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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) September 25, 1996
Advanta Mortgage Loan Trust 1996-3
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(Exact name of registrant as specified in its charter)
New York 33-99510 Application Pending
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o Advanta Mortgage Conduit 92127
Services, Inc. ------------
Attention: Milton Riseman (Zip Code)
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 $638,000,000 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. 33-99510 (as amended, the "Registration Statement").
Pursuant to the Registration Statement, Advanta Mortgage Loan Trust 1996-3 (the
"Registrant" or the "Trust") issued approximately $400,000,000 in aggregate
principal amount of its Mortgage Loan Asset-Backed Certificates, Series 1996-3
(the "Certificates"), on September 25, 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 September 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 two
registered classes, the Class A-1 and Class A-2 (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
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-2 Group II Certificates represent undivided ownership
interests in a group of variable rate Mortgage Loans secured by Mortgages in a
first lien position.
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 Variable Rate for the Class A-1 Certificates
and the Class A-2 Certificates.
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The Class A-1 Certificates have an aggregate principal amount of
$280,000,000. The Class A-2 Certificates have an aggregate principal amount of
$120,000,000.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated September 6, 1996 and the
Prospectus Supplement dated September 11, 1996 filed pursuant to Rule 424(b)(5)
of the Act on September 19, 1996.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated September 11, 1996 between Advanta
Mortgage Conduit Services, Inc. and Morgan Stanley & Co. Incorporated, as
representative of the Underwriters (the "Representative").
4.1 Pooling and Servicing Agreement, dated as of September 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, Advanta 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 September 25, 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.
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28.1 Indemnification Agreement dated as of September 1, 1996,
between Advanta Mortgage Conduit Services, Inc., Morgan Stanley & Co.
Incorporated 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 1996-3
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By: /s/ Mark Casale
--------------------------
Name: Mark Casale
Title: Vice President
Dated: October 4, 1996
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EXHIBIT INDEX
Exhibit No. Description Page No.
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1.1 Underwriting Agreement, dated
September 11, 1996 between Advanta
Mortgage Conduit Services, Inc. and
Morgan Stanley & Co. Incorporated. 7
4.1 Pooling and Servicing Agreement, dated
as of September 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. 51
4.2 Master Loan Transfer Agreement, dated
as of February 15, 1995, between
Advanta Mortgage Conduit Services,
Inc., as sponsor, Advanta 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. 185
4.3 Conveyance Agreement dated as of
September 25, 1996 between the
Affiliated Originators and Advanta
Mortgage Conduit Services, Inc. 211
4.4 Advanta Mortgage Holding Company
Guaranty. 215
4.5 Certificate Insurance Policy. 219
24.1 Consent of KPMG Peat Marwick regarding
financial statements of the
Certificate Insurer and its report. 224
28.1 Indemnification Agreement dated as of
September 1, 1996, between Advanta
Mortgage Conduit Services, Inc.,
Morgan Stanley & Co. Incorporated and
Financial Guaranty Insurance Company
in connection with the Underwriting
Agreement. 226
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EXHIBIT 1.1
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EXECUTION COPY
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Mortgage Loan Asset-Backed Certificates,
Series 1996-3, Class A Certificates
UNDERWRITING AGREEMENT
September 11, 1996
MORGAN STANLEY & CO. INCORPORATED
As Representative of the Underwriters
named in Schedule I
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. (the "Company") has
authorized the issuance and sale of Mortgage Loan Asset-Backed Certificates,
Series 1996-3, (the "Certificates") consisting of the Class A-1 Group I
Certificates (the "Class A-1 Certificates") and the Class A-2 Group II
Certificates (the "Class A-2 Certificates, together with the Class A-1
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 1996-3 (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 September 25, 1996 (the "Closing Date"), an
aggregate principal balance of approximately $400,000,000. The certificates are
to be issued under a pooling and servicing agreement, to be dated as of
September 1, 1996 (the "Pooling and Servicing Agreement"), among the Company, as
sponsor, Advanta 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
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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 Closing Date.
The Company will also enter into an Indemnification Agreement (the
"Indemnification Agreement") dated as of September 1, 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 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
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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 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
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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.
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
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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 adverse effect on the business or
financial condition of the Company, (b) which asserts the invalidity
of this Agreement, the Pooling and Servicing Agreement, the
Insurance Agreement, the Purchase Agreement, the Indemnification
Agreement or the Certificates, (c) which seeks 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
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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
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
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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 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
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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-0ff 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.
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
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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 September 25, 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 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.
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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 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
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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 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
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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.
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
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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 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
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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 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,
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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 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
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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 Trust Estate 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.
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.
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<PAGE>
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 and the A-2 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 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
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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 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
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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, 1996, and no such amendment has been authorized. No
event has occurred since March 31, 1996, 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, 1996;
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
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<PAGE>
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 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
20
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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 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
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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
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
22
<PAGE>
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.
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 March
31, 1996, 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
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<PAGE>
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;
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 June 30, 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
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<PAGE>
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 June 30, 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 June 30, 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.
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.
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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 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
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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, 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
27
<PAGE>
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; 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 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,
28
<PAGE>
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 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,
29
<PAGE>
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 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
30
<PAGE>
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 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
31
<PAGE>
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:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
32
<PAGE>
(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 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
33
<PAGE>
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 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.
34
<PAGE>
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 Morgan Stanley & Co.
Incorporated, as Representative of the Underwriters, 1585 Broadway,
New York, New York, 10036, Attention: _____________ (Fax:
212-761-0782);
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,
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
35
<PAGE>
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 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
36
<PAGE>
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:
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
By:______________________
[Underwriting Agreement]
<PAGE>
================================================================================
SCHEDULE A
- --------------------------------------------------------------------------------
Purchase Price
Initial Principal Amount to Underwriters
of Offered Certificates disregarding
Class Purchased by Underwriters accrued interest
- --------------------------------------------------------------------------------
Class A-1 $280,000,000 %
- --------------------------------------------------------------------------------
Class A-2 $120,000,000 %
================================================================================
39
<PAGE>
EXHIBIT A
As of _______, 1996
Morgan Stanley & Co. Incorporated
As Representative of the Underwriters
named in Schedule I
1585 Broadway
New York, New York 10036
Re: Underwriting Agreement dated September __, 1996
(the "Underwriting Agreement") between Advanta
Mortgage Conduit Services, Inc. ("Advanta") and
Morgan Stanley & Co. Incorporated (the
"Representative") and Indemnification Agreement
dated as of September 1, 1996 (the "Indemnifica-
tion 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
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
By:__________________________________
Authorized Signatory
3
<PAGE>
SCHEDULE I
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
Lehman Brothers Inc.
