2 Certificate Principal Balance............. 6
Class A-2 Certificate Termination Date.............. 6
Class A-2 Distribution Amount....................... 6
Class A-2 Formula Distribution Amount............... 6
Class A-2 Interest Carry-Forward Amount............. 6
Class A-2 Interest Distribution Amount.............. 7
Class A-2 Pass-Through Rate......................... 7
Class A-2 Principal Distribution Amount............. 7
Class A-3 Certificate............................... 7
Class A-3 Certificate Principal Balance............. 8
Class A-3 Certificate Termination Date.............. 8
i
<PAGE>
Page
Class A-3 Distribution Amount....................... 8
Class A-3 Formula Distribution Amount............... 8
Class A-3 Interest Carry-Forward Amount............. 8
Class A-3 Interest Distribution Amount.............. 8
Class A-3 Pass-Through Rate......................... 9
Class A-3 Principal Distribution Amount............. 9
Class A-4 Certificate............................... 9
Class A-4 Certificate Principal Balance............. 9
Class A-4 Certificate Termination Date.............. 9
Class A-4 Distribution Amount....................... 9
Class A-4 Formula Distribution Amount............... 10
Class A-4 Interest Carry-Forward Amount............. 10
Class A-4 Interest Distribution Amount.............. 10
Class A-4 Pass-Through Rate......................... 10
Class A-4 Principal Distribution Amount............. 10
Class A-5 Certificate............................... 11
Class A-5 Certificate Principal Balance............. 11
Class A-5 Certificate Termination Date.............. 11
Class A-5 Distribution Amount....................... 11
Class A-5 Formula Distribution Amount............... 11
Class A-5 Interest Carry-Forward Amount............. 11
Class A-5 Interest Distribution Amount.............. 12
Class A-5 Pass-Through Rate......................... 12
Class A-5 Principal Distribution Amount............. 12
Class A-6 Available Funds Pass-Through
Rate............................................. 12
Class A-6 Certificate............................... 13
Class A-6 Certificate Principal Balance............. 13
Class A-6 Distribution Account...................... 13
Class A-6 Distribution Amount....................... 13
Class A-6 Formula Distribution Amount............... 13
Class A-6 Formula Pass-Through Rate................. 14
Class A-6 Full Distribution Amount.................. 14
Class A-6 Full Interest Distribution
Amount........................................... 14
Class A-6 Insured Distribution Amount............... 14
Class A-6 Insured Payment........................... 14
Class A-6 Interest Carry-Forward Amount............. 14
Class A-6 Interest Distribution Amount.............. 14
Class A-6 Pass-Through Rate......................... 15
Class A-6 Preference Amount......................... 15
Class A-6 Principal Distribution Amount............. 15
Class A-6 Reimbursement Amount...................... 15
Class R Distribution Account........................ 15
Class RS Certificate................................ 15
Class RS Distribution Account....................... 15
Clean-Up Call Date.................................. 16
Code................................................ 16
Combined Loan-to-Value Ratio........................ 16
Compensating Interest............................... 16
ii
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Page
Conduit Acquisition Trust........................... 16
Coupon Rate......................................... 16
Cut-Off Date........................................ 16
Date-of-Payment Loan................................ 16
Delinquency Advance................................. 16
Delinquent.......................................... 17
Delivery Order...................................... 17
Depository.......................................... 17
Designated Depository Institution................... 17
Designated Residual Owner........................... 18
Determination Date.................................. 18
Direct Participant" or "DTC Participant............. 18
Disqualified Organization........................... 18
Document Delivery Requirements...................... 18
Eligible Investments................................ 18
Excess Spread Rate.................................. 18
Excess Subordinated Amount.......................... 18
Event of Default.................................... 18
FDIC................................................ 18
Freddie Mac......................................... 18
File................................................ 19
Final Determination................................. 19
First Mortgage Loan................................. 19
FNMA................................................ 19
Gross Margin........................................ 19
Group I............................................. 19
Group I Amortized Subordinated Amount
Requirement...................................... 19
Group I Available Funds............................. 19
Group I Certificate Principal Balance............... 19
Group I Certificates................................ 19
Group I Deficiency Amount........................... 20
Group I Formula Distribution Amount................. 20
Group I Initial Specified Subordinated
Amount........................................... 20
Group I Insured Distribution Amount................. 20
Group I Insured Payment............................. 20
Group I Interest Distribution Amount................ 20
Group I Interest Remittance Amount.................. 20
Group I Monthly Remittance Amount................... 20
Group I Net Funds Cap Rate.......................... 21
Group I Preference Amount........................... 21
Group I Premium Amount.............................. 21
Group I Principal Carry-Forward Amount.............. 21
Group I Principal Distribution Amount............... 22
Group I Principal Remittance Amount................. 22
Group I Projected Net Monthly Excess
Cashflow......................................... 23
Group I Reimbursement Amount........................ 23
Group I Specified Subordinated Amount............... 23
iii
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Page
Group I Subordinated Amount......................... 24
Group I Subordination Deficit....................... 24
Group I Total Available Funds....................... 24
Group I Total Monthly Excess Spread................. 24
Group I Weighted Average Net Loan Rate.............. 24
Group I Weighted Average Pass-Through
Rate............................................. 25
Group II............................................ 25
Group II Amortized Subordinated Amount
Requirement...................................... 25
Group II Available Funds............................ 25
Group II Deficiency Amount.......................... 25
Group II Initial Specified Subordinated
Amount........................................... 25
Group II Interest Remittance Amount................. 25
Group II Monthly Remittance Amount.................. 25
Group II Preference Amount.......................... 26
Group II Premium Amount"............................ 26
Group II Principal Carry-Forward Amount............. 26
Group II Principal Distribution Amount.............. 26
Group II Principal Remittance Amount................ 27
Group II Projected Net Monthly Excess
Cashflow......................................... 27
Group II Specified Subordinated Amount.............. 27
Group II Subordinated Amount........................ 28
Group II Subordination Deficit...................... 28
Group II Total Available Funds...................... 28
Group II Total Monthly Excess Spread................ 28
Group II Trigger Event.............................. 29
Group II Weighted Average Net Loan Rate............. 29
Highest Lawful Rate................................. 29
Indemnification Agreement........................... 29
Index............................................... 29
Indirect Participant................................ 29
Initial Premiums.................................... 29
Insurance Agreement................................. 29
Insurance Policy.................................... 29
Insured Payment..................................... 29
Interest Accrual Period............................. 29
Interest Advance.................................... 30
Interest Determination Date......................... 30
Interest Rate Adjustment Date....................... 30
Late Payment Rate................................... 30
LIBOR............................................... 30
Liquidated Loan..................................... 30
Liquidation Expenses................................ 31
Liquidation Proceeds................................ 31
Loan Balance........................................ 31
Loan Purchase Price................................. 31
London Business Day................................. 31
iv
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Page
Master Servicer..................................... 32
Master Servicer's Trust Receipt..................... 32
Master Servicing Fee................................ 32
Master Transfer Agreement........................... 32
Monthly Remittance Amount........................... 32
Moody's............................................. 32
Mortgage............................................ 32
Mortgage Loan Group................................. 32
Mortgage Loans...................................... 32
Mortgagor........................................... 33
Net Liquidation Proceeds............................ 33
Net Monthly Excess Cashflow......................... 33
Note................................................ 33
Officer's Certificate............................... 33
Operative Documents................................. 33
Original Aggregate Loan Balance..................... 33
Original Certificate Principal Balance.............. 33
Original Principal Amount........................... 34
Originator.......................................... 34
Outstanding......................................... 34
Owner............................................... 34
Pass-Through Rate................................... 34
Payment Date........................................ 35
Percentage Interest................................. 35
Person.............................................. 35
Pool Cumulative Realized Losses..................... 35
Pool Delinquency Rate............................... 35
Pool Principal Balance.............................. 35
Pool Rolling Three Month Delinquency
Rate............................................. 35
Premium Amount...................................... 35
Premium Percentage.................................. 35
Prepaid Installment................................. 35
Prepayment.......................................... 36
Preservation Expenses............................... 36
Principal and Interest Account...................... 36
Principal Remittance Amount......................... 36
Prohibited Transaction.............................. 36
Property............................................ 36
Purchase Option Period.............................. 36
Qualified Liquidation............................... 36
Qualified Mortgage.................................. 36
Qualified Replacement Mortgage...................... 36
Realized Loss....................................... 37
Record Date......................................... 37
Reference Banks..................................... 37
Register............................................ 38
Registrar........................................... 38
Registration Statement.............................. 38
Reimbursement Amount................................ 38
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Page
Reimbursement Rate.................................. 38
REMIC............................................... 38
REMIC Provisions.................................... 38
REMIC Trust......................................... 38
Remittance Date..................................... 38
Remittance Period................................... 39
REO Property........................................ 39
Replacement Cut-Off Date............................ 39
Representation Letter............................... 39
Reserve Interest Rate............................... 39
Residual Net Monthly Excess Cashflow................ 39
Schedules of Mortgage Loans......................... 39
Second Mortgage Loan................................ 40
Securities Act...................................... 40
Senior Lien......................................... 40
Servicer Affiliate.................................. 40
Servicing Advance................................... 40
Servicing Fee....................................... 40
Specified Subordinated Amount....................... 40
Sponsor............................................. 40
Standard & Poor's................................... 40
Startup Day......................................... 40
Step-up Payment Date................................ 40
Subordinated Amount................................. 40
Subordination Deficiency Amount..................... 41
Subordination Increase Amount....................... 41
Subordination Reduction Amount...................... 41
Substitution Amount................................. 41
Sub-Servicer........................................ 41
Sub-Servicing Agreement............................. 41
Supplemental Interest Payment Account............... 41
Supplemental Interest Payment Amount
Available........................................ 41
Supplemental Interest Trust......................... 42
Tax Matters Person.................................. 42
Termination Notice.................................. 42
Termination Price................................... 42
Total Monthly Excess Cashflow....................... 42
Total Monthly Excess Spread......................... 42
Transaction Documents............................... 42
Trust............................................... 42
Trust Estate........................................ 42
Trustee............................................. 43
Trustee's Fees...................................... 43
Unaffiliated Originator Loan........................ 43
Unaffiliated Originators............................ 43
Underwriters........................................ 43
1.2. Use of Words and Phrases............................ 43
1.3. Captions; Table of Contents......................... 43
1.4. Opinions............................................ 43
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Page
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE
TRUST............................................... 44
2.1. Establishment of the Trust.......................... 44
2.2. Office.............................................. 44
2.3. Purposes and Powers................................. 44
2.4. Appointment of the Trustee; Declaration
of Trust............................................ 44
2.5. Expenses of the Trust............................... 44
2.6. Ownership of the Trust.............................. 45
2.7. Situs of the Trust.................................. 45
2.8. Miscellaneous REMIC Provisions...................... 45
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE
LOANS............................................... 46
3.1. Representations and Warranties of the
Sponsor............................................. 46
3.2. Representations and Warranties of the
Master Servicer..................................... 49
3.3. Representations and Warranties of the
Sponsor with Respect to the Mortgage
Loans............................................... 52
3.4. Covenants of Sponsor to Take Certain
Actions with Respect to the Mortgage
Loans In Certain Situations......................... 54
3.5. Conveyance of the Mortgage Loans.................... 56
3.6. Acceptance by Trustee; Certain
Substitutions of Mortgage Loans;
Certification by Trustee............................ 58
3.7. Cooperation Procedures.............................. 60
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES................... 60
4.1. Issuance of Certificates............................ 60
4.2. Sale of Certificates................................ 60
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS.............. 61
5.1. Terms............................................... 61
5.2. Forms............................................... 61
5.3. Execution, Authentication and Delivery.............. 62
5.4. Registration and Transfer of
Certificates........................................ 62
5.5. Mutilated, Destroyed, Lost or Stolen
Certificates........................................ 64
5.6. Persons Deemed Owners............................... 65
5.7. Cancellation........................................ 65
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Page
5.8. Limitation on Transfer of Ownership
Rights.............................................. 66
5.9. Assignment of Rights................................ 67
ARTICLE VI COVENANTS........................................... 67
6.1. Distributions....................................... 67
6.2. Money for Distributions to be Held in
Trust; Withholding.................................. 67
6.3. Protection of Trust Estate.......................... 68
6.4. Performance of Obligations.......................... 69
6.5. Negative Covenants.................................. 70
6.6. No Other Powers..................................... 70
6.7. Limitation of Suits................................. 70
6.8. Unconditional Rights of Owners to Receive
Distributions....................................... 71
6.9. Rights and Remedies Cumulative...................... 72
6.10. Delay or Omission Not Waiver........................ 72
6.11. Control by Owners................................... 72
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES................ 73
7.1. Collection of Money................................. 73
7.2. Establishment of Accounts........................... 73
7.3. The Certificate Insurance Policy.................... 73
7.4. Reserved............................................ 76
7.5. Flow of Funds....................................... 76
7.6. Investment of Accounts.............................. 80
7.7. Eligible Investments................................ 81
7.8. Reports by Trustee.................................. 82
7.9. Additional Reports by Trustee....................... 86
7.10. Supplemental Interest Payment Account,
Supplement Interest Payments and Class RS
Distribution Account................................ 86
ARTICLE VIII SERVICING AND ADMINISTRATION OF MORTGAGE
LOANS............................................... 87
8.1. Master Servicer and Sub-Servicers................... 87
8.2. Collection of Certain Mortgage Loan
Payments............................................ 90
8.3. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers.......................... 91
8.4. Successor Sub-Servicers............................. 91
8.5. Liability of Master Servicer........................ 91
8.6. No Contractual Relationship Between
Sub-Servicer and Trustee or the Owners.............. 91
8.7. Assumption or Termination of
Sub-Servicing Agreement by Trustee.................. 92
8.8. Principal and Interest Account...................... 92
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Page
8.9. Delinquency Advances, Compensating
Interest and Servicing Advances..................... 94
8.10. Purchase of Mortgage Loans.......................... 95
8.11. Maintenance of Insurance............................ 95
8.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements............................. 97
8.13. Realization Upon Defaulted Mortgage
Loans............................................... 98
8.14. Trustee to Cooperate; Release of Files.............. 99
8.15. Servicing Compensation..............................100
8.16. Annual Statement as to Compliance...................100
8.17. Annual Independent Certified Public
Accountants' Reports................................101
8.18. Access to Certain Documentation and
Information Regarding the Mortgage Loans............101
8.19. Assignment of Agreement.............................101
8.20. Removal of Master Servicer; Resignation
of Master Servicer..................................102
8.21. Inspections by Certificate Insurer;
Errors and Omissions Insurance......................107
8.22. Merger, Conversion, Consolidation or
Succession to Business of Master
Servicer............................................108
8.23. Notices of Material Events..........................108
ARTICLE IX TERMINATION OF TRUST................................109
9.1. Termination of Trust................................109
9.2. Termination Upon Option of Master
Servicer............................................110
9.3. Termination Upon Loss of REMIC Status...............111
9.4. Disposition of Proceeds.............................112
9.5. Netting of Amounts..................................113
ARTICLE X THE TRUSTEE.........................................113
10.1. Certain Duties and Responsibilities.................113
10.2. Removal of Trustee for Cause........................115
10.3. Certain Rights of the Trustee.......................116
10.4. Not Responsible for Recitals or Issuance
of Certificates.....................................117
10.5. May Hold Certificates...............................118
10.6. Money Held in Trust.................................118
10.7. No Lien for Fees....................................118
10.8. Corporate Trustee Required; Eligibility.............118
10.9. Resignation and Removal; Appointment of
Successor...........................................119
10.10. Acceptance of Appointment by Successor
Trustee.............................................120
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Page
10.11. Merger, Conversion, Consolidation or
Succession to Business of the Trustee...............121
10.12. Reporting; Withholding..............................121
10.13. Liability of the Trustee............................122
10.14. Appointment of Co-Trustee or Separate
Trustee.............................................122
ARTICLE XI MISCELLANEOUS.......................................124
11.1. Compliance Certificates and Opinions................124
11.2. Form of Documents Delivered to the
Trustee.............................................125
11.3. Acts of Owners......................................125
11.4. Notices, etc. to Trustee............................126
11.5. Notices and Reports to Owners; Waiver of
Notices.............................................126
11.6. Rules by Trustee and Sponsor........................127
11.7. Successors and Assigns..............................127
11.8. Severability........................................127
11.9. Benefits of Agreement...............................128
11.10. Legal Holidays......................................128
11.11. Governing Law.......................................128
11.12. Counterparts........................................128
11.13. Usury...............................................128
11.14. Amendment...........................................129
11.15. REMIC Status; Taxes.................................130
11.16. Additional Limitation on Action and
Imposition of Tax...................................132
11.17. Appointment of Tax Matters Person...................132
11.18. The Certificate Insurer.............................133
11.19. Maintenance of Records..............................133
11.20. Notices.............................................133
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SCHEDULE I -- Schedules of Mortgage Loans
EXHIBIT A-1 -- Form of Class A-1 Certificate
EXHIBIT A-2 -- Form of Class A-2 Certificate
EXHIBIT A-3 -- Form of Class A-3 Certificates
EXHIBIT A-4 -- Form of Class A-4 Certificates
EXHIBIT A-5 -- Form of Class A-5 Certificates
EXHIBIT A-6 -- Form of Class A-6 Certificates
EXHIBIT B -- Contents of Mortgage Loan File
EXHIBIT C -- Form of Class RS Certificates
EXHIBIT D -- Form of Certificate Re: Mortgage Loans
Prepaid in full After the Cut-Off Date
EXHIBIT E -- Form of Trustee's Acknowledgement of
Receipt
EXHIBIT F -- Form of Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Form of Class RS Tax Matters Transfer
Certificate
EXHIBIT I -- [Reserved]
EXHIBIT J -- Form of Monthly Report
EXHIBIT K -- Form of Master Servicer's Trust Receipt
xi
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POOLING AND SERVICING AGREEMENT, relating to ADVANTA MORTGAGE LOAN TRUST
1996-2, dated as of May 1, 1996, by and among ADVANTA MORTGAGE CONDUIT SERVICES,
INC., a Delaware corporation, in its capacity as Sponsor of the Trust (the
"Sponsor"), ADVANTA MORTGAGE CORP. USA, a Delaware corporation, in its capacity
as master servicer (the "Master Servicer"), and BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., a national banking association, in its capacity as trustee
(the "Trustee").
WHEREAS, the Sponsor wishes to establish a trust and two subtrusts, and to
provide for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Master Servicer has agreed to service the Mortgage Loans,
which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when executed and
authenticated by the Trustee valid instruments, and to make this Agreement a
valid agreement, in accordance with their and its terms, have been done;
WHEREAS, Bankers Trust Company of California, N.A. is willing to serve in
the capacity of Trustee hereunder; and
WHEREAS, Financial Guaranty Insurance Company (the "Certificate Insurer")
is intended to be a third party beneficiary of this Agreement and is hereby
recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Sponsor, the Master Servicer and the Trustee hereby agree
as follows:
<PAGE>
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement, the following
terms shall have the meanings set forth below, unless the context clearly
indicates otherwise:
"Account": Any account established in accordance with Section 7.2 or 8.8
hereof each of which shall be established at a Designated Depository
Institution.
"Advanta Mortgage Files": For any Mortgage Loan identified on the related
Schedule of Mortgage Loans with an "A" Code, the items listed as (a), (b), (c),
(d) and (f) on Exhibit B hereto.
"Advanta Servicing Fee": With respect to any Mortgage Loan that is not an
Unaffiliated Originator Loan, an amount retained by the Servicer or by any
successor thereto as compensation for servicing and administration duties
relating to such Mortgage Loan pursuant to Section 8.15 hereof and equal to
0.50% per annum of the then outstanding Loan Balance of such Mortgage Loan as of
the opening of business on the first day of each calendar month payable on a
monthly basis; provided, however, that in the event that, as of any Payment
Date, (i) the Group I Weighted Average Pass-Through Rate applicable to such
Payment Date exceeds (ii) the product of (x) the weighted average Coupon Rate of
the Group I Mortgage Loans for the related Remittance Period and (y) a fraction,
the numerator of which is the Group I Certificate Principal Balance immediately
prior to such Payment Date and the denominator of which is the aggregate Loan
Balance of the Group I Mortgage Loans as of the beginning of the related
Remittance Period, then the aggregate Advanta Servicing Fee for the related
Remittance Period shall be reduced by an amount equal to the product of (a)
one-twelfth of such excess and (b) the aggregate Loan Balances of the Group I
Mortgage Loans as of the opening of business on the first day of such related
Remittance Period, but in no event less than an annualized rate of 0.40%; and
provided further that the foregoing provision shall not apply if an entity other
than Advanta Mortgage Corp. USA is acting as Master Servicer. In the event that
both the Group I Premium Amount and the Advanta Servicing Fee are being reduced
pursuant to the respective definitions thereof, the Group I Premium Amount shall
be reduced first.
"Affiliated Originators": Advanta Mortgage Corp. USA, a Delaware
corporation, Advanta Mortgage Corp. Midatlantic, a Pennsylvania corporation,
Advanta Mortgage Corp. Midatlantic II, a Pennsylvania corporation, Advanta
Mortgage Corp. Midwest, a Pennsylvania corporation, Advanta
2
<PAGE>
Mortgage Corp. of New Jersey, a New Jersey corporation, Advanta Mortgage Corp.
Northeast, a New York corporation, Colonial National Bank USA, a national
banking association, Advanta Finance Corp., a Nevada corporation, and Advanta
Mortgage Corp. of New Jersey II, a New Jersey corporation.
"Agreement": This Pooling and Servicing Agreement, as it may be amended
from time to time, and including the Exhibits hereto.
"AMHC": Advanta Mortgage Holding Company, a Delaware corporation and the
corporate parent of Advanta Mortgage Corp. USA, and the indirect corporate
parent of Advanta Mortgage Conduit Services, Inc.
"Appraised Value": The appraised value of any Property based upon the
appraisal or other valuation made at the time of the origination of the related
Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase money
mortgage, the sales price of the Property at such time of origination, if such
sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person who is
authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Trustee, the
Sponsor and the Master Servicer, initially including those individuals whose
names appear on the lists of Authorized Officers delivered on the Startup Day.
"Available Funds": With respect to Group I, the Group I Available Funds and
with respect to the Class A-6 Certificates, the Group II Available Funds.
"Balloon Loan": Any Mortgage Loan which has an amortization schedule which
extends beyond its maturity date, resulting in a relatively large unamortized
principal balance due in a single payment at maturity.
"Bulk Acquisition Loan": Any Mortgage Loan purchased by the Sponsor or by
an Affiliated Originator from another, unaffiliated Originator as part of a bulk
portfolio acquisition; such Mortgage Loans shall be identified on the related
Schedule of Mortgage Loans with a "B" code.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the State of New York, the State of
California or in the city in which the principal corporate trust office of the
Trustee is located, are authorized or obligated by law or executive order to be
closed.
3
<PAGE>
"Certificate": Any one of the Class A Certificates, or the Class RS
Certificates, each representing the interests and the rights described in this
Agreement.
"Certificate Account": The Certificate Account established in accordance
with Section 7.2 hereof and maintained by the Trustee.
"Certificate Insurance Policy": The certificate guaranty insurance policy
dated May 29, 1996 issued by the Certificate Insurer to the Trustee for the
benefit of the Owners of the Class A Certificates.
"Certificate Insurer": Financial Guaranty Insurance Company or any
successor thereto, as issuer of the Certificate Insurance Policy.
"Certificate Insurer Default": Any period during which the Certificate
Insurer has failed (or continued to fail) to honor a proper claim made under the
Certificate Insurance Policy and as to which the Certificate Insurer has not
provided a reasonable explanation regarding the invalidity of such claim to the
Sponsor.
"Certificate Insurer Premium Rate": .11% per annum.
"Certificate Principal Balance": As to the Class A-1 Certificates, the
Class A-1 Certificate Principal Balance; as to the Class A-2 Certificates, the
Class A-2 Certificate Principal Balance; as to the Class A-3 Certificates, the
Class A-3 Certificate Principal Balance; as to the Class A-4 Certificates, the
Class A-4 Certificate Principal Balance; as to the Class A-5 Certificates, the
Class A-5 Certificate Principal Balance; and as to the Class A-6 Certificates,
the Class A-6 Certificate Principal Balance. As to any particular Class A
Certificate, the product of the Percentage Interest evidenced thereby and the
Certificate Principal Balance of all Class A Certificates of the same Class. The
Class RS Certificates do not have a "Certificate Principal Balance".
"Class": All of the Class A-1 Certificates, all of the Class A-2
Certificates, all of the Class A-3 Certificates, all of the Class A-4
Certificates, all of the Class A-5 Certificates, all of the Class A-6
Certificates, or all of the Class RS Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, or the Class A-6 Certificates.
"Class A-1 Certificate": Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form
4
<PAGE>
of Exhibit A-1 hereto. The Class A-1 Certificates shall be issued with an
initial aggregate Certificate Principal Balance equal to the Original
Certificate Principal Balance therefor.
"Class A-1 Certificate Principal Balance": As of any time of determination,
the Original Certificate Principal Balance of the Class A-1 Certificates less
any amounts actually distributed as part of the Class A-1 Distribution Amount
pursuant to Section 7.5 hereof made with respect to principal thereon on all
prior Payment Dates; provided, that, this amount is exclusive of Insured
Payments for the sole purpose of effecting the Certificate Insurer's subrogation
rights.
"Class A-1 Certificate Termination Date": The Payment Date on which the
Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Distribution Amount": With respect to the Class A-1 Certificates
for any Payment Date, the amount actually distributed to the Owners of the Class
A-1 Certificates on such Payment Date, which amount shall be the lesser of (x)
the Class A-1 Formula Distribution Amount for such Payment Date and (y) the
amount (including any applicable portion of any Group I Insured Payment)
available for distribution on account of the Class A-1 Certificates for such
Payment Date.
"Class A-1 Formula Distribution Amount": With respect to the Class A-1
Certificates for any Payment Date, the sum of (x) the Class A-1 Interest
Distribution Amount for such Payment Date and (y) the Class A-1 Principal
Distribution Amount for such Payment Date.
"Class A-1 Interest Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-1 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class A-1
Certificates on such immediately preceding Payment Date on account of the Class
A-1 Interest Distribution Amount and (ii) 30 days' interest on such amount at
the Class A-1 Pass-Through Rate.
"Class A-1 Interest Distribution Amount": With respect to the Class A-1
Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (based on a 360-day year
comprised of twelve 30 day months) on the Class A-1 Certificate
Principal Balance immediately prior to such Payment Date during the
related Interest
5
<PAGE>
Accrual Period at the Class A-1 Pass-Through Rate; and
(ii) the Class A-1 Interest Carry-Forward Amount.
"Class A-1 Pass-Through Rate": 6.74% per annum.
"Class A-1 Principal Distribution Amount": With respect to the Class A-1
Certificates for any Payment Date, the lesser of (x) the Group I Principal
Distribution Amount as of such Payment Date and (y) the Class A-1 Certificate
Principal Balance as of such Payment Date.
On the Class A-1 Certificate Termination Date, any excess of (I) the amount
described in clause (x) of the preceding paragraph over (II) the amount
described in clause (y) of the preceding paragraph shall be distributed with
respect to the Class A-2 Certificates, as elsewhere provided herein.
"Class A-2 Certificate": Any Certificate designated as a "Class A-2
Certificate" on the face thereof, in the form of Exhibit A-2 hereto. The Class
A-2 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-2 Certificate Principal Balance": As of any time of determination,
the Original Certificate Principal Balance of the Class A-2 Certificates less
any amounts actually distributed as part of the Class A-2 Distribution Amount
pursuant to Section 7.5 hereof made with respect to principal thereon on all
prior Payment Dates; provided, that, this amount is exclusive of Insured
Payments for the sole purpose of effecting the Certificate Insurer's subrogation
rights.
"Class A-2 Certificate Termination Date": The Payment Date on which the
Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Distribution Amount": With respect to the Class A-2 Certificates
for any Payment Date, the amount actually distributed to the Owners of the Class
A-2 Certificates on such Payment Date, which amount shall be the lesser of (x)
the Class A-2 Formula Distribution Amount for such Payment Date and (y) the
amount (including any applicable portion of any Group I Insured Payment)
available for distribution on account of the Class A-2 Certificates for such
Payment Date.
"Class A-2 Formula Distribution Amount": With respect to the Class A-2
Certificates for any Payment Date, the sum of (x) the Class A-2 Interest
Distribution Amount for
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such Payment Date and (y) the Class A-2 Principal Distribution Amount for such
Payment Date.
"Class A-2 Interest Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-2 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class A-2
Certificates on such immediately preceding Payment Date on account of the Class
A-2 Interest Distribution Amount and (ii) 30 days' interest on such amount at
the Class A-2 Pass-Through Rate.
"Class A-2 Interest Distribution Amount": With respect to the Class A-2
Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (based on a 360-day year
comprised of twelve 30-day months) on the Class A-2 Certificate
Principal Balance immediately prior to such Payment Date during the
related Interest Accrual Period at the Class A-2 Pass-Through Rate;
and
(ii) the Class A-2 Interest Carry-Forward Amount.
"Class A-2 Pass-Through Rate": 7.03% per annum.
"Class A-2 Principal Distribution Amount": With respect to the Class A-2
Certificates for any Payment Date prior to the Class A-1 Certificate Termination
Date, zero.
On the Class A-1 Certificate Termination Date, an amount equal to the
lesser of (A) any portion of the Group I Principal Distribution Amount not
applied on the Class A-1 Certificate Termination Date to reduce the Class A-1
Certificate Principal Balance to zero and (B) the Class A-2 Certificate
Principal Balance, shall be distributed with respect to the Class A-2
Certificates.
With respect to the Class A-2 Certificates for any Payment Date following
the Class A-1 Certificate Termination Date, the lesser of (x) the Group I
Principal Distribution Amount for such Payment Date and (y) the Class A-2
Certificate Principal Balance as of such Payment Date.
On the Class A-2 Certificate Termination Date, any excess of (I) the amount
described on clause (x) of the preceding paragraph over (II) the amount
described in clause (y) of the preceding paragraph shall be distributed with
respect to the Class A-3 Certificates as elsewhere provided herein.
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"Class A-3 Certificate": Any Certificate designated as a "Class A-3
Certificate" on the face thereof, in the form of Exhibit A-3 hereto. The Class
A-3 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-3 Certificate Principal Balance": As of any time of determination,
the Original Certificate Principal Balance of the Class A-3 Certificates less
any amounts actually distributed as part of the Class A-3 Distribution Amount
pursuant to Section 7.5 hereof made with respect to principal thereon on all
prior Payment Dates; provided, that, this amount is exclusive of Insured
Payments for the sole purpose of effecting the Certificate Insurer's subrogation
rights.
"Class A-3 Certificate Termination Date": The Payment Date on which the
Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Distribution Amount": With respect to the Class A-3 Certificates
for any Payment Date, the amount actually distributed to the Owners of the Class
A-3 Certificates on such Payment Date, which amount shall be the lesser of (x)
the Class A-3 Formula Distribution Amount for such Payment Date and (y) the
amount (including any applicable portion of any Group I Insured Payment)
available for distribution on account of the Class A-3 Certificates for such
Payment Date.
"Class A-3 Formula Distribution Amount": With respect to the Class A-3
Certificates for any Payment Date, the sum of (x) the Class A-3 Interest
Distribution Amount for such Payment Date and (y) the Class A-3 Principal
Distribution Amount for such Payment Date.
"Class A-3 Interest Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-3 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class A-3
Certificates on such immediately preceding Payment Date on account of the Class
A-3 Interest Distribution Amount and (ii) 30 days' interest on such amount at
the Class A-3 Pass-Through Rate.
"Class A-3 Interest Distribution Amount": With respect to the Class A-3
Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (based on a 360-day year
comprised of twelve 30-day months) on the Class A-3 Certificate
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Principal Balance immediately prior to such Payment Date during the
related Interest Accrual Period at the Class A-3 Pass-Through Rate;
and
(ii) the Class A-3 Interest Carry-Forward Amount.
"Class A-3 Pass-Through Rate": 7.44% per annum.
"Class A-3 Principal Distribution Amount": With respect to the Class A-3
Certificates for any Payment Date prior to the Class A-2 Certificate Termination
Date, zero.
On the Class A-2 Certificate Termination Date, an amount equal to the
lesser of (A) any portion of the Group I Principal Distribution Amount not
applied on the Class A-2 Certificate Termination Date to reduce the Class A-2
Certificate Principal Balance to zero and (B) the Class A-3 Certificate
Principal Balance, shall be distributed with respect to the Class A-3
Certificates.
With respect to the Class A-3 Certificates for any Payment Date following
the Class A-2 Certificate Termination Date, the lesser of (x) the Group I
Principal Distribution Amount for such Payment Date and (y) the Class A-3
Certificate Principal Balance as of such Payment Date.
On the Class A-3 Certificate Termination Date, any excess of (I) the amount
described on clause (x) of the preceding paragraph over (II) the amount
described in clause (y) of the preceding paragraph shall be distributed with
respect to the Class A-4 Certificates as elsewhere provided herein.
"Class A-4 Certificate": Any Certificate designated as a "Class A-4
Certificate" on the face thereof, in the form of Exhibit A-4 hereto. The Class
A-4 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-4 Certificate Principal Balance": As of any time of determination,
the Original Certificate Principal Balance of the Class A-4 Certificates less
any amounts actually distributed as part of the Class A-4 Distribution Amount
pursuant to Section 7.5 hereof made with respect to principal thereon on all
prior Payment Dates; provided, that, this amount is exclusive of Insured
Payments for the sole purpose of effecting the Certificate Insurer's subrogation
rights.
"Class A-4 Certificate Termination Date": The Payment Date on which the
Class A-4 Certificate Principal Balance is reduced to zero.
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<PAGE>
"Class A-4 Distribution Amount": With respect to the Class A-4 Certificates
for any Payment Date, the amount actually distributed to the Owners of the Class
A-4 Certificates on such Payment Date, which amount shall be the lesser of (x)
the Class A-4 Formula Distribution Amount for such Payment Date and (y) the
amount (including any applicable portion of any Group I Insured Payment)
available for distribution on account of the Class A-4 Certificates for such
Payment Date.
"Class A-4 Formula Distribution Amount": With respect to the Class A-4
Certificates for any Payment Date, the sum of (x) the Class A-4 Interest
Distribution Amount for such Payment Date and (y) the Class A-4 Principal
Distribution Amount for such Payment Date.
"Class A-4 Interest Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-4 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class A-4
Certificates on such immediately preceding Payment Date on account of the Class
A-4 Interest Distribution Amount and (ii) 30 days' interest on such amount at
the Class A-4 Pass-Through Rate.
"Class A-4 Interest Distribution Amount": With respect to the Class A-4
Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (based on a 360-day year
comprised of twelve 30-day months) on the Class A-4 Certificate
Principal Balance immediately prior to such Payment Date during the
related Interest Accrual Period at the Class A-4 Pass-Through Rate;
and
(ii) the Class A-4 Interest Carry-Forward Amount.
"Class A-4 Pass-Through Rate": 7.75% per annum.
"Class A-4 Principal Distribution Amount": With respect to the Class A-4
Certificates for any Payment Date prior to the Class A-3 Certificate Termination
Date, zero.
On the Class A-3 Certificate Termination Date, an amount equal to the
lesser of (A) any portion of the Group I Principal Distribution Amount not
applied on the Class A-3 Certificate Termination Date to reduce the Class A-3
Certificate Principal Balance to zero and (B) the Class A-4 Certificate
Principal Balance, shall be distributed with respect to the Class A-4
Certificates.
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With respect to the Class A-4 Certificates for any Payment Date following
the Class A-3 Certificate Termination Date, the lesser of (x) the Group I
Principal Distribution Amount as of such Payment Date and (y) the Class A-4
Certificate Principal Balance as of such Payment Date.
On the Class A-4 Certificate Termination Date, any excess of (I) the amount
described on clause (x) of the preceding paragraph over (II) the amount
described in clause (y) of the preceding paragraph shall be distributed with
respect to the Class A-5 Certificates as elsewhere provided herein.
"Class A-5 Certificate": Any Certificate designated as a "Class A-5
Certificate" on the face thereof, in the form of Exhibit A-5 hereto. The Class
A-5 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-5 Certificate Principal Balance": As of any time of determination,
the Original Certificate Principal Balance of the Class A-5 Certificates less
any amounts actually distributed as part of the Class A-5 Distribution Amount
pursuant to Section 7.5 hereof made with respect to principal thereon on all
prior Payment Dates; provided, that, this amount is exclusive of Insured
Payments for the sole purpose of effecting the Certificate Insurer's subrogation
rights.
"Class A-5 Certificate Termination Date": The Payment Date on which the
Class A-5 Certificate Principal Balance is reduced to zero.
"Class A-5 Distribution Amount": With respect to the Class A-5 Certificates
for any Payment Date, the amount actually distributed to the Owners of the Class
A-5 Certificates on such Payment Date, which amount shall be the lesser of (x)
the Class A-5 Formula Distribution Amount for such Payment Date and (y) the
amount (including any applicable portion of any Group I Insured Payment)
available for distribution on account of the Class A-5 Certificates for such
Payment Date.
"Class A-5 Formula Distribution Amount": With respect to the Class A-5
Certificates for any Payment Date, the sum of (x) the Class A-5 Interest
Distribution Amount for such Payment Date and (y) the Class A-5 Principal
Distribution Amount for such Payment Date.
"Class A-5 Interest Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-5 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the
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<PAGE>
amount of the actual distribution made to the Owners of the Class A-5
Certificates on such immediately preceding Payment Date on account of the Class
A-5 Interest Distribution Amount and (ii) 30 days' interest on such amount at
the Class A-5 Pass-Through Rate.
"Class A-5 Interest Distribution Amount": With respect to the Class A-5
Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (based on a 360-day year
comprised of twelve 30-day months) on the Class A-5 Certificate
Principal Balance immediately prior to such Payment Date during the
related Interest Accrual Period at the Class A-5 Pass-Through Rate;
and
(ii) the Class A-5 Interest Carry-Forward Amount.
"Class A-5 Pass-Through Rate": 8.08% per annum, subject to the Group I Net
Funds Cap Rate.
"Class A-5 Principal Distribution Amount": With respect to the Class A-5
Certificates for any Payment Date prior to the Class A-4 Certificate Termination
Date, zero.
On the Class A-4 Certificate Termination Date, an amount equal to the
lesser of (A) any portion of the Group I Principal Distribution Amount not
applied on the Class A-4 Certificate Termination Date to reduce the Class A-4
Certificate Principal Balance to zero and (B) the Class A-5 Certificate
Principal Balance, shall be distributed with respect to the Class A-5
Certificates.
With respect to the Class A-5 Certificates for any Payment Date following
the Class A-4 Certificate Termination Date, the lesser of (x) the Group I
Principal Distribution Amount for such Payment Date and (y) the Class A-5
Certificate Principal Balance as of such Payment Date.
On the Class A-5 Certificate Termination Date, any excess of (I) the amount
described in clause (x) of the preceding paragraph over (II) the amount
described in clause (y) of the preceding paragraph shall be distributed with
respect to the Class A-6 Certificates as elsewhere provided herein.
"Class A-6 Available Funds Pass-Through Rate": With respect to any Payment
Date, an amount, expressed as a per annum rate, equal to:
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(a) (i) the aggregate amount of interest due on all of the Mortgage Loans
in Group II for the related Remittance Period plus the Subordination Reduction
Amount for Group II, if any, for such Payment Date, minus,
(ii) the aggregate of the Servicing Fee, the Trustee's Fee and the premium
due to the Certificate Insurer, in each case relating to Group II, on such
Payment Date minus,
(iii) commencing on the 37th Payment Date following the Closing Date, an
amount equal to 0.50% per annum times the aggregate Principal Balances of the
Mortgage Loans in Group II as of the beginning of such related Remittance Date,
divided by
(b) the Class A-6 Certificate Principal Balance immediately prior to such
Payment Date, calculated on the basis of a 360 day year and the actual number of
days elapsed.
"Class A-6 Certificate": Any Certificate designated as a "Class A-6
Certificate" on the face thereof, in the form of Exhibit A-6 hereto. The Class
A-6 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-6 Certificate Principal Balance": As of any time of determination,
the Original Certificate Principal Balance of the Class A-6 Certificates less
amounts actually distributed as part of the Class A-6 Distribution Amount
pursuant to Section 7.5 hereof made with respect to principal thereon on all
prior Payment Dates; provided, that, this amount is exclusive of Insured
Payments for the sole purpose of effecting the Certificate Insurer's subrogation
rights.
"Class A-6 Distribution Account": The Class A-6 Distribution Account
established in accordance with Section 7.2 hereof and maintained by the Trustee.
"Class A-6 Distribution Amount": With respect to the Class A-6 Certificates
for any Payment Date, the amount actually distributed to the Owners of the Class
A-6 Certificates on such Payment Date, which amount shall be the lesser of (x)
the Class A-6 Formula Distribution Amount for such Payment Date and (y) the
amount (including any applicable portion of any Class A-6 Insured Payment)
available for distribution on account of the Class A-6 Certificates for such
Payment Date.
"Class A-6 Formula Distribution Amount": With respect to the Class A-6
Certificates for any Payment Date, the sum of (x) the Class A-6 Interest
Distribution Amount for such Payment Date and (y) the Class A-6 Principal
Distribution Amount for such Payment Date.
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"Class A-6 Formula Interest Shortfall": As defined in Section 7.10(b)
hereof.
"Class A-6 Formula Pass-Through Rate": As of any Payment Date, the rate
described in clause (i) of the definition of "Class A-6 Pass-Through Rate".
