<PAGE>
- --------------------------------------------------------------------------------
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) November 22, 1996
Advanta Revolving Home Equity Loan Trust 1996-A
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 33-99510 Application Pending
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o Advanta Mortgage Conduit 92127
Services, Inc. ----------
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
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
<PAGE>
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 $1,100,000,000 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 Revolving Home
Equity Loan Trust 1996-A (the "Registrant" or the "Trust") issued approximately
$50,000,000 in aggregate principal amount of its Revolving Home Equity Loan
Asset-Backed Certificates, Series 1996-A (the "Certificates"), on November 22,
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 November 1, 1996, among Advanta Mortgage Conduit
Services, Inc. (the "Company"), Advanta Mortgage Corp. USA, in its capacity as
master servicer (the "Master Servicer"), Advanta National Bank USA as Originator
(the "Originator") and Bankers Trust Company of California, N.A., in its
capacity as Trustee (the "Trustee"). The Certificates consist of one registered
class, the Class A Certificates. The Certificates represent undivided beneficial
ownership interests in the Trust. The Originator will also retain an
uncertificated interest in the Trust.
The assets of the Trust initially will include a pool of
revolving home equity loans (the "Mortgage Loans") secured by mortgages or deeds
of trust (the "Mortgages") on one-to-four family residential properties.
Interest distributions on the Class A Certificates are based
on the Certificate Principal Balance thereof and the then applicable Class A
Interest Rate thereof. The Class A Interest Rate is a variable rate for the
Certificates.
The Certificates have an aggregate principal amount of
$50,000,000.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated September 6, 1996 and the
Prospectus Supplement dated
2
<PAGE>
November 15, 1996 filed pursuant to Rule 424(b)(5) of the Act on November 20,
1996.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated November 15, 1996 between
Advanta Mortgage Conduit Services, Inc., Advanta National Bank USA and Lehman
Brothers, Inc.
4.1 Pooling and Servicing Agreement, dated as of November 1,
1996, between Advanta Mortgage Conduit Services, Inc., as sponsor, Advanta
Mortgage Corp. USA, as master servicer, Advanta National Bank USA, as
originator, and Bankers Trust Company of California, N.A., as trustee.
4.2 Advanta Mortgage Holding Company Guaranty.
4.3 Certificate Insurance Policy.
99.1 Indemnification Agreement dated as of November 22, 1996,
between Advanta National Bank USA, Lehman Brothers, Inc. and MBIA Insurance
Corporation in connection with the Underwriting Agreement.
3
<PAGE>
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 REVOLVING HOME EQUITY LOAN TRUST 1996-A
By: Advanta Mortgage Conduit Services, Inc., as
Sponsor
By: /s/ Mark T. Dunsheath
-----------------------
Name: Mark T. Dunsheath
Title: Vice President
Dated: December 6, 1996
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
1.1 Underwriting Agreement, dated November
15, 1996 between Advanta Mortgage
Conduit Services, Inc., Advanta
National Bank USA and Morgan Stanley &
Co. Incorporated. 7
4.1 Pooling and Servicing Agreement, dated
as of December 1, 1996, between
Advanta Mortgage Conduit Services,
Inc., as sponsor, Advanta National
Bank USA, as Originator, Advanta
Mortgage Corp. USA, as master
servicer, and Bankers Trust Company of
California, N.A., as Trustee. 50
4.2 Advanta Mortgage Holding Company
Guaranty. 184
99.1 Indemnification Agreement dated as of
November 23, 1996, between Advanta
National Bank USA, Lehman Brothers,
Inc. and MBIA Insurance Corporation in
connection with the Underwriting
Agreement. 190
<PAGE>
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA NATIONAL BANK USA
Advanta Revolving Home Equity Loan Asset-Backed
Certificates, Series 1996-A, Class A Certificates
UNDERWRITING AGREEMENT
November 15, 1996
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Advanta National Bank USA as Originator (the "Originator") has
authorized the issuance and sale of Revolving Home Equity Loan Asset-Backed
Certificates, Series 1996-A Class A (the "Certificates"), consisting of variable
rate pass-through Class A Certificates. The Certificates will be issued by the
Advanta Revolving Home Equity Loan Trust 1996-A (the "Trust"), whose assets will
include a pool of adjustable rate home equity revolving credit line loans, made
or to be made in the future (the "Mortgage Loans") under certain home equity
revolving credit line loan agreements, and certain related property. The
Certificates represent undivided interests issued by the Trust. The Originator
will retain, initially, the remaining undivided interest in the trust assets
(the "Originator Interest") which may be sold or pledged at anytime, subject to
certain conditions specified in the Pooling and Servicing Agreement. The Class A
Principal Balance of the Certificates as of the opening of business on November
22, 1996 (the "Closing Date"), shall be $50,000,000. The Certificates are to be
issued under a pooling and servicing agreement, to be dated as of November 1,
1996 (the "Pooling and Servicing Agreement"), among Advanta Mortgage Conduit
Services, Inc., as sponsor (the "Sponsor"), Advanta Mortgage Corp. USA, as
master servicer (the "Master Servicer"), the Originator 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 MBIA
Insurance Corporation (the "Certificate Insurer") which will unconditionally and
irrevocably guarantee to the Trustee for the benefit of the Owners of the
Certificates on any Payment Date, the amount by
<PAGE>
which the (i) Class A Principal Balance exceeds the (ii) Trust Collateral Value
minus the Non-Subordinated Originator's Interest, and (iii) any accrued and
unpaid interest due on the Certificates.
The Certificates and the Originator's Interest are more fully
described in a Registration Statement which the Company has furnished to Lehman
Brothers (the "Underwriter"). Capitalized terms used but not defined herein
shall have the meanings given to them in the Pooling and Servicing Agreement.
The Company will also enter into an Insurance Agreement dated
as of November 22, 1996 (the "Insurance Agreement"), with the Originator, the
Master Servicer, the Trustee 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. The
Originator will also enter into an Indemnification Agreement dated as of
November 22, 1996 (the "Indemnification Agreement"), with the Underwriter, 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 and the Originator. The Company and the Originator
each represent and warrant to, and agree with the Underwriter
that:
A. Registration Statements on Form S-3, as amended
by Post-Effective Amendments thereto, have (i) been prepared
by the Company and the Originator 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 Underwriter. As used in this Agreement, "Effective Time"
means the date and the time as of which such Registration
Statements, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission;
"Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in
such Registration Statements, or amendments thereof, including
a preliminary prospectus supplement which, as completed, is
proposed to be used in connection
2
<PAGE>
with the sale of the Certificates and any prospectus filed
with the Commission by the Company with the consent of the
Underwriter 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 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 the Underwriter (i) has provided
to the Company Collateral term sheets (as hereinafter defined)
that the Underwriter has provided to a prospective investor,
the Company has filed such Collateral term sheets as an
exhibit to a report on Form 8-K within two business days of
3
<PAGE>
its receipt thereof, or (ii) has provided to the Company
Structural term sheets or Computational Materials (each as
defined below) that the Underwriter has provided to a
prospective investor, the Company will file or cause to be
filed with the Commission a report on Form 8-K containing such
Structural term sheet and Computational Materials, as soon as
reasonably practicable after the date of this Agreement, but
in any event, not later than the date on which the Prospectus
is filed with the Commission pursuant to Rule 424 of the Rules
and Regulations.
B. The 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 Underwriter 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 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
4
<PAGE>
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
or the Originator, otherwise than as set forth or contemplated
in the Prospectus as supplemented or amended as of the Closing
Date.
E. Each of the Company and the Originator has been
duly incorporated and is validly existing as a corporation or
national banking association, as the case may be, 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 or national banking association 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 Insurance
Agreement and, in the case of the Originator, the
Indemnification 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
or the Originator is a party or of which any of its properties
is the subject (a) which if determined adversely to the
Company or the Originator would have a material adverse effect
on the business or financial condition of the Company or the
Originator, (b) which asserts the invalidity of this
Agreement, the Pooling and Servicing Agreement, the
Indemnification Agreement, the Insurance Agreement, or the
Certificates, (c) which seeks to prevent the issuance of the
Certificates or the consummation by the Company or the
Originator of any of the transactions contemplated by the
Pooling and Servicing
5
<PAGE>
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 or the Originator of its obligations under, or the
validity or enforceability of, the Pooling and Servicing
Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement, or the Certificates.
G. This Agreement has been, and the Pooling and
Servicing 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 the
Originator, and this Agreement constitutes, and the Pooling
and Servicing 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 and the Originator
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
Indemnification Agreement and the Insurance Agreement by the
Company and the Originator 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 or the Originator is a party,
by which the Company or the Originator is bound or to which
any of the property or assets of the Company, the Originator
or any of their subsidiaries are subject, nor will such
actions result in any violation of the provisions of the
articles of incorporation or by-laws of the Company or of the
Originator or any statute or any
6
<PAGE>
order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or the Originator
or any of their properties or assets.
I. Arthur Andersen LLP are independent public
accountants with respect to the Company and Originator as
required by the Securities Act and the Rules and Regulations.
J. The direction by the Originator to the Trustee to
execute, authenticate, issue and deliver the Certificates has
been duly authorized by the Originator, 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
Certificates to the Underwriter, or the consummation by the
Company or the Originator of the other transactions
contemplated by this Agreement, the Pooling and Servicing
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 Certificates by the Underwriter or as
have been obtained.
L. The Originator 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 Originator 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 Originator 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 Originator
7
<PAGE>
will: (i) have good title to the interest in the Mortgage
Loans conveyed by the Originator, 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 Pooling and Servicing Agreement or
in the 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 Certificates to
the Underwriter. Upon execution and delivery of the Pooling
and Servicing Agreement by the Trustee, the Trustee will have
acquired beneficial ownership of all of the Originator's
right, title and interest in and to the Mortgage Loans. Upon
delivery to the Underwriter of the Certificates, the
Underwriter will have good title to the 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. None of the Sponsor, the Originator or 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 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 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 and the Originator set forth in
the Pooling and
8
<PAGE>
Servicing Agreement, the Insurance Agreement and, in the case
of the Originator, the Indemnification Agreement will be true
and correct in all material respects.
Any certificate signed by an officer of the Company or the
Originator and delivered to the Underwriter or counsel for the Underwriter in
connection with an offering of the 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
Underwriter to purchase the 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 Originator agrees to instruct the Trustee to issue and agrees to sell
to the Underwriter, and the Underwriter agrees (except as provided in Sections X
and XI hereof) to purchase from the Originator the aggregate initial principal
amount of the Certificates set forth on Schedule A, at the purchase price or
prices set forth in Schedule A.
SECTION III. Delivery and Payment. Delivery of and payment for
the Certificates to be purchased by the Underwriter 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 Underwriter, the Company and the
Originator at 10:00 A.M. New York City time on the Closing Date or at such other
time or date as shall be agreed upon in writing by the Underwriter, the Company
and the Originator. Payment shall be made to the Originator by wire transfer of
same day funds payable to the account of the Originator. Delivery of the
Certificates shall be made to the Underwriter against payment of the purchase
price thereof. The Certificates shall be in such denominations and registered in
such names as the Underwriter may request in writing at least two business days
prior to the Closing Date. The Certificates will be made available for
examination by the Underwriter no later than 2:00 p.m. New York City time on the
first business day prior to the Closing Date.
SECTION IV. Offering by the Underwriter. It is understood
that, subject to the terms and conditions hereof, the Underwriter proposes to
offer the Certificates for sale to the public as set forth in the Prospectus.
SECTION V. Covenants of the Company. The Company and the
Originator agree as follows:
9
<PAGE>
A. To prepare the Prospectus in a form approved by
the Underwriter 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
Underwriter, 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
Underwriter 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 Certificates, to promptly advise
the Underwriter 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 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 Underwriter and to
counsel for the Underwriter a signed copy of the Registration
Statement as originally filed with the Commission, and of each
amendment thereto filed with the Commission, including all
consents and exhibits filed therewith.
C. To deliver promptly to the Underwriter such
number of the following documents as the Underwriter shall
reasonably request: (i) conformed copies of the Registration
Statement as originally filed with the Commission and each
amendment
10
<PAGE>
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 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 Underwriter and, upon the Underwriter's request, shall
file such document and prepare and furnish without charge to
the Underwriter and to any dealer in securities as many copies
as the Underwriter 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 the Underwriter is required to deliver
a Prospectus in connection with sales of any of the
Certificates at any time nine months or more after the
Effective Time, upon the request of the Underwriter but at the
expense of the Underwriter, the Company shall prepare and
deliver to the Underwriter as many copies as the Underwriter
may reasonably request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Securities
Act.
D. To file promptly with the Commission any
amendment to the Registration Statement or the Prospectus or
any supplement to the Prospectus that may, in the judgment of
the Company or the Underwriter, 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
11
<PAGE>
copy thereof to the Underwriter and counsel for the
Underwriter and obtain the consent of the Underwriter to the
filing.
F. To make generally available to holders of the
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 their best efforts, in cooperation with
the Underwriter, to qualify the Certificates for offering and
sale under the applicable securities laws of such states and
other jurisdictions of the United States as the Underwriter
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 Certificates. The Company and the
Originator will file or cause the filing of such statements
and reports as may be required by the laws of each
jurisdiction in which the Certificates have been so qualified.
H. Not, without the Underwriter'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 Certificates to the
public.
I. So long as the Certificates shall be outstanding,
to deliver to the Underwriter as soon as such statements are
furnished to the Trustee: (i) the annual statement as to
compliance delivered to the Trustee pursuant to Section 8.16
of the Pooling and Servicing Agreement; (ii) the annual
statement of a firm of independent public accountants
furnished to the Trustee pursuant to Section 8.17 of the
Pooling and Servicing Agreement; and (iii) the Monthly
Statement furnished to the Certificateholders pursuant to
Section 7.8 of the Pooling and Servicing Agreement.
12
<PAGE>
J. To apply the net proceeds from the sale of the
Certificates in the manner set forth in the Prospectus.
SECTION VI. Conditions to the Underwriter's Obligation. The
obligation of the Underwriter to purchase the 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 and the Originator
herein contained; (ii) the performance by the Company and the Originator of all
of their respective obligations hereunder; and (iii) the following conditions as
of the Closing Date:
A. The Underwriter 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. The Underwriter shall not have discovered and
disclosed to the Company on or prior to the Closing Date that
the Registration Statement or the Prospectus or any amendment
or supplement thereto contains an untrue statement of a fact
or omits to state a fact which, in the opinion of Dewey
Ballantine, counsel for the Underwriter, 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
Certificates, the Indemnification Agreement, the Registration
Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all respects to counsel for
the Underwriter, 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 Underwriter shall have received the favorable
opinion of Dewey Ballantine, special
13
<PAGE>
counsel to the Company and the Originator with respect to the
following items, dated the Closing Date, to the effect that:
1. The Company and the Originator has each been duly
organized and is validly existing as a corporation or national
banking association, as the case may be, 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 or Originator, as the case may be,
under the Pooling and Servicing Agreement. Each of the Company
and the Originator 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
and, in the case of the Originator, the Indemnification
Agreement.
2. This Agreement, the Certificates, the Pooling and
Servicing Agreement and the Insurance Agreement have been duly
and validly authorized, executed and delivered by the Company
and the Originator, and the Originator has duly and validly
authorized the Indemnification Agreement, all requisite
corporate action having been taken with respect thereto, each
(other than the Certificates and the Indemnification
Agreement) constitutes the valid, legal and binding agreement
of the Company, and each constitutes the valid, legal and
binding agreement of the Originator.
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 or the
Originator of the Pooling and Servicing Agreement, this
Agreement, the Insurance Agreement or, in the case of the
Originator, 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 or the Originator; (ii) any term or
provision of any material agreement, contract, instrument or
indenture, to which the Company or the Originator is a party
or is bound and known to such counsel; or (iii) any order,
judgment, writ, injunction or decree of any court or
governmental agency or body or other tribunal having
jurisdiction over the Company or the Originator and known to
such counsel; or
14
<PAGE>
(B) results in, or will result in the creation or imposition
of any lien, charge or encumbrance upon any of the Trust's
assets or upon the Certificates, except as otherwise
contemplated by the Pooling and Servicing Agreement.
4. The endorsement and delivery of each Credit Line
Agreement, 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 Originator in the Credit
Line Agreement 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
Originator and to prevent any other sale, transfer,
assignment, pledge or other encumbrance of the Mortgage Loans
by the Originator 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, the Indemnification
Agreement, this Agreement or the offer, issuance, sale or
delivery of the Certificates or the consummation of any other
transaction contemplated thereby by the Company and the
Originator, 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 or the Originator before any
court, governmental agency or body or other tribunal (i)
asserting the invalidity of the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification
Agreement, this 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 Insurance Agreement, the
Indemnification Agreement or this Agreement or (iii) which
would materially and adversely affect the performance by the
Company or the Originator of obligations under, or the
validity or enforceability of, the Pooling and Servicing
15
<PAGE>
Agreement, the Indemnification Agreement, the Certificates,
the Insurance Agreement, or this Agreement.
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
CLASS A CERTIFICATES," to the extent such statements purport
to summarize certain provisions of the Certificates or of the
Pooling and Servicing Agreement, are fair and accurate in all
material respects.
11. The statements in the Prospectus and Prospectus
Supplement set forth under the captions "ERISA
CONSIDERATIONS," "CERTAIN FEDERAL INCOME TAX CONSEQUENCES,"
and the statements in the Prospectus set forth under the
caption "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND
RELATED MATTERS," to the
16
<PAGE>
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. Such opinion shall also relate to comparable
matters with respect to the Advanta Mortgage Holding Company.
13. 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.
14. Such other matters as the Underwriter 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 and the Originator, the Trustee and public officials. Such opinions may
also assume the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the Company and
the Originator.
E. The Underwriter 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 Underwriter and counsel for the
Underwriter, to the effect that they have performed certain
specified procedures requested by the Underwriter with respect
to the information set forth in the Prospectus and certain
matters relating to the Originator.
F. The 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 Underwriter and counsel
for the Underwriter 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
Underwriter or accompanied by reliance letters
17
<PAGE>
to the Underwriter or shall state that the Underwriter may
rely upon them.
G. The Underwriter 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 as of the Closing Date, and in
the Pooling and Servicing Agreement, the Insurance Agreement,
and in all related agreements, as of the date specified in
such agreements, are true and correct, and the Company, has
complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or
prior to the Closing Date;
2. there are no actions, suits or proceedings
pending, or to the best of such officer's knowledge,
threatened against or affecting the Company which if adversely
determined, individually or in the aggregate, would be
reasonably likely to adversely affect the Company's
obligations under the Pooling and Servicing Agreement, the
Insurance Agreement or this 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 Originator, 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;
18
<PAGE>
5. there has been no amendment or other document
filed affecting the certificate of incorporation or bylaws of
the Company since September 30, 1996, and no such amendment
has been authorized. No event has occurred since September 30,
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 September 30, 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 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 or the Originator, signed or signs the
Registration Statement, the Pooling and Servicing Agreement,
this 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 Insurance 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 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 Underwriter shall have received a favorable
opinion of counsel to the Trustee, dated
19
<PAGE>
the Closing Date and in form and substance satisfactory to the
Underwriter, 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
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
20
<PAGE>
of the instruments and documents referred to therein by the parties thereto
other than the Trustee.
I. The Underwriter 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 prior to the Closing
Date and shall conform in all material respects to the
description thereof in the Prospectus.
K. The Underwriter 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
Underwriter, to the effect that:
1. The Certificate Insurer is a stock insurance
corporation, duly incorporated and validly existing under the
laws of the State of New York. The Certificate 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 Certificate
Insurer of the Policy, the Insurance Agreement are within the
corporate power of the Certificate Insurer and have been
authorized by all necessary corporate action on the part of
the Certificate Insurer; the Policy has been duly executed and
is the valid and binding obligation of the Certificate 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
21
<PAGE>
creditors' rights generally and by general principles of
equity.
3. The Certificate 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
Certificate 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 Certificate Insurer, the lack of
which would adversely affect the validity or enforceability of
the Policy; to the extent required by applicable legal
requirements that would adversely affect validity or
enforceability of the Policy, the form of the Policy has been
filed with, and approved by, all governmental authorities
having jurisdiction over the Certificate Insurer in connection
with the Policy.
5. The 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
Originator, the Trustee, the Certificate 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 Certificate 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
22
<PAGE>
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 the Originator 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 Certificate
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 September 30, 1996, of (A) the Company, the
Originator and any subsidiaries or (B) the Certificate
Insurer, that is in the Underwriter's judgment material and
adverse and that makes it in the Underwriter's judgment
impracticable to market the Certificates on the terms and in
the manner contemplated in the Prospectus.
O. The Underwriter shall have received from the
Certificate 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 Certificate
Insurer which, if adversely determined, individually or in the
aggregate, would adversely affect the Certificate Insurer's
performance under the Policy, the Indemnification Agreement or
the Insurance Agreement;
2. each person who as an officer or representative
of the Certificate Insurer, signed or signs the Policy, the
Insurance Agreement, the
23
<PAGE>
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 Certificate 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 September 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 direction of which has not been
indicated, in the rating accorded the claims paying ability of
the Certificate 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 Certificate
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 Coopers and Lybrand, an independent
certificated public accountant, which are incorporated by
reference in the Prospectus, fairly present in all material
respects the financial condition of the Certificate 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
Certificate Insurer as of September 30, 1996 and the related
statement of income and retained earnings for the three-month
period then ended, copies of which are included in
24
<PAGE>
the Prospectus, fairly present in all material respects the
financial condition of the Certificate 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
September 30, 1996, no material adverse change has occurred in
the financial position of the Certificate Insurer other than
as set forth in the Prospectus.
The officer of the Certificate Insurer certifying to items 5-7
shall be an officer in charge of a principal financial function.
The Certificate 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 Underwriter shall have received from Dewey
Ballantine, special counsel to the Company and the Originator,
a survey in form and substance satisfactory to the
Underwriter, 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 Originator shall have complied
with all such requirements.
Q. The Underwriter 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 Underwriter shall reasonably
require.
R. The Underwriter and counsel for the Underwriter
shall have received copies of any opinions of counsel to the
Company, the Originator or the Certificate 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 Underwriter or
accompanied by reliance letters to the Underwriter or shall
state the Underwriter may rely thereon.
25
<PAGE>
S. The Underwriter shall have received such further
information, certificates and documents as the Underwriter 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
Certificate Insurer, pursuant to which AMHC agrees to become
jointly and severally liable with the Company, the Originator
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 Underwriter and the Certificate Insurer substantially
in the form of Exhibit A hereto.
V. Prior to the Closing Date, counsel for the
Underwriter 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
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 Originator in connection with the issuance and sale of
the Certificates as herein contemplated shall be satisfactory
in form and substance to the Underwriter and counsel for the
Underwriter.
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
26
<PAGE>
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 Underwriter,
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 Underwriter by notice to the Company and the Originator 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 Underwriter.
SECTION VII. Payment of Expenses. The Company and the
Originator agree to pay: (a) the costs incident to the authorization, issuance,
sale and delivery of the Certificates and any taxes payable in connection
therewith; (b) the costs incident to the preparation, printing and filing under
the Securities Act of the Registration Statement and any amendments and exhibits
thereto; (c) the costs of distributing the Registration Statement as originally
filed and each amendment thereto and any post-effective amendments thereof
(including, in each case, exhibits), the Preliminary Prospectus, the Prospectus
and any amendment or supplement to the Prospectus or any document incorporated
by reference therein, all as provided in this Agreement; (d) the costs of
reproducing and distributing this Agreement; (e) the fees and expenses of
qualifying the 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 Underwriter); (f) any fees charged
by securities rating services for rating the Certificates; and (g) all other
costs and expenses incident to the performance of the obligations of the Company
and the Originator; provided that, except as provided in this Section VII, the
Underwriter shall pay its own costs and expenses, including the costs and
expenses of Dewey Ballantine, any transfer taxes on the Certificates which they
may sell and the expenses of advertising any offering of the Certificates made
by the Underwriter.
27
<PAGE>
If this Agreement is terminated by the Underwriter, in
accordance with the provisions of Section VI or Section X, the Company and the
Originator shall reimburse the Underwriter for its 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
and the Originator agree to indemnify and hold harmless the Underwriter and each
person, if any, who controls the 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 Certificates), to which the 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 the Underwriter and each such controlling person promptly upon
demand for any legal or other expenses reasonably incurred by the Underwriter or
such controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that neither the Company nor the
Originator shall 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 by the Underwriter specifically for
inclusion therein; and provided, further, that as to any Preliminary Prospectus
this indemnity shall not inure to the benefit of the Underwriter or any
controlling person on account of any loss, claim, damage, liability or action
arising from the sale of the Certificates to any person by the Underwriter if
the 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
28
<PAGE>
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
or the Originator 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 the Underwriter
shall not 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 the 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 or the Originator may otherwise have
to the Underwriter or any controlling person of the Underwriter.
B. The Underwriter agrees to indemnify and hold harmless the
Company, the Originator, each of their respective directors, each of their
respective officers who signed the Registration Statement, and each person, if
any, who controls the Company or the Originator 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 the Originator 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, 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 the Underwriter specifically for inclusion therein,
and shall reimburse the Company, the Originator and any such director, officer
or controlling person for any legal or other expenses reasonably incurred by the
Company or the Originator 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 the
Underwriter may otherwise have to the Company, the Originator or any such
director, officer or controlling person.
29
<PAGE>
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 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
30
<PAGE>
attorneys (in addition to local counsel) at any time for all such indemnified
parties, which firm shall be designated in writing by the Underwriter, if the
indemnified parties under this Section VIII consist of the Underwriter or any of
its controlling persons, or by the Company or the Originator, as the case may
be, if the indemnified parties under this Section VIII consist of the Company or
the Originator, as the case may be, 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. The Underwriter agrees to deliver to the Company
no later than the date on which the Prospectus Supplement is
required to be filed pursuant to Rule 424 with a copy of its
Derived Information (defined below) for filing with the
Commission on Form 8-K.
E. The 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, the
Originator, each of the Company's and the Originator's
respective officers and directors and each person who controls
the Company or the Originator within the meaning of Section 15
of the Securities Act against any and all losses, claims,
damages or liabilities to which they may become subject under
the Securities Act or otherwise, insofar as such losses,
claims, damages
31
<PAGE>
or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of a material fact
contained in the Derived Information provided by the
Underwriter, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading, and agrees to reimburse each such indemnified
party for any legal or other expenses reasonably incurred by
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
the Underwriter under this Section VIII(E) shall be in
addition to any liability which the 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
(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 Underwriter by the Company and the Originator
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,
32
<PAGE>
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 and the
Originator on the one hand and the Underwriter on the other
from the offering of the 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 and the Originator on the one hand and the
Underwriter on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other
relevant equitable considerations.
The relative benefits of the Underwriter and the Company and
the Originator shall be deemed to be in such proportion so that the Underwriter
is 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.
33
<PAGE>
The relative fault of the Underwriter and the Company and the
Originator 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 and the Originator
or by the Underwriter, 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, the Originator and the Underwriter 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 the Underwriter be responsible for any amount
in excess of the underwriting discount applicable to the Certificates purchased
by the 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 Underwriter confirms that the information set
forth (i) in the Prospectus Supplement relating to market
making and (ii) in the third 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 and the
Originator by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement and the Prospectus.
SECTION IX. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or contained in certificates of officers of the Company or the
Originator submitted pursuant hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Underwriter or controlling persons thereof, or by or on behalf of the Company or
the Originator and shall survive delivery of any Certificates to the
Underwriter.
34
<PAGE>
SECTION X. Termination of Agreement. The Underwriter may
terminate this Agreement immediately upon notice to the Company and the
Originator, 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 Underwriter, shall be delivered or sent
by mail, telex or facsimile transmission to Lehman Brothers, 3
World Financial Center, New York, New York, 10285-1100,
Attention: Syndicate Registration Department (Fax:
212-528-8822);
B. if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to Advanta Mortgage
Conduit Services, Inc. 16875 West Bernardo Drive, San Diego,
California 92127 Attention: General Counsel (Fax:
619-674-3592).