Prudential Securities Incorporated
4
<PAGE>
EXHIBIT 4.1
<PAGE>
POOLING AND SERVICING AGREEMENT
Relating to
ADVANTA MORTGAGE LOAN TRUST
1996-3
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 September 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........................................... 2
AMHC................................................ 2
Appraised Value..................................... 2
Authorized Officer.................................. 3
Available Funds..................................... 3
Balloon Loan........................................ 3
Bulk Acquisition Loan............................... 3
Business Day........................................ 3
Certificate......................................... 3
Certificate Account................................. 3
Certificate Insurance Policy........................ 3
Certificate Insurer................................. 3
Certificate Insurer Default......................... 3
Certificate Insurer Premium Rate.................... 4
Certificate Principal Balance....................... 4
Class............................................... 4
Class A Certificate................................. 4
Class A-1 Available Funds Pass-Through
Rate............................................. 4
Class A-1 Certificate............................... 4
Class A-1 Certificate Termination Date.............. 4
Class A-1 Distribution Account...................... 5
Class A-1 Formula Distribution Amount............... 5
Class A-1 Formula Interest Shortfall................ 5
Class A-1 Formula Pass-Through Rate................. 5
Class A-1 Full Distribution Amount.................. 5
Class A-1 Full Interest 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 Available Funds Pass-Through
Rate............................................. 6
Class A-2 Certificate............................... 6
Class A-2 Distribution Account...................... 7
Class A-2 Distribution Amount....................... 7
Class A-2 Formula Pass-Through Rate................. 7
Class A-2 Full Distribution Amount.................. 7
Class A-2 Full Interest Distribution
Amount........................................... 7
i
<PAGE>
Page
Class A-2 Interest Carry-Forward Amount............. 7
Class A-2 Pass-Through Rate......................... 7
Class A-2 Principal Distribution Amount............. 8
Class R Certificate................................. 8
Class RS Certificate................................ 8
Class RS Distribution Account....................... 8
Clean-Up Call Date.................................. 8
Code................................................ 8
Combined Loan-to-Value Ratio........................ 8
Compensating Interest............................... 8
Conduit Acquisition Trust........................... 8
Coupon Rate......................................... 9
Cut-Off Date........................................ 9
Date-of-Payment Loan................................ 9
Delinquency Advance................................. 9
Delinquent.......................................... 9
Delivery Order...................................... 9
Depository.......................................... 9
Designated Depository Institution................... 9
Designated Residual Owner........................... 10
Determination Date.................................. 10
Direct Participant" or "DTC Participant............. 10
Disqualified Organization........................... 10
Document Delivery Requirements...................... 10
Eligible Investments................................ 11
Excess Subordinated Amount.......................... 11
Event of Default.................................... 11
FDIC................................................ 11
Freddie Mac......................................... 11
File................................................ 11
Final Determination................................. 11
First Mortgage Loan................................. 11
FNMA................................................ 11
Gross Margin........................................ 11
Group I............................................. 11
Group I Amortized Subordinated Amount
Requirement...................................... 12
Group I Available Funds............................. 12
Group I Certificates................................ 12
Group I Certificate Principal Balance............... 12
Group I Deficiency Amount........................... 12
Group I Formula Distribution Amount................. 12
Group I Initial Specified Subordinated
Amount........................................... 12
Group I Insured Distribution Amount................. 12
Group I Insured Payment............................. 12
Group I Interest Distribution Amount................ 12
Group I Interest Remittance Amount.................. 12
Group I Monthly Remittance Amount................... 12
Group I Pass-Through Rate........................... 13
Group I Preference Amount........................... 13
Group I Premium Amount.............................. 13
Group I Principal Carry-Forward Amount.............. 13
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Group I Principal Distribution Amount............... 13
Group I Principal Remittance Amount................. 14
Group I Reimbursement Amount........................ 14
Group I Specified Subordinated Amount............... 15
Group I Subordinated Amount......................... 15
Group I Subordination Deficit....................... 15
Group I Total Available Funds....................... 15
Group I Total Monthly Excess Spread................. 15
Group II............................................ 15
Group II Amortized Subordinated Amount
Requirement...................................... 16
Group II Available Funds............................ 16
Group II Certificate................................ 16
Group II Certificate Principal Balance.............. 16
Group II Deficiency Amount.......................... 16
Group II Formula Distribution Amount................ 16
Group II Initial Specified Subordinated
Amount........................................... 16
Group II Insured Distribution Amount................ 16
Group II Insured Payment............................ 16
Group II Interest Distribution Amount............... 16
Group II Interest Remittance Amount................. 17
Group II Monthly Remittance Amount.................. 17
Group II Preference Amount.......................... 17
Group II Premium Amount"............................ 17
Group II Principal Carry-Forward Amount............. 17
Group II Principal Distribution Amount.............. 17
Group II Principal Remittance Amount................ 18
Group II Reimbursement Amount....................... 19
Group II Specified Subordinated Amount.............. 19
Group II Subordinated Amount........................ 19
Group II Subordination Deficit...................... 19
Group II Total Available Funds...................... 19
Group II Total Monthly Excess Spread................ 19
Indemnification Agreement........................... 20
Index............................................... 20
Indirect Participant................................ 20
Initial Premiums.................................... 20
Insurance Agreement................................. 20
Insurance Policy.................................... 20
Insured Payment..................................... 20
Interest Accrual Period............................. 20
Interest Advance.................................... 20
Interest Determination Date......................... 20
Interest Rate Adjustment Date....................... 20
Late Payment Rate................................... 20
LIBOR............................................... 21
Liquidated Loan..................................... 21
Liquidation Expenses................................ 21
Liquidation Proceeds................................ 21
Loan Balance........................................ 22
Loan Purchase Price................................. 22
London Business Day................................. 22
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Page
Master Servicer..................................... 22
Master Servicer's Trust Receipt..................... 22
Master Servicing Fee................................ 22
Master Transfer Agreement........................... 22
Monthly Remittance Amount........................... 23
Moody's............................................. 23
Mortgage............................................ 23
Mortgage Loan Group................................. 23
Mortgage Loans...................................... 23
Mortgagor........................................... 23
Net Liquidation Proceeds............................ 23
Net Monthly Excess Cashflow......................... 24
Note................................................ 24
Officer's Certificate............................... 24
Operative Documents................................. 24
Original Aggregate Loan Balance..................... 24
Original Certificate Principal Balance.............. 24
Original Principal Amount........................... 24
Originator.......................................... 24
Outstanding......................................... 24
Owner............................................... 25
Pass-Through Rate................................... 25
Payment Date........................................ 25
Percentage Interest................................. 25
Person.............................................. 25
Pool Cumulative Realized Losses..................... 25