"Class A-6 Full Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-6 Full Interest Distribution Amount for such Payment Date
and (y) the Class A-6 Principal Distribution Amount for such Payment Date.
"Class A-6 Full Interest Distribution Amount": With respect to any Payment
Date, the Class A-6 Interest Distribution Amount for such Payment Date
calculated using the Class A-6 Formula Pass-Through Rate for such Payment Date
rather than the Class A-6 Pass-Through Rate for such Payment Date plus, if the
full amount of the Class A-6 Formula Interest Shortfall, if any, was not funded
on any prior Payment Date and remains unpaid on such Payment Date, such amount,
together with interest thereon (from the Payment Date on which such Class A-6
Formula Interest Shortfall was calculated) at the Class A-6 Formula Pass-Through
Rate for such Payment Date.
"Class A-6 Insured Distribution Amount": As to the Class A-6 Certificates
for any Payment Date, the sum of (x) the Class A-6 Interest Distribution Amount
for such Payment Date and (y) the Group II Subordination Deficit as of such
Payment Date.
"Class A-6 Insured Payment": An amount equal to the sum of (i) as of each
Payment Date, the Group II Deficiency Amount and (ii) any unpaid Class A-6
Preference Amount.
"Class A-6 Interest Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-6 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class A-6
Certificates on such immediately preceding Payment Date on account of the Class
A-6 Interest Distribution Amount and (ii) 30 days' interest on such amount at
the Class A-6 Formula Pass-Through Rate applicable to such Payment Date.
"Class A-6 Interest Distribution Amount": With respect to the Class A-6
Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (for the actual number of
days elapsed assuming a 360-day year) on the Class A-6 Certificate
Principal Balance immediately prior to such
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<PAGE>
Payment Date during the related Interest Accrual Period at the Class
A-6 Pass-Through Rate applicable to such Interest Accrual Period; and
(ii) the Class A-6 Interest Carry-Forward Amount.
"Class A-6 Pass-Through Rate": As of any Payment Date, the per annum rate
equal to the lesser of (i)(a) with respect to any Payment Date which occurs on
or prior to the Step-up Payment Date, the London interbank offering rate for
one-month United States dollar deposits ("LIBOR") plus 0.34% per annum, or (b)
in the case of any Payment Date after the Step-up Payment Date, LIBOR plus 0.68%
per annum and (ii) the Class A-6 Available Funds Pass-Through Rate for such
Payment Date.
"Class A-6 Preference Amount": As defined in the Certificate Insurance
Policy.
"Class A-6 Principal Distribution Amount": With respect to the Class A-6
Certificates for any Payment Date, an amount equal to the lesser of (x) the
Group II Principal Distribution Amount as of such Payment Date and (y) the Class
A-6 Certificate Principal Balance as of such Payment Date.
"Class A-6 Reimbursement Amount": As of any Payment Date, the sum of (x)(i)
all Class A-6 Insured Payments previously received by the Trustee not previously
repaid to the Certificate Insurer pursuant to Sections 7.5(c)(iv)(C) and
7.5(c)(iv)(D) hereof plus (ii) interest accrued on each such Class A-6 Insured
Payment not previously repaid calculated from the date the Trustee received the
related Class A-6 Insured Payment at the Class A-6 Pass-Through Rate applicable
to such date and (y)(i) any amounts then due and owing to the Certificate
Insurer relating to the Class A-6 Certificates under the Insurance Agreement
plus (ii) interest on such amounts at the Late Payment Rate. The Certificate
Insurer shall notify the Trustee and the Sponsor of the amount of any Class A-6
Reimbursement Amount.
"Class R Distribution Account": The Class R Distribution Account
established in accordance with Section 7.2 hereof and maintained by the Trustee.
"Class RS Certificate": Any of those Certificates representing the right to
receive excess amounts in the Supplemental Interest Payment Account, and
designated as the "Class RS Certificate" on the face thereof, in the form of
Exhibit C hereto.
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"Class RS Distribution Account": The Class RS Distribution Account
established in accordance with Section 7.10(a) hereof and maintained by the
Trustee.
"Clean-Up Call Date": The first Remittance Date following the date on which
the aggregate Loan Balances of all Mortgage Loans has declined to 10% or less of
the aggregate principal balance of the Mortgage Loans as of the Closing Date.
"Code": The Internal Revenue Code of 1986, as amended and any successor
statute.
"Combined Loan-to-Value Ratio": With respect to any First Mortgage Loan,
the percentage equal to the Original Principal Amount of the related Note
divided by the Appraised Value of the related Property and with respect to any
Second Mortgage Loan or Third Mortgage Loan, the percentage equal to (a) the sum
of (i) the remaining principal balance, as of origination of the Second Mortgage
Loan or Third Mortgage Loan, as appropriate, of the Senior Lien note(s) relating
to such Second Mortgage Loan or Third Mortgage Loan, as appropriate, and (ii)
the Original Principal Amount of the Note relating to such Second Mortgage Loan
or Third Mortgage Loan, as appropriate, divided by (b) the Appraised Value.
"Compensating Interest": As defined in Section 8.9(b) hereof.
"Conduit Acquisition Trust": The trust described in the Pooling and
Servicing Agreement dated as of February 15, 1995 among the Sponsor, Bankers
Trust Company of California, N.A., as trustee, and Advanta Mortgage Corp. USA,
as the master servicer.
"Conduit Mortgage Files": For any Mortgage Loan identified on the related
Schedule of Mortgage Loans with a "B" or a "C" Code, the items listed on Exhibit
B hereto.
"Coupon Rate": The rate of interest borne by each Note.
"Cut-Off Date": The date as of which Mortgage Loans are transferred and
assigned to the Trust, the opening of business May 1, 1996.
"Date-of-Payment Loan": Any Mortgage Loan as to which, pursuant to the Note
relating thereto, interest is computed and charged to the Mortgagor at the
Coupon Rate on the outstanding principal balance of such Note based on the
number of days elapsed between receipt of the Mortgagor's last payment through
receipt of the Mortgagor's most current payment.
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<PAGE>
"Delinquency Advance": As defined in Section 8.9(a) hereof.
"Delinquent": A Mortgage Loan is "delinquent" if any payment due thereon is
not made by the close of business on the day such payment is scheduled to be
due. A Mortgage Loan is "30 days delinquent" if such payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as Exhibit G
hereto and delivered by the Sponsor to the Trustee on the Startup Day pursuant
to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover Square, New York, New
York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to each Account, an
institution whose deposits are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, the long-term deposits of which shall be
rated (x) A or better by Standard & Poor's and (y) A2 or better by Moody's and
in one of the two highest short-term rating categories for S&P and the highest
short-term rating category for Moody's, unless otherwise approved in writing by
the Certificate Insurer and each of Moody's and Standard & Poor's, and which is
any of the following: (i) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (ii) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(iv) a principal subsidiary of a bank holding company, or (v) approved in
writing by the Certificate Insurer, Moody's and Standard & Poor's and, in each
case acting or designated by the Master Servicer as the depository institution
for the Principal and Interest Account; provided, however, that any such
institution or association shall have combined capital, surplus and undivided
profits of at least $100,000,000. Notwithstanding the foregoing, an Account may
be held by an institution otherwise meeting the preceding requirements except
that the only applicable rating requirement shall be that the unsecured and
uncollateralized debt obligations thereof shall be rated Baa3 or better by
Moody's if such institution has trust powers and the Principal and Interest
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<PAGE>
Account is held by such institution in its corporate trust department.
"Designated Residual Owner": Advanta Mortgage Corp. USA.
"Determination Date": As to each Payment Date, the third Business Day
preceding such Payment Date or such earlier day as shall be agreed by the
Certificate Insurer and Trustee.
"Direct Participant" or "DTC Participant" means any broker-dealer, bank or
other financial institution for which the Depository holds Class A Certificates
from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall have the
meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Document Delivery Requirements": The Sponsor's obligations to deliver
certain legal documents, to prepare and record certain Mortgage assignments or
to deliver certain opinions relating to Mortgage assignments, in each case with
respect to the Mortgage Loans and as set forth in Section 3.5 hereof.
"Eligible Investments": Those investments so designated pursuant to Section
7.7 hereof.
"Excess Spread Rate": With respect to any Group II Mortgage Loan and for
any Payment Date, the excess, if any, of (a) the Coupon Rate as of the beginning
of the related Remittance Period for such Mortgage Loan minus the sum of (i) the
rate at which the Servicing Fee for such Group II Mortgage Loan is calculated
and (ii) the rate at which the Trustee's Fees are calculated over (b) the Group
II Adjusted Pass-Through Rate for such Payment Date.
"Excess Subordinated Amount": With respect to any Mortgage Loan Group and
Payment Date, the excess, if any, of (x) the Subordinated Amount that would
apply to the related Mortgage Loan Group on such Payment Date after taking into
account the payment of the related Group Principal Distribution Amount on such
Payment Date (except for any distributions of related Subordination Reduction
Amounts on such Payment Date) over (y) the related Specified Subordinated Amount
for such Payment Date.
"Event of Default": Any event described in clauses (a) or (b) of Section
8.20 hereof.
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<PAGE>
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"Freddie Mac": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Trustee pursuant to Section 3.5
hereof pertaining to a particular Mortgage Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
"Final Determination": As defined in Section 9.3(a) hereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a first priority
mortgage lien with respect to any Property.
"FNMA": The Federal National Mortgage Association, a federally-chartered
and privately-owned corporation existing under the Federal National Mortgage
Association Charter Act, as amended, or any successor thereof.
"Gross Margin": With respect to each Mortgage Loan with an adjustable rate,
the fixed percentage amount set forth in the related Mortgage Note which amount
is added to the Index in accordance with the terms of the related Mortgage Note
to determine, on each Interest Rate Adjustment Date, the Coupon Rate for such
Mortgage Loan, subject to any maximum.
"Group I": The pool of Mortgage Loans identified in the related Schedule of
Mortgage Loans as having been assigned to Group I, including any Qualified
Replacement Mortgages delivered in replacement thereof.
"Group I Amortized Subordinated Amount Requirement": As of any date of
determination, the product of (x) 5.80% and (y) the aggregate Loan Balances of
all Mortgage Loans in Group I as of the close of business on the last day of the
Remittance Period immediately preceding such date.
"Group I Available Funds": As defined in Section 7.3(a) hereof.
"Group I Certificate Principal Balance": With respect to any Payment Date,
the sum of (i) the Class A-1 Certificate Principal Balance as of such Payment
Date, (ii) the Class A-2 Certificate Principal Balance as of such Payment Date,
(iii) the Class A-3 Certificate Principal Balance as of such Payment Date, (iv)
the Class A-4 Certificate Principal Balance as of such Payment Date and
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<PAGE>
(v) the Class A-5 Certificate Principal Balance as of such Payment Date.
"Group I Certificates": Together, the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates and the
Class A-5 Certificates.
"Group I Deficiency Amount": As defined in Section 7.3(b)(i) hereof.
"Group I Formula Distribution Amount": With respect to the Group I
Certificates for any Payment Date, the sum of (i) the Class A-1 Formula
Distribution Amount for such Payment Date, (ii) the Class A-2 Formula
Distribution Amount for such Payment Date, (iii) the Class A-3 Formula
Distribution Amount for such Payment Date, (iv) the Class A-4 Formula
Distribution Amount for such Payment Date and (v) the Class A-5 Formula
Distribution Amount for such Payment Date.
"Group I Initial Specified Subordinated Amount": $6,815,000.
"Group I Insured Distribution Amount": As to the Group I Certificates and
any Payment Date, the sum of (x) the Group I Interest Distribution Amount for
such Payment Date and (y) the Group I Subordination Deficit, if any, as of such
Payment Date.
"Group I Insured Payment": An amount equal to the sum of (i) as of each
Payment Date, the Group I Deficiency Amount and (ii) any unpaid Group I
Preference Amount.
"Group I Interest Distribution Amount": As of any Payment Date the sum of
(i) the Class A-1 Interest Distribution Amount for such Payment Date, (ii) the
Class A-2 Interest Distribution Amount for such Payment Date, (iii) the Class
A-3 Interest Distribution Amount for such Payment Date, (iv) the Class A-4
Interest Distribution Amount for such Payment Date and (v) the Class A-5
Interest Distribution Amount for such Payment Date.
"Group I Interest Remittance Amount": As of any Remittance Date, the sum,
without duplication, of (i) all interest collected by the Master Servicer during
the related Remittance Period with respect to the Mortgage Loans in Group I,
(ii) all Delinquency Advances made by the Master Servicer on such Remittance
Date with respect to Group I and (iii) all Compensating Interest paid by the
Master Servicer on such Remittance Date with respect to Group I, net of amounts
allowed to be retained pursuant to Section 8.8(c).
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"Group I Monthly Remittance Amount": As of any Remittance Date, the sum of
(i) the Group I Interest Remittance Amount for such Remittance Date and (ii) the
Group I Principal Remittance Amount for such Remittance Date.
"Group I Net Funds Cap Rate": As of any Payment Date, a per annum rate,
expressed as a percentage, equal to the product of (x) 100 and (y) a fraction,
the numerator of which is an amount equal to (i) the sum of (A) a full month's
scheduled interest due on all of the Group I Mortgage Loans during the
immediately preceding Remittance Period and (B) the amount of any Group I
Subordination Reduction Amount for such Payment Date minus (ii) the sum of (A)
the sum of the Class A-1 Interest Distribution Amount, the Class A-2 Interest
Distribution Amount, the Class A-3 Interest Distribution Amount and the Class
A-4 Interest Distribution Amount and in each case as of such Payment Date, (B)
the product of (1) one-twelfth of the rate at when the Servicing Fee applicable
to Group I is then calculated and (2) the aggregate Loan Balances of the Group I
Mortgage Loans as of the beginning of the immediately preceding Remittance
Period, (C) the Group I Premium Amount, and (D) Trustee's Fees and the
denominator of which is one-twelfth of the Class A-5 Certificate Principal
Balance immediately prior to such Payment Date.
"Group I Preference Amount": As defined in the Certificate Insurance
Policy.
"Group I Premium Amount": As to any Payment Date, the product of (x)
one-twelfth of the Premium Percentage and (y) the Group I Certificate Principal
Balance on such Payment Date (after taking into account any distributions of the
Group I Principal Distribution Amount to be made on such Payment Date);
provided, however, that in the event that, as of any Payment Date, (i) the sum
of (x) the Group I Weighted Average Pass-Through Rate applicable to such Payment
Date and (y) the Premium Percentage exceeds (ii) the product of (a) the weighted
average Coupon Rate of the Group I Mortgage Loans as of the beginning of the
related Remittance Period less 0.50% and (b) a fraction, the numerator of which
is the Group I Certificate Principal Balance immediately prior to such Payment
Date and the denominator of which is the aggregate Loan Balance of the Group I
Mortgage Loans as of the beginning of the related Remittance Period, then the
Group I Premium Amount for such Payment Date shall be reduced by an amount equal
to the lesser of (x) the product of (a) one-twelfth of such excess and (b) the
Group I Certificate Principal Balance as of such Payment Date (after taking into
account any distributions of principal on such Payment Date) and (y) the product
of (a) one-twelfth of the Premium Percentage and (b) the Group I Certificate
Principal Balance as of such Payment Date (after taking into account any
distributions of principal on such Payment Date).
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"Group I Principal Carry-Forward Amount": With respect to any Payment Date,
the amount, if any, by which (x) the Group I Subordination Deficit, if any, as
of the immediately preceding Payment Date exceeded (y) the amount of the actual
distribution made to the Owners of the Group I Certificates on such immediately
preceding Payment Date on account of the Group I Principal Distribution Amount.
"Group I Principal Distribution Amount": With respect to the Group I
Certificates for any Payment Date, the lesser of:
(i) the excess of (a) the sum, as of such Payment Date, of (x) the Group I
Total Available Funds and (y) any Group I Insured Payment over (b) the
Group I Interest Distribution Amount (calculated, for this purpose
only, using 8.08% as the Class A-5 Pass-Through Rate); and
(ii) the sum, without duplication, of:
(a) the Group I Principal Carry-Forward Amount,
(b) the principal actually collected by the Master Servicer with respect to
the Mortgage Loans in Group I during the related Remittance Period,
(c) the Loan Balance of each Mortgage Loan in Group I that either was
repurchased by an Originator or by the Sponsor or purchased by the Master
Servicer on the related Remittance Date, to the extent such Loan Balance is
actually received by the Trustee,
(d) any Substitution Amounts delivered by the Sponsor on the related
Remittance Date in connection with a substitution of a Mortgage Loan in Group I,
to the extent such Substitution Amounts are actually received by the Trustee,
(e) all Net Liquidation Proceeds actually collected by the Master Servicer
with respect to the Mortgage Loans in Group I during the related Remittance
Period (to the extent such Net Liquidation Proceeds related to principal),
(f) the amount of any Group I Subordination Deficit for such Payment Date,
(g) the proceeds received by the Trustee of any termination of Group I (to
the extent such proceeds related to principal),
(h) the amount of any Subordination Increase Amount with respect to Group I
for such Payment Date, to the extent of any Net Monthly Excess Cashflow
available for such purpose;
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minus
(i) the amount of any Subordination Reduction Amount with respect to Group
I for such Payment Date.
"Group I Principal Remittance Amount": As of any Remittance Date, the sum,
without duplication, of (i) the principal actually collected by the Master
Servicer with respect to Mortgage Loans in Group I during the related Remittance
Period, (ii) the Loan Balance of each such Mortgage Loan in Group I that either
was repurchased by an Originator or by the Sponsor or purchased by the Master
Servicer on such Remittance Date, to the extent such Loan Balance was actually
deposited in the Principal and Interest Account, (iii) any Substitution Amounts
delivered by the Sponsor in connection with a substitution of a Mortgage Loan in
Group I, to the extent such Substitution Amounts were actually deposited in the
Principal and Interest Account on such Remittance Date, and (iv) all Net
Liquidation Proceeds actually collected by the Master Servicer with respect to
such Mortgage Loans in Group I during the related Remittance Period (to the
extent such Liquidation Proceeds related to principal) net of amounts allowed to
be retained pursuant to Section 8.8(c).
"Group I Projected Net Monthly Excess Cashflow": As of any date of
calculation, five times Net Monthly Excess Cashflow relating to Group I, as
calculated pursuant to Section 7.5(c)(iv) hereof on the Payment Date immediately
preceding such date of calculation.
"Group I Reimbursement Amount": As of any Payment Date, the sum of (x)(i)
all Group I Insured Payments previously received by the Trustee and all Group I
Preference Amounts previously paid by the Certificate Insurer and in each case
not previously repaid to the Certificate Insurer pursuant to Section
7.5(c)(iv)(C) or Section 7.5(c)(iv)(D) hereof plus (ii) interest accrued on each
such Group I Insured Payment not previously repaid calculated at the Group I
Weighted Average Pass-Through Rate from the date the Trustee received the
related Group I Insured Payment and (y)(i) any amounts then due and owing to the
Certificate Insurer relating to Group I under the Insurance Agreement plus (ii)
interest on such amounts at the Late Payment Rate. The Certificate Insurer shall
notify the Trustee and the Sponsor of the amount of any Group I Reimbursement
Amount.
"Group I Specified Subordinated Amount": means:
(a) for any Payment Date occurring during the period commencing on the
Startup Day and ending on the later to occur of (x) the date upon which
principal in the amount of $117,500,000 (one-half of the aggregate Loan
Balance of the Group I Mortgage Loans as of the Cut-Off Date) has
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been received in respect of the Mortgage Loans in Group I and (y) the
thirtieth Payment Date following the Startup Day, the greater of the Group
I Initial Specified Subordinated Amount and the excess of (i) one-half of
the aggregate Loan Balances of all Mortgage Loans in Group I which are 90
or more days Delinquent (including REO Properties) over (ii) the Group I
Projected Net Monthly Excess Cash Flow as of the immediately preceding
Payment Date; and
(b) for any Payment Date occurring after the end of the period in
clause (a) above, the greatest of (i) the lesser of (A) the Group I Initial
Specified Subordinated Amount and (B) the Group I Amortized Subordinated
Amount Requirement, (ii) the excess of (A) one-half of the aggregate Loan
Balances of all Mortgage Loans in Group I which are 90 or more days
Delinquent (including REO Properties) over (B) the Group I Projected Net
Monthly Excess Cashflow as of such Payment Date, (iii) an amount equal to
$1,175,000 (0.50% of the aggregate Loan Balance of the Group I Mortgage
Loans as of the Cut-Off Date) and (iv) three (3) times the then outstanding
Loan Balance of the Mortgage Loan in Group I with the largest outstanding
Loan Balance.
"Group I Subordinated Amount": As of any Payment Date, the excess, if any,
of (x) the aggregate Loan Balances of the Mortgage Loans in Group I as of the
close of business on the last day of the related Remittance Period over (y) the
Group I Certificate Principal Balance as of such Payment Date (after taking into
account the payment of the Group I Principal Distribution Amount on such Payment
Date except for any portion thereof related to a Group I Insured Payment).
"Group I Subordination Deficit": With respect to Mortgage Loan Group I as
of any Payment Date, the amount, if any, by which (x) the aggregate Group I
Certificate Principal Balance, after taking into account the payment of the
Group I Principal Distribution Amount (calculated for this purpose only without
regard to clause (ii)(f) thereof) on such Payment Date, exceeds (y) the
aggregate Loan Balances of the Mortgage Loans in Mortgage Loan Group I as of the
close of business on the last day of the prior Remittance Period.
"Group I Total Available Funds": As defined in Section 7.3(a) hereof.
"Group I Total Monthly Excess Spread": With respect to Mortgage Loan Group
I as of any Payment Date, the excess of (i) the interest which is collected on
the Mortgage Loans in Mortgage Loan Group I during the prior Remittance Period,
less the related Servicing Fees, less the Trustee's Fees, plus any Delinquency
Advances and Compensating Interest paid by the
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Master Servicer with respect to Mortgage Loan Group I with respect to such
Remittance Period over (ii) the sum of (x) the interest due on the Group I
Certificates on such Payment Date and (y) the Group I Premium Amount for such
Payment Date.
"Group I Weighted Average Net Loan Rate": As of any Payment Date, the
weighted average of the Coupon Rates (minus (i) the Servicing Fee, (ii) the
annual rate at which the Group I Premium Amount applicable to such Payment Date
has been calculated and (iii) the Trustee's Fees applicable to the Group I
Mortgage Loans during the immediately preceding Remittance Period, expressed as
an annual percentage rate) (weighted by the related Loan Balances) of the Group
I Mortgage Loans, calculated as of the first day of the immediately preceding
Remittance Period.
"Group I Weighted Average Pass-Through Rate": As to the Group I
Certificates and any Payment Date, the weighted average of the Class A-1
Pass-Through Rate, the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through
Rate, the Class A-4 Pass-Through Rate and the Class A-5 Pass-Through Rate as of
such Payment Date, and prior to taking into account any distributions to be made
on such Payment Date.
"Group II": The pool of Mortgage Loans identified in the related Schedule
of Mortgage Loans as having been assigned to Group II, including any Qualified
Replacement Mortgages delivered in replacement thereof.
"Group II Adjusted Pass-Through Rate": With respect to any Payment Date,
the product of (x) the sum of (i) the Class A-6 Pass-Through Rate immediately
prior to such Payment Date, and (ii) the Certificate Insurer Premium Rate and
(y) a fraction, the numerator of which is the Class A-6 Certificate Principal
Balance immediately prior to such Payment Date and the denominator of which is
the aggregate Loan Balance of all Group II Mortgage Loans as of the beginning of
the related Remittance Period.
"Group II Amortized Subordinated Amount Requirement": As of any date of
determination, the product of (x) 8.00% or, if a Group II Trigger Event has
occurred with respect to such Payment Date, 11.10% and (y) the aggregate Loan
Balances of all Mortgage Loans in Group II as of the close of business on the
last day of the Remittance Period immediately preceding such date.
"Group II Available Funds": As defined in Section 7.3(a)(ii) hereof.
"Group II Deficiency Amount": As defined in Section 7.3(b)(ii).
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"Group II Initial Specified Subordinated Amount": With respect to Group II,
an amount equal to $2,600,000 (or, if a Group II Trigger Event has occurred with
respect to such Payment Date, $3,607,500).
"Group II Interest Remittance Amount": As of any Remittance Date, the sum,
without duplication, of (i) all interest collected by the Master Servicer during
the related Remittance Period with respect to the Mortgage Loans in Group II,
(ii) all Delinquency Advances made by the Master Servicer on such Remittance
Date with respect to Group II and (iii) all Compensating Interest paid by the
Master Servicer on such Remittance Date with respect to Group II net of amounts
allowed to be retained in Section 8.8(c).
"Group II Monthly Remittance Amount": As of any Remittance Date, the sum of
(i) the Group II Interest Remittance Amount for such Remittance Date and (ii)
the Group II Principal Remittance Amount for such Remittance Date.
"Group II Preference Amount": As defined in the Certificate Insurance
Policy.
"Group II Premium Amount": As to any Payment Date, the product of (x)
one-twelfth of the Premium Percentage and (y) the Group II Certificate Principal
Balance on such Payment Date (after taking into account any distributions of the
Group II Principal Distribution Amount on such Payment Date).
"Group II Principal Carry-Forward Amount": With respect to any Payment
Date, the amount, if any, by which (x) the Group II Subordination Deficit, if
any, as of the immediately preceding Payment Date exceeded (y) the amount of the
actual distribution made to the Class A-6 Distribution Account on such
immediately preceding Payment Date on account of the Group II Principal
Distribution Amount.
"Group II Principal Distribution Amount": With respect to the Class A-6
Certificates for any Payment Date, the lesser of:
(i) the excess of (a) the sum, as of such Payment Date, of (x) the Group II
Total Available Funds and (y) any Class A-6 Insured Payment over (b) the
Group II Interest Distribution Amount; and
(ii) the sum, without duplication, of:
(a) the Group II Principal Carry-Forward Amount,
(b) the principal actually collected by the Master Servicer with respect to
the Mortgage Loans in Group II during the related Remittance Period,
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(c) the Loan Balance of each Mortgage Loan in Group II that either was
repurchased by an Originator or by the Sponsor or purchased by the Master
Servicer on the related Remittance Date, to the extent such Loan Balance is
actually received by the Trustee,
(d) any Substitution Amounts delivered by the Sponsor on the related
Remittance Date in connection with a substitution of a Mortgage Loan in Group
II, to the extent such Substitution Amounts are actually received by the
Trustee,
(e) all Net Liquidation Proceeds actually collected by the Master Servicer
with respect to the Mortgage Loans in Group II during the related Remittance
Period (to the extent such Net Liquidation Proceeds related to principal),
(f) the amount of any Group II Subordination Deficit for such Payment Date,
(g) the proceeds received by the Trustee of any termination of Group II (to
the extent such proceeds relate to principal),
(h) the amount of any Subordination Increase Amount with respect to Group
II for such Payment Date, to the extent of any Net Monthly Excess Cashflow
available for such purpose;
minus
(i) the amount of any Subordination Reduction Amount with respect to Group
II for such Payment Date.
"Group II Principal Remittance Amount": As of any Remittance Date, the sum,
without duplication, of (i) the principal actually collected by the Master
Servicer with respect to Mortgage Loans in Group II during the related
Remittance Period, (ii) the Loan Balance of each such Mortgage Loan in Group II
that either was repurchased by an Originator or by the Sponsor or purchased by
the Master Servicer on such Remittance Date, to the extent such Loan Balance was
actually deposited in the Principal and Interest Account, (iii) any Substitution
Amounts delivered by the Sponsor in connection with a substitution of a Mortgage
Loan in Group II, to the extent such Substitution Amounts were actually
deposited in the Principal and Interest Account on such Remittance Date, and
(iv) all Net Liquidation Proceeds actually collected by the Master Servicer with
respect to such Mortgage Loans in Group II during the related Remittance Period
(to the extent such Liquidation Proceeds related to principal) net of amounts
allowed to be retained pursuant to Section 8.8(c).
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"Group II Projected Net Monthly Excess Cashflow": As of any date of
calculation, five times Net Monthly Excess Cashflow relating to Group II, as
calculated pursuant to Section 7.5(c)(v) hereof on the Payment Date immediately
preceding such date of calculation.
"Group II Specified Subordinated Amount":
(a) for any Payment Date occurring during the period commencing on the
Startup Day and ending on the later to occur of (x) the date upon which
principal in the amount of $32,688,718 (one-half of the aggregate Loan
Balance of the Group II Mortgage Loans as of the Cut-Off Date) has been
received in respect of the Mortgage Loans in Group II and (y) the thirtieth
Payment Date following the Startup Day, the greater of the Group II Initial
Specified Subordinated Amount and the excess of (i) one-half of the
aggregate Loan Balances of all Mortgage Loans in Group II which are 90 or
more days Delinquent (including REO Properties) over (ii) the Group II
Projected Net Monthly Excess Cash Flow as of the immediately preceding
Payment Date; and
(b) for any Payment Date occurring after the end of the period in
clause (a) above, the greatest of (i) the lesser of (A) the Group II
Initial Specified Subordinated Amount and (B) the Group II Amortized
Subordinated Amount Requirement, (ii) the excess of (A) one-half of the
aggregate Loan Balances of all Mortgage Loans in Group II which are 90 or
more days Delinquent (including REO Properties) over (B) the Group II
Projected Net Monthly Excess Cashflow as of such Payment Date, (iii) an
amount equal to $326,887 (0.50% of the aggregate Loan Balance of the Group
II Mortgage Loans as of the Cut-Off Date) and (iv) three (3) times the then
outstanding Loan Balance of the Mortgage Loan in Group II with the largest
outstanding Loan Balance.
"Group II Subordinated Amount": As of any Payment Date, the excess, if any,
of (x) the aggregate Loan Balances of the Mortgage Loans in Group II as of the
close of business on the last day of the related Remittance Period over (y) the
Group II Certificate Principal Balance as of such Payment Date (after taking
into account the payment of the Group II Principal Distribution Amount on such
Payment Date except for any portion thereof related to a Group II Insured
Payment).
"Group II Subordination Deficit": With respect to Mortgage Loan Group II as
of any Payment Date, the amount, if any, by which (x) the Group II Certificate
Principal Balance, after taking into account the payment of the Group II
Principal Distribution Amount (calculated for this purpose only without regard
to clause (ii)(f) thereof) on such Payment
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Date, exceeds (y) the aggregate Loan Balances of the Mortgage Loans in Mortgage
Loan Group II as of the close of business on the last day of the prior
Remittance Period.
"Group II Total Available Funds": As defined in Section 7.3(a)(ii) hereof.
"Group II Total Monthly Excess Spread": With respect to Mortgage Loan Group
II as of any Payment Date, the difference between (i) the interest which is
collected on the Mortgage Loans in Mortgage Loan Group II during the prior
Remittance Period, less the related Servicing Fees, less the Trustee's Fees,
plus any Delinquency Advances and Compensating Interest paid by the Master
Servicer with respect to Mortgage Loan Group II and such Remittance Period and
(ii) the sum of (x) the interest due on the Class A-6 Certificates at the Class
A-6 Pass-Through Rate on such Payment Date, and (y) the Group II Premium Amount
for such Payment Date.
"Indemnification Agreement": The Indemnification Agreement dated as of May
13, 1996 among the Certificate Insurer, the Sponsor, and the Underwriters.
"Index": With respect to any adjustable rate Mortgage Note, the applicable
index set forth therein.
"Indirect Participant" shall mean any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
"Initial Premiums": The initial premiums payable by the Sponsor on behalf
of the Trust to the Certificate Insurer in consideration of the delivery to the
Trustee of the Certificate Insurance Policy.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as of
May 1, 1996 among the Sponsor, the Master Servicer and the Certificate Insurer,
as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage insurance policy
relating to a Mortgage Loan.
"Insured Payment": With respect to the Group I Certificates, the Group I
Insured Payment and with respect to the Class A-6 Certificates, the Class A-6
Insured Payment.
"Interest Accrual Period": With respect to the Class A-1 Certificates, the
Class A-2 Certificates, the Class A-3 Certificates, the Class A-4 Certificates
and the Class A-5 Certificates, and any Payment Date, the calendar month
immediately preceding such Payment Date. With respect to the Class A-6
Certificates, the period commencing on the prior
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Payment Date (or on May 29, 1996 with respect to the June 25, 1996 Payment Date)
and ending on the day immediately preceding such Payment Date.
"Interest Advance": As defined in Section 7.10(b) hereof.
"Interest Determination Date": With respect to any Interest Accrual Period
for the Class A-6 Certificates (other than the initial Interest Accrual Period),
the second London Business Day preceding the first day of such Interest Accrual
Period.
"Interest Rate Adjustment Date": The date on which an adjustment to the
Coupon Rate on a Mortgage Note becomes effective.
"Late Payment Rate": For any Payment Date, the rate of interest, as it is
publicly announced by Citibank, N.A. at its principal office in New York, New
York as its prime rate (any change in such prime rate of interest to be
effective on the date such change is announced by Citibank, N.A.) plus 2%. The
Late Payment Rate shall be computed on the basis of a year of 365 days
calculating the actual number of days elapsed. In no event shall the Late
Payment Date exceed the maximum rate permissible under any applicable law
limiting interest rates.
"LIBOR": With respect to any Interest Accrual Period for the Class A-6
Certificates, the rate determined by the Trustee on the related Interest
Determination Date on the basis of the offered rates of the Reference Banks for
one-month U.S. dollar deposits, as such rates appear on the Reuters Screen LIBO
Page, as of 11:00 a.m. (London time) on such Interest Determination Date. On
each Interest Determination Date, LIBOR for the related Interest Accrual Period
will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the related Interest
Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two Reference Banks
provide such offered quotations, LIBOR for the related Interest
Accrual Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest
Rate.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A Mortgage Loan
which is purchased from the Trust
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pursuant to Section 3.3, 3.4, 3.6(b) or 8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the Master Servicer
or any Sub-Servicer in connection with the liquidation of any defaulted Mortgage
Loan, such expenses, including, without limitation, legal fees and expenses, and
any unreimbursed Servicing Advances expended by the Master Servicer or any
Sub-Servicer pursuant to Section 8.9 with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan, any amounts
(including the proceeds of any Insurance Policy) recovered by the Master
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, the outstanding
principal balance thereof as of the Cut-Off Date, less any related Principal
Remittance Amounts relating to such Mortgage Loan included in previous related
Monthly Remittances that were transferred by the Master Servicer or any
Sub-Servicer to the Trustee for deposit in the related Certificate Account;
provided, however, (x) that the Loan Balance for any Mortgage Loan which has
become a Liquidated Loan shall be zero as of the first day of the Remittance
Period following the Remittance Period in which such Mortgage Loan becomes a
Liquidated Loan, and at all times thereafter and (y) the Loan Balance "as of the
Cut-Off Date" for any Mortgage Loan originated during the period from the
Cut-Off Date to the Closing Date shall be the Original Loan Balance thereof.
"Loan Purchase Price": With respect to any Mortgage Loan purchased from the
Trust on a Remittance Date pursuant to Section 3.3, 3.4, 3.6(b) or 8.10 hereof,
an amount equal to the Loan Balance of such Mortgage Loan as of the date of
purchase, plus one month's interest on the outstanding Loan Balance thereof as
of the beginning of the preceding Remittance Period computed at the Coupon Rate
less the Servicing Fee (expressed as an annual percentage rate), if any,
together with, without duplication, the aggregate amount of (i) all delinquent
interest, all Delinquency Advances and Servicing Advances theretofore made with
respect to such Mortgage Loan and not subsequently recovered from the related
Mortgage Loan, (ii) all Delinquency Advances which the Master Servicer or any
Sub-Servicer has theretofore failed to remit with respect to such Mortgage Loan
and (iii) any Reimbursement Amount relating to such Mortgage Loan.
"London Business Day": A day on which banks are open for dealing in foreign
currency, and exchange in London and New York City.
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"Master Servicer": Advanta Mortgage Corp. USA, a Delaware corporation, and
its permitted successors and assigns.
"Master Servicer's Trust Receipt": The Master Servicer's trust receipt in
the form set forth as Exhibit K hereto.
"Master Servicing Fee": As to any Payment Date the product of (x)
one-twelfth of 0.50% and (y) the aggregate Loan Balances of the Unaffiliated
Originator Loans as of the opening of business on the first day of the preceding
calendar month.
"Master Transfer Agreement": Any one of the Master Loan Transfer Agreements
among the Sponsor and/or the Conduit Acquisition Trust, the Trustee and one or
more Originators. For purposes of this Agreement the Master Loan Transfer
Agreements are (x) the Master Loan Transfer Agreement dated as of February 15,
1995 among the Sponsor, the Trustee and the Affiliated Originators named therein
and (y) any similar agreement with an Unaffiliated Originator designated as a
"Master Transfer Agreement" with the written consent of the Certificate Insurer,
together, in either case, with any related Conveyance Agreements (as defined
therein).
"Monthly Remittance Amount": With respect to Group I, the Group I Monthly
Remittance Amount, and with respect to Group II, the Group II Monthly Remittance
Amount.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first or second or third lien on an estate in fee simple interest in real
property securing a Note.
"Mortgage Loan Group": Either Group I or Group II. References herein to the
related Class of Class A Certificates, when used with respect to a Mortgage Loan
Group, shall mean (A) in the case of Group I, the Group I Certificates, and (B)
in the case of Group II, the Class A-6 Certificates.
"Mortgage Loans": Such of the mortgage loans transferred and assigned to
the Trust pursuant to Section 3.5(a) hereof, together with any Qualified
Replacement Mortgages substituted therefor in accordance with this Agreement, as
from time to time are held as a part of the Trust Estate, the Mortgage Loans
originally so held being identified in the Schedule of Mortgage Loans. The term
"Mortgage Loan" includes the terms "First Mortgage Loan" and "Second Mortgage
Loan". The term "Mortgage Loan" includes any
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Mortgage Loan which is Delinquent, which relates to a foreclosure or which
relates to a Property which is REO Property prior to such Property's disposition
by the Trust. Any mortgage loan which, although intended by the parties hereto
to have been, and which purportedly was, transferred and assigned to the Trust
by the Sponsor, in fact was not transferred and assigned to the Trust for any
reason whatsoever shall nevertheless be considered a "Mortgage Loan" for all
purposes of this Agreement. The term "Mortgage Loan" includes the term "Bulk
Acquisition Loan".
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation Proceeds
net of, without duplication, Liquidation Expenses and unreimbursed Servicing
Advances, unreimbursed Delinquency Advances and accrued and unpaid Servicing
Fees through the date of liquidation relating to such Liquidated Loan. In no
event shall Net Liquidation Proceeds with respect to any Liquidated Loan be less
than zero.
"Net Monthly Excess Cashflow": As defined in Section 7.5(c)(v) hereof.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any Authorized Officer of
any Person delivering such certificate and delivered to the Trustee.
"Operative Documents": Collectively, this Agreement, the Master Transfer
Agreements, the Certificate Insurance Policy, the Certificates, the
Indemnification Agreement and the Insurance Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Mortgage Loans as of the Cut-Off Date, i.e., $300,377,478.32.
"Original Certificate Principal Balance": As of the Startup Day and as to
each Class of Class A Certificates, the original Certificate Principal Balances
thereof, as follows:
Class A-1 Certificates $92,819,000
Class A-2 Certificates $56,572,000
Class A-3 Certificates $36,642,000
Class A-4 Certificates $19,406,000
Class A-5 Certificates $29,561,000
Class A-6 Certificates $65,000,000
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The Class RS Certificates do not have an Original Certificate Principal
Balance.
"Original Principal Amount": With respect to each Note, the principal
amount of such Note or the mortgage note relating to a Senior Lien, as the case
may be, on the date of origination thereof.
"Originator": Any entity from which the Sponsor has purchased Mortgage
Loans. The Originators are Advanta Mortgage Corp. USA, Advanta Mortgage Corp.
Midatlantic, Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp.
Midwest, Advanta Mortgage Corp. of New Jersey, Advanta Mortgage Corp. of New
Jersey II, Advanta Mortgage Corp. Northeast, Colonial National Bank USA and
Advanta Finance Corp.
"Outstanding": With respect to all Certificates of a Class, as of any date
of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final payment
money in the necessary amount has been theretofore deposited with the
Trustee in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement,
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or stolen for
which replacement Certificates have been issued as provided for in Section
5.5 hereof.
"Owner": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.6.
"Pass-Through Rate". As to the Class A-1 Certificates, the Class A-1
Pass-Through Rate; as to the Class A-2 Certificates, the Class A-2 Pass-Through
Rate; as to the Class A-3 Certificates, the Class A-3 Pass-Through Rate; as to
the Class A-4 Certificates, the Class A-4 Pass-Through Rate; as to the Class A-5
Certificates, the Class A-5 Pass-Through Rate; as to the Class A-6 Certificates,
the Class A-6 Pass-Through Rate.
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"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 25th day of each month,
commencing in the month following the Startup Day.
"Percentage Interest": As to any Class A Certificate, that percentage,
expressed as a fraction, the numerator of which is the Certificate Principal
Balance of such Certificate as of the Cut-Off Date and the denominator of which
is the Original Certificate Principal Balance of all Class A Certificates of the
same Class; and as to any Class RS Certificate, that Percentage Interest set
forth on such Class RS Certificate.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Cumulative Realized Losses": With respect to any period, the sum of
all Realized Losses with respect to the Mortgage Loans experienced during such
period.
"Pool Delinquency Rate": With respect to any Remittance Period, the
fraction, expressed as a percentage, equal to (x) the aggregate principal
balances of all Mortgage Loans 90 or more days Delinquent (including all
foreclosures and REO Properties) as of the close of business on the last day of
such Remittance Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Remittance Period.