C. if to the Originator, shall be delivered or sent
by mail to Advanta National Bank USA Brandywine Corporate
Center, 650 Naamans Road, Claymont, Delaware 19703 (Telephone:
302-791-4400).
SECTION XII. Persons Entitled to the Benefit of this
Agreement. This Agreement shall inure to the benefit of and be binding upon the
Underwriter, the Company, the Originator 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 Underwriter within the
meaning of Section 15 of the Securities Act, and for the benefit of directors of
the Company or of the Originator, officers of the Company who have signed the
Registration Statement and any person controlling the Company or the Originator
within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section XII, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
SECTION XIII. Survival. The respective indemnities,
representations, warranties and agreements of the
35
<PAGE>
Company, the Originator and the Underwriter 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 XIV. 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 XV. 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 XVI. Counterparts. This Agreement may be executed in
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
SECTION XVII. 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.
36
<PAGE>
If the foregoing correctly sets forth the agreement between
the Company and the Underwriter, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By:
------------------------
Name: Mark T. Dunsheath
Title: Vice President
CONFIRMED AND ACCEPTED, as of the date first above written:
LEHMAN BROTHERS INC.
By:
------------------------
Name:
Title:
[Underwriting Agreement]
<PAGE>
CONFIRMED AND ACCEPTED, as of
the date first above written:
ADVANTA NATIONAL BANK USA
By:
------------------------
Name: Mark T. Dunsheath
Title: Vice President
[Underwriting Agreement]
38
<PAGE>
================================================================================
SCHEDULE A
- --------------------------------------------------------------------------------
Purchase Price
Initial Principal Amount to Underwriter
of Certificates Purchased disregarding
Class by the Underwriter accrued interest
- --------------------------------------------------------------------------------
Class A $50,000,000_ %
================================================================================
39
<PAGE>
EXHIBIT A
As of _______, 1996
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Underwriting Agreement dated November 15, 1996
(the "Underwriting Agreement") between Advanta
Mortgage Conduit Services, Inc. (the "Sponsor"),
Advanta National Bank USA (the "Originator") and
Lehman Brothers Inc. (the "Underwriter"); Indem-
nification Agreement dated November 22, 1996
(the "Indemnification Agreement") among the Ori-
ginator, the Underwriter and the MBIA Insurance
Corporation (the "Certificate Insurer") Insur-
ance Agreement dated as of November 22, 1996
(the "Insurance Agreement") among the Certifi-
cate Insurer, the Sponsor, the Trustee and the
Underwriter
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, the Indemnification
Agreement and the Insurance Agreement (together, the "Designated Agreements"),
the Sponsor and the Originator have 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 the Sponsor and the Originator 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 the
Sponsor and the Originator under the Designated Agreements (including the
payment of money damages for a breach of any of the Sponsor's and the
Originator's obligations under the Designated Agreements, whether financial or
otherwise) but shall not include any obligations not relating to the payment of
money.
<PAGE>
As a condition of their respective executions of the
Designated Agreements, the Underwriter and the Certificate Insurer have required
the undersigned, Advanta Mortgage Holding Company ("AMHC"), the parent
corporation of the Sponsor and the Originator, to acknowledge its
joint-and-several liability with the Sponsor and the Originator 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
the Sponsor and the Originator 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
the Sponsor to the Certificate Insurer for the
payment of the Joint and Several Obligations and
this Insurance Agreement.
(iii) AMHC hereby agrees to be absolutely and
unconditionally jointly and severally liable with
the Originator to the Certificate Insurer for the
payment of the Joint and Several Obligations under
the Indemnification Agreement.
(iv) 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 the Sponsor 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:
MBIA INSURANCE CORPORATION
By:
--------------------------------
Authorized Signatory
LEHMAN BROTHERS
By:
--------------------------------
Authorized Signatory
3
<PAGE>
EXECUTION COPY
POOLING AND SERVICING AGREEMENT
Relating to
ADVANTA REVOLVING HOME EQUITY LOAN TRUST
1996-A
Among
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
ADVANTA NATIONAL BANK USA,
as Originator,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
Dated as of November 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
Accepted Servicing Practices....................... 2
Accelerated Principal Payments..................... 2
Account............................................ 2
Addition Notice.................................... 2
Additional Balance................................. 2
Additional Mortgage Loans.......................... 2
Agreement.......................................... 2
Alternative Principal Payment...................... 3
AMHC............................................... 3
Amortization Period................................ 3
Amortized Overcollateralization Amount
Requirement.................................... 3
Appraised Value.................................... 3
Assignment of Mortgage............................. 3
Authorized Officer................................. 3
Authorized Newspapers.............................. 3
Available Funds.................................... 3
Available Funds Shortfall.......................... 3
Available Subsequent Mortgage Loans................ 3
Billing Cycle...................................... 4
Business Day....................................... 4
Capitalized Interest Account....................... 4
Capitalized Interest Account Deposit............... 4
Capitalized Interest Amount........................ 4
Capitalized Interest Requirement................... 4
Capitalized Interest Revolving Period
Amount......................................... 4
Certificate........................................ 4
Certificate Account................................ 4
Certificate Insurance Policy....................... 5
Certificate Insurer................................ 5
Civil Relief Act................................... 5
Class A Certificate................................ 5
Class A Principal Balance.......................... 5
Class A Formula Rate............................... 5
Class A Interest Distribution Amount............... 5
Class A Interest Rate.............................. 5
Closing Day........................................ 5
Code............................................... 5
Combined Loan-to-Value Ratio....................... 5
Credit Limit....................................... 6
i
<PAGE>
Page
----
Credit Limit Utilization Rate...................... 6
Credit Line Agreement.............................. 6
Cut-off Date....................................... 6
Cut-Off Date Pool Balance.......................... 6
Cut-Off Date Principal Balance..................... 6
Date-of-Payment Loans.............................. 6
Debt Service Reduction............................. 6
Defective Mortgage Loan............................ 6
Deficient Valuation................................ 7
Delinquent......................................... 7
Delivery Order..................................... 7
Depository......................................... 7
Designated Depository Institution.................. 7
Determination Date................................. 8
Direct Participant" or "DTC Participant............ 8
Document Delivery Requirements..................... 8
Draw............................................... 8
Draw Period........................................ 8
Eligible Investments............................... 8
Event of Default................................... 8
FDIC............................................... 8
FHLMC.............................................. 9
Final Scheduled Payment Date....................... 9
First Mortgage Loan................................ 9
Fixed Allocation Percentage........................ 9
Floating Allocation Percentage..................... 9
Foreclosure Profit................................. 9
FNMA............................................... 9
Highest Lawful Rate................................ 9
Increased Senior Lien Limitation................... 9
Indemnification Agreement.......................... 9
Indirect Participant............................... 9
Initial Mortgage Loans............................. 10
Initial Premium.................................... 10
Initial Specified Overcollateralization
Amount......................................... 10
Insurance Agreement................................ 10
Insurance Policy................................... 10
Insurance Proceeds................................. 10
Insured Payment.................................... 10
Interest Accrual Period............................ 10
Interest Determination Date........................ 10
Interest Remittance Amount......................... 11
Invested Amount.................................... 11
Late Payment Rate.................................. 11
LIBOR.............................................. 11
LIBOR Business Day................................. 11
Lifetime Rate Cap.................................. 11
Liquidated Mortgage Loan........................... 11
Liquidation Expenses............................... 11
Liquidation Proceeds............................... 12
ii
<PAGE>
Page
----
Liquidation Report................................. 12
Loan Purchase Price................................ 12
Loan Rate.......................................... 12
Loan Rate Cap...................................... 12
London Business Day................................ 12
Managed Amortization Period........................ 12
Master Servicer.................................... 13
Master Servicer Affiliate.......................... 13
Master Servicer's Trust Receipt.................... 13
Maximum Principal Payment.......................... 13
Maximum Step-Down Amount........................... 13
Minimum Monthly Payment............................ 13
Minimum Originator's Interest...................... 13
Monthly Remittance Amount.......................... 13
Moody's............................................ 13
Mortgage........................................... 13
Mortgage Files..................................... 13
Mortgage Loan Schedule............................. 13
Mortgage Loans..................................... 14
Mortgaged Property................................. 14
Mortgagor.......................................... 14
Net Funds Cap Rate................................. 14
Net Funds Cap Carry-Forward Amount................. 14
Net Liquidation Proceeds........................... 14
Net Monthly Excess Cashflows....................... 15
Net Principal Collections.......................... 15
Nonrecoverable Advance............................. 15
Non-Subordinated Originator's Interest............. 15
O/C Mortgage Loans................................. 15
Officer's Certificate.............................. 15
Operative Documents................................ 15
Original Class A Principal Balance................. 15
Original Cut-Off Date Pool Balance................. 15
Original Pre-Funded Amount......................... 15
Original Principal Amount.......................... 15
Original Principal Balance......................... 16
Originator......................................... 16
Originator Certificate............................. 16
Originator's Current Amount........................ 16
Originator's Interest.............................. 16
Outstanding........................................ 16
Overcollateralization Amount....................... 17
Overcollateralization Release Amount............... 17
Overcollateralization Deficiency Amount............ 17
Overcollateralization Deficit...................... 17
Owner.............................................. 17
Payment Date....................................... 17
Percentage Interest................................ 17
Person............................................. 18
Pool Balance....................................... 18
Pool Certification................................. 18
iii
<PAGE>
Page
----
Pool Factor........................................ 18
Preference Amount.................................. 18
Pre-Funded Amount.................................. 18
Pre-Funded Mortgage Loans.......................... 18
Pre-Funding Account................................ 18
Pre-Funding Earnings............................... 18
Pre-Funding Period................................. 18
Pre-Funding Transfer Date.......................... 18
Premium Amount..................................... 19
Premium Percentage................................. 19
Prepaid Installment................................ 19
Prepayment......................................... 19
Prepayment Interest Shortfall...................... 19
Preservation Expenses.............................. 19
Prime.............................................. 19
Principal and Interest Account..................... 19
Principal Balance.................................. 20
Principal Collections.............................. 20
Principal Remittance Amount........................ 20
Projected Net Monthly Excess Cashflow.............. 20
Prospectus......................................... 20
Qualified Replacement Mortgage..................... 21
Rapid Amortization Commencement Date............... 21
Rapid Amortization Event........................... 21
Rapid Amortization Period.......................... 21
Realized Loss...................................... 22
Record Date........................................ 22
Reference Banks.................................... 22
Register........................................... 22
Registrar.......................................... 22
Registration Statement............................. 23
Reimbursement Amount............................... 23
Relief Act Shortfall............................... 23
REO Property....................................... 23
Remittance Date.................................... 23
Remittance Period.................................. 23
Replacement Cut-Off Date........................... 24
Representation Letter.............................. 24
Revolving Account.................................. 24
Revolving Period................................... 24
S&P ............................................... 24
Schedule of Mortgage Loans......................... 24
Scheduled Principal Distribution Amount............ 24
Second Mortgage Loan............................... 24
Securities Act..................................... 24
Senior Lien........................................ 24
Servicing Advance.................................. 25
Servicing Fee...................................... 25
Servicing Fee Rate................................. 25
Specified Overcollateralization Amount............. 25
Sponsor............................................ 25
iv
<PAGE>
Page
----
Step-Down Amount................................... 25
Subsequent Cut-Off Date............................ 25
Subsequent Mortgage Loans.......................... 25
Subsequent Transfer Agreement...................... 25
Subsequent Transfer Date........................... 25
Substitution Amount................................ 26
Sub-Servicer....................................... 26
Sub-Servicing Agreement............................ 26
Telerate Screen Page 3750.......................... 26
Termination Fees................................... 26
Transaction Documents.............................. 26
Transfer Date...................................... 26
Transfer Notice Date............................... 26
Trust.............................................. 26
Trust Collateral Value............................. 26
Trust Fund......................................... 27
Trustee............................................ 27
Trustee's Fee...................................... 27
Underwriter........................................ 27
1.2. Use of Words and Phrases..................................... 27
1.3. Captions; Table of Contents.................................. 27
1.4. Opinions ................................................... 28
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST............... 28
2.1. Establishment of the Trust................................... 28
2.2. Office....................................................... 28
2.3. Purposes and Powers.......................................... 28
2.4. Appointment of the Trustee; Declaration of
Trust.............................................. 29
2.5. Expenses of the Trust........................................ 29
2.6. Ownership of the Trust....................................... 29
2.7. Situs of the Trust........................................... 29
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR, THE
ORIGINATOR AND THE MASTER SERVICER................................. 30
3.1. Representations and Warranties of the
Sponsor and the Originator......................... 30
3.2. Representations and Warranties of the Master
Servicer........................................... 33
3.3. Representations and Warranties of the
Originator with Respect to the Mortgage
Loans; Retransfer of Certain Mortgage
Loans.............................................. 36
3.4. Covenants of Originator to Take Certain
Actions with Respect to the Mortgage
Loans In Certain Situations........................ 44
3.5. Conveyance of the Initial Mortgage Loans..................... 46
v
<PAGE>
Page
----
3.6. Acceptance by Trustee; Certain Substitutions
of Mortgage Loans; Certification by
Trustee............................................ 50
3.7. Cooperation Procedures....................................... 54
3.8. Conveyance of the Subsequent Mortgage Loans.................. 54
3.9. Retransfers of Mortgage Loans at Election of
Originator......................................... 58
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES......................... 59
4.1. Issuance of Certificates..................................... 59
4.2. Sale of Certificates......................................... 59
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS.................... 60
5.1. Terms........................................................ 60
5.2. Forms........................................................ 60
5.3. Execution, Authentication and Delivery....................... 61
5.4. Registration and Transfer of Certificates.................... 61
5.5. Mutilated, Destroyed, Lost or Stolen
Certificates....................................... 64
5.6. Persons Deemed Owners........................................ 65
5.7. Cancellation................................................. 65
5.8. Limitation on Transfer of Ownership Rights................... 65
5.9. Assignment of Rights......................................... 67
5.10. Liabilities................................................. 67
ARTICLE VI
COVENANTS................................................. 68
6.1. Distributions................................................ 68
6.2. Money for Distributions to be Held in Trust;
Withholding........................................ 68
6.3. Protection of Trust Fund..................................... 69
6.4. Performance of Obligations................................... 70
6.5. Negative Covenants........................................... 70
6.6. No Other Powers.............................................. 71
6.7. Limitation of Suits.......................................... 71
6.8. Unconditional Rights of Owners to Receive
Distributions...................................... 72
6.9. Rights and Remedies Cumulative............................... 72
6.10. Delay or Omission Not Waiver................................ 73
6.11. Control by Owners........................................... 73
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES...................... 74
7.1. Collection of Money.......................................... 74
7.2. Establishment of Accounts.................................... 74
vi
<PAGE>
Page
----
7.3. The Certificate Insurance Policy............................. 74
7.4. Pre-Funding Account and Capitalized Interest
Account............................................ 75
7.5. Flow of Funds................................................ 76
7.6. Investment of Accounts....................................... 79
7.7. Eligible Investments......................................... 80
7.8. Reports by Trustee........................................... 81
7.9. Additional Reports by Trustee................................ 84
ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE
LOANS.............................................................. 85
8.1. Master Servicer and Sub-Servicers............................ 85
8.2. Collection of Certain Mortgage Loan
Payments........................................... 90
8.3. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers......................... 90
8.4. Successor Sub-Servicers...................................... 90
8.5. Liability of Master Servicer................................. 91
8.6. No Contractual Relationship Between Sub-
Servicer and Trustee or the Owners................. 91
8.7. Assumption or Termination of Sub-Servicing
Agreement by Trustee............................... 91
8.8. Principal and Interest Account............................... 92
8.9. Servicing Advances........................................... 94
8.10. Purchase of Mortgage Loans.................................. 94
8.11. Maintenance of Insurance.................................... 94
8.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements............................ 96
8.13. Realization Upon Defaulted Mortgage Loans................... 97
8.14. Trustee to Cooperate; Release of Mortgage
Files.............................................. 98
8.15. Servicing Compensation......................................100
8.16. Annual Statement as to Compliance...........................100
8.17. Annual Independent Certified Public
Accountants' Reports...............................101
8.18. Access to Certain Documentation and
Information Regarding the Mortgage Loans...........101
8.19. Assignment of Agreement.....................................101
8.20. Removal of Master Servicer; Resignation of
Master Servicer....................................102
8.21. Inspections by Certificate Insurer; Errors
and Omissions Insurance............................106
8.22. Merger, Conversion, Consolidation or
Succession to Business of Master
Servicer...........................................107
8.23. Notices of Material Events..................................107
ARTICLE IX
vii
<PAGE>
Page
----
TERMINATION OF TRUST......................................108
9.1. Termination of Trust.........................................108
9.2. Termination Upon Option of Master Servicer...................108
9.3. Tax Treatment................................................109
9.4. Rapid Amortization Events....................................109
9.5. Additional Rights Upon the Occurrence of
Certain Events.....................................111
9.6. Disposition of Proceeds......................................113
9.7. Netting of Amounts...........................................113
ARTICLE X
THE TRUSTEE...............................................113
10.1. Certain Duties and Responsibilities.........................113
10.2. Removal of Trustee for Cause................................115
10.3. Certain Rights of the Trustee...............................116
10.4. Not Responsible for Recitals or Issuance of
Certificates.......................................118
10.5. May Hold Certificates.......................................118
10.6. Money Held in Trust.........................................118
10.7. No Lien for Fees............................................118
10.8. Corporate Trustee Required; Eligibility.....................118
10.9. Resignation and Removal; Appointment of
Successor..........................................119
10.10. Acceptance of Appointment by Successor
Trustee............................................120
10.11. Merger, Conversion, Consolidation or
Succession to Business of the Trustee..............121
10.12. Reporting; Withholding.....................................121
10.13. Liability of the Trustee...................................122
10.14. Appointment of Co-Trustee or Separate
Trustee............................................122
ARTICLE XI
MISCELLANEOUS.............................................124
11.1. Compliance Certificates and Opinions........................124
11.2. Form of Documents Delivered to the Trustee..................125
11.3. Acts of Owners..............................................126
11.4. Notices, etc. to Trustee....................................126
11.5. Notices and Reports to Owners; Waiver of
Notices............................................127
11.6. Rules by Trustee and Originator.............................127
11.7. Successors and Assigns......................................127
11.8. Severability................................................127
11.9. Benefits of Agreement.......................................128
11.10. Legal Holidays.............................................128
11.11. Governing Law..............................................128
11.12. Counterparts...............................................128
11.13. Usury ...................................................128
11.14. Amendment..................................................129
viii
<PAGE>
Page
----
11.15. Acceptance of Obligations..................................130
11.16. The Certificate Insurer....................................130
11.17. Maintenance of Records.....................................130
11.18. Notices ...................................................130
SCHEDULE I -- Schedules of Mortgage Loans
EXHIBIT A-1 -- Form of Class A Certificate
EXHIBIT A-2 -- Form of Originator Certificate
EXHIBIT B -- Contents of Advanta Mortgage Files
EXHIBIT C -- Form of Credit Line Agreement
EXHIBIT D -- Form of Certificate Re: Mortgage Loans
Prepaid in full After the Initial Cut-Off
Date
EXHIBIT E -- Form of Trustee's Receipt
EXHIBIT F -- Form of Pool Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Power of Attorney
EXHIBIT I -- Form of Notice for Certificate Insurance
Policy
EXHIBIT J -- Form of Monthly Report
EXHIBIT K -- Form of Master Servicer's Trust Receipt
EXHIBIT L -- Subsequent Transfer Agreement
EXHIBIT M -- Form of Liquidation Report
EXHIBIT N -- Form of Addition Notice
EXHIBIT O -- Assignment
ix
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to ADVANTA
REVOLVING HOME EQUITY LOAN TRUST 1996-A, dated as of November 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"), ADVANTA NATIONAL BANK USA, in its capacity as Originator (the
"Originator"), 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, which
provides 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, MBIA Insurance Corporation, Inc. (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, the
Originator and the Trustee hereby agree as follows:
x
<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:
"Accepted Servicing Practices" shall mean the Master
Servicer's normal servicing practices in servicing and administering mortgage
loans for its own account, which in general will conform to the mortgage
servicing practices of prudent mortgage lending institutions which service for
their own account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located and will
give due consideration to the Certificate Insurer's and the Certificateholders'
reliance on the Master Servicer.
"Accelerated Principal Payments": With respect to any
Payment Date, a payment of Excess Cashflow received as a payment of principal by
the Owners of the Class A Certificates, for the purpose of increasing the
Overcollateralization Amount to the Specified Overcollateralization Amount
applicable to such Payment Date; during the Revolving Period such Accelerated
Principal Payments shall only occur if the amount then on deposit in the
Revolving Account is in excess of $3,000,000.
"Account": Any account established in accordance with
Section 7.2 or 8.8 hereof.
"Addition Notice": With respect to the transfer of
Subsequent Mortgage Loans to the Trust pursuant to Section 3.8(b) of this
Agreement, notice, which shall be given not later than five Business Days prior
to the related Subsequent Transfer Date, of the Originator's designation of
Subsequent Mortgage Loans to be sold to the Trust and the aggregate Principal
Balance of such Subsequent Mortgage Loans.
"Additional Balance": As to any Mortgage Loan and day,
the aggregate amount of all Draws conveyed to the Trust pursuant to Section 3.5.
"Additional Mortgage Loans": Subsequent Mortgage Loans
assigned to the Trust in consideration of amounts released to the Originator
pursuant to Section 7.5(b)(vii) hereof.
1
<PAGE>
"Agreement": This Pooling and Servicing Agreement, as it
may be amended from time to time, and including the Exhibits hereto.
"Alternative Principal Payment": As to any Payment Date,
the amount (but not less than zero) equal to Net Principal Collections for such
Payment Date.
"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.
"Amortization Period": The Rapid Amortization Period,
together with the Managed Amortization Period.
"Amortized Overcollateralization Amount Requirement": As
defined in the Insurance Agreement.
"Appraised Value": As to any Mortgaged Property, the
value established by a drive by inspection or a full appraisal of such Mortgaged
Property in order to establish compliance with the underwriting criteria then in
effect in connection with the application for the Mortgage Loan secured by such
Mortgaged Property.
"Assignment of Mortgage": With respect to each Mortgage
Loan, an assignment of the Mortgage, notice of transfer or equivalent
instrument, in recordable form, sufficient under the laws of the jurisdiction
wherein the related Mortgaged Property is located to reflect the recordation of
the sale of the Mortgage to the Trustee for the benefit of the Owners.
"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 Originator, the Master Servicer and the Sponsor, initially
including those individuals whose names appear on the lists of Authorized
Officers delivered on the Closing Day.
"Authorized Newspapers": Any of the following, The Wall
Street Journal, the New York Times, the Washington Post, the Los Angeles Times
or such other newspaper determined by the Trustee in its judgment with respect
to Section 9.5.
"Available Funds": As defined in Section 7.3(a) hereof.
"Available Funds Shortfall": As defined in Section 7.3(b)
hereof.
2
<PAGE>
"Available Subsequent Mortgage Loans": With respect to
any Payment Date, all Mortgage Loans delivered to the Trustee on all Subsequent
Transfer Dates occurring during the calendar month in which such Payment Date
occurs which meet all requirements applicable to Subsequent Mortgage Loans.
"Billing Cycle": With respect to any Mortgage Loan and
Remittance Period, the billing period specified in the related Credit Line
Agreement and with respect to which amounts billed are received during such
Remittance Period.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York 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.
"Capitalized Interest Account": The Capitalized Interest
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Capitalized Interest Account Deposit": $308,475.73.
"Capitalized Interest Amount": With respect to any
Determination Date, the amount on deposit in the Capitalized Interest Account.
"Capitalized Interest Requirement": As to any Payment
Date occurring during the Pre-Funding Period and the Revolving Period, the
difference, if any, between (x) the interest due on the Class A Certificates
plus the Premium Amount on such Payment Date and (y) the sum of (i) one month's
interest on the aggregate Principal Balances of all Mortgage Loans as of the
close of business on the last day of the immediately preceding Remittance
Period, calculated at the Class A Interest Rate plus the Premium Amount as of
such Payment Date and (ii) any Pre-Funding Earnings to be transferred to the
Certificate Account on such Payment Date pursuant to Section 7.4(d) hereof.
"Capitalized Interest Revolving Period Amount": With
respect to any Distribution Date which occurs during the Revolving Period but
after the end of the Pre-Funding Period, the product of (x) one-twelfth of the
Class A Interest Rate applicable to the following Distribution Date, (y)
$3,000,000 and (z) the maximum number of months remaining in the Revolving
Period.
"Certificate": A Class A Certificate.
3
<PAGE>
"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 November 22, 1996, issued by the Certificate Insurer to
the Trustee for the benefit of the Owners of the Certificates.
"Certificate Insurer": MBIA Insurance Corporation, Inc.
or any successor thereto, as issuer of the
Insurance Policy.
"Civil Relief Act": The Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
"Class A Certificate": Any Certificate designated as a
"Class A Certificate" on the face thereof, in the form of
Exhibit A-1 hereto. The Class A Certificates shall be issued with an initial
aggregate Class A Principal Balance equal to the Original Class A Principal
Balance therefor.
"Class A Principal Balance": As of any time of
determination, the Original Class A Principal Balance of the Class A
Certificates less any amounts actually distributed theretofore as principal
thereon to the Owners of the Class A Certificates on all prior Payment Dates.
"Class A Formula Rate": For any Interest Accrual Period,
the sum of (i) LIBOR and (ii) 0.23%.
"Class A Interest Distribution Amount": With respect to
any Payment Date, the product of (x) one-twelfth of the Class A
Pass-Through Rate applicable to such Payment Date and (y) the Class A Principal
Balance immediately prior to such Payment Date (based on a 360-day year and the
actual number of days in the prior calendar month).
"Class A Interest Rate": As to any Payment Date, the
lesser of (i) the Class A Formula Rate and (ii) the Net Funds Cap
Rate.
"Closing Day": November 22, 1996.
"Code": The Internal Revenue Code of 1986, as amended and
any successor statute.
"Combined Loan-to-Value Ratio": With respect to any
Mortgage Loan as of any date, the percentage equivalent of a fraction, the
numerator of which is the sum of (i) the Credit Limit and (ii) the outstanding
principal balance as of the date of execution of the related Credit Line
Agreement (or
4
<PAGE>
as of any subsequent date, if any, as of which such outstanding principal
balance may be determined in connection with an increase in the Credit Limit for
such Mortgage Loan) of any mortgage loan or mortgage loans that are senior in
priority to the Mortgage Loan and which is secured by the same Mortgaged
Property and the denominator of which is the lesser of (i) the Appraised Value
of the related Mortgaged Property as set forth in the Mortgage File on such date
of execution or on such subsequent date, if any, and (ii) in the case of a
Mortgaged Property purchased within one year of such date of execution, the
purchase price thereof.
"Credit Limit": As to any Mortgage Loan, the maximum
principal balance permitted under the terms of the related Credit Line
Agreement.
"Credit Limit Utilization Rate": As to any Mortgage Loan,
the percentage equivalent of a fraction the numerator of which is
the Principal Balance for such Mortgage Loan and the denominator of which is the
related Credit Limit.
"Credit Line Agreement": With respect to any Mortgage
Loan, the related home equity line of credit agreement and promissory
note executed by the related Mortgagor and any amendment or modification
thereof.
"Cut-off Date": With respect to each Initial Mortgage
Loan, the Initial Cut-Off Date. With respect to any Subsequent Mortgage
Loan, the Subsequent Cut-Off Date related to such Subsequent Mortgage Loan. With
respect to each Qualified Replacement Mortgage, the Replacement Cut-off Date
related to such Qualified Replacement Mortgage.
"Cut-Off Date Pool Balance": The aggregate Principal
Balances of all the Mortgage Loans as of the related Cut-Off Date; as
of the Initial Cut-Off Date, $38,501,016.94.
"Cut-Off Date Principal Balance": With respect to any
Mortgage Loan, the unpaid principal balance thereof as
of the related Cut-Off Date.