Pool Delinquency Rate............................... 25
Pool Principal Balance.............................. 26
Pool Rolling Three Month Delinquency
Rate............................................. 26
Premium Amount...................................... 26
Premium Percentage.................................. 26
Prepaid Installment................................. 26
Prepayment.......................................... 26
Preservation Expenses............................... 26
Principal and Interest Account...................... 26
Principal Remittance Amount......................... 26
Prohibited Transaction.............................. 26
Property............................................ 27
Purchase Option Period.............................. 27
Qualified Liquidation............................... 27
Qualified Mortgage.................................. 27
Qualified Replacement Mortgage...................... 27
Realized Loss....................................... 28
Record Date......................................... 28
Reference Banks..................................... 28
Register............................................ 28
Registrar........................................... 28
Registration Statement.............................. 28
Reimbursement Amount................................ 28
REMIC............................................... 28
REMIC Provisions.................................... 28
REMIC Trust......................................... 29
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Page
Remittance Date..................................... 29
Remittance Period................................... 29
REO Property........................................ 29
Replacement Cut-Off Date............................ 29
Representation Letter............................... 29
Reserve Interest Rate............................... 29
Residual Net Monthly Excess Cashflow................ 29
Schedules of Mortgage Loans......................... 30
Second Mortgage Loan................................ 30
Securities Act...................................... 30
Senior Lien......................................... 30
Servicer Affiliate.................................. 30
Servicing Advance................................... 30
Servicing Fee....................................... 30
Specified Subordinated Amount....................... 30
Sponsor............................................. 30
Standard & Poor's................................... 30
Startup Day......................................... 30
Step-up Payment Date................................ 30
Subordinated Amount................................. 31
Subordination Deficiency Amount..................... 31
Subordination Increase Amount....................... 31
Subordination Reduction Amount...................... 31
Substitution Amount................................. 31
Sub-Servicer........................................ 31
Sub-Servicing Agreement............................. 31
Supplemental Interest Payment Account............... 31
Supplemental Interest Payment Amount
Available........................................ 31
Supplemental Interest Trust......................... 32
Tax Matters Person.................................. 32
Termination Notice.................................. 32
Termination Price................................... 32
Total Monthly Excess Cashflow....................... 32
Total Monthly Excess Spread......................... 32
Transaction Documents............................... 32
Trust............................................... 32
Trust Estate........................................ 32
Trustee............................................. 32
Trustee's Fees...................................... 33
Unaffiliated Originator Loan........................ 33
Unaffiliated Originators............................ 33
Underwriters........................................ 33
1.2. Use of Words and Phrases............................... 33
1.3. Captions; Table of Contents............................ 33
1.4. Opinions............................................... 33
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE
TRUST............................................... 34
2.1. Establishment of the Trust............................. 34
2.2. Office................................................. 34
2.3. Purposes and Powers.................................... 34
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2.4. Appointment of the Trustee; Declaration of
Trust............................................. 34
2.5. Expenses of the Trust.................................. 34
2.6. Ownership of the Trust................................. 35
2.7. Situs of the Trust..................................... 35
2.8. Miscellaneous REMIC Provisions......................... 35
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS........ 36
3.1. Representations and Warranties of the
Sponsor........................................... 36
3.2. Representations and Warranties of the Master
Servicer.......................................... 38
3.3. Representations and Warranties of the Sponsor
with Respect to the Mortgage Loans................ 41
3.4. Covenants of Sponsor to Take Certain Actions
with Respect to the Mortgage Loans In
Certain Situations.................................... 43
3.5. Conveyance of the Mortgage Loans....................... 45
3.6. Acceptance by Trustee; Certain Substitutions
of Mortgage Loans; Certification by
Trustee........................................... 47
3.7. Cooperation Procedures................................. 49
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES................... 49
4.1. Issuance of Certificates............................... 49
4.2. Sale of Certificates................................... 49
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS.............. 50
5.1. Terms.................................................. 50
5.2. Forms.................................................. 50
5.3. Execution, Authentication and Delivery................. 51
5.4. Registration and Transfer of Certificates.............. 51
5.5. Mutilated, Destroyed, Lost or Stolen
Certificates...................................... 54
5.6. Persons Deemed Owners.................................. 54
5.7. Cancellation........................................... 54
5.8. Limitation on Transfer of Ownership Rights............. 55
5.9. Assignment of Rights................................... 56
ARTICLE VI COVENANTS........................................... 56
6.1. Distributions.......................................... 56
6.2. Money for Distributions to be Held in Trust;
Withholding....................................... 56
6.3. Protection of Trust Estate............................. 57
6.4. Performance of Obligations............................. 58
6.5. Negative Covenants..................................... 58
6.6. No Other Powers........................................ 59
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6.7. Limitation of Suits.................................... 59
6.8. Unconditional Rights of Owners to Receive
Distributions..................................... 60
6.9. Rights and Remedies Cumulative......................... 60
6.10. Delay or Omission Not Waiver.......................... 60
6.11. Control by Owners..................................... 61
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES................ 61
7.1. Collection of Money.................................... 61
7.2. Establishment of Accounts.............................. 62
7.3. The Certificate Insurance Policy....................... 62
7.4. Reserved............................................... 65
7.5. Flow of Funds.......................................... 65
7.6. Investment of Accounts................................. 68
7.7. Eligible Investments................................... 69
7.8. Reports by Trustee..................................... 70
7.9. Additional Reports by Trustee.......................... 74
7.10. Supplemental Interest Payment Account,
Supplement Interest Payments and Class RS
Distribution Account.............................. 74
ARTICLE VIII SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS................................... 76
8.1. Master Servicer and Sub-Servicers...................... 76
8.2. Collection of Certain Mortgage Loan
Payments.......................................... 78
8.3. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers........................ 79
8.4. Successor Sub-Servicers................................ 79
8.5. Liability of Master Servicer........................... 79
8.6. No Contractual Relationship Between
Sub-Servicer and Trustee or the Owners............ 80
8.7. Assumption or Termination of Sub-Servicing
Agreement by Trustee.............................. 80
8.8. Principal and Interest Account......................... 80
8.9. Delinquency Advances, Compensating Interest
and Servicing Advances............................ 82
8.10. Purchase of Mortgage Loans............................ 83
8.11. Maintenance of Insurance.............................. 84
8.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements........................... 85
8.13. Realization Upon Defaulted Mortgage Loans............. 86
8.14. Trustee to Cooperate; Release of Files................ 87
8.15. Servicing Compensation................................ 89
8.16. Annual Statement as to Compliance..................... 89
8.17. Annual Independent Certified Public
Accountants' Reports.............................. 89
