<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) December 19, 1996
Advanta Mortgage Loan Trust 1996-4
-----------------------------------------------------
(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 $638,000,000 principal amount of Mortgage Loan Asset-Backed
Certificates on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by the Registration Statements
on Form S-3 (Registration File No. 33-99510 (as amended, the "Registration
Statement"). Pursuant to the Registration Statement, Advanta Mortgage Loan Trust
1996-4 (the "Registrant" or the "Trust") issued approximately $330,000,000 in
aggregate principal amount of its Mortgage Loan Asset-Backed Certificates,
Series 1996-4 (the "Certificates"), on December 19, 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 December 1, 1996, between Advanta Mortgage Conduit
Services, Inc. (the "Company"), Advanta Mortgage Corp. USA, in its capacity as
master servicer (the "Master Servicer") and Bankers Trust Company of California,
N.A., in its capacity as Trustee (the "Trustee"). The Certificates consist of
two registered classes, the Class A-1 and Class A-2 (collectively, the "Class A
Certificates"), the Class R Certificates (the "Class R Certificates" and,
together with the Class A Certificates, the "Certificates"). The Certificates
initially evidence, in the aggregate, 100% of the undivided beneficial ownership
interests in the Trust.
The assets of the Trust initially will include two investment
pools (each, a "Mortgage Loan Group" or "Group") of closed-end mortgage loans
(the "Mortgage Loans") secured by mortgages or deeds of trust (the "Mortgages")
on one-to-four family residential properties. The Class A-1 Group I Certificates
represent undivided ownership interests in a pool of fixed-rate Mortgage Loans
secured by Mortgages which may be either in a first or in a junior lien
position. The Class A-2 Group II Certificates represent undivided ownership
interests in a group of variable rate Mortgage Loans secured by Mortgages which
may be either in a first or in a junior lien position.
Interest distributions on the Class A Certificates are based
on the Certificate Principal Balance thereof and the then applicable
Pass-Through Rate thereof. The Pass-
<PAGE>
Through Rate is Variable Rate for the Class A-1 Certificates and the Class A-2
Certificates.
The Class A-1 Certificates have an aggregate principal amount
of $210,000,000. The Class A-2 Certificates have an aggregate principal amount
of $120,000,000.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated September 6, 1996 and the
Prospectus Supplement dated December 6, 1996 filed pursuant to Rule 424(b)(5) of
the Act on September 19, 1996.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated December 6,
1996 between Advanta Mortgage Conduit Services, Inc. and
Prudential Securities Incorporated, as representative of the
Underwriters (the "Representative").
4.1 Pooling and Servicing Agreement, dated as of December 1,
1996, between Advanta Mortgage Conduit Services, Inc., as sponsor, Advanta
Mortgage Corp. USA, as master servicer, and Bankers Trust Company of California,
N.A., as Trustee.
4.2 Master Loan Transfer Agreement, dated as of February 15,
1995, between Advanta Mortgage Conduit Services, Inc., as sponsor, Advanta
National Bank, USA, Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp.
Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of New
Jersey, Advanta Mortgage Corp. Northeast and Advanta Mortgage Corp. USA
(collectively, the "Affiliated Originators"), and Bankers Trust Company, as
trustee.
4.3 Conveyance Agreement dated as of December 19, 1996 between
the Affiliated Originators and Advanta Mortgage Conduit Services, Inc.
4.4 Advanta Mortgage Holding Company Guaranty.
4.5 Certificate Insurance Policy.
<PAGE>
24.1 Consent of KPMG Peat Marwick regarding financial
statements of the Certificate Insurer and its reports.
28.1 Indemnification Agreement dated as of December 1, 1996,
between Advanta Mortgage Conduit Services, Inc., Prudential Securities
Incorporated and Financial Guaranty Insurance Company in connection with the
Underwriting Agreement.