"Date-of-Payment Loans": Any Mortgage Loan as to which,
pursuant to the Credit Line Agreement relating thereto, interest is
computed and charged to the Mortgagor at the rate on the outstanding principal
balance of such Credit Line Agreement based on the number of days elapsed
between receipt of the Mortgagor's last payment through receipt of the
Mortgagor's most current payment.
"Debt Service Reduction": With respect to any Mortgage
Loan, a reduction by a court of competent jurisdiction of the Minimum
Monthly Payment due on such Mortgage Loan.
5
<PAGE>
"Defective Mortgage Loan": A Mortgage Loan determined not
to satisfy the criteria set forth in this Agreement.
"Deficient Valuation: With respect to any Mortgage Loan,
a valuation of the related Mortgaged Property by a court of
competent jurisdiction in an amount less than the then outstanding Principal
Balance of the Mortgage Loan, which valuation results from a proceeding
initiated under the United States Bankruptcy Code.
"Deficiency Amount": For any Payment Date, any shortfalls
in amounts available in the Certificate Account to pay, in full on
such Payment Date, (i) the Class A Interest Distribution Amount (excluding any
Net Funds Cap Carry-Forward Amounts, any Prepayment Interest Shortfalls and any
Relief Act Shortfalls) and (ii) the Overcollateralization Deficit, plus, on the
Final Scheduled Payment Date, any shortfall in amounts available in the
Certificate Account to pay outstanding Class A Principal Balance.
"Delinquent": A Mortgage Loan is "delinquent" if any
payment due thereon is not made by the close of business on the day such
payment is scheduled to be due. A Mortgage Loan is "30 days delinquent" if such
payment has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such payment was due, or,
if there is no such corresponding day (e.g., as when a 30-day month follows a
31-day month in which a payment was due on the 31st day of such month) then on
the last day of such immediately succeeding month. Similarly for "60 days
delinquent," "90 days delinquent" and so on.
"Delivery Order": The delivery order in the form set
forth as Exhibit G hereto and delivered by the Originator to the Trustee on
the Closing Day pursuant to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover
Square, New York, New York 10004 and any successor Depository hereafter
named.
"Designated Depository Institution": With respect to the
Principal and Interest 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 S&P
and (y) A2 or better by Moody's and in one of the two highest short-term rating
categories, unless otherwise approved in writing by the Certificate Insurer and
each of Moody's and S&P, 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
6
<PAGE>
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 S&P 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, the Principal and Interest
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 trust capacity and not in
its commercial capacity.
"Determination Date": As to each Payment Date, the third
Business Day next preceding such Payment Date or such earlier day as
shall be agreed by the Certificate Insurer and Trustee.
"Direct Participant" or "DTC Participant": Any
broker-dealer, bank or other financial institution for which the Depository
holds the Class A Certificates from time to time as a securities depository.
"Document Delivery Requirements": The
Originator'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 upon
certain conditions as set forth in Section 3.5 hereof.
"Draw": With respect to any Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the related Cut-Off Date in
accordance with the related Credit Line Agreement.
"Draw Period": With respect to any Mortgage Loan, the
period of time specified in the related Credit Line Agreement whereby
a Mortgagor may make a Draw under the related Credit Line Agreement, not to
exceed three years unless extended pursuant to such Credit Line Agreement.
"Eligible Investments": Those investments so designated
pursuant to Section 7.7 hereof.
"Event of Default": Any event described in clauses (a) or
(b) of Section 8.20 hereof.
7
<PAGE>
"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.
"Final Scheduled Payment Date": The Payment Date in
December, 2021 whereby the Owners of the Class A Certificates shall be
entitled to receive a payment of principal in an amount equal to the outstanding
Class A Principal Balance. The Final Scheduled Payment Date is the date which is
one year after the date which is the latest possible maturity date of a Mortgage
Loan which amortizes according to its terms.
"First Mortgage Loan": A Mortgage Loan which constitutes
a first priority mortgage lien with respect to any
Mortgaged Property.
"Fixed Allocation Percentage": 98%.
"Floating Allocation Percentage": The percentage
equivalent of a fraction, the numerator of which shall be the Invested Amount as
of such Payment Date and the denominator of which is the Trust Collateral Value
as of such Payment Date.
"Foreclosure Profit": With respect to a Liquidated
Mortgage Loan, the amount, if any, by which (i) the aggregate of its
Net Liquidation Proceeds exceeds (ii) the related Principal Balance (plus
accrued and unpaid interest thereon at the applicable Loan Rate from the date
interest was last paid through the date of receipt of the final Liquidation
Proceeds) of such Liquidated Mortgage Loan immediately prior to the final
recovery of its Liquidation Proceeds.
"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.
"Highest Lawful Rate": As defined in Section 11.13.
"Increased Senior Lien Limitation": As defined in Section
3.6(c).
"Indemnification Agreement": The Indemnification
Agreement dated as of November 22, 1996 among the Originator, the Certificate
Insurer and the Underwriter.
8
<PAGE>
"Indirect Participant" shall mean any financial
institution for whom any Direct Participant holds an interest
in the Class A Certificates.
"Initial Cut-Off Date": With respect to each Initial
Mortgage Loans, the opening of business on November 1, 1996.
"Initial Mortgage Loans": Mortgage Loans delivered by the
Originator to the Trust on the Closing Day.
"Initial Premium": The initial premium payable by the
Originator on behalf of the Trust to the Certificate Insurer in consideration of
the delivery to the Trustee of the Certificate Insurance Policy.
"Initial Specified Overcollateralization Amount": As
defined in the Insurance Agreement.
"Insurance Agreement": The Insurance Agreement dated as
of November 22, 1996 among the Sponsor, the Originator, the Master
Servicer, the Trustee 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.
"Insurance Proceeds": Proceeds paid by any insurer (other
than the Certificate Insurer) pursuant to any insurance policy
covering a Mortgage Loan, or amounts required to be paid by the Master Servicer
pursuant to the last sentence of the first paragraph of Section 8.11(b), or the
penultimate sentence of Section 8.11(c), net of any component thereof (i)
covering any expenses incurred by or on behalf of the Master Servicer in
connection with obtaining such proceeds, (ii) that is applied to the restoration
or repair of the related Mortgaged Property, (iii) released to the Mortgagor in
accordance with the Master Servicer's normal servicing procedures, or (iv)
required to be paid to any holder of a mortgage senior to such Mortgage Loan.
"Insured Payment": (i) As of any Payment Date, any
Deficiency Amount and (ii) any Preference Amount.
"Interest Accrual Period": With respect to the Class A
Certificates, the period commencing on the prior Payment Date (or on the
Closing Date with respect to the December 26, 1996 Payment Date) and ending on
the day immediately preceding such Payment Date.
"Interest Determination Date": With respect to any
Interest Accrual Period for the Class A Certificates
(other than the initial Interest Accrual Period), the second
9
<PAGE>
London Business Day preceding such first day of such Interest Accrual Period.
"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, except that with respect to Prepaid Installments, interest shall be
remitted in the related Remittance Period.
"Invested Amount": The excess of (x) the Trust Collateral
Value over (y) the Non-Subordinated Originator's Interest.
"Late Payment Rate": For any Payment Date, the rate of
interest, as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 2%. The Late Payment Rate shall be computed on the basis of a year of 365
days calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"LIBOR": With respect to any Interest Accrual Period for
the Class A Certificates, the rate determined by the Trustee on the related
Interest Determination Date appearing on the Telerate Screen Page 3750,
as of 11:00 AM, London Time, on the second LIBOR Business Day prior to the first
day of such Interest Accrual Period. If such rate does not appear on such page
(or such other page as may replace that page on that service, or if such service
is no longer offered, such other service for displaying LIBOR or comparable
rates as may be selected by the Sponsor after consultation with the Trustee),
the rate will be the Reference Bank Rate.
"LIBOR Business Day": Any day other than (i) a Saturday
or a Sunday or (ii) a day on which banking institutions in the State of New York
or in the city of London, England are required or authorized by law to
be closed.
"Lifetime Rate Cap": With respect to each Mortgage Loan
with respect to which the related Credit Line Agreement provides for a lifetime
rate cap, the maximum Loan Rate permitted over the life of such
Mortgage Loan under the terms of the related Credit Line Agreement, as set forth
on Exhibit C hereto.
"Liquidated Mortgage Loan": As defined in Section 8.13(b)
hereof. A Mortgage Loan which is purchased
10
<PAGE>
from the Trust pursuant to Section 3.3, 3.4, 3.6(b) or 8.10 hereof is not a
"Liquidated Mortgage 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
Mortgage Loan, any amounts (including the proceeds of any Insurance Policy but
excluding any amounts drawn on the Certificate Insurance Policy)
recovered by the Master Servicer in connection with such Liquidated Mortgage
Loan, whether through trustee's sale, foreclosure sale or otherwise.
"Liquidation Report": As set forth in Exhibit M.
"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 Principal Balance of such Mortgage
Loan as of the date of purchase, plus one month's interest on the outstanding
Principal Balance thereof as of the beginning of the preceding Remittance Period
computed at the Loan Rate, if any, together with, without duplication, the
aggregate amount of (i) all delinquent interest, all Servicing Advances
theretofore made with respect to such Mortgage Loan and not subsequently
recovered from the related Mortgage Loan and (ii) any Reimbursement Amount
relating to such Mortgage Loan.
"Loan Rate": With respect to any Mortgage Loan and as of
any day, the per annum rate of interest applicable under the related Credit Line
Agreement to the calculation of interest for such day on the Principal Balance
of such Mortgage Loan.
"Loan Rate Cap": With respect to each Mortgage Loan, the
lesser of (i) the Lifetime Rate Cap, if any, or (ii) the applicable state usury
ceiling, if any.
"London Business Day": A day on which banks are open for
dealing in foreign currency, and exchange in London and New York City.
"Managed Amortization Period": The Period commencing on
the Payment Date after which the Revolving Period ends, and ending on the
earlier to occur of (x) the November, 1999 Payment Date and (y) the Payment Date
which immediately precedes the occurrence of a Rapid Amortization
Event.
11
<PAGE>
"Margin": With respect to each Mortgage Loan with an
adjustable rate, the fixed percentage amount set forth in the related Credit
Line Agreement which amount is added to Prime in accordance with the terms of
the related Credit Line Agreement to determine, on each Interest Determination
Date, the Coupon Rate for such Mortgage Loan, subject to any maximum.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Master 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.
"Master Servicer's Trust Receipt": The Master Servicer's
trust receipt in the form set forth as Exhibit K hereto.
"Maximum Principal Payment": With respect to any Payment
Date, the Fixed Allocation Percentage of the Principal Collections relating to
such Payment Date.
"Maximum Step-Down Amount": As of any Payment Date, the
excess of (i) the aggregate, cumulative amount of Overcollateralization Release
Amounts for such current, and all prior, Payment Dates over (ii) the aggregate,
cumulative amount of all Step-Down Amounts for all prior Payment Dates.
"Minimum Monthly Payment": With respect to any Mortgage
Loan and any month, the minimum amount required to be paid by the related
Mortgagor in that month.
"Minimum Originator's Interest": With respect to any
date, an amount equal to 2% of the Trust Collateral Value.
"Monthly Remittance Amount": As of any Remittance Date,
the sum of (i) the Interest Remittance Amount for such Remittance Date and (ii)
the Principal Remittance Amount for such Remittance Date.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other
instrument creating a first or junior lien on an estate in fee simple interest
in real property securing a Credit Line Agreement.
"Mortgage Files": For each Mortgage Loan, the items
listed as (a), (b), (c), (d), (e) and (f) on Exhibit B hereto.
12
<PAGE>
"Mortgage Loan Schedule": A schedule of Mortgage Loans
transferred to the Trust, attached hereto as Schedule II, as it may be further
supplemented in connection with subsequent transfers of Subsequent Mortgage
Loans.
"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 Fund, the
Mortgage Loans originally so held being identified in the Schedule of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan" and
"Second Mortgage Loan". The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Mortgaged Property which is REO Property prior to such Mortgaged 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 Originator, 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
terms "Initial Mortgage Loan," and "Subsequent Mortgage Loan".
"Mortgaged Property": The underlying property securing a
Mortgage Loan.
"Mortgagor": The obligor on a Credit Line Agreement.
"Net Funds Cap Rate": For any Interest Accrual Period,
the fraction, expressed as an annual percentage rate, the numerator of which is
twelve times the interest due on the Mortgage Loans during the prior Remittance
Period, net of the amount of Prepayment Interest Shortfalls, Relief Act
Shortfalls, Servicing Fee, Trustee's Fee and Premium Amount for the related
Remittance Period and the denominator of which is the Trust Collateral Value
immediately prior to the related Payment Date less, commencing on the thirteenth
Payment Date, 0.50%.
"Net Funds Cap Carry-Forward Amount": In the event that,
on any Payment Date, the Net Funds Cap Rate is less than the Class A Formula
Rate (i.e., the Class A Pass-Through Rate equals the Net Funds Cap Rate), the
excess of the amount of interest due based on the Class A Formula Rate, over the
interest due based on the Net Funds Cap Rate, together with interest thereon at
the then-applicable Class A Formula Rate.
13
<PAGE>
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances and accrued and unpaid Servicing Fees through
the date of liquidation relating to such Liquidated Mortgage Loan. In no event
shall Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan be
less than zero.
"Net Monthly Excess Cashflows": With respect to any
Payment Date, the amount of Available Funds remaining after the allocations
described in clauses (i) through (ix) of Section 7.5(b).
"Net Principal Collections": With respect to any Payment
Date, the excess of (x) Principal Collections with respect to the related
Remittance Period over (y) the aggregate principal amount of all Additional
Balances arising during such related Remittance Period; provided that in no
event will Net Principal Collections be less than zero with respect to any
Payment Date.
"Nonrecoverable Advance" shall mean, with respect to any
Mortgage Loan, any Servicing Advance previously made and not reimbursed pursuant
to Section 8.9 which, in the good faith business judgment of the Master
Servicer, as evidenced by an Officer's Certificate delivered to the Certificate
Insurer and the Trustee, would not be ultimately recoverable.
"Non-Subordinated Originator's Interest": As of any date
of determination, that portion of the Originator's Interest which is not
represented by the Specified Overcollateralization Amount as of such date.
"O/C Mortgage Loans": Subsequent Mortgage Loans assigned
to the Trust in consideration of and (x) a corresponding increase in the
Originator's Interest and (y) amounts released to the Originator pursuant to
Section 7.5(b)(x) hereof .
"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
Subsequent Transfer Agreements, the Certificate Insurance Policy, the
Certificates, the Indemnification Agreement and the Insurance Agreement.
"Original Class A Principal Balance": $50,000,000.
"Original Cut-Off Date Pool Balance": The Pool Balance
calculated as of the Initial Cut-Off Date.
14
<PAGE>
"Original Pre-Funded Amount": The amount deposited in the
Pre-Funding Account on the Closing Day, from the proceeds of the sale of the
Class A Certificates, which amount is $12,519,391.22.
"Original Principal Amount": With respect to any
particular Class A Certificate, an amount equal to the product of (i) the
Percentage Interest of such Class A Certificate and (ii) the Original Class A
Principal Balance.
"Original Principal Balance": With respect to each Credit
Line Agreement, the principal amount of such Credit Line Agreement or the
mortgage note relating to a Senior Lien, as the case may be, on the date of
origination thereof.
"Originator": Advanta National Bank, USA.
"Originator Certificate": Any certificate designated as
an "Originator Certificate" on the face thereof, in the form of Exhibit A-2
hereto.
"Originator's Current Amount": On any Payment Date the
sum of (I) the product of (x) 100% minus the Floating Allocation Percentage for
such Payment Date; (y) Interest Collections for such Payment Date and (z) a
fraction equal to the Non-Subordinated Originator's Interest divided by the
Originator's Interest plus (II) the product of (x) the difference between (i)
during the Managed Amortization Period, the Net Principal Collections on the
Mortgage Loans received during the related Remittance Period, and during the
Rapid Amortization Period, the Principal Collections on the Mortgage Loans
received during the related Remittance Period, and (ii) during the Managed
Amortization Period, the lesser of the Alternative Principal Payment and the
Maximum Principal Payment for such Payment Date, and during the Rapid
Amortization Period, the Maximum Principal Payment for such Payment Date and (y)
a fraction, equal to the Non-Subordinated Originator's Interest divided by the
Originator's Interest.
"Originator's Interest": As of any Payment Date, is the
excess, if any, of (x) the Trust Collateral Value as of such Payment Date over
(y) the Class A Principal Balance as of such Payment Date (after taking into
account reductions therein on such Payment Date).
"Outstanding": With respect to all Certificates, 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;
15
<PAGE>
(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.
"Overcollateralization Amount": As of any Payment Date, the
lesser of (x) the Originator's Interest as of such date and (y) the Specified
Overcollateralization Amount for such Payment Date.
"Overcollateralization Release Amount": With respect to any
Payment Date on which the Originator's Interest is greater than the Specified
Overcollateralization Amount, if the Specified Overcollateralization Amount is
reduced, the corresponding increase in the Non-Subordinated Originator's
Interest which shall be equal to the reduction in the Specified
Overcollateralization Amount.
"Overcollateralization Deficiency Amount": With respect to
any Payment Date, the difference, if any, between (i) the Specified
Overcollateralization Amount applicable to such Payment Date and (ii) the
Overcollateralization Amount applicable to such Payment Date.
"Overcollateralization Deficit": With respect to any Payment
Date, the amount, if any, by which (i) the aggregate Class A Principal Balance,
after taking into account the payment to the Owners of the Class A Certificates
of all principal from sources other than the Certificate Insurance Policy on
such Payment Date, exceeds (ii) the excess of (x) the Trust Collateral Value as
of such Payment Date over (y) the Non-Subordinated Originator's Interest as of
such Payment Date.
"Owner": The Person in whose name a Certificate is registered
in the Register, to the extent described in Section 5.6 other than the Master
Servicer or any affiliate thereof.
"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
16
<PAGE>
the Closing Day or, if such day is not a Business Day, then on the succeeding
Business Day.
"Percentage Interest": As to any Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Class A
Principal Balance of such Certificate as of the related Cut-Off Date and the
denominator of which is the Original Class A Principal Balance of all Class A
Certificates of the same Class; and as to any Originator Certificate, that
Percentage Interest set forth on such Originator Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Balance": With respect to any date, the Principal
Balances of the Mortgage Loans as of such date.
"Pool Certification": As defined in Exhibit F attached
hereto.
"Pool Factor": A seven-digit decimal which the Trustee shall
compute monthly expressing the Class A Principal Balance as of each Payment Date
(after giving effect to any distribution of principal on such Payment Date) as a
proportion of the Original Class A Principal Balance. On the Closing Date, the
Pool Factor will be 1.0000000. Thereafter, the Pool Factor shall decline to
reflect reductions in the related Class A Principal Balance resulting from
distributions of principal to the Class A Certificates.
"Preference Amount": As defined in the Certificate Insurance
Policy.
"Pre-Funded Amount": With respect to any Determination Date,
the amount on deposit in the Pre-Funding Account.
"Pre-Funded Mortgage Loans": Subsequent Mortgage Loans
assigned to the Trust in consideration of amounts released to the Originator
from the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Pre-Funding Earnings": With respect to any Payment Date, the
actual investment earnings then on deposit in the Pre-Funding Account.
17
<PAGE>
"Pre-Funding Period": The period commencing on the Closing
Day and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which a Rapid Amortization Event occurs and
(iii) the February 1997 Payment Date.
"Pre-Funding Transfer Date": Any Subsequent Transfer Date on
which Pre-Funded Mortgage Loans are assigned to the Trust.
"Premium Amount": As to any Payment Date, the product of (x)
one-twelfth of the Premium Percentage and (y) the Class A Principal Balance on
such Payment Date (before taking into account any distributions of the Scheduled
Principal Distribution Amount to be made 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.
"Prepayment Interest Shortfall": With respect to any
Remittance Period, for each Mortgage Loan that was the subject during the
related Remittance Period of a Prepayment, an amount equal to the excess, if
any, of (i) 30 days' interest on the Principal Balance of such Mortgage Loan as
of the first day of such Remittance Period at a per annum rate equal to the Loan
Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant
to application of the Civil Relief Act, any Deficient Valuation and/or any Debt
Service Reduction) minus the Servicing Fee over (ii) the amount of interest
actually remitted by the Mortgagor in connection with such Prepayment less the
Servicing Fee for such Mortgage Loan in such month.
"Preservation Expenses": Expenditures made by the Master
Servicer or any Sub-Servicer in connection with a
18
<PAGE>
foreclosed Mortgage Loan prior to the liquidation thereof, including, without
limitation, expenditures for real estate property taxes, hazard insurance
premiums, property restoration or preservation.
"Prime": The Prime rate of interest charged from time to time
as set forth in the related Credit Line Agreement.
"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 Balance": As to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any date, the related Cut-Off Date Principal
Balance, plus (i) any Additional Balance in respect of such Mortgage Loan, minus
(ii) all collections credited as principal against the Principal Balance of any
such Mortgage Loan in accordance with the related Credit Line Agreement prior to
such day. For purposes of this definition, a Liquidated Mortgage Loan shall be
deemed to have a Principal Balance of zero as of the first day of the Remittance
Period following the Remittance Period in which such Mortgage Loan becomes a
Liquidated Mortgage Loan and at all times thereafter.
"Principal Collections": As to any Payment Date, the sum of
all payments by or on behalf of Mortgagors and any other amounts constituting
principal (including, but not limited to, any portion of Insurance Proceeds or
Net Liquidation Proceeds allocable to principal of the applicable Mortgage Loan,
but excluding Foreclosure Profits) collected by the Master Servicer under the
Mortgage Loans during the related Remittance Period. The terms of the related
Credit Line Agreement shall determine the portion of each payment in respect of
a Mortgage Loan that constitutes principal or interest.
"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 during the related Remittance Period,
(ii) the Principal Balance of each such Mortgage Loan that either was
repurchased by the Originator or purchased by the Master Servicer on such
Remittance Date, to the extent such Principal Balance was actually deposited in
the Principal and Interest Account, (iii) any Substitution Amounts delivered by
the Originator in connection with a substitution of a Mortgage Loan, 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
19
<PAGE>
Mortgage Loans during the related Remittance Period (to the extent such
Liquidation Proceeds related to principal).
"Projected Net Monthly Excess Cashflow": As of any date of
calculation, three times the Net Monthly Excess Cashflow as calculated on the
Payment Date immediately preceding such date of calculation.
"Prospectus": That certain Prospectus dated September 6,
1996, naming Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage Corp.
USA as registrants and describing certain mortgage loan asset-backed securities
to be issued from time to time as described in related Prospectus Supplements.
"Prospectus Supplement": That certain Prospectus Supplement
dated November 15, 1996, describing the Class A Certificates issued by the
Trust.
"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, (ii) has a Loan Rate at least equal to the Loan Rate
of the Mortgage Loan being replaced, (which 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 the Payment Date occurring in December 2020, (vi) has a Combined
Loan-to-Value Ratio as of the Initial Cut-Off Date or Subsequent Cut-Off Date,
as applicable, no higher than the Combined Loan-to-Value Ratio of the replaced
Mortgage Loan at such time, (vii) has a Principal Balance as of the related
Replacement Cut-Off Date equal to or less than the Principal Balance of the
replaced Mortgage Loan as of such Replacement Cut-Off Date, (viii) is in the
same lien position or better. Except with respect to clause (vi) above, 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.
"Rapid Amortization Commencement Date": The earlier of (i)
the Payment Date in December, 1999, and (ii) the Payment Date next succeeding
the Remittance Period in which a Rapid Amortization Event is deemed to occur
pursuant to Section 9.4.
20
<PAGE>
"Rapid Amortization Event": As defined in Section 9.4.
"Rapid Amortization Period": The period which follows the
earlier to occur of (x) the end of the Managed Amortization Period and (y) the
occurrence of a Rapid Amortization Event. If a Rapid Amortization Event occurs
during the Revolving Period, the Rapid Amortization Period will commence
immediately, and the Class A Certificates shall never have a Managed
Amortization Period.
"Realized Loss": As to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal 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.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Bank of 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 Originator 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.
"Reference Bank Rate" shall be determined on the basis of the
rates at which deposits in U.S. Dollars are offered by the reference banks
(which shall be three major banks that are engaged in transactions in the London
interbank market, selected by the Sponsor after consultation with the Trustee)
as of 11:00 A.M., London time, on the day that is two LIBOR Business Days prior
to the immediately preceding Payment Date to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the principal
amount of the Class A Certificates then outstanding. The Trustee will request
the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
will be the arithmetic mean of the quotations. If on such date fewer than two
quotations are provided as requested, the rate will be the arithmetic mean of
the rates quoted by one or more major banks in New York City, selected by the
Sponsor after consultation with the Trustee, as of 11:00 A.M., New York City
time, on such date for loans in U.S. Dollars to leading European banks for a
period of one month in amounts
21
<PAGE>
approximately equal to the principal amount of the Class A Certificates then
outstanding. If no such quotations can be obtained, the rate will be LIBOR for
the prior Payment Date.
"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 the Prospectus Supplement
relating to the Class A Certificates constituting a part thereof.
"Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all payments made pursuant to the Certificate Insurance Policy previously
received by the Trustee and all Preference Amounts previously paid to the
Trustee by the Certificate Insurer and in each case not previously repaid to the
Certificate Insurer pursuant to Section 7.5(b)(ix) hereof plus (ii) interest
accrued on each such payment made pursuant to the Certificate Insurance Policy
not previously repaid calculated at the Late Payment Rate from the date the
Trustee received the related payment made pursuant to the Certificate Insurance
Policy and (y)(i) any amounts then due and owing to the Certificate Insurer
under the Insurance Agreement plus (ii) interest on such amounts at the Late
Payment Rate. The Certificate Insurer shall notify the Trustee and the
Originator of the amount of any Reimbursement Amount.
"Relief Act Shortfall": With respect to any Remittance
Period, for any Mortgage Loan as to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Remittance
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (i) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (ii) the sum of (a) one month's
interest on the Principal Balance of such Mortgage Loan at the rate equal to the
sum of the Class A Interest Rate, the rate at which the Trustee's Fee is
calculated and the Premium Percentage, plus (b) the aggregate Servicing Fee for
such Mortgage Loan payable to the Master Servicer in such calendar month.
"REO Property": A Mortgaged 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.
22
<PAGE>
"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 the 18th day or, if such day is not a Business Day, the
next preceding Business Day, of each month, commencing in the month following
the month in which the Closing Day occurs.
"Remittance Period": As to any Payment Date, the calendar
month preceding the month of such Payment Date.
"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.
"Revolving Account": The Revolving Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Revolving Period": The period commencing on the Closing Day
and ending on the earliest to occur of (i) the Payment Date in November, 1997,
(ii) the Payment Date prior to the commencement of the Rapid Amortization Period
and (iii) the first Payment Date on which Additional Mortgage Loans having an
aggregate, cumulative Principal Balance (calculated as of the related subsequent
Transfer Dates) equal to $10,204,081.63 have been assigned to the Trust.
"S&P": Standard & Poor's Rating Group, a division of The
McGraw Hill Companies.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans,
attached hereto as Schedule II, as it may be further supplemented in connection
with Subsequent Transfers.
"Scheduled Principal Distribution Amount": On any Payment
Date during the Managed Amortization Period, the excess (but in no event less
than zero) of (x) the lesser of (i) the Maximum Principal Payment and (ii) the
Alternative Principal Payment over (y) the Step-Down Amount, if any, with
respect to such Payment Date. Beginning with the first Payment Date in the Rapid
Amortization Period, the excess of (x) the Maximum Principal Payment over (y)
the Step-Down Amount, if any, with respect to such Payment Date.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Mortgaged Property.
23
<PAGE>
"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 Mortgaged Property having a first
priority lien; and with respect to any Third Mortgage Loan, the mortgage loans
relating to the corresponding Mortgaged Property having first and second
priority liens.
"Servicing Advance": As defined in Section 8.9 and Section
8.13 hereof.