8.18. Access to Certain Documentation and
Information Regarding the Mortgage Loans.......... 90
8.19. Assignment of Agreement............................... 90
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8.20. Removal of Master Servicer; Resignation of
Master Servicer................................... 90
8.21. Inspections by Certificate Insurer; Errors
and Omissions Insurance........................... 96
8.22. Merger, Conversion, Consolidation or
Succession to Business of Master
Servicer.......................................... 96
8.23. Notices of Material Events............................ 96
ARTICLE IX TERMINATION OF TRUST................................ 97
9.1. Termination of Trust................................... 97
9.2. Termination Upon Option of Master Servicer............. 98
9.3. Termination Upon Loss of REMIC Status.................. 98
9.4. Disposition of Proceeds................................ 100
9.5. Netting of Amounts..................................... 100
ARTICLE X THE TRUSTEE......................................... 101
10.1. Certain Duties and Responsibilities................... 101
10.2. Removal of Trustee for Cause.......................... 102
10.3. Certain Rights of the Trustee......................... 104
10.4. Not Responsible for Recitals or Issuance of
Certificates...................................... 105
10.5. May Hold Certificates................................. 105
10.6. Money Held in Trust................................... 105
10.7. No Lien for Fees...................................... 106
10.8. Corporate Trustee Required; Eligibility............... 106
10.9. Resignation and Removal; Appointment of
Successor......................................... 106
10.10. Acceptance of Appointment by Successor
Trustee........................................... 108
10.11. Merger, Conversion, Consolidation or
Succession to Business of the Trustee............. 108
10.12. Reporting; Withholding............................... 109
10.13. Liability of the Trustee............................. 109
10.14. Appointment of Co-Trustee or Separate
Trustee........................................... 110
ARTICLE XI MISCELLANEOUS....................................... 111
11.1. Compliance Certificates and Opinions.................. 111
11.2. Form of Documents Delivered to the Trustee............ 112
11.3. Acts of Owners........................................ 113
11.4. Notices, etc. to Trustee.............................. 113
11.5. Notices and Reports to Owners; Waiver of
Notices........................................... 114
11.6. Rules by Trustee and Sponsor.......................... 114
11.7. Successors and Assigns................................ 114
11.8. Severability.......................................... 114
11.9. Benefits of Agreement................................. 115
11.10. Legal Holidays....................................... 115
11.11. Governing Law........................................ 115
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11.12. Counterparts......................................... 115
11.13. Usury................................................ 115
11.14. Amendment............................................ 116
11.15. REMIC Status; Taxes.................................. 117
11.16. Additional Limitation on Action and
Imposition of Tax................................. 119
11.17. Appointment of Tax Matters Person.................... 119
11.18. The Certificate Insurer.............................. 119
11.19. Maintenance of Records............................... 120
11.20. Notices.............................................. 120
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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 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 -- Power of Attorney
EXHIBIT J -- Form of Monthly Report
EXHIBIT K -- Form of Master Servicer's Trust Receipt
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POOLING AND SERVICING AGREEMENT, relating to ADVANTA MORTGAGE LOAN
TRUST 1996-3, dated as of September 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.
"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 Mortgage Corp. of
New Jersey, a New Jersey corporation, Advanta Mortgage Corp. Northeast, a New
York corporation, Advanta 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.
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"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 the Group I Certificates, the
Group I Available Funds and with respect to the Group II 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.
"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 September 25, 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.
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"Certificate Insurer Premium Rate": As defined in the Insurance
Agreement.
"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 any particular Class A
Certificate, the product of the Percentage Interest evidenced thereby and the
Certificate Principal Balance of the respective Class A Certificates. 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 or all of the Class RS Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates or the
Class A-2 Certificates.
"Class A-1 Available Funds Pass-Through Rate": With respect to any
Payment Date an amount, expressed as a per annum rate, equal to:
(a) (i) without duplication the aggregate amount of interest due and
collected on all of the Mortgage Loans in Group I for the related Remittance
Period including the portion of each Delinquency Advance attributable to
interest on the related Mortgage Loan for such period plus the Subordination
Reduction Amount for Group I, if any, for such Payment Date, and 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 I, on
such Payment Date minus,
(iii) commencing on the Startup Day, an amount equal to 0.75% per
annum times the aggregate Principal Balance of the Mortgage Loans in Group I as
of the beginning of such related Remittance Period, divided by
(b) the Class A-1 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-1 Certificate": Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form 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 Termination Date": The Payment Date on which
the Class A-1 Certificate Principal Balance is reduced to zero.
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"Class A-1 Distribution Account": The Class A-1 Distribution Account
established in accordance with Section 7.2 hereof and maintained by the Trustee.
"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 Formula Interest Shortfall": As defined in Section
7.10(b) hereof.
"Class A-1 Formula Pass-Through Rate": As of any Payment Date, the
rate described in clause (i) of the definition of "Class A-1 Pass-Through Rate".
"Class A-1 Full Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-1 Full Interest Distribution Amount for such
Payment Date and (y) the Class A-1 Principal Distribution Amount for such
Payment Date.
"Class A-1 Full Interest Distribution Amount": With respect to any
Payment Date, the Class A-1 Interest Distribution Amount for such Payment Date
calculated using the Class A-1 Formula Pass-Through Rate for such Payment Date
rather than the Class A-1 Pass-Through Rate for such Payment Date plus, if the
full amount of the Class A-1 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-1
Formula Interest Shortfall was calculated) at the Class A-1 Formula Pass-Through
Rate 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
5
<PAGE>
and (ii) 30 days' interest on such amount at the Class A-1 Formula Pass-Through
Rate applicable to such Payment Date.
"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 (the actual number of
days elapsed assuming a 360- day year) on the Class A-1
Certificate Principal Balance immediately prior to such Payment
Date during the related Interest Accrual Period at the Class A-1
Pass-Through Rate applicable to such Interest Accrual Period;
and
(ii) the Class A-1 Interest Carry-Forward Amount.
"Class A-1 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 0.39% per annum or (b) in
the case of any Payment Date after the Step-up Payment Date, LIBOR plus 1.00%
per annum and (ii) the Class A-1 Available Funds Pass-Through Rate for such
Payment Date.
"Class A-1 Principal Distribution Amount": With respect to the Class
A-1 Certificates for any Payment Date, an amount equal to 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.
"Class A-2 Available Funds Pass-Through Rate": With respect to any
Payment Date, an amount, expressed as a per annum rate, equal to:
(a) (i) without duplication, the aggregate amount of interest due
and collected on all of the Mortgage Loans in Group II for the related
Remittance Period including the portion of each Delinquency Advance attributable
to interest on the related Mortgage Loan for such period, plus the Subordination
Reduction Amount for Group II, if any, for such Payment Date, and 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 10th 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
6
<PAGE>
as of the beginning of such related Remittance Date, divided by
(b) the Class A-2 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-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 Distribution Account": The Class A-2 Distribution Account
established in accordance with Section 7.2 hereof and maintained by the Trustee.
"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 II Insured
Payment) available for distribution on account of the Class A-2 Certificates for
such Payment Date.