<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 MORTGAGE LOAN TRUST 1996-4
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By: /s/ Mark T. Dunsheath
---------------------------------
Name: Mark T. Dunsheath
Title: Vice President
Dated: January 2, 1996
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
1.1 Underwriting Agreement, dated December
6, 1996 between Advanta Mortgage
Conduit Services, Inc. and Prudential
Securities Incorporated. 7
4.1 Pooling and Servicing Agreement, dated
as of December 1, 1996, between
Advanta Mortgage Conduit Services,
Inc., as sponsor, Advanta Mortgage
Corp. USA, as master servicer, Bankers
Trust Company of California, N.A., as
Trustee. 51
4.2 Master Loan Transfer Agreement, dated
as of February 15, 1995, between
Advanta Mortgage Conduit Services,
Inc., as sponsor, Advanta National
Bank, USA, Advanta Mortgage Corp.
Midatlantic, Advanta Mortgage Corp.
Midatlantic II, Advanta Mortgage Corp.
Midwest, Advanta Mortgage Corp. of New
Jersey, Advanta Mortgage Corp.
Northeast and Advanta Mortgage Corp.
USA (collectively, the "Affiliated
Originators"), and Bankers Trust
Company, as trustee. 185
4.3 Conveyance Agreement dated as of
December 19, 1996 between the
Affiliated Originators and Advanta
Mortgage Conduit Services, Inc. 211
4.4 Advanta Mortgage Holding Company
Guaranty. 215
4.5 Certificate Insurance Policy. 219
24.1 Consent of KPMG Peat Marwick regarding
financial statements of the
Certificate Insurer and its report. 224
28.1 Indemnification Agreement dated as of
December 1, 1996, between Advanta
Mortgage Conduit Services, Inc.,
Prudential Securities Incorporated and
Financial Guaranty Insurance Company
in connection with the Underwriting
Agreement. 226
</TABLE>
<PAGE>
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Mortgage Loan Asset-Backed Certificates,
Series 1996-4, Class A Certificates
UNDERWRITING AGREEMENT
December 6, 1996
PRUDENTIAL SECURITIES INCORPORATED
As Representative of the Underwriters
named in Schedule I
One New York Plaza, 15th floor
New York, New York 10292
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. (the "Company") has
authorized the issuance and sale of Mortgage Loan Asset-Backed Certificates,
Series 1996-4, (the "Certificates") consisting of the Class A-1 Group I
Certificates (the "Class A-1 Certificates") and the Class A-2 Group II
Certificates (the "Class A-2 Certificates, together with the Class A-1
Certificates, the "Offered Certificates") and of an additional class of
subordinate certificates (the "Subordinate Certificates" or the "Class R
Certificates"). The Certificates will be issued by the Advanta Mortgage Loan
Trust 1996-4 (the "Trust"), and will evidence in the aggregate the entire
beneficial interest in a trust estate (the "Trust Estate") consisting primarily
of two segregated pools (the "Mortgage Pools") of closed-end mortgage loans (the
"Mortgage Loans"), and certain related property. The Mortgage Loans shall have,
as of the opening of business on December 1, 1996 (the "Cut-Off Date"), an
aggregate principal balance of approximately $330,000,000. The certificates are
to be issued under a pooling and servicing agreement, to be dated as of December
1, 1996 (the "Pooling and Servicing Agreement"), among the Company, as sponsor,
Advanta Mortgage Corp. USA, as master servicer, and Bankers Trust Company of
California, N.A., as trustee (the "Trustee").
On or prior to the date of issuance of the Certificates, the
Company will obtain a guaranty insurance policy (the "Policy") issued by
Financial Guaranty Insurance Company (the "Insurer") which will unconditionally
and irrevocably guarantee to the Trustee for the benefit of the holders of the
Offered Certificates the amount by which the sum of the related Group Interest
Distribution Amount and the
<PAGE>
related Subordination Deficit, if any, exceeds the related Total Available
Funds.