"Servicing Fee": With respect to any Payment Date, the
product of (i) one-twelfth of the Servicing Fee Rate and (ii) the aggregate
Principal Balance of the Mortgage Loans on the first day of the Remittance
Period preceding such Payment Date (or at the Cut-Off Date with respect to the
first Payment Date).
"Servicing Fee Rate": 0.50% per annum.
"Specified Overcollateralization Amount": As defined in the
Insurance Agreement.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a
Delaware Corporation.
"Step-Down Amount": As of any Payment Date, the lesser of (x)
the Maximum Step-Down Amount for such Payment Date and (y) the Maximum Principal
Payment or the Alternative Principal Payment, as applicable to such Payment
Date; provided, that for any Payment Date on which the Specified
Overcollateralization Amount exceeds the Overcollateralization Amount, the
Step-Down Amount shall be reduced (but not below zero) by the amount of any such
excess.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loan, the opening of business on the first day of the calendar month in
which the related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loans": The Mortgage Loans assigned to
the Trust pursuant to Section 3.8 of the Agreement, which shall be listed on the
Schedule of Mortgage Loans attached to the Subsequent Transfer Agreement. The
term "Subsequent Mortgage Loan" includes the terms "Pre-Funded Mortgage Loan",
"Additional Mortgage Loan" and "O/C Mortgage Loan".
"Subsequent Transfer Agreement": Each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Trustee and the
Originator substantially in
24
<PAGE>
the form of Exhibit L hereto, by which Subsequent Mortgage Loans are assigned to
the Trust.
"Subsequent Transfer Date": The date specified in each
Subsequent Transfer Agreement, which must, with respect to any Payment Date, be
a date occurring during the calendar month in which such Payment Date occurs,
and on or prior to the Remittance Date occurring in such month.
"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 Principal 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 Loan Rate net of
the Servicing Fee, if any, 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 the servicing and/or
administration of certain Mortgage Loans as permitted by Section 8.3.
"Telerate Screen Page 3750": The display designated as page
3750 on the Telerate Service (or such other page as may replace page 3750 on
that service for the purpose of displaying London interbank offered rates of
major banks).
"Termination Fees": With respect to Mortgage Loans which
prepay in full or in part and are secured by Mortgaged Properties in certain
jurisdictions, an account termination fee generally not exceeding $500 may be
charged by the Master Servicer and retained as additional servicing compensation
pursuant to Section 8.15. Such Termination Fees may not be applicable to
accounts terminated subsequent to a date designated in the related Credit Line
Agreement which depending on the jurisdiction may be during the Draw Period.
"Transaction Documents": Collectively this Agreement, the
Insurance Agreement, the Indemnification Agreement, the Underwriting Agreement
relating to the Class A Certificates, any Sub-Servicing Agreement, any
Subsequent Transfer Agreement, the Registration Statement relating to the Class
A Certificates.
"Transfer Date": As defined in Section 3.9 herein.
25
<PAGE>
"Transfer Notice Date": As defined in Section 3.9 herein.
"Trust": Advanta Revolving Home Equity Loan Trust 1996-A, the
trust created under this Agreement.
"Trust Collateral Value": As of any Payment Date, the sum of
(i) the Pool Balance at the end of the prior calendar month, (ii) the aggregate
Principal Balances as of the related Cut-Off Dates of all Subsequent Mortgage
Loans previously assigned to the Trust during the calendar month in which such
Payment Date occurs and (iii) the amounts, if any, on deposit in the Pre-Funding
Account and the Revolving Account at the close of business on such Payment Date.
"Trust Fund": 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 and the Certificate Insurer, including all proceeds thereof including,
without limitation, (i) the Initial Mortgage Loans, Qualified Replacement
Mortgages and Subsequent Mortgage Loans, (ii) such amounts, including Eligible
Investments, as from time to time may be held in all Accounts (except as
otherwise provided herein), (iii) any Mortgaged Property, the ownership of which
has been effected on behalf of the Trust as a result of foreclosure or
acceptance by the Master Servicer or any Sub-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 Trust and the
Originator under any Insurance Policies, (v) Net Liquidation Proceeds with
respect to any Liquidated Mortgage Loan, (vi) the Certificate Insurance Policy,
(vii) such amounts held in the Capitalized Interest Account, and (viii) such
amounts held in the Pre-Funding Account, the Principal and Interest Account, the
Revolving Account, and the Certificate Account.
"Trustee": Bankers Trust Company of California, N.A., located
on the date of execution of this Agreement at 3 Park Plaza, 16th Floor, Irvine,
California 92714, not in its individual capacity but solely as Trustee under
this Agreement, and any successor hereunder.
"Trustee's Fee": With respect to any Payment Date, the
product of (x) one-twelfth of .015% and (y) the Pool Balance as of the end of
the immediately preceding Remittance Period.
"Underwriter": Lehman Brothers Inc.
Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter"
26
<PAGE>
and other equivalent words refer to this Agreement as a whole and not solely to
the particular section of this Agreement in which any such word is used. The
definitions set forth in Section 1.1 hereof include both the singular and the
plural. Whenever used in this Agreement, any pronoun shall be deemed to include
both singular and plural and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or
headings in this Agreement and the Table of Contents are for convenience only
and in no way define, limit or describe the scope and intent of any provisions
of this Agreement.
Section 1.4. Opinions. Each opinion with respect to the
validity, binding nature and enforceability of documents or Certificates may be
qualified to the extent that the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law) and may state
that no opinion is expressed on the availability of the remedy of specific
enforcement, injunctive relief or any other equitable remedy. Any opinion
required to be furnished by any Person hereunder 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 Revolving Home Equity Loan Trust 1996-A".
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., 3 Park
Plaza, 16th Floor, Irvine, California 92614, a national banking association, or
at such other address as the Trustee may designate by notice to the Originator,
the Master Servicer, the Sponsor, 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
27
<PAGE>
Fund 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 Fund and distributions to the Owners.
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 Closing 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 Closing Day to serve as Trustee pursuant
to Section 10.8 hereof and declares that it will hold the Trust Fund in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners and the Certificate Insurer.
Section 2.5. Expenses of the Trust. The expenses of the
Trust, including the reasonable expenses of the Trustee, that have been reviewed
and approved by the Sponsor (which approval shall not be unreasonably withheld),
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 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 Closing 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 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.
28
<PAGE>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR, THE ORIGINATOR AND THE MASTER SERVICER
Section 3.1. Representations and Warranties of the Sponsor
and the Originator. The Sponsor and the Originator each hereby represents,
warrants and covenants to the Trustee, the Master Servicer, the Certificate
Insurer and to the Owners as of the Closing Day that:
(a) The Sponsor and the Originator are corporations duly
organized, validly existing and in good standing under the laws of the
State of Delaware and are in good standing each as a foreign
corporation in each jurisdiction in which the nature of its respective
business, or the properties owned or leased by it make such
qualification necessary. The Sponsor and the Originator have all
requisite corporate power and authority to own and operate its
respective properties, to carry out its respective business as
presently conducted and as proposed to be conducted and to enter into
and discharge its respective 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 and the Originator are a party
by the Sponsor and the Originator and its respective 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 the
Originator and will not violate the Sponsor's or the Originator'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 or the Originator is
a party or by which the Sponsor or the 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 the Sponsor
or the Originator or any of its respective properties.
(c) This Agreement and the other Operative Documents to which
the Sponsor or the 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 the Sponsor and
the Originator, respectively, enforceable against it in
29
<PAGE>
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 and the Originator are not in default with
respect to any agreement, 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 the Originator or its respective
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
and the Originator's knowledge, threatened against the Sponsor or the
Originator 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 the
Originator or its respective 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
or the 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.
(g) The statements contained in the Registration Statement
which describe the Sponsor, the Originator or matters or activities for
which the Sponsor or the Originator is responsible in accordance with
the Operative Documents or which are attributed to the Sponsor or the
Originator 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 the Originator 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 or the Originator not misleading. To the best of the Sponsor's
and the
30
<PAGE>
Originator's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact required to be stated
therein or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein not
misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Sponsor and the Originator make 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 and the Originator 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 Originator and the performance by the Sponsor and the
Originator of its respective 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 and the Originator.
(j) The Originator 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 Originator 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 Originator is solvent and the Originator will not be
rendered insolvent as a result of the sale of the Mortgage Loans to the
Trust or the sale of the Certificates.
31
<PAGE>
(m) Prior to May 20, 1996, the Originator conducted business
under the name of Colonial National Bank USA. On May 20, 1996 the
Originator changed its corporate name to Advanta National Bank USA and
has operated under such name since such date.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the Mortgage
Loans to the Trustee.
Section 3.2. Representations and Warranties of the Master
Servicer. The Master Servicer hereby represents, warrants and covenants to the
Trustee, the Sponsor, the Certificate Insurer and to the Owners as of the
Closing 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 Mortgaged 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.
32
<PAGE>
(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
material agreement, any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or governmental
agency, which might have consequences that would materially and
adversely affect the condition (financial or other) or operations of
the Master Servicer or its properties or might have consequences that
would materially and adversely affect its performance hereunder and
under the other Operative Documents to which the Master Servicer is a
party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
litigation might have consequences that would prohibit its entering
into this Agreement or any other Operative Document to which it is a
party or that would materially and adversely affect the condition
(financial or otherwise) or operations of the Master Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other
Operative Documents to which the Master Servicer is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Master
Servicer contains any untrue statement of a material fact or omits to
state any material fact necessary to make the certificate, statement or
report not misleading.
(g) The statements contained in the Registration Statement
which describe the Master Servicer or matters or activities for which
the Master Servicer is responsible in accordance with the Operative
Documents or which are attributed to the Master Servicer therein are
true and correct in all material respects, and the Registration
Statement does not contain any untrue statement of a material fact with
respect to the Master Servicer or omit to state a material fact
required to be
33
<PAGE>
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, 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.
34
<PAGE>
(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 Originator, 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 or the Certificate Insurer pursuant to
Section 8.20 hereof; provided, however, that if the Master Servicer can
demonstrate to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended with
the written approval of the Certificate Insurer.
Section 3.3. Representations and Warranties of the Originator
with Respect to the Mortgage Loans; Retransfer of Certain Mortgage Loans.
(a) The Originator 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 and on
which the Certificate Insurer relies in issuing the Certificate Insurance
Policy. Such representations and warranties speak as of the Closing Day with
respect to the Initial Mortgage Loans, and as of the related Subsequent Transfer
Date with respect to any Subsequent Mortgage Loan (unless otherwise specified),
but shall in each case survive the sale, transfer, and assignment of the
Mortgage Loans to the Trustee:
(i) All of the original or certified
documentation set forth in Section 3.5 (including all material
documents related thereto) with respect to each Initial Mortgage Loan
has been or will be delivered to the Trustee on the Closing Day or,
with respect to any Subsequent Mortgage Loans, on the related
Subsequent Transfer Date, or as otherwise provided in Section 3.5. Each
of the documents and instruments specified to be
35
<PAGE>
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;
(ii) 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;
(iii) As of the Closing Day with respect to
the Initial Mortgage Loans and the related Subsequent Transfer Date
with respect to any Subsequent Mortgage Loan (unless otherwise
specified), and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage, this Agreement constitutes a valid
transfer and assignment to the Trust of all right, title and interest
of the Trust in and to the related Cut-Off Date Principal Balances with
respect to the applicable Mortgage Loans, all monies due or to become
due with respect thereto (excluding payments in respect of accrued
interest due prior to the related Cut-Off Date), and all proceeds of
such related Cut-Off Date Principal Balances with respect to the
Mortgage Loans and such funds as are from time to time deposited in the
Principal and Interest Account (excluding any investment earnings
thereon) and all other property specified in the definition of
"Mortgage Loan" as being part of the corpus of the Trust conveyed to
the Trust by the Originator, and upon payment for the Additional
Balances, will constitute a valid transfer and assignment to the
Trustee of all right, title and interest of the Originator in and to
the Additional Balances, all monies due or to become due with respect
thereto, and all proceeds of such Additional Balances and all other
property specified in the definition of "Mortgage Loan" relating to the
Additional Balances. In addition, if this Agreement is not deemed to be
a valid transfer and assignment to the Trustee of such right, title and
interest, this Agreement shall in any event constitute a grant of a
security interest (as defined in the UCC as in effect in New York) in
such property to the Trustee on behalf of the Trust. If this Agreement
constitutes the grant of a security interest to the Trust in such
property, and if the Trustee maintains possession of the Mortgage File
for each Mortgage Loan, the Trust shall have a first priority perfected
security interest in such property, subject to the effect of Section
9-306 of the UCC with respect to collections on the Mortgage Loans that
are deposited in the Principal and Interest Account;
36
<PAGE>
(iv) As of the Closing Day with respect to the
Initial Mortgage Loans, the related Subsequent Transfer Date with
respect to any Subsequent Mortgage Loan (unless otherwise specified)
and the applicable Transfer Date with respect to any Qualified
Replacement Mortgage and as of the date any Additional Balance is
created, the information set forth in the Mortgage Loan Schedule for
such Mortgage Loans is true and correct in all material respects;
(v) As of the Closing Day and any Subsequent
Transfer Date, no more than 1.0% of the related Cut-Off Date Pool
Balance of the Mortgage Loans is secured by Mortgaged Properties
located within any single zip code area. None of the Mortgage Loans
consists of Date-of-Payment Loans;
(vi) 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;
(vii) The credit underwriting guidelines
applicable to each Mortgage Loan conform in all material respects to
the description thereof set forth in the Prospectus and the Prospectus
Supplement;
(viii) The Mortgages and Credit Line
Agreements have not been assigned or pledged, and the Originator is the
sole owner and holder of the Mortgages and Credit Line Agreements free
and clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any
nature, and has full right and authority, under all governmental and
regulatory bodies having jurisdiction over the ownership of the
applicable Mortgage Loan, to sell, assign or transfer the same;
(ix) As of the Closing Day with respect to the
Initial Mortgage Loans, the Subsequent Transfer Date with respect to
the Subsequent Mortgage Loans and the applicable Transfer Date with
respect to any Qualified Replacement Mortgage, there is no valid
offset, defense or counterclaim of any obligor under any Credit Line
Agreement or Mortgage. Neither the operation of any of the terms of
each Credit Line Agreement and each Mortgage nor the exercise of any
right thereunder will render either the Credit Line Agreement or the
Mortgage unenforceable, in whole or in part, nor subject to any right
of rescission, set-off, claim, counterclaim or defense, including,
without limitation, the defense of usury and no such right of
rescission, set-off,
37
<PAGE>
counterclaim or defense has been asserted with respect
thereto;
(x) No Minimum Monthly Payment is more than 89
days delinquent (measured on a contractual basis); and with respect to
the Initial Mortgage Loans no more than 1.27% (by Initial Cut-Off Date
Pool Balance) were 30-59 days delinquent (measured on a contractual
basis) and no more than 0.15% (by Initial Cut-Off Date Pool Balance)
were 60-89 days delinquent (measured on a contractual basis). No
Subsequent Mortgage Loan will be more than 30 days delinquent;
(xi) As of the related Cut-Off Date with
respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Qualified Replacement Mortgage, each Credit Line
Agreement and each Mortgage Loan is an enforceable obligation of the
related Mortgagor, except as the enforceability thereof may be limited
by the bankruptcy, insolvency or similar laws affecting creditors'
rights generally;
(xii) The definition of Prime in each Credit
Line Agreement relating to a Mortgage Loan does not differ materially
from the definition in the form of Credit Line Agreement in Exhibit C;
(xiii) The weighted average remaining term to
maturity of the Initial Mortgage Loans on a contractual basis as of the
Initial Cut-Off Date for the Mortgage Loans is approximately 272
months. On each date that the Loan Rates have been adjusted, interest
rate adjustments on the Mortgage Loans were made in compliance with the
related Mortgage and Credit Line Agreement and applicable law. Over the
term of each Initial Mortgage Loan, the Loan Rate may not exceed the
related Loan Rate Cap, if any. The Loan Rate Caps for the Initial
Mortgage Loans range between 17.25% and 24.00%. The Initial Mortgage
Loans margins range between 1.00% and 8.00% and the weighted average
margin is approximately 3.20% as of the related Cut-Off Date for the
Initial Mortgage Loans. The Loan Rates on such Initial Mortgage Loans
range between 7.25% and 16.25% and the weighted average Loan Rate is
approximately 11.403%; and
(xiv) The Credit Limits on the Initial
Mortgage Loans range between $10,000 and $246,000 with an average of
$31,743.55. As of the Initial Cut-Off Date for the Initial Mortgage
Loans, no Initial Mortgage Loan had a principal balance in excess of
approximately $245,000 and the average principal balance of the Initial
Mortgage Loans is equal to approximately $30,035.
38
<PAGE>
(xv) Each Mortgage Loan being transferred to
the Trust is a Mortgage;
(xvi) Each Subsequent Mortgage Loan complies
with the requirements in Section 3.8 of this Agreement, including
without limitation the conditions described in subsections (c) and (d)
of such Section 3.8;
(xvii) Each Mortgaged Property is improved by
a single (one-to-four) family residential dwelling, which may include
condominiums and townhouses but shall not include cooperatives;
(xviii) Except as previously disclosed in
writing to the Trustee and the Certificate Insurer, with respect to
each Mortgage Loan, there is only one originally executed Credit Line
Agreement not stamped as a duplicate.
(xix) No Mortgage Loan had a Combined Loan-
to-Value Ratio in excess of 100%;
(xx) As of the Closing Date with respect to
the Initial Mortgage Loans and the applicable Transfer Date with
respect to any Subsequent Mortgage Loans, each Mortgage is either a
valid and subsisting first or second lien of record on the Mortgaged
Property (subject in the case of any Second Mortgage Loan only to a
Senior Lien on such Mortgaged Property) and subject in all cases to the
exceptions to title set forth in the title insurance policy, with
respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular
mortgage lending activities, and except for liens for (i) real estate
taxes and special assessments not yet delinquent, (ii) income taxes,
(iii) any covenants, conditions and restrictions, rights of way,
easements, and other matters of public record 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;
(xxi) Immediately prior to the transfer and
assignment herein contemplated, the Originator held good and
indefeasible title to, and was the sole owner of, each Mortgage Loan
conveyed by the Originator (including its Cut-Off Date Pool Balance),
all monies due or to become due with respect thereto, and all proceeds
of such Cut-Off Date Pool Balances with respect to the Mortgage Loans
is subject to no liens, charges, mortgages, encumbrances or rights of
others except liens which will be released simultaneously with such
transfer and
39
<PAGE>
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;
(xxii) There is no delinquent tax or
assessment lien or mechanic's lien on any Mortgaged Property, and each
Mortgaged Property is free of substantial damage and is in good repair;
(xxiii) To the best knowledge of the
Originator, there is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien
prior to, or equal with, the lien of the related Mortgage except liens
which are fully insured by the title insurance policy.
(xxiv) 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;
(xxv) To the best knowledge of the Originator,
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 Mortgaged Property is situated, was issued on the date of
origination of the Mortgage Loan and as of the Cut-Off Date and each
applicable Transfer Date with respect to the Subsequent Mortgage Loan,
each such policy is valid and remains in full force and effect, or a
title search or guaranty of title customary in the relevant
jurisdiction was obtained with respect to a Mortgage Loan as to which
no title insurance policy or binder was issued.
(xxvi) As of the Closing Date with respect to
the Mortgage Loans and the applicable Transfer Date with respect to any
Subsequent Mortgage Loan, each Credit Line Agreement is the legal,
valid, binding and enforceable 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
40
<PAGE>
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;
(xxvii) Within 90 days of the Closing Date,
each original Mortgage required to be recorded 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 as
against creditors of or purchasers from the Originator, subject to the
provisions of Section 3.5(b) hereof (or are in the process of being
recorded);
(xxviii) The terms of each Credit Line
Agreement 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;
(xxix) Except as otherwise required by law or
pursuant to the statute under which the related Mortgage Loan was made,
the related Credit Line Agreement is not and has not been secured by
any collateral, pledged account or other security except the lien of
the corresponding Mortgage;
(xxx) Each Mortgaged 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;
(xxxi) There is no proceeding pending or
threatened for the total or partial condemnation of any Mortgaged
Property, nor is such a proceeding currently occurring, and each
Mortgaged Property is undamaged by waste, fire, earthquake or earth
movement, flood, tornado or other casualty, so as to affect adversely
the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended;
(xxxii) 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
41
<PAGE>
has been obtained and is contained in the related Mortgage File;
(xxxiii) Each Mortgage contains customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the related
Mortgaged 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) otherwise by judicial foreclosure. There is no homestead or
other exemption available which materially interferes with the right to
sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage;
(xxxiv) As of the Closing Date with respect to
the Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans, there is no default, breach, violation or
event of acceleration existing under any Mortgage or the related Credit
Line Agreement 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
Originator has not waived any default, breach, violation or event of
acceleration;
(xxxv) The credit underwriting guidelines
applicable to each Mortgage Loan conform in all material respects to
the Originator's underwriting guidelines;
(xxxvi) To the best knowledge of the
Originator, all parties to the Credit Line Agreement and the Mortgage
had legal capacity to execute the Credit Line Agreement and the
Mortgage and each Credit Line Agreement and Mortgage have been duly and
properly executed by such parties; and
(xxxvii) No selection procedures reasonably
believed by the Originator to be adverse to the interests of the Owners
or the Certificate Insurer was utilized in selecting the Mortgage
Loans.
(xxxviii) Each Mortgage Loan shall have a
three year interest only Draw Period with a twenty-year amortization
schedule.
(b) Upon the discovery by the Originator, the Master Servicer,
the Sponsor, the Certificate Insurer or the Trustee of a breach of any of the
representations and warranties made 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
42
<PAGE>
the other parties. The Master Servicer shall promptly notify the Originator of
such breach and request that the Originator cure such breach or take the actions
described in Section 3.4(b) hereof within the time periods required thereby, and
the Originator shall cure such breach or take such actions; provided, however,
that the cure for any breach of a representation and warranty relating to the
characteristics of the Mortgage Loans in the aggregate shall be a reassignment
of, or substitution for, only those Mortgage Loans necessary to cause such
characteristics to be in compliance with the related representation and
warranty. Upon accepting such transfer and making any required deposit into the
Principal and Interest Account or substitution of a Qualified Replacement
Mortgage, as the case may be, the Originator shall be entitled to receive an
instrument of assignment or transfer from the Trustee to the same extent as set
forth in Section 3.6 with respect to the transfer of Mortgage Loans under that
Section.
It is understood and agreed that the obligation of the
Originator to accept a transfer of a Mortgage Loan as to which a breach has
occurred and is continuing and to make any required deposit in the Principal and
Interest Account or to substitute an Qualified Replacement Mortgage, as the case
may be, shall constitute the sole remedy against the Originator respecting such
breach available to Owners of the Class A Certificates, the Trustee on behalf of
the Owners of the Class A Certificates and the Certificate Insurer, except as
otherwise provided in the Insurance Agreement.
Section 3.4. Covenants of Originator 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 the Originator, the Master Servicer, the Sponsor, the Certificate Insurer,
any Sub-Servicer or the Trustee that the representations and warranties set
forth in Section 3.3 of this Agreement were untrue in any material respect as of
the Closing Day (or the Subsequent Transfer Date, or the Transfer Date, as the
case may be) 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 Originator acknowledges that a breach of any
representation or warranty (x) relating to marketability of title sufficient to
transfer unencumbered title to a Mortgage Loan, (y) relating to enforceability
of the Mortgage Loan against the related Mortgagor or Mortgaged Property or (z)
set forth in clause (viii) of Section 3.3 above constitutes breach of a
representation or warranty which "materially and
43
<PAGE>
adversely affects the interests of the Owners or of the Certificate Insurer" in
such Mortgage Loan.
(b) Upon the earliest to occur of the Originator'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 Originator 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 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 which has given rise to the requirement for action by the
Originator a Qualified Replacement Mortgage and deliver the Substitution Amount
applicable thereto, together with the aggregate amount of all 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 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. It is understood and agreed that
the obligation of the Originator 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, except as
otherwise provided in the Insurance Agreement.
(c) In the event that any Qualified Replacement Mortgage is
delivered by an Originator or by an affiliate of the Originator, as the case may
be, to the Trust pursuant to Section 3.3, Section 3.4 or Section 3.6 hereof, the
Originator 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 Originator, the Master Servicer, the Sponsor, the Certificate
Insurer, any Sub-Servicer or the Trustee that the representations and warranties
set forth 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
set forth in Section 3.3 above referring to items "as of the Initial Cut-Off
Date" or "as of the Subsequent Cut-Off Date" or "as of the related Cut-Off Date"
or "as of the Closing Day" or "as of the Subsequent Transfer Date" shall be
deemed to refer to such
44
<PAGE>
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 Initial Mortgage Loans. (a) The
Originator, concurrently with the execution and delivery hereof, hereby
transfers, assigns, sets over and otherwise conveys without recourse, to the
Trustee, all right, title and interest of the Originator in and to (i) each
Initial Mortgage Loan listed on the Schedule of Mortgage Loans, including its
Principal Balance (including all Additional Balances) and all collections in
respect thereof received on or after the Initial Cut-Off Date (excluding
payments in respect of accrued interest due prior to the Initial Cut-Off Date;
(ii) property that secured a Mortgage Loan that is acquired by foreclosure or
deed in lieu of foreclosure; (iii) the Originator's rights under the hazard
insurance policies; and (iv) all other assets included or to be included in the
Trust for the benefit of Owners and the Certificate Insurer; provided, however,
neither the Trustee nor the Trust assumes the obligation under any Credit Line
Agreement that provides for the funding of future advances to the Mortgagor
thereunder, and neither the Trust nor the Trustee shall be obligated or
permitted to fund any such future advances. Additional Balances shall be part of
the related Principal Balance and are hereby transferred to the Trust for
application to the Originator's Interest only on the Closing Day pursuant to
this Section 3.5, and therefor part of the Trust property. In addition, on or
prior to the Closing Day, the Originator shall cause the Certificate Insurer to
deliver the Certificate Insurance Policy to the Trustee for the benefit of the
Owners of the Class A Certificates. The foregoing transfer, assignment, set-over
and conveyance to the Trust shall be made to the Trustee, on behalf of the
Trust, and each reference in this Agreement to such transfer, assignment,
set-over and conveyance shall be construed accordingly.
The Originator agrees to take or cause to be taken such
actions and execute such documents (including, without limitation, the filing of
all necessary continuation statements for the UCC-1 financing statements filed
in the State of New York (which shall have been filed within 90 days of the
Closing Day) describing the Mortgage Loans and naming the Originator as debtor
and the Trustee as secured party and any amendments to UCC-1 financing
statements required to reflect a change in the name or corporate structure of
the Originator or the filing of any additional UCC-1 financing statements due to
the change in the principal office of the
45
<PAGE>
Originator (within 90 days of any event necessitating such filing)) as are
necessary to perfect and protect the Certificateholders' and the Certificate
Insurer's interests in each Mortgage Loan and the proceeds thereof.
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Originator agrees to:
(i) cause to be delivered, on the Closing Day with respect to
the Initial Mortgage Loans or, on the Subsequent Transfer Date with
respect to Subsequent Mortgage Loans, or, on the Transfer Date with
respect to the Qualified Replacement Mortgage without recourse to the
Trustee on the Closing Day with respect to each Initial Mortgage Loan
or, on the Subsequent Transfer Date with respect to Subsequent Mortgage
Loans, listed on the Schedule of Mortgage Loans, the items listed in
the definition of "Mortgage Files"; and
(ii) cause, within 75 Business Days following the Closing Day,
Assignments of Mortgage to be submitted for recording in the
appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof as against creditors of or purchasers from the
Originator to the Trustee; provided, however, that Assignments of
Mortgage shall not be required to be submitted for recording with
respect to any Mortgage Loan as to which the recordholder is the
Originator (under either its current name, "Advanta National Bank USA"
or its prior name, "Colonial National Bank USA"), unless
(A) (x) otherwise directed in writing by the
Certificate Insurer, (y) upon the occurrence of an Event of
Default or (z) the long-term unsecured debt of the Originator
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; or
(B) the related Mortgaged Property is not located in
a jurisdiction in which, as evidenced by an Opinion of Counsel
delivered to the Trustee within 30 Business Days of the
Closing Date, recordation of such Assignment is not necessary
to perfect the lien of the Trustee in the related Mortgage
Loan.