"Class A-2 Formula Interest Shortfall": As defined in Section
7.10(b) hereof.
"Class A-2 Formula Pass-Through Rate": As of any Payment Date, the
rate described in clause (i) of the definition of "Class A-2 Pass-Through Rate".
"Class A-2 Full Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-2 Full Interest Distribution Amount for such
Payment Date and (y) the Class A-2 Principal Distribution Amount for such
Payment Date.
"Class A-2 Full Interest Distribution Amount": With respect to any
Payment Date, the Class A-2 Interest Distribution Amount for such Payment Date
calculated using the Class A-2 Formula Pass-Through Rate for such Payment Date
rather than the Class A-2 Pass-Through Rate for such Payment Date plus, if the
full amount of the Class A-2 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-2
Formula Interest Shortfall was calculated) at the Class A-2 Formula Pass-Through
Rate for such Payment Date.
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"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 Formula Pass-Through Rate applicable to such Payment
Date.
"Class A-2 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 0.30% per annum, or (b)
in the case of any Payment Date after the Step-up Payment Date, LIBOR plus 0.60%
per annum and (ii) the Class A-2 Available Funds Pass-Through Rate for such
Payment Date.
"Class A-2 Principal Distribution Amount": With respect to the Class
A-2 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-2 Certificate Principal Balance as of such Payment Date.
"Class R Certificate": Any of those Certificates representing
certain residual rights to distributions from the REMIC and designated as the
"Class R Certificate" on the face thereof.
"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.
"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
Startup Day.
"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
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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 opening of business September 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.
"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.
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"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 Advanta Mortgage Files": Any Advanta Mortgage File
relating to a Property located in any of the following jurisdictions: Florida,
Louisiana, Maine, Missouri, New Hampshire, New Mexico, Nevada, Oregon, Texas,
Utah and West Virginia and Vermont.
"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 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.
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"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 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.
"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.
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"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 defined in
the Insurance Agreement.
"Group I Available Funds": As defined in Section 7.3(a) hereof.
"Group I Certificates": The Class A-1 Certificates.
"Group I Certificate Principal Balance": As of any date of
determination, the Original Certificate Principal Balance of the Class A-1
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.
"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 Class A-1 Formula Distribution Amount for
such Payment Date.
"Group I Initial Specified Subordinated Amount": As defined in the
Insurance Agreement.
"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.
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"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
Class A-1 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).
"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 Pass-Through Rate": As to the Group I Certificates and any
Payment Date, the Class A-1 Pass-Through Rate prior to taking into account any
distributions to be made on such Payment Date.
"Group I Preference Amount": As defined in the Certificate Insurance
Policy.
"Group I Premium Amount": As to any Payment Date, the difference
between (i) the product of (x) one-twelfth of the Premium Percentage and (y) the
Group I Certificate Principal Balance on such Payment Date (before taking into
account any distributions of the Group I Principal Distribution Amount to be
made on such Payment Date) and (ii) (a) with respect to each Payment Date, other
than the first Payment Date, the product of (x) one-twelfth of the Premium
Percentage and (y) the Group I Principal Distribution Amount with respect to the
immediately preceding Payment Date.
"Group I Principal Carry-Forward Amount": With respect to any
Payment Date, the amount, if any, by which (x) the Group I Subordination Deficit
(prior to taking into account any distribution of principal on such Payment
Date), if any, as of the immediately preceding Payment Date exceeded (y) the
amount of the actual distribution made to the Class A-1 Distribution Account on
such immediately preceding Payment Date on account of the Group I Principal
Distribution Amount.
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"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; 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;
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
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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 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 Class A-1
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 Class A-1 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 Group I Reimbursement
Amount.
"Group I Specified Subordinated Amount": As defined in the Insurance
Agreement.
"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.
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"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 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 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 Amortized Subordinated Amount Requirement": As defined in
the Insurance Agreement.
"Group II Available Funds": As defined in Section 7.3(a)(ii) hereof.
"Group II Certificates": The Class A-2 Certificates.
"Group II Certificate Principal Balance": As of any date 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.
"Group II Deficiency Amount": As defined in Section 7.3(b)(ii).
"Group II 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 such Payment Date and (y) the Class A-2 Principal
Distribution Amount for such Payment Date.
"Group II Initial Specified Subordinated Amount": As defined in the
Insurance Agreement.
"Group II Insured Distribution Amount": As to the Class A-2
Certificates for any Payment Date, the sum of (x) the Class A-2 Interest
Distribution Amount for such
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Payment Date and (y) the Group II Subordination Deficit as of such Payment Date.
"Group II 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-2
Preference Amount.
"Group II 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 (for the actual number
of days elapsed assuming a 360-day year) 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 applicable to such Interest Accrual Period;
and
(ii) the Class A-2 Interest Carry-Forward Amount.
"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 difference
between the product of (x) one-twelfth of the Premium Percentage and (y) the
Group II Certificate Principal Balance on such Payment Date (before taking into
account any distributions of the Group II Principal Distribution Amount on such
Payment Date) and (ii) (a) with respect to the initial Payment Date the product
of (x) one-twelfth of the Premium Percentage and (y) the Group II Principal
Distribution Amount with respect to the immediately preceding 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, (prior to taking into
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account any distribution of principal on such Payment Date) if any, as of the
immediately preceding Payment Date exceeded (y) the amount of the actual
distribution made to the Class A-2 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-2 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 Group II 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,
(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
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(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).
"Group II Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all Group II 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 Group II
Insured Payment not previously repaid calculated from the date the Trustee
received the related Group II Insured Payment at the Class A-2 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-2 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 Group II Reimbursement Amount.
"Group II Specified Subordinated Amount": As defined in the
Insurance Agreement.
"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
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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 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-2 Certificates at the Class
A-2 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 September 1, 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 September 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 Group II Certificates, the Group
II Insured Payment.
"Interest Accrual Period": With respect to the Class A-1
Certificates and the Class A-2 Certificates, the period commencing on the prior
Payment Date (or on September
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25, 1996 with respect to the October 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 Group I and Group II Certificates, 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, means the lesser of (a)
the greater of (x) the then applicable highest rate of interest on the
Certificates or (y) the prime rate as published in the Wall Street Journal on
the related due date of amounts owed to the Certificate Insurer under the
Insurance Agreement (including such amounts owed pursuant to Section 3.03(c) of
the Insurance Agreement) and (b) the maximum rate permissible under applicable
usury or similar laws limiting interest rates. The Late Payment Rate shall be
computed on the basis of the actual number of days elapsed over a year of 360
days.
"LIBOR": With respect to any Interest Accrual Period for the Group I
Certificates and Group II 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 Group II 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",
"Second Mortgage Loan" and "Third Mortgage Loan". The term
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"Mortgage Loan" includes any 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": As defined in the Insurance
Agreement.