Only the Offered Certificates are being purchased by the
Underwriters.
The Certificates are more fully described in a Registration
Statement which the Company has furnished to the Underwriters. Capitalized terms
used but not defined herein shall have the meanings given to them in the Pooling
and Servicing Agreement.
Simultaneously with the execution of the Pooling and Servicing
Agreement, the Company will enter into a conveyance agreement pursuant to the
Master Loan Transfer Agreement dated as of February 15, 1995 among the Trustee,
and the Affiliated Originators named thereon (together, the "Purchase
Agreement"), pursuant to which the Affiliated Originators will transfer to the
Company all of their right, title and interest in and to the Mortgage Loans as
of the Closing Date.
The Company will also enter into an Indemnification Agreement
(the "Indemnification Agreement") dated as of December 1, 1996, among the
Underwriters, the Company and the Certificate Insurer, governing the liability
of the several parties with respect to the losses resulting from material
misstatements or omissions contained in the Prospectus Supplement.
SECTION I. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with the Underwriters that:
A. Registration Statements on Form S-3, as amended by
Post-Effective Amendments thereto, have (i) been prepared by
the Company in conformity with the requirements of the
Securities Act of 1933 (the "Securities Act") and the rules
and regulations (the "Rules and Regulations") of the United
States Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities
Act. Copies of such Registration Statements have been
delivered by the Company to the Underwriters. As used in this
Agreement, "Effective Time" means the date and the time as of
which such Registration Statements, or the most recent
post-effective amendment thereto, if any, was declared
effective by the Commission; "Effective Date" means the date
of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such Registration Statements, or
amendments thereof, including a
2
<PAGE>
preliminary prospectus supplement which, as completed, is
proposed to be used in connection with the sale of the Offered
Certificates and any prospectus filed with the Commission by
the Company with the consent of the Underwriters pursuant to
Rule 424(a) of the Rules and Regulations; "Registration
Statement" means such registration statements, as amended by
all Post-Effective Amendments thereto heretofore filed with
the Commission, at the Effective Time, including any documents
incorporated by reference therein at such time; and
"Prospectus" means such final prospectus, as first
supplemented by a prospectus supplement (the "Prospectus
Supplement") relating to the Offered Certificates, as first
filed with the Commission pursuant to paragraph (1) or (4) of
Rule 424(b) of the Rules and Regulations. Reference made
herein to any Preliminary Prospectus or to the Prospectus
shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form
S-3 under the Securities Act, as of the date of such
Preliminary Prospectus or the Prospectus, as the case may be,
and any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any document filed under the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of
such Preliminary Prospectus or the Prospectus, as the case may
be, and incorporated by reference in such Preliminary
Prospectus or the Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall
be deemed to include any report of the Company filed with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act after the Effective Time that is incorporated by reference
in the Registration Statement. The Commission has not issued
any order preventing or suspending the use of any Preliminary
Prospectus. There are no contracts or documents of the Company
which are required to be filed as exhibits to the Registration
Statement pursuant to the Securities Act or the Rules and
Regulations which have not been so filed or incorporated by
reference therein on or prior to the Effective Date of the
Registration Statements. The conditions for use of Form S-3,
as set forth in the General Instructions thereto, have been
satisfied.
To the extent that any Underwriter (i) has provided
to the Company Collateral term sheets (as hereinafter defined)
that such Underwriter has provided to a prospective investor,
the Company has
3
<PAGE>
filed such Collateral term sheets as an exhibit to a report on
Form 8-K within two business days of its receipt thereof, or
(ii) has provided to the Company Structural term sheets or
Computational Materials (each as defined below) that such
Underwriter has provided to a prospective investor, the
Company will file or cause to be filed with the Commission a
report on Form 8-K containing such Structural term sheet and
Computational Materials, as soon as reasonably practicable
after the date of this Agreement, but in any event, not later
than the date on which the Prospectus is filed with the
Commission pursuant to Rule 424 of the Rules and Regulations.