All recording, if required pursuant to this Section 3.5, shall
be accomplished at the expense of the Originator. Notwithstanding anything to
the contrary contained in this Section 3.5, in those instances where the public
recording
46
<PAGE>
office retains the original Mortgage, the assignment of a Mortgage or the
intervening assignments of the Mortgage after it has been recorded, the
Originator 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 and any Assignment of
Mortgage in recordable form received by the Trustee shall be kept in the related
Mortgage File.
(c) In the case of Initial Mortgage Loans which have been
prepaid in full on or after the Initial Cut-Off Date and prior to the Closing
Day, or with respect to Subsequent Mortgage Loans which have been prepaid in
full on or after the Subsequent Cut-Off Date and prior to the Subsequent
Transfer Date, the Originator, in lieu of the foregoing, will deliver within 15
Business Days after the Closing Day, or Subsequent Transfer Date, as applicable,
to the Trustee a certification of an Authorized Officer in the form set forth in
Exhibit D.
(d) The Originator shall transfer, assign, set over and
otherwise convey without recourse, to the Trustee all right, title and interest
of the Originator in and to any Qualified Replacement Mortgage delivered to the
Trustee on behalf of the Trust by the Originator 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 Originator 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, assign, set over and otherwise convey without recourse,
on the Originator'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
Originator agrees to cause to be delivered
47
<PAGE>
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 Originator (i) the original Credit Line Agreement, or
the certified copy, relating thereto, endorsed without recourse, to the
Originator and (ii) such other documents as constituted the Advanta Mortgage
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 Originator 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 Originator shall reflect on its records that the
Mortgage Loans have been sold to the Trust.
(j) If the Master Servicer's shareholders' equity (on a
consolidated basis with AMHC) calculated pursuant to generally accepted
accounting principles, as evidenced by the Financial Statements (as defined in
the Insurance Agreement, and which the Master Servicer hereby agrees to provide
to the Certificate Insurer on a quarterly basis promptly after the same are
available), falls below $5,000,000, then the Originator shall promptly prepare
and deliver to the Trustee the Mortgage assignments. Upon the direction of the
Certificate Insurer, the Trustee shall submit such assignments for recording in
the appropriate jurisdictions. The Master Servicer shall pay the anticipated
recording costs to the Trustee on the date of delivery of the assignments to the
Trustee, and if the Master Servicer fails to do so then the Trustee shall pay
such costs and shall be entitled to reimbursement therefor from amounts
otherwise distributable to the Owners of the Originator Certificates.
(k) To the extent that the ratings, if any, then assigned to
the unsecured debt of the Originator or of the Originator's ultimate corporate
parent are satisfactory to the Certificate Insurer, Moody's and S&P, then any of
the Document Delivery Requirements described above may be waived by an
instrument signed by the Certificate Insurer, S&P and Moody's (or any documents
theretofore delivered to the Trustee returned to the Originator) on such terms
and subject to such conditions as the Certificate Insurer, Moody's and S&P may
permit.
48
<PAGE>
Section 3.6. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee. (a) The Trustee hereby acknowledges
its receipt of the Certificate Insurance Policy and agrees to execute and
deliver on the Closing Day and on each Subsequent Transfer Date and each
Transfer Date an acknowledgment of receipt of the Credit Line Agreements
delivered by the Originator 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 Fund and delivered to the Trustee, as Trustee in trust upon and subject to
the conditions set forth herein for the benefit of the Owners and the
Certificate Insurer. The Trustee further agrees to review any other documents
delivered by the Originator within 90 days after the Closing Day (or within 90
days with respect to any Subsequent Mortgage Loan or Qualified Replacement
Mortgage after the assignment thereof) and to deliver to the Originator, the
Master Servicer and the Certificate Insurer a Pool Certification in the form
attached hereto as Exhibit F to the effect that, as to each Mortgage Loan listed
in the Schedule of Mortgage Loans (other than any Mortgage Loan paid in full or
any Mortgage Loan specifically identified in such Pool Certification as not
covered by such Pool Certification), (i) all documents required to be delivered
to it pursuant to this Agreement are in its possession, (ii) such documents have
been reviewed by it and have not been mutilated, damaged, torn or otherwise
physically altered and relate to such Mortgage Loan and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Schedules of Mortgage Loans as to loan number and address, accurately
reflects the information set forth in the Mortgage File; provided, however, that
such Pool Certificate shall not be delivered prior to 90 days after the Closing
Day with respect to the Initial Mortgage Loans and 90 days after the Pre-Funding
Period with respect to the Pre-Funded Mortgage Loans and 90 days after the
Revolving Period with respect to Additional Mortgage Loans and O/C Mortgage
Loans. The Trustee shall be under no duty or obligation to inspect, review or
examine any such documents, instruments, certificates or other papers to verify
the validity, legality, enforceability, sufficiency, due authorization,
recordability or genuineness of same or 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 Mortgage File which is not properly executed,
has not been received within the specified period, or is unrelated to the
Mortgage Loans
49
<PAGE>
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 Originator
and the Certificate Insurer. In performing any such review, the Trustee may
conclusively rely on the Originator as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Trustee's review of the items delivered by the Originator pursuant to Section
3.5(b)(i) is limited solely to confirming that the documents listed in Section
3.5(b)(i) have been executed and received, relate to the Mortgage Files
identified in the Schedules of Mortgage Loans and conform materially to the
description thereof in the Schedule of Mortgage Loans. The Originator agrees to
use reasonable efforts to remedy a material defect in a document constituting
part of a Mortgage 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
Originator 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 Originator will then on the next
succeeding Business Day (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. Upon receipt of any Qualified
Replacement Mortgage or of written notification signed by a Servicing Officer to
the effect that the Loan Purchase Price in respect of a Defective Mortgage Loan
has been deposited into the Principal and Interest Account, then as promptly as
practicable, the Trustee shall execute such documents and instruments of
transfer presented by the Originator, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Originator to effect such transfer by the Trust of such
Defective Mortgage Loan pursuant to this Section. It is understood and agreed
that the obligation of the Originator to accept a transfer of a Defective
Mortgage Loan and to either convey an Qualified Replacement Mortgage or to make
a deposit of any related Loan Purchase Price into the Principal and Interest
Account shall constitute the sole remedy respecting such defect available to
Owners, the Trustee and the Certificate Insurer against the Originator.
The Originator, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall deliver an
amended Mortgage Loan Schedule to the Trustee and the Certificate Insurer and
shall make appropriate entries in its general account records to reflect
50
<PAGE>
such transfer. The Originator shall, following such retransfer, appropriately
mark its records to indicate that it is no longer servicing such Mortgage Loan
on behalf of the Trust. The Originator, promptly following such transfer, shall
appropriately mark its electronic ledger and make appropriate entries in its
general account records to reflect such transfer.
(c) As to any Qualified Replacement Mortgage, the Originator
shall, if required to deliver any such Qualified Replacement Mortgage, deliver
to the Trustee with respect to such Qualified Replacement Mortgage such
documents and agreements as are required to be held by the Trustee in accordance
with Section 3.6. For any Remittance Period during which the Originator
substitutes one or more Qualified Replacement Mortgages, the Master Servicer
shall determine the Substitution Amount which amount shall be deposited by the
Originator in the Principal and Interest Account at the time of substitution.
All amounts received in respect of the Qualified Replacement Mortgage during the
Remittance Period in which the circumstances giving rise to such substitution
occur shall not be a part of the Trust Fund and shall not be deposited by the
Master Servicer in the Principal and Interest Account. All amounts received by
the Master Servicer during the Remittance Period in which the circumstances
giving rise to such substitution occur in respect of any Defective Mortgage Loan
so removed by the Trust Fund shall be deposited by the Master Servicer in the
Principal and Interest Account. Upon such substitution, the Qualified
Replacement Mortgage shall be subject to the terms of this Agreement in all
respects, and the Originator shall be deemed to have made with respect to such
Qualified Replacement Mortgage or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 3.3. The
procedures applied by the Originator in selecting each Qualified Replacement
Mortgage shall not be materially adverse to the interests of the Trustee, the
Owners or the Certificate Insurer.
The Originator may consent to the placing of a lien senior to
that of any Mortgage on the related Mortgaged Property, provided that
(x) such Mortgage succeeded to a first lien position after the
related Mortgage Loan was conveyed to the Trust and, immediately
following the placement of such senior lien, such Mortgage is in a
second lien position and the outstanding principal amount of the
mortgage loan secured by such subsequent senior lien is no greater than
the outstanding principal amount of the senior mortgage loan secured by
the Mortgaged Property as of the date the related Mortgage Loan was
originated; or
51
<PAGE>
(y) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the related Cut-Off Date and the new senior
lien secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount and interest rate of the
replacement first mortgage loan immediately following such refinancing
is not greater than the outstanding principal amount and interest rate
of such existing first mortgage loan at the date of origination of such
Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Originator can
consent to the placing of liens senior to that of a Mortgage on the related
Mortgaged Property only if the Combined Loan-to-Value and second mortgage ratio
is less than or equal to the original Combined Loan-to-Value and second mortgage
ratio; provided, however, the Originator may consent to the placing of a senior
lien on up to 3.7% of the Mortgage Loans if the Combined Loan-to-Value will not
increase to greater than 80%; provided, further, that the Originator may only
approve modifications if the related Mortgagor has used the Credit Line
Agreement in the past twelve months and has made timely payments, the current
characteristics of the related Mortgagor meet the Originator's underwriting
guidelines used at the time of origination and the Originator receives verbal
verification of employment of the related Mortgagor.
The Originator may also, without prior approval from the
Rating Agencies or the Certificate Insurer, increase the Credit Limits on
Mortgage Loans provided that (i) new appraisals are obtained and the Combined
Loan-to-Value Ratios of the Mortgage Loans after giving effect to such increase
are less than or equal to the Combined Loan-to-Value Ratios of the Mortgage
Loans as of the related Cut-Off Date, (ii) such increases are consistent with
the Originator's underwriting policies, (iii) the related Mortgagor has used the
Credit Line Agreement in the past twelve months and has made timely payments and
(iv) the Originator receives verbal verification of employment of the related
Mortgagor. In addition, the Originator may increase the Credit Limits on
Mortgage Loans having aggregate balances of up to 5% of the Pool Balance,
without obtaining new appraisals provided that (i) the increase in the Credit
Limit does not cause the Combined Loan-to-Value Ratios of the Mortgage Loans to
exceed 80%, (ii) the increase is consistent with the Originator's underwriting
policies, (iii) the related Mortgagor has used the Credit Line Agreement in the
past twelve months and has made timely payments and (iv) the Originator receives
verbal verification of employment of the related Mortgagor.
52
<PAGE>
Furthermore, the Originator may, without prior approval from
the Rating Agencies and the Certificate Insurer solicit Mortgagors for a
reduction in Loan Rates of no more than .50%; provided that the Originator can
only reduce such Loan Rates on up to 5% of the Mortgage Loans by Pool Balance.
Any such solicitations shall not result in a reduction in the weighted average
Margin of the Mortgage Loans in the pool by more than 2.5 basis points taking
into account any such prior reductions.
Subject to the above limitations, the Originator or the Master
Servicer, may agree to changes in the terms of a Mortgage Loan at the request of
the Mortgagor; provided, that such changes (i) do not materially and adversely
affect the interests of Owners or the Certificate Insurer and (ii) are
consistent with Accepted Servicing Practices.
Notwithstanding anything to the contrary, neither the
Originator nor the Master Servicer shall agree to any changes or modifications
in the terms of any Mortgage Loan that, after giving effect to such change or
modifications, would cause any criteria set forth in Section 3.8 to be violated.
Section 3.7. Cooperation Procedures. (a) The Originator 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 Originator, 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.
Section 3.8. Conveyance of the Subsequent Mortgage Loans. (a)
The Originator may, on Subsequent Transfer Dates, deliver to the Trustee loans
eligible to become Subsequent Mortgage Loans on the next following Payment Date,
in exchange, on such Payment Date, for monies released to the Originator
pursuant to Section 7.5 hereof, or a corresponding increase in the Originator's
Interest.
If, on any Payment Date, the Principal Balance as of the
related Subsequent Cut-Off Date of all Available Subsequent Mortgage Loans is
less than the sum of (x) the amount on deposit in the Pre-Funding Account (net
of Pre-Funding Earnings) at the opening of business on such Payment Date, (y)
the amount described in Section 7.5(b)(vii) and (z)
53
<PAGE>
the amount which is the lessor of (a) the amount described in Section
7.5(b)(x)(A)(1)(a) and (b) the amount described in Section 7.5(b)(x)(A)(1)(b),
then such Available Subsequent Mortgage Loans shall be allocated in the
following order of priority:
(i) first, as Pre-Funded Mortgage Loans, to the extent of the
amount described in clause (x) above;
(ii) second, as Additional Mortgage Loans, to the extent of the
amount described in clause (y) above; and
(iii) third, as O/C Mortgage Loans, to the extent of the amount of
clause (z) above.
Upon assignment of any Additional Mortgage Loan, the Trustee
shall release to the Originator an amount equal to the lesser of (A) the sum of
(i) Net Principal Collections for the related Remittance Period and (ii) the
amount on deposit in the Revolving Account at the opening of business on such
Payment Date and (B) the aggregate Principal Balance as of the related
Subsequent Cut-Off Date of all Additional Mortgage Loans relating to such
Payment Date pursuant to Section 7.5(b)(vii).
Upon assignment of any Pre-Funded Mortgage Loan, the Trustee
shall release to the Originator an amount equal to the Principal Balance thereof
as of the related Subsequent Cut-Off Date from amounts then on deposit in the
Pre-Funding Account.
Upon assignment of any O/C Mortgage Loan, the Trustee shall
release to the Originator an amount equal to the lesser of (a) the
Overcollateralization Deficiency Amount for such Payment Date and (b) the
aggregate Principal Balance thereof as of the related Subsequent Cut-Off Date of
all such available O/C Mortgage Loans, pursuant to Section 7.5(b)(x).
In addition, the Originator may assign O/C Mortgage Loans to
the Trust in exchange for an increase in the Originator's Interest in lieu of,
or in addition to, money.
(b) The Originator shall transfer to the Trustee the
Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date.
(i) the Originator shall have provided the Trustee and the
Certificate Insurer with a timely Addition Notice and shall have
provided any information reasonably requested by any of the foregoing
with respect to the Subsequent Mortgage Loans;
54
<PAGE>
(ii) the Originator shall have delivered to the Trustee a
duly executed written assignment (including an acceptance by the
Trustee) in substantially the form of Exhibit L (the "Subsequent
Transfer Agreement"), which shall include Schedules of Mortgage Loans,
listing the Subsequent Mortgage Loans and any other exhibits listed
thereon;
(iii) the Master Servicer shall have deposited in the
Principal and Interest Account all collections in respect of the
Subsequent Mortgage Loans received on or after the related Subsequent
Cut-Off Date;
(iv) as of each Subsequent Transfer Date, none of the
related Originator, the Master Servicer or the Sponsor was insolvent
nor will any of them have been made insolvent by such transfer nor is
any of them aware of any pending insolvency;
(v) such addition will not result in a material adverse tax
consequence to the Trust or the Owners of the Certificates;
(vi) with respect to Subsequent Mortgage Loans which are
Pre-Funded Mortgage Loans, the Pre-Funding Period shall not have
terminated; and
(vii) the Originator shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and in the related Subsequent
Transfer Agreement;
(c) The obligation of the Trust to accept the assignment
of a Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the
following requirements: (i) such Subsequent Mortgage Loan may not be 30 or more
days contractually delinquent as of the related Subsequent Cut-Off Date.
(d) The obligation of the Trust to accept the assignment
of a Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the
following additional requirements, any of which may be waived or modified in any
respect by the Certificate Insurer by a written instrument executed by the
Certificate Insurer:
(1) (i) No such Subsequent Mortgage Loan may have a
Combined Loan-to-Value Ratio greater than 100%; (ii) no Subsequent
Mortgage Loan shall have a Credit Utilization Rate in excess of 100%;
(iii) no Subsequent Mortgage Loan shall have a debt to income ratio in
excess of 55%; (iv) no Subsequent Mortgage Loan shall have a
55
<PAGE>
final maturity date later than the Payment Date in December 2020; (v)
all Subsequent Mortgage Loans shall have a three year interest only,
Draw Period with a 20 year amortization schedule.
(2) After giving effect to the assignment to the Trust of
any such Subsequent Mortgage Loan (i) the weighted average net Loan
Rate of all Mortgage Loans shall be no less than 11.35%; (ii) the
Mortgage Loans shall have weighted average Combined Loan-to-Value Ratio
no greater than 74.8%; (iii) the Mortgage Loans shall have a weighted
average single Loan-to-Value of not less than 28.1%; (iv) no more than
49.7% of Mortgage Loans shall have a Combined Loan-to-Value greater
than 80%; (v) no more than 0.44% of the Mortgage Loans shall have a
Combined Loan-to-Value greater than 85%; (vi) the ratio of First
Mortgage Loans to Second Mortgage Loans shall not be less than 59%;
(vii) the weighted average margin shall not be less than 3.20%; (viii)
the percentage of A classified loans shall not be less than 68.75%;
(ix) the percentage of B classified loans shall not be less than 22.0%;
(x) the percentage of C classified loans shall not be greater than
8.38%; (xi) no less than 33.9% of the Mortgage Loans shall be First
Mortgage Loans; (xii) no less than 99% of the Mortgage Loans shall be
"Fully Documented" loans; (xiii) at least 96% of the Mortgage Loans
shall be single family properties; (xiv) at least 98.7% of the Mortgage
Loans shall be owner occupied properties.
(e) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Originator agrees to satisfy the conditions set
forth in Sections 3.5(b)-(j), 3.6 and 3.7.
(f) In connection with the transfer of any Subsequent
Mortgage Loans to the Trust the Originator, the Sponsor, the Master Servicer and
the Trustee may, with the prior written consent of the Certificate Insurer,
amend the definition of "Specified Overcollateralization Amount" for the purpose
of changing the related Specified Overcollateralization Amount; provided,
however, that any such amendment must comply with the provisions of Sections
11.14(b) and 11.14(d) hereof.
(g) The Certificate Insurer, in its sole discretion and
without consent by any Person, may modify the Specified Overcollateralization
Amount to reflect (i) the characteristics of the Mortgage Loans following the
Pre-Funding Period or at quarterly intervals during the Revolving Period and
(ii) the results of the due diligence.
56
<PAGE>
Section 3.9. Retransfers of Mortgage Loans at Election of
Originator. Subject to the conditions set forth below, the holder of the
Originator's Interest may, but shall not be obligated to (except the Originator
shall be obligated upon a breach of a representation or warranty), accept the
reassignment of Mortgage Loans from the Trust as of the close of business on a
Payment Date (the "Transfer Date"). On the fifth Business Day (the "Transfer
Notice Date") prior to the Transfer Date designated in such notice, the holder
of the Originator's Interest shall give the Trustee, the Certificate Insurer and
the Master Servicer a notice of the proposed reassignment that contains a list
of the Mortgage Loans to be reassigned. Such reassignment of Mortgage Loans
shall be permitted upon satisfaction of the following conditions:
(i) No Rapid Amortization Event has occurred;
(ii) On the Transfer Notice Date the Originator's
Interest (after giving effect to the removal from the Trust of the
Mortgage Loans proposed to be retransferred) is at least equal to the
Specified Overcollateralization Amount;
(iii) The transfer of any Mortgage Loans on any Transfer
date during the Managed Amortization Period shall not, in the
reasonable belief of the holder of the Originator's Interest, cause a
Rapid Amortization Event to occur or an event which with notice or
lapse of time or both would constitute a Rapid Amortization Event;
(iv) On or before the Transfer Date, the Originator shall
have delivered to the Trustee, the Certificate Insurer and the Rating
Agencies a revised Mortgage Loan Schedule, reflecting the proposed
transfer and the Transfer Date, and the Master Servicer shall have
marked its servicing records to show that the Mortgage Loans reassigned
to the holder of the Originator's Interest are no longer owned by the
Trust;
(v) The holder of the Originator's Interest shall
represent and warrant that random selection procedures were used in
selecting the Mortgage Loans and no other selection procedures were
used which are adverse to the interests of the Owners of the Class A
Certificates or the Certificate Insurer were utilized in selecting the
Mortgage Loans to be removed from the Trust;
(vi) The holder of the Originator's Interest shall have
delivered to the Trustee and the Certificate Insurer an Officer's
Certificate certifying that the items set forth in subparagraphs (i)
through (vi),
57
<PAGE>
inclusive, have been performed or are true and correct, as the case may
be. The Trustee may conclusively rely on such Officer's Certificate,
shall have no duty to make inquiries with regard to the matters set
forth therein and shall incur no liability in so relying.
Upon receiving the requisite information from the owner of the Originator's
Interest, the Master Servicer shall perform in a timely manner those acts
required of it, as specified above. Upon satisfaction of the above conditions,
on the Transfer Date the Trustee shall deliver, or cause to be delivered, to the
owner of the Originator's Interest the Mortgage File for each Mortgage Loan
being so reassigned, and the Trustee shall execute and deliver to the owner of
the Originator's Interest such other documents prepared by the Originator as
shall be reasonably necessary to reassign such Mortgage Loans to the owner of
the Originator's Interest. Any such transfer of the Trust's right, title and
interest in and to Mortgage Loans shall be without recourse, representation or
warranty by or of the Trustee or the Trust to the owner of the Originator's
Interest.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Closing
Day, upon the Trustee's receipt from the Originator of an executed Delivery
Order in the form set forth as Exhibit G hereto, the Trustee shall execute,
authenticate and deliver the Certificates and the Originator Certificate 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 Closing Day, at the offices of Dewey Ballantine, 1301 Sixth
Avenue, New York, New York, the Originator will sell and convey the Initial
Mortgage Loans and the money, instruments and other property related thereto to
the Trustee, and the Trustee will 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. Upon receipt of the proceeds of the
sale of the Certificates, the Trustee shall, from the proceeds of the sale of
the Certificates, (a) pay other fees and expenses identified by the Originator,
(b) deposit an amount equal to the Original Pre-Funded Amount in the Pre-Funding
Account and (c) deposit an amount equal to the Capitalized Interest Account
Deposit in the Capitalized Interest Account, and (d) pay to the Originator the
balance
58
<PAGE>
after deducting such amounts. The Originator shall pay directly to the
Certificate Insurer the Initial Premium.
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 Credit Line Agreements guaranteed by any Person
(except that the Credit Line Agreements 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 Revolving Account, the Certificate Account, the
Capitalized Interest Account and the Pre-Funding Account, except as otherwise
provided herein, from earnings on monies and the proceeds of property held as a
part of the Trust Fund and, upon the occurrence of certain events, from payments
made pursuant to the Certificate Insurance Policy. 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, certain payments made pursuant
to the Certificate Insurance Policy, pro rata in accordance with such Owner's
Percentage Interest and certain amounts payable from the Pre-Funding Account.
(b) Each Owner is required, and hereby agrees, to return
to the Trustee any Certificate with respect to which the Trustee has made the
final distribution due thereon. Any such Certificate as to which the Trustee has
made the final distribution thereon shall be deemed cancelled and shall no
longer be Outstanding for any purpose of this Agreement, whether or not such
Certificate is ever returned to the Trustee.
Section 5.2. Forms. The Class A Certificates and the
Originator Certificate shall be in substantially the forms set forth in Exhibits
A-1 and A-2, 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
59
<PAGE>
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 and the Originator 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 and the Originator Certificate 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 the
Originator Certificate, as the case may be, or did not hold such offices at the
date of authentication of such Certificates or the Originator Certificate, as
the case may be.
The initial Certificates and the Originator Certificate
shall be dated as of the Closing 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. The Originator Certificate shall not 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 Originator Certificate and the registration of transfer of Certificates and
the Originator Certificate. The Trustee is hereby appointed registrar for the
purpose of registering Certificates and the Originator Certificate and transfers
of Certificates and the Originator Certificate as herein provided. The Owners
and the holder of the Originator Certificate 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 or the Originator
Certificate at the office designated as the location of the Register, the
Trustee shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new
60
<PAGE>
Certificates of a like Class and in the aggregate principal amount of the
Certificate so surrendered or a new Originator Certificate.
(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 or the Originator Certificate shall be
valid evidence of the same ownership interests in the Trust and entitled to the
same benefits under this Agreement as the Certificates or the Originator
Certificate surrendered upon such registration of transfer or exchange.
(e) Every Certificate and any Originator 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, in the case of each Certificate,
the Owner thereof, and, in the case of the Originator Certificate, the holder
thereof or, in any case, his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner or to the
holder of the Originator Certificate for any registration of transfer or
exchange of Certificates or the Originator Certificate, 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 or the Originator Certificate; 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 Initial Cut-Off Date Pool 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.
61
<PAGE>
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
Originator, the Sponsor, the Master Servicer and the Trustee shall have no
responsibility or obligation to Direct or Indirect Participants or beneficial
owners for which the Depository holds Class A Certificates from time to time as
a Depository. Without limiting the immediately preceding sentence, the
Originator, 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
62
<PAGE>
depository's agent or designee but, if the Sponsor does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names registered Owners of Class A Certificates
transferring Class A Certificates shall designate, in accordance with the
provisions hereof.
(i) Notwithstanding any other provision of this Agreement
to the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates as the case may be and all notices with
respect to such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
Section 5.5. Mutilated, Destroyed, Lost or Stolen
Certificates. If (i) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate or Originator's Certificate, and (ii) in the case of
any mutilated Certificate or Originator's Certificate, such mutilated
Certificate or Originator's Certificate shall first be surrendered to the
Trustee, and in the case of any destroyed, lost or stolen Certificate or
Originator's Certificate, there shall be first delivered to the Trustee such
security or indemnity as may be reasonably required by it to hold the Trustee
harmless (provided, that with respect to an Owner which is an insurance company,
a letter of indemnity furnished by it shall be sufficient for this purpose),
then, in the absence of notice to the Trustee that such Certificate or
Originator's 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 or Originator's Certificate, a
new Certificate of like Class, tenor and aggregate principal amount, bearing a
number not contemporaneously outstanding or a new Originator's Certificate.
Upon the issuance of any new Certificate or Originator's
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
63
<PAGE>
same Class duly issued hereunder and such mutilated, destroyed, lost or stolen
Certificate shall not be valid for any purpose.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates
or Originator's 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 and as the owners of the
Originator's Certificate, as the case may be, for the purpose of receiving
distributions with respect to such Certificate or Originator's 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 or
Originator's 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 or Originator's
Certificate shall be authenticated in lieu of or in exchange for any Certificate
or Originator's Certificate cancelled as provided in this Section, except as
expressly permitted by this Agreement. All cancelled Certificates or
Originator's Certificates may be held or destroyed by the Trustee in accordance
with its standard 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, the Originator or any of their respective affiliates. Except for the
initial issuance of the Originator's Certificate to the Originator, no transfer
of a Class A Certificate or an Originator's Certificate shall be made to an
employee benefit plan subject to Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), a plan subject to section 4975 of
the Code or a Person using the assets of such an employee benefit plan or plan
to acquire its interest in the Class A Certificate or Originator's Certificate.
By its acceptance of a Class A Certificate or an Originator's Certificate, the
transferee of such Certificate will be deemed to have represented and warranted
that it is not subject to the foregoing restriction.
(b) No sale or other transfer of record or beneficial
ownership of the Originator's Interest shall be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended, and
64
<PAGE>
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
Closing Day, (i) the Originator shall require a written opinion of counsel
acceptable to and in form and substance satisfactory to the Originator 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 Trust, the Trustee, the Originator 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, the Originator and the
Trustee certifying to the Trustee, the Originator and the Sponsor the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trust, the Trustee, the Originator or the Sponsor. The Owner of the
Originator's Interest desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee, the Certificate Insurer, the Originator 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.