"Original Certificate Principal Balance": As of the Startup Day and
as to each Class of Class A Certificates, the original Certificate Principal
Balances thereof, are as follows:
Class A-1 Certificates $280,000,000
Class A-2 Certificates $120,000,000
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
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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, Advanta 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.
"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.
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"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 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.
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"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) 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 November 25, 2026, (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
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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, or Third Mortgage Loan if the Mortgage Loan to be
substituted for is a Third 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 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.
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"Reimbursement Amount": A Group I Reimbursement Amount or a Group II
Reimbursement Amount.
"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, the Class A-1 Distribution Account and the Class A-2
Distribution Account.
"Remittance Date": Any date on which the Master Servicer is required
to remit monies on deposit in the Principal and Interest Account to the Trustee,
which shall be no later than the 18th day of each month, or, if such day is not
a Business Day, the next preceding Business Day, 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
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(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. 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.
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"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": September 25, 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.
"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
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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.
"Supplemental Interest Trust": The Advanta Supplemental Interest
Trust 1996-3 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 1996-3, 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 the Supplemental Interest Account),
(iii) any Property, the ownership of which has been effected on behalf of the
Trust as a result of foreclosure or acceptance by the
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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.
"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": Morgan Stanley & Co. Incorporated, Bear, Stearns &
Co. Inc., Lehman 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,
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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 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 1996-3". 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 monies 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
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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 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, the uncertificated right of
the Class A-1 Distribution Account to receive the Group I Distribution Amount
and the uncertificated right of the Class A-2 Distribution Account to receive
the Group II Distribution Amount (the "Uncertificated Interests") 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
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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.
(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, 2026
Class A-2 Certificates November 25, 2026
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 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
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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.
(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
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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 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,
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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.
(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
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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 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,
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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 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
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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 Startup Day 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
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
Coupon Rate of at least 7.375% 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 30-89 days Delinquent,
and no Mortgage Loan is 90 or more days' Delinquent;
(vi) As of the Startup Day no more than 0.50% 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 14% 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 Cut-Off Date, no
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more than 2.80% 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 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
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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 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
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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.
(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; provided that the
assignments of mortgage listed in clause (e) of Exhibit B hereto shall be
delivered to the Trustee with respect to the Designated Advanta Mortgage
Files within 75 Business Days of the Startup Day.
(ii) cause, within 75 Business Days following the Startup Day the
assignments of Mortgage to be submitted
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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, for administrative convenience and facilitation of servicing and to
reduce closing costs, 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 Advanta 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 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.
Such assignments of mortgage shall, in addition to the requirements
specified in Exhibit B, be in recordable form. On or before the Startup Day, the
Sponsor shall deliver to the Trustee original executed powers of attorney, from
the current recordholders of the related Mortgage substantially in the form of
Exhibit I, authorizing the Master Servicer on behalf of the Trustee to record
the assignments of mortgage as provided in clause (ii) above. Pursuant to such
power of attorney, the Trustee also may execute a new assignment of mortgage for
any Mortgage Loan if the original assignment of mortgage delivered by the
Sponsor to the Trustee is not in recordable form at such time as the assignment
of mortgage is to be recorded by the Trustee.
(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,
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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 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.
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(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 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
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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.
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
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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.
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), monies in the Principal and Interest Account, the Supplemental
Interest Payment Account, the Class A-1 Distribution Account and the Class A-2
Distribution Account, except as otherwise provided herein, from earnings on
monies 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-1 and the Class A-2 Certificates, certain amounts payable from the
Supplemental Interest Payment Account, the Class A-1 Distribution Account and
from the Class A-2 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
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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 Class A-1 Certificates, the Class A-2
Certificates and the Class RS Certificates shall be in substantially the forms
set forth in Exhibits A-1, A-2, 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 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
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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,
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
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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 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;
provided, that the cost of any such re-registration shall be paid by the
Sponsor.
(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
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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.
(j) Neither the Sponsor, the Master Servicer nor the Trustee will
have any liability for any actions taken by DTC or its nominee, Euroclear or
CEDEL, including, without limitation, actions for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Class A Certificates held by Euroclear, CEDEL or Cede & Co., as nominee for DTC,
or for maintaining supervising or reviewing any records relating to such
beneficial ownership interests.
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) any mutilated Certificate is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) 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; provided, that such insurance company possesses at least an
investment grade rating from either Standard & Poor's or Moody's), 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
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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 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
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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 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
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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 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 monies 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 the Certificate
Insurer, as their interests may appear, 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
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such request as it deems reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
(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.
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The Trustee may contract with other Persons to assist it in
performing its duties hereunder.
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.
Section 6.9. Rights and Remedies Cumulative. Except as otherwise
provided herein, no right or remedy herein
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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; 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.
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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-1 Distribution
Account to be held by the Trustee in trust for the benefit of the Class A-1
Certificates and the Certificate Insurer, as their interest may appear, and a
Class A-2 Distribution Account to be held by the Trustee in trust for the
benefit of the Class A-2 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 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
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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
Group II 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 Group
II 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 Policy, the Trustee
shall deposit such Insured Payments in the Certificate Account.
(ii) If the Group II 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 Group II Principal Distribution Amount to
be actually distributed on such Payment Date without regard to any Group II
Insured Payment to be made with respect
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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 Class A 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 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 any Group I Insured
Payment or Group II Insured Payment, as applicable, 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
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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 Group I Insured Payment or Group
II Insured Payment, as applicable. 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) On each Remittance Date, 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.
(b) On each Remittance Date, 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.
(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 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;
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(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;
(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
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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; 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 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, the Trustee shall transfer (i) to the Class A-1
Distribution Account the Class A-1 Distribution Amount for such
Payment Date; (ii) to the Class A-2 Distribution Account, the Class
A-2 Distribution Amount for such Payment Date; and (iii) 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 monies
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:
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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.
(e) The Trustee shall distribute on each Payment Date to the Owners
of the Class A-1 Certificates, from the amount then on deposit in the Class A-1
Distribution Account, the lesser of (x) such amount on deposit in such Account
and (y) the Class A-1 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) The Trustee shall distribute on each Payment Date to the Owners
of the Class A-2 Certificates, from the amount then on deposit in the Class A-2
Distribution Account, the lesser of (x) such amount on deposit in such Account
and (y) the Class A-2 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).
(g) 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 and the
Certificate Insurer, as their interests may appear, 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.
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(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:
(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.
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(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:
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. Monies 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.
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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 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;
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(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 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
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Balance of all Mortgage Loans in the related Mortgage Loan Group in
foreclosure proceedings (and whether any 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 loan number of the related Mortgage Loan and 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.