"Pool Principal Balance": The aggregate principal balances of all Mortgage
Loans.
"Pool Rolling Three Month Delinquency Rate": As of any Payment Date, the
fraction, expressed as a percentage, equal to the average of the Pool
Delinquency Rates for each of the three (or one and two, in the case of the
first and second Payment Dates) immediately preceding Remittance Periods.
"Premium Amount": As to any Payment Date, the sum of (i) the Group I
Premium Amount on such Payment Date and (ii) the Group II Premium Amount on such
Payment Date.
"Premium Percentage": As defined in the Insurance Agreement.
"Prepaid Installment": With respect to any Mortgage Loan, any installment
of principal thereof and interest thereon received prior to the scheduled due
date for such installment, intended by the Mortgagor as an early payment
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thereof and not as a Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan which is received
by the Master Servicer in advance of the scheduled due date for the payment of
such principal (other than the principal portion of any Prepaid Installment),
and the proceeds of any Insurance Policy which are to be applied as a payment of
principal on the related Mortgage Loan shall be deemed to be Prepayments for all
purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Master Servicer or any
Sub-Servicer in connection with a foreclosed Mortgage Loan prior to the
liquidation thereof, including, without limitation, expenditures for real estate
property taxes, hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": Collectively, each principal and interest
account created by the Master Servicer or any Sub-Servicer pursuant to Section
8.8(a) hereof, or pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": As applicable, the Group I Principal
Remittance Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": "Prohibited transaction" shall have the meaning
set forth from time to time in the definition thereof at Section 860F(a)(2) of
the Code (or any successor statute thereto) and applicable to the Trust.
"Property": The underlying property securing a Mortgage Loan.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": "Qualified liquidation" shall have the meaning set
forth from time to time in the definition thereof at Section 860F(a)(4) of the
Code (or any successor statute thereto) and applicable to the Trust and the Tax
Estates.
"Qualified Mortgage": "Qualified mortgage" shall have the meaning set forth
from time to time in the definition thereof at Section 860G(a)(3) of the Code
(or any successor statute thereto) and applicable to the Trust and the Mortgage
Loan Groups.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for another
pursuant to Section 3.3, 3.4 or 3.6(b)
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hereof, which (i) bears a variable rate of interest if the Mortgage Loan to be
substituted for is in Group II or bears a fixed rate of interest if the Mortgage
Loan to be substituted for is in Group I, (ii) has a Coupon Rate at least equal
to the Coupon Rate of the Mortgage Loan being replaced, (which, in the case of a
Mortgage Loan in Group II, shall mean a Mortgage Loan having the same interest
rate index, a margin over such index and a maximum interest rate at least equal
to those applicable to the Mortgage Loan being replaced), (iii) is of the same
or better property type and the same or better occupancy status as the replaced
Mortgage Loan, (iv) shall be of the same or better credit quality classification
(determined in accordance with the Originators' credit underwriting guidelines)
as the Mortgage Loan being replaced, (v) shall mature no later than May, 2027,
(vi) has a Combined Loan-to-Value Ratio as of the Cut-Off Date no higher than
the Combined Loan-to-Value Ratio of the replaced Mortgage Loan at such time,
(vii) has a Loan Balance as of the related Replacement Cut-Off Date equal to or
less than the Loan Balance of the replaced Mortgage Loan as of such Replacement
Cut-Off Date, (viii) satisfies all of the representations and warranties set
forth in Section 3.3 and the criteria set forth from time to time in the
definition thereof at Section 860G(a)(4) of the Code (or any successor statute
thereto) and applicable to the Trust, all as evidenced by an Officer's
Certificate of the Sponsor delivered to the Trustee and the Certificate Insurer
prior to any such substitution and (ix) is a valid First Mortgage Loan if the
Mortgage Loan to be substituted for is a valid First Mortgage Loan or Second
Mortgage Loan if the Mortgage Loan to be substituted for is a Second Mortgage
Loan. In the event that one or more mortgage loans are proposed to be
substituted for one or more mortgage loans, the Certificate Insurer may allow
the foregoing tests to be met on a weighted average basis or other aggregate
basis acceptable to the Certificate Insurer, as evidenced by a written approval
delivered to the Trustee by the Certificate Insurer, except that the requirement
of clauses (vi) and (viii) hereof must be satisfied as to each Qualified
Replacement Mortgage.
"Realized Loss": As to any Liquidated Loan, the amount, if any, by which
the Loan Balance thereof as of the date of liquidation is in excess of Net
Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs or, if such day is not a Business Day, the next preceding Business
Day.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The Bank or
Tokyo and National Westminster Bank PLC; provided that if any of the foregoing
banks are not suitable
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to serve as a Reference Bank, then any leading banks selected by the Trustee
which are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Sponsor
or any affiliate thereof, (iii) whose quotations appear on the Reuters Screen
LIBO Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Trustee.
"Register": The register maintained by the Trustee in accordance with
Section 5.4 hereof, in which the names of the Owners are set forth.
"Registrar": The Trustee, acting in its capacity as Trustee appointed
pursuant to Section 5.4 hereof, or any duly appointed and eligible successor
thereto.
"Registration Statement": The Registration Statement filed by the Sponsor
with the Securities and Exchange Commission, including all amendments thereto
and including the Prospectus and Prospectus Supplement relating to the Class A
Certificates constituting a part thereof.
"Reimbursement Amount": A Group I Reimbursement Amount or a Class A-6
Reimbursement Amount.
"Reimbursement Rate": With respect to any Group I Insured Payment and
Payment Date, the Group I Weighted Average Pass-Through Rate as of such Payment
Date; with respect to any Group II Insured Payment and Payment Date, the Class
A-6 Formula Pass-Through Rate.
"REMIC": A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Sections 860A through
860G of the Code, and related provisions, and regulations and rulings
promulgated thereunder, as the foregoing may be in effect from time to time.
"REMIC Trust": The segregated pool of assets consisting of the Trust Estate
except for the Supplemental Interest Payment Account, the Class RS Distribution
Account and the Class A-6 Distribution Account.
"Remittance Date": Any date on which the Master Servicer is required to
remit moneys on deposit in the Principal and Interest Account to the Trustee,
which shall be not later than the 18th day of each month, or, if such day is not
a Business Day, the next preceding Business Day,
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commencing in the month following the month in which the Startup Day occurs.
"Remittance Period": The period (inclusive) beginning on the first day of
the calendar month immediately preceding the month in which a Remittance Date
occurs and ending on the last day of such immediately preceding calendar month.
"REO Property": A Property acquired by the Master Servicer or any
Sub-Servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Reserve Interest Rate": With respect to any Interest Determination Date,
the rate per annum that the Trustee determines to be either (i) the arithmetic
mean (rounded upwards if necessary to the nearest whole multiple of 1/16%) of
the one-month U.S. dollar lending rates which three New York City banks selected
by the Trustee are quoting on the relevant Interest Determination Date to the
principal London offices of leading banks in the London interbank market or (ii)
in the event that the Trustee can determine no such arithmetic mean, the lowest
one-month U.S. dollar lending rate which three New York City banks selected by
the Trustee are quoting on such Interest Determination Date to leading European
banks.
"Residual Net Monthly Excess Cashflow": With respect to any Payment Date,
the aggregate Net Monthly Excess Cashflow, if any, remaining with respect to
both Mortgage Loan Groups after the making of all applications described in
Section 7.5(c) hereof.
"Schedules of Mortgage Loans": The Schedules of Mortgage Loans, attached
hereto as Schedule I. Such Schedules shall also contain one of the following
codes for each Mortgage Loan: "B" if such Mortgage Loan is a Bulk Acquisition
Loan, "C" if such Mortgage Loan is an Unaffiliated Originator Loan or "A" for
all other Mortgage Loans.
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The information contained on each Mortgage Loan Schedule shall be delivered
to the Trustee on a computer readable magnetic tape or disk.
"Second Mortgage Loan": A Mortgage Loan which constitutes a second priority
mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the mortgage loan
relating to the corresponding Property having a first priority lien; and with
respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
"Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Master Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": As defined in Section 8.9(c) and Section 8.13 hereof.
"Servicing Fee": With respect to any Mortgage Loan which is an Unaffiliated
Originator Loan, the sum of any servicing fee relating to such Unaffiliated
Originator Loan and the Master Servicing Fee. With respect to any Mortgage Loan
other than an Unaffiliated Originator Loan, the Advanta Servicing Fee. The
Sponsor shall inform the Trustee as to the level of any servicing fee relating
to an Unaffiliated Originator Loan, which shall not be in excess of 0.50% per
month, unless otherwise approved by the Certificate Insurer in writing.
"Specified Subordinated Amount": As applicable, the Group I Specified
Subordinated Amount or the Group II Specified Subordinated Amount.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware corporation.
"Standard & Poor's": Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies.
"Startup Day": May 29, 1996.
"Step-up Payment Date": The second Payment Date which follows the Clean-up
Call Date.
"Subordinated Amount": As applicable, the Group I Subordinated Amount or
the Group II Subordinated Amount.
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"Subordination Deficiency Amount": With respect to any Mortgage Loan Group
and Payment Date, the excess, if any, of (i) the Specified Subordinated Amount
applicable to such Mortgage Loan Group and Payment Date over (ii) the
Subordinated Amount applicable to such Mortgage Loan Group and Payment Date
prior to taking into account the payment of any related Subordination Increase
Amounts on such Payment Date.
"Subordination Increase Amount": With respect to any Mortgage Loan Group
and Payment Date, the lesser of (i) the Subordination Deficiency Amount as of
such Payment Date (after taking into account the payment of the related Group
Principal Distribution Amount on such Payment Date (except for any Subordination
Increase Amount)) and (ii) the aggregate amount of Net Monthly Excess Cashflow
to be allocated to such Mortgage Loan Group pursuant to Sections 7.5(c)(v)(A)
and 7.5(c)(v)(B) on such Payment Date.
"Subordination Reduction Amount": With respect to any Mortgage Loan Group
and Payment Date, an amount equal to the lesser of (x) the Excess Subordinated
Amount for such Mortgage Loan Group and Payment Date and (y) the Principal
Remittance Amount with respect to such Mortgage Loan Group for the related
Remittance Period.
"Substitution Amount": In connection with the delivery of any Qualified
Replacement Mortgage, if the outstanding principal amount of such Qualified
Replacement Mortgage as of the applicable Replacement Cut-Off Date is less than
the Loan Balance of the Mortgage Loan being replaced as of such Replacement
Cut-Off Date, an amount equal to such difference together with accrued and
unpaid interest on such amount calculated at the Coupon Rate net of the
Servicing Fee of the Mortgage Loan being replaced.
"Sub-Servicer": Any Person with whom the Master Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
8.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Master Servicer
and any Sub-Servicer relating to servicing and/or administration of certain
Mortgage Loans as permitted by Section 8.3.
"Supplemental Interest Payment Account": The Supplemental Interest Payment
Account established in accordance with Section 7.10(a) hereof and maintained by
the Trustee.
"Supplemental Interest Payment Amount Available": As defined in Section
7.10(b) hereof.
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"Supplemental Interest Trust": The Advanta Supplemental Interest Trust
1996-2 created pursuant to Section 7.10(a) hereof.
"Tax Matters Person": The Tax Matters Person appointed pursuant to Section
11.17 hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Third Mortgage Loan": A Mortgage Loan which constitutes a third priority
mortgage lien with respect to the related Property.
"Total Monthly Excess Cashflow": As defined in Section 7.5(c)(iv) hereof.
"Total Monthly Excess Spread": Either the Group I Total Monthly Excess
Spread or the Group II Total Monthly Excess Spread, as appropriate.
"Transaction Documents": Collectively this Agreement, the Insurance
Agreement, the Underwriting Agreement relating to the Class A Certificates, the
Master Transfer Agreements, any Sub-Servicing Agreement, the Indemnification
Agreement relating to the Prospectus offering the Class A Certificates, the
Registration Statement relating to the Class A Certificates and the
Certificates.
"Trust": Advanta Mortgage Loan Trust 1996-2, the trust created under this
Agreement.
"Trust Estate": Collectively, all money, instruments and other property, to
the extent such money, instruments and other property are subject or intended to
be held in trust, and in the subtrusts, for the benefit of the Owners, including
all proceeds thereof, including, without limitation, (i) the Mortgage Loans,
(ii) such amounts, including Eligible Investments, as from time to time may be
held in all Accounts (except as otherwise provided herein), (iii) any Property,
the ownership of which has been effected on behalf of the Trust as a result of
foreclosure or acceptance by the Master Servicer of a deed in lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) any Insurance
Policies relating to the Mortgage Loans and any rights of the Sponsor under any
Insurance Policies, (v) Net Liquidation Proceeds with respect to any Liquidated
Loan, (vi) the Certificate Insurance Policy, and (vii) the rights of the Sponsor
against any Originator pursuant to the related Master Transfer Agreement.
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"Trustee": Bankers Trust Company of California, N.A., located on the date
of execution of this Agreement at Bankers Trust Company, 3 Park Plaza, Irvine,
California 92714, a national banking association, not in its individual capacity
but solely as Trustee under this Agreement, and any successor hereunder.
"Trustee's Fees": With respect to any Payment Date and Mortgage Loan Group,
the Product of (x) one-twelfth of .01% and (y) the aggregate Loan Balance of the
Mortgage Loan in the related Mortgage Loan Group as of the beginning of the
related Remittance Period.
"Unaffiliated Originator Loan": Any Mortgage Loan purchased by the Sponsor
from an Unaffiliated Originator and sold to the Trust by the Sponsor.
"Unaffiliated Originators": Any Originator (x) not affiliated with the
Sponsor and (y) approved in writing by the Certificate Insurer.
"Uncertificated Interest": As defined in Section 2.8(b) hereof.
"Underwriters": Lehman Brothers Inc., Salomon Brothers Inc and Prudential
Securities Incorporated.
Section 1.2. Use of Words and Phrases. "Herein", "hereby", "hereunder",
"hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this
Agreement as a whole and not solely to the particular section of this Agreement
in which any such word is used. The definitions set forth in Section 1.1 hereof
include both the singular and the plural. Whenever used in this Agreement, any
pronoun shall be deemed to include both singular and plural and to cover all
genders.
Section 1.3. Captions; Table of Contents. The captions or headings in this
Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.
Section 1.4. Opinions. Each opinion with respect to the validity, binding
nature and enforceability of documents or Certificates may be qualified to the
extent that the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law) and may state that no
opinion is expressed on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy. Any opinion required to be
furnished by any Person hereunder
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must be delivered by counsel upon whose opinion the addressee of such opinion
may reasonably rely, and such opinion may state that it is given in reasonable
reliance upon an opinion of another, a copy of which must be attached,
concerning the laws of a foreign jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust. The parties hereto do hereby
create and establish, pursuant to the laws of the State of New York and this
Agreement, the Trust, which, for convenience, shall be known as "Advanta
Mortgage Loan Trust 1996-2". Each Mortgage Loan Group shall constitute a
sub-trust of the Trust.
Section 2.2. Office. The office of the Trust shall be in care of the
Trustee, addressed to Bankers Trust Company of California, N.A., Three Park
Plaza, Irvine, California 92714, or at such other address as the Trustee may
designate by notice to the Sponsor, the Master Servicer, the Owners and to the
Certificate Insurer.
Section 2.3. Purposes and Powers. The purpose of the Trust is to engage in
the following activities, and only such activities: (i) the issuance of the
Certificates and the acquiring, owning and holding of Mortgage Loans and the
Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of moneys in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing contained herein shall permit the Trustee to take any
action which would result in the loss of REMIC status for the REMIC Trust.
Section 2.4. Appointment of the Trustee; Declaration of Trust. The Sponsor
hereby appoints the Trustee as trustee of the Trust effective as of the Startup
Day, to have all the rights, powers and duties set forth herein. The Trustee
hereby acknowledges and accepts such appointment, represents and warrants its
eligibility as of the Startup Day to serve as Trustee pursuant to Section 10.8
hereof and declares that it will hold the Trust Estate in trust upon and subject
to the conditions set forth herein for the benefit of the Owners.
Section 2.5. Expenses of the Trust. The expenses of the Trust, including
the annual fees of the Trustee, and
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any other expenses of the Trust that have been reviewed and approved by the
Sponsor (which approval shall not be unreasonably withheld), including the
reasonable expenses of the Trustee shall be paid by the Sponsor to the Trustee
or to such other Person to whom such amounts may be due. Failure by the Sponsor
to pay any such fees or other expenses shall not relieve the Trustee of its
obligations hereunder. The Trustee hereby covenants with the Owners that every
material contract or other material agreement entered into by the Trustee on
behalf of the Trust shall expressly state therein that no Owner shall be
personally liable in connection with such contract or agreement.
Section 2.6. Ownership of the Trust. On the Startup Day the ownership
interests in the Trust and the subtrusts shall be transferred as set forth in
Section 4.2 hereof, such transfer to be evidenced by sale of the Certificates as
described therein. Thereafter, transfer of any ownership interest shall be
governed by Sections 5.4 and 5.8 hereof.
Section 2.7. Situs of the Trust. It is the intention of the parties hereto
that the Trust constitute a trust under the laws of the State of New York. The
Trust will be created in, and all Accounts maintained by the Trustee on behalf
of the Trust will be located in, the State of New York. The Trust will not have
any employees and will not have any real or personal property (other than
property acquired pursuant to Section 8.13 hereof) located in any state other
than in the State of New York and payments will be received by the Trust only in
the State of New York and payments from the Trust will be made only from the
State of New York. The Trust's only office will be at the office of the Trustee
as set forth in Section 2.2 hereof.
Section 2.8. Miscellaneous REMIC Provisions. (a) The REMIC Trust shall
elect to be treated as a REMIC under Section 860D of the Code, as described in
Section 11.15. Any inconsistencies or ambiguities in this Agreement or in the
administration of the Trust shall be resolved in a manner that preserves the
validity of the election of the REMIC Trust to be treated as a REMIC.
(b) Each of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, and
the uncertificated right of the Class A-6 Distribution Account to receive the
Group II Distribution Amount (the "Uncertificated Interest") is hereby
designated as a class of "regular interests" in the REMIC and the uncertificated
right of the Supplemental Interest Payment Account to receive the distributions
described in Section 7.5(c)(vi)(ix) hereof is hereby designated as the "residual
interest" in the REMIC Trust, as defined in Section 860G(a) of the Code.
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(c) The Startup Day is hereby designated as the "startup day" of the REMIC
within the meaning of Section 860G(a)(9) of the Code.
(d) The final scheduled Payment Date for any Class of Certificates is
hereby established as follows:
Class Final Scheduled Payment Date
----- ----------------------------
Class A-1 Certificates November 25, 2009
Class A-2 Certificates March 25, 2011
Class A-3 Certificates August 25, 2018
Class A-4 Certificates March 25, 2022
Class A-5 Certificates June 25, 2027
Class A-6 Certificates June 25, 2027
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS
Section 3.1. Representations and Warranties of the Sponsor. The Sponsor
hereby represents, warrants and covenants to the Trustee, the Certificate
Insurer and to the Owners as of the Startup Day that:
(a) The Sponsor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is in good
standing as a foreign corporation in each jurisdiction in which the nature
of its business, or the properties owned or leased by it make such
qualification necessary. The Sponsor has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative
Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Sponsor is a party by the Sponsor and its
performance and compliance with the terms of this Agreement and of the
other Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Sponsor and will not
violate the Sponsor's
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Articles of Incorporation or Bylaws or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or
other instrument to which the Sponsor is a party or by which the Sponsor is
bound, or violate any statute or any order, rule or regulation of any
court, governmental agency or body or other tribunal having jurisdiction
over the Sponsor or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Sponsor is a party, assuming due authorization, execution and delivery by
the other parties hereto and thereto, each constitutes a valid, legal and
binding obligation of the Sponsor, enforceable against it in accordance
with the terms hereof and thereof, except as the enforcement hereof and
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (whether considered in
a proceeding or action in equity or at law).
(d) The Sponsor 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 might have consequences that would
materially and adversely affect the condition (financial or other) or
operations of the Sponsor or its properties or might have consequences that
would materially and adversely affect its performance hereunder and under
the other Operative Documents to which it is a party.
(e) No litigation is pending or, to the best of the Sponsor's
knowledge, threatened against the Sponsor which litigation might have
consequences that would prohibit its entering into this Agreement or any
other Operative Document to which it is a party or that would materially
and adversely affect the condition (financial or otherwise) or operations
of the Sponsor or its properties or might have consequences that would
materially and adversely affect its performance hereunder and under the
other Operative Documents to which it is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Sponsor contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
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(g) The statements contained in the Registration Statement which
describe the Sponsor or matters or activities for which the Sponsor is
responsible in accordance with the Operative Documents or which are
attributed to the Sponsor therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue
statement of a material fact with respect to the Sponsor or omit to state a
material fact required to be stated therein or necessary in order to make
the statements contained therein with respect to the Sponsor not
misleading. To the best of the Sponsor's knowledge and belief, the
Registration Statement does not contain any untrue statement of a material
fact required to be stated therein or omit to state any material fact
required to be stated therein or necessary to make the statements contained
therein not misleading.
(h) 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 the Sponsor makes no such
representation or warranty), that are necessary or advisable in connection
with the purchase and sale of the Certificates and the execution and
delivery by the Sponsor of the Operative Documents to which it is a party,
have been duly taken, given or obtained, as the case may be, are in full
force and effect on the date hereof, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either
the time within which any appeal therefrom may be taken or review thereof
may be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative
Documents on the part of the Sponsor and the performance by the Sponsor of
its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Sponsor.
(j) The Sponsor received fair consideration and reasonably equivalent
value in exchange for the sale of the interests in the Mortgage Loans
evidenced by the Certificates.
(k) The Sponsor did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any
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intent to hinder, delay or defraud any of its respective creditors.
(l) The Sponsor is solvent and the Sponsor will not be rendered
insolvent as a result of the sale of the Mortgage Loans to the Trust or the
sale of the Certificates.
It is understood and agreed that the representations and warranties set
forth in this Section 3.1 shall survive delivery of the Mortgage Loans to the
Trustee.
Section 3.2. Representations and Warranties of the Master Servicer. The
Master Servicer hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, is,
and each Sub-Servicer is, in compliance with the laws of each state in
which any Property is located to the extent necessary to enable it to
perform its obligations hereunder and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business, or
the properties owned or leased by it make such qualification necessary. The
Master Servicer and each Sub-Servicer has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative
Documents to which it is a party. The Master Servicer has, on a
consolidated basis with its parent, AMHC, equity of at least $5,000,000, as
determined in accordance with generally accepted accounting principles.
(b) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this
Agreement and the other Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of the
Master Servicer and will not violate the Master Servicer's Articles of
Incorporation or Bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other
instrument to which the Master Servicer is a party or by which the Master
Servicer is bound or violate any statute or any order, rule or regulation
of any court, governmental agency or body or other tribunal having
jurisdiction over the Master Servicer or any of its properties.
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(c) This Agreement and the other Operative Documents to which the
Master Servicer is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a valid,
legal and binding obligation of the Master Servicer, enforceable against it
in accordance with the terms hereof, except as the enforcement hereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in
equity or at law).
(d) The Master Servicer 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 might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Master Servicer or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which the Master
Servicer is a party.
(e) No litigation is pending or, to the best of the Master Servicer's
knowledge, threatened against the Master Servicer which litigation might
have consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Master Servicer or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which the Master
Servicer is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Master Servicer
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report not
misleading.
(g) The statements contained in the Registration Statement which
describe the Master Servicer or matters or activities for which the Master
Servicer is responsible in accordance with the Operative Documents or which
are attributed to the Master Servicer therein are true and correct in all
material respects, and the Registration Statement does not contain any
untrue statement of a material fact with respect to the Master Servicer or
omit to state a material fact required to be stated therein or necessary to
make the statements
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contained therein with respect to the Master Servicer not misleading. To
the best of the Master Servicer's knowledge and belief, the Registration
Statement does not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements contained therein not misleading.
(h) The Servicing Fee is a "current (normal) servicing fee rate" as
that term is used in Statement of Financial Accounting Standards No. 65
issued by the Financial Accounting Standards Board. Neither the Master
Servicer nor any affiliate thereof will report on any financial statements
any part of the Servicing Fee as an adjustment to the sales price of the
Mortgage Loans.
(i) 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 the Master Servicer makes
no such representation or warranty), that are necessary or advisable in
connection with the execution and delivery by the Master Servicer of the
Operative Documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date
hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which
any appeal therefrom may be taken or review thereof may be obtained has
expired or no review thereof may be obtained or appeal therefrom taken, and
are adequate to authorize the consummation of the transactions contemplated
by this Agreement and the other Operative Documents on the part of the
Master Servicer and the performance by the Master Servicer of its
obligations under this Agreement and such of the other Operative Documents
to which it is a party.
(j) The collection practices used by the Master Servicer with respect
to the Mortgage Loans directly serviced by it have been, in all material
respects, legal, proper, prudent and customary in the mortgage loan
servicing business.
(k) The transactions contemplated by this Agreement are in the
ordinary course of business of the Master Servicer.
(l) The terms of each existing Sub-Servicing Agreement and each
designated Sub-Servicer are acceptable
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to the Master Servicer and any new Sub-Servicing Agreements or
Sub-Servicers will comply with the provisions of Section 8.3.
It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive delivery of the Mortgage Loans to the
Trustee.
Upon discovery by any of the Originators, the Master Servicer, the Sponsor,
any Sub-Servicer, the Certificate Insurer or the Trustee of a breach of any of
the representations and warranties set forth in this Section 3.2 which
materially and adversely affects the interests of the Owners or of the
Certificate Insurer, the party discovering such breach shall give prompt written
notice to the other parties. Within 30 days of its discovery or its receipt of
notice of breach, the Master Servicer shall cure such breach in all material
respects and, upon the Master Servicer's continued failure to cure such breach,
may thereafter be removed by the Trustee pursuant to Section 8.20 hereof;
provided, however, that if the Master Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing remedial
action, then the cure period may be extended with the written approval of the
Certificate Insurer.
Section 3.3. Representations and Warranties of the Sponsor with Respect to
the Mortgage Loans.
(a) The Sponsor makes the following representations and warranties as to
the Mortgage Loans on which the Trustee relies in accepting the Mortgage Loans
in trust and executing and authenticating the Certificates. Such representations
and warranties speak as of the Startup Day, but shall survive the sale,
transfer, and assignment of the Mortgage Loans to the Trustee:
(i) The information with respect to each Mortgage Loan (including any
Unaffiliated Originator Loans) set forth in the Schedules of Mortgage Loans
is true and correct as of the Cut-Off Date;
(ii) All of the original or certified documentation set forth in
Section 3.5 (including all material documents related thereto) with respect
to each Mortgage Loan (including any Unaffiliated Originator Loans) has
been or will be delivered to the Trustee on the Startup Day, or as
otherwise provided in Section 3.5;
(iii) Except for any Unaffiliated Originator Loans being serviced by a
servicer other than the Master Servicer, each Mortgage Loan is being
serviced by the Master Servicer or a Person controlling, controlled by or
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under common control with the Master Servicer and qualified to service
mortgage loans;
(iv) The Note related to each Mortgage Loan in Group I bears a fixed
Coupon Rate of at least 5.00% per annum;
(v) As of the Cut-Off Date, no more than 1.00% of the Original
Aggregate Loan Balance of the Mortgage Loans are 30-59 days Delinquent, and
no Mortgage Loan is 60 or more days' Delinquent;
(vi) As of the Startup Day no more than 2% of the Original Aggregate
Loan Balance of the Mortgage Loans is secured by Properties located within
any single zip code area, and no more than 15% of the Original Aggregate
Loan Balance of the Mortgage Loans consists of Date-of-Payment Loans;
(vii) Each Mortgage Loan conforms, and all such Mortgage Loans in the
aggregate conform, in all material respects to the description thereof set
forth in the Registration Statement;
(viii) Except for the Bulk Acquisition Loans and any Unaffiliated
Originator Loans, as of the Startup Day, no more than 2.50% of the Loan
Balance of the Mortgage Loans relates to Mortgage Loans originated under
the Originators' non-income verification program for self-employed
borrowers; and
(ix) The credit underwriting guidelines applicable to each Mortgage
Loan conform in all material respects to the description thereof set forth
in the Prospectus.
(b) The Sponsor hereby assigns to the Trustee for the benefit of the Owners
of the Certificates and the Certificate Insurer all of its right, title and
interest in respect of each Master Transfer Agreement applicable to the related
Mortgage Loan. Insofar as such Master Transfer Agreement provides for
representations and warranties made by the related Originator in respect of a
Mortgage Loan and any remedies provided thereunder for any breach of such
representations and warranties, such right, title and interest may be enforced
by the Master Servicer or by the Trustee on behalf of the Owners and the
Certificate Insurer. Upon the discovery by the Sponsor, the Master Servicer, the
Certificate Insurer or the Trustee of a breach of any of the representations and
warranties made in a Master Transfer Agreement in respect of any Mortgage Loan
which materially and adversely affects the interests of the Owners or of the
Certificate Insurer in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to
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the other parties. The Master Servicer shall promptly notify the related
Originator of such breach and request that such Originator cure such breach or
take the actions described in Section 3.4(b) hereof within the time periods
required thereby, and if such Originator does not cure such breach in all
material respects, the Sponsor shall cure such breach or take such actions. The
obligations of the Sponsor or Master Servicer, as the case may be, set forth
herein with respect to any Mortgage Loan as to which such a breach has occurred
and is continuing shall constitute the sole obligations of the Master Servicer
and of the Sponsor in respect of such breach.
Section 3.4. Covenants of Sponsor to Take Certain Actions with Respect to
the Mortgage Loans In Certain Situations. (a) With the provisos and limitations
as to remedies set forth in this Section 3.4, upon the discovery by any
Originator, the Sponsor, the Master Servicer, the Certificate Insurer, any
Sub-Servicer or the Trustee that the representations and warranties set forth in
Section 3.3 of this Agreement or in the Master Transfer Agreement were untrue in
any material respect as of the Startup Day and such breaches of the
representations and warranties materially and adversely affect the interests of
the Owners or of the Certificate Insurer, the party discovering such breach
shall give prompt written notice to the other parties.
The Sponsor acknowledges that a breach of any representation or warranty
(x) relating to marketability of title sufficient to transfer unencumbered title
to a Mortgage Loan, (y) relating to enforceability of the Mortgage Loan against
the related Mortgagor or Property or (z) set forth in clause (viii) of Section
3.3 above constitutes breach of a representation or warranty which "materially
and adversely affects the interests of the Owners or of the Certificate Insurer"
in such Mortgage Loan.
(b) Upon the earliest to occur of the Sponsor's discovery, its receipt of
notice of breach from any one of the other parties hereto or from the
Certificate Insurer or such time as a breach of any representation and warranty
materially and adversely affects the interests of the Owners or of the
Certificate Insurer as set forth above, the Sponsor hereby covenants and
warrants that it shall promptly cure such breach in all material respects or it
shall (or shall cause an affiliate of the Sponsor to or an Originator to),
subject to the further requirements of this paragraph, on the second Remittance
Date next succeeding such discovery, receipt of notice or such other time (i)
substitute in lieu of each Mortgage Loan in the related Mortgage Loan Group
which has given rise to the requirement for action by the Sponsor a Qualified
Replacement Mortgage and deliver the Substitution Amount applicable thereto,
together with the aggregate amount of all Delinquency Advances and Servicing
Advances theretofore
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made with respect to such Mortgage Loan, to the Master Servicer for deposit in
the Principal and Interest Account or (ii) purchase such Mortgage Loan from the
REMIC Trust at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Principal and Interest Account. In connection with any such proposed purchase or
substitution, the Sponsor at its expense, shall cause to be delivered to the
Trustee and to the Certificate Insurer an opinion of counsel experienced in
federal income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the REMIC Trust or
would jeopardize the status of the REMIC Trust as a REMIC, and the Sponsor shall
only be required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the REMIC Trust or would not jeopardize
the status of the REMIC Trust as a REMIC. Any required purchase or substitution,
if delayed by the absence of such opinion shall nonetheless occur if so directed
by the Certificate Insurer upon the earlier of (i) the occurrence of a default
or imminent default with respect to the Mortgage Loan or (ii) the delivery of
such opinion. It is understood and agreed that the obligation of the Sponsor to
cure the defect, or substitute for, or purchase any Mortgage Loan as to which a
representation or warranty is untrue in any material respect and has not been
remedied shall constitute the sole remedy available to the Owners, the Trustee
or the Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is delivered by an
Originator or by the Sponsor (or by an affiliate of the Sponsor, as the case may
be) to the Trust pursuant to Section 3.3, Section 3.4 or Section 3.6 hereof, the
related Originator and the Sponsor shall be obligated to take the actions
described in Section 3.4(b) with respect to such Qualified Replacement Mortgage
upon the discovery by any of the Owners, the Sponsor, the Master Servicer, the
Certificate Insurer, any Sub-Servicer or the Trustee that the representations
and warranties set forth in the related Master Transfer Agreement or in Section
3.3 above are untrue in any material respect on the date such Qualified
Replacement Mortgage is conveyed to the Trust such that the interests of the
Owners or the Certificate Insurer in the related Qualified Replacement Mortgage
are materially and adversely affected; provided, however, that for the purposes
of this subsection (c) the representations and warranties in the related Master
Transfer Agreement or as set forth in Section 3.3 above referring to items "as
of the Cut-Off Date" or "as of the Startup Day" shall be deemed to refer to such
items as of the date such Qualified Replacement Mortgage is conveyed to the
Trust.
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(d) It is understood and agreed that the covenants set forth in this
Section 3.4 shall survive delivery of the respective Mortgage Loans (including
Qualified Replacement Mortgage Loans) to the Trustee.
Section 3.5. Conveyance of the Mortgage Loans. (a) The Sponsor,
concurrently with the execution and delivery hereof, and on behalf of the
Conduit Acquisition Trust, hereby transfers, sells, assigns, sets over and
otherwise conveys without recourse, to the Trustee, all right, title and
interest of the Conduit Acquisition Trust in and to each Mortgage Loan listed on
the Schedule of Mortgage Loans delivered by the Sponsor on the Startup Day, all
its right, title and interest in and to principal collected and interest
accruing on each such Mortgage Loan on and after the Cut-Off Date and all its
right, title and interest in and to all Insurance Policies. The transfer by the
Conduit Acquisition Trust of the Mortgage Loans set forth on the Schedule of
Mortgage Loans to the Trustee is absolute and is intended by the Owners and all
parties hereto to be treated as a sale by the Conduit Acquisition Trust.
(b) In connection with the transfer and assignment of the Mortgage Loans,
the Sponsor agrees to:
(i) cause to be delivered, on the Startup Day, without recourse, to
the Trustee the items listed in the definitions of "Advanta Mortgage Files"
and "Conduit Mortgage Files," as appropriate.
(ii) cause, within 75 Business Days following the Startup Day to be
submitted for recording in the appropriate jurisdictions wherein such
recordation is necessary to perfect the lien thereof as against creditors
of or purchasers from the related Originator to the Trustee; provided,
however, that Assignments of Mortgage shall not be required to be submitted
for recording with respect to any Mortgage Loan which relates to an Advanta
Mortgage File, unless (x) otherwise directed in writing by the Certificate
Insurer, (y) upon the occurrence of any Event of Default or (z) the
long-term unsecured debt of Colonial National Bank USA is assigned ratings
of less than BBB by Standard & Poor's or Baa2 by Moody's or the long-term
unsecured debt of some other entity approved by the Certificate Insurer is
assigned comparable ratings.
All recording required pursuant to this Section 3.5 shall be accomplished
at the expense of the Originators or of the Sponsor. Notwithstanding anything to
the contrary contained in this Section 3.5, in those instances where the public
recording office retains the original Mortgage, the assignment of a Mortgage or
the intervening assignments of the
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Mortgage after it has been recorded, the Sponsor shall be deemed to have
satisfied its obligations hereunder upon delivery to the Trustee of a copy of
such Mortgage, such assignment or assignments of Mortgage certified by the
public recording office to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Trustee shall be kept in
the related file.
(c) In the case of Mortgage Loans which have been prepaid in full on or
after the Cut-Off Date and prior to the Startup Day, the Sponsor, in lieu of the
foregoing, will deliver within 15 Business Days after the Startup Day, to the
Trustee a certification of an Authorized Officer in the form set forth in
Exhibit D.
(d) The Sponsor (or the Conduit Acquisition Trust or an affiliate of the
Sponsor) shall transfer, sell, assign, set over and otherwise convey without
recourse, to the Trustee all right, title and interest of the Sponsor (or the
Conduit Acquisition Trust or of such affiliate) in and to any Qualified
Replacement Mortgage delivered to the Trustee pursuant to Section 3.3, Section
3.4 or Section 3.6 hereof and all its right, title and interest to principal
collected and interest accruing on such Qualified Replacement Mortgage on and
after the applicable Replacement Cut-Off Date; provided, however, that the
Sponsor (or the Conduit Acquisition or such affiliate) shall reserve and retain
all right, title and interest in and to payments of principal and interest due
on such Qualified Replacement Mortgage prior to the applicable Replacement
Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in connection with the
conveyance of a Qualified Replacement Mortgage therefor, the Trustee will
transfer, sell, assign, set over and otherwise convey without recourse, on the
Sponsor's order, all of its right, title and interest in and to such released
Mortgage Loan and all the Trust's right, title and interest to principal
collected and interest accruing on such released Mortgage Loan on and after the
applicable Replacement Cut-Off Date; provided, however, that the Trust shall
reserve and retain all right, title and interest in and to payments of principal
collected and interest accruing on such released Mortgage Loan prior to the
applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Sponsor agrees
to cause to be delivered to the Trustee the items described in Section 3.5(b) on
the date of such transfer and assignment or, if a later delivery time
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is permitted by Section 3.5(b), then no later than such later delivery time.
(g) As to each Mortgage Loan released from the Trust in connection with the
conveyance of a Qualified Replacement Mortgage the Trustee shall deliver on the
date of conveyance of such Qualified Replacement Mortgage and on the order of
the Sponsor (i) the original Note, or the certified copy, relating thereto,
endorsed without recourse, to the Sponsor and (ii) such other documents as
constituted the File with respect thereto.
(h) If a Mortgage assignment is lost during the process of recording, or is
returned from the recorder's office unrecorded due to a defect therein, the
Sponsor shall prepare a substitute assignment or cure such defect, as the case
may be, and thereafter cause each such assignment to be duly recorded.
(i) The Sponsor shall cause to be reflected on the records of the Conduit
Acquisition Trust that the Mortgage Loans have been sold to the Trust.
(j) To the extent that the ratings, if any, then assigned to the unsecured
debt of the Sponsor or of the Sponsor's ultimate corporate parent are
satisfactory to the Certificate Insurer, Moody's and Standard & Poor's, then any
of the Document Delivery Requirements described above may be waived by an
instrument signed by the Certificate Insurer, Standard & Poor's and Moody's (or
any documents theretofore delivered to the Trustee returned to the Sponsor) on
such terms and subject to such conditions as the Certificate Insurer, Moody's
and Standard & Poor's may permit.
Section 3.6. Acceptance by Trustee; Certain Substitutions of Mortgage
Loans; Certification by Trustee. (a) The Trustee agrees to execute and deliver
on the Startup Day an acknowledgment of receipt of the Notes delivered by the
Sponsor in the form attached as Exhibit E hereto, and declares that it will hold
such documents and any amendments, replacement or supplements thereto, as well
as any other assets included in the definition of Trust Estate and delivered to
the Trustee, as Trustee in trust upon and subject to the conditions set forth
herein for the benefit of the Owners. The Trustee further agrees to review any
other documents delivered by the Sponsor within 90 days after the Startup Day
(or within 90 days with respect to any Qualified Replacement Mortgage after the
assignment thereof) and to deliver to the Sponsor, the Master Servicer and the
Certificate Insurer a Certification in the form attached as Exhibit F hereto.
The Trustee shall be under no duty or obligation to inspect, review or examine
any such documents, instruments, certificates or other papers to determine that
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they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face, nor shall the
Trustee be under any duty to determine independently whether there are any
intervening assignments or assumption or modification agreements with respect to
any Mortgage Loan.
(b) If the Trustee during such 90-day period finds any document
constituting a part of a File which is not properly executed, has not been
received within the specified period, or is unrelated to the Mortgage Loans
identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does
not conform in a material respect to the description thereof as set forth in the
Schedules of Mortgage Loans, the Trustee shall promptly so notify the Sponsor
and the Certificate Insurer. In performing any such review, the Trustee may
conclusively rely on the Sponsor as to the purported genuineness of any such
document and any signature thereon. The Sponsor agrees to use reasonable efforts
to remedy a material defect in a document constituting part of a File of which
it is so notified by the Trustee. If, however, within 60 days after the
Trustee's notice to it respecting such defect the Sponsor has not remedied or
caused to be remedied the defect and the defect materially and adversely affects
the interest in the related Mortgage Loan of the Owners or of the Certificate
Insurer, the Sponsor will (or will cause the related Originator or an affiliate
of the Sponsor to) on the next succeeding Remittance Date (i) substitute in lieu
of such Mortgage Loan a Qualified Replacement Mortgage and, deliver the
Substitution Amount applicable thereto to the Master Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Mortgage Loan at a purchase
price equal to the Loan Purchase Price thereof, which purchase price shall be
delivered to the Master Servicer for deposit in the Principal and Interest
Account. In connection with any such proposed purchase or substitution the
Sponsor shall cause at the Sponsor's expense to be delivered to the Trustee and
to the Certificate Insurer an opinion of counsel experienced in federal income
tax matters stating whether or not such a proposed purchase or substitution
would constitute a Prohibited Transaction for the REMIC Trust or would
jeopardize the status of the REMIC Trust as a REMIC, and the Sponsor shall only
be required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the REMIC Trust or would not jeopardize
the status of the REMIC Trust as a REMIC. Any required purchase or substitution,
if delayed by the absence of such opinion shall nonetheless occur upon the
earlier of (i) the occurrence of a default or imminent default with respect to
the Mortgage Loan or (ii) the delivery of such opinion or (iii) at the direction
of the Certificate Insurer.