(c) The holder of the Originator's Certificate may
transfer all, but not less than all, of its interest in the Originator's
Interest. The Originator's Interest shall not be transferred except upon
satisfaction of the following conditions precedent: (i) the Person that acquires
a Originator Certificate shall (A) be organized and existing under the laws of
the United States of America or any state or the District of Columbia thereof,
and (B) expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee, the performance of every covenant and obligation of
the Originator hereunder; (ii) the holder of the Originator's Interest shall
deliver to the Trustee an Officer's Certificate stating that such transfer and
such supplemental agreement comply with this Section 5.8 and that all conditions
precedent provided by this subsection 5.8(c) have been complied with and an
Opinion of Counsel stating that all conditions precedent provided by this
subsection 5.8(c) have been complied with, and the Trustee may conclusively rely
on such Officer's Certificate, shall have no duty to make inquiries with regard
to the matters set forth therein and shall incur no liability in so relying;
(iii) the holder of the Originator's Interest shall deliver to the Trustee a
letter from each Rating Agency confirming that its rating of the Class A
Certificates, after giving effect to such transfer, will not be reduced or
withdrawn without regard to the Policy; (iv) the transferee of the Originator's
Interest shall deliver to the Trustee an Opinion of Counsel to the effect that
(a) such transfer will not adversely affect the treatment of the Class A
Certificates after such transfer as debt for federal and applicable state income
tax purposes, (b) such transfer will not result in the
65
<PAGE>
Trust being subject to tax at the entity level for federal or applicable state
tax purposes, (c) such transfer will not have any material adverse impact on the
federal or applicable state income taxation of a Class A Certificateholder or
any Certificate Owner and (d) such transfer will not result in the arrangement
created by this Agreement or any "portion" of the Trust, being treated as a
taxable mortgage pool as defined in Section 7701(i) of the Code; (v) all filings
and other actions necessary to continue the perfection of the interest of the
Trust in the Mortgage Loans and the other property conveyed hereunder shall have
been taken or made. Notwithstanding the foregoing, the requirement set forth in
subclause (i)(A) of this Section 5.8(c) shall not apply in the event the Trustee
shall have received a letter from each Rating Agency confirming that its rating
of the Class A Certificates, after giving effect to a proposed transfer to a
Person that does not meet the requirement set forth in subclause (i)(A), shall
not be reduced or withdrawn. Notwithstanding the foregoing, the requirements set
forth in this paragraph (c) shall not apply to the initial issuance of the
Originator's Interest to the Originator.
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.
Section 5.10. Liabilities. The Holder of the Originator's
Interest shall indemnify and hold harmless the Trust and the Trustee, its
officer, directors, employees and agents from and against any reasonable loss,
liability, expense, damage or injury suffered or sustained by reason of any
acts, omissions or alleged acts or omissions arising out of or based upon the
arrangement created by this Agreement or any Subsequent Transfer Agreement, as
though this Agreement or such Subsequent Transfer Agreement created a
partnership under the New York Uniform Partnership Law in which the Holder of
the Originator's Interest is the general partner; provided, however, that the
Holder of the Originator's Interest shall not indemnify the Trustee if such
acts, omissions or alleged acts or omissions constitute or are caused by fraud,
negligence, or willful misconduct by the Trustee; provided, further, that the
Holder of the Originator's Interest shall not indemnify the Trust or the Owners
of the Class A Certificates for any liabilities, costs or expenses of the Trust
with respect to any action taken by the Trustee at the request of the Owners of
the Class A Certificates; provided, further, that the Holder of the Originator's
Interest shall not indemnify the Trust or the owners of the Class A Certificates
as to any losses, claims or damages incurred by
66
<PAGE>
any of them in their capacities as investors, including, without limitation,
losses incurred as a result of Liquidated Mortgage Loans; and provided, further,
that the Holder of the Originator's Interest shall not indemnify the Trust or
the Owner of the Class A Certificates for any liabilities, costs or expenses of
the Trust, the Trustee or the Owners of the Class A Certificates arising under
any tax law relating to any Federal, state, local or foreign income or franchise
taxes or any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply therewith)
required to be paid by the Trust or the Owners of the Class A Certificates in
connection herewith to any taxing authority. Any such indemnification shall not
be payable from the Trust Fund. The provisions of this indemnity shall run
directly to and be enforceable by an injured party subject to the limitations
hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. The Trustee will duly and
punctually pay distributions with respect to the Certificates in accordance with
the terms of the Certificates and this Agreement. Such distributions shall be
made (i) by check mailed on each Payment Date or (ii) if requested by any Owner,
to such Owner by wire transfer to an account within the United States designated
no later than five Business Days prior to the related Record Date, made on each
Payment Date, in each case to each Owner of record on the immediately preceding
Record Date; provided, however, that an Owner of a Class A Certificate shall
only be entitled to payment by wire transfer if such Owner owns Class A
Certificates in the aggregate denomination of at least $5,000,000.
Section 6.2. Money for Distributions to be Held in Trust;
Withholding. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from payments made pursuant to the
Certificate Insurance Policy 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 payments made pursuant to the Certificate Insurance Policy
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.
67
<PAGE>
(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 Originator's Interest; 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 Originator's Interest for payment thereof (but only
to the extent of the amounts so paid to the Certificate Insurer or the Owners of
the Originator's Interest), 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
Trust 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 Originator's Interest. The Trustee
shall, at the direction of the Sponsor, also adopt and employ, at the expense of
the Trust, 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 Fund. (a) The Trustee
will hold the Trust Fund in trust for the benefit of the Owners and, upon
request of the Certificate Insurer, or, with the consent of the Certificate
Insurer, at the request and expense of the Originator, will from time to time
execute and deliver all such supplements and amendments hereto pursuant to
Section 11.14 hereof and all instruments of further assurance and other
instruments, and will take such other action upon such request as it deems
reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any portion of
the Trust Fund;
(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
68
<PAGE>
(iv) preserve and defend title to the Trust Fund and the
rights of the Trustee, and the ownership interests of the Owners
represented thereby, in such Trust Fund against the claims of all
Persons and parties.
The Trustee shall send copies of any request received
from the Certificate Insurer or the Originator 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 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 Originator's Interest.
(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 Originator, the Sponsor or the
Certificate Insurer from any of their respective covenants or obligations under
any instrument or document relating to the Trust Fund or the Certificates or
which would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of, any such instrument
or document, except as expressly provided in this Agreement or such other
instrument or document.
The Trustee may contract with other Persons to assist it
in performing its duties hereunder.
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 Fund except as expressly permitted by this Agreement;
69
<PAGE>
(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 Fund;
(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 Fund 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 Fund 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 Policies 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
Originator, 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 Certificates then
Outstanding, by such percentage of the Percentage
Interests represented by the Originator's Interest, shall
have made written request to the Trustee to institute
such proceeding in respect of such Event of Default;
70
<PAGE>
(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 Originator's Interest;
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 in its sole discretion may determine what action, if any, shall be
taken, 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 conferred upon or reserved
to the Trustee, the Certificate Insurer or to the Owners is intended to be
exclusive of any
71
<PAGE>
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 Originator's Interest 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 Fund,
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.
72
<PAGE>
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) payments made pursuant to the Certificate Insurance Policy.
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
Fund and shall apply it as provided in this Agreement.
Section 7.2. Establishment of Accounts. The Originator
shall cause to be established, and the Trustee shall maintain, at the corporate
trust office of the Trustee, a Certificate Account, a Pre-Funding Account, a
Revolving Account and a Capitalized Interest Account, each 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.
Section 7.3. The Certificate Insurance Policy.
(a) (i) On each Determination Date the Trustee shall
determine with respect to the immediately following Payment Date, the amount
(the "Available Funds") to be on deposit in the Certificate Account on such
Payment Date (excluding the amounts of any payments made pursuant to the
Certificate Insurance Policy, the Trustee's Fee, the Servicing Fee and the
Premium Amount) and equal to the sum of amounts described in Section 7.5(a) with
respect to such immediately following Payment Date.
(b) If (i) the Available Funds for such Payment Date are
not sufficient to pay the Class A Interest Distribution Amount and/or (ii)
following the application of all Available Funds, on Overcollateralization
Deficit would exist (either such event being an "Available Funds Shortfall"),
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 payment in an amount equal to the aggregate Available
Funds Shortfall.
(c) Upon receipt of payments made pursuant to the
Certificate Insurance Policy from the Certificate Insurer
73
<PAGE>
on behalf of Owners, the Trustee shall deposit such payments in the Certificate
Account and shall distribute such payments, or the proceeds thereof, in
accordance with Section 7.5 hereof to the Owners of the Class A Certificates of
the related Class.
(d) The Trustee shall (i) receive payments made pursuant
to the Certificate Insurance Policy as attorney-in-fact of each Owner of the
Class A Certificates receiving any Insured Payment from the Certificate Insurer
and (ii) disburse such Insured Payment to the Owners of such Class A
Certificates as set forth in Section 7.5 hereof. The Certificate Insurer shall
be entitled to receive the related Reimbursement Amount pursuant to Section
7.5(b)(ix) 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 payments made
pursuant to the Certificate Insurance Policy, 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 such related Reimbursement
Amount.
Section 7.4. Pre-Funding Account and Capitalized Interest
Account. (a) On the Closing Day, the Trustee will deposit from the proceeds of
the sale of the Class A Certificates, on behalf of the Owners of the Class A
Certificates and the Certificate Insurer, in the Pre-Funding Account, the
Original Pre-Funded Amount and in the Capitalized Interest Account, the
Capitalized Interest Account Deposit.
(b) On each Pre-Funding Transfer Date, the Originator
shall instruct the Trustee to withdraw from the Pre-Funding Account and release
to the Originator an amount equal to 100% of the Principal Balance of the
Pre-Funded Mortgage Loans transferred to the Trust on such Pre-Funding Transfer
Date upon satisfaction of the conditions set forth in Section 3.8 hereof with
respect to such transfer.
(c) On the Payment Dates occurring in December, 1996,
January, 1997 and February, 1997, the Trustee shall transfer from the
Pre-Funding Account to the Certificate Account the Pre-Funding Earnings, if any,
applicable to each such Payment Date.
(d) On each Payment Date occurring during the Pre-Funding
Period and the Revolving Period, the Trustee shall transfer from the Capitalized
Interest Account to the Certificate Account the Capitalized Interest
Requirement, if any, for such Payment Dates.
74
<PAGE>
(e) With respect to the Payment Dates in December 1996
and January 1997, if the Originator delivers a sufficient number of Subsequent
Mortgage Loans to satisfy its obligations hereunder, any amount remaining in the
Capitalized Interest Account in excess of the Capitalized Interest Revolving
Period Amount shall be released to the Originator on such Payment Date.
On the Payment Date which immediately follows the end of
the Revolving Period, and following any withdrawals from the Capitalized
Interest Account on such Payment Date, the Capitalized Interest Account shall be
closed and any remaining amount on deposit therein shall be paid to the Owner of
the Originator's Interest.
Section 7.5. Flow of Funds. (a) The Trustee shall deposit
to the Certificate Account, without duplication, upon receipt, (i) any payments
made pursuant to the Certificate Insurance Policy, (ii) the proceeds of any
liquidation of the assets of the Trust, the Monthly Remittance Amount remitted
by the Master Servicer or any Sub-Servicer, together with any Substitution
Amounts, and any Loan Purchase Price amounts received by the Trustee, (iii) on
the Payment Dates occurring in December, 1996, January, 1997 and February 1997,
the Pre-Funding Earnings transferred by the Trustee pursuant to Section 7.4(c)
hereof, (iv) the Capitalized Interest Requirement to be transferred on such
Payment Dates from the Capitalized Interest Account, pursuant to Section 7.4(d)
hereof and (v) the portion of the amount, if any, to be transferred on such
Payment Date from the Pre-Funding Account, pursuant to Section 7.5(b)(vi) hereof
and (vi) the amounts, if any, transferred from the Revolving Account pursuant to
Sections 7.5(b)(vi), (vii), (viii) and (x) hereof.
(b) With respect to the Certificate Account, on each
Payment Date, the Trustee shall make the following allocations, disbursements
and transfers 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, to the Trustee, the Trustee's Fee then due;
(ii) second, to the Owner of the Originator's Interest, the
Originator's Current Amount, if any, for such Payment
Date;
(iii) third, from amounts then on deposit in the Certificate
Account, the Premium Amount for such Payment Date.
75
<PAGE>
(iv) fourth, to the Owners of the Class A Certificates, the
Class A Interest Distribution Amount for such Payment
Date;
(v) fifth, to the Owners of the Class A Certificates, as a
distribution of principal, the Overcollateralization
Deficit for such Payment Date;
(vi) sixth, if such Payment Date is the first Payment Date
following the end of the Pre-Funding Period, to the
Owners of the Class A Certificates as a distribution of
principal any amount remaining in the Pre-Funding Account
(after taking into account all transfers of Subsequent
Mortgage Loans on or prior to such Payment Date);
provided, that if such remaining amount is less than
$100,000, such amount shall be deposited in the Revolving
Account and shall be deemed to be on deposit in the
Revolving Account on such Payment Date; provided that, if
the amount on deposit in the Revolving Account exceeds
$3,000,000, the amount of such excess shall be
distributed to the Owners of the Class A Certificates as
a distribution of principal;
(vii) seventh, for each Payment Date during the Revolving
Period to the Owner of the Originator's Interest, in
exchange for the Originator's transfer as of such Payment
Date of the Additional Mortgage Loans, an amount equal to
the lesser of (A) the sum of (i) Net Principal
Collections for the related Remittance Period and (ii)
the amount on deposit in the Revolving Account at the
opening of business on such Payment Date and (B) the
aggregate Principal Balance as of the related Subsequent
Cut-Off Date of all Additional Mortgage Loans relating to
such Payment Date; provided, that if the amount described
in clause (A) exceeds the amount described in clause (B),
an amount equal to such excess shall be deposited to (or
retained in) the Revolving Account and shall be deemed to
be on deposit in the Revolving Account on such Payment
Date; provided that, if the amount on deposit in the
Revolving Account exceeds $3,000,000, the amount of such
excess shall be distributed to the Owners of the Class A
Certificates as a distribution of principal;
(viii) eighth, for each Payment Date during the Amortization
Period, to the Owners of the Class A Certificates as a
distribution of principal,
76
<PAGE>
the Scheduled Principal Distribution Amount for such
Payment Date; plus, if such Payment Date is the first
Payment Date occurring during the Amortization Period,
all amounts then on deposit in the Revolving Account,
after taking into account any deposits thereto and any
withdrawals therefrom on such Payment Date;
(ix) ninth, to the Certificate Insurer, the Reimbursement
Amount, if any, then due to it;
(x) tenth,
(A) during the Revolving Period,
(1) to the Originator, in exchange for
the Originator's assignment as of
such Payment Date of the O/C Mortgage
Loans, to the extent available, up to
an amount equal to the lesser of (a)
the Overcollateralization Deficiency
Amount for such Payment Date; and (b)
the Principal Balance as of the
related Subsequent Cut-Off Date of
all such available O/C Mortgage
Loans, or
(2) to the extent not released to the
Originator in exchange for the
Originator's assignment as of such
Payment Date of the O/C Mortgages, to
the Revolving Account up to an amount
equal to the Overcollateralization
Deficiency Amount, or
(3) if, on such Payment Date, the amount
on deposit in the Revolving Account
(after taking into account any
deposits thereto and any withdrawals
therefrom on such Payment Date)
exceeds $3,000,000, to the Owners of
the Class A Certificates as a
distribution of principal the amount
of such excess.
(B) During the Amortization Period, to the Owners
of the Class A Certificates as a distribution
of principal up to an amount
77
<PAGE>
equal to the Overcollateralization Deficiency
Amount (the "Accelerated Principal Payment");
(xi) eleventh, to the Master Servicer, reimbursement for
Servicing Advances to the extent not previously
reimbursed and reimbursement for Servicing Advances which
have been deemed Nonrecoverable Advances;
(xii) twelfth, to the Owners of the Class A Certificates, the
amount of any Net Funds Cap Carry-Forward Amount then
due; and
(xiii) thirteenth, to the holder of the Originator's
Certificate, any amount remaining on deposit in the
Certificate Account.
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 directed in writing by the Master Servicer, in one or
more Eligible Investments bearing interest or sold at a discount. During the
continuance of an event described in Sections 8.20(a) or (b) hereof and
following any removal of the Master Servicer, the Certificate Insurer shall
direct such investments. No investment in any Account shall mature later than
the Business Day immediately preceding the next Payment Date.
(b) If any amounts are needed for disbursement from any
Account held by the Trustee and sufficient uninvested funds are not available to
make such disbursement, the Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. No
investments will be liquidated prior to maturity unless the proceeds thereof are
needed for disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not
in any way be held liable by reason of any insufficiency in any Account held by
the Trustee resulting from any loss on any Eligible Investment included therein
(except to the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held by
the Trustee uninvested upon the occurrence of either of the following events:
78
<PAGE>
(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.
(c) FHLMC participation certificates and senior debt
obligations.
(d) Federal Home Loan Banks' consolidated senior debt
obligations.
(e) FNMA mortgage-backed securities (other than stripped
mortgage securities which are valued greater than par on the portion of unpaid
principal) and senior debt obligations.
(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 S&P and P-1 by Moody's.
79
<PAGE>
(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 S&P, or is the lead bank of a parent bank holding company with an
uninsured, unsecured and unguaranteed obligation meeting such rating
requirements, 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 S&P and P-1 or better by Moody's.
(i) Investments in money market funds rated AAAm or
AAAm-G by S&P and AAA or P-1 by Moody's.
(j) Investments approved in writing by the Certificate
Insurer and acceptable to Moody's and S&P.
Provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
Section 7.8. Reports by Trustee. [Revise] (a) On each
Payment Date the Trustee shall provide to each Owner, to the Master Servicer, to
the Certificate Insurer, to
80
<PAGE>
each Underwriter, to the Originator, to the Sponsor, to S&P and to Moody's a
written report in substantially the form set forth as Exhibit J hereto, as such
form may be revised by the Trustee, the Master Servicer, Moody's and S&P from
time to time, but in every case setting forth the information requested on
Exhibit J hereto and the following information:
(i) the Class A Certificate Distribution Amount;
(ii) the amount of such distributions allocable to
principal;
(iii) the amount of such distributions allocable to
interest and the related Class A Certificate;
(iv) the amount of any Unpaid Class A Certificate
Interest Shortfall in such distribution;
(v) the amount of any Insured Payment included in the
amounts distributed Certificates on such Payment Date;
(vi) information furnished by the Originator 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) for Payment Dates during the Pre-Funding Period,
the remaining Pre-Funded Amount;
(ix) for the final Subsequent Transfer Date, the amount
of any remaining Pre-Funded Amount that has not been used to fund the
purchase of Subsequent Mortgage Loans and that will be distributed to
the Owners of the related class of certificates as principal, if any,
on the immediately following Payment Date;
(x) the amounts, if any, of any Realized Losses for the
related Remittance Period; and
(xi) the amount, if any, of principal in such
distribution, separately stating the components thereof;
(xii) the Servicing Fee for such Payment Date;
(xiii) the Class A Principal Balance and the Pool Factor,
each after giving effect to such distribution;
81
<PAGE>
(xiv) the Pool Balance as of the end of the preceding
Remittance Period and the Pool Balance at the close of business on the
last day of the related Remittance Period;
(xv) the Insured Payment, if any;
(xvi) the number and aggregate Principal Balances of
Mortgage Loans as to which the Minimum Monthly Payment is delinquent
for 30-59 days, 60-89 days and 90 or more days, respectively, as of the
end of the preceding Remittance Period;
(xvii) the book value (within the meaning of 12 C.F.R.
ss. 571.13 or comparable provision) of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(xviii) the Class A Pass-Through Rate applicable to the
distribution on the following Payment Date;
(xix) the number and principal balances of any Mortgage
Loans retransferred to the Originator pursuant to (a) Section 3.6 and
(b) Section 3.9;
(xx) the Overcollateralization Deficit;
(xxi) the aggregate Principal Balance of the Subsequent
Mortgage Loans for the related Remittance Period;
(xxii) the amount of the Accelerated Principal Payment,
if any, for the related Payment Date;
(xxiii) the amount of any Net Funds Cap Carry-Forward
Amount;
(xxiv) the amount of any Step-Down Amount;
(xxv) the amount of the Originator's Interest; and
(xxvi) the amount of the Non-Subordinated Originator's
Interest.
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.
82
<PAGE>
(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 Originator, to S&P and to Moody's, together with the
information described in Subsection (a) preceding, the following information 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 and the Principal
Balances thereof, together with the number, aggregate Principal
Balances of such Mortgage Loans and the percentage (based on the
aggregate Principal Balance of the Mortgage Loans) of the aggregate
Principal Balance of such Mortgage Loans to the aggregate Principal
Balance of all Mortgage Loans (a) 30-59 days Delinquent, (b) 60-89
days Delinquent and (c) 90 or more days Delinquent;
(ii) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal Balance
of the Mortgage Loans) of the aggregate Principal Balance of such
Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans
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 Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal Balance
of the Mortgage Loans) of the aggregate Principal Balance of such
Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans
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 Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal Balance
of the Mortgage Loans) of the aggregate Principal Balance of such
Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans
relating to REO Properties (and whether any such Mortgage Loans are
also included in any of the statistics described in the foregoing
clause (i)); and
(v) the book value of any REO Property.
(c) The foregoing reports shall be sent be to an Owner
only insofar as such Owner owns a Certificate.
Section 7.9. Additional Reports by Trustee. (a) The
Trustee shall report to the Originator, the Master
83
<PAGE>
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
Originator, 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 Originator, the Master Servicer or the Certificate Insurer,
transmit promptly to the Originator, the Master Servicer and the Certificate
Insurer copies of all accounting of aggregate receipts in respect of the
Mortgage Loans furnished to it by the Master Servicer pursuant to Section
8.8(d)(ii) hereof and shall notify the Originator, the Master Servicer and the
Certificate Insurer if any such receipts have not been received by the Trustee.
(b) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer with respect to its
actual knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
Section 3.3(a) hereof. On the date that is eighteen months after the Closing
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 under
Section 3.4(b) hereof with respect thereto.
(c) On a quarterly basis during the Revolving Period,
commencing on February 26, 1997 the Master Servicer shall deliver to the
Certificate Insurer, Moody's and S&P a mortgage portfolio tape containing the
characteristics of all Subsequent Mortgage Loans added to the Trust since the
Closing Date.
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 8.1. Master Servicer and Sub-Servicers.
(a) Advanta Mortgage Corp. USA agrees to act as the
Master Servicer and to perform all servicing duties under this Agreement subject
to the terms hereof.
(b) The Master Servicer shall service and administer the
Mortgage Loans on behalf of the Trustee and the Certificate Insurer and shall
have full power and authority, acting alone or through one or more
Sub-Servicers, to do any and all things in connection with such servicing and
84
<PAGE>
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Master Servicer, in its own name or the name of
a Sub-Servicer, may, and is hereby authorized and empowered by the Trustee to,
execute and deliver, on behalf of itself, the Owners, the Certificate Insurer
and the Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, the insurance
policies and accounts related thereto and the properties subject to the
Mortgages in accordance with the terms of this Agreement. Upon the execution and
delivery of this Agreement, and from time to time as may be required thereafter,
the Trustee shall furnish the Master Servicer or its Sub-Servicers with any
powers of attorney and such other documents as may be necessary or appropriate
to enable the Master Servicer to carry out its servicing and administrative
duties hereunder.
In servicing and administering the Mortgage Loans, the
Master Servicer shall employ procedures consistent with Accepted Servicing
Practices and in a manner consistent with recovery under any insurance policy
required to be maintained by the Master Servicer pursuant to this Agreement.
Costs incurred by the Master Servicer in effectuating the
timely payment of taxes and assessments on the property securing a Credit Line
Agreement and foreclosure costs may be added by the Master Servicer to the
amount owing under such Credit Line Agreement where the terms of such Credit
Line Agreement so permit; provided, however, that the addition of any such cost
shall not be taken into account for purposes of calculating the principal amount
of the Credit Line Agreement and the Mortgage Loan secured by the Credit Line
Agreement or distributions to be made to Owners. Such costs shall be recoverable
by the Master Servicer pursuant to Section 8.9 and 8.13.
(c) Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Owners, the
Certificate Insurer and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the related Properties, including consenting to the placement of a
lien senior to that of any Mortgage on the related Mortgaged Property; provided,
that,
(x) such Mortgage succeeded to a first lien position
after the related Mortgage Loan was conveyed to
85
<PAGE>
the Trust and, immediately following the placement of such senior lien,
such Mortgage is in a second lien position and the outstanding
principal amount of the mortgage loan secured by such subsequent senior
lien is no greater than the outstanding principal amount of the senior
mortgage loan secured by the Mortgaged Property as of the date the
related Mortgage Loan was originated; or
(y) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the related Cut-Off Date and the new senior
lien secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount and interest rate of the
replacement first mortgage loan immediately following such refinancing
is not greater than the outstanding principal amount and interest rate
of such existing first mortgage loan at the date of origination of such
Mortgage Loan;
provided, further, that such senior lien does not secure a note that
provides for negative amortization. Notwithstanding the foregoing, the
Master Servicer can consent to the placing of liens senior to that of a
Mortgage on the related Mortgaged Property only if the Combined
Loan-to-Value and second mortgage ratio is less than or equal to the
original Combined Loan-to-Value and second mortgage ratio; provided,
however, the Master Servicer may consent to the placing of a senior
lien on up to 3.7% of the Mortgage Loans if the Combined Loan-to-Value
will not increase to greater than 80%; provided, further that the
Master Servicer may only approve modifications if the related Mortgagor
has used the Credit Line Agreement in the past twelve months and has
made timely payments, the current characteristics of the related
Mortgagor are consistent with the Accepted Servicing Practices and the
Master Servicer receives verbal verification of employment of the
related Mortgagor.
At the written direction of the Originator, the Master
Servicer may also, without prior approval from the Rating Agencies or the
Certificate Insurer, increase the Credit Limits on Mortgage Loans provided that
(i) new appraisals are obtained and the Combined Loan-to-Value Ratios of the
Mortgage Loans after giving effect to such increase are less than or equal to
the Combined Loan-to-Value Ratios or the Mortgage Loans as of the related
Cut-Off Date, (ii) such increases are consistent with the Accepted Servicing
Practices, (iii) the related Mortgagor has used the Credit Line Agreement in the
past twelve months and has made timely payments and (iv) the Master Servicer
receives verbal verification of employment of the related Mortgagor. In
addition, the Master Servicer, at the written direction of the Originator may
increase the
86
<PAGE>
Credit Limits on Mortgage Loans having aggregate balances of up to 5% of the
aggregate Cut-Off Date Pool Balance, without obtaining new appraisals provided
that (i) the increase in the Credit Limit does not cause the Combined
Loan-to-Value Ratios of the Mortgage Loans to exceed 80%, (ii) the increase is
consistent with Accepted Servicing Practices, (iii) the related Mortgagor has
used the Credit Line Agreement in the past twelve months and has made timely
payments and (iv ) the Master Servicer receives verbal verification of
employment of the related Mortgagor.
Furthermore, the Master Servicer may, without prior
approval from the Rating Agencies and the Certificate Insurer solicit Mortgagors
for a reduction in Loan Rates of no more than .50%; provided that the Master
Servicer can only reduce such Loan Rates on up to 5% of the Mortgage Loans by
Pool Balance. Any such solicitations shall not result in a reduction in the
weighted average Margin of the Mortgage Loans in the pool by more than 2.5 basis
points taking into account any such prior reductions.
Subject to the above limitations, the Master Servicer may
agree to changes in the terms of a Mortgage Loan at the request of the
Mortgagor; provided, that such changes (i) do not materially and adversely
affect the interests of Owners or the Certificate Insurer and (ii) are
consistent with Accepted Servicing Practices.