(d) The Sponsor and the Master Servicer, on behalf of
Certificateholders and the Trust (the "Trust Parties") hereby authorize the
Trustee to include the loan level information with respect to the Mortgage
Loans, excluding any information relating to the fees or amounts due to the
Certificate Insurer, contained in reports provided to the Certificate Insurer or
the Trustee by the Servicer hereunder and, if so directed by an Authorized
Officer of the Sponsor in writing to the Trustee, the monthly report to the
Owners prepared by the Trustee (the "Information") on The Bloomberg, an on-line
computer based on-line information network maintained by Bloomberg L.P.
("Bloomberg") or on any other on-line computer based on-line information network
or service ("Information Network"), or in other electronic or print information
services deemed acceptable by the Sponsor or the Master Servicer as designated
in writing to the Trustee by an Authorized Officer of the Master Servicer. The
Trust Parties agree not to commence any actions or proceedings, or otherwise
assert any claims, against the Trustee or its affiliates or any of the Trustee's
or its affiliates' respective agents, representatives, directors, officers or
employees (collectively, the "Designated Parties"), arising out of, or
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related to or in connection with the dissemination and/or use of any Information
by the Trustee, including, but not limited to, claims based on allegations of
inaccurate or incomplete information by the Trustee to Bloomberg or to any
Information Network or otherwise (other than in connection with the Trustee's
negligence or willful misconduct). The Trust Parties 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 Parties' negligence or willful misconduct). The Trustee makes 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
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,
Sponsor and Master Servicer 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.
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(a) The parties hereto do hereby create and establish a trust, the
"Advanta Supplemental Interest Trust 1996-3" (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:
(i) 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-1 Full Interest Distribution
Amount over (ii) the Class A-1 Interest Distribution Amount over (y) the
Supplemental Interest Payment Amount Available as of such Payment Date
(the "Class A-1 Formula Interest Shortfall"), the Trustee shall demand
that the Designated Residual Owner fund the Class A-1 Formula Interest
Shortfall on the related Payment Date.
(ii) 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-2 Full Interest Distribution
Amount over (ii) the Class A-2 Interest Distribution Amount over (y) the
Supplemental Interest Payment Amount Available as of such Payment Date
(the "Class A-2 Formula Interest Shortfall"), the Trustee shall demand
that the Designated Residual Owner fund the Class A-2 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-1 Distribution
Account the lesser of (x) the amount by which the Class A-1 Full Interest
Distribution Amount exceeds the Class A-1 Interest Distribution Amount and (y)
the Supplemental Interest Payment Amount Available.
On each Payment Date, the Trustee shall withdraw from the
Supplemental Interest Payment Account and deposit in the Class A-2 Distribution
Account the lesser of (x) the amount by which the Class A-2 Full Interest
Distribution Amount exceeds the Class A-2 Interest Distribution Amount and (y)
the Supplemental Interest Payment Amount Available.
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(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
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 or any
Sub-servicer with any powers of attorney and other documents necessary or
appropriate to enable the Master Servicer or any Sub-servicer
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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 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
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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 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 or any Sub-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
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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; 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
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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 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. Any termination fee due
under any such sub-servicing agreement shall be paid by the preceding Master
Servicer but in no event shall the Trustee be liable for any such fee.
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 the Certificate Insurer, as their interests may appear, 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
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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 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;
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(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.
(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
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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 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
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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.
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
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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 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 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
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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 or any Sub-servicer of a notification that
payment in full will be escrowed in a manner customary for such purposes, the
Master Servicer or any Sub-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 or any Sub-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 Servicer or any Sub-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 or any Sub-servicer; in
such
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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
or any Sub-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 or any
Sub-servicer. Such receipt shall obligate the Master Servicer or any
Sub-servicer to return the File to the Trustee when the need therefor by the
Master Servicer or any Sub-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 or any Sub-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.
(e) Each Master Servicer's Trust Receipt may be delivered to the
Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such other
means, including, without limitation, electronic or computer readable medium, as
the Master Servicer and the Trustee shall mutually agree. The Trustee shall
promptly release the related File(s) within five (5) to seven (7) business days
of receipt of a properly completed Master Servicer's Trust Receipt pursuant to
clauses (i), (ii) or (iii) above or such shorter period as may be agreed upon by
the Master Servicer and the Trustee. Receipt of a Master Servicer's Trust
Receipt pursuant to clauses (i), (ii) or (iii) above shall be authorization to
the Trustee to release such Files, provided the Trustee has determined that such
Master Servicer's Trust Receipt has been executed, with respect to clauses (i)
or (ii) above, or approved, with
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respect to clause (iii) above, by an Authorized Officer of the Master Servicer
or any Sub-servicer, and so long as the Trustee complies with its duties and
obligations under this Agreement. If the Trustee is unable to release the Files
within the time frames previously specified, the Trustee shall immediately
notify the Master Servicer or any Sub-servicer indicating the reason for such
delay, but in no event shall such notification be later than five business days
after receipt of a Master Servicer's Trust Receipt. If the Master Servicer is
required to pay penalties or damages due solely to the Trustee's negligent
failure to release the related File or the Trustee's negligent failure to
execute and release documents in a timely manner, the Trustee shall be liable
for such penalties or damages.
On each day that the Servicer remits to the Trustee Master Servicer's
Trust Receipts pursuant to clauses (ii) or (iii) above, the Master Servicer or
any Sub-servicer shall also submit to the Trustee a summary of the total amount
of such Master Servicer's Trust Receipts requested on such day by the same
method as described in such clauses (ii) or (iii) above.
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 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
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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 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.
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(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 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;
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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
(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 September of any year,
commencing in September 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;
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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 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.
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(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 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.
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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.
(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
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Owners of the occurrence of any event specified in Section 8.20(a) of which the
Trustee has knowledge.
(m) Notwithstanding anything herein to the contrary, upon
termination of the Master Servicer hereunder, any liabilities of the Master
Servicer which accrued prior to such termination shall survive such termination.
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 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,
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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
(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
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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. 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.
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(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.
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.
(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
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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 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
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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;
(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
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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.
(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,
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reimbursement of expenses as are described in the fee quote letter, dated
September 23, 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 any Class B 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, 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
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(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, or, if there are
no Class A Certificates then Outstanding, by such Percentage Interest
represented by any Class of Class RS Certificates then Outstanding 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;
(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
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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 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
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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 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.
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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 Class
RS Certificates then Outstanding may at any time, with the prior written consent
of the Certificate Insurer, 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 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
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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 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
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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 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 including, without
limitation, when the Trustee is acting as Master Servicer, 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. 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,
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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, 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;
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(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 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
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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
(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
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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 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
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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 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.
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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.
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
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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 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,
or caused to be filed, by the Tax Matters Person with respect to the REMIC Trust
or the Certificates.