B. The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will, when they
become effective or are filed with the Commission, as the case
may be, conform in all respects to the requirements of the
Securities Act and the Rules and Regulations. The Registration
Statement, as of the Effective Date thereof and of any
amendment thereto, did not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Prospectus as of its date, and as amended or
supplemented as of the Closing Date (as hereinafter defined)
does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
provided that no representation or warranty is made as to
information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity
with written information furnished to the Company in writing
by the Underwriters expressly for use therein.
C. The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
any
4
<PAGE>
further documents so filed and incorporated by reference in
the Prospectus, when such documents become effective or are
filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading.
D. Since the respective dates as of which information
is given in the Prospectus, there has not been any material
adverse change in the general affairs, management, financial
condition, or results of operations of the Company, otherwise
than as set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
E. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, is duly qualified
to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires such
qualification, and has all power and authority necessary to
own or hold its properties, to conduct the business in which
it is engaged and to enter into and perform its obligations
under this Agreement, the Pooling and Servicing Agreement, the
Purchase Agreement, the Indemnification Agreement and the
Insurance Agreement, and to cause the Certificates to be
issued.
F. There are no actions, proceedings or
investigations pending before or threatened by any court,
administrative agency or other tribunal to which the Company
is a party or of which any of its properties is the subject
(a) which if determined adversely to the Company would have a
material adverse effect on the business or financial condition
of the Company, (b) which asserts the invalidity of this
Agreement, the Pooling and Servicing Agreement, the Insurance
Agreement, the Purchase Agreement, the Indemnification
Agreement or the Certificates, (c) which seeks to prevent the
issuance of the Certificates or the consummation by the
Company of any of the transactions contemplated by the Pooling
and Servicing Agreement, the Purchase Agreement, the Insurance
Agreement, the Indemnification Agreement or this Agreement, as
the
5
<PAGE>
case may be, or (d) which might materially and adversely
affect the performance by the Company of its obligations
under, or the validity or enforceability of, the Pooling and
Servicing Agreement, the Insurance Agreement, the Purchase
Agreement, this Agreement, the Indemnification Agreement or
the Certificates.
G. This Agreement has been, and the Pooling and
Servicing Agreement, the Purchase Agreement, the
Indemnification Agreement and the Insurance Agreement when
executed and delivered as contemplated hereby and thereby will
have been, duly authorized, executed and delivered by the
Company, and this Agreement constitutes, and the Pooling and
Servicing Agreement, the Purchase Agreement, the
Indemnification Agreement and the Insurance Agreement, when
executed and delivered as contemplated herein, will
constitute, legal, valid and binding instruments enforceable
against the Company in accordance with their respective terms,
subject as to enforceability to (x) applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws
affecting creditors' rights generally, (y) general principles
of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law), and (z) with respect to
rights of indemnity under this Agreement, the Indemnification
Agreement and the Insurance Agreement, limitations of public
policy under applicable securities laws.
H. The execution, delivery and performance of this
Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement, the Indemnification Agreement and the Insurance
Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby, and the issuance
and delivery of the Certificates do not and will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party, by which the
Company is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will
such actions result in any violation of the provisions of the
articles of incorporation or by-laws of the Company or any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Company or any of its properties or assets.
6
<PAGE>
I. Arthur Andersen LLP are independent public
accountants with respect to the Company as required by the
Securities Act and the Rules and Regulations.
J. The direction by the Company to the Trustee to
execute, authenticate, issue and deliver the Certificates has
been duly authorized by the Company, and assuming the Trustee
has been duly authorized to do so, when executed,
authenticated, issued and delivered by the Trustee in
accordance with the Pooling and Servicing Agreement, the
Certificates will be validly issued and outstanding and will
be entitled to the benefits provided by the Pooling and
Servicing Agreement.