In addition to the foregoing, the Master Servicer may
solicit Mortgagors to change any other terms of the related Mortgage Loans;
provided, that such changes (i) do not materially and adversely affect the
interest of Owners or the Certificate Insurer and (ii) are consistent with
Accepted Servicing Practices. Nothing herein shall limit the right of the Master
Servicer to solicit Mortgagors with respect to new loans (including mortgage
loans) that are not Mortgage Loans.
The relationship of the Master Servicer (and of any
successor to the Master Servicer as servicer under this Agreement) to the
Trustee under this Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.
In the event that the rights, duties and obligations of
the Master Servicer are terminated hereunder, any successor to the Master
Servicer in its sole discretion may, to the extent permitted by applicable law,
terminate the existing subservicer arrangements with any subservicer or assume
the terminated Master Servicer's rights under such subservicing arrangements
which termination or assumption will not violate the terms of such arrangements.
87
<PAGE>
(d) The Master Servicer may consent to any modification
of the terms of any Credit Line Agreement not expressly prohibited hereby if the
effect of any such modification will not be to affect materially and adversely
the security afforded by the related Mortgaged Property, the timing of receipt
of any payments required hereby or the interests of the Certificate Insurer;
(e) 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.
(f) 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 Mortgaged
Property on behalf of the Trustee, and (iii) to hold title to any Mortgaged
Property upon such foreclosure or deed in lieu of foreclosure on behalf of the
Trustee; provided, however, that Section 8.14(a) shall constitute a power of
attorney from the Trustee to the Master Servicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Mortgage Loan paid in full (or with respect to which payment in full has been
escrowed). Subject to Sections 8.13 and 8.14, the Trustee shall furnish the
Master Servicer and any Sub-Servicer with any powers of attorney and other
documents as the Master Servicer or such Sub-Servicer shall reasonably request
to enable the Master Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
(g) 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.
(h) Servicing Advances incurred by the Master Servicer or
any Sub-Servicer in connection with the servicing
88
<PAGE>
of the Mortgage Loans (including any penalties in connection with the payment of
any taxes and assessments or other charges) on any Mortgaged Property shall be
recoverable by the Master Servicer or such Sub-Servicer to the extent described
in Section 8.9 and in Section 7.5(b)(xi) hereof.
Section 8.2. Collection of Certain Mortgage Loan
Payments. (a) In accordance with Accepted Servicing Practices and subject to the
limitations set forth in Section 8.1, 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 nor
extend the maturity of any Mortgage Loan beyond the Payment Date in December
2020; or (iii) modify payments of monthly principal and interest on any Mortgage
Loan becoming subject to the terms of the Civil Relief Act, as amended, in
accordance with the Master Servicer's general policies of the comparable
mortgage loans subject to such Act.
(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 Credit Line Agreement.
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 acceptable to the Certificate Insurer 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 directly service the
related Mortgage
89
<PAGE>
Loans itself or enter into a Sub-Servicing Agreement with a successor
Sub-Servicer that qualifies under Section 8.3.
Section 8.5. Liability of Master Servicer. The Master
Servicer shall not be relieved of its obligations under this Agreement
notwithstanding any Sub-Servicing Agreement or any of the provisions of this
Agreement relating to agreements or arrangements between the Master Servicer and
a Sub-Servicer or otherwise, and the Master Servicer shall be obligated to the
same extent and under the same terms and conditions as if it alone were
servicing and administering the Mortgage Loans. The Master Servicer shall be
entitled to enter into any agreement with a Sub-Servicer for indemnification of
the Master Servicer by such Sub-Servicer and nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement. The
Trust shall not indemnify the Master Servicer for any losses due to the Master
Servicer's or any Sub-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.
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.
90
<PAGE>
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 and maintain at one or
more Designated Depository Institutions the Principal and Interest Account.
Subject to Subsections (c) and (e) below, the Master
Servicer and any Sub-Servicer shall deposit all receipts related to the Mortgage
Loans to the Principal and Interest Account on a daily basis (but no later than
the second Business Day after receipt).
On the Closing Day, and on each Subsequent Transfer Date
and each Transfer Date, the Originator shall cause the Master Servicer to
deposit to the Principal and Interest Account all receipts related to the
related Mortgage Loans received after the Initial Cut-Off Date or related
Replacement Cut-Off Date or related Subsequent Cut-Off Date, as the case may be.
(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 and the Certificate Insurer. 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. The Master Servicer shall deposit the amount of any
investment losses immediately into the Principal and Interest Account as
realized.
(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 Initial Cut-Off Date
or related Subsequent Cut-Off Date, as the case may be, including any
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 and other recoveries or amounts related to the Mortgage Loans
received by the Master Servicer, 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
91
<PAGE>
Prepayments) collected on the related Mortgage Loans prior to the Initial
Cut-Off Date or related Subsequent Cut-Off Date, as the case may be, (iii)
interest accruing on the related Mortgage Loans prior to the Initial Cut-Off
Date or related Subsequent Cut-Off Date, as the case may be and (iv) Net
Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed the
Principal 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 pay to itself from any funds in the Principal and
Interest Account any accrued and unpaid Servicing Fees
and reimburse itself pursuant to Section 8.9(a) hereof
for unreimbursed Servicing Advances and Servicing
Advances which have been deemed Nonrecoverable Advances;
(C) to withdraw investment earnings on amounts on deposit in
the Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest Account
following the termination of the Trust Fund 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 aggregate payments on the total 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, the Interest Remittance Amount and the 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 S&P, then
92
<PAGE>
the requirement to maintain the Principal and Interest Account may be waived by
an instrument signed by the Certificate Insurer, S&P 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 S&P may permit.
Section 8.9. Servicing Advances. 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,
from Insurance Proceeds, and (y) as provided in Section 7.5(b)(xi) 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 90 days or more or any
Mortgage Loan as to which enforcement proceedings have been brought by the
Master Servicer or by any Sub-Servicer pursuant to Section 8.13. Any such Loan
so purchased shall be purchased by the Master Servicer on a Remittance Date at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Principal and Interest Account.
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 or (ii) the maximum insurable value of the
Mortgaged Property.
(b) If the Mortgage Loan at the time of origination
relates to a Mortgaged 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
93
<PAGE>
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 or (ii) 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.
It is understood and agreed that such insurance shall be
with insurers approved by the Master Servicer and that no earthquake or other
additional insurance is to be required of any Mortgagor or to be maintained on
property acquired in respect of a defaulted loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. Any cost incurred by the Master Servicer in
maintaining any such insurance shall be added to the amount owing under the
Mortgage Loan where the terms of the Mortgage Loan so permit; provided, however,
that the addition of any such cost shall not be taken into account for purposes
of calculating the principal amount of the Credit Line Agreement or the
distributions to be made to the Owners. Such costs shall be recoverable by the
Servicer pursuant to Section 8.9.
(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 Mortgaged
Property a policy complying with the preceding paragraphs of this Section 8.11,
and there shall have been a loss which would have been covered by such policy,
deposit in the Principal and Interest Account from the Master Servicer's own
funds the difference, if any, between the amount that would have been payable
under a policy complying with the preceding paragraphs of this Section 8.11 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.
94
<PAGE>
Section 8.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements. When a Mortgaged 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 Credit Line Agreement; 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 Credit Line
Agreement and, unless prohibited by applicable law or any of the agreements,
guaranties or assignments relating to the Mortgage Loans contained in the
Advanta Mortgage Files, 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 Credit Line Agreement;
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 Mortgage File and which shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. 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 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
95
<PAGE>
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 Mortgaged 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 hereof.
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. Pursuant to its efforts to sell such REO Property, the Master Servicer
shall either itself or through an agent selected by the Master Servicer protect
and conserve such REO Property in the same manner and to such extent as is
customary in the locality where such REO Property is located and may, incident
to its conservation and protection of the interests of the Owners, rent the
same, or any part thereof, as the Master Servicer deems to be in the best
interest of the Owners for the period prior to the sale of such REO Property.
The Master Servicer shall take into account the existence of any hazardous
substances, hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act of 1976, or other federal, state or local
environmental legislation, on a Mortgaged Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such Mortgaged
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
96
<PAGE>
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Mortgage Loan" and shall promptly deliver to the
Certificate Insurer a related Liquidation Report with respect to such Mortgage
Loan.
Section 8.14. Trustee to Cooperate; Release of Mortgage
Files. (a) Upon the payment in full of the Principal Balance of any Mortgage
Loan (including the repurchase of any Mortgage Loan or any liquidation of such
Mortgage Loan through foreclosure or otherwise), or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer shall deliver to the Trustee a
Master Servicer's Trust Receipt. Upon receipt of such Master Servicer's Trust
Receipt, the Trustee shall promptly release the related Mortgage File, in trust
to (i) the Master Servicer, (ii) an escrow agent or (iii) any employee, agent or
attorney of the Trustee, in each case pending its release by the Master
Servicer, such escrow agent or such employee, agent or attorney of the Trustee,
as the case may be. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Master Servicer is
authorized to give, as attorney-in-fact for the Trustee and the mortgagee under
the Mortgage which secured the Credit Line Agreement, an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the
Mortgaged 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 may prepare
and submit to the Trustee, a satisfaction (or assignment without recourse, if
requested by the Person or Persons entitled thereto) in form for execution by
the Trustee with all requisite information completed by the Master Servicer; in
such event, the Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related Mortgage
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 Mortgage File is released to an escrow
agent or an employee, agent or attorney of the Trustee), upon request of the
Master Servicer and delivery to the Trustee of a Master Servicer's Trust
Receipt, release the related Mortgage File to the Master Servicer and
97
<PAGE>
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
Mortgage Files. The Trustee shall complete in the name of the Trustee any
endorsement in blank on any Credit Line Agreement prior to releasing such Credit
Line Agreement to the Master Servicer. Such receipt shall obligate the Master
Servicer to return the Mortgage File to the Trustee when the need therefor by
the Master Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of the liquidation information, in
physical or electronic form, a copy of the Master Servicer's Trust Receipt shall
be released by the Trustee to the Master Servicer.
(c) The Master Servicer shall have the right to approve
applications of Mortgagors for consent to (i) partial releases of Mortgages,
(ii) alterations to Mortgaged Properties and (iii) removal, demolition or
division of Mortgaged Properties. No application for approval shall be
considered by the Master Servicer unless: (x) the provisions of the related
Credit Line Agreement 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
maximum Combined Loan-to-Value Ratio and debt-to-income ratio specified as the
then-current maximum levels under the Originator's underwriting guidelines for a
similar credit grade borrower and (z) the lien priority of the related Mortgage
is not adversely affected. Upon receipt by the Trustee and the Certificate
Insurer of an Officer's Certificate executed on behalf of the Master Servicer
setting forth the action proposed to be taken in respect of a particular
Mortgage Loan and certifying that the criteria set forth in the immediately
preceding sentence have been satisfied, the Trustee shall execute and deliver to
the Master Servicer the consent or partial release so requested by the Master
Servicer. A proposed form of consent or partial release, as the case may be,
shall accompany any Officer's Certificate delivered by the Master Servicer
pursuant to this paragraph.
(d) No costs associated with the procedures described in
this Section 8.14 shall be an expense of the Trust.
(e) 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 S&P pursuant to Section 3.5(k)
hereof.
98
<PAGE>
(f) 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 Mortgage 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 Mortgage 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 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
Mortgage 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 Mortgage 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 Master 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, Termination Fees,
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, S&P and Moody's, on or before
99
<PAGE>
the fifteenth of April 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 fifteenth of April of each year,
commencing in 1997, the Master Servicer, at its own expense, shall cause to be
delivered to the Trustee, the Certificate Insurer, S&P 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 substantially in compliance with the
testing procedures as set forth in Appendix 3 of the Audit Guide for Audits of
HUD Approved Nonsupervised Mortgagees or (ii) examined such operations
substantially in compliance with the requirements of the Uniform Single
Attestation 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,
100
<PAGE>
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 (or the Owners pursuant to Section 6.11
hereof), each with the consent of the Certificate Insurer, or the Certificate
Insurer 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 three Business Days following written notice to an
Authorized Officer of the Master Servicer from the Trustee or from any
Owner.
(ii) The Master Servicer shall (I) apply for or consent
to the appointment of a receiver, trustee, liquidator or custodian or
similar entity with respect to itself or its property, (II) admit in
writing its inability to pay its debts generally as they become due,
(III) make a general assignment for the benefit of creditors, (IV) be
adjudicated a bankrupt or insolvent, (V) commence a voluntary case
under the federal bankruptcy laws of the United States of America or
file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the
material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or (VI) take corporate action
for the purpose of effecting any of the foregoing;
(iii) If without the application, approval or consent of
the Master Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of
the Master Servicer an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement 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
101
<PAGE>
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 and shall continue in default thereof
for a period of sixty (60) days after notice by the Trustee or the
Certificate Insurer of said failure; provided, however, that if the
Master Servicer can demonstrate to the reasonable satisfaction of the
Certificate Insurer that it is diligently pursuing remedial action,
then the cure period may be extended with the written approval of the
Certificate Insurer; or
(v) The Master Servicer shall fail to cure any breach of
any of its representations and warranties set forth in Section 3.2
which materially and adversely affects the interests of the Owners or
Certificate Insurer for a period of thirty (30) days after the Master
Servicer's discovery or receipt of notice thereof; provided, however,
that if the Master Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing
remedial action, then the cure period may be extended with the written
approval of the Certificate Insurer.
(b) The Certificate Insurer may remove the Master
Servicer upon the occurrence of any of the following events:
(i) the failure by the Master Servicer to make any
required Servicing Advance which failure continues for thirty (30) days
or more after written notice from the Certificate Insurer; or
(ii) the failure by the Master Servicer to perform any
one or more of its material obligations hereunder, which failure
continues for sixty (60) or more days after written notice from
Certificate Insurer;
(iii) failure on the part of the Master Servicer to make
a payment or deposit required under this Agreement within three
Business Days after the date such payment or deposit is required to be
made;
(iv) if on any Payment Date the net cumulative Realized
Losses since the Closing Date equal or exceed 5% of the aggregate
Principal Balance of the Mortgage Loans;
(v) if the cumulative Realized Losses over any
twelve-month period exceed 2% of the average aggregate Principal
Balance of the Mortgage Loans as of the close
102
<PAGE>
of Business on the last day of each of the twelve preceding Remittance
Periods; or
(vi) if the three month moving average of the 90-day
delinquency rate exceeds 7%;
provided, however, that prior to any removal of the Master Servicer by the
Certificate Insurer pursuant to clauses (i) or (ii) 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) or (ii) 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 with respect to clause
(i) (60 days with respect to clause (ii)) 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).
(c) The Master Servicer shall not resign from the
obligations and duties hereby imposed on it except by mutual written consent of
the Sponsor, the Master Servicer, the Certificate Insurer and the Trustee or
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.
(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.
103
<PAGE>
(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 $5,000,000, 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 Originator 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 Fund. 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
Originator, but shall in any event be entitled to receive, and to enforce
payment of, such fee from the Originator.
(h) In the event the Trustee solicits bids as provided
above, the Trustee shall solicit, by public announcement, bids from housing and
home finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid. The Trustee shall
deduct from any sum received by the Trustee from the successor to the Master
Servicer in respect of such sale, transfer and assignment all
104
<PAGE>
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.
(j) The Trustee or any other successor Master Servicer,
upon assuming the duties of Master Servicer hereunder, shall immediately make
all Servicing Advances which the Master Servicer has theretofore failed to pay
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
Servicing Advances 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 S&P of the
transfer of the servicing to the successor.
(l) The Trustee shall give notice to the Certificate
Insurer, Moody's and S&P and to the Owners of the occurrence of any event
specified in Section 8.20(a) of which the Trustee has knowledge.
Section 8.21. Inspections by Certificate Insurer; Errors
and Omissions Insurance. (a) At any reasonable time and from time to time upon
reasonable notice, the Certificate
105
<PAGE>
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 reasonable 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 S&P 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 Originator, the Sponsor, the Master Servicer or AMHC in any federal, state
or local court or before any governmental body or agency, or before any
arbitration board, or any such proceedings threatened by any governmental
agency, which, if adversely determined, would have a material adverse effect
upon any the Originator's, 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
Originator, the Sponsor, the Master Servicer or AMHC under any applicable
bankruptcy, reorganization,
106
<PAGE>
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 Originator,
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 Originator's, the
Sponsor's, the Master Servicer's or the AMHC's business that the Originator,
Sponsor, the Master Servicer or AMHC is to cease and desist, or to undertake any
practice, program, procedure or policy employed by the Originator, 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
Originator's, 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 Originator, 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 on the
Payment Date following the later of (A) payment in full of all amounts owing to
the Certificate Insurer and (B) the earliest of (i) the Payment Date on which
the Class A Principal Balance shall have been reduced to zero, (ii) the final
payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the
optional transfer to the Originator of the Class A Certificates, as described in
Section 9.2, and (iv) the Payment Date in December, 2021. 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) The Class A Certificates shall be subject to optional transfer to the
Originator on any Payment Date after the Class A Principal Balance has been
reduced to an amount less than or equal to $5,000,000 (10% of the Original Class
A Principal Balance) and all amounts due and owing to the Certificate Insurer as
the Reimbursement Amount have been paid. Such transfer shall only be permitted
if the Originator
107
<PAGE>
delivers to the Trustee an amount equal to the sum of the outstanding Class A
Principal Balance and accrued and unpaid interest thereon at the Class A
Interest Rate through the day preceding the final Payment Date plus all
Reimbursement Amounts (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) Promptly following any such purchase, the Trustee
will release the Mortgage Files to the Master Servicer, or otherwise upon their
order, in a manner similar to that described in Section 8.14 hereof.
(c) Advanta National Bank USA may not participate in any
purchase described in this Section 9.2, or fund any portion of the purchase
price, unless the then-outstanding Principal Balances of the Mortgage Loans in
the Trust Fund is less than or equal to five percent of the sum of the aggregate
Loan Balances of all Mortgage Loans in the Trust Fund as of the Initial Cut-Off
Date and the Original Pre-Funded Amount.
Section 9.3. Tax Treatment. It is the intention of the
Originator, the Sponsor and the Owners of the Class A Certificates that the
Class A Certificates will be indebtedness of the Originator for federal, state
and local income and franchise tax purposes and for purposes of any other tax
imposed on or measured by income. The Originator, the Sponsor, the Trustee and
each Owner of a Class A Certificate by acceptance of its Class A Certificate (by
virtue of such Owner's acquisition of a beneficial interest therein) agrees to
treat the Class A Certificates (or beneficial interest therein), for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness of the Originator secured by the assets
of the Trust and to report the transactions contemplated by this Agreement on
all applicable tax returns in a manner consistent with such treatment. Each
Class A Certificateholder agrees that it will cause any Certificate Owner
acquiring an interest in a Class A Certificate through it to comply with this
Agreement as to treatment of the Class A Certificates as indebtedness for
federal, state and local income and franchise tax purposes and for purposes of
any other tax imposed on or measured by income. The Trustee will prepare and
file all tax reports required hereunder.
Section 9.4. Rapid Amortization Events. If any one of the
following events shall occur:
108
<PAGE>
(a) failure on the part of the Originator (i) to make any
payment or deposit required by the terms of this Agreement, on or before the
date occurring three Business Days after the date such payment or deposit is
required to be made herein, or (ii) duly to observe or perform in any material
respect any other covenants or agreements of the Originator set forth in this
Agreement, which failure, in the case of clause (ii), continues unremedied for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Originator by
the Trustee, and the Trustee by the Certificate Insurer or the Holders of Class
A Certificates evidencing Percentage Interests aggregating not less than 51%;
(b) any representation or warranty made by the Originator
in this Agreement shall prove to have been incorrect in any material respect
when made, and which continues to be incorrect in any material respect for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Originator, by
the Trustee, or to the Originator and the Trustee by either the Certificate
Insurer or the Holders of Class A Certificates evidencing Percentage Interests
aggregating not less than 51%; provided, however, that a Rapid Amortization
Event pursuant to this subparagraph (b) shall not be deemed to have occurred
hereunder if the Originator has purchased or made a substitution for the related
Mortgage Loan or Mortgage Loans during such period (or such longer period (not
to exceed an additional 60 days) with the consent of the Trustee and the
Certificate Insurer) in accordance with the provisions hereof;
(c) the Originator shall voluntarily go into liquidation,
consent to the appointment of a conservator or receiver or liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Originator, or of or
relating to all or substantially all of such Person's property, or a decree or
order of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Originator and such decree or order
shall have remained in force undischarged or unstayed for a period of 30 days;
or the Originator shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations;
109
<PAGE>
(d) the Trust shall become subject to regulation as an
"investment company" under the Investment Company Act of 1940, as amended;
(e) a claim is made under the Certificate Insurance
Policy, or
(f) the removal of the Master Servicer following the
occurrence of an event permitting removal of the Master Servicer pursuant to
Section 8.20 thereof;
then, in the case of any event described in subparagraph (a), (b) or (f) after
the applicable grace period, if any, set forth in such subparagraphs, either the
Trustee with the consent of the Certificate Insurer, the Certificate Insurer or
the Holders of Class A Certificates with the consent of the Certificate Insurer
evidencing Percentage Interests aggregating more than 51%, by notice given in
writing to the Certificate Insurer, the Originator and the Master Servicer (and
to the Trustee if given by either the Certificate Insurer or the Class A
Certificateholders) may declare that an early amortization event (a "Rapid
Amortization Event") has occurred as of the date of such notice, and in the case
of any event described in subparagraph (c), (d) or (e), a Rapid Amortization
Event shall occur without any notice or other action on the part of the Trustee,
the Certificate Insurer or the Class A Certificateholders, immediately upon the
occurrence of such event.
Section 9.5. Additional Rights Upon the Occurrence of
Certain Events.
(a) If the Originator voluntarily goes into liquidation
or consents to the appointment of a conservator or receiver or liquidator or
similar person in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to the Originator or of or
relating to all or substantially all its property, or a decree or order of a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator or receiver or liquidator or similar person in
any insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Originator and such decree shall have remained in
force undischarged or unstayed for a period of 30 days; or the Originator shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations (such voluntary liquidation, appointment,
entering of such decree, admission, filing, making, suspension or violation or
other
110
<PAGE>
event described above, an "Insolvency Event"), the Originator shall on the day
of such appointment, voluntary liquidation, entering of such decree, admission,
filing, making, suspension or inability, as the case may be (the "Appointment
Day"), promptly give notice to the Trustee, the Master Servicer and the
Certificate Insurer of such Insolvency Event. Within 15 days of the receipt by
the Trustee of the Originator notice of an Insolvency Event, the Trustee shall
(i) publish a notice in Authorized Newspapers that an Insolvency Event has
occurred and (ii) send written notice to the Class A Certificateholders
describing the provisions of this Section 9.4, which notice shall inform Owners
of the Class A Certificates that unless the Certificate Insurer or (with the
consent of the Certificate Insurer) more than 50% of all Owners of the Class A
Certificates advise the Trustee in writing that they wish the Trustee to
instruct the Master Servicer not to sell, dispose of or otherwise liquidate the
Mortgage Loans within 90 days from the day notice pursuant to clause (i) above
is first published (the "Publication Date"), the Trustee shall instruct the
Master Servicer to proceed to sell, dispose of, or otherwise liquidate the
Mortgage Loans in a commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of competitive bids, and
shall proceed to consummate the sale, liquidation or disposition of the Mortgage
Loans as provided above with the highest bidder for the Mortgage Loans. The
Originator shall be permitted to bid for the Mortgage Loans. The Trustee may
obtain a prior determination from such conservator or receiver that the terms
and manner of any proposed sale, disposition or liquidation are commercially
reasonable. Any such sale, disposition or liquidation will be servicing retained
by the Master Servicer. The provisions of Sections 9.3 and 9.4 shall not be
deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or
liquidation of the Mortgage Loans pursuant to Section 9.4(a) above shall be
treated as collections on the Mortgage Loans received during the Rapid
Amortization Period; provided, however, that such proceeds will, based on
amounts specified in writing by the Master Servicer to the Trustee, first be
paid to the Certificate Insurer to reimburse the Certificate Insurer for
previously unreimbursed Reimbursement Amounts and other amounts owing under the
Insurance Agreement; and provided, further, that the Certificateholders'
Floating Allocation Percentage of such remaining proceeds shall be paid to Class
A Certificateholders in the following amounts and order of priority:
(i) all accrued and unpaid interest on the Class A
Principal Balance through the Interest Period immediately preceding the
Payment Date on which such proceeds are distributed to the Class A
Certificateholders; and
111
<PAGE>
(ii) an amount of principal up to the Class A Principal
Balance.
The Policy shall cover any shortfall in the event such proceeds are insufficient
to make payment of the Class A Principal Balance. On the day following the
Payment Date on which such proceeds are distributed to the Class A
Certificateholders, the Trust shall terminate.
Section 9.6. Disposition of Proceeds. The Trustee shall,
upon receipt thereof, deposit the proceeds of any liquidation of the Trust Fund
pursuant to this Article IX to the Certificate Account; provided, however, that
any amounts representing Servicing Fees, 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 9.7. 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;
112
<PAGE>
(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 Servicing Advances, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by an Authorized
Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it
in good faith in accordance with the direction
of the Certificate Insurer or of the Owners of
a majority in Percentage Interest of the
Certificates of the affected Class or Classes
and the Certificate Insurer relating to the
time, method and place of conducting any
proceeding for any remedy available to the
Trustee, or exercising any trust or power
conferred upon the Trustee, under this
Agreement relating to such Certificates.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
(e) No provision of this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
113
<PAGE>
(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 as
compensation for its services hereunder such ordinary fees and reimbursement of
expenses as are described in the fee quote letter, dated November 8, 1996 and
executed by the Originator.
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 Originator, 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 Offered Certificates then
Outstanding, by such Percentage Interests represented by
the Originator's Interest, a written notice specifying
114
<PAGE>
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
(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 Originator shall give to the Certificate Insurer,
Moody's and S&P notice of the occurrence of any such event of which the
Originator 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 Originator or (y) the Owners of a majority of the
Percentage Interests represented by the Class A Certificates, may, whether or
not the Trustee resigns pursuant to Section 10.9 hereof, immediately,
concurrently with the giving of notice to the Trustee, and without delaying the
30 days required for notice therein, appoint a successor Trustee pursuant to the
terms of Section 10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except as
otherwise provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution,
115
<PAGE>
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 Originator, the
Certificate Insurer or the Owners of any Class of Certificates
mentioned herein shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel, and the written
advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement at the
request or direction of any of the Owners pursuant to this Agreement,
unless such Owners shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or document, but
the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed and supervised with due care by it hereunder; and
(h) the Trustee shall not be liable for any action it
takes or omits to take in good faith which it reasonably believes to be
authorized by the Authorized Officer of any Person or within its rights
or powers
116
<PAGE>
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
Originator 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 Originator and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
Section 10.7. No Lien for Fees. The Trustee shall have no
lien on the Trust Fund 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 Baa3 by Moody's (or such lower rating
as may be acceptable to Moody's) and (y) a long-term deposit rating of at least
BBB from S&P (or such lower rating as may be acceptable to S&P). 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
117
<PAGE>
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 Originator 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
Originator 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 S&P. Upon receiving notice of resignation, the Originator, with the
prior written consent of the Certificate Insurer, 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 Originator, one copy of
which instrument shall be delivered to the Trustee so resigning and one copy to
the successor trustee or trustees. If no successor trustee shall have been
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Owner may, on
behalf of himself and all others similarly situated, petition any such court for
the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(c) If at any time the Trustee shall cease to be eligible
under Section 10.8 hereof and shall fail to resign after written request
therefor by the Originator or by the Certificate Insurer, the Certificate
Insurer or the Originator 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
Originator, 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
118
<PAGE>
majority of the Percentage Interests represented by the Originator's Interest,
may at any time, with the 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 Originator 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
Originator, 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 Originator shall promptly appoint a successor Trustee. 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 Originator's
Interest delivered to the Originator and the retiring Trustee, the successor
Trustee so appointed shall forthwith upon its acceptance of such appointment
become the successor Trustee and supersede the successor Trustee appointed by
the Originator. If no successor Trustee shall have been so appointed by the
Originator 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 Originator 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 Originator on behalf of the Trust and to its predecessor
Trustee an instrument accepting such appointment hereunder and
119
<PAGE>
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 Originator 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 Originator 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 Originator shall mail notice thereof by
first-class mail, postage prepaid, to the Owners at their last addresses
appearing upon the Register. The Originator shall send a copy of such notice to
Moody's and S&P. If the Originator fails to mail such notice within ten days
after acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be mailed at the expense of the Trust.