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(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 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
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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 R Certificates hereby appoint the Trustee as their agent to act as the Tax
Matters Person for 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
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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 or, if there
are no Class A Certificates then Outstanding, by at least a majority of the
Class B 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 1996-3
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: Advanta Mortgage Conduit
Services Inc.
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Attention:
The Master Advanta Mortgage Corp. USA
Servicer: 16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
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
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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 Ratings Group
26 Broadway
15th Floor
New York, New York 10004
Attention: Surveillance Dept.
Underwriters: Morgan Stanley & Co. Incorporated
Representative of the
Underwriters
1585 Broadway
New York, New York 10036
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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 Casale
Vice-President
ADVANTA MORTGAGE CORP. USA
as Master Servicer
By:_____________________________
Mark Casale
Vice-President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:_____________________________
Erin Deegan
Assistant Vice President
[Pooling and Servicing Agreement]
<PAGE>
EXHIBIT 4.2
<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
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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
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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.
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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
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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
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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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<PAGE>
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
16
<PAGE>
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
17
<PAGE>
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.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers, all as of the day and year first
above written.
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
19
<PAGE>
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>
EXHIBIT 4.3
<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., Advanta Mortgage Receivables,
Inc. 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 1996-3 (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 1996-3, 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 September 1, 1996.
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 September 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,
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:_____________________________
Dated: September 25, 1996
3
<PAGE>
EXHIBIT 4.4
<PAGE>
September 25, 1996
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
Re: Underwriting Agreement dated September 11, 1996 (the
"Underwriting Agreement") between Advanta Mortgage Conduit
Services, Inc. ("Advanta") and Morgan Stanley & Co.
Incorporated (as Representative of the Underwriters, the
"Representative") and Indemnification Agreement dated as of
September 1, 1996 (the "Indemnifica- tion Agreement") among
Financial Guaranty Insurance Company (the "Certificate
Insurer"), Advanta and the Representative and the Insurance
and Indemnity Agreement dated as of September 1, 1996 (the
"Insurance Agreement") among the Certificate Insurer, Advanta,
and Advanta Mortgage Corp. USA ("USA")
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, the Indemnification
Agreement and the Insurance Agreement (together, the "Designated Agreements"),
Advanta has undertaken certain financial obligations with respect to the
indemnification of the Underwriter 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, the Indemnification Agreement and the Insurance Agreement, the
Underwriter and the Certificate Insurer have required the undersigned, Advanta
Mortgage Holding Company
<PAGE>
("AMHC"), the parent corporation of Advanta, to acknowledge its
joint-and-several liability with Advanta for the payment of the Joint and
Several Obligations under the Designated Agreements.
Now, therefore, the Underwriter, 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 Underwriter
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 and the Insurance
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 Underwriter 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:___________________________
Mark A. Casale
Vice President
CONFIRMED AND ACCEPTED, as of the date first above written:
FINANCIAL GUARANTY INSURANCE COMPANY
By:_________________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
By:_________________________________
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 Trust Policy Number: 96010524
Trust 1996-3
Control Number: 0010001
Insured Obligations: $400,000,000 in
aggregate principal amount of Mortgage Deposit Premium: $33,333.33
Loan Asset Backed Certificates, Series
1996-3, Class A-1 Group I Certificates
(the "Group I Certificates") and Class
A-2 Group II Certificates (the "Group II
Certificates" and together with the
Group I Certificates, the "Certificates")
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 Certificates, to the extent set forth in the Pooling and
Servicing Agreement.
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 pursuant to the
Pooling and Servicing Agreement, for disbursement to such Certificateholders in
the same manner as the payments with respect to the Certificates.
Upon such payment, Financial Guaranty shall be fully subrogated to the rights of
the Certificateholders to receive the amount so paid as set forth in Sections
7.3(d) and (e) 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 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
Certificateholder is required to return such voided payment, or any portion of
such voided payment made in respect of the Certificates (a "Preference Amount"),
Financial Guaranty will pay on the guarantee described in the first paragraph
hereof, an amount equal to each such 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 or the 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 (i) required to make any payment under this
Surety Bond in respect of any Preference Amount to the extent such Preference
Amount is comprised of amounts previously paid by Financial Guaranty hereunder,
or (ii) obligated to make any payment in respect of any Preference Amount, which
payment represents a payment of the principal amount of the 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 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 the 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 Preference Amounts will be
made with Financial Guaranty's own funds.
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
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 reason,
including the payment of the Certificates 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 October 25, 1996, in an amount equal to one-twelfth of the
Certificate Insurer Premium Rate multiplied by the sum of the then outstanding
Certificate Principal Balance of the Group I Certificates and the Group II
Certificates on the Payment Date on which said monthly premium shall be due and
payable after giving effect to distributions to the 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 respective meanings set
forth in the Pooling and Servicing Agreement. "Notice" means written notice in
the form of Exhibit A 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, the person, other than the Trust, the
Master Servicer, any Subservicer or Underwriter or the Sponsor 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 September 1, 1996.
In the event that payments under any 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.
/s/ Ann Stearn /s/ Michael Miran
- --------------- -----------------
President Authorized Representative
Effective Date: September 25, 1996
Form 9013
Page 4 of 4
<PAGE>
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 reinusrance 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.
/S/ KPMG Peat Marwick LLP
New York, New York
September 16, 1996
<PAGE>
EXHIBIT 28.1
<PAGE>
INDEMNIFICATION AGREEMENT
This Agreement, dated as of September 1, 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 Morgan Stanley & Co. Incorporated, as Representative (the
"Representative") of itself, Bear, Stearns & Co. Inc., Lehman Brothers Inc. and
Prudential Securities Incorporated (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 1996-3, Class A-1 and Class A-2 issued pursuant to a
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement")
dated as of September 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 1996-3, Class A-1 and Class A-2 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.
<PAGE>
"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.
"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 6,
1996 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 September 11, 1996 relating to the offer and sale of the
Class A-1 and Class A-2 Certificates.
"Registration Statement" means the registration statement on Form
S-3 of the Issuer (Registration No. 33-99510) 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 September 11, 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.
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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.
(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 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 and an opinion dated January 21, 1993 of Ernst & Young,
independent certified public accountants, 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
3
<PAGE>
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 June 30, 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 covered by such statements in
accordance with generally accepted accounting principles consistently
applied, and, since June 30, 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 Group, a division
of The McGraw Hill Companies ("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.
4
<PAGE>
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:
(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).
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(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.
(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.
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<PAGE>
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-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
7
<PAGE>
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
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
8
<PAGE>
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 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
9
<PAGE>
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.
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
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<PAGE>
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 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, New York 10006
Attention: General Counsel
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If to the Issuer: ADVANTA Mortgage
Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
If to the Underwriter: Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
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 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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<PAGE>
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
MORGAN STANLEY & CO.
INCORPORATED
By:__________________________
Name: Murray Stoltz
Title: Principal
13