K. No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body of the United States is required
for the issuance of the Certificates and the sale of the
Offered Certificates to the Underwriters, or the consummation
by the Company of the other transactions contemplated by this
Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement, the Indemnification Agreement and the Insurance
Agreement, except such consents, approvals, authorizations,
registrations or qualifications as may be required under State
securities or Blue Sky laws in connection with the purchase
and distribution of the Offered Certificates by the
Underwriters or as have been obtained.
L. The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate
State, Federal or foreign regulatory agencies or bodies
necessary to conduct the business now conducted by it and as
described in the Prospectus, and the Company has not received
notice of any proceedings relating to the revocation or
modification of any such license, certificate, authority or
permit which if decided adversely to the Company would, singly
or in the aggregate, materially and adversely affect the
conduct of its business, operations or financial condition.
M. At the time of execution and delivery of the
Pooling and Servicing Agreement, the Company will: (i) have
good title to the interest in the Mortgage Loans conveyed by
the Affiliated Originators, free and clear of any lien,
mortgage,
7
<PAGE>
pledge, charge, encumbrance, adverse claim or other security
interest (collectively, "Liens"); (ii) not have assigned to
any person any of its right, title or interest in the Mortgage
Loans, in the Purchase Agreement, in the Pooling and Servicing
Agreement or in the Offered Certificates being issued pursuant
thereto; and (iii) have the power and authority to sell its
interest in the Mortgage Loans to the Trustee and to sell the
Offered Certificates to the Underwriters. Upon execution and
delivery of the Pooling and Servicing Agreement by the
Trustee, the Trustee will have acquired beneficial ownership
of all of the Company's right, title and interest in and to
the Mortgage Loans. Upon delivery to the Underwriters of the
Offered Certificates, the Underwriters will have good title to
the Offered Certificates, free of any Liens.
N. As of the Cut-0ff Date, each of the Mortgage Loans
will meet the eligibility criteria described in the Prospectus
and will conform to the descriptions thereof contained in the
Prospectus.
O. Neither the Company nor the Trust created by the
Pooling and Servicing Agreement is an "investment company"
within the meaning of such term under the Investment Company
Act of 1940 (the "1940 Act") and the rules and regulations of
the Commission thereunder.
P. At the Closing Date, the Certificates
and the Pooling and Servicing Agreement will conform
in all material respects to the descriptions
thereof contained in the Prospectus.
Q. At the Closing Date, the Offered Certificates
shall have been rated in the highest rating category by at
least two nationally recognized rating agencies.
R. Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of this
Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement, the Insurance Agreement, the Indemnification
Agreement and the Certificates have been paid or will be paid
at or prior to the Closing Date.
S. At the Closing Date, each of the representations
and warranties of the Company set forth in the Pooling and
Servicing Agreement and the Insurance Agreement will be true
and correct in all material respects.
8
<PAGE>
Any certificate signed by an officer of the Company and
delivered to the Representative or counsel for the Underwriters in connection
with an offering of the Offered Certificates shall be deemed, and shall state
that it is, a representation and warranty as to the matters covered thereby to
each person to whom the representations and warranties in this Section I are
made.
SECTION II. Purchase and Sale. The commitment of the
Underwriters to purchase the Offered Certificates pursuant to this Agreement
shall be deemed to have been made on the basis of the representations and
warranties herein contained and shall be subject to the terms and conditions
herein set forth. The Company agrees to instruct the Trustee to issue and agrees
to sell to the Underwriters, and the Underwriters agree (except as provided in
Sections X and XI hereof) to purchase from the Company the aggregate initial
principal amounts of Offered Certificates set forth on Schedule A, at the
purchase price or prices set forth in Schedule A.
The obligations of the Underwriters hereunder to purchase the
Offered Certificates of each Class shall be several and not joint. Each
Underwriter's obligation shall be to purchase the aggregate principal amount of
Offered Certificates of the related Class as is indicated with respect to each
Underwriter under the caption "Underwriting" in the Prospectus. The right of the
Company and a non-defaulting Underwriter shall be as set forth in Section XIII
hereof.