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Section 3.7. Cooperation Procedures. (a) The Sponsor shall, in connection
with the delivery of each Qualified Replacement Mortgage to the Trustee, provide
the Trustee with the information set forth in the Schedules of Mortgage Loans
with respect to such Qualified Replacement Mortgage.
(b) The Sponsor, the Master Servicer and the Trustee covenant to provide
each other with all data and information required to be provided by them
hereunder at the times required hereunder, and additionally covenant reasonably
to cooperate with each other in providing any additional information required by
any of them in connection with their respective duties hereunder.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Startup Day, upon the
Trustee's receipt from the Sponsor of an executed Delivery Order in the form set
forth as Exhibit G hereto, the Trustee shall execute, authenticate and deliver
the Certificates on behalf of the Trust in accordance with the directions set
forth in such Delivery Order.
Section 4.2. Sale of Certificates. At 11 a.m. New York City time on the
Startup Date, at the offices of Dewey Ballantine, 1301 Sixth Avenue, New York,
New York, the Sponsor will sell and convey the Mortgage Loans and the money,
instruments and other property related thereto to the Trustee, and the Trustee
will (i) deliver to the Underwriter, the Class A Certificates with an aggregate
Percentage Interest in each Class equal to 100%, registered in the name of Cede
& Co. or in such other names as the Underwriter shall direct, against payment of
the purchase price thereof by wire transfer of immediately available funds to
the Trustee and (ii) deliver to the Sponsor, the Class RS Certificates, with an
aggregate Percentage Interest in each Class equal to 100%, registered as the
Sponsor shall request. Upon receipt of the proceeds of the sale of the
Certificates, the Trustee shall, from the proceeds of the sale of the
Certificates, pay other fees and expenses identified by the Sponsor, and (b) pay
to the Sponsor the balance after deducting such amounts. The Sponsor shall pay
directly to the Certificate Insurer the Initial Premiums.
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ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms. (a) The Certificates are pass-through securities having
the rights described therein and herein. Notwithstanding references herein or
therein with respect to the Certificates as to "principal" and "interest" no
debt of any Person is represented thereby, nor are the Certificates or the
underlying Notes guaranteed by any Person (except that the Notes may be recourse
to the Mortgagors thereof to the extent permitted by law and except for the
rights of the Trustee with respect to the Certificate Insurance Policy).
Distributions on the Certificates are payable solely from payments received on
or with respect to the Mortgage Loans (other than the Servicing Fees), moneys in
the Principal and Interest Account, the Supplemental Interest Payment Account
and the Class A-6 Distribution Account, except as otherwise provided herein,
from earnings on moneys and the proceeds of property held as a part of the Trust
Estate and, upon the occurrence of certain events, from Insured Payments. Each
Certificate entitles the Owner thereof to receive monthly on each Payment Date,
in order of priority of distributions with respect to such Class of
Certificates, a specified portion of such payments with respect to the Mortgage
Loans in the related Mortgage Loan Group, certain related Insured Payments, pro
rata in accordance with such Owner's Percentage Interest and in the case of the
Class A-6 Certificates, certain amounts payable from the Supplemental Interest
Payment Account and from the Class A-6 Distribution Account.
(b) Each Owner is required, and hereby agrees, to return to the Trustee any
Certificate with respect to which the Trustee has made the final distribution
due thereon. Any such Certificate as to which the Trustee has made the final
distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
Section 5.2. Forms. The A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates,
the Class A-6 Certificates, and the Class RS Certificates shall be in
substantially the forms set forth in Exhibits A-1, A-2, A-3, A-4, A-5, A-6, and
Exhibit C hereof, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Agreement or as may in the Sponsor's judgment be necessary, appropriate or
convenient to comply, or facilitate compliance, with applicable laws, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of
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any applicable securities laws or as may, consistently herewith, be determined
by the Authorized Officer of the Sponsor executing such Certificates, as
evidenced by his execution thereof.
Section 5.3. Execution, Authentication and Delivery. Each Certificate shall
be executed on behalf of the Trust, by the manual signature of one of the
Trustee's Authorized Officers and shall be authenticated by the manual signature
of one of the Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who were at any
time the proper officers of the Trustee shall, upon proper authentication by the
Trustee, bind the Trust, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the execution and delivery of such
Certificates or did not hold such offices at the date of authentication of such
Certificates.
The initial Certificates shall be dated as of the Startup Day and delivered
at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated as set forth
above.
Section 5.4. Registration and Transfer of Certificates. (a) The Trustee, as
registrar, shall cause to be kept a register (the "Register") in which, subject
to such reasonable regulations as it may prescribe, the Trustee shall provide
for the registration of Certificates and the registration of transfer of
Certificates. The Trustee is hereby appointed registrar for the purpose of
registering Certificates and transfers of Certificates as herein provided. The
Owners shall have the right to inspect the Register at all reasonable times and
to obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon surrender for
registration of transfer of any Certificate at the office designated as the
location of the Register, the Trustee shall execute, authenticate and deliver,
in the name of the designated transferee or transferees, one or more new
Certificates of a like Class and in the aggregate principal amount of the
Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by such
Owner may be exchanged for other Certificates authorized of like Class, tenor
and a like aggregate original principal amount and bearing numbers not
contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever any
Certificate is so surrendered for exchange, the Trustee shall execute,
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authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(d) All Certificates issued upon any registration of transfer or exchange
of Certificates shall be valid evidence of the same ownership interests in the
Trust and entitled to the same benefits under this Agreement as the Certificates
surrendered upon such registration of transfer or exchange.
(e) Every Certificate presented or surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the Owner thereof
or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any registration of
transfer or exchange of Certificates, but the 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 Certificates; any
other expenses in connection with such transfer or exchange shall be an expense
of the Trust.
(g) It is intended that the Class A Certificates be registered so as to
participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Class A Certificates shall, except as otherwise provided
in the next paragraph, be initially issued in the form of a single fully
registered Class A Certificate with a denomination equal to the Original
Aggregate Loan Balance. Upon initial issuance, the ownership of each such Class
A Certificate shall be registered in the Register in the name of Cede & Co., or
any successor thereto, as nominee for the Depository.
The Sponsor and the Trustee are hereby authorized to execute and deliver
the Representation Letter with the Depository.
With respect to Class A Certificates registered in the Register in the name
of Cede & Co., as nominee of the Depository, the Sponsor, the Master Servicer
and the Trustee shall have no responsibility or obligation to Direct or Indirect
Participants or beneficial owners for which the Depository holds Class A
Certificates from time to time as a Depository. Without limiting the immediately
preceding sentence, the Sponsor, the Master Servicer and the Trustee shall have
no responsibility or obligation with respect to (i) the accuracy of the records
of the Depository, Cede & Co., or any Direct or Indirect Participant with
respect to the ownership interest in the Class A Certificates, (ii) the delivery
to any Direct or Indirect Participant or any other Person, other than a
registered Owner of a Class A Certificate
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as shown in the Register, of any notice with respect to the Class A Certificates
or (iii) the payment to any Direct or Indirect Participant or any other Person,
other than a registered Owner of a Class A Certificate as shown in the Register,
of any amount with respect to any distribution of principal or interest on the
Class A Certificates. No Person other than a registered Owner of a Class A
Certificate as shown in the Register shall receive a certificate evidencing such
Class A Certificate.
Upon delivery by the Depository to the Trustee of written notice to the
effect that the Depository has determined to substitute a new nominee in place
of Cede & Co., and subject to the provisions hereof with respect to the payment
of interest by the mailing of checks or drafts to the registered Owners of Class
A Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the close of business on a Record Date, the name
"Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(h) In the event that (i) the Depository or the Sponsor advises the Trustee
in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the
Class A Certificates and the Sponsor or the Trustee is unable to locate a
qualified successor or (ii) the Sponsor at its sole option elects to terminate
the book-entry system through the Depository, the Class A Certificates shall no
longer be restricted to being registered in the Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that time, the
Sponsor may determine that the Class A Certificates shall be registered in the
name of and deposited with a successor depository operating a global book-entry
system, as may be acceptable to the Sponsor, or such depository's agent or
designee but, if the Sponsor does not select such alternative global book-entry
system, then the Class A Certificates may be registered in whatever name or
names registered Owners of Class A Certificates transferring Class A
Certificates shall designate, in accordance with the provisions hereof.
(i) Notwithstanding any other provision of this Agreement to the contrary,
so long as any Class A Certificate is registered in the name of Cede & Co., as
nominee of the Depository, all distributions of principal or interest on such
Class A Certificates as the case may be and all notices with respect to such
Class A Certificates as the case may be shall be made and given, respectively,
in the manner provided in the Representation Letter.
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates. If (i) any
mutilated Certificate is surrendered
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to the Trustee, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (ii) in the case of any
mutilated Certificate, such mutilated Certificate shall first be surrendered to
the Trustee, and in the case of any destroyed, lost or stolen Certificate, there
shall be first delivered to the Trustee such security or indemnity as may be
reasonably required by it to hold the Trustee harmless (provided, that with
respect to an Owner which is an insurance company, a letter of indemnity
furnished by it shall be sufficient for this purpose), then, in the absence of
notice to the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute, authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Class, tenor and aggregate principal amount, bearing a
number not contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the Trustee
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto; any other expenses
in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in exchange for or in
lieu of any mutilated, destroyed, lost or stolen Certificate shall constitute
evidence of a substitute interest in the Trust, and shall be entitled to all the
benefits of this Agreement equally and proportionately with any and all other
Certificates of the same Class duly issued hereunder and such mutilated,
destroyed, lost or stolen Certificate shall not be valid for any purpose.
The provisions of this Section 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 5.6. Persons Deemed Owners. The Trustee and any agent of the
Trustee may treat the Person in whose name any Certificate is registered as the
Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
Section 5.7. Cancellation. All Certificates surrendered for registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. No
Certificate shall be authenticated in lieu of or in exchange
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for any Certificate cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates may be held by the
Trustee in accordance with its standard retention policy.
Section 5.8. Limitation on Transfer of Ownership Rights. (a) No sale or
other transfer of any Class A Certificate shall be made to the Sponsor, any
Originator or any of their respective affiliates.
(b) No sale or other transfer of record or beneficial ownership of a Class
RS Certificate (whether pursuant to a purchase, a transfer resulting from a
default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or agent of a Disqualified Organization. The transfer,
sale or other disposition of a Class RS Certificate (whether pursuant to a
purchase, a transfer resulting from a default under a secured lending agreement
or otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Class RS Certificates. Furthermore, in no event shall the
Trustee accept surrender for transfer, registration of transfer, or register the
transfer, of any Class RS Certificates nor authenticate and make available any
Class RS Certificates unless the Trustee has received an affidavit from the
proposed transferee in the form attached hereto as Exhibit H. Each holder of a
Class RS Certificate, by his acceptance thereof, shall be deemed for all
purposes to have consented to the provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial ownership of a
Class RS Certificate shall be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event such a transfer is to be made within three years from the
Startup Day, (i) the Trustee or the Sponsor shall require a written opinion of
counsel acceptable to and in form and substance satisfactory to the Sponsor that
such transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which opinion of counsel shall not be an expense
of the Trustee or the Sponsor, and (ii) the Trustee shall require the Transferee
to execute an investment letter acceptable to and in form and substance
satisfactory to the Sponsor certifying to the Trustee and the Sponsor the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or the Sponsor. The Owner of a Class RS Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
the
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Sponsor against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws. No Class RS
Certificate shall be acquired by or transferred to (i) an employee benefit plan
(as defined in section 3(3) of the Employee Retirement Security Act of 1974, as
amended ("ERISA")) 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, or (iii)
an entity whose underlying assets are deemed to be assets of a plan described in
(i) or (ii) above by reason of such plan's investment in the entity. Any Class
RS Certificate transferred shall (x) certify that it is not any of the above and
(y) deliver an opinion of counsel to that effect.
Section 5.9. Assignment of Rights. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute a transfer of an ownership interest sufficient to render the
transferee an Owner of the Trust without compliance with the provisions of
Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. The Trustee will duly and punctually pay
distributions with respect to the Certificates in accordance with the terms of
the Certificates and this Agreement. Such distributions shall be made (i) by
check mailed on each Payment Date or (ii) if requested by any Owner, to such
Owner by wire transfer to an account within the United States designated no
later than five Business Days prior to the related Record Date, made on each
Payment Date, in each case to each Owner of record on the immediately preceding
Record Date; provided, however, that an Owner of a Class A Certificate shall
only be entitled to payment by wire transfer if such Owner owns Class A
Certificates in the aggregate denomination of at least $5,000,000.
Section 6.2. Money for Distributions to be Held in Trust; Withholding. (a)
All payments of amounts due and payable with respect to any Certificate that are
to be made from amounts withdrawn from the Certificate Account pursuant to
Section 7.5 hereof or from Insured Payments shall be made by and on behalf of
the Trustee, and no amounts so withdrawn from the Certificate Account for
payments of the Certificates and no Insured Payment shall be paid over to the
Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all requirements
of the Code and applicable state and
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local law with respect to the withholding from any distributions made by it to
any Owner of any applicable withholding taxes imposed thereon and with respect
to any applicable reporting requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of any amount
due with respect to any Class A Certificate and remaining unclaimed by the Owner
of such Class A Certificate for the period then specified in the escheat laws of
the State of New York after such amount has become due and payable shall be
discharged from such trust and be paid first, to the Certificate Insurer on
account of any Reimbursement Amounts, and second to the Owners of the Class RS
Certificates; and the Owner of such Class A Certificate shall thereafter, as an
unsecured general creditor, look only to the Certificate Insurer or the Owners
of the Class RS Certificates for payment thereof (but only to the extent of the
amounts so paid to the Certificate Insurer or the Owners of the Class RS
Certificates), and all liability of the Trustee with respect to such trust money
shall thereupon cease; provided, however, that the Trustee, before being
required to make any such payment, shall at the expense of the Sponsor cause to
be published once, in the eastern edition of The Wall Street Journal, notice
that such money remains unclaimed and that, after a date specified therein,
which shall be not fewer than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be paid to the Certificate
Insurer or the Owners of the Class RS Certificates. The Trustee shall, at the
direction of the Sponsor, also adopt and employ, at the expense of the Sponsor,
any other reasonable means of notification of such payment (including but not
limited to mailing notice of such payment to Owners whose right to or interest
in moneys due and payable but not claimed is determinable from the Register at
the last address of record for each such Owner).
Section 6.3. Protection of Trust Estate. (a) The Trustee will hold the
Trust Estate in trust for the benefit of the Owners and, upon request of the
Certificate Insurer, or, with the consent of the Certificate Insurer, at the
request and expense of the Sponsor, will from time to time execute and deliver
all such supplements and amendments hereto pursuant to Section 11.14 hereof and
all instruments of further assurance and other instruments, and will take such
other action upon such request as it deems reasonably necessary or advisable,
to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
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(ii) perfect, publish notice of, or protect the validity of any grant
made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Trustee, and the ownership interests of the Owners represented thereby,
in such Trust Estate against the claims of all Persons and parties.
The Trustee shall send copies of any request received from the Certificate
Insurer or the Sponsor to take any action pursuant to this Section 6.3 to the
other party.
(b) The Trustee shall have the power to enforce, and shall enforce the
obligations of the other parties to this Agreement and of the Certificate
Insurer, 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 Owners; provided, however, that
nothing in this Section shall require any action by the Trustee unless the
Trustee shall first (i) have been furnished indemnity satisfactory to it and
(ii) when required by this Agreement, have been requested to take such action by
a majority of the Percentage Interests represented by the affected Class or
Classes of Class A Certificates then Outstanding or, if there are no longer any
affected Class A Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class RS Certificates.
(c) The Trustee shall execute any instrument required pursuant to this
Section so long as such instrument does not conflict with this Agreement or with
the Trustee's fiduciary duties.
Section 6.4. Performance of Obligations. The Trustee will not take any
action that would release the Sponsor or the Certificate Insurer from any of
their respective covenants or obligations under any instrument or document
relating to the Trust Estate or the Certificates or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or document, except as
expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in performing its
duties hereunder.
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Section 6.5. Negative Covenants. The Trustee will not, to the extent within
the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of the Trust
Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the distributions
payable in respect of, the Certificates (other than amounts properly
withheld from such payments under the Code) or assert any claim against any
present or former Owner by reason of the payment of any taxes levied or
assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in part,
except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this Agreement, or
release any Person from any covenants or obligations with respect to the
Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any lien, charge,
adverse claim, security interest, mortgage or other encumbrance to or upon
the Trust Estate or any part thereof or any interest therein or the
proceeds thereof.
Section 6.6. No Other Powers. The Trustee will not, to the extent within
the control of the Trustee, permit the Trust to engage in any business activity
or transaction other than those activities permitted by Section 2.3 hereof.
Section 6.7. Limitation of Suits. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Certificate Insurance Policy or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the Sponsor and the
Trustee of such Owner's intention to institute such proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the affected Class or Classes of Certificates then
Outstanding or, if there are no affected Classes of Class A
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Certificates then Outstanding, by such percentage of the Percentage
Interests represented by the Class RS Certificates, shall have made
written request to the Trustee to institute such proceeding in respect
of such Event of Default;
(3) such Owner or Owners have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute such proceeding;
(5) as long as any Class A Certificates are Outstanding, the Certificate
Insurer consented in writing thereto; and
(6) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Certificate Insurer or by
the Owners of a majority of the Percentage Interests represented by
the Class A Certificates or, if there are no Class A Certificates then
Outstanding, by such majority of the Percentage Interests represented
by the Class RS Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Owners, each representing less than a
majority of the applicable Class of Certificates, the Trustee shall act at the
direction of the Certificate Insurer, notwithstanding any other provision of
this Agreement.
Section 6.8. Unconditional Rights of Owners to Receive Distributions.
Notwithstanding any other provision in this Agreement, the Owner of any
Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
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Section 6.9. Rights and Remedies Cumulative. Except as otherwise provided
herein, no right or remedy herein conferred upon or reserved to the Trustee, the
Certificate Insurer or to the Owners 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. Except
as otherwise provided herein, 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 6.10. Delay or Omission Not Waiver. No delay of the Trustee, the
Certificate Insurer or any Owner of any Certificate to exercise any right or
remedy under this Agreement to any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article VI or by law to the
Trustee, the Certificate Insurer or to the Owners may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee, the Certificate
Insurer or by the Owners, as the case may be.
Section 6.11. Control by Owners. The Certificate Insurer or the Owners of a
majority of the Percentage Interests represented by the Class A Certificates
then Outstanding, with the consent of the Certificate Insurer (which may not be
unreasonably withheld) or, if there are no longer any Class A Certificates then
Outstanding, by such majority of the Percentage Interests represented by the
Class RS Certificates then Outstanding, with the consent of the Certificate
Insurer (which may not be unreasonably withheld) may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee with
respect to the Certificates or exercising any trust or power conferred on the
Trustee with respect to the Certificates or the Trust Estate, including, but not
limited to, those powers set forth in Section 6.3 and Section 8.20 hereof;
provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Agreement;
(2) the Trustee shall have been provided with indemnity satisfactory to
it; and
(3) the Trustee may take any other action deemed proper by the Trustee,
which is not inconsistent with such direction; provided, however, that
the Trustee need not take any action which it determines might involve
it in liability or may be unjustly prejudicial to the Owners not so
directing;
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provided, further, that in the event that any directions provided by
the Trustee and the Certificate Insurer conflict with each other, the
Certificate Insurer's direction shall prevail.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of all money and other
property payable to or receivable by the Trustee pursuant to this Agreement,
including (a) all payments due on the Mortgage Loans in accordance with the
respective terms and conditions of such Mortgage Loans and required to be paid
over to the Trustee by the Master Servicer or by any Sub-Servicer and (b)
Insured Payments. The Trustee shall hold all such money and property received by
it, other than pursuant to or as contemplated by Section 6.2(b) hereof, as part
of the Trust Estate and shall apply it as provided in this Agreement.
Section 7.2. Establishment of Accounts. (a) The Sponsor shall cause to be
established, and the Trustee shall maintain, at the corporate trust office of
the Trustee, a Certificate Account, to be held by the Trustee in the name of the
Trust for the benefit of the Owners of the Certificates and the Certificate
Insurer, as their interests may appear.
(b) The Sponsor shall cause to be established, and the Trustee shall
maintain, at the corporate trust office of the Trustee, a Class A-6 Distribution
Account to be held by the Trustee in trust for the benefit of the Class A-6
Certificates and the Certificate Insurer, as their interests may appear.
(c) The Sponsor shall cause to be established, and the Trustee shall
maintain, at the corporate trust office of the Trustee, a Class R Distribution
Account to be held by the Trustee in trust for the benefit of the Owners of the
Class R Certificates and the Certificate Insurer, as their interests may appear.
Section 7.3. The Certificate Insurance Policy.
(a) On each Determination Date the Trustee shall determine with respect to
the immediately following Payment Date:
(i) the amounts to be on deposit in the Certificate Account on such
Payment Date with respect to Group I (disregarding the amounts of any Group
I Insured
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Payments) and equal to the sum of (x) such amounts excluding the amount of
any Total Monthly Excess Cashflow amounts included in such amounts and
excluding an amount equal to the Group I Premium Amount together with any
Master Servicing Fees described in 7.5(c)(i) and Trustee's Fees described
in 7.5(c)(iii) for the related Payment Date plus (y) any amounts of Total
Monthly Excess Cashflow to be applied on account of Group I on such Payment
Date; the amounts described in the preceding clause (x) with respect to
each Mortgage Loan Group and Payment Date after taking into account the
portion of the Group I Principal Distribution Amount to be actually
distributed on such Payment Date without regard to any Group I Insured
Payment to be made with respect to such Payment Date, are the "Group I
Available Funds"; the sum of the amounts described in the preceding clauses
(x) and (y) are the "Group I Total Available Funds";
(ii) the amounts to be on deposit in the Certificate Account on such
Payment Date with respect to Group II (disregarding the amounts of any
Class A-6 Insured Payments) and equal to the sum of (x) such amounts
excluding the amount of any Total Monthly Excess Cashflow amounts included
in such amounts and excluding an amount equal to the Group II Premium
Amount together with any Master Servicing Fees described in 7.5(c)(i) and
Trustee's Fees described in 7.5(c)(iii) for the related Payment Date, plus
(y) any amounts of Total Monthly Excess Cashflow to be applied on account
of Group II on such Payment Date; the amounts described in the preceding
clause (x) with respect to each Group II and Payment Date, after taking
into account the portion of the Group II Principal Distribution Amount to
be actually distributed on such Payment Date without regard to any Class
A-6 Insured Payment to be made with respect to such Payment Date, are the
"Group II Available Funds"; the sum of the amounts described in the
preceding clauses (x) and (y) are the "Group II Total Available Funds"; and
(b) (i) If the Group I Insured Distribution Amount for any Payment Date
exceeds the Group I Total Available Funds for such Payment Date after taking
into account the portion of the Group I Principal Distribution Amount to be
actually distributed on such Payment Date without regard to any Group I Insured
Payment to be made with respect to such Payment Date (such event being a "Group
I Deficiency Amount"), the Trustee shall complete a Notice in the form of
Exhibit A to the Certificate Insurance Policy and submit such notice to the
Certificate Insurer no later than 12:00 noon New York City time on the second
Business Day preceding such Payment Date as a claim for a Insured Payment in an
amount equal to such Group I Deficiency Amount. Upon receipt of Insured Payments
from the Certificate Insurer under the Certificate Insurance
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Policy, the Trustee shall deposit such Insured Payments in the Certificate
Account.
(ii) If the Class A-6 Insured Distribution Amount for any, Payment Date
exceeds the Group II Total Available Funds for such Payment Date (after taking
into account the portion of the Class A-6 Principal Distribution Amount to be
actually distributed on such Payment Date without regard to any Class A-6
Insured Payment to be made with respect to such Payment Date) (such event being
a "Group II Deficiency Amount"), the Trustee shall complete a Notice in the form
of Exhibit A to the Certificate Insurance Policy and submit such notice to the
Certificate Insurer no later than 12:00 noon New York City time on the second
Business Day preceding such Payment Date as a claim for an Insured Payment in an
amount equal to such Group II Deficiency Amount. Upon receipt of Insured
Payments from the Certificate Insurer under the Certificate Insurance Policy,
the Trustee shall deposit such Insured Payments in the Certificate Account.
(c) The Trustee shall distribute all Insured Payments received, or the
proceeds thereof, in accordance with Section 7.5(c) to the Owners of the Class A
Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as attorney-in-fact of
each Owner of the Class A Certificates of the related Class receiving any
Insured Payment from the Certificate Insurer and (ii) disburse such Insured
Payment to the Owners of the related Class A Certificates as set forth in
Section 7.5(c). The Certificate Insurer shall be entitled to receive the related
Reimbursement Amount pursuant to Sections 7.5(c)(iv)(C) and 7.5(c)(iv)(D) hereof
with respect to each Insured Payment made by the Certificate Insurer. The
Trustee hereby agrees on behalf of each Owner of Class A Certificates and the
Trust for the benefit of the Certificate Insurer that it recognizes that to the
extent the Certificate Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Owners of such Class A
Certificates, the Certificate Insurer will be entitled to receive the related
Reimbursement Amount pursuant to Sections 7.5(c)(iv)(C) and 7.5(c)(iv)(D)
hereof.
(e) The Trustee shall receive, as attorney-in-fact of each Owner of an
Insured Certificate, any Insured Payment from the Certificate Insurer and
disburse the same to each Owner of an Insured Certificate in accordance with the
provisions of Section 7.3. Insured Payments disbursed by the Trustee from
proceeds of the Certificate Insurance Policy shall not be considered payment by
the Trust Fund nor shall such payments discharge the obligation of the Trust
Fund with respect to such Insured Certificates, and the Certificate Insurer
shall become the owner of such unpaid amounts due from
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the Trust Fund in respect of Insured Certificates. The Trustee hereby agrees on
behalf of each Holder of an Insured Certificate for the benefit of the
Certificate Insurer that it recognizes that to the extent the Certificate
Insurer makes Insured Payments, either directly or indirectly (as by paying
through the Trustee), to the insured Certificateholders, the Certificate Insurer
will be subrogated to the rights of the insured Certificateholders with respect
to such Insured Payment, shall be deemed to the extent of payments so made to be
a registered insured Certificateholder and shall receive all future
distributions until all such Insured Payments by the Certificate Insurer,
together with interest thereon at the interest rate borne by the Insured
Certificates, have been fully reimbursed. To evidence such subrogation, the
Trustee shall, or shall cause the Certificate Registrar to, note the Certificate
Insurer's rights as subrogee on the registration books maintained by the Trustee
or the Certificate Registrar upon receipt from the Certificate Insurer of proof
of payment of any Insured Payment. The effect of the foregoing provisions is
that, to the extent of Insured Payments made by it, the Certificate Insurer
shall be paid before payment of the balance of the distributions are made to the
other Owners of the Insured Certificates.
Section 7.4. Reserved.
Section 7.5. Flow of Funds. (a) The Trustee shall deposit to the
Certificate Account with respect to Group I, without duplication, upon receipt,
any Insured Payments relating to Group I, the proceeds of any liquidation of the
assets of the Trust, insofar as such assets relate to Group I, the Group I
Monthly Remittance Amount remitted by the Master Servicer or any Sub-Servicer,
together with any Substitution Amounts and any Loan Purchase Price amounts
received by the Trustee (each with respect to Group I).
(b) The Trustee shall deposit to the Certificate Account with respect to
Group II, without duplication, upon receipt, any Insured Payments relating to
Group II, the proceeds of any liquidation of the assets of the Trust, insofar as
such assets relate to Group II, the Group II Monthly Remittance Amount remitted
by the Master Servicer or any Sub-Servicer, together with any Substitution
Amounts and any Loan Purchase Price amounts received by the Trustee (each with
respect to Group II).
(c) Subject to any superseding provisions of clause (d) below during the
continuance of a Certificate Insurer Default, on each Payment Date the Trustee
shall make the following allocations, disbursements and transfers of amounts
then on deposit in the Certificate Account for each Mortgage Loan Group in the
following order of priority, and each such allocation, transfer and disbursement
shall be treated as
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having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) first, from amounts then on deposit in the Certificate Account to the
Master Servicer, an amount equal to any Master Servicing Fees then due
to it on account of the Unaffiliated Originator Loans not theretofore
received by the Master Servicer pursuant to Section 8.8(c)(i) hereof,
as reported by the Master Servicer to the Trustee;
(ii) second, (x) from amounts then on deposit therein with respect to Group
I, the Group I Premium Amount for such Payment Date and (y) from
amounts then on deposit therein with respect to Group II, the Group II
Premium Amount for such Payment Date;
(iii) third, from amounts then on deposit in the Certificate Account to the
Trustee, an amount equal to the Trustee's Fees then due to it;
(iv) fourth, on each Payment Date, the Trustee shall allocate an amount
equal to the excess of (a) the sum of (x) the Total Monthly Excess
Spread with respect to such Mortgage Loan Group and Payment Date plus
(y) any Subordination Reduction Amount with respect to such Mortgage
Loan Group and Payment Date (such sum being the "Total Monthly Excess
Cashflow" with respect to such Mortgage Loan Group and Payment Date)
with respect to each Mortgage Loan Group in the following order of
priority:
(A) first, such Total Monthly Excess Cashflow shall be allocated on
such Payment Date with respect to the related Mortgage Loan Group
in an amount equal to the excess, if any, of (x) the related
Group Insured Distribution Amount for such Payment Date over (y)
the Available Funds with respect to such Mortgage Loan Group for
such Payment Date (the amount of such difference being the
"Available Funds Shortfall" with respect to the related Mortgage
Loan Group);
(B) second, any portion of the Total Monthly Excess Cashflow with
respect to such Mortgage Loan Group remaining after the
application described in clause (A) above shall be allocated
against any Available Funds Shortfall with respect to the other
Mortgage Loan Group;
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(C) third, any portion of the Total Monthly Excess Cashflow with
respect to such Mortgage Loan Group remaining after the
allocations described in clauses (A) and (B) above shall be paid
to the Certificate Insurer in respect of amounts owed on account
of any Reimbursement Amount with respect to the related Mortgage
Loan Group;
(D) fourth, any portion of the Total Monthly Excess Cashflow with
respect to such Mortgage Loan Group remaining after the
allocations described in clauses (A), (B) and (C) above shall be
paid to the Certificate Insurer in respect of any Reimbursement
Amount with respect to the other Mortgage Loan Group;
(v) fifth, the amount, if any, of the Total Monthly Excess Cashflow with
respect to a Mortgage Loan Group on a Payment Date remaining after the
allocations described in clause (iv) above is the "Net Monthly Excess
Cashflow" with respect to such Mortgage Loan Group for such Payment
Date; such amount is required to be applied in the following order of
priority:
(A) first, such Net Monthly Excess Cashflow shall be used to reduce
to zero, through the payment of a Subordination Increase Amount,
any Subordination Deficiency Amount with respect to the related
Mortgage Loan Group as of such Payment Date;
(B) second, any portion of the Net Monthly Excess Cashflow remaining
after the application described in clause (A) above shall be used
to reduce to zero, through the payment of a Subordination
Increase Amount, any Subordination Deficiency Amounts with
respect to the other Mortgage Loan Group; if Subordination
Deficiency Amounts exist with respect to the other Mortgage Loan
Group on such Payment Date, such remaining amount shall be used
to fund Subordination Increase Amounts; and
(C) third, any remaining Net Monthly Excess Cashflow remaining after
the applications described in clauses (A) and (B) above shall be
paid to the Master Servicer to the extent of any unreimbursed
Delinquency Advances, unreimbursed Servicing Advances and accrued
and unpaid Servicing Fees, in each case as
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certified to the Trustee by the Master Servicer to be owing to it
as of such Payment Date.
(vi) sixth, following the making by the Trustee of all allocations,
transfers and disbursements described above under Sections 7.3 and
7.10 hereof and the prior clauses of this Section 7.5, from amounts
(including any related Insured Payment) then on deposit in the
Certificate Account with respect to the Group I Mortgages, the Trustee
shall distribute (i) to the Owners of the Class A-1 Certificates the
Class A-1 Distribution Amount for such Payment Date; (ii) to the
Owners of the Class A-2 Certificates, the Class A-2 Distribution
Amount for such Payment Date; (iii) to the Owners of the Class A-3
Certificates, the Class A-3 Distribution Amount for such Payment Date;
(iv) to the Owners of the Class A-4 Certificates, the Class A-4
Distribution Amount for such Payment Date; (v) to the Owners of the
Class A-5 Certificates, the Class A-5 Distribution Amount for such
Payment Date, and (vi) to the Class A-6 Distribution Account, the
Class A- 6 Distribution Amount for such Payment Date and (ix) to the
Class R Distribution Account, the Residual Net Monthly Excess
Cashflow, if any, for such Payment Date.
(vii) seventh, on each Payment Date, the Trustee shall transfer all moneys
then on deposit in the Class R Distribution Account to the
Supplemental Interest Payment Account; such transfer shall be deemed
to be a distribution on the Class R Certificates.
(d) On any Payment Date during the continuance of any Certificate Insurer
Default:
(i) No Premium Amounts or Reimbursement Amounts shall be paid to the
Certificate Insurer, and any amounts otherwise payable to the
Certificate Insurer as Premium Amounts or Reimbursement Amounts
shall be retained in the Certificate Account as Group I Total
Available Funds or Group II Total Available Funds, as
appropriate; and
(ii) If there is a Subordination Deficit for Group I, then the Group I
Total Available Funds for such Payment Date shall be distributed
pro rata to the Owners of any Outstanding Group I Certificates on
such Payment Date, with such amount first
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applied to accrued interest then due on the Group I Certificates,
with any remaining amount applied to principal.
(e) The Trustee shall distribute on each Payment Date to the Owners of the
Class A-6 Certificates, from the amount then on deposit in the Class A-6
Distribution Account, the lesser of (x) such amount on deposit in such Account
and (y) the Class A-6 Full Distribution Amount on such Payment Date. Any
application of such amount shall be first made to interest and then to principal
(subject to the requirements of paragraph (d)(ii) above).
(f) Notwithstanding any of the foregoing provisions, the aggregate amount
distributed to the Owners of any Class A Certificates on account of principal
shall not exceed the Original Certificate Principal Balance for the related
Class.
Section 7.6. Investment of Accounts. (a) So long as no event described in
Sections 8.20(a) or (b) hereof shall have occurred and be continuing, and
consistent with any requirements of the Code, all or a portion of the Accounts
held by the Trustee shall be invested and reinvested by the Trustee in the name
of the Trustee for the benefit of the Owners, as directed in writing by the
Master Servicer, in one or more Eligible Investments bearing interest or sold at
a discount. During the continuance of an event described in Sections 8.20(a) or
(b) hereof and following any removal of the Master Servicer, the Certificate
Insurer shall direct such investments. No investment in any Account shall mature
later than the Business Day immediately preceding the next Payment Date.
(b) If any amounts are needed for disbursement from any Account held by the
Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. No investments will be
liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in any way be
held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any loss on any Eligible Investment included therein (except to
the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held by the Trustee
uninvested upon the occurrence of either of the following events:
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(i) the Master Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee within
ten days after receipt of a written request for such directions from the
Trustee; or
(ii) the Master Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee during
the ten-day period described in clause (i) preceding, by 11:15 a.m. New
York time (or such other time as may be agreed by the Master Servicer or
the Certificate Insurer, as the case may be, and the Trustee) on any
Business Day (any such investment by the Trustee pursuant to this clause
(ii) to mature on the next Business Day after the date of such investment).
(e) For purposes of investment, the Trustee shall aggregate all amounts on
deposit in the Accounts. All income or other gain from investments in the
Accounts shall be deposited, pro rata, in the Accounts immediately on receipt,
and any loss resulting from such investments shall be charged, pro rata, to the
Accounts.
Section 7.7. Eligible Investments. The following are Eligible Investments:
(a) Direct general obligations of the United States or the obligations of
any agency or instrumentality of the United States fully and unconditionally
guaranteed, the timely payment or the guarantee of which constitutes a full
faith and credit obligation of the United States.
(b) Federal Housing Administration debentures and rated Aa2 or higher by
Moody's.
(c) Freddie Mac senior debt obligations and rated Aa2 or higher by Moody's.
(d) Federal Home Loan Banks' consolidated senior debt obligations and rated
Aa2 or higher by Moody's.
(e) FNMA senior debt obligations and rated Aa2 or higher by Moody's.
(f) Federal funds, certificates of deposit, time and demand deposits, and
bankers' acceptances (having original maturities of not more than 365 days) of
any domestic bank, the short-term debt obligations of which have been rated A-1
or better by Standard & Poor's and P-1 by Moody's.
(g) Investment agreements approved by the Certificate Insurer provided:
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1. The agreement is with a bank or insurance company which has an
unsecured, uninsured and unguaranteed obligation (or claims-paying ability)
rated Aa2 or better by Moody's and AA or better by Standard & Poor's and
2. Moneys invested thereunder may be withdrawn without any penalty,
premium or charge upon not more than one day's notice (provided such notice
may be amended or canceled at any time prior to the withdrawal date), and
3. The agreement is not subordinated to any other obligations of such
insurance company or bank, and
4. The same guaranteed interest rate will be paid on any future
deposits made pursuant to such agreement, and
5. The Trustee and the Certificate Insurer receive an opinion of
counsel that such agreement is an enforceable obligation of such insurance
company or bank.
(h) Commercial paper (having original maturities of not more than 365 days)
rated A-1 or better by Standard & Poor's and P-1 or better by Moody's.
(i) Investments in money market funds rated AAAm or AAAm-G by Standard &
Poor's and Aaa or P-1 by Moody's.
(j) Investments approved in writing by the Certificate Insurer and
acceptable to Moody's and Standard & Poor's;
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
Section 7.8. Reports by Trustee. (a) On each Payment Date the Trustee shall
provide to each Owner, to the Master Servicer, to the Certificate Insurer, to
each Underwriter, to the Sponsor, to Standard & Poor's and to Moody's a written
report in substantially the form set forth as Exhibit J hereto with respect to
each Mortgage Loan Group, as such form may be revised by the Trustee, the Master
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Servicer, Moody's and Standard & Poor's from time to time, but in every case
setting forth the information requested on Exhibit J hereto and the following
information:
(i) the amount of the distribution with respect to the related Class
of the Class A Certificates and the Class RS Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein and separately
identifying any Subordination Increase Amounts;
(iii) the amount of such distributions allocable to interest;
(iv) the Certificate Principal Balance for each Class of Class A
Certificates as of such Payment Date, together with the principal amount of
such Class of Class A Certificates (based on a Certificate in an original
principal amount of $1,000) then outstanding, in each case after giving
effect to any payment of principal on such Payment Date;
(v) the amount of any Insured Payment included in the amounts
distributed to any Class of Certificates on such Payment Date;
(vi) information furnished by the Sponsor pursuant to Section
6049(d)(7)(C) of the Code and the regulations promulgated thereunder to
assist the Owners in computing their market discount;
(vii) the total of any Substitution Amounts and any Loan Purchase
Price amounts included in such distribution;
(viii) the amount of any Supplemental Interest Payment, Class RS
Certificate distribution and any Interest Advance on such Distribution
Date, together with the amount of any unreimbursed Interest Advance then
owed to the Trustee;
(ix) the amount of any Subordination Reduction Amount with respect to
each Mortgage Loan Group;
(x) the amounts, if any, of any Realized Losses in each Mortgage Loan
Group for the related Remittance Period;
(xi) the Pool Rolling Three-Month Delinquency Rate and the Pool
Cumulative Realized Losses (x) as a
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percentage of the average Pool Principal Balance as of the close of
business on the last day of each of the twelve preceding Remittance Periods
and (y) as a percentage of the Original Aggregate Loan Balance; and
(xii) a number with respect to each Class (the "Pool Factor" for such
Class) computed by dividing the Certificate Loan Balance for such Class
(after giving effect to any distribution of principal to be made on such
Payment Date) by the Original Certificate Principal Balance for such Class
on the Startup Day.
Items (i) through (iii) above shall, with respect to each Class of Class A
Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to
the Certificates for such calendar year.