No successor Trustee shall accept its appointment unless
at the time of such acceptance such successor shall be qualified and eligible
under this Article X.
Section 10.11. Merger, Conversion, Consolidation or
Succession to Business of the Trustee. Any corporation or association into which
the Trustee may be merged or converted or with which it may be consolidated, or
any corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation or
association shall be otherwise qualified and eligible under this Article X. In
case any Certificates have been executed, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such Trustee
may adopt such execution and deliver the Certificates so executed with the same
effect as if such successor Trustee had itself executed such Certificates.
Section 10.12. Reporting; Withholding. The Trustee shall
timely provide to the Owners the Internal Revenue
120
<PAGE>
Service's Form 1099 and any other statement required by applicable Treasury
regulations as determined by the Originator, 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
Originator, 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 Originator and Master Servicer covenant and agree
to indemnify the Trustee, and by the Originator when the Trustee is acting as
Master Servicer, from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses (including legal fees and expenses)
other than those resulting from the negligence or bad faith of the Trustee. The
Trustee and any director, officer, employee or agent of the Trustee may rely and
shall be protected in acting or refraining from acting in good faith on any
certificate, notice or other document of any kind prima facie properly executed
and submitted by the Authorized Officer of any Person respecting any matters
arising hereunder. Such indemnification shall survive the removal or resignation
of the Trustee 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 Fund or Mortgaged 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 to act as co-Trustee or co-Trustees, jointly with the Trustee, of
all or any part of the Trust Fund or separate Trustee or separate Trustees of
any part of the Trust Fund,
121
<PAGE>
and to vest in such Person or Persons, in such capacity and for the benefit of
the Owners, such title to the Trust Fund, 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. 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 Fund or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Trustee or co-Trustee, but solely at
the direction of the Trustee;
(ii) No 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
122
<PAGE>
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 and S&P, the Originator
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 Originator, the Certificate Insurer or the
Owners to the Trustee to take any action under any provision of this Agreement,
the Originator, the Certificate Insurer or the Owners, as the case may be, shall
furnish to the Trustee a certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action have been
complied with, except that in the case of any such application or request as to
which the furnishing of any documents is specifically required by any provision
of this Agreement relating to such particular application or request, no
additional certificate need be furnished.
Except as otherwise specifically provided herein, each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
123
<PAGE>
(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 Originator or of the
Master Servicer, stating that the information with respect to such factual
matters is in the possession of the Originator or of the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any opinion of counsel may also be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Trustee, stating that the
information with respect to such matters is in the possession of the Trustee,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may be based on the written opinion of
other counsel, in which event such opinion of counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee may reasonably rely
upon the opinion of such other counsel.
Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates, statements, opinions or
other instruments under
124
<PAGE>
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 Originator. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "act" of the Owners signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Trustee and the Trust, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a witness of
such execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Whenever such execution is by an officer of a corporation or a member
of a partnership on behalf of such corporation or partnership, such certificate
or affidavit shall also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the
Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Owner of any Certificate shall
bind the Owner of every Certificate issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything done,
omitted or suffered to be done by the Trustee or the Trust in reliance thereon,
whether or not notation of such action is made upon such Certificates.
Section 11.4. Notices, etc. to Trustee. Any request,
demand, authorization, direction, notice, consent, waiver or act of the Owners
or other documents provided or permitted by this Agreement to be made upon,
given or furnished to, or filed with the Trustee by any Owner, the Certificate
Insurer or by the Originator 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.
125
<PAGE>
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 Originator. The
Trustee may make reasonable rules for any meeting of Owners. The Originator may
make reasonable rules and set reasonable requirements for its functions.
Section 11.7. Successors and Assigns. All covenants and
agreements in this Agreement by any party hereto shall bind its successors and
assigns, whether so expressed or not.
Section 11.8. Severability. In case any provision in this
Agreement or in the Certificates shall be invalid, illegal or unenforceable, the
validity, legality and
126
<PAGE>
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
127
<PAGE>
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 Originator
and the Master Servicer, may at any time and from time to time, with the prior
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, or (ii) 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 Originator and the Master Servicer
may, at any time and from time to time, with the prior 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
Overcollateralization Amount"; 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 Originator, 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 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
128
<PAGE>
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 or (b) reduce the aforesaid
percentages of Percentage Interests which are required to consent to any such
amendments, without the consent of the Owners of all Certificates of the Class
or Classes affected then Outstanding.
(d) The Certificate Insurer, the Owners, Moody's and S&P
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. Acceptance of Obligations. The Originator,
by its acceptance of the Originator's Interest, agrees to be bound by and to
perform all the duties of the Originator set forth in this Agreement.
Section 11.16. The Certificate Insurer. The Certificate
Insurer is a third-party beneficiary of this Agreement. Any right conferred to
the Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policy except with respect to amendments to this Agreement
pursuant to Section 11.14. During any period of suspension the Certificate
Insurer's rights hereunder shall vest in the Owners of the Class A Certificates
and shall be exercisable by the Owners of at least a majority in Percentage
Interest of the Class A Certificates then Outstanding. At such time as the Class
A Certificates are no longer Outstanding hereunder and the Certificate Insurer
has been reimbursed for all payments made pursuant to the Certificate Insurance
Policy to which it is entitled hereunder, the Certificate Insurer's rights
hereunder shall terminate.
Section 11.17. Maintenance of Records. Each Originator
and Owner of a Originator Certificate shall each continuously keep an original
executed counterpart of this Agreement in its official records.
Section 11.18. Notices. All notices hereunder shall be
given as follows, until any superseding instructions are given to all other
Persons listed below:
129
<PAGE>
The Trustee: Bankers Trust Company
c/o Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92714
Attention: ADVANTA REVOLVING
1996-A
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: ADVANTA Mortgage Conduit
Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Vice President -
Structured Finance
Tel: (619) 674-3356
Fax: (619) 674-3666
with a copy addressed to the
attention of the General
Counsel at the same address.
130
<PAGE>
The Master Servicer: ADVANTA Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Senior Vice President,
Loan Service
Tel: (619) 674-3356
Fax: (619) 674-3666
The Originator: Advanta National Bank USA
Brandywine Corporate Center
650 Naamans Road
Claymont, DE 19703
Tel: (302) 791-4400
The Certificate
Insurer : MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Surveillance Dept.:
Structured Finance
Group (Advanta REV
HEL 96-A)
Tel: (914) 765-3111
Fax: (914) 765-3919
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring
Department
S&P: Standard & Poor's Corporation
26 Broadway
15th Floor
New York, New York 10004
Attention: Surveillance Dept.
Underwriter: Lehman Brothers, Inc.
131
<PAGE>
IN WITNESS WHEREOF, the Sponsor, the Originator, 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:
--------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
ADVANTA MORTGAGE CORP. USA, as Master
Servicer
By:
--------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
ADVANTA NATIONAL BANK USA, as
Originator
By:
-------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By:
-------------------------------------
Name: Erin L. Deegan
Title: Assistant Vice President
[Pooling and Servicing Agreement]
<PAGE>
STATE OF CALIFORNIA )
: ss.:
COUNTY OF SAN DIEGO )
On the ______ day of November, 1996, before me personally
came _______________, to me known, who, being by me duly sworn, did depose and
say that his/her address is c/o ADVANTA Mortgage Conduit Services, Inc., 16875
West Bernardo Drive, San Diego, California 92127; that he/she is the
_______________ of each of ADVANTA Mortgage Conduct Services Inc. and of ADVANTA
Mortgage Corp. USA, which are described in and which executed the above
instrument; and that he/she signed his/her name thereto by order of the
respective Board of Directors of said corporations.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this certificate first above
written.
[NOTARIAL SEAL]
-----------------------------------
Notary Public
133
<PAGE>
STATE OF CALIFORNIA )
: ss.:
COUNTY OF ORANGE )
On the ____ day of November, 1996, before me personally
came _______________ to me known, who, being by me duly sworn did depose and say
that his/her office is located at Three Park Plaza, Irvine, California 92714;
that he/she is an _______________ of Bankers Trust Company, the New York banking
corporation described in and that executed the above instrument as Trustee; and
that he/she signed his/her name thereto under authority granted by the Board of
Directors of said New York banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this certificate first above
written.
[NOTARIAL SEAL] ---------------------------
Notary Public
1
<PAGE>
November 22, 1996
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285-1200
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Underwriting Agreement dated November 15, 1996 (the
"Underwriting Agreement") between Advanta Mortgage
Conduit Services, Inc. (the "Sponsor"), Advanta
National Bank USA (the "Originator") and Lehman
Brothers Inc. (the "Underwriter"), the
Indemnification Agreement dated November 22, 1996
(the "Indemnification Agreement") among the
Originator, the Underwriter and the MBIA Insurance
Corporation (the "Certificate Insurer") and the
Insurance Agreement dated as of November 22, 1996
(the "Insurance Agreement") among the MBIA Insurance
Corporation, as the Certificate Insurer, Advanta, and
Advanta Mortgage Corp. USA (the "Master Servicer")
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, the Indemnification
Agreement and the Insurance Agreement (together, the "Designated Agreements"),
the Sponsor and the Originator have 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 the Sponsor and the Originator 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 the
Sponsor and the Originator under the Designated Agreements (including the
payment of money damages for a breach of any of the Sponsor's or Originator'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
Designated Agreements, the Underwriter and the Certificate
<PAGE>
Insurer have required the undersigned, Advanta Mortgage Holding Company
("AMHC"), the parent corporation of the Sponsor and the Originator, to
acknowledge its joint-and-several liability with the Sponsor and the Originator
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 the
Sponsor and the Originator 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 the
Sponsor to the Certificate Insurer for the payment of
the Joint and Several Obligations under the Insurance
Agreement.
(iii) AMHC hereby agrees to be absolutely and unconditional
jointly and severally liable with the Originator to
the Certificate Insurer for the payment of the Joint
and Several Obligations under the Indemnification
Agreement.
(iv) 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 the Sponsor or another
affiliate of AMHC.
Capitalized terms used herein and not defined herein shall
have their respective meanings as set forth in the Agreement.
[AMHC Guaranty to the Underwriter and MBIA]
<PAGE>
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:
-----------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MBIA INSURANCE CORPORATION
By:
--------------------------------
Name:
Title:
LEHMAN BROTHERS INC.
as Underwriter
By:
--------------------------------
Name: Martin P. Harding
Title: Managing Director
[AMHC Guaranty to the Underwriter and MBIA]
<PAGE>
MBIA INSURANCE CORPORATION,
as Certificate Insurer
ADVANTA NATIONAL BANK USA
as Originator
and
LEHMAN BROTHERS INC.,
as Underwriter
INDEMNIFICATION AGREEMENT
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1996-A
ADVANTA REVOLVING HOME EQUITY LOAN ASSET-BACKED
CERTIFICATES
SERIES 1996-A, CLASS A CERTIFICATES
Dated as of November 22, 1996
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions................................................... 1
Section 2. Representations and Warranties of the Certificate Insurer..... 3
Section 3. Agreements, Representations and Warranties of the Underwriter. 4
Section 4. Agreements, Representations and Warranties of the Originator.. 4
Section 5. Indemnification............................................... 5
Section 6. Certificate Insurer Undertaking............................... 6
Section 7. Notice To Be Given Certificate Insurer........................ 6
Section 8. Notice To Be Given to the Underwriter......................... 7
Section 9. Notice To Be Given the Originator............................. 8
Section 10. Contribution.................................................. 9
Section 11. Notices....................................................... 10
Section 12. Governing Law, Etc............................................ 10
Section 13. Insurance Agreement; Underwriting Agreement;
Pooling and Servicing Agreement............................... 10
Section 14. Limitations................................................... 10
Section 15. Counterparts.................................................. 10
TESTIMONIUM .................................................... SIGNATURE PAGE
SIGNATURES AND SEALS ........................................... SIGNATURE PAGE
......................................................INDEMNIFICATION AGREEMENT
2
<PAGE>
This Agreement, dated as of November 22, 1996, is by and among MBIA
Insurance Corporation (the "Certificate Insurer"), as the Certificate Insurer
under the Certificate Guaranty Insurance Policy (the "Policy") issued in
connection with the Class A Certificates described below, Advanta National Bank
USA (the "Originator") and Lehman Brothers Inc. as the Underwriter.
Section 1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings stated herein, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.
Capitalized terms used in this Agreement but not otherwise defined herein will
have the meanings ascribed to such terms in the Pooling and Servicing Agreement
(as described 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
Certificate Insurer, the Originator and the Underwriter.
"Class A Certificates" means the Advanta Revolving Home Equity Loan
Asset Backed Certificates, Series 1996-A, Class A Certificates 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.
"Insurance Agreement" means the Insurance Agreement, dated as of
November 22, 1996, by and among the Originator, the Master Servicer, Advanta
Mortgage Conduit Services, Inc., as Sponsor, Bankers Trust Company of
California, N.A., as Trustee and the Certificate Insurer.
"Certificate Insurer Party" means the Certificate 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.
"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).
"Master Servicer" means Advanta Mortgage Corp. USA, as Master Servicer.
1
<PAGE>
"Originator Party" means the Originator, 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.
"Person" means any individual, partnership, joint venture, corporation,
trust or unincorporated organization or any government or agency or political
subdivision thereof.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of November 1, 1996 by and among the Originator, the Sponsor,
the Master Servicer and the Trustee.
"Prospectus" means the form of final Prospectus 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 November 15, 1996.
"Registration Statement" means the registration statement on Form_S-3
of the Sponsor relating to the Class A Certificates.
"Trustee" means Bankers Trust Company of California, N.A., or any
successor thereto.
"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.
"Underwriter" means Lehman Brothers Inc.
"Underwriting Agreement" means the Underwriting Agreement by and
between the Sponsor and the Underwriter, dated November 15, 1996.
Section 2. Representations and Warranties of the Certificate Insurer.
The Certificate Insurer represents and warrants to the Underwriter and the
Originator as follows:
(a) Organization and Licensing. The Certificate 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 Certificate Insurer has the corporate
power and authority to issue the Policy and to execute and deliver this
Agreement and the Insurance 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 and the
Insurance Agreement have been duly
2
<PAGE>
authorized by all necessary corporate proceedings. No further approvals
or filings of any kind, including, without limitation, any further
approvals of or further filings with any governmental agency or other
governmental authority, or any approval of the Certificate Insurer's
board of directors or stockholders, are necessary for the Policy, this
Agreement and the Insurance Agreement to constitute the legal, valid
and binding obligations of the Certificate Insurer.
(d) Enforceability. The Policy, when issued, and this
Agreement and the Insurance Agreement will each constitute a legal,
valid and binding obligation of the Certificate Insurer, enforceable in
accordance with its terms, subject to applicable laws affecting the
enforceability of creditors' rights generally.
(e) Financial Information. The consolidated financial
statements of the Certificate Insurer as of December_31, 1995 and
December_31, 1994 and for the three years ended December_31, 1995
incorporated by reference in the Prospectus Supplement (the
"Certificate Insurer Audited Financial Statements"), fairly present in
all material respects the financial condition of the Certificate
Insurer as of such date and for the period covered by such statements
in accordance with generally accepted accounting principles
consistently applied. The consolidated financial statements of the
Certificate Insurer and its subsidiaries for the nine months ended
September 30, 1996 incorporated by reference in the Prospectus
Supplement (the "Certificate Insurer Unaudited Financial Statements")
present fairly in all material respects the financial condition of the
Certificate Insurer as of such date and for the period covered by such
statements in accordance with generally accepted accounting principles
applied in a manner consistent with the accounting principles used in
preparing the Certificate Insurer Audited Financial Statements, and,
since September_30, 1996 there has been no material change in such
financial condition of the Certificate Insurer which would materially
and adversely affect its ability to perform its obligations under the
Policy.
(f) Certificate Insurer Information. The information in the
Prospectus Supplement as of the date hereof under the caption "The
Policy and The Certificate Insurer" (the "Certificate 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
Certificate Insurer's ability to perform its obligations under the
Policy.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Certificate 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 or which would
materially and adversely affect its ability to perform its obligations
under this Agreement, the Policy or the Insurance Agreement.
Section 3. Agreements, Representations and Warranties of the
Underwriter. The Underwriter represents and warrants to and agrees with the
Originator and the Certificate Insurer that the statements in the Prospectus
Supplement made in reliance upon and in conformity with
3
<PAGE>
written information relating to the Underwriter furnished to the Originator
specifically for use in the preparation of the Prospectus Supplement, and
acknowledged in writing (referred to herein as the "Underwriter Information"),
are true and correct in all material respects.
Section 4. Agreements, Representations and Warranties of the
Originator. The Originator represents and warrants to and agrees with the
Certificate Insurer and the Underwriter as follows:
(a) Registration Statement. The information in the
Registration Statement, the Prospectus and the Prospectus Supplement,
other than the Certificate 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 Originator 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, makes
such qualification necessary.
(c) Corporate Power. The Originator has the corporate power
and authority to execute and deliver this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement, any Subsequent Transfer
Agreement and the Insurance 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, the Pooling
and Servicing Agreement, any Subsequent Transfer Agreement and the
Insurance Agreement by the Originator 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 Originator's board of directors or
stockholders, are necessary for this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement, any Subsequent Transfer
Agreement and the Insurance Agreement to constitute the legal, valid
and binding obligations of the Originator.
(e) Enforceability. This Agreement, the Pooling and Servicing
Agreement, the Underwriting Agreement, any Subsequent Transfer
Agreement and the Insurance Agreement will each constitute a legal,
valid and binding obligation of the Originator, each 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 Originator and to general principles of equity.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Originator's knowledge,
threatened against it at law or in
4
<PAGE>
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, the
Pooling and Servicing Agreement, any Subsequent Transfer Agreement or
the Insurance Agreement.
Section 5. Indemnification. (a)_The Certificate Insurer hereby agrees,
upon the terms and subject to the conditions of this Agreement, to indemnify,
defend and hold harmless each Originator Party and the Underwriter Party against
any and all Losses incurred by them with respect to the offer and sale of any of
the Class A Certificates and resulting from the Certificate Insurer's breach of
any of its representations and warranties set forth in Section_2 of this
Agreement.
(b) The Underwriter hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Certificate Insurer Party against any and all Losses incurred by it with respect
to the offer and sale of any of the Class A Certificates and resulting from the
Underwriter's breach of any of its representations and warranties set forth in
Section_3 of this Agreement.
(c) The Originator hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Certificate Insurer Party against any and all Losses incurred by it with respect
to the offer and sale of any of the Class A Certificates and resulting from the
Originator'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.
Section 6. Certificate Insurer Undertaking. The Certificate Insurer
hereby agrees that, for so long as the Underwriter is required under the Act to
deliver a Prospectus Supplement in connection with the sale of any of the Class
A Certificates, the Certificate Insurer will furnish to the Underwriter or the
Originator, or both, upon written request of such party or parties and at the
expense of the Underwriter or the Originator, as the case may be, copies of the
Certificate 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)
within a reasonable time after they are available.
Section 7. Notice To Be Given Certificate Insurer. Except as provided
in Section_10 below with respect to contribution, the indemnification provided
herein by the Certificate Insurer shall be the exclusive remedy of each
Underwriter Party or Originator Party for the Losses resulting from the
Certificate Insurer's breach of a representation, warranty or agreement
hereunder; provided, however, that each Underwriter Party or Originator 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.
5
<PAGE>
In the event that any action or regulatory proceeding shall be commenced or
claim asserted which may entitle each Underwriter Party or Originator Party to
be indemnified under this Agreement, such party shall give the Certificate
Insurer written or telegraphic notice of such action or claim reasonably
promptly after receipt of written notice thereof. The Certificate 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, each
Originator Party or each 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 Certificate 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 Certificate Insurer, (2) the Certificate 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 Certificate 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
Certificate Insurer (in which case, if such Indemnified Party notifies the
Certificate Insurer in writing that it elects to employ separate counsel at the
expense of the Certificate Insurer, the Certificate 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 Certificate
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 Certificate Insurer shall not be
liable for the fees and expenses of more than one counsel for all Originator
Parties and more than one counsel for all Underwriter Parties. The Underwriter
Parties and Originator Parties shall cooperate with the Certificate Insurer
Parties in resolving any event which would give rise to an indemnity obligation
pursuant to Section_5(a) hereof in the most efficient manner. No settlement of
any such claim or action shall be entered into without the consent of each
Originator Party or each Underwriter Party, as the case may be, who is subject
to such claim or action, on the one hand, and each Certificate Insurer Party who
is subject to such claim or action, on the other hand; provided, however, that
the consent of such Originator 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 Originator Party or
Underwriter Party. Any failure by a Originator Party or Underwriter Party, as
the case may be, to comply with the provisions of this Section shall relieve the
Certificate Insurer of liability only if such failure is materially prejudicial
to any legal pleadings, grounds, defenses or remedies in respect thereof or the
Certificate Insurer's financial liability hereunder, and then only to the extent
of such prejudice.
Section 8. Notice To Be Given to the Underwriter. Except as provided
below in Section_10 with respect to contribution, the indemnification provided
herein by the Underwriter shall be the exclusive remedy of any Certificate
Insurer Party for the Losses resulting from the Underwriter's breach of a
representation, warranty or agreement hereunder; provided, however, that each
Certificate 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
6
<PAGE>
proceeding shall be commenced or claim asserted which may entitle a Certificate
Insurer Party to be indemnified under this Agreement, such party shall give the
Underwriter written or telegraphic notice of such action or claim reasonably
promptly after receipt of written notice thereof. The Underwriter 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 Certificate
Insurer Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to counsel for the Underwriter, 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 Underwriter, (2) the Underwriter
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 Underwriter 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
Underwriter (in which case, if such Indemnified Party notifies the Underwriter
in writing that it elects to employ separate counsel at the expense of the
Underwriter, the Underwriter 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
Underwriter, 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 Underwriter shall not be
liable for the fees and expenses of more than one counsel for all Certificate
Insurer Parties. The Certificate Insurer Party shall cooperate with each
Underwriter Party and each Originator Party in resolving any event which would
give rise to an indemnification obligation pursuant to Section 5(b) hereof in
the most efficient manner. No settlement of any such claim or action shall be
entered into without the consent of each Certificate Insurer Party who is
subject to such claim or action, on the one hand, and each Underwriter Party who
is subject to such claim or action, on the other hand; provided, however, that
the consent of such Certificate Insurer Party shall not be required if such
settlement fully discharges, with prejudice against the plaintiff, the claim or
action against such Certificate Insurer Party. Any failure by a Certificate
Insurer Party to comply with the provisions of this Section shall relieve the
Underwriter of liability only if such failure is materially prejudicial to any
legal pleadings, grounds, defenses or remedies in respect thereof or the
Underwriter's liability hereunder, and then only to the extent of such
prejudice.
Section_9. Notice To Be Given the Originator. Except as provided below
in Section 10 with respect to contribution, the indemnification provided herein
by the Originator shall be the exclusive remedy of any Certificate Insurer Party
for the Losses resulting from the Originator's breach of a representation,
warranty or agreement hereunder; provided, however, that the Certificate 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
a Certificate Insurer Party to be indemnified under this Agreement, such party
shall give the Originator written or telegraphic notice of such action or claim
reasonably promptly after receipt of written notice thereof. The Originator
shall be entitled to participate in the defense of any such action or claim in
reasonable cooperation
7
<PAGE>
with, and with the reasonable cooperation of, the Certificate Insurer Party. The
Indemnified Party will have the right to employ its own counsel in any such
action in addition to counsel for the Originator, 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 Originator, (2) the Originator 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 Originator, 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 Originator (in
which case, if such Indemnified Party notifies the Originator in writing that it
elects to employ separate counsel at the expense of the Originator, the
Originator 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
Originator, 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 Originator shall not be
liable for the fees and expenses of more than one counsel for all Certificate
Insurer Parties. The Certificate Insurer Party shall cooperate with each
Originator Party and each 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 each Certificate Insurer Party who is
subject to such claim or action, on the one hand, and the Originator Party, on
the other hand; provided, however, that the consent of such Certificate Insurer
Party shall not be required if such settlement fully discharges, with prejudice
against the plaintiff, the claim or action against such Certificate Insurer
Party. Any failure by a Certificate Insurer Party to comply with the provisions
of this Section shall relieve the Originator of liability only if such failure
is materially prejudicial to any legal pleadings, grounds, defenses or remedies
in respect thereof or the Originator's liability hereunder, and then only to the
extent of such prejudice.
Section_10. Contribution. (a)_To provide for just and equitable
contribution if the indemnification provided by the Certificate Insurer is
determined to be unavailable for any Underwriter Party or Originator Party
(other than pursuant to Section_5 or_7 of this Agreement), the Certificate
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 Originator Parties and all
Certificate Insurer Parties, respectively.
(b) To provide for just and equitable contribution if the
indemnification provided by the Originator is determined to be unavailable for
any Certificate Insurer Party (other than pursuant to Section_5 or_9 of this
Agreement), the Originator 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 Originator Parties and all Certificate Insurer Parties.
(c) To provide for just and equitable contribution if the
indemnification provided by the Underwriter is determined to be unavailable for
any Certificate Insurer Party (other than
8
<PAGE>
pursuant to Section_5 or_8 of this Agreement), the Underwriter 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 Originator Parties and all
Certificate Insurer Parties.
(d) The relative fault of each Indemnifying Party, on the one hand, and
of each Indemnified Party, on the other hand, shall be determined by reference
to, among other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth in Section_2, 3 or 4 of this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the Parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
(e) The Parties agree that the Certificate Insurer shall be solely
responsible for the Certificate Insurer Information and for the Certificate
Insurer Financial Statements, that the Underwriter shall be solely responsible
for the Underwriter Information provided by the Underwriter in writing for use
in the Prospectus Supplement and that the Originator shall be responsible for
all other information in the Registration Statement and the Prospectus
Supplement.
(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 Originator
Party or any Certificate Insurer Party, (ii) the issuance of any Class A
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.
Section_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 Certificate Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: General Counsel
If to the Originator: Advanta National Bank USA.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: General Counsel
If to the Underwriter: Lehman Brothers Inc.
9
<PAGE>
Three World Financial Center
New York, NY 10285-1200
Attention: General Counsel
Section_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 Certificate Insurer, the
Originator and the Underwriter.
Section_13. Insurance Agreement; Underwriting Agreement; Pooling and
Servicing Agreement. This Agreement in no way limits or otherwise affects the
indemnification obligations of the Originator under (a) the Insurance Agreement,
(b) the Underwriting Agreement, (c) the Pooling and Servicing Agreement or (d)
any Subsequent Transfer Agreement.
Section 14. Limitations. Nothing in this Agreement shall be construed
as a representation or undertaking by the Certificate Insurer concerning
maintenance of the rating currently assigned to its claims-paying ability by
Moody's Investors Service, Inc. ("Moody's") and/or Standard_& Poor's Ratings
Group, a division of The McGraw Hill Companies, Inc. ("S&P") or any other rating
agency (collectively, the "Rating Agencies").
Section_15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall together constitute but one and the same
instrument.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
10
<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.
MBIA INSURANCE CORPORATION,
as Certificate Insurer
By
-------------------------------------
Title
----------------------------------
ADVANTA NATIONAL BANK USA,
as Originator
By
-------------------------------------
Title
----------------------------------
LEHMAN BROTHERS INC.,
as Underwriter
By
-------------------------------------
Title
----------------------------------