SECTION III. Delivery and Payment. Delivery of and payment for the Offered
Certificates to be purchased by the Underwriters shall be made at the offices of
Dewey Ballantine, 1301 Sixth Avenue, New York, New York 10019, or at such other
place as shall be agreed upon by the Representative and the Company at 10:00
A.M. New York City time on December 19, 1996 or at such other time or date as
shall be agreed upon in writing by the Representative and the Company (such date
being referred to as the "Closing Date"). Payment shall be made to the Company
by wire transfer of same day funds payable to the account of the Company.
Delivery of the Offered Certificates shall be made to the Representative for the
accounts of the Underwriters against payment of the purchase price thereof. The
Offered Certificates shall be in such denominations and registered in such
names as the Representative may request in writing at least two business days
prior to the Closing Date. The Offered Certificates will be made available for
examination by the Representative no later than 2:00 p.m. New York City time on
the first business day prior to the Closing Date.
SECTION IV. Offering by the Underwriters. It is understood
that, subject to the terms and conditions hereof,
9
<PAGE>
the Underwriters proposes to offer the Offered Certificates for sale to the
public as set forth in the Prospectus.
SECTION V. Covenants of the Company. The Company agrees as
follows:
A. To prepare the Prospectus in a form approved by
the Representative and to file such Prospectus pursuant to
Rule 424(b) under the Securities Act not later than the
Commission's close of business on the second business day
following the execution and delivery of this Agreement; to
make no further amendment or any supplement to the
Registration Statement or to the Prospectus prior to the
Closing Date except as permitted herein; to advise the
Representative, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has
been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to
furnish the Representative with copies thereof; to file
promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and,
for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Offered
Certificates, to promptly advise the Representative of its
receipt of notice of the issuance by the Commission of any
stop order or of: (i) any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus; (ii) the
suspension of the qualification of the Offered Certificates
for offering or sale in any jurisdiction; (iii) the initiation
of or threat of any proceeding for any such purpose; (iv) any
request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information. In the event of the issuance of any stop order or
of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any
such qualification, the Company promptly shall use its best
efforts to obtain the withdrawal of such order or suspension.
B. To furnish promptly to the Representative and to
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed with the Commission, and of each
amendment thereto
10
<PAGE>
filed with the Commission, including all consents and exhibits
filed therewith.
C. To deliver promptly to the Representative such
number of the following documents as the Representative shall
reasonably request: (i) conformed copies of the Registration
Statement as originally filed with the Commission and each
amendment thereto (in each case including exhibits); (ii) each
Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus; and (iii) any document incorporated
by reference in the Prospectus (including exhibits thereto).
If the delivery of a prospectus is required at any time prior
to the expiration of nine months after the Effective Time in
connection with the offering or sale of the Offered
Certificates, and if at such time any events shall have
occurred as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or
supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in
order to comply with the Securities Act or the Exchange Act,
the Company shall notify the Representative and, upon the
Representative's request, shall file such document and prepare
and furnish without charge to the Underwriters and to any
dealer in securities as many copies as the Representative may
from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case
any of the Underwriters are required to deliver a Prospectus
in connection with sales of any of the Offered Certificates at
any time nine months or more after the Effective Time, upon
the request of the Representative but at the expense of such
Underwriter, the Company shall prepare and deliver to such
Underwriter as many copies as such Underwriter may reasonably
request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Securities Act.
D. To file promptly with the Commission any amendment
to the Registration Statement or the Prospectus or any
supplement to the Prospectus that
11
<PAGE>
may, in the judgment of the Company or the Representative, be
required by the Securities Act or requested by the Commission.