(b) In addition, on each Payment Date the Trustee will distribute to each
Owner, to the Certificate Insurer, to each Underwriter, to the Master Servicer,
to the Sponsor, to Standard & Poor's and to Moody's, together with the
information described in Subsection (a) preceding, the following information
with respect to each Mortgage Loan Group as of the close of business on the last
Business Day of the prior calendar month, which is hereby required to be
prepared by the Master Servicer and furnished to the Trustee for such purpose on
or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each Mortgage Loan Group and
the aggregate Loan Balances thereof, together with the number, aggregate
principal balances of such Mortgage Loans in such Mortgage Loan Group and
the percentage (based on the aggregate Loan Balances of the Mortgage Loans
in such Mortgage Loan Group) of the aggregate Loan Balances of such
Mortgage Loans to the aggregate Loan Balance of all Mortgage Loans in the
related Mortgage Loan Group (a) 30-59 days Delinquent, (b) 60-89 days
Delinquent and (c) 90 or more days Delinquent;
(ii) the number, aggregate Loan Balances of all Mortgage Loans in each
Mortgage Loan Group and percentage (based on the aggregate Loan Balances of
the Mortgage Loans in such Mortgage Loan Group) of the aggregate Loan
Balances of such Mortgage Loans to the aggregate Loan Balance of all
Mortgage Loans in the related Mortgage Loan Group in foreclosure
proceedings (and whether any
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such Mortgage Loans are also included in any of the statistics described in
the foregoing clause (i));
(iii) the number, aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group relating
to Mortgagors in bankruptcy proceedings (and whether any such Mortgage
Loans are also included in any of the statistics described in the foregoing
clause (i));
(iv) the number, aggregate Loan Balances of all Mortgage Loans in each
Mortgage Loan Group and percentage (based on the aggregate Loan Balances of
the Mortgage Loans in such Mortgage Loan Group) of the aggregate Loan
Balances of such Mortgage Loans to the aggregate Loan Balance of all
Mortgage Loans in the related Mortgage Loan Group relating to REO
Properties (and whether any such Mortgage Loans are also included in any of
the statistics described in the foregoing clause (i)); and
(v) the book value of any REO Property in each Mortgage Loan Group.
(c) The foregoing reports shall be sent be to an Owner only insofar as such
Owner owns a Certificate with respect to the related Mortgage Loan Group.
The Sponsor, the Master Servicer and the Trustee on behalf of
Certificateholders and the Trust (the "Trust Parties") hereby authorize the
Certificate Insurer and the Trustee to include the information contained in
reports provided to the Certificate Insurer or the Trustee hereunder (the
"Information") on The Bloomberg, an on-line computer based information network
maintained by Bloomberg L.P. ("Bloomberg"), or in other electronic or print
information services. The Trust Parties agree not to commence any actions or
proceedings, or otherwise assert any claims, against the Certificate Insurer or
the Trustee or their affiliates or any of the Certificate Insurer's or the
Trustee's or their affiliates' respective agents, representatives, directors,
officers or employees (collectively, the "Designated Parties"), arising out of,
or related to or in connection with the dissemination and/or use of any
Information by the Certificate Insurer or the Trustee, including, but not
limited to, claims based on allegations of inaccurate, incomplete or erroneous
transfer of information by the Certificate Insurer or the Trustee to Bloomberg
or otherwise (other than in connection with the Certificate Insurer's or the
Trustee's gross negligence or willful misconduct). The Trust Parties
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waive their rights to assert any such claims against the Designated Parties and
fully and finally release the Designated Parties from any and all such claims,
demands, obligations, actions and liabilities (other than in connection with
such Designated's gross negligence or willful misconduct). The Certificate
Insurer and the Trustee make no representations or warranties, expressed or
implied, of any kind whatsoever with respect to the accuracy, adequacy,
timeliness, completeness, merchantability or fitness for any particular purpose
of any Information in any form or manner. The Certificate Insurer reserve the
right at any time to withdraw or suspend the dissemination of the Information by
the Certificate Insurer or the Trustee, as appropriate. The authorizations,
covenants and obligations of the Trust Parties under this section shall be
irrevocable and shall survive the termination of this Agreement.
Section 7.9. Additional Reports by Trustee. (a) The Trustee shall report to
the Sponsor, the Master Servicer and the Certificate Insurer with respect to the
amount then held in each Account (including investment earnings accrued or
scheduled to accrue) held by the Trustee and the identity of the investments
included therein, as the Sponsor, the Master Servicer or the Certificate Insurer
may from time to time request. Without limiting the generality of the foregoing,
the Trustee shall, at the request of the Sponsor, the Master Servicer or the
Certificate Insurer, transmit promptly to the Sponsor, the Master Servicer and
the Certificate Insurer copies of all accounting of receipts in respect of the
Mortgage Loans furnished to it by the Master Servicer and shall notify the
Sponsor, the Master Servicer and the Certificate Insurer if any such receipts
have not been received by the Trustee.
(b) The Trustee shall immediately report to the Certificate Insurer with
respect to its actual knowledge, without independent investigation, of any
breach of any of the representations or warranties relating to individual
Mortgage Loans set forth in any Master Transfer Agreement or in Section 3.3(a)
hereof. On the date that is eighteen months after the Startup Day, the Trustee
shall provide the Certificate Insurer with a written report of all of such
inaccuracies to such date of which it has actual knowledge, without independent
investigation, and of the action taken by the Originators and/or the Sponsor
under the related Master Transfer Agreement or under Section 3.4(b) hereof with
respect thereto.
Section 7.10. Supplemental Interest Payment Account, Supplement Interest
Payments and Class RS Distribution Account.
(a) The parties hereto do hereby create and establish a trust, the "Advanta
Supplemental Interest Trust
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1996-2" (the "Supplemental Interest Trust"). The Supplemental Interest Trust
shall hold two trust accounts, the "Supplemental Interest Payment Account" and a
"Class RS Distribution Account" to be held by the Trustee in its name on behalf
of the Supplemental Interest Trust.
(b) The amount, if any, on deposit in the Supplemental Interest Payment
Account on any Payment Date is the "Supplemental Interest Payment Amount
Available" on such Payment Date.
If, on any Determination Date, the Trustee determines that the Supplemental
Interest Payment Amount Available to be available on the next Payment Date is
less than the excess of (x) the excess of (i) the Class A-6 Full Interest
Distribution Amount over (ii) the Class A-6 Interest Distribution Amount over
(y) the Supplemental Interest Payment Amount Available as of such Payment Date
(the "Class A-6 Formula Interest Shortfall"), the Trustee shall demand that the
Designated Residual Owner fund the Class A-6 Formula Interest Shortfall on the
related Payment Date. The amount so funded by the Designated Residual Owner on
any such Payment Date is the "Interest Advance" for such Payment Date.
On each Payment Date the Trustee shall withdraw from the Supplemental
Interest Payment Account and deposit in the Class A-6 Distribution Account the
lesser of (x) the amount by which the Class A-6 Full Interest Distribution
Amount exceeds the Class A-6 Interest Distribution Amount and (y) the
Supplemental Interest Payment Amount Available.
(c) Any portion of the Supplemental Interest Payment Amount Available after
application of clause (b) above shall be applied in the following order of
priority:
(i) first, to the Designated Residual Owner, as reimbursement for
unpaid Interest Advances, together with interest thereon, with the earliest
Interest Advances being deemed to be paid first;
(ii) second, to the Class RS Distribution Account, the remainder.
(d) the Trustee shall on each Payment Date and after making all other
transfers and distributions distribute the amount on deposit in the Class RS
Distribution Account to the Owners of the Class RS Certificates, pro rata in
accordance with their Percentage Interests.
ARTICLE VIII
SERVICING AND ADMINISTRATION
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OF MORTGAGE LOANS
Section 8.1. Master Servicer and Sub-Servicers. (a) Acting directly or
through one or more Sub-Servicers as provided in Section 8.3, the Master
Servicer, as master servicer, shall service and administer the Mortgage Loans in
accordance with this Agreement and with reasonable care, and using that degree
of skill and attention that the Master Servicer exercises with respect to
comparable mortgage loans that it services for itself or others, and shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable.
(b) The duties of the Master Servicer shall include collecting and posting
of all payments, responding to inquiries of Mortgagors or by federal, state or
local government authorities with respect to the Mortgage Loans, investigating
delinquencies, reporting tax information to Mortgagors in accordance with its
customary practices and accounting for collections and furnishing monthly and
annual statements to the Trustee with respect to distributions, paying
Compensating Interest and making Delinquency Advances and Servicing Advances
pursuant hereto. The Master Servicer shall follow its customary standards,
policies and procedures in performing its duties as Master Servicer. The Master
Servicer shall cooperate with the Trustee and furnish to the Trustee with
reasonable promptness information in its possession as may be necessary or
appropriate to enable the Trustee to perform its tax reporting duties hereunder.
The Trustee shall furnish the Master Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Master Servicer to carry
out its servicing and administrative duties hereunder.
(c) Without limiting the generality of the foregoing, the Master Servicer
(i) shall continue, and is hereby authorized and empowered by the Trustee, to
execute and deliver, on behalf of itself, the Owners and the Trustee or any of
them, any and all instruments of satisfaction or cancellation, or of full
release or discharge and all other comparable instruments, with respect to the
Mortgage Loans and with respect to the related Properties; (ii) may consent to
any modification of the terms of any Note not expressly prohibited hereby if the
effect of any such modification (x) will not be to affect materially and
adversely the security afforded by the related Property, the timing of receipt
of any payments required hereby or the interests of the Certificate Insurer and
(y) will not cause the REMIC Trust to fail to qualify as a REMIC.
(d) The Master Servicer shall have the right using that degree of skill and
attention that the Master Servicer
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exercises with respect to comparable mortgage loans that it services for itself
or others, to approve applications of Mortgagors for consent to (i) partial
releases of Mortgages, (ii) alterations to Properties and (iii) removal,
demolition or division of Properties. No application for approval shall be
considered by the Master Servicer unless: (x) the provisions of the related Note
and Mortgage have been complied with; (y) the Combined Loan-to-Value Ratio
(which may, for this purpose, be determined at the time of any such action in a
manner reasonably acceptable to the Certificate Insurer) and the Mortgagor's
debt-to-income ratio after any release does not exceed the Combined
Loan-to-Value Ratio and debt-to-income ratio applicable to such Mortgage Loan at
origination and (z) the lien priority of the related Mortgage is not adversely
affected; provided, however, that the foregoing requirements (x), (y) and (z)
shall not apply to any such situation described in this paragraph if such
situation results from any condemnation or easement activity by a governmental
entity.
(e) The parties intend that the REMIC Trust shall constitute, and that the
affairs of REMIC Trust shall be conducted so as to qualify it as a REMIC. In
furtherance of such intention, the Master Servicer covenants and agrees that it
shall act as agent (and the Master Servicer is hereby appointed to act as agent)
on behalf of the REMIC Trust and that in such capacity it shall: (i) use its
best efforts to conduct the affairs of the REMIC Trust at all times that any
Class of Certificates are outstanding so as to maintain the status of the REMIC
Trust as a REMIC under the REMIC Provisions; (ii) not knowingly or intentionally
take any action or omit to take any action that would cause the termination of
the REMIC status of REMIC Trust or that would subject the Trust to tax and (iii)
exercise reasonable care not to allow the REMIC Trust to receive income from the
performance of services or from assets not permitted under the REMIC Provisions
to be held by a REMIC.
(f) The Master Servicer may, and is hereby authorized to, perform any of
its servicing responsibilities with respect to all or certain of the Mortgage
Loans through a Sub-Servicer as it may from time to time designate, but no such
designation of a Sub-Servicer shall serve to release the Master Servicer from
any of its obligations under this Agreement. Such Sub-Servicer shall have all
the rights and powers of the Master Servicer with respect to such Mortgage Loans
under this Agreement.
(g) Without limiting the generality of the foregoing, but subject to
Sections 8.13 and 8.14, the Master Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Trustee to execute and deliver, and may be
authorized and empowered by the Trustee, to execute
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and deliver, on behalf of itself, the Owners and the Trustee or any of them, (i)
any and all instruments of satisfaction or cancellation or of partial or full
release or discharge and all other comparable instruments with respect to the
Mortgage Loans and with respect to the Properties, (ii) and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Property on behalf of the Trustee, and (iii) to hold title to
any Property upon such foreclosure or deed in lieu of foreclosure on behalf of
the Trustee; provided, however, that Section 8.14(a) shall constitute a power of
attorney from the Trustee to the Master Servicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Mortgage Loan paid in full (or with respect to which payment in full has been
escrowed). Subject to Sections 8.13 and 8.14, the Trustee shall furnish the
Master Servicer and any Sub-Servicer with any powers of attorney and other
documents as the Master Servicer or such Sub-Servicer shall reasonably request
to enable the Master Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
(h) The Master Servicer shall give prompt notice to the Trustee of any
action, of which the Master Servicer has actual knowledge, to (i) assert a claim
against the Trust or (ii) assert jurisdiction over the Trust.
(i) Servicing Advances incurred by the Master Servicer or any Sub-Servicer
in connection with the servicing of the Mortgage Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Property shall be recoverable by the Master Servicer or such Sub-Servicer to
the extent described in Section 8.9(c) and in Section 7.5(c)(v)(C) hereof.
Section 8.2. Collection of Certain Mortgage Loan Payments. (a) The Master
Servicer shall, to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any applicable Insurance Policies,
follow such collection procedures as it follows from time to time with respect
to mortgage loans in its servicing portfolio that are comparable to the Mortgage
Loans; provided that the Master Servicer shall always at least follow collection
procedures that are consistent with or better than standard industry practices.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or about to be in default because of a Mortgagor's
financial condition, arrange with the Mortgagor a schedule for the payment of
delinquent payments due on the related Mortgage Loan;
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provided, however, the Master Servicer shall not reschedule the payment of
delinquent payments more than one time in any twelve consecutive months with
respect to any Mortgagor.
(b) The Master Servicer shall hold in escrow on behalf of the related
Mortgagor all Prepaid Installments received by it, and shall apply such Prepaid
Installments as directed by such Mortgagor and as set forth in the related Note.
Section 8.3. Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers. The Master Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution which is
in compliance with the laws of each state necessary to enable it to perform its
obligations under such Sub-Servicing Agreement. The Master Servicer shall give
notice to the Certificate Insurer of the appointment of any Sub-Servicer and
shall furnish to the Certificate Insurer a copy of the Subservicing Agreement.
For purposes of this Agreement, the Master Servicer shall be deemed to have
received payments on Mortgage Loans when any Sub-Servicer has received such
payments. Any such Sub-Servicing Agreement shall be consistent with and not
violate the provisions of this Agreement.
Section 8.4. Successor Sub-Servicers. The Master Servicer may terminate any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement and to either itself directly service the related
Mortgage Loans itself or enter into a Sub-Servicing Agreement with a successor
Sub-Servicer that qualifies under Section 8.3.
Section 8.5. Liability of Master Servicer. The Master Servicer shall not be
relieved of its obligations under this Agreement notwithstanding any
Sub-Servicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a Sub-Servicer or
otherwise, and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in such Sub-Servicing
Agreement shall be deemed to limit or modify this Agreement. The Trust shall not
indemnify the Master Servicer for any losses due to the Master Servicer's
negligence.
Section 8.6. No Contractual Relationship Between Sub-Servicer and Trustee
or the Owners. Any Sub-Servicing Agreement and any other transactions or
services relating to
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the Mortgage Loans involving a Sub-Servicer shall be deemed to be between the
Sub-Servicer and the Master Servicer alone and the Certificate Insurer, the
Trustee and the Owners shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to any
Sub-Servicer except as set forth in Section 8.7.
Section 8.7. Assumption or Termination of Sub-Servicing Agreement by
Trustee. In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Master Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Master Servicer and a Sub-Servicer may be
assumed or terminated by the Trustee at its option.
The Master Servicer shall, upon request of the Trustee, but at the expense
of the Master Servicer, deliver to the assuming party documents and records
relating to each Sub-Servicing Agreement and an accounting of amounts collected
and held by it and otherwise use its best reasonable efforts to effect the
orderly and efficient transfer of the Sub-Servicing Agreements to the assuming
party, without the payment of any fee by the Trustee, notwithstanding any
contrary provision in any Sub-Servicing Agreement.
Section 8.8. Principal and Interest Account.
(a) The Master Servicer and/or each Sub-Servicer, as applicable, shall
establish in the name of the Trust for the benefit of the Owners of the
Certificates and maintain at one or more Designated Depository Institutions the
Principal and Interest Account.
Subject to Subsections (c) and (e) below, the Master Servicer and any
Sub-Servicer shall deposit all receipts related to the Mortgage Loans to the
Principal and Interest Account on a daily basis (but no later than the first
Business Day after receipt).
On the Startup Day the Sponsor and/or the Master Servicer shall deposit to
the Principal and Interest Account all receipts related to the Mortgage Loans
which relate to or are received on or after the Cut-Off Date.
(b) All funds in the Principal and Interest Account may only be held (i)
uninvested, up to the limits insured by the FDIC or (ii) invested in Eligible
Investments. The Principal and Interest Account shall be held in trust in the
name of the Trust and for the benefit of the Owners of the Certificates. Any
investment earnings on funds held in the Principal and Interest Account shall be
for the account of the
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Master Servicer and may only be withdrawn from the Principal and Interest
Account by the Master Servicer immediately following the remittance of the
Monthly Remittance Amounts by the Master Servicer. Any references herein to
amounts on deposit in the Principal and Interest Account shall refer to amounts
net of such investment earnings. Any investment losses are at the expense of the
Master Servicer and shall be replaced on or prior to the Remittance Date.
(c) Subject to Subsection (e) below, the Master Servicer shall deposit to
the Principal and Interest Account all principal and interest collections on the
Mortgage Loans received on or after the Cut-Off Date including any Prepaid
Installments, Prepayments and Net Liquidation Proceeds, all Loan Purchase Prices
and Substitution Amounts received or paid by the Master Servicer with respect to
the Mortgage Loans, other recoveries or amounts related to the Mortgage Loans
received by the Master Servicer, Compensating Interest and Delinquency Advances
together with any amounts which are reimbursable from the Principal and Interest
Account, but net of (i) the Servicing Fee with respect to each Mortgage Loan and
other servicing compensation to the Master Servicer as permitted by Section 8.15
hereof, (ii) principal (including Prepayments) collected on the related Mortgage
Loans prior to the Cut-Off Date, (iii) interest accruing on the related Mortgage
Loans prior to the Cut-Off Date and (iv) Net Liquidation Proceeds to the extent
such Net Liquidation Proceeds exceed the Loan Balance of the related Mortgage
Loan.
(d) (i) The Master Servicer may make withdrawals from the Principal and
Interest Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of the Monthly
Remittance Amounts due on the Remittance Date;
(B) to reimburse itself pursuant to Section 8.9(a) hereof for unrecovered
Delinquency Advances and Servicing Advances;
(C) to withdraw investment earnings on amounts on deposit in the Principal
and Interest Account;
(D) to withdraw amounts that have been deposited to the Principal and
Interest Account in error; and
(E) to clear and terminate the Principal and Interest Account following
the termination of the Trust Estate pursuant to Article X.
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(ii) On the tenth day of each month, the Master Servicer shall send to the
Trustee a report, in the form of a computer tape, detailing the payments on the
Mortgage Loans during the prior Remittance Period. Such tape shall be in the
form and have the specifications as may be agreed to between the Master Servicer
and the Trustee from time to time.
(iii) On each Remittance Date the Master Servicer shall remit to the
Trustee by wire transfer, or otherwise make funds available in immediately
available funds, (x) for Group I, the Group I Interest Remittance Amount and the
Group I Principal Remittance Amount and (y) for Group II, the Group II Interest
Remittance Amount and the Group II Principal Remittance Amount.
(e) To the extent that the ratings, if any, then assigned to the unsecured
debt of the Master Servicer or of the Master Servicer's ultimate corporate
parent are satisfactory to the Certificate Insurer, Moody's and Standard &
Poor's, then the requirement to maintain the Principal and Interest Account may
be waived by an instrument signed by the Certificate Insurer, Standard & Poor's
and Moody's, and the Master Servicer may be allowed to co-mingle with its
general funds the amounts otherwise required to be deposited to the Principal
and Interest Account, on such terms and subject to such conditions as the
Certificate Insurer, Moody's and Standard & Poor's may permit.
Section 8.9. Delinquency Advances, Compensating Interest and Servicing
Advances. (a) The Master Servicer is required, not later than each Remittance
Date, to deposit into the Principal and Interest Account an amount equal to the
sum of the interest portions (net of the Servicing Fees) due, but not collected,
with respect to Delinquent Mortgage Loans during the prior Remittance Period,
but only if, in its good faith business judgment, the Master Servicer reasonably
believes that such amount will ultimately be recovered from the related Mortgage
Loan. Such amounts are "Delinquency Advances".
The Master Servicer shall be permitted to fund its payment of Delinquency
Advances on any Remittance Date and to reimburse itself for any Delinquency
Advances paid from the Master Servicer's own funds, from collections on the
related Mortgage Loan. The Master Servicer may use funds deposited to the
Principal and Interest Account subsequent to the related Remittance Period and
shall deposit into the Principal and Interest Account with respect thereto (i)
collections from the Mortgagor whose Delinquency gave rise to the shortfall
which resulted in such Delinquency Advance and (ii) Net Liquidation Proceeds
recovered on account of the related Mortgage Loan to the extent of the amount of
aggregate Delinquency Advances related thereto or (iii) from its own funds. If
not therefore
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recovered from the related Mortgagor or the related Net Liquidation Proceeds,
Delinquency Advances shall be recoverable pursuant to Section 7.5(c)(v)(C).
(b) On or prior to each Remittance Date, the Master Servicer shall deposit
in the Principal and Interest Account with respect to any full Prepayment
received on a Mortgage Loan during the related Remittance Period out of its own
funds without any right of reimbursement therefor, an amount equal to the
difference between (x) 30 days' interest at the Mortgage Loan's Coupon Rate
(less the Servicing Fee) on the Loan Balance of such Mortgage Loan as of the
first day of the related Remittance Period and (y) to the extent not previously
advanced, the interest (less the Servicing Fee) paid by the Mortgagor with
respect to the Mortgage Loan during such Remittance Period (any such amount paid
by the Master Servicer, "Compensating Interest"). The Master Servicer shall in
no event be required to pay Compensating Interest with respect to any Remittance
Period in an amount in excess of the aggregate Servicing Fee received by the
Master Servicer with respect to all Mortgage Loans for such Remittance Period.
(c) The Master Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, the cost of (i) Preservation Expenses, (ii) any enforcement or
judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Master Servicer reasonably believes such costs and expenses
will increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
amount so paid will constitute a "Servicing Advance". The Master Servicer may
recover Servicing Advances (x) from the Mortgagors to the extent permitted by
the Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of
the related Mortgage Loan and (y) as provided in Section 7.5(c)(v)(C) hereof. In
no case may the Master Servicer recover Servicing Advances from principal and
interest payments on any Mortgage Loan or from any amounts relating to any other
Mortgage Loan except as provided pursuant to Section 7.5(c)(v)(C) hereof.
Section 8.10. Purchase of Mortgage Loans. The Master Servicer may, but is
not obligated to, purchase for its own account any Mortgage Loan which becomes
Delinquent, in whole or in part, as to four consecutive monthly installments or
any Mortgage Loan as to which enforcement proceedings have been brought by the
Master Servicer or by any Sub-Servicer pursuant to Section 8.13. Any such Loan
so purchased shall be purchased by the Master Servicer on a Remittance Date at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Principal and Interest Account.
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Section 8.11. Maintenance of Insurance. (a) The Master Servicer shall cause
to be maintained with respect to each Mortgage Loan a hazard insurance policy
with a generally acceptable carrier that provides for fire and extended
coverage, and which provides for a recovery by the Master Servicer on behalf of
the Trust of insurance proceeds relating to such Mortgage Loan in an amount not
less than the least of (i) the outstanding principal balance of the Mortgage
Loan, (ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to a Property
in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Master Servicer will
cause to be maintained with respect thereto a flood insurance policy in a form
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier in an amount representing
coverage, and which provides for a recovery by the Master Servicer on behalf of
the Trust of insurance proceeds relating to such Mortgage Loan of not less than
the least of (i) the outstanding principal balance of the Mortgage Loan, (ii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify the
Trust and the Certificate Insurer out of the Master Servicer's own funds for any
loss to the Trust and the Certificate Insurer resulting from the Master
Servicer's failure to maintain the insurance required by this Section.
(c) In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended coverage on
all of the Mortgage Loans, then, to the extent such policy names the Master
Servicer as loss payee and provides coverage in an amount equal to the aggregate
unpaid principal balance on the Mortgage Loans without co-insurance, and
otherwise complies with the requirements of this Section 8.11, the Master
Servicer shall be deemed conclusively to have satisfied its obligations with
respect to fire and hazard insurance coverage under this Section 8.11, it being
understood and agreed that such blanket policy may contain a deductible clause,
in which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Property a policy complying with the preceding
paragraphs of this Section 8.11, and there shall have been a loss which would
have been covered by such policy, deposit in the Principal and Interest Account
from the Master Servicer's own funds the difference, if any, between the amount
that would have been payable under a policy complying with the preceding
paragraphs of this Section 8.11
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and the amount paid under such blanket policy. Upon the request of the Trustee
or the Certificate Insurer, the Master Servicer shall cause to be delivered to
the Trustee or the Certificate Insurer, a certified true copy of such policy.
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements.
When a Property has been or is about to be conveyed by the Mortgagor, the Master
Servicer shall, to the extent it has knowledge of such conveyance or prospective
conveyance, exercise its rights to accelerate the maturity of the related
Mortgage Loan under any "due-on-sale" clause contained in the related Mortgage
or Note; provided, however, that the Master Servicer shall not exercise any such
right if (i) the "due-on-sale" clause, in the reasonable belief of the Master
Servicer, is not enforceable under applicable law or (ii) the Master Servicer
reasonably believes that to permit an assumption of the Mortgage Loan would not
materially and adversely affect the interest of the Owners or of the Certificate
Insurer. In such event, the Master Servicer shall enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Note and, unless prohibited by applicable law or the Mortgage Documents, the
Mortgagor remains liable thereon. If the foregoing is not permitted under
applicable law, the Master Servicer is authorized to enter into a substitution
of liability agreement with such person, pursuant to which the original
Mortgagor is released from liability and such person is substituted as Mortgagor
and becomes liable under the Note; provided, however, that to the extent any
such substitution of liability agreement would be delivered by the Master
Servicer outside of its usual procedures for mortgage loans held in its own
portfolio the Master Servicer shall, prior to executing and delivering such
agreement, obtain the prior written consent of the Certificate Insurer. The
Mortgage Loan, as assumed, shall conform in all respects to the requirements,
representations and warranties of this Agreement. The Master Servicer shall
notify the Trustee that any such assumption or substitution agreement has been
completed by forwarding to the Trustee the original copy of such assumption or
substitution agreement, which copy shall be added by the Trustee to the related
File and which shall, for all purposes, be considered a part of such File to the
same extent as all other documents and instruments constituting a part thereof.
The Master Servicer shall be responsible for recording any such assumption or
substitution agreements. In connection with any such assumption or substitution
agreement, the required monthly payment on the related Mortgage Loan shall not
be changed but shall remain as in effect immediately prior to the assumption or
substitution, the stated maturity or outstanding principal amount of such
Mortgage Loan shall not be changed nor shall any required monthly payments of
principal or interest be deferred or forgiven. Any fee collected by the
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Master Servicer or the Sub-Servicer for consenting to any such conveyance or
entering into an assumption or substitution agreement shall be retained by or
paid to the Master Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption which the Master Servicer
may be restricted by law from preventing, for any reason whatsoever.
Section 8.13. Realization Upon Defaulted Mortgage Loans. (a) The Master
Servicer shall foreclose upon or otherwise comparably effect the ownership on
behalf of the Trust of Properties relating to defaulted Mortgage Loans as to
which no satisfactory arrangements can be made for collection of Delinquent
payments and which the Master Servicer has not purchased pursuant to Section
8.10. In connection with such foreclosure or other conversion, the Master
Servicer shall exercise such of the rights and powers vested in it hereunder,
and use the same degree of care and skill in their exercise or use, as prudent
mortgage lenders would exercise or use under the circumstances in the conduct of
their own affairs, including, but not limited to, advancing funds for the
payment of taxes, amounts due with respect to Senior Liens, and insurance
premiums. Any amounts so advanced shall constitute "Servicing Advances" within
the meaning of Section 8.9(b) hereof. The Master Servicer shall sell any REO
Property within 23 months of its acquisition by the Trust, unless the Master
Servicer obtains for the Trustee an opinion of counsel experienced in federal
income tax matters, addressed to the Trustee, the Certificate Insurer and the
Master Servicer, to the effect that the holding by the Trust of such REO
Property for any greater period will not result in the imposition of taxes on
"Prohibited Transactions" of the REMIC Trust as defined in Section 860F of the
Code or cause the Trust to fail to qualify as a REMIC under the REMIC Provisions
at any time that any Certificates are outstanding, in which case the Master
Servicer shall sell any REO Property by the end of any extended period specified
in any such opinion.
Notwithstanding the generality of the foregoing provisions, the Master
Servicer shall manage, conserve, protect and operate each REO Property for the
Owners solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the Trust of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from foreclosure
property" which is subject to taxation under the
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REMIC Provisions. Pursuant to its efforts to sell such REO Property, the Master
Servicer shall either itself or through an agent selected by the Master Servicer
protect and conserve such REO Property in the same manner and to such extent as
is customary in the locality where such REO Property is located and may,
incident to its conservation and protection of the interests of the Owners, rent
the same, or any part thereof, as the Master Servicer deems to be in the best
interest of the Owners for the period prior to the sale of such REO Property.
The Master Servicer shall take into account the existence of any hazardous
substances, hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act of 1976, or other federal, state or local
environmental legislation, on a Property in determining whether to foreclose
upon or otherwise comparably convert the ownership of such Property.
(b) The Master Servicer shall determine, with respect to each defaulted
Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan".
Section 8.14. Trustee to Cooperate; Release of Files. (a) Upon the payment
in full of any Mortgage Loan (including the repurchase of any Mortgage Loan or
any liquidation of such Mortgage Loan through foreclosure or otherwise), or the
receipt by the Master Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Master Servicer shall
deliver to the Trustee a Master Servicer's Trust Receipt. Upon receipt of such
Master Servicer's Trust Receipt, the Trustee shall promptly release the related
File, in trust to (i) the Master Servicer, (ii) an escrow agent or (iii) any
employee, agent or attorney of the Trustee, in each case pending its release by
the Master Servicer, such escrow agent or such employee, agent or attorney of
the Trustee, as the case may be. Upon any such payment in full, or the receipt
of such notification that such funds have been placed in escrow, the Master
Servicer is authorized to give, as attorney-in-fact for the Trustee and the
mortgagee under the Mortgage which secured the Note, an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account. In lieu of executing any such satisfaction or assignment, as
the case may be, the Master
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Servicer may prepare and submit to the Trustee, a satisfaction (or assignment
without recourse, if requested by the Person or Persons entitled thereto) in
form for execution by the Trustee with all requisite information completed by
the Master Servicer; in such event, the Trustee shall execute and acknowledge
such satisfaction or assignment, as the case may be, and deliver the same with
the related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of any Mortgage
Loan, including, without limitation, foreclosure or other comparable conversion
of a Mortgage Loan or collection under any applicable Insurance Policy, the
Trustee shall (except in the case of the payment or liquidation pursuant to
which the related File is released to an escrow agent or an employee, agent or
attorney of the Trustee), upon request of the Master Servicer and delivery to
the Trustee of a Master Servicer's Trust Receipt, release the related File to
the Master Servicer and shall execute such documents as shall be necessary to
the prosecution of any such proceedings, including, without limitation, an
assignment without recourse of the related Mortgage to the Master Servicer;
provided that there shall not be released and unreturned at any one time more
than 10% of the entire number of Files. The Trustee shall complete in the name
of the Trustee any endorsement in blank on any Note prior to releasing such Note
to the Master Servicer. Such receipt shall obligate the Master Servicer to
return the File to the Trustee when the need therefor by the Master Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of the liquidation information, in physical or electronic form, the
Master Servicer's Trust Receipt shall be released by the Trustee to the Master
Servicer.
(c) No costs associated with the procedures described in this Section 8.14
shall be an expense of the Trust.
(d) The provisions set forth in Subsections (a) and (b) may be superseded
by any waiver of the Document Delivery Requirement as may be given by the
Certificate Insurer, Moody's and Standard & Poor's pursuant to Section 3.5(j)
hereof.
Section 8.15. Servicing Compensation. As compensation for its activities
hereunder, the Master Servicer shall be entitled to retain the amount of the
Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad check charges,
assumption fees, late payment charges, or any other servicing-related fees, Net
Liquidation Proceeds not required to be deposited in the Principal and Interest
Account pursuant to Section 8.8(c)(v) and similar items may, to the
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extent collected from Mortgagors, be retained by the Master Servicer.
Section 8.16. Annual Statement as to Compliance. The Master Servicer, at
its own expense, will deliver to the Trustee, Certificate Insurer, Standard &
Poor's and Moody's, on or before the last day of March of each year, commencing
in 1997, an Officer's Certificate stating, as to each signer thereof, that (i) a
review of the activities of the Master Servicer during such preceding calendar
year and of performance under this Agreement has been made under such officers'
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officers and
the nature and status thereof including the steps being taken by the Master
Servicer to remedy such defaults.
Section 8.17. Annual Independent Certified Public Accountants' Reports. On
or before the last day of March of each year, commencing in 1997, the Master
Servicer, at its own expense, shall cause to be delivered to the Trustee, the
Certificate Insurer, Standard & Poor's and Moody's a letter or letters of a firm
of independent, nationally recognized certified public accountants reasonably
acceptable to the Certificate Insurer stating that such firm has, with respect
to the Master Servicer's overall servicing operations (i) performed applicable
tests in accordance with the compliance testing procedures as set forth in
Appendix 3 of the Audit Guide for Audits of HUD Approved Nonsupervised
Mortgagees or (ii) examined such operations in accordance with the requirements
of the Uniform Single Audit Program for Mortgage Bankers, and in either case
stating such firm's conclusions relating thereto.
Section 8.18. Access to Certain Documentation and Information Regarding the
Mortgage Loans. The Master Servicer shall provide to the Trustee, the
Certificate Insurer, the FDIC and the supervisory agents and examiners of each
of the foregoing access to the documentation regarding the Mortgage Loans
required by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Master Servicer designated by it.
Upon any change in the format of the computer tape maintained by the Master
Servicer in respect of the Mortgage Loans, the Master Servicer shall deliver a
copy of such computer tape to the Trustee and in addition shall provide a copy
of such computer tape to the Trustee and the Certificate
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Insurer at such other times as the Trustee or the Certificate Insurer may
reasonably request.
Section 8.19. Assignment of Agreement. The Master Servicer may not assign
its obligations under this Agreement, in whole or in part, unless it shall have
first obtained the written consent of the Trustee and Certificate Insurer, which
such consent shall not be unreasonably withheld; provided, however, that any
assignee must meet the eligibility requirements set forth in Section 8.20(g)
hereof for a successor servicer. Notice of any such assignment shall be given by
the Master Servicer to the Trustee, the Certificate Insurer and Moody's.
Section 8.20. Removal of Master Servicer; Resignation of Master Servicer.
(a) The Trustee with the consent of the Certificate Insurer, or the Certificate
Insurer (or the Owners pursuant to Section 6.11 hereof) may remove the Master
Servicer upon the occurrence of any of the following events:
(i) The Master Servicer shall fail to deliver to the Trustee any
proceeds or required payment, which failure continues unremedied for five
Business Days following written notice to an Authorized Officer of the
Master Servicer from the Trustee or from any Owner.
(ii) The Master Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing its
inability to pay its debts generally as they become due, (III) make a
general assignment for the benefit of creditors, (IV) be adjudicated a
bankrupt or insolvent, (V) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or
an order for relief or seeking to take advantage of any insolvency law or
file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceeding or
(VI) take corporate action for the purpose of effecting any of the
foregoing;
(iii) If without the application, approval or consent of the Master
Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Master
Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement
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with creditors, a readjustment of debts, the appointment of a trustee,
receiver, liquidator or custodian or similar entity with respect to the
Master Servicer or of all or any substantial part of its assets, or other
like relief in respect thereof under any bankruptcy or insolvency law, and,
if such proceeding is being contested by the Master Servicer in good faith,
the same shall (A) result in the entry of an order for relief or any such
adjudication or appointment or (B) continue undismissed or pending and
unstayed for any period of seventy-five (75) consecutive days; or
(iv) The Master Servicer shall fail to perform any one or more of its
obligations hereunder other than the obligations contemplated by Subsection
8.20(i) above, and shall continue in default thereof for a period of sixty
(60) days after notice by the Trustee or the Certificate Insurer of said
failure; provided, however, that if the Master Servicer can demonstrate to
the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Certificate Insurer; or
(v) The Master Servicer shall fail to cure any breach of any of its
representations and warranties set forth in Section 3.2 which materially
and adversely affects the interests of the Owners or Certificate Insurer
for a period of thirty (30) days after the Master Servicer's discovery or
receipt of notice thereof; provided, however, that if the Master Servicer
can demonstrate to the reasonable satisfaction of the Certificate Insurer
that it is diligently pursuing remedial action, then the cure period may be
extended with the written approval of the Certificate Insurer.
(b) The Certificate Insurer also may remove the Master Servicer upon the
occurrence of any of the following events:
(i) a Group I Total Available Funds Shortfall or a Group II Total
Available Funds Shortfall; provided, however, that the Certificate Insurer
shall have no right to remove the Master Servicer under this clause (i) if
the Master Servicer can demonstrate to the reasonable satisfaction of the
Certificate Insurer that such event was due to circumstances beyond the
control of the Master Servicer; or
(ii) the failure by the Master Servicer to make any required Servicing
Advance; or
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(iii) the failure by the Master Servicer to perform any one or more of
its obligations hereunder, which failure materially and adversely affects
the interests of the Certificate Insurer; or
(iv) the failure by the Master Servicer to make any required
Delinquency Advance or to pay any Compensating Interest; or
(v) if on any Payment Date the Pool Rolling Three-Month Delinquency
Rate exceeds 7%;
(vi) if on any Payment Date occurring in June of any year, commencing
in June 1997, the aggregate Pool Cumulative Realized Losses over the prior
twelve month period exceed 3% of the average Pool Principal Balance as of
the close of business on the last day of each of the twelve preceding
Remittance Periods; or
(vii) (a) if on any Payment Date of the first sixty Payment Dates
after the Startup Day the aggregate Pool Cumulative Realized Losses for all
prior Remittance Periods since the Startup Day exceed 8% of the Original
Aggregate Loan Balance and (b) if on any Payment Date thereafter the
aggregate Pool Cumulative Realized Losses for all prior Remittance Periods
since the Startup Day exceed 12.5% of the Original Aggregate Loan Balance;
provided, however, with respect to clauses (v), (vi) and (vii), if the
Servicer can demonstrate to the reasonable satisfaction of the Certificate
Insurer that any such event was due to circumstances beyond the control of
the Servicer, such event shall not be considered an event of termination of
the Servicer;
provided, however, that (x) prior to any removal of the Master Servicer by the
Certificate Insurer pursuant to clauses (i), (ii) or (iii) of this Section
8.20(b), the Master Servicer shall first have been given by the Certificate
Insurer and by registered or certified mail, notice of the occurrence of one or
more of the events set forth in clauses (i), (ii) or (iii) above and the Master
Servicer shall not have remedied, or shall not have taken actions satisfactory
to the Certificate Insurer to remedy, such event or events within 30 days (60
days with respect to clause (iii)) after the Master Servicer's receipt of such
notice (provided, however, that if the Master Servicer can demonstrate to the
reasonable satisfaction of the Certificate Insurer that it is diligently
pursuing remedial action, then the cure period in each case may be extended with
the written approval of the Certificate Insurer) and (y) in the event of the
refusal or inability of the Master Servicer to make any required Delinquency
Advance or to pay any Compensating Interest or Monthly Remittance, such removal
shall be effective (without the requirement of any action on
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the part of the Certificate Insurer or of the Trustee) at 4 p.m. on the second
Business Day following the day on which the Trustee or the Certificate Insurer
notifies an Authorized Officer of the Master Servicer that a required
Delinquency Advance has not been received by the Trustee. Upon the Trustee's
determination that a required Delinquency Advance or payment of Compensating
Interest has not been made by the Master Servicer, the Trustee shall so notify
in writing an Authorized Officer of the Master Servicer and the Certificate
Insurer as soon as is reasonably practical.
(c) The Master Servicer shall not resign from the obligations and duties
hereby imposed on it, except upon determination that its duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the Master Servicer so causing such a conflict being of a type and nature
carried on by the Master Servicer at the date of this Agreement. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an opinion of counsel to such effect which shall be delivered to
the Trustee and the Certificate Insurer.
(d) No removal or resignation of the Master Servicer shall become effective
until the Trustee or a successor servicer shall have assumed the Master
Servicer's responsibilities and obligations in accordance with this Section. If
no successor servicer is available, the Trustee shall act as successor servicer
and perform all of the obligations of this Section, including, without
limitation, making Delinquency Advances and paying Compensating Interest;
provided, however, that the Trustee will not be obligated to act as successor
servicer if it is legally unable to perform its duties hereunder.
(e) Upon removal or resignation of the Master Servicer, the Master Servicer
also shall promptly deliver or cause to be delivered to a successor servicer or
the Trustee all the books and records (including, without limitation, records
kept in electronic form) that the Master Servicer has maintained for the
Mortgage Loans, including all tax bills, assessment notices, insurance premium
notices and all other documents as well as all original documents then in the
Master Servicer's possession.
(f) Any collections received by the Master Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the Trustee or the successor Master Servicer.
(g) Upon removal or resignation of the Master Servicer, the Trustee (x) may
solicit bids for a successor
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servicer as described below, and (y) pending the appointment of a successor
Master Servicer as a result of soliciting such bids, shall serve as Master
Servicer. The Trustee shall, if it is unable to obtain a qualifying bid and is
prevented by law from acting as Master Servicer, appoint, or petition a court of
competent jurisdiction to appoint, any housing and home finance institution,
bank or mortgage servicing institution which has shareholders' equity of not
less than $10,000,000, as determined in accordance with generally accepted
accounting principles, and acceptable to the Certificate Insurer as the
successor to the Master Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Master Servicer hereunder.
The compensation of any successor servicer (including, without limitation, the
Trustee) so appointed shall be the aggregate Servicing Fees, together with the
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in Sections 8.8 and 8.15; provided, however,
that if the Trustee acts as successor Master Servicer then the Sponsor agrees to
pay to the Trustee at such time that the Trustee becomes such successor Master
Servicer a fee of twenty-five dollars ($25.00) for each Mortgage Loan then
included in the Trust Estate. The Trustee shall be obligated to serve as
successor Master Servicer whether or not the $25.00 fee described in the
preceding sentence is paid by the Sponsor, but shall in any event be entitled to
receive, and to enforce payment of, such fee from the Sponsor.
(h) In the event the Trustee solicits bids as provided above, the Trustee
shall solicit, by public announcement, bids from housing and home finance
institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid. The Trustee shall
deduct from any sum received by the Trustee from the successor to the Master
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities hereunder. After such deductions, the
remainder of such sum shall be paid by the Trustee to the Master Servicer at the
time of such sale, transfer and assignment to the Master Servicer's successor.
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(i) The Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. The
Master Servicer agrees to cooperate with the Trustee and any successor Master
Servicer in effecting the termination of the Master Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Trustee or
such successor Master Servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Master Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor Master Servicer, as applicable, all amounts which then have been or
should have been deposited in the Principal and Interest Account by the Master
Servicer or which are thereafter received with respect to the Mortgage Loans.
Neither the Trustee nor any other successor Master Servicer shall be held liable
by reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Master
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Master Servicer or (iii) any breaches of a predecessor Servicer.
(j) The Trustee or any other successor Master Servicer, upon assuming the
duties of Master Servicer hereunder, shall immediately make all Delinquency
Advances and pay all Compensating Interest which the Master Servicer has
theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Trustee is acting as successor Master Servicer, the Trustee
shall only be required to make Delinquency Advances (including the Delinquency
Advances described in this clause (j)) if, in the Trustee's reasonable good
faith judgment, such Delinquency Advances will ultimately be recoverable from
the related Mortgage Loans.
(k) The Master Servicer which is being removed or is resigning shall give
notice to the Mortgagors and to Moody's and Standard & Poor's of the transfer of
the servicing to the successor.
(l) The Trustee shall give notice to the Certificate Insurer, Moody's and
Standard & Poor's and to the Owners of the occurrence of any event specified in
Section 8.20(a) of which the Trustee has knowledge.
Section 8.21. Inspections by Certificate Insurer; Errors and Omissions
Insurance. (a) At any reasonable time and from time to time upon reasonable
notice, the Certificate Insurer, the Trustee, or any agents or representatives
thereof may inspect the Master Servicer's servicing operations and discuss the
servicing operations of the Master Servicer with any of its officers or
directors. The costs and expenses incurred by the Master Servicer or its agents
or
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representatives in connection with any such examinations or discussions shall be
paid by the Master Servicer.
(b) The Master Servicer agrees to maintain errors and omissions coverage
and a fidelity bond, each at least to the extent generally maintained by prudent
mortgage loan servicers having servicing portfolios of a similar size.
Section 8.22. Merger, Conversion, Consolidation or Succession to Business
of Master Servicer. Any corporation into which the Master Servicer 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 Master Servicer shall
be a party, or any corporation succeeding to all or substantially all of the
business of the Master Servicer, shall be the successor of the Master Servicer
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto provided that such corporation meets the
qualifications set forth in Section 8.20(g).
Section 8.23. Notices of Material Events. The Master Servicer shall give
prompt notice to the Certificate Insurer, the Trustee, Moody's and Standard &
Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which with notice or
the passage of time, or both, would result in the occurrence of a default by the
Sponsor, any Originator or the Master Servicer under any Transaction Document or
would constitute a material breach of a representation, warranty or covenant
under any Transaction Document;
(b) The submission of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation against the Sponsor, the
Master Servicer or AMHC in any federal, state or local court or before any
governmental body or agency, or before any arbitration board, or any such
proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse effect upon any the Sponsor's, the
Master Servicer's or AMHC's ability to perform its obligations under any
Transaction Document;
(c) The commencement of any proceedings by or against the Sponsor, the
Master Servicer or AMHC under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official shall have been, or may be, appointed or requested for the Sponsor, the
Master Servicer or AMHC; and
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(d) The receipt of notice from any agency or governmental body having
authority over the conduct of any of the Sponsor's the Master Servicer's or the
AMHC's business that the Sponsor, the Master Servicer or AMHC is to cease and
desist, or to undertake any practice, program, procedure or policy employed by
the Sponsor, the Master Servicer or AMHC in the conduct of the business of any
of them, and such cessation or undertaking will materially adversely affect the
conduct of the Sponsor's, the Master Servicer's or AMHC's business or its
ability to perform under the Transaction Documents or materially adversely
affect the financial affairs of the Sponsor, the Master Servicer or AMHC.
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust created hereunder and all
obligations created by this Agreement will terminate upon the earlier of (i) the
payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policy of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
the REMIC Trust is effected as described below or (iii) as described in Section
9.2 or 9.3 hereof. To effect a termination of this Agreement pursuant to clause
(ii) above, the Owners of all Certificates then Outstanding shall (x)
unanimously direct the Trustee on behalf of the Trust to adopt a plan of
complete liquidation with respect to the REMIC Trust, as contemplated by Section
860F(a)(4) of the Code and (y) provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such liquidation
constitutes a Qualified Liquidation, and the Trustee either shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, or shall distribute equitably in kind all of the assets of the Trust
Estate to the remaining Owners of the Certificates based on their interests in
the Trust, each in accordance with such plan, so that the liquidation or
distribution of the Trust Estate, the distribution of any proceeds of the
liquidation and the termination of this Agreement occur no later than the close
of the 90th day after the date of adoption of the plan of liquidation and such
liquidation qualifies as a Qualified Liquidation. In no event, however, will the
Trust created by this Agreement continue beyond the expiration of twenty-one
(21) years from the death of the last survivor of the descendants of Joseph P.
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Kennedy, the late Ambassador of the United States to the United Kingdom, living
on the date hereof. The Trustee shall give written notice of termination of the
Agreement to each Owner in the manner set forth in Section 11.5.
Section 9.2. Termination Upon Option of Master Servicer. (a) On any
Remittance Date on or after the CleanUp Call Date, the Master Servicer acting
directly or through one or more affiliates may determine to purchase and may
cause the purchase from the Trust of all (but not fewer than all) Mortgage Loans
in the Trust Estate and all property theretofore acquired in respect of any such
Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise then
remaining in the Trust Estate at a price equal to the sum of (v) the greater of
(i) 100% of the aggregate Loan Balances of the related Mortgage Loans as of the
day of purchase minus the amount actually remitted by the Master Servicer
representing the related Monthly Principal Remittance Amount on such Remittance
Date for the related Remittance Period and (ii) the fair market value of such
Mortgage Loans (disregarding accrued interest), (w) the amount of any difference
between the related Monthly Interest Remittance Amount actually remitted by the
Master Servicer on such Remittance Date and the related Monthly Interest
Remittance Amount due on such Remittance Date, (x) the related Reimbursement
Amount, if any, as of such Remittance Date and (y) the aggregate amount of any
Delinquency Advances and Servicing Advances remaining unreimbursed, together
with any accrued and unpaid Servicing Fees, as of such Remittance Date (such
amount, the "Termination Price"). In connection with such purchase, the Master
Servicer shall remit to the Trustee all amounts then on deposit in the Principal
and Interest Account for deposit to the Certificate Account, which deposit shall
be deemed to have occurred immediately preceding such purchase.
(b) In connection with any such purchase, the Master Servicer shall provide
to the Trustee an opinion of counsel experienced in federal income tax matters
to the effect that such purchase constitutes a Qualified Liquidation of the
REMIC Trust.
(c) Promptly following any such purchase, the Trustee will release the
Files to the Master Servicer, or otherwise upon their order, in a manner similar
to that described in Section 8.14 hereof.
(d) If the Master Servicer does not exercise its option pursuant to this
Section 9.2 with respect to the Trust Estate, then the Certificate Insurer may
do so on the same terms.
(e) Colonial may not participate in any purchase described in this Section
9.2, or fund any portion of the
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purchase price, unless the then-outstanding Loan Balances of the Mortgage Loans
in the Trust Estate is less than or equal to five percent of the sum of the
aggregate Loan Balances of all Mortgage Loans in the Trust Estate as of the
Cut-Off Date.
Section 9.3. Termination Upon Loss of REMIC Status. (a) Following a (x)
final determination by the Internal Revenue Service, or by a court of competent
jurisdiction, in either case from which no appeal is taken within the permitted
time for such appeal, or (y) if any appeal is taken, following a final
determination of such appeal from which no further appeal can be taken, to the
effect that the REMIC Trust does not and will no longer qualify as a "REMIC"
pursuant to Section 860D of the Code (the "Final Determination") or (z)
following the delivery of an opinion of counsel ("REMIC Opinion") to the effect
that the effect of the Final Determination is to increase substantially the
probability that the REMIC Trust will no longer qualify as a "REMIC" pursuant to
Section 860D of the Code, on any Remittance Date on or after the date which is
30 calendar days following such Final Determination, (i) the Owners of a
majority in Percentage Interest represented by the Class A Certificates then
Outstanding may direct the Trustee to adopt a plan of complete liquidation with
respect to the Trust Estate and (ii) the Certificate Insurer may notify the
Trustee of the Certificate Insurer's determination to purchase from the Trust
all (but not fewer than all) Mortgage Loans in the Trust Estate and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure, or otherwise
in respect of any Mortgage Loan then remaining in the Trust Estate at a price
equal to the Termination Price. In connection with such purchase, the Master
Servicer shall remit to the Trustee all amounts then on deposit in the Principal
and Interest Account for deposit in the Certificate Account, which deposit shall
be deemed to have occurred immediately preceding such purchase.
(b) Upon receipt of such direction from the Owners of such Class A
Certificates or such notice from the Certificate Insurer, the Trustee shall
notify the holders of the Class RS Certificates of such election to liquidate or
such determination to purchase, as the case may be, (the "Termination Notice").
The Owner of a majority of the Percentage Interest of the Class RS Certificates
then Outstanding may, on any Remittance Date, within 60 days from the date of
receipt of the Termination Notice (the "Purchase Option Period"), at their
option, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price.
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(c) If, during the Purchase Option Period, the Owners of the Class RS
Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Owners of the Class A Certificates have given the Trustee
the direction described in clause (a)(i) above, the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, such that, if so directed, the liquidation of the Trust Estate, the
distribution of the proceeds of such liquidation occur no later than the close
of the 60th day, or such later day as the Owners of the Class A Certificates
shall permit or direct in writing, after the expiration of the Purchase Option
Period and (ii) in the event that the Certificate Insurer has given the Trustee
notice of the Certificate Insurer's determination to purchase the Mortgage Loans
in the Trust Estate described in clause (a)(ii) preceding, the Certificate
Insurer shall, on any Remittance Date within 60 days, purchase all (but not
fewer than all) Mortgage Loans in the Trust Estate, and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure or otherwise in respect of
any Mortgage Loan then remaining in the Trust Estate. In connection with such
purchase, the Master Servicer shall remit to the Trustee all amounts then on
deposit in the Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase.
(d) Following a Final Determination, the Owners of a majority of the
Percentage Interest of the Class RS Certificates then Outstanding may, at their
option on any Remittance Date and upon delivery to the Owners of the Class A
Certificates and the Certificate Insurer of an opinion of counsel experienced in
federal income tax matters selected by the Owners of such Class RS Certificates
which opinion shall be reasonably satisfactory in form and substance to a
majority of the Percentage Interests represented by the Class A Certificates
then Outstanding and the Certificate Insurer, to the effect that the effect of
the Final Determination is to increase substantially the probability that the
gross income of the REMIC Trust will be subject to federal taxation, purchase
from the Trust all (but not fewer than all) Mortgage Loans in the Trust Estate,
and all property theretofore acquired by foreclosure, deed in lieu of
foreclosure, or otherwise in respect of any Mortgage Loan then remaining in the
Trust Estate at a purchase price equal to the Termination Price. In connection
with such purchase, the Master Servicer shall remit to the Trustee all amounts
then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase. The foregoing opinion shall be deemed satisfactory
unless the Owners of a majority of the Percentage Interest represented by the
Class A Certificates then Outstanding or the Certificate Insurer give
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the Owners of a majority of the Percentage Interest of the Class RS Certificates
notice that such opinion is not satisfactory within thirty days after receipt of
such opinion.
Section 9.4. Disposition of Proceeds. The Trustee shall, upon receipt
thereof, deposit the proceeds of any liquidation of the Trust Estate pursuant to
this Article IX to the Certificate Account; provided, however, that any amounts
representing Servicing Fees, unreimbursed Delinquency Advances or unreimbursed
Servicing Advances theretofore funded by the Master Servicer from the Master
Servicer's own funds shall be paid by the Trustee to the Master Servicer.
Section 9.5. Netting of Amounts. If any Person paying the Termination Price
would receive a portion of the amount so paid, such Person may net any such
amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities.
(a) The Trustee (i) undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.
(b) Notwithstanding the appointment of the Master Servicer hereunder, the
Trustee is hereby empowered to perform the duties of the Master Servicer
hereunder whether following the failure of the Master Servicer to perform,
pursuant to Section 8.20 hereof or otherwise. Specifically, and not in
limitation of the foregoing, the Trustee shall have the power:
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii)to enforce due-on-sale clauses and to enter into assumption and
substitution agreements as permitted by Section 8.12 hereof;
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(iv) to deliver instruments of satisfaction pursuant to Section 8.14;
(v) to make Delinquency Advances and Servicing Advances and to pay
Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by an Authorized Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii)the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the
direction of the Certificate Insurer or of the Owners of a majority in
Percentage Interest of the Certificates of the affected Class or
Classes and the Certificate Insurer relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement relating to such Certificates.
(d) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
(e) No provision of this Agreement shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(f) The permissive right of the Trustee to take actions enumerated in this
Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
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(g) The Trustee shall be under no obligation to institute any suit, or to
take any remedial proceeding under this Agreement, or to take any steps in the
execution of the trusts hereby created or in the enforcement of any rights and
powers hereunder until it shall be indemnified to its satisfaction against any
and all costs and expenses, outlays and counsel fees and other reasonable
disbursements and against all liability, except liability which is adjudicated
to have resulted from its negligence or willful misconduct, in connection with
any action so taken. The Trustee shall receive from the Sponsor promptly upon
demand therefor, reimbursement of expenses as are described in the fee quote
letter, dated ___________, 1996 and executed by the Sponsor.
Section 10.2. Removal of Trustee for Cause. (a) The Trustee may be removed
pursuant to paragraph (b) hereof upon the occurrence of any of the following
events (whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners entitled thereto on
any Payment Date amounts available for distribution in accordance with
the terms hereof; or
(2) the Trustee shall fail in the performance of, or breach, any covenant
or agreement of the Trustee in this Agreement, or if any
representation or warranty of the Trustee made in this Agreement or in
any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material
respect as of the time when the same shall have been made, and such
failure or breach 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 Trustee by the Sponsor, the Certificate Insurer or by the
Owners of at least 25% of the aggregate Percentage Interests
represented by the Class A Certificates then Outstanding, or, if there
are no Class A Certificates then Outstanding, by such Percentage
Interests represented by the Class RS Certificates, a written notice
specifying such failure or breach and requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt,
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marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Trustee, and such decree or order shall have remained in
force undischarged or unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or sequestrator or custodian
of the property of the Trustee is appointed in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Trustee or relating to all or
substantially all of its property; or
(5) the Trustee shall become insolvent (however insolvency is evidenced),
generally fail to pay its debts as they come due, file or consent to
the filing of a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, voluntarily suspend payment of its
obligations, or take corporate action for the purpose of any of the
foregoing.
The Sponsor shall give to Moody's and Standard & Poor's notice of the
occurrence of any such event of which the Sponsor is aware.
(b) If any event described in Paragraph (a) occurs and is continuing, then
and in every such case (i) the Certificate Insurer or (ii) with the prior
written consent (which shall not be unreasonably withheld) of the Certificate
Insurer (x) the Sponsor or (y) the Owners of a majority of the Percentage
Interests represented by the Class A Certificates, may, whether or not the
Trustee resigns pursuant to Section 10.9 hereof, immediately, concurrently with
the giving of notice to the Trustee, and without delaying the 30 days required
for notice therein, appoint a successor Trustee pursuant to the terms of Section
10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except as otherwise provided
in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
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(b) any request or direction of the Sponsor, the Certificate Insurer
or the Owners of any Class of Certificates mentioned herein shall be
sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction
of any of the Owners pursuant to this Agreement, unless such Owners shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note or other paper or document, but the Trustee in its discretion
may make such further inquiry or investigation into such facts or matters
as it may see fit;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed and supervised
with due care by it hereunder; and
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication
of the Certificates.
Section 10.4. Not Responsible for Recitals or Issuance of Certificates. The
recitals contained herein and in the Certificates, except any such recitals
relating to the
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Trustee, shall be taken as the statements of the Sponsor and the Trustee assumes
no responsibility for their correctness. The Trustee makes no representation as
to the validity or sufficiency of this Agreement or of the Certificates other
than as to validity and sufficiency of its authentication of the Certificates.
Section 10.5. May Hold Certificates. The Trustee or any agent of the Trust,
in its individual or any other capacity, may become an Owner or pledgee of
Certificates and may otherwise deal with the Trust with the same rights it would
have if it were not Trustee or such agent.
Section 10.6. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other trust funds except to the extent
required herein or required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed with
the Sponsor and except to the extent of income or other gain on investments
which are deposits in or certificates of deposit of the Trustee in its
commercial capacity and income or other gain actually received by the Trustee on
Eligible Investments.
Section 10.7. No Lien for Fees. The Trustee shall have no lien on the Trust
Estate for the payment of any fees and expenses.
Section 10.8. Corporate Trustee Required; Eligibility. There shall at all
times be a Trustee hereunder which shall be a corporation or association
organized and doing business under the laws of the United States of America or
of any State authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000, subject to
supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Certificate Insurer and having (x)
long-term, unsecured debt rated at least A2 by Moody's (or such lower rating as
may be acceptable to Moody's) and (y) a long-term deposit rating of at least A
from Standard & Poor's (or such lower rating as may be acceptable to Standard &
Poor's). If such Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation or association 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 Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall, upon the request of the Sponsor
with the consent of the Certificate Insurer (which consent shall not be
unreasonably withheld) or
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of the Certificate Insurer, resign immediately in the manner and with the effect
hereinafter specified in this Article X.
Section 10.9. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a successor trustee
pursuant to this Article X shall become effective until the acceptance of
appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may resign
at any time by giving written notice of resignation to the Sponsor and by
mailing notice of resignation by first-class mail, postage prepaid, to the
Certificate Insurer and the Owners at their addresses appearing on the Register.
A copy of such notice shall be sent by the resigning Trustee to Moody's and
Standard & Poor's. Upon receiving notice of resignation, the Sponsor shall
promptly appoint a successor trustee or trustees by written instrument, in
duplicate, executed on behalf of the Trust by an Authorized Officer of the
Sponsor, one copy of which instrument shall be delivered to the Trustee so
resigning and one copy to the successor trustee or trustees. If no successor
trustee shall have been appointed and have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Owner may, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible under Section
10.8 hereof and shall fail to resign after written request therefor by the
Sponsor or by the Certificate Insurer, the Certificate Insurer or the Sponsor
with the written consent of the Certificate Insurer may remove the Trustee and
appoint a successor trustee by written instrument, in duplicate, executed on
behalf of the Trust by an Authorized Officer of the Sponsor, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
(d) The Owners of a majority of the Percentage Interests represented by the
Class A Certificates, or, if there are no Class A Certificates then Outstanding,
by such majority of the Percentage Interests represented by the Class RS
Certificates, may at any time remove the Trustee and appoint a successor trustee
by delivering to the Trustee to be removed, to the successor trustee so
appointed, to the Sponsor and to the Certificate Insurer, copies of the record
of the
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act taken by the Owners, as provided for in Section 11.3 hereof.
(e) If the Trustee fails to perform its duties in accordance with the terms
of this Agreement or becomes ineligible to serve as Trustee, the Certificate
Insurer may remove the Trustee and appoint a successor trustee by written
instrument, in triplicate, signed by the Certificate Insurer duly authorized,
one complete set of which instruments shall be delivered to the Sponsor, one
complete set to the Trustee so removed and one complete set to the successor
Trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of the Trustee for any cause, the
Sponsor shall promptly appoint a successor Trustee acceptable to the Certificate
Insurer. If within one year after such resignation, removal or incapability or
the occurrence of such vacancy, a successor Trustee shall be appointed by act of
the Owners of a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding or, if there are no Class A Certificates then
Outstanding, by such majority of the Percentage Interest of the Class RS
Certificates delivered to the Sponsor and the retiring Trustee, the successor
Trustee so appointed shall forthwith upon its acceptance of such appointment
become the successor Trustee and supersede the successor Trustee appointed by
the Sponsor. If no successor Trustee shall have been so appointed by the Sponsor
or the Owners and shall have accepted appointment in the manner hereinafter
provided, any Owner may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor Trustee.
(g) The Sponsor shall give notice of any removal of the Trustee by mailing
notice of such event by first-class mail, postage prepaid, to the Certificate
Insurer and to the Owners as their names and addresses appear in the Register.
Each notice shall include the name of the successor Trustee and the address of
its corporate trust office.
Section 10.10. Acceptance of Appointment by Successor Trustee. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Sponsor on behalf of the Trust and to its predecessor Trustee an instrument
accepting such appointment hereunder and stating its eligibility to serve as
Trustee 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 vested with all the rights, powers,
trusts, duties and obligations of its
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predecessor hereunder; but, on request of the Sponsor or the successor Trustee,
such predecessor Trustee shall, upon payment of its charges then unpaid, execute
and deliver an instrument transferring to such successor Trustee all of the
rights, powers and trusts of the Trustee so ceasing to act, and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such Trustee so ceasing to act hereunder. Upon request of any such
successor Trustee, the Sponsor on behalf of the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as provided in this
Section, the Sponsor shall mail notice thereof by first-class mail, postage
prepaid, to the Owners at their last addresses appearing upon the Register. The
Sponsor shall send a copy of such notice to Moody's and Standard & Poor's. If
the Sponsor fails to mail such notice 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 Trust.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11. Merger, Conversion, Consolidation or Succession to Business
of the Trustee. Any corporation or association into which the Trustee may be
merged or converted or with which it may be consolidated, or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided, however,
that such corporation or association shall be otherwise qualified and eligible
under this Article X. In case any Certificates have been executed, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such Trustee may adopt such execution and deliver the
Certificates so executed with the same effect as if such successor Trustee had
itself executed such Certificates.
Section 10.12. Reporting; Withholding. The Trustee shall timely provide to
the Owners the Internal Revenue Service's Form 1099 and any other statement
required by applicable Treasury regulations as determined by the Sponsor, and
shall withhold, as required by applicable law, federal, state or local taxes, if
any, applicable to distributions to the Owners, including but not limited to
backup withholding
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under Section 3406 of the Code and the withholding tax on distributions to
foreign investors under Sections 1441 and 1442 of the Code.
Section 10.13. Liability of the Trustee. The Trustee shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Trustee herein. Neither the Trustee nor any of the
directors, officers, employees or agents of the Trustee shall be under any
liability on any Certificate or otherwise to any Account, the Sponsor, the
Master Servicer or any Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Trustee
or any such Person against any liability which would otherwise be imposed by
reason of negligent action, negligent failure to act or bad faith in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Subject to the foregoing sentence, the Trustee shall not be
liable for losses on investments of amounts in any Account (except for any
losses on obligations on which the bank serving as Trustee is the obligor). In
addition, the Sponsor and Master Servicer covenant and agree to indemnify the
Trustee, and its officers, directors, employees and agents and when the Trustee
is acting as Master Servicer, the Master Servicer, and its officers, directors,
employees and agents from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses (including legal fees and expenses)
other than those resulting from the negligence or bad faith of the Trustee or
the Master Servicer, respectively. The Trustee and any director, officer,
employee or agent of the Trustee may rely and shall be protected in acting or
refraining from acting in good faith on any certificate, notice or other
document of any kind prima facie properly executed and submitted by the
Authorized Officer of any Person respecting any matters arising hereunder.
Section 10.14. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the Master Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
and the Certificate Insurer to act as co-Trustee or co-Trustees, jointly with
the Trustee, of all or any part of the Trust Estate or separate Trustee or
separate Trustees of any part of the Trust Estate, and to vest in such Person or
Persons, in such capacity and for the benefit of the Owners, such title to the
Trust Estate, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties,
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obligations, rights and trusts as the Master Servicer and the Trustee may
consider necessary or desirable. If the Master Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in the case any event indicated in Sections 8.20(a) or 8.20(b) shall have
occurred and be continuing, the Trustee alone shall have the power to make such
appointment with the consent of the Certificate Insurer. No co-Trustee or
separate Trustee hereunder shall be required to meet the terms of eligibility as
a successor Trustee under Section 10.8 and no notice to Owner of the appointment
of any co-Trustee or separate Trustee shall be required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent permitted, be
appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate Trustee or co-Trustee jointly
(it being understood that such separate Trustee or co-Trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Master Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to
the Trust Estate or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate Trustee or co-Trustee, but
solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally liable by reason
of any act or omission of any other co-Trustee hereunder; and
(iii) The Master Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate Trustee or
co-Trustee.
Any notice, request or other writing given to the 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 Section 10.14. Each separate Trustee and co-Trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the
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provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Master Servicer.
Any separate Trustee or co-Trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate Trustee or co-Trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
The Trustee shall give to Moody's, the Sponsor and the Certificate Insurer
notice of the appointment of any Co-Trustee or separate Trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions. Upon any application or
request by the Sponsor, the Certificate Insurer or the Owners to the Trustee to
take any action under any provision of this Agreement, the Sponsor, the
Certificate Insurer or the Owners, as the case may be, shall furnish to the
Trustee a certificate stating that all conditions precedent, if any, provided
for in this Agreement relating to the proposed action have been complied with,
except that in the case of any such application or request as to which the
furnishing of any documents is specifically required by any provision of this
Agreement relating to such particular application or request, no additional
certificate need be furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) 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; and
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(c) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 11.2. Form of Documents Delivered to the Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be based,
insofar as it relates to legal matters, upon an opinion of counsel, unless such
Authorized Officer knows, or in the exercise of reasonable care should know,
that the opinion is erroneous. Any such certificate of an Authorized Officer of
the Trustee or any opinion of counsel may be based, insofar as it relates to
factual matter upon a certificate or opinion of, or representations by, one or
more Authorized Officers of the Sponsor or of the Master Servicer, stating that
the information with respect to such factual matters is in the possession of the
Sponsor or of the Master Servicer, unless such Authorized Officer or 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. Any
opinion of counsel may also be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an Authorized Officer
of the Trustee, stating that the information with respect to such matters is in
the possession of the Trustee, 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. Any opinion of counsel may be based
on the written opinion of other counsel, in which event such opinion of counsel
shall be accompanied by a copy of such other counsel's opinion and shall include
a statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.3. Acts of Owners. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Agreement to
be given or taken
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by the Owners may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Owners in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to the Sponsor
and/or the Certificate Insurer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"act" of the Owners 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 Agreement and conclusive in favor of the
Trustee and the Trust, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Whenever such execution is
by an officer of a corporation or a member of a partnership on behalf of such
corporation or partnership, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Owner of any Certificate shall bind the Owner of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered to
be done by the Trustee or the Trust in reliance thereon, whether or not notation
of such action is made upon such Certificates.
Section 11.4. Notices, etc. to Trustee. Any request, demand, authorization,
direction, notice, consent, waiver or act of the Owners or other documents
provided or permitted by this Agreement to be made upon, given or furnished to,
or filed with the Trustee by any Owner, the Certificate Insurer or by the
Sponsor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
Section 11.5. Notices and Reports to Owners; Waiver of Notices. Where this
Agreement provides for notice to Owners of any event or the mailing of any
report to Owners, such notice or report shall be sufficiently given (unless
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otherwise herein expressly provided) if mailed, first-class postage prepaid, to
each Owner affected by such event or to whom such report is required to be
mailed, at the address of such Owner as it appears on the Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice or the mailing of such report. In any case where a notice
or report to Owners is mailed in the manner provided above, neither the failure
to mail such notice or report nor any defect in any notice or report so mailed
to any particular Owner shall affect the sufficiency of such notice or report
with respect to other Owners, and any notice or report which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given or
provided.
Where this Agreement 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 Owners shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Owners when such notice is required to be given pursuant
to any provision of this Agreement, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice.
Where this Agreement provides for notice to any rating agency that rated
any Certificates, failure to give such notice shall not affect any other rights
or obligations created hereunder.
Section 11.6. Rules by Trustee and Sponsor. The Trustee may make reasonable
rules for any meeting of Owners. The Sponsor may make reasonable rules and set
reasonable requirements for its functions.
Section 11.7. Successors and Assigns. All covenants and agreements in this
Agreement by any party hereto shall bind its successors and assigns, whether so
expressed or not.
Section 11.8. Severability. In case any provision in this Agreement or in
the Certificates 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.
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Section 11.9. Benefits of Agreement. Nothing in this Agreement or in the
Certificates, expressed or implied, shall give to any Person, other than the
Owners, the Certificate Insurer and the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
Section 11.10. Legal Holidays. In any case where the date of any Remittance
Date, any Payment Date, any other date on which any distribution to any Owner is
proposed to be paid, or any date on which a notice is required to be sent to any
Person pursuant to the terms of this Agreement shall not be a Business Day, then
(notwithstanding any other provision of the Certificates or this Agreement)
payment or mailing 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 or mailed on
the nominal date of any such Remittance Date, such Payment Date, or such other
date for the payment of any distribution to any Owner or the mailing of such
notice, as the case may be, and no interest shall accrue for the period from and
after any such nominal date, provided such payment is made in full on such next
succeeding Business Day.
Section 11.11. Governing Law. In view of the fact that Owners are expected
to reside in many states and outside the United States and the desire to
establish with certainty that this Agreement will be governed by and construed
and interpreted in accordance with the law of a state having a well-developed
body of commercial and financial law relevant to transactions of the type
contemplated herein, this Agreement and each Certificate shall be construed in
accordance with and governed by the laws of the State of New York applicable to
agreements made and to be performed therein.
Section 11.12. Counterparts. This instrument may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 11.13. Usury. The amount of interest payable or paid on any
Certificate under the terms of this Agreement shall be limited to an amount
which shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the State of New York or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error
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on the part of the Trustee acting on behalf of the Trust and the Owner receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Trustee on behalf of the Trust, refund the amount of such
excess or, at the option of such Owner, apply the excess to the payment of
principal of such Certificate, if any, remaining unpaid. In addition, all sums
paid or agreed to be paid to the Trustee for the benefit of Owners of
Certificates for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Certificates.
Section 11.14. Amendment. (a) The Trustee, the Sponsor and the Master
Servicer, may at any time and from time to time, with the prior written approval
of the Certificate Insurer but without the giving of notice to or the receipt of
the consent of the Owners, amend this Agreement, and the Trustee shall consent
to such amendment, for the purpose of (i) curing any ambiguity, or correcting or
supplementing any provision hereof which may be inconsistent with any other
provision hereof, or to add provisions hereto which are not inconsistent with
the provisions hereof, (ii) upon receipt of an opinion of counsel experienced in
federal income tax matters to the effect that no entity-level tax will be
imposed on the REMIC Trust or upon the transferor of a Class RS Certificate as a
result of the ownership of any Class RS Certificate by a Disqualified
Organization, removing the restriction on transfer set forth in Section 5.8(b)
hereof or (iii) complying with the requirements of the Code and the regulations
proposed or promulgated thereunder; provided, however, that any such action
shall not, as evidenced by an opinion of counsel delivered to the Trustee,
materially and adversely affect the interests of any Owner (without its written
consent).
(b) The Trustee, the Sponsor and the Master Servicer may, at any time and
from time to time, with the prior written approval of the Certificate Insurer
but without the giving of notice to or the receipt of the consent of the Owners,
amend this Agreement, and the Trustee shall consent to such amendment, for the
purpose of changing the definition of "Specified Subordinated Amount" with
respect to any Mortgage Loan Group; provided, however, that no such change shall
affect the weighted average life of the related Class of Class A Certificates
(assuming an appropriate prepayment speed as determined by the Underwriter) by
more than five percent, as determined by the Underwriter.
(c) This Agreement may also be amended by the Trustee, the Sponsor, and the
Master Servicer at any time and from time to time, with the prior written
approval of the Certificate Insurer and not less than a majority of the
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Percentage Interest represented by each affected Class of Certificates then
Outstanding, for the purpose of adding any provisions or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Owners hereunder; provided, however, that no such
amendment shall (a) change in any manner the amount of, or change the timing of,
payments which are required to be distributed to any Owner without the consent
of the Owner of such Certificate, (b) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such amendments or (c)
result in a down-rating or withdrawal of any ratings then assigned to the Class
A Certificates, without the consent of the Owners of all Certificates of the
Class or Classes affected then Outstanding.
(d) Each proposed amendment to this Agreement shall be accompanied by an
opinion of counsel nationally recognized in federal income tax matters addressed
to the Trustee and to the Certificate Insurer to the effect that such amendment
would not adversely affect the status of the REMIC Trust as a REMIC.
(e) The Certificate Insurer, the Owners, Moody's and Standard & Poor's
shall be provided with copies of any amendments to this Agreement, together with
copies of any opinions or other documents or instruments executed in connection
therewith.
Section 11.15. REMIC Status; Taxes. (a) The Tax Matters Person shall
prepare and file or cause to be filed with the Internal Revenue Service Federal
tax or information returns with respect to the REMIC Trust and the Certificates
containing such information and at the times and in such manner as may be
required by the Code or applicable Treasury regulations, and shall furnish to
Owners such statements or information at the times and in such manner as may be
required thereby. For this purpose, the Tax Matters Person may, but need not,
rely on any proposed regulations of the United States Department of the
Treasury. The Tax Matters Person shall indicate the election to treat the REMIC
Trust as a REMIC (which election shall apply to the taxable period ending
December 31, 1996 and each calendar year thereafter) in such manner as the Code
or applicable Treasury regulations may prescribe. The Trustee, as Tax Matters
Person appointed pursuant to Section 11.17 hereof shall sign all tax information
returns filed pursuant to this Section 11.15. The Tax Matters Person shall
provide information necessary for the computation of tax imposed on the transfer
of a Class RS Certificate to a Disqualified Organization, or an agent of a
Disqualified Organization, or a pass-through entity in which a Disqualified
Organization is the record holder of an interest. The Tax Matters Person shall
provide the Trustee with copies of any Federal tax or information returns filed,
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or caused to be filed, by the Tax Matters Person with respect to the REMIC Trust
or the Certificates.
(b) The Tax Matters Person shall timely file all reports required to be
filed by the Trust with any federal, state or local governmental authority
having jurisdiction over the Trust, including other reports that must be filed
with the Owners, such as the Internal Revenue Service's Form 1066 and Schedule Q
and the form required under Section 6050K of the Code, if applicable to REMICs.
Furthermore, the Tax Matters Person shall report to Owners, if required, with
respect to the allocation of expenses pursuant to Section 212 of the Code in
accordance with the specific instructions to the Tax Matters Person by the
Sponsor with respect to such allocation of expenses. The Tax Matters Person
shall collect any forms or reports from the Owners determined by the Sponsor to
be required under applicable federal, state and local tax laws.
(c) The Tax Matters Person shall provide to the Internal Revenue Service
and to persons described in Section 860E(e)(3) and (6) of the Code the
information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Sponsor covenants and agrees that within ten Business Days after
the Startup Day it shall provide to the Trustee any information necessary to
enable the Trustee to meet its obligations under subsections (b) and (c) above.
(e) The Trustee, the Sponsor and the Master Servicer each covenants and
agrees for the benefit of the Owners (i) to take no action which would result in
the termination of "REMIC" status for the REMIC Trust, (ii) not to engage in any
"prohibited transaction", as such term is defined in Section 860F(a)(2) of the
Code and (iii) not to engage in any other action which may result in the
imposition on the REMIC Trust of any other taxes under the Code.
(f) The REMIC Trust shall, for federal income tax purposes, maintain books
on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b), no Eligible Investment
shall be sold prior to its stated maturity (unless sold pursuant to a plan of
liquidation in accordance with Article IX hereof).
(h) Neither the Sponsor nor the Trustee shall enter into any arrangement by
which the Trustee will receive a fee or other compensation for services rendered
pursuant to this
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Agreement, which fee or other compensation is paid from the Trust Estate, other
than as expressly contemplated by this Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the Trustee or the
Sponsor may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received the prior written consent of the
Certificate Insurer and an opinion of counsel experienced in federal income tax
matters to the effect that such transaction does not result in a tax imposed on
the Trustee or cause a termination of REMIC status for the REMIC Trust;
provided, however, that such transaction is otherwise permitted under this
Agreement.
Section 11.16. Additional Limitation on Action and Imposition of Tax. (a)
Any provision of this Agreement to the contrary notwithstanding, the Trustee
shall not, without having obtained an opinion of counsel experienced in federal
income tax matters to the effect that such transaction does not result in a tax
imposed on the Trust or cause a termination of REMIC status for the REMIC Trust,
(i) sell any assets in the Trust Estate, (ii) accept any contribution of assets
after the Startup Day or (iii) agree to any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited transactions" of
the REMIC Trust as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" as defined in Section 860G(c) of the Code, on any
contribution to the REMIC Trust after the Startup Day pursuant to Section
860G(d) of the Code, or any other tax (other than any minimum tax imposed by
Sections 23151(a) or 23153(a) of the California Revenue and Taxation Code) is
imposed, such tax shall be paid by (i) the Trustee, if such tax arises out of or
results from a breach by the Trustee of any of its obligations under this
Agreement, (ii) the Master Servicer, if such tax arises out of or results from a
breach by the Master Servicer of any of its obligations under this Agreement, or
otherwise (iii) the Owners of the Class RS Certificates in proportion to their
Percentage Interests. To the extent such tax is chargeable against the Owners of
the Class RS Certificates, notwithstanding anything to the contrary contained
herein, the Trustee is hereby authorized to retain from amounts otherwise
distributable to the Owners of the Class RS Certificates on any Payment Date
sufficient funds to reimburse the Trustee for the payment of such tax (to the
extent that the Trustee has not been previously reimbursed or indemnified
therefor).
Section 11.17. Appointment of Tax Matters Person. The Owners of the Class
RS Certificates hereby appoint the Trustee as their agent to act as the Tax
Matters Person for
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REMIC Trust for all purposes of the Code and such Tax Matters Person will
perform, or cause to be performed, such duties and take, or cause to be taken,
such actions as are required to be performed or taken by the Tax Matters Person
under the Code.
Section 11.18. The Certificate Insurer. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during the continuance of a Certificate
Insurer Default. During the continuance of a Certificate Insurer Default the
Certificate Insurer's rights hereunder shall vest in the Owners of the Class A
Certificates and shall be exercisable by the Owners of at least a majority in
Percentage Interest of the Class A Certificates then Outstanding. At such time
as the Class A Certificates are no longer Outstanding hereunder and the
Certificate Insurer has been reimbursed for all Insured Payments to which it is
entitled hereunder, the Certificate Insurer's rights hereunder shall terminate.
Section 11.19. Maintenance of Records. Each Originator and Owner of a Class
RS Certificate shall each continuously keep an original executed counterpart of
this Agreement in its official records.
Section 11.20. Notices. All notices hereunder shall be given as follows,
until any superseding instructions are given to all other Persons listed below:
The Trustee: Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92714
Attention: Advanta 1996-1
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: Advanta Mortgage Conduit
Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Vice President -
Structured Finance
Tel: (619) 674-1800
Fax: (619) 674-3357
with a copy addressed to the
attention of the General
Counsel at the same address.
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The Master
Servicer: Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Senior Vice President,
Loan Service
Tel: (619) 674-1800
Fax: (619) 674-3592
The Certificate
Insurer : Financial Guaranty Insurance
Company
115 Broadway
New York, New York 10006
Attention: Risk Management
Tel: (212) 312-3000
Fax: (212) 312-3090
with a copy to the General
Counsel
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring
Department
Standard & Poor's: Standard & Poor's Corporation
26 Broadway
15th Floor
New York, New York 10004
Attention: Surveillance Dept.
Underwriters: Lehman Brothers Inc., as
Representative of the
Underwriters
Three World Financial Center
New York, New York 10285
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IN WITNESS WHEREOF, the Sponsor, the Master Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
ADVANTA MORTGAGE CONDUIT
SERVICES, INC.,
as Sponsor
By:_____________________________
Mark A. Casale
Vice President
ADVANTA MORTGAGE CORP. USA,
as Master Servicer
By:_____________________________
Mark A. Casale
Vice President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:_____________________________
Erin Deegan
Assistant Vice President
[Pooling and Servicing Agreement]
<PAGE>
STATE OF PENNSYLVANIA )
: ss.:
COUNTY OF MONTGOMERY )
On the __th day of May, 1996, before me personally came Mark A. Casale, to
me known, who, being by me duly sworn, did depose and say that his address is
c/o Advanta Mortgage Corp. USA, 500 Office Center Drive Suite 400, Ft.
Washington, PA 19034; that he is the Vice President of each of Advanta Mortgage
Conduit Services, Inc. and of Advanta Mortgage Corp. USA, which are described in
and which executed the above instrument; and that he signed his name thereto by
order of the respective Board of Directors of said corporations.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
_________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 29th day of May, 1996, before me personally came Erin Deegan to me
known, who, being by me duly sworn did depose and say that her office is located
at Three Park Plaza, Irvine, California 92714; that she is an Assistant Vice
President of Bankers Trust Company of California, N.A., the national banking
corporation described in and that executed the above instrument as Trustee; and
that she signed her name thereto under authority granted by the Board of
Directors of said national banking association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
_________________________
Notary Public
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<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
MASTER LOAN TRANSFER AGREEMENT
Dated as of February 15, 1995
by and among
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
COLONIAL NATIONAL BANK USA
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.,
as Affiliated Originators,
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
and
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions ............................................... 1
Section 2. Interest Calculations ..................................... 4
Section 3. Transfers of Mortgage Loans ............................... 4
Section 4. Representations, Warranties and Covenants
Regarding the Affiliated Originators and the
Sponsor ................................................... 4
Section 5. Representations and Warranties of the
Affiliated Originators Regarding the Mortgage
Loans ..................................................... 9
Section 6. Authorized Representatives ................................ 16
Section 7. Notices ................................................... 16
Section 8. Governing Law ............................................. 17
Section 9. Assignment ................................................ 17
Section 10. Counterparts .............................................. 17
Section 11. Amendment ................................................. 17
Section 12. Severability of Provisions ................................ 17
Section 13. No Agency; No Partnership or Joint Venture ................ 17
Section 14. Further Assurances ........................................ 18
Section 15. The Certificate Insurer ................................... 18
Section 16. Maintenance of Records .................................... 18
i
<PAGE>
THIS MASTER LOAN TRANSFER AGREEMENT, dated as of February 15, 1995, between
Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta Mortgage
Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of
New Jersey, Advanta Mortgage Corp. Northeast, Advanta Mortgage Conduit Services,
Inc., Advanta Finance Corp. and Colonial National Bank USA, each a seller (each
an "Affiliated Originator" and collectively, the "Affiliated Originators"),
Bankers Trust Company of California, N.A., as trustee ("Trustee") and Advanta
Mortgage Conduit Services, Inc., as sponsor ("Sponsor");
I. BACKGROUND
A. Each Affiliated Originator is an originator or purchaser of mortgage
loans which such Affiliated Originator may, from time to time, convey to the
Conduit Acquisition Trust, or cause the Conduit Acquisition Trust to acquire;
B. The Affiliated Originators and the Sponsor expect, from time to time, to
cause that such mortgage loans to be conveyed to an Advanta Trust in connection
with a securitization transaction sponsored by the Sponsor.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained, the parties hereto hereby agree as follows:
Section 1. Definitions. Whenever used in this Agreement or in any
Conveyance Agreement, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this Article; provided,
however, that any capitalized terms used herein or in any conveyance Agreement
and not defined herein shall have their respective meanings as set forth in the
related Advanta Pooling Agreement.
Advanta Pooling Agreement: Any Pooling and Servicing Agreement entered into
by Advanta Mortgage Conduit Services, Inc. as Sponsor, Advanta Mortgage Corp.
USA, as Master Servicer and a trustee, as it may be amended and supplemented
from time to time by the parties thereto.
Advanta Trust: A securitization trust created by the Sponsor into which
Mortgage Loans described in this Agreement and the Conveyance Agreements are
deposited.
Agreement: This Master Loan Transfer Agreement as it may be amended from
time to time, including the exhibits and supplements hereto.
Bulk Acquisition Loan: Any Mortgage Loan purchased by an Affiliated
Originator from another Originator (other
<PAGE>
than any other Affiliated Originator) as part of a bulk portfolio acquisition.
Conduit Acquisition P&S: The Pooling and Servicers Agreement dated as of
February 15, 1995 by and between the Sponsor and the Trustee relating to the
Conduit Acquisition Trust.
Conduit Acquisition Trust: The trust created pursuant to the Conduit
Acquisition P&S.
Conveyance Agreement: Any Conveyance Agreement relating to a Pool, in
substantially the form set forth as Exhibit A hereto.
Coupon Rate: The rate of interest borne by each Note.
Cut-Off Date: With respect to any Pool, as defined in the related
Conveyance Agreement.
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
File: The documents delivered to the Trustee pursuant to the document
delivery provisions of the Conduit Acquisition P&S pertaining to a particular
Mortgage Loan, together with any additional documents required to be added to
the File pursuant to the Conduit Acquisition P&S.
First Mortgage Loan: A Mortgage Loan which constitutes a first priority
mortgage lien with respect to any Property.
FNMA: The Federal National Mortgage Association, a federally-chartered and
privately-owned corporation existing under the Federal National Mortgage
Association Charter Act, as amended, or any successor thereof.
Loan Balance: With respect to each Mortgage Loan, the outstanding principal
balance thereof on the related CutOff Date, less any related Principal
Remittance Amounts relating to such Mortgage Loan included in previous related
Monthly Remittance Amounts that were transferred by the Master Servicer or any
Sub-Servicer to the Trustee for deposit in the related Certificate Account.
2
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Master Servicer: Advanta Mortgage Corp. USA, a Delaware corporation, and
its permitted successors and assigns.
Mortgage Loans: Each of the mortgage loans subject hereto, together with
any Qualified Replacement Mortgages substituted therefor in accordance with the
related Advanta Pooling Agreement.
Note: The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
Offered Certificates: Any securities issued by an Advanta Trust which are
not retained by the Sponsor or any Originator.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool: Any group of Mortgage Loans transferred to the Sponsor pursuant to a
specific Conveyance Agreement.
Property: The underlying property securing a Mortgage Loan.
Qualified Mortgage: "Qualified Mortgage" shall have the meaning set forth
from time to time in the definition thereof at Section 860G(a)(3) of the Code
(or any successor statute thereto) and applicable to the related Advanta Trust.
Schedules of Mortgage Loans: The Schedules of Mortgage Loans required to be
delivered pursuant to the related Advanta Pooling Agreement.
Second Mortgage Loan: A Mortgage Loan which constitutes a second priority
mortgage lien with respect to the related Property.
Senior Lien: With respect to any Second Mortgage Loan, the mortgage loan
relating to the corresponding Property having a first priority lien; and with
respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
Third Mortgage Loan: A Mortgage Loan which constitutes a third priority
mortgage lien with respect to the related Property.
Trustee: Bankers Trust Company of California, N.A., located on the date of
execution of this Agreement at 3 Park
3
<PAGE>
Plaza, Irvine, California 92714, a national banking association, not in its
individual capacity but solely as Trustee, and any successor hereunder.
Unaffiliated Originator Loan: Any Mortgage Loan purchased by an Affiliated
Originator from an Unaffiliated Originator.
Unaffiliated Originators: Any Originator (x) not affiliated with the
Sponsor and (y) approved in writing by the Certificate Insurer.
Section 2. Interest Calculations. All calculations of interest hereunder,
including, without limitation, calculations of interest at the Coupon Rate,
which are made in respect of the Loan Balance of a Mortgage Loan shall be made
on a daily basis using a 360-day year comprised of twelve 30-day months.
Section 3. Transfers of Mortgage Loans. From time to time in connection
with the establishment of Advanta Trusts the Affiliated Originators and the
Sponsor, intend to transfer Mortgage Loans from the Conduit Acquisition Trust to
the related Advanta Trust. Each such transfer will be evidenced by a Conveyance
Agreement in substantially the form of Exhibit A hereto.
Section 4. Representations, Warranties and Covenants Regarding the
Affiliated Originators and the Sponsor. (a) Each Affiliated Originator hereby
represents and warrants to the Sponsor, the Trustee and their respective
successors and assigns that, as of the date hereof;
(i) Such Affiliated Originator is a corporation (or, in the case of
Colonial National Bank USA, a national banking association) duly organized,
validly existing and in good standing under the laws governing its creation
and existence and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business, or the properties owned
or leased by it make such qualification necessary. Such Affiliated
Originator has all requisite corporate power and authority to own and
operate its properties, to carry out its business as presently conducted
and as proposed to be conducted, to enter into and discharge its
obligations under this Agreement and the Conveyance Agreements.
(ii) The execution and delivery of this Agreement by such Affiliated
Originator and its performance and compliance with the terms of this
Agreement and the Conveyance Agreements to which it is a party have been
duly authorized by all necessary corporate action on the part of such
Affiliated Originator and will not violate
4
<PAGE>
such Affiliated Originator's Articles of Incorporation, Articles of
Association or Bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in a breach of, any material contract, agreement or other instrument
to which such Affiliated Originator or its properties is a party or by
which such Affiliated Originator is bound or violate any statute or any
order, rule or regulation of any court, governmental agency or body or
other tribunal having jurisdiction over such Affiliated Originator or any
of its properties.
(iii) This Agreement and the Conveyance Agreements to which such
Affiliated Originator is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a valid,
legal and binding obligation of such Affiliated Originator, enforceable
against it in accordance with the terms hereof, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (whether considered in
a proceeding or action in equity or at law).
(iv) Such Affiliated Originator 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 might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of such Affiliated Originator or its
properties, or might have consequences that would materially and adversely
affect its performance hereunder and under the other Conveyance Agreements
to which such Affiliated Originator is a party, or which would draw into
question the validity of this Agreement or the Mortgage Loans taken as a
whole or of any action taken or to be taken in connection with the
obligations of the Affiliated Originator contemplated herein.
(v) No litigation is pending or, to the best of such Affiliated
Originator's knowledge, threatened against such Affiliated Originator which
litigation might have consequences that would prohibit its entering into
this Agreement or any Conveyance Agreements to which it is a party or that
would materially and adversely affect the condition (financial or
otherwise) or operations of such Affiliated Originator or its properties or
might have consequences that would materially and adversely affect its
performance hereunder and under the Conveyance Agreements to which such
Affiliated Originator is a party.
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(vi) Neither this Agreement nor any certificate of an officer,
statement furnished in writing or report delivered pursuant to the terms
hereof by such Affiliated Originator contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
certificate, statement or report not misleading.
(vii) Upon the receipt of each Mortgage Loan and other items of the
Mortgage by the Trustee under this Agreement, the related Advanta Trust
will have good and marketable title to such Mortgage Loan and such other
items of the related Trust Estate free and clear of any lien (other than
liens which will be simultaneously released).
(viii) Neither such Affiliated Originator nor any affiliate thereof
will report on any financial statement any part of the Servicing Fee as an
adjustment to the sales price of the Mortgage Loans.
(ix) 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 Affiliated Originator
makes no such representation or warranty), that are necessary or advisable
in connection with the sale of the Mortgage Loans and the execution and
delivery by such Affiliated Originator of this Agreement and the Conveyance
Agreements to which it is a party, have been duly taken, given or obtained,
as the case may be, are in full force and effect on the date hereof, are
not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review thereof
may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement and the
conveyance Agreements on the part of such Affiliated Originator and the
performance by such Affiliated Originator of its obligations under this
Agreement and such of the Conveyance Agreements to which it is a party.
(x) The origination practices used by such Affiliated Originator with
respect to the Mortgage Loans originated by such Affiliated Originator have
been, (i) in all material respects, legal, proper, prudent and customary in
the mortgage loan lending business and (ii)
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in compliance with the Servicer's underwriting criteria as described in the
Prospectus.
(xi) The transactions contemplated by this Agreement are in the
ordinary course of business of such Affiliated Originator. The transfer,
assignment and conveyance of the Mortgage Notes and the Mortgages by the
Servicer pursuant to this Agreement are not subject to the bulk transfer
laws or any similar statutory provisions in effect in any applicable
jurisdiction.
(xii) Such Affiliated Originator received fair consideration and
reasonably equivalent value in exchange for the sale of the interests in
the Mortgage Loans.
(xiii) Such Affiliated Originator did not sell any interest in any
Mortgage Loan with any intent to hinder, delay or defraud any of its
respective creditors.
(xiv) Such Affiliated Originator is solvent, and such Affiliated
Originator will not be rendered insolvent as a result of the sale of the
Mortgage Loans to the related Advanta Trust.
The representations and warranties set forth in this paragraph (a) shall survive
the sale and assignment of the Mortgage Loans to the Sponsor.
In addition, each Affiliated Originator hereby covenants to perform the
obligations, if any, imposed upon it by the related Advanta Pooling Agreement.
(b) The Sponsor hereby represents and warrants to each Affiliated
Originator and the Trustee that, as of the date hereof:
(i) The Sponsor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
licenses and qualifications necessary to carry on its business as now being
conducted and to perform its obligations hereunder; the Sponsor has the
power and authority to execute and deliver this Agreement and to perform
its obligations in accordance herewith; the execution, delivery and
performance of this Agreement (including any Conveyance Agreement and any
other instruments of transfer to be delivered pursuant to this Agreement)
by the Sponsor and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and
do not violate the organization documents of the Sponsor, contravene or
violate any law, regulation, rule, order, judgement or decree to which the
Sponsor or its properties are subject or contravene,
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violate or result in any breach of any provision of, or constitute a
default under, or result in the imposition of any lien on any assets of the
Sponsor pursuant to the provisions of, any mortgage, indenture, contract,
agreement or other undertaking to which the Sponsor is a party or which
purports to be binding upon Sponsor or any of Sponsor's assets; this
Agreement evidences the valid and binding obligation of the Sponsor
enforceable against the Sponsor in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditor's rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity;
(ii) 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, that are necessary in
connection with the execution and delivery by the Sponsor of this
Agreement, have been duly taken, given or obtained, as the case may be, are
in full force and effect, are not subject to any pending proceedings or
appeals (administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be obtained
has expired or no review thereof may be obtained or appeal therefrom taken,
and are adequate to authorize the consummation of the transactions
contemplated by this Agreement on the part of the Sponsor and the
performance by the Sponsor of its obligations under this Agreement; and
(iii) There is no action, suit, proceeding or investigation pending
or, to the best of the Sponsor's knowledge, threatened against the Sponsor
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 the Sponsor or in any material impairment of the
right or ability of the Sponsor to carry on its business substantially as
now conducted, or in any material liability on the part of the Sponsor or
which would draw into question the validity of this Agreement or of any
action taken or to be taken in connection with the obligations of the
Sponsor contemplated herein, or which would be likely to impair the ability
of the Sponsor to perform under the terms of this Agreement.
The representations and warranties set forth in this paragraph (b) shall survive
the sale and assignment of the Mortgage Loans to the Sponsor. Upon discovery of
a breach of any of
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the foregoing representations and warranties which materially and adversely
affects the interests of the Affiliated Originator, the Affiliated Originator
shall give prompt written notice to the Sponsor. Within 30 days of its receipt
of notice of breach, the Sponsor shall cure such breach in all material
respects.
Section 5. Representations and Warranties of the Affiliated Originators
Regarding the Mortgage Loans. (a) Set forth in paragraph (b) below is a listing
of representations and warranties which will be deemed to have been made by each
Affiliated Originator in connection with each conveyance of a Pool from the
Conduit Acquisition Trust to the related Advanta Trust. In addition, a
Conveyance Agreement may, with respect to the Mortgage Loans in the related
Pool, delete or modify any of such representations and warranties, or may add
additional representations and warranties ("Additional Representations and
Warranties"). The representations and warranties listed in paragraph (b) below,
together with any Additional Representations and Warranties, are the
"Representations and Warranties". Reference to the Cut-Off Date are as of the
Cut-Off Date set forth in the related Conveyance Agreement with respect to a
Mortgage Loan.
(b) With respect to each Mortgage Loan, each Affiliated Originator hereby
represents, warrants and covenants to the Sponsor and the Trustee, as of the
related Cut-Off Date, as follows, on which representations, warranties and
covenants the Trustee relies in accepting the Mortgage Loans:
(i) The information with respect to each Mortgage Loan set forth in
the Schedules of Mortgage Loans is true and correct as of the Cut-Off Date;
(ii) All of the original or certified documentation required to be
delivered to the Trustee pursuant to the related Advanta Pooling Agreement
(including all material documents related thereto) with respect to each
Mortgage Loan has been or will be delivered to the Trustee in accordance
with the terms of such Advanta Pooling Agreement. Each of the documents and
instruments specified to be included therein has been duly executed and in
due and proper form, and each such document or instrument is in a form
generally acceptable to prudent mortgage lenders that regularly originate
or purchase mortgage loans comparable to the Mortgage Loans for sale to
prudent investors in the secondary market that invest in mortgage loans
such as the Mortgage Loans.
(iii) Each Mortgage Loan being transferred to the Sponsor is a
Qualified Mortgage and is a Mortgage;
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(iv) Each Property is improved by a single (one-to-four) family
residential dwelling, which may include condominiums and townhouses but
shall not include cooperatives;
(v) No Mortgage Loan had a Combined Loan-to-Value Ratio in excess of
100%;
(vi) Each Mortgage is either a valid and subsisting first, second or
third lien of record on the Property (subject in the case of any Second
Mortgage Loan or Third Mortgage Loan only to a Senior Lien on such
Property) and subject in all cases to the exceptions to title set forth in
the title insurance policy, with respect to the related Mortgage Loan,
which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such other
exceptions to which similar properties are commonly subject and which do
not individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage;
(vii) Immediately prior to the transfer and assignment herein
contemplated, each Affiliated Originator held good and indefeasible title
to, and was the sole owner of, each Mortgage Loan conveyed by such
Affiliated Originator subject to no liens, charges, mortgages, encumbrances
or rights of others except liens which will be released simultaneously with
such transfer and assignment; and immediately upon the transfer and
assignment herein contemplated, the Trustee will hold good and indefeasible
title to, and be the sole owner of, each Mortgage Loan subject to no liens,
charges, mortgages, encumbrances or rights of others except liens which
will be released simultaneously with such transfer and assignment;
(viii) As of the related Cut-Off Date, no Mortgage Loan is 30 or more
days Delinquent, except for any portion of the Mortgage Loans which the
related Advanta Pooling Agreement permits to be more than 30 days
Delinquent;
(ix) There is no delinquent tax or assessment lien or mechanic's lien
on any Property, and each Property is free of substantial damage and is in
good repair;
(x) There is no valid and enforceable right of rescission offset,
defense or counterclaim to any Note or Mortgage, including the obligation
of the related Mortgagor to pay the unpaid principal of or interest on such
Note or the defense of usury, nor will the operation
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of any of the terms of the Mortgage Note or the Mortgage, or the exercise
of any right thereunder, render either the Mortgage Note or the Mortgage
unenforceable in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and no
such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(xi) There is no mechanics' lien or claim for work, labor or material
affecting any Property which is or may be a lien prior to, or equal with,
the lien of the related Mortgage except those which are insured against by
any title insurance policy referred to in paragraph (xiii) below;
(xii) Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and
regulations, including, without limitation, the federal Truth-in-Lending
Act and other consumer protection laws, real estate settlement procedure,
usury, equal credit opportunity, disclosure and recording laws;
(xiii) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard California Land Title Association form or
American Land Title Association form, or other form acceptable in a
particular jurisdiction by a title insurance company authorized to transact
business in the state in which the related Property is situated, in an
amount at least equal to the Original Principal Amount of such Mortgage
Loan insuring the mortgagee's interest under the related Mortgage Loan as
the holder of a valid first or second mortgage lien of record on the real
property described in the related Mortgage, as the case may be, subject
only to exceptions of the character referred to in paragraph (vi) above,
was effective on the date of the origination of such Mortgage Loan, and, as
of the Cut-Off Date such policy will be valid and thereafter such policy
shall continue in full force and effect;
(xiv) The improvements upon each Property are covered by a valid and
existing hazard insurance policy (which may be a blanket policy of the type
described in the related Advanta Pooling Agreement) with a generally
acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan (together, in the case of a
Second Mortgage Loan, with the outstanding principal balance of the Senior
Lien), (B) the minimum amount required to
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compensate for damage or loss on a replacement cost basis or (C) the full
insurable value of the Property;
(xv) If any Property is in an area identified in the Federal Register
by the Federal Emergency Management Agency as having special flood hazards,
a flood insurance policy (which may be a blanket policy of the type
described in the Advanta Pooling Agreement) in a form meeting the
requirements of the current guidelines of the Federal Insurance
Administration is in effect with respect to such Property with a generally
acceptable carrier in an amount representing coverage not less than the
least of (A) the outstanding principal balance of the related Mortgage Loan
(together, in the case of a Second Mortgage Loan, with the outstanding
principal balance of the Senior Lien), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973;
(xvi) Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its
terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law),
and all parties to each Mortgage Loan had full legal capacity to execute
all documents relating to such Mortgage Loan and convey the estate therein
purported to be conveyed;
(xvii) Each Affiliated Originator has caused and will cause to be
performed any and all acts required to be performed to preserve the rights
and remedies of the servicer in any Insurance Policies applicable to any
Mortgage Loans delivered by such Affiliated Originator including, to the
extent such Mortgage Loan is not covered by a blanket policy described in
the Advanta Pooling Agreement, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the servicer;
(xviii) Each original Mortgage was recorded or is in the process of
being recorded, and all subsequent assignments of the original Mortgage
have been recorded in the appropriate jurisdictions wherein such
recordation is necessary to perfect the lien thereof for the benefit of the
applicable Affiliated Originator, subject to the provisions of Section
3.5(b) of the Advanta Pooling Agreement, (or are in the process of being
recorded);
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(xix) The terms of each Note and each Mortgage have not been impaired,
altered or modified in any respect, except by a written instrument which
has been recorded, if necessary, to protect the interest of the owners and
which has been delivered to the Trustee. The substance of any such
alteration or modification is reflected on the related Schedule of Mortgage
Loans and has been approved by the primary mortgage guaranty insurer, if
any;
(xx) The proceeds of each Mortgage Loan have been fully disbursed, and
there is no obligation on the part of the mortgagee to make future advances
thereunder. Any and all requirements as to completion of any on-site or
off-site improvements and as to disbursements of any escrow funds therefor
have been complied with. All costs, fees and expenses incurred in making or
closing or recording such Mortgage Loans were paid;
(xxi) Except as otherwise required by law or pursuant to the statute
under which the related Mortgage Loan was made, the related Note is not and
has not been secured by any collateral, pledged account or other security
except the lien of the corresponding Mortgage;
(xxii) No Mortgage Loan was originated under a buydown plan;
(xxiii) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
(xxiv) Each Property is located in the state identified in the
Schedule of Mortgage Loans and consists of one or more parcels of real
property with a residential dwelling erected thereon;
(xxv) Each Mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Property is sold without the prior consent of the
mortgagee thereunder;
(xxvi) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-Off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate and
single repayment term reflected on the Schedule of Mortgage Loans. The
consolidated principal amount does not exceed the original principal amount
of the related Mortgage Loan. No Note permits or obligates the Master
Servicer, the Sub-Servicer or the Sponsor to
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make future advances to the related Mortgagor at the option of the
Mortgagor;
(xxvii) There is no proceeding pending or threatened for the total or
partial condemnation of any Property, nor is such a proceeding currently
occurring, and each Property is undamaged by waste, fire, earthquake or
earth movement, flood, tornado or other casualty, so as to affect adversely
the value of the Property as security for the Mortgage Loan or the use for
which the premises were intended;
(xxviii) All of the improvements which were included for the purposes
of determining the Appraised Value of any Property lie wholly within the
boundaries and building restriction lines of such Property, and no
improvements on adjoining properties encroach upon such Property, and, if a
title insurance policy exists with respect to such Property, are stated in
such title insurance policy and affirmatively insured;
(xxix) No improvement located on or being part of any Property is in
violation of any applicable zoning law or regulation. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of each Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained
from the appropriate authorities and such Property is lawfully occupied
under the applicable law;
(xxx) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Sponsor or the
related Trust to the trustee under the deed of trust, except in connection
with a trustee's sale after default by the related Mortgagor;
(xxxi) With respect to each Second Mortgage Loan, either (A) no
consent for such Mortgage Loan was required by the holder of the related
Senior Lien prior to the making of such Mortgage Loan or (B) such consent
has been obtained and is contained in the related File;
(xxxii) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the related Property of the benefits of the security,
including (A) in the case of a Mortgage designated as a deed of trust, by
trustee's sale and (B)
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otherwise by judicial foreclosure. There is no homestead or other exemption
available which materially interferes with the right to sell the related
Property at a trustee's sale or the right to foreclose the related
Mortgage;
(xxxiii) Except as provided by clause (viii) of this Section, there is
no default, breach, violation or event of acceleration existing under any
Mortgage or the related Note and no event which, with the passage of time
or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration; and the
applicable Affiliated Originator has not waived any default, breach,
violation or event of acceleration;
(xxxiv) Except for any Bulk Acquisition Loan, no instrument of release
or waiver has been executed in connection with any Mortgage Loan, and no
Mortgagor has been released, in whole or in part, except in connection with
an assumption agreement which has been approved by the primary mortgage
guaranty insurer, if any, and which has been delivered to the Trustee;
(xxxv) Except for any Bulk Acquisition Loan, the maturity date of each
Mortgage Loan which is a Second Mortgage Loan is at least twelve months
prior to the maturity date of the related first mortgage loan if such first
mortgage loan provides for a balloon payment;
(xxxvi) The credit underwriting guidelines applicable to each Mortgage
Loan which is not a Bulk Acquisition Loan or an Unaffiliated Originator
Loan conform in all material respects to the Sponsor's underwriting
guidelines;
(xxxvii) The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the Sponsor's
underwriting guidelines;
(xxxviii) All parties to the Note and the Mortgage had legal capacity
to execute the Note and the Mortgage and each Note and Mortgage have been
duly and properly executed by such parties; and
(xxxix) The related Affiliated Originator has no actual knowledge that
there exist on any Property any hazardous substances, hazardous wastes or
solid wastes, as such terms are defined in the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and
Recovery Act of 1976, or other federal, state or local environmental
legislation.
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(c) No Originator Payment Obligations. There is no obligation on the part
of the Servicer or any other party to make payments in addition to those made by
the Mortgagor except for delinquency.
The Representations and Warranties shall survive the transfer and
assignment of the Mortgage Loans to the related Advanta Trust. Upon discovery by
the Affiliated Originator or the Sponsor of a breach of any of the
Representations and Warranties, without regard to any limitation set forth in
such Representation or Warranty concerning the knowledge of the Affiliated
Originator as to the facts stated therein, which breach, in the opinion of the
Sponsor, materially and adversely affects the interests of the Sponsor, the
Owners or of the Certificate Insurer in the related Mortgage Loan or Mortgage
Loans, the party discovering such breach shall give prompt written notice to the
other party, and the related Affiliated Originator shall be required to take the
remedial actions required by the related Advanta Pooling Agreement within the
time periods required thereto. Each Affiliated Originator hereby acknowledges
that a breach of any of the Representations and Warranties listed in clauses
(iii), (x), (xvi) and (xxxviii) above a priori materially and adversely affects
the interests of the related Advanta Trust, the related Owners and the
Certificate Insurer.
Section 6. Authorized Representatives. The names of the officers of the
Affiliated Originators and of the Sponsor who are authorized to give and receive
notices, requests and instructions and to deliver certificates and documents in
connection with this Agreement on behalf of the Affiliated Originator and of the
Sponsor ("Authorized Representatives") are set forth on Exhibit B. From time to
time, the Affiliated Originator and the Sponsor may, by delivering to the
Trustee a revised exhibit, change the information previously given, but the
Trustee shall be entitled to rely conclusively on the last exhibit until receipt
of a superseding exhibit.
Section 7. Notices. All demands, notices and communications relating to
this Agreement shall be in writing and shall be deemed to have been duly given
when received by the other party or parties at the address shown below, or such
other address as may hereafter be furnished to the other party or parties by
like notice. Any such demand, notice or communication hereunder shall be deemed
to have been received on the date delivered to or received at the premises of
the addressee.
If to the Trustee:
Bankers Trust Company of California, N.A.
3 Park Plaza
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Irvine, CA 92714
Telecopy: (714) 253-7577
Telephone: (714) 253-7575
If to the Affiliated Originators or the Sponsor:
Advanta Mortgage Corp. USA
500 Office Center Drive
Suite 400
Ft. Washington, PA 19034
Attention: Mark Casale - Vice President
Telecopy: (215) 283-4639
Telephone: (215) 283-4376
Section 8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of laws rules applied in the State of New York.
Section 9. Assignment. No party to this Agreement may assign its rights or
delegate its obligations under this Agreement without the express written
consent of the other parties, except as otherwise set forth in this Agreement.
Section 10. Counterparts. For the purpose of facilitating the execution of
this Agreement and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed to
be an original, and together shall constitute and be one and the same
instrument.
Section 11. Amendment. This Agreement may be amended from time to time by
the Affiliated Originators, the Sponsor and the Trustee only by a written
instrument executed by such parties and with the prior written consent of the
Certificate Insurer.
Section 12. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 13. No Agency; No Partnership or Joint Venture. Neither the
Affiliated Originators nor the Sponsor is the agent or representative of the
other, and nothing in this Agreement shall be construed to make either the
Affiliated Originator nor the Sponsor liable to any third party for services
performed by it or for debts or claims accruing to it against the other party.
Nothing contained
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herein nor the acts of the parties hereto shall be construed to create a
partnership or joint venture between the Sponsor and the Affiliated Originator.
Section 14. Further Assurances. The Affiliated Originators and Sponsor
agree to cooperate reasonably and in good faith with one another in the
performance of this Agreement.
Section 15. The Certificate Insurer. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligation's under the related
Certificate Insurance Policies. During any period of suspension, the Certificate
Insurer's rights hereunder shall vest in the Owners of the related Offered
Certificates and shall be exercisable by the owners of at least a majority in
Percentage Interest of the related Offered Certificates then outstanding. At
such time as the related Offered Certificates are no longer Outstanding under
the related Advanta Pooling Agreement and the Certificate Insurer has been
reimbursed for all Insured Payments to which it is entitled under the related
Advanta Pooling Agreement, the Certificate Insurer's rights hereunder shall
terminate.
Section 16. Maintenance of Records. Each Affiliated Originator shall each
continuously keep an original executed counterpart of this Agreement in its
official records.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.
COLONIAL NATIONAL BANK USA
The Sellers
BY:______________________________________
Name: Mark Casale
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee and not in its
individual capacity
BY:______________________________________
Name: Holly Holland
Title: Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC. as Sponsor
BY:______________________________________
Name: Mark Casale
Title: Vice President
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EXHIBIT A
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta
Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage
Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Mortgage Conduit
Services, Inc., Advanta Finance Corp. and Colonial National Bank USA, as
Affiliated Originators and Advanta Mortgage Conduit Services, Inc., as Sponsor,
pursuant to the Master Loan Transfer Agreement dated as of February 15, 1995
among themselves and Bankers Trust Company of California, N.A. as Trustee (the
"Mortgage Transfer Agreement"), hereby confirm their understanding with respect
to the conveyance by each Affiliated Originator and the Sponsor of those
Mortgage Loans listed on the attached Schedule of Mortgage Loans (the
"Transferred Mortgage Loans") from the Conduit Acquisition Trust to the Advanta
Mortgage Loan Trust __________-__.
Conveyance of Transferred Mortgage Loans. Each Affiliated Originator and
the Sponsor, concurrently with the execution and delivery of this Conveyance
Agreement, does hereby irrevocably transfer, assign, set over and otherwise
convey, and does direct the Trustee to convey from the Conduit Acquisition Trust
to the Advanta Mortgage Loan Trust __________-__, without recourse (except as
otherwise explicitly provided for herein) all of its right, title and interest
in and to the Transferred Mortgage Loans being conveyed by it, including
specifically, without limitation, the Mortgages (as such term is defined in the
"related Advanta Pooling Agreement"), the Files and all other documents,
materials and properties appurtenant thereto and the Notes, including all
interest and principal received by such Affiliated Originator on or with respect
to such Transferred Mortgage Loans on or after the related Cut-off Date,
together with all of its right, title and interest in and to the proceeds
received on or after the related Cut-off Date of any related insurance policies.
If an Affiliated Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, such Affiliated Originator shall
promptly deliver to the Trustee such original Mortgage or mortgage assignment
with evidence of recording indicated thereon upon receipt thereof from the
public recording official.
A-1
<PAGE>
The costs relating to the delivery of the documents specified in this
Conveyance Agreement shall be borne by each Affiliated Originator.
The Affiliated Originators hereby make the Representations and Warranties
set forth in Section 5(b) of the Master Transfer Agreement with respect to the
Transferred Mortgage Loans.
The "Cut-Off Date" with respect to such Transferred Mortgage Loans shall be
___________ __, _______.
All terms and conditions of the Mortgage Transfer Agreement are hereby
incorporated herein, provided that in the event of any conflict the provisions
of this Conveyance Agreement shall control over the conflicting provisions of
the Mortgage Transfer Agreement.
For purposes of this Conveyance Agreement, the "related Advanta Pooling
Agreement" is the Pooling and Servicing Agreement dated as of ___________ __,
______ relating to Advanta Mortgage Loan Trust __________-__.
A-2
<PAGE>
Terms capitalized herein and not defined herein shall have their respective
meanings as set forth in the Mortgage Transfer Agreement.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.
COLONIAL NATIONAL BANK USA,
as Affiliated Originators
By:______________________________________
Mark Casale
Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC.
as Sponsor
By:______________________________________
Mark Casale
Vice President
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.,
as Trustee
By:______________________________________
Holly Holland
Vice President
Dated:
A-3
<PAGE>
EXHIBIT B
AUTHORIZED REPRESENTATIVES
Reference is hereby made to the Master Loan Transfer Agreement, dated as of
February 15, 1995 (the "Agreement"), among Advanta Mortgage Corp. USA, Advanta
Mortgage Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic II, Advanta
Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey, Advanta Mortgage
Corp. Northeast, Advanta Mortgage Conduit Services, Inc., Advanta Finance Corp.
and Colonial National Bank USA, as Affiliated Originators, Advanta Mortgage
Conduit Services, Inc., as Sponsor and Bankers Trust Company of California,
N.A., as Trustee:
The following are the Affiliated Orginators' Authorized Representatives for
purposes of the Agreement:
Name Title
- ---- -----
Annette Aguirre Senior Vice President, General Counsel and
Secretary
Mark Casale Vice President
The following are the Sponsor's Authorized Representatives for purposes of
the Agreement:
Name Title
- ---- -----
Annette Aguirre Senior Vice President, General Counsel and
Secretary
Mark Casale Vice President
B-1
<PAGE>
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA, Advanta Mortgage Corp.
Midatlantic, Advanta Mortgage Corp. Midatlantic II, Advanta
Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey,
Advanta Mortgage Corp. Northeast, Advanta Mortgage Conduit
Services, Inc., Advanta Finance Corp. and Advanta National
Bank USA, as Affiliated Originators and Advanta Mortgage
Conduit Services, Inc., as Sponsor, pursuant to the Master
Loan Transfer Agreement dated as of February 15, 1995 (the
"Mortgage Transfer Agreement") among themselves and Bankers
Trust Company of California, N.A. as conduit trustee (the
"Conduit Trustee"), hereby confirm their understanding with
respect to the conveyance by each Affiliated Originator and
the Sponsor of those Mortgage Loans listed on the attached
Schedule of Mortgage Loans (the "Transferred Mortgage Loans")
from the Conduit Acquisition Trust to the Advanta Mortgage
Loan Trust 1996-2 (the "Trust").
Conveyance of Transferred Mortgage Loans. Each
Affiliated Originator and the Sponsor, concurrently with the
execution and delivery of this Conveyance Agreement, does
hereby irrevocably transfer, assign, set over and otherwise
convey, and does direct the Conduit Trustee to convey:
(i) from the Conduit Acquisition Trust to the Trust
1996-2, without recourse (except as otherwise explicitly
provided for herein) all of its right, title and interest in
and to the Transferred Mortgage Loans being conveyed by it,
including specifically, without limitation, the Mortgages (as
such term is defined in the "related Advanta Pooling
Agreement"), the Files and all other documents, materials and
properties appurtenant thereto and the Notes, including all
interest and principal received by such Affiliated Originator
on or with respect to such Transferred Mortgage Loans on or
after the related Cut-off Date, together with all of its
right, title and interest in and to the proceeds received on
or after the related Cut-off Date of any related insurance
policies.
If an Affiliated Originator cannot deliver the
original Mortgage or mortgage assignment with evidence of
recording thereon concurrently with the execution and delivery
of this Conveyance Agreement solely because of a delay caused
by the public recording office where such original Mortgage or
mortgage assignment has been delivered for recordation, such
Affiliated Originator shall promptly deliver to Bankers Trust
Company of California, in its capacity as Trustee (the
"Trustee") such original Mortgage or mortgage assignment with
<PAGE>
evidence of recording indicated thereon upon receipt thereof
from the public recording official.
The costs relating to the delivery of the documents
specified in this Conveyance Agreement shall be borne by each
Affiliated Originator.
The Affiliated Originators hereby make the
Representations and Warranties set forth in Section 5(b) of
the Master Transfer Agreement with respect to the Transferred
Mortgage Loans, together with the following additional
representation and warranty:
As of the Startup Day, no Mortgagor is currently a
debtor in a case under Title 11 of the United States Code, or
any similar state insolvency proceeding.
Bankers Trust Company of California, N.A., in its
capacity as Trustee, and the Trust are intended beneficiaries
of this Agreement and of the foregoing representations,
warranties and agreements.
The "Cut-Off Date" with respect to such Transferred
Mortgage Loans shall be May 1, 1996.
The Sponsor, the Conduit Trustee, Advanta Mortgage
Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta
Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest,
Advanta Mortgage Corp. of New Jersey, Advanta Mortgage Corp.
Northeast, Advanta Mortgage Conduit Services, Inc., Advanta
Finance Corp. and Advanta National Bank USA hereby agree to
the addition of Advanta Conduit Receivables, Inc. as an
"Affiliated Originator" under the Mortgage Transfer Agreement.
All terms and conditions of the Master Transfer
Agreement are hereby incorporated herein; provided that in the
event of any conflict the provisions of this Conveyance
Agreement shall control over the conflicting provisions of the
Master Transfer Agreement.
For purposes of this Conveyance Agreement, the
"related Advanta Pooling Agreement" with respect to the
Transferred Mortgage Loans is the Pooling and Servicing
Agreement dated as of May 1, 1996 by and among the Sponsor,
Advanta Mortgage Corp. USA and Bankers Trust Company of
California, N.A.
2
<PAGE>
Terms capitalized herein and not defined herein
shall have their respective meanings as set forth in the
Mortgage Transfer Agreement.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE RECEIVABLES, INC.
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.
ADVANTA NATIONAL BANK USA
ADVANTA CONDUIT RECEIVABLES INC.,
as Affiliated Originators
By:_____________________________
Mark Casale
Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC., as Sponsor
By:_____________________________
Mark Casale
Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A. as Trustee
By:_____________________________
Erin Deegan
Assistant Vice President
Dated: May 29, 1996
3
<PAGE>
May 29, 1996
Advanta Mortgage Loan Trust
1996-2 (the "Trust")
c/o Bankers Trust Company
of California, N.A.
Three Park Plaza
16th Floor
Irvine, California 92714
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
Re: Pooling and Servicing Agreement dated as of
May 1, 1996 (the "Pooling Agreement") Advanta
as the Sponsor, Advanta Mortgage Corp. USA, as
Master Servicer, and Bankers Trust Company of
California, N.A. as Trustee (the "Trustee")
and the Master Loan Transfer Agreement dated
as of February 15, 1995 (the "Master Transfer
Agreement") among the Sponsor, the Trustee and
the Affiliated Originators named therein (the
"Affiliated Originators")
Ladies and Gentlemen:
Pursuant to the Agreements, USA in its capacity as Master Servicer, has
undertaken certain financial obligations with respect to its servicing of the
Mortgage Loans, including, but not limited to, the making of Delinquency
Advances and Servicing Advances. In addition, the Sponsor and the Affiliated
Originators have, in the Agreement and in the Master Transfer Agreement
undertaken certain financial obligations, including, but not limited to, the
payment of the Loan Purchase Price relating to the repurchase of defective
Mortgage Loans, the payment of Substitution Amounts in connection with the
substitution of Qualified Replacement Mortgages and the payment of certain
expenses of the Trust. Any financial obligations of USA, the Sponsor or any
Affiliated Originator under the Agreement or the Master Transfer Agreement,
whether or not specifically enumerated in this paragraph, are hereinafter
referred to as the "Joint and Several Obligations"; provided, however, that
"Joint and Several Obligations" shall mean only the financial obligations of
USA, the Sponsor or any Affiliated Originator under the Agreement or the Master
Transfer Agreement (including the payment of money damages for a breach of any
of USA's, the
<PAGE>
Sponsor's or any Affiliated Originator's obligations under the Agreement or the
Master Transfer Agreement, whether financial or otherwise) but shall not include
any obligations not relating to the payment of money (e.g., the obligation to
service the Mortgage Loans).
The Certificate Insurer has required the undersigned, Advanta Mortgage
Holding Company ("AMHC"), the parent corporation of USA and the indirect
corporate parent of the Sponsor, to acknowledge its joint-and-several liability
with USA, the Sponsor and the Affiliated Originators for the payment of the
Joint and Several Obligations under the Agreement and the Master Transfer
Agreement.
Now, therefore, the Trust, the Certificate Insurer and AMHC do hereby agree
that:
(i) AMHC hereby agrees to be absolutely and unconditionally jointly and
severally liable with USA, the Sponsor and the Affiliated Originators
to the Trust and the Certificate Insurer for the payment of the Joint
and Several Obligations.
(ii) AMHC may honor its obligations hereunder either by direct payment of
any Joint and Several Obligations or by causing any Joint and Several
Obligations to be paid to the Trust and the Certificate Insurer by
USA, the Sponsor, any Affiliated Originator or another affiliate of
AMHC.
2
<PAGE>
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE
HOLDING COMPANY
By:___________________________
Name: Mark A. Casale
Title: Vice President
Acknowledged and Agreed:
ADVANTA MORTGAGE LOAN
TRUST, 1996-2
By: Bankers Trust Company
of California, N.A.,
as Trustee
By:___________________________
Name: Erin Deegan
Title: Assistant Vice President
Acknowledged:
FINANCIAL GUARANTY INSURANCE COMPANY
By:___________________________
Name:
Title:
Dated: May 29, 1996
3
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
Issuer: Advanta Mortgage Loan Policy Number: 96010261
Trust 1996-2
Control Number: 0010001
Insured Obligations: $300,000,000
in aggregate principal amount of Deposit Premium: $27,500
Mortgage Loan Asset Backed
Certificates, Series 1996-2
Trustee: Bankers Trust Company of California, N.A.
Financial Guaranty Insurance Company ("Financial Guaranty"), a New York stock
insurance company, in consideration of its receipt of the Deposit Premium and
subject to the terms of this Surety Bond, hereby unconditionally and irrevocably
agrees to pay each Insured Payment to the Trustee named above or its successor,
as trustee for the Series 1996-2 Certificates, to the extent set forth in the
Pooling and Servicing Agreement. The Class A-1, A-2, A-3, A-4 and A-5 Group I
Certificates (the "Group I Certificates") and the Class A-6 Variable Rate Group
II Certificates (the "Group II Certificates") collectively are referred to
herein as the "Insured Obligations".
Financial Guaranty will make such payment out of its own funds by 11:00 A.M.
(New York City Time) in immediately available funds to the Trustee on the later
of (i) the Business Day next following the day on which Financial Guaranty shall
have received Notice that an Insured Payment is due and (ii) the Payment Date on
which the Insured Payment is distributable to Certificateholders of the Insured
Obligations pursuant to the Pooling and Servicing Agreement, for disbursement to
such Certificateholders in the same manner as the payments with respect to the
Series 1996-2 Certificates.
Upon such payment, Financial Guaranty shall be fully subrogated to the rights of
the Series 1996-2 Certificateholders to receive the amount so paid as set forth
in Section 7.3(d) of the Pooling and Servicing Agreement. Financial Guaranty's
obligations hereunder with respect to each Payment Date shall be discharged to
the extent funds consisting of the Insured Payment are received by the Trustee
on behalf of the Certificateholders of the Insured Obligations for distribution
to such holders, as provided in the Pooling and Servicing Agreement and herein,
whether or not such funds are properly applied by the Trustee.
Form 9013
Page 1 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
If the payment of any portion or all of any amount that is insured hereunder is
voided pursuant to a final, non-appealable order under the U.S. Bankruptcy Code
in an insolvency proceeding, and, as a result, the Trustee or any Group I
Certificateholder or Class A-6 Certificateholder is required to return such
voided payment, or any portion of such voided payment made in respect of the
Group I Certificates or Class A-6 Certificates (a "Group I Preference Amount" or
"Class A-6 Preference Amount", respectively), Financial Guaranty will pay on the
guarantee described in the first paragraph hereof, an amount equal to each such
Group I Preference Amount or Class A-6 Preference Amount, on the second Business
Day following receipt by Financial Guaranty of (x) a certified copy of a final
order of a court exercising jurisdiction in such insolvency proceeding to the
effect that the Trustee, the Group I Certificateholder or Class A-6
Certificateholder, as the case may be, is required to return any such payment or
portion thereof prior to the termination of the Trust because such payment was
voided under applicable law, with respect to which order the appeal period has
expired without an appeal having been filed (the "Final Order"), (y) an
assignment, in form reasonably satisfactory to Financial Guaranty, irrevocably
assigning to Financial Guaranty all rights and claims of such beneficiary
relating to or arising under such Preference Amount and (z) a Notice in the form
of Exhibit A hereto appropriately completed and executed by the beneficiary.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order and not
to the beneficiary directly.
Notwithstanding the foregoing, in no event shall Financial Guaranty be obligated
to make any payment in respect of any Group I Preference Amount or Class A-6
Preference Amount, which payment represents a payment of the principal amount of
the Group I Certificates or Class A-6 Certificates, prior to the time Financial
Guaranty would have been required to make a payment in respect of such
principal.
Financial Guaranty shall make payments due in respect of Group I Preference
Amounts or Class A-6 Preference Amounts prior to 2:00 p.m. New York city time on
the second Business Day following Financial Guaranty's receipt of the documents
required under clauses (x) through (z) of the second preceding paragraph. Any
such documents received by Financial Guaranty after 2:00 p.m. New York City time
on any Business Day or on any day that is not a Business Day shall be deemed to
have been received by Financial Guaranty prior to 2:00 p.m. on the next
succeeding Business Day. All payments made by Financial Guaranty hereunder in
respect of Group I Preference Amounts or Class A-6 Preference Amounts will be
made with Financial Guaranty's own funds.
This Surety Bond is non-cancellable for any reason, including nonpayment of any
premium. The premium on this Surety Bond is not refundable for any
Form 9013
Page 2 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
reason, including the payment of the Insured Obligations prior to their
respective maturities.
In addition to the Deposit Premium set forth on the face of this Surety Bond, a
monthly premium shall be due and payable on this Surety Bond on each Payment
Date, commencing June 25, 1996, in an amount equal to one-twelfth of .11 % of
the sum of the then outstanding Group I Certificate Principal Balance plus the
Group II Certificate Principal Balance on the Payment Date on which said monthly
premium shall be due and payable after giving effect to distributions to Series
1996-2 Certificateholders.
This Surety Bond is subject to and shall be governed by the laws of the State of
New York. The proper venue for any action or proceeding on this Surety Bond
shall be the County of New York, State of New York. The insurance provided by
this Surety Bond is not covered by the New York Property/Casualty Insurance
Security Fund (New York Insurance Code, Article 76).
Capitalized terms used and not defined herein shall have the respective meanings
set forth in the Pooling and Servicing Agreement. "Notice" means written notice
in the form of Exhibit I to this Surety Bond by registered or certified mail or
telephonic or telegraphic notice, subsequently confirmed by written notice
delivered via telecopy, telex or hand delivery from the Trustee to Financial
Guaranty specifying the information set forth therein. "Certificateholder"
means, as to a particular Certificate of the Insured Obligations, the person,
other than the Trust, the Servicer, any Subservicer or the Representative or any
Depositor who, on the applicable Payment Date is entitled under the terms of
such Certificate to payment thereof. "Pooling and Servicing Agreement" means the
Pooling and Servicing Agreement by and among Advanta Mortgage Conduit Services,
Inc., as Sponsor, Advanta Mortgage Corp. USA, as Master Servicer and Bankers
Trust Company of California, N.A., as Trustee, dated as of May 1, 1996.
In the event that payments under any Series 1996-2 Certificate is accelerated,
nothing herein contained shall obligate Financial Guaranty to make any payment
of principal or interest on such Certificates on an accelerated basis, unless
such acceleration of payment by Financial Guaranty is at the sole option of
Financial Guaranty.
Form 9013
Page 3 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
IN WITNESS WHEREOF, Financial Guaranty has caused this Policy to be affixed with
its corporate seal and to be signed by its duly authorized officer in facsimile
to become effective and binding upon Financial Guaranty by virtue of the
countersignature of its duly authorized representative.
President Authorized Representative
Effective Date: May 29, 1996
Form 9013
Page 4 of 4
<PAGE>
EXHIBIT A
NOTICE
To: Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
Attention: General Counsel
Telephone: (212) 312-3000
Telecopier: (212) 312-3093
Re: Advanta Mortgage Loan Trust 1996-2, Mortgage Loan Asset-Backed Certificates,
Class A-1, A-2, A-3, A-4, and A-5 Group I Certificates and Class A-6
Variable Rate Group II Certificates, Series 1996-2
Payment Date: ____________________________
We refer to that certain Pooling and Servicing Agreement dated as of May 1, 1996
by and among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer and Bankers Trust Company of California,
N.A., as Trustee (the "Pooling and Servicing Agreement") relating to the above
referenced Mortgage Loan Asset-Backed Certificates. All capitalized terms not
otherwise defined herein or in the Surety Bond shall have the same respective
meanings assigned to such terms in the Pooling and Servicing Agreement.
(a) The Trustee has determined under the Pooling and Servicing Agreement that in
respect of the Payment Date set forth above:
(i) The Group I Interest Distribution Amount is $__________ and the Class
A-6 Interest Distribution Amount is $ ;
(ii) The Group I Subordination Deficit is $_________ and the Group II
Subordination Deficit is $________;
(iii) The unpaid Group I Preference Amount is $______________ and the unpaid
Class A-6 Preference Amount is $ ;
(iv) Group I Total Available Funds is $____________ and the Group II Total
Available Funds is $____________.
<PAGE>
Please be advised that the amount set forth in (a)(iv) above is not sufficient
to pay all of the following amounts in full: the Group I Interest Distribution
Amount, the Class A-6 Interest Distribution Amount, the Group I Subordination
Deficit, the Group II Subordination Deficit, the unpaid Group I Preference
Amount and the unpaid Class A-6 Preference Amount in respect of the Payment Date
set forth above.
Accordingly, pursuant to Section 7.3 of the Pooling and Servicing Agreement,
this statement constitutes a notice for payment of a [Group I] [Class A-6]
Insured Payment in the amount of $____________ (the difference between (1) the
amount set forth in (a)(iv) above in respect of the related Group and (2) the
sum of the amounts set forth in (a)(i), (a)(ii) and (a)(iii) above in respect of
the related Certificates of such Group under the Surety Bond.
(b) No amount claimed hereunder is in excess of the amount payable under the
Surety Bond.
The amount requested in this Notice should be paid to:
[Payment Instructions]
[Attached hereto is a copy of the final and nonappealable court order in
connection with a Preference Amount in the amount set forth therein, together
with an assignment of rights and appointment of agent.]
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or statement of claim containing
any materially false information, or conceals for the purpose of misleading,
information concerning any fact material thereto, commits a fraudulent insurance
act, which is a crime, and shall also be subject to a civil penalty not to
exceed Five Thousand Dollars ($5,000.00) and the state value of the claim for
each such violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice this ____
day of ______________________.
Bankers Trust Company of California, N.A.,
as Trustee
By:______________________________
Title:______________________________
<PAGE>
May 29, 1996
Lehman Brothers, Inc. Bankers Trust Company of California
Two World Financial Center 3 Park Plaza, 16th Floor
New York, New York 10285 Irvine, California 92714
Prudential Securities Inc. Moody's Investors Service, Inc.
One New York Plaza 99 Church Street
New York, NY 10292 New York, New York 10004
Salomon Brothers Inc Standard & Poor's Ratings Services
Seven World Trade Center 26 Broadway
New York, New York 10048 New York, New York 10004
Advanta Mortgage Conduit Services, Inc.
Advanta Mortgage Corp. USA
500 Office Center Drive
Suite 400
Ft. Washington, PA 19034
Ladies and Gentlemen:
I am Vice President and Senior Counsel of Financial Guaranty Insurance Company
("Financial Guaranty"), and have been requested to render an opinion in
connection with the issuance by Financial Guaranty of its Surety Bond No.
96010261 (the "Policy") delivered to Bankers Trust Company of California, N.A.,
as Trustee relating to $300,000,000 in aggregate principal amount of Mortgage
Loan Asset Backed Certificates, Series 1996-2 (the "Certificates") issued by
Advanta Mortgage Loan Trust 1996-2 (the "Trust"). I have examined such documents
and records as I have deemed relevant for purposes of this opinion, including
(i) the Certificate of Incorporation of Financial Guaranty, including all
amendments thereto, (ii) the amended By-laws of Financial Guaranty as in effect
on the date hereof, (iii) the Certificate of Authority
<PAGE>
Lehman Brothers, Inc. May 29, 1996
Prudential Securities Incorporated Page 2
Salomon Brothers Inc
Advanta Mortgage Conduit Services, Inc.
Advanta Mortgage Corp. USA
Bankers Trust Company of California
Moody's Investors Service, Inc.
Standard & Poor's Ratings Services
issued to Financial Guaranty by the superintendent of Insurance of the State of
New York, (iv) the executed Policy, (v) the statements in the Prospectus
Supplement dated May 13, 1996 relating to the Certificates (the "Prospectus
Supplement") under the captions "THE CERTIFICATE INSURANCE POLICY" and "THE
CERTIFICATE INSURER", (vii) the Pooling and Servicing Agreement, dated as of May
1, 1996 (the "Pooling Agreement"), by and among Advanta Mortgage Conduit
Services, Inc., as Sponsor, Advanta Mortgage Corp. USA, as Master Servicer and
Bankers Trust Company of California, N.A., as Trustee, (viii) the Insurance and
Indemnity Agreement dated as of May 1, 1996 (the "Insurance Agreement") by and
among Financial Guaranty, the Sponsor and the Master Servicer and (ix) the
Indemnification Agreement dated as of May 1, 1996 ("Indemnification Agreement")
by and among Financial Guaranty, the Sponsor and Lehman Brothers Inc., as
Representative of itself, Prudential Securities Incorporated and Salomon
Brothers Inc (collectively, the Underwriters"). On the basis of the foregoing,
it is my opinion that:
(1) Financial Guaranty (a) is a stock insurance company duly organized, validly
existing and in good standing under the laws of the State of New York, (b)
has the corporate power and authority to own its assets and to carry on the
business in which it is currently engaged, and (c) is duly qualified and in
good standing as a foreign corporation under the laws of each jurisdiction
where
<PAGE>
Lehman Brothers, Inc. May 29, 1996
Prudential Securities Incorporated Page 3
Salomon Brothers Inc
Advanta Mortgage Conduit Services, Inc.
Advanta Mortgage Corp. USA
Bankers Trust Company of California
Moody's Investors Service, Inc.
Standard & Poor's Ratings Services
failure so to qualify or to be in good standing would have a material and
adverse effect on its business or operations.
(2) No litigation or administrative proceedings of or before any court, tribunal
or governmental body are currently pending or, to the best of my knowledge,
threatened against Financial Guaranty, which, if adversely determined, would
have a material and adverse effect on the ability of Financial Guaranty to
perform its obligations under the Policy.
(3) No approval, authorization or other action by, or filing with, any
governmental authority of the United States of America or any state having
jurisdiction over Financial Guaranty is required in connection with the
issuance by Financial Guaranty of the Policy or the performance by Financial
Guaranty of its duties thereunder except such as have been obtained, taken
or made. The issuance of the Policy will not contravene any law or
governmental regulation or order presently binding on Financial Guaranty or
the charter or the bylaws of Financial Guaranty or contravene any provision
of or constitute a default under any indenture, contract or other instrument
to which Financial Guaranty is a party or by which it is bound.
(4) Each of the Policy, the Insurance Agreement and the Indemnification
Agreement has been duly issued and delivered, is valid and binding upon
Financial Guaranty and enforceable against Financial Guaranty in accordance
with its terms, subject to applicable laws affecting creditor's rights
generally and to the application of
<PAGE>
Lehman Brothers, Inc. May 29, 1996
Prudential Securities Incorporated Page 4
Salomon Brothers Inc
Advanta Mortgage Conduit Services, Inc.
Advanta Mortgage Corp. USA
Bankers Trust Company of California
Moody's Investors Service, Inc.
Standard & Poor's Ratings Services
general principles of equity and, with respect to each of the Insurance
Agreement and the Indemnification Agreement, enforceability of rights to
indemnification under the Insurance Agreement and Indemnification Agreement
may be subject to limitations of public policy under applicable securities
laws.
(5) Financial Guaranty, as an insurance company, is not eligible for relief
under the Federal Bankruptcy Laws. Any proceedings for the liquidation,
conservation or rehabilitation of Financial Guaranty would be governed by
the provisions of the Insurance Law of the State of New York.
(6) The Policy is not required to be registered under the Securities Act of
1933, as amended.
(7) The statements set forth in the Prospectus Supplement under the captions
"THE CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" relating to
Financial Guaranty and the Policy accurately and fairly present the summary
information set forth therein, except that no opinion is expressed as to
financial statements or other financial information included in the
Prospectus Supplement relating to Financial Guaranty or FGIC Corporation.
This opinion is given to you for your sole benefit, and no other person or
entity is entitled to rely hereon.
Very truly yours,
Michael Miran
Vice President
Senior Counsel
MM:ab
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OFFICER'S CERTIFICATE
I, Michael Miran, hereby certify that I am a Vice President of
Financial Guaranty Insurance Company, a New York stock insurance corporation
("Financial Guaranty") and further, to the best of my knowledge and after due
inquiry, as follows:
1. Attached hereto is a true and correct copy of the amended
Certificate of Incorporation and By-laws of Financial Guaranty and a Certificate
of Good Standing for Financial Guaranty, all of which are in full force and
effect on the date hereof.
2. There are no actions, suits or proceedings pending or threatened
against or affecting Financial Guaranty which if adversely determined,
individually or in the aggregate, would adversely affect the performance of
Financial Guaranty's obligations under the Surety Bond (the "Policy") dated May
29, 1996 relating to the Advanta Mortgage Loan Trust 1996-2 Mortgage Loan Asset
Backed Certificates, Series 1996-2.
3. Each person who, as an officer or representative of Financial
Guaranty, signed the Policy, and any other document delivered prior hereto or on
the date hereof in connection with the issuance of the Policy was, at the time
of such signing, duly elected or appointed, qualified and acting as such officer
or representative, and the signatures of such persons appearing on such
documents are their genuine manual or facsimile signatures.
4. Financial Guaranty has, on the date hereof, delivered the Policy and
acknowledged receipt of the amount of the Deposit Premium set forth therein.
5. The statements relating to Financial Guaranty and the Policy
contained in the Prospectus Supplement dated May 13, 1996, under the captions
"THE CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" accurately and
fairly present the summary information set forth therein and do not omit any
material fact with respect to the description of the Policy or the ability of
Financial Guaranty to meet its obligations under the Policy.
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(2)
Capitalized terms not otherwise defined herein have the meanings set
forth in the Pooling and Servicing Agreement, dated as of May 1, 1996, by and
among, Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta Mortgage
Corp. USA, as Master Servicer and Bankers Trust Company of California, N.A., as
Trustee.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of Financial Guaranty.
Dated: May 29, 1996
By:________________________
Name: Michael Miran
Title: Vice President
I, Warren K. Tong, Team Leader of Financial Guaranty, hereby certify
that Michael Miran, is a Vice President of Financial Guaranty, and that the
signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: May 29, 1996
By:________________________
Name: Warren K. Tong
Title: Vice President
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CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Financial Guaranty Insurance Company:
We consent to the use of our report dated January 19, 1996 on the financial
statements of Financial Guaranty Insurance Company as of December 31, 1995 and
1994, and for each of the years in the three-year period ended December 31, 1995
included in the Form 8-K of Advanta Mortgage Conduit Services, Inc., and to the
reference to our firm under the heading "Experts" in the Prospectus Supplement.
Our report refers to changes, in 1993, in accounting methods for multiple-year
retrospectively rated reinsurance contracts and for the adoption of the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities.
KPMG Peat Marwick L.L.P.
New York, New York
May 22, 1996
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INDEMNIFICATION AGREEMENT
This Agreement, dated as of May 13, 1996, is by and among Financial
Guaranty Insurance Company (the "Insurer"), as the Insurer under the certificate
guaranty surety bonds (the "Policy") to be issued in connection with the
Certificates described below, Advanta Mortgage Conduit Services, Inc. (the
"Issuer") and Lehman Brothers Inc., as Representative (the "Representative") of
itself, Prudential Securities Incorporated and Salomon Brothers Inc
(collectively, the "Underwriters").
1. Definitions. As used in this Agreement, the following terms shall have
the respective meanings stated below:
"Act" means the Securities Act of 1933, as amended, together with all
related rules and regulations.
"Agreement" means this Indemnification Agreement by and among the
Insurer, the Issuer and the Underwriters.
"Certificates" means Advanta Mortgage Loan Asset-Backed Certificates,
Series 1996-2, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and
Class A-6 issued pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") dated as of May 1, 1996 among the
Issuer, as Sponsor, Advanta Mortgage Corp. USA, as Servicer and Bankers
Trust Company of California, N.A., as Trustee.
"Class A Certificates" means the Advanta Mortgage Loan Asset-Backed
Certificates, Series 1996-2, Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-6 issued pursuant to the Pooling and Servicing
Agreement.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 5 below, as the context requires.
"Insurer Party" means the Insurer and its respective parents,
subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or any "controlling person" (as such term is used in the
Act) of any of the foregoing.
"Issuer Party" means the Issuer, each of its parents, subsidiaries and
affiliates, and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the
foregoing.
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"Losses" means (i) any actual out-of-pocket loss paid by the party
entitled to indemnification or contribution hereunder, and (ii) any actual
out-of-pocket costs and expenses paid by such party, including reasonable
fees and expenses of its counsel, to the extent not paid, satisfied or
reimbursed from funds provided by any other Person (provided that the
foregoing shall not create or imply any obligation to pursue recourse
against any such other Person).
"Person" means any individual, partnership, joint venture,
corporation, trust or unincorporated organization or any government or
agency or political subdivision thereof.
"Prospectus" means the form of final Prospectus, dated September 13,
1995 as supplemented by the Prospectus Supplement included in the
Registration Statement on each date that the Registration Statement and any
post-effective amendment or amendments thereto became effective.
"Prospectus Supplement" means the form of final Prospectus Supplement,
dated May 13, 1996 relating to the offer and sale of the Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5 and Class A-6 Certificates.
"Registration Statement" means the registration statement on Form S-3
of the Issuer (Registration No. 33-95006) relating to the Certificates in
the form in which it has become effective.
"State Securities Law" means any state, local or foreign statute, and
any rule or regulation thereunder, regulating (i) transactions and dealings
in securities, (ii) any person or entity engaging in such transactions or
advising with respect to securities or (iii) investment companies.
"Underwriting Agreement" means the Underwriting Agreement by and
between the Issuer and the Representative, dated May 13, 1996.
"Underwriter Party" means the Underwriter and its parents,
subsidiaries and affiliates and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Act)
of any of the foregoing.
2. Representations and Warranties of the Insurer. The Insurer represents
and warrants to the Underwriter and the Issuer as follows:
(a) Organization and Licensing. The Insurer is a duly incorporated and
existing New York stock insurance company licensed to do business in the
State of New York.
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(b) Corporate Power. The Insurer has the corporate power and authority
to issue the Policy and execute and deliver this Agreement and to perform
all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. The issuance of the Policy and the
execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate proceedings. No further approvals or
filings of any kind, including, without limitation, any further approvals
of or further filing with any governmental agency or other governmental
authority, or any approval of the Insurer's board of directors or
stockholders, are necessary for the Policy and this Agreement to constitute
the legal, valid and binding obligations of the Insurer.
(d) No Conflicts. The execution and delivery of this Agreement and
consummation of the transactions contemplated hereunder will not result in
the breach of any terms or provisions of the certificate of incorporation
or by-laws of the Insurer, or result in the breach of a term or provision
of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement or other
material instrument to which the Insurer or its property is subject, or
result in the violation of any law, rule, regulation, order, judgment or
decree to which the Insurer or any of its property is subject or result in
the creation of any lien on any of Insurer's assets or property (other than
pursuant to this Agreement).
(e) Enforceability. The Policy, when issued, and this Agreement, will
each constitute a legal, valid and binding obligation of the Insurer,
enforceable in accordance with its terms subject to applicable laws
affecting the enforceability of creditors' rights generally and general
principles of equity.
(f) Financial Information. The balance sheet of the Insurer as of
December 31, 1995 and the related statements of income, stockholders'
equity and cash flows for the fiscal year then ended, and the accompanying
footnotes, together with an opinion thereon dated January 20, 1995 of KPMG
Peat Marwick, an independent certified public accountant, a copy of which
is attached as Appendix A to the Prospectus (the "Insurer Financial
Statements"), fairly present in all material respects the financial
condition of the Insurer as of such date and for the period covered by such
statements in accordance with generally accepted accounting principles
consistently applied, and, since December 31, 1995, there has been no
material change in such financial condition of the Insurer which would
materially and adversely affect its ability to perform its obligations
under the Policy. The balance sheet of the Insurer as of March 31, 1996 and
the related statements of income, stockholders' equity and cash flows for
the period then ended, a copy of which is attached as Appendix B to the
Prospectus Supplement (the "Insurer Unaudited Financial Statements") fairly
present in all material respects the financial condition of the Insurer as
of such date and for the period
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covered by such statements in accordance with generally accepted accounting
principles consistently applied, and, since March 31, 1996, there has been
no material change in such financial condition of the Insurer which would
materially and adversely affect its ability to perform its obligations
under the Policy.
(g) Insurer Information. The information in the Prospectus as of the
date hereof under the captions "The Certificate Insurer" and "The
Certificate Insurance Policy" (collectively, the "Insurer Information") is
true and correct in all material respects and does not contain any untrue
statement of a fact that is material to the Insurer's ability to perform
its obligations under the Policy.
(h) Limitations. Nothing in this Agreement shall be construed as a
representation or undertaking by the Insurer concerning maintenance of the
rating currently assigned to its claims-paying ability by Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("Standard &
Poor's"), or any other rating agency (collectively, the "Rating Agencies").
The Rating Agencies, in assigning such rating, may take into account facts
and assumptions not described in the Prospectus, and the facts and
assumptions which are considered by the Rating Agencies are subject to
change over time. The Insurer has not attempted to disclose all facts and
assumptions which the Rating Agencies deem relevant in assigning a rating
within a particular rating category to the Insurer's claims-paying ability.
Notwithstanding the foregoing, the Insurer is not aware of any facts that,
if disclosed to Moody's, or Standard & Poor's, would be reasonably expected
to result in a downgrade of the rating of the claims-paying ability of the
Insurer by either of such Rating Agencies.
(i) No Litigation. There are no actions, suits, proceedings or
investigations pending, or to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would materially and adversely affect its condition
(financial or otherwise) or operations of it or would materially and
adversely affect its ability to perform its obligations under this
Agreement or the Policy.
(j) 1933 Act Registration. The Policy is exempt from registration
under the Act.
3. Agreements, Representations and Warranties of the Underwriters. The
Underwriters represent and warrant to and agree with the Issuer and the Insurer
that the statements contained in the Prospectus under the caption "Underwriting"
(referred to herein as the "Underwriters Information") are true and correct in
all material respects.
4. Agreements, Representations and Warranties of the Issuer. The Issuer
represents and warrants to and agrees with the Insurer and the Underwriters as
follows:
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(a) Registration Statement. The information in the Registration
Statement, other than the Insurer Information, is true and correct in all
material respects and does not contain any untrue statement of a fact that
is material or omit to state a fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Organization. The Issuer is duly incorporated and existing under
the laws of the State of Delaware and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business, or
the properties owned or leased by it make such qualification necessary.
(c) Corporate Power. The Issuer has the corporate power and authority
to execute and deliver this Agreement, the Underwriting Agreement, the
Pooling and Servicing Agreement and to perform all of its obligations
hereunder and thereunder.
(d) Authorization; Approvals. The execution, delivery and performance
of this Agreement, the Underwriting Agreement and the Pooling and Servicing
Agreement by the Issuer have been duly authorized by all necessary
corporate proceedings. No further approvals or filings of any kind,
including, without limitation, any further approvals of or further filing
with any governmental agency or other governmental authority, or any
approval of the Issuer's board of directors or stockholders, are necessary
for this Agreement, the Underwriting Agreement and the Pooling and
Servicing Agreement to constitute the legal, valid and binding obligations
of the Issuer.
(e) No Conflicts. The execution and delivery of this Agreement and
consummation of the transactions contemplated hereunder will not result in
the breach of any terms or provisions of the certificate of incorporation
or by-laws of Issuer or result in the breach of a term or provision of, or
conflict with or constitute a default under or result in the acceleration
of any obligation under, any material agreement or other material
instrument to which the Issuer or its property is subject, or result in the
violation of any law, rule, regulation, order, judgment or decree to which
the Issuer or any of its property is subject or result in the creation of
any lien on any of Issuer's assets or property (other than pursuant to this
Agreement).
(f) Enforceability. This Agreement, the Pooling and Servicing
Agreement and the Underwriting Agreement, will each constitute a legal,
valid and binding obligation of the Issuer, enforceable in accordance with
its terms subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of
the bankruptcy, insolvency or reorganization of the Issuer and to general
principles of equity.
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(g) No Litigation. There are no actions, suits, proceedings or
investigations pending, or to the best of the Issuer's knowledge,
threatened against it at law or in equity or before any court, governmental
agency, board or commission or any arbitrator which, if decided adversely,
would materially and adversely affect its condition (financial or
otherwise) or operations of it or would materially and adversely affect its
ability to perform its obligations under this Agreement, the Underwriting
Agreement or the Pooling and Servicing Agreement.
5. Indemnification.
(a) The Insurer hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Issuer Party and each Underwriter Party against any and all Losses incurred
by them with respect to the offer and sale of the Certificates and
resulting from the Insurer's breach of any of its representations and
warranties set forth in Section 2 of this Agreement.
(b) The Underwriters hereby severally, and not jointly agree, upon the
terms and subject to the conditions of this Agreement, to indemnify, defend
and hold harmless each Insurer Party against any and all Losses incurred by
them which arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact in the Underwriters Information
or (ii) the omission or alleged omission to state in the Underwriters
Information a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(c) The Issuer hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all losses incurred by them with respect to
the offer and sale of the Certificates and resulting from the Issuer's
breach of any of its representations and warranties set forth in Section 4
of this Agreement.
(d) Upon the incurrence of any Losses entitled to indemnification
hereunder, the Indemnifying Party shall reimburse the Indemnified Party
promptly upon establishment by the Indemnified Party to the Indemnifying
Party of the Losses incurred.
6. Insurer Undertaking. The Insurer hereby agrees that, for so long as the
Underwriters are required under the Act to deliver a Prospectus in connection
with the sale of the Class A Certificates, the Insurer will furnish to either
the Representative or the Issuer, or both, upon written request of such party or
parties and at the expense of the Underwriters or the Issuer, as the case may
be, copies of the Insurer's most recent financial statements (annual or interim,
as the case may be) prepared in accordance with generally accepted accounting
principles (subject, as to interim statements, to normal year-
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end adjustments and to the absence of footnotes) within a reasonable time after
they are available.
7. Notice to be Given to the Insurer. Except as provided in Section 10
below with respect to contribution, the indemnification provided herein by the
Insurer shall be the exclusive remedy of the Underwriter Party or Issuer Party
for the Losses resulting from the Insurer's breach of a representation, warranty
or agreement hereunder; provided, however, that the Underwriter Party or Issuer
Party shall be entitled to pursue any other remedy at law or in equity for any
such breach so long as the damages sought to be recovered shall not exceed the
Losses incurred thereby resulting from such breach. In the event that any action
or regulatory proceeding shall be commenced or claim asserted which may entitle
the Underwriter Party or Issuer Party to be indemnified under this Agreement,
such party shall give the Insurer written or telegraphic notice of such action
or claim reasonably promptly after receipt of written notice thereof. The
Insurer shall be entitled to participate in the defense of any such action or
claim in reasonable cooperation with, and with the reasonable cooperation of,
the Issuer Party or Underwriter Party, as the case may be. The Indemnified Party
will have the right to employ its own counsel in any such action in addition to
counsel for the Insurer, but the fees and expenses of such counsel will be at
the expense of such Indemnified Party unless (1) the employment of counsel by
the Indemnified Party at its expense has been authorized in writing by the
Insurer, or (2) the Insurer has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, or (3) the named parties to any such action include
the Insurer on the one hand, and, on the other hand, the Indemnified Party, and
such Indemnified Party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Insurer (in which case, if such Indemnified Party
notifies the Insurer in writing that it elects to employ separate counsel at the
expense of the Insurer, the Insurer shall not have the right to assume the
defense of such action or proceeding on such Indemnified Party's behalf), in
each of which cases the reasonable fees and expenses of counsel (including local
counsel) will be at the expense of the Insurer and all such fees and expenses
will be reimbursed promptly as they are incurred but, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, the
Insurer shall not be liable for the fees and expenses of more than one counsel
for all Issuer Parties and more than one counsel for all Underwriter Parties.
The Underwriter Parties and Issuer Parties shall cooperate with the Insurer
Parties in resolving any event which would give rise to an indemnity obligation
pursuant to Section 5(a) hereof in the most efficient manner. No settlement of
any such claim or action shall be entered into without the consent of the Issuer
Party or Underwriter Party, as the case may be, who is subject to such claim or
action, on the one hand and the Insurer Party who is subject to such claim or
action on the other hand; provided, however, that the consent of such Issuer
Party or such Underwriter Party, as applicable, shall not be required if such
settlement fully discharges, with prejudice against the plaintiff, the claim or
action against such Issuer Party or Underwriter Party. Any failure by an Issuer
Party or Underwriter Party, as the case may be, to comply with the
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provisions of this Section shall relieve the Insurer of liability only if such
failure is materially prejudicial to any legal pleadings, grounds, defenses or
remedies in respect thereof or the Insurer's financial liability hereunder and
then only to the extent of such prejudice.
8. Notice to be Given to the Representative. Except as provided below in
Section 10 with respect to contribution, the indemnification provided herein by
the Underwriters shall be the exclusive remedy of any Insurer Party for the
Losses resulting from the Underwriter's breach of a representation, warranty or
agreement hereunder; provided, however, that the Insurer Party shall be entitled
to pursue any other remedy at law or in equity for any such breach so long as
the damages sought to be recovered shall not exceed the Losses incurred thereby
resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle an Insurer
Party to be indemnified under this Agreement, such party shall give the
Representative written or telegraphic notice of such action or claim reasonably
promptly after receipt of written notice thereof. The Underwriters shall be
entitled to participate in the defense of any such action or claim in reasonable
cooperation with, and with the reasonable cooperation of, the Insurer Party. The
Indemnified Party will have the right to employ its own counsel in any such
action in addition to counsel for the Underwriters, but the fees and expenses of
such counsel will be at the expense of such Indemnified Party unless (1) the
employment of counsel by the Indemnified Party at its expense has been
authorized in writing by the Representative, or (2) the Underwriters have not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, or (3) the named
parties to any such action include the Underwriters on the one hand, and on the
other hand, the Indemnified Party, and such Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Underwriters
(in which case, if such Indemnified Party notifies the Representative in writing
that it elects to employ separate counsel at the expense of the Underwriters,
the Underwriters shall not have the right to assume the defense of such action
or proceeding on such Indemnified Party's behalf), in each of which cases the
reasonable fees and expenses of counsel will be at the expense of the
Underwriters and all such fees and expenses will be reimbursed promptly as they
are incurred but, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, the Underwriters shall not be
liable for the fees and expenses of more than one counsel for all Insurer
Parties. The Insurer Party shall cooperate with the Underwriter Party and the
Issuer Party in resolving any event which would give rise to an indemnification
obligation pursuant to Section 5(b) hereof in the most efficient manner. No
settlement of any such claim or action shall be entered into without the consent
of the Insurer Party who is subject to such claim or action, on the one hand and
the Underwriter Party who is subject to such claim or action on the other hand;
provided, however, that the consent of such Insurer Party shall not be required
if such settlement fully discharges, with prejudice against the plaintiff, the
claim or action against such Insurer Party. Any failure by an Insurer Party to
comply with the provisions of this Section shall relieve the Underwriters
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of liability only if such failure is materially prejudicial to any legal
pleadings, grounds, defenses or remedies in respect thereof or the Underwriters'
liability hereunder and then only to the extent of such prejudice.
9. Notice to be Given to the Issuer. Except as provided below in Section 10
with respect to contribution, the indemnification provided herein by the Issuer
shall be the exclusive remedy of any Insurer Party for the Losses resulting from
the Issuer's breach of a representation, warranty or agreement hereunder;
provided, however, that the Insurer Party shall be entitled to pursue any other
remedy at law or in equity for any such breach so long as the damages sought to
be recovered shall not exceed the Losses incurred thereby resulting from such
breach. In the event that any action or regulatory proceeding shall be commenced
or claim asserted which may entitle an Insurer Party to be indemnified under
this Agreement, such party shall give the Issuer written or telegraphic notice
of such action or claim reasonably promptly after receipt of written notice
thereof. The Issuer shall be entitled to participate in the defense of any such
action or claim in reasonable cooperation with, and with the reasonable
cooperation of, the Insurer Party. The Indemnified Party will have the right to
employ its own counsel in any such action in addition to counsel for the Issuer,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party unless (1) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Issuer, or (2) the Issuer
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or (3)
the named parties to any such action include the Issuer on the one hand, and on
the other hand, the Indemnified Party, and such Indemnified Party shall have
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Issuer
(in which case, if such Indemnified Party notifies the Issuer in writing that it
elects to employ separate counsel at the expense of the Issuer, the Issuer shall
not have the right to assume the defense of such action or proceeding on such
Indemnified Party's behalf), in each of which cases the reasonable fees and
expenses of counsel will be at the expense of the Issuer and all such fees and
expenses will be reimbursed promptly as they are incurred but, in connection
with any one action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, the Issuer shall not be liable for the fees and expenses of more
than one counsel for all Insurer Parties. The Insurer Party shall cooperate with
the Issuer Party and the Underwriter Party in resolving any event which would
give rise to an indemnification obligation pursuant to Section 5(c) hereof in
the most efficient manner. No settlement of any such claim or action shall be
entered into without the consent of the Insurer Party, who is subject to such
claim or action, on the one hand and the Issuer Party on the other hand;
provided, however, that the consent of such Insurer Party shall not be required
if such settlement fully discharges, with prejudice against the plaintiff, the
claim or action against such Insurer Party. Any failure by an Insurer Party to
comply with the provisions of this Section shall relieve the Issuer of liability
only if such failure is materially prejudicial to any legal pleadings, grounds,
defenses, or remedies in respect thereof or the Issuer's liability hereunder and
then only to the extent of such prejudice.
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10. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by the Insurer is determined to be unavailable for
any Underwriter Party or Issuer Party (other than pursuant to Section 5 or
7 of this Agreement), the Insurer shall contribute to the aggregate costs
of liabilities arising from any breach of a representation or warranty set
forth in this Agreement on the basis of the relative fault of all
Underwriter Parties, all Issuer Parties and all Insurer Parties,
respectively.
(b) To provide for just and equitable contribution if the
indemnification provided by the Issuer is determined to be unavailable for
any Insurer Party (other than pursuant to Section 5 or 9 of this
Agreement), the Issuer shall contribute to the aggregate costs of
liabilities arising from any breach of a representation or warranty set
forth in this Agreement on the basis of the relative fault of all
Underwriter Parties, all Issuer Parties and all Insurer Parties.
(c) To provide for just and equitable contribution if the
indemnification provided by the Underwriters is determined to be
unavailable for any Insurer Party (other than pursuant to Section 5 or 8 of
this Agreement), the Underwriters shall contribute to the aggregate costs
of liabilities arising from (i) any untrue statement or alleged untrue
statement of a material fact in the Underwriters Information or (ii) the
omission or alleged omission to state in the Underwriters Information a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading on the basis of the relative fault of all Underwriter
Parties, all Issuer Parties and all Insurer Parties; provided however, that
the Underwriter Party shall not be liable for any amount in excess of (i)
the excess of the sales prices of the Class A Certificates to the public
over the prices paid therefor by the Underwriters, over (ii) the aggregate
amount of any damages which the Underwriter Party has been otherwise
required to pay in respect of the same or any substantially similar claim.
(d) The relative fault of each Indemnifying Party, on the one hand,
and of each Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the breach of, or alleged breach
of, any of its representations and warranties set forth in Section 2, 3 or
4 of this Agreement relates to information supplied by, or action within
the control of, the Indemnifying Party or the Indemnified Party and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such breach.
(e) The parties agree that the Insurer shall be solely responsible for
the Insurer Information and for the Insurer Financial Statements, that the
Underwriters shall be solely responsible for the Underwriter Information
and that
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the Issuer shall be responsible for all other information in the
Registration Statement and in the Prospectus.
(f) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(g) The indemnity and contribution agreements contained in this
Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter Party, any
Issuer Party or any Insurer Party, (ii) the issuance of the Certificates or
the Policy or (iii) any termination of this Agreement.
(h) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to
contribution promptly upon establishment by the party entitled to
contribution to the contributor of the Losses incurred.
It is understood and agreed that the indemnities set forth in this
Agreement shall service the execution and delivery of this Agreement and the
issuance, sale and delivery of the Class A Certificates.
11. Notices. All notices and other communications provided for under this
Agreement shall be addressed to the address set forth below as to each party or
at such other address as shall be designated by a party in a written notice to
the other party.
If to the Insurer: Financial Guaranty Insurance Company
115 Broadway
New York, NY 10006
Attention: General Counsel
If to the Issuer: Advanta Mortgage
Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
If to the Underwriter: Lehman Brothers Inc.
Three World Financial Center
New York, NY 10285-1200
12. Governing Law, Etc. This Agreement shall be deemed to be a contract
under the laws of the State of New York and shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws provisions. This Agreement may not be assigned by any party
without the express
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written consent of each other party. Amendments of this Agreement shall be in
writing signed by each party. This Agreement shall not be effective until
executed by each of the Insurer, the Issuer and the Representative.
13. Underwriting Agreement; Pooling and Servicing Agreement. This Agreement
in no way limits or otherwise affects the indemnification obligations of the
Issuer under (a) the Underwriting Agreement or (b) the Pooling and Servicing
Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, all as of the date first above written.
FINANCIAL GUARANTY INSURANCE
COMPANY
By:__________________________
Name:
Title:
ADVANTA MORTGAGE CONDUIT
SERVICES, INC.
By:__________________________
Name: Mark Casale
Title: Vice President
LEHMAN BROTHERS INC.
By:__________________________
Name:
Title:
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