E. Prior to filing with the Commission any (i)
Preliminary Prospectus, (ii) amendment to the Registration
Statement or supplement to the Prospectus, or document
incorporated by reference in the Prospectus, or (iii)
Prospectus pursuant to Rule 424 of the Rules and Regulations,
to furnish a copy thereof to the Representative and counsel
for the Underwriters and obtain the consent of the
Representative to the filing.
F. To make generally available to holders of the
Offered Certificates as soon as practicable, but in any event
not later than 90 days after the close of the period covered
thereby, a statement of earnings of the Trust (which need not
be audited) complying with Section 11(a) of the Securities Act
and the Rules and Regulations (including, at the option of the
Company, Rule 158) and covering a period of at least twelve
consecutive months beginning not later than the first day of
the first fiscal quarter following the Closing Date.
G. To use its best efforts, in cooperation with the
Representative, to qualify the Offered Certificates for
offering and sale under the applicable securities laws of such
states and other jurisdictions of the United States as the
Representative may designate, and maintain or cause to be
maintained such qualifications in effect for as long as may be
required for the distribution of the Offered Certificates. The
Company will file or cause the filing of such statements and
reports as may be required by the laws of each jurisdiction in
which the Offered Certificates have been so qualified.
H. Not, without the Representative's prior written
consent, to publicly offer or sell or contract to sell any
mortgage pass-through securities, collateralized mortgage
obligations or other similar securities representing interests
in or secured by other mortgage-related assets originated or
owned by the Company for a period of 5 business days following
the commencement of the offering of the Offered Certificates
to the public.
I. So long as the Offered Certificates shall be
outstanding, to deliver to the Representative as soon as such
statements are furnished to
12
<PAGE>
the Trustee: (i) the annual statement as to compliance
delivered to the Trustee pursuant to Section 8.16 of the
Pooling and Servicing Agreement; (ii) the annual statement of
a firm of independent public accountants furnished to the
Trustee pursuant to Section 8.17 of the Pooling and Servicing
Agreement; and (iii) the Monthly Statement furnished to the
Certificateholders pursuant to Section 7.8 of the Pooling and
Servicing Agreement.
J. To apply the net proceeds from the sale
of the Offered Certificates in the manner set forth in the
Prospectus.
SECTION VI. Conditions to the Underwriters' Obligations. The
obligations of the Underwriters to purchase the Offered Certificates pursuant to
this Agreement are subject to: (i) the accuracy on and as of the Closing Date of
the representations and warranties on the part of the Company herein contained;
(ii) the performance by the Company of all of their respective obligations
hereunder; and (iii) the following conditions as of the Closing Date:
A. The Representative shall have received
confirmation of the effectiveness of the Registration
Statement. No stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission. Any request of the
Commission for inclusion of additional information in the
Registration Statement or the Prospectus shall have been
complied with.
B. None of the Underwriters shall have discovered and
disclosed to the Company on or prior to the Closing Date that
the Registration Statement or the Prospectus or any amendment
or supplement thereto contains an untrue statement of a fact
or omits to state a fact which, in the opinion of Dewey
Ballantine, counsel for the Underwriters, is material and is
required to be stated therein or is necessary to make the
statements therein not misleading.
C. All corporate proceedings and other legal matters
relating to the authorization, form and validity of this
Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement, the Indemnification Agreement, the Offered
Certificates, the Registration Statement and the Prospectus,
and all other legal matters relating to
13
<PAGE>
this Agreement and the transactions contemplated hereby shall
be satisfactory in all respects to counsel for the
Underwriters, and the Company shall have furnished to such
counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
D. The Representative shall have received the
favorable opinion of Dewey Ballantine, special counsel to the
Company with respect to the following items, dated the Closing
Date, to the effect that:
1. The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of
the State of Delaware, and is qualified to do business in each
state necessary to enable it to perform its obligations as
Sponsor under the Pooling and Servicing Agreement. The Company
has the requisite power and authority to execute and deliver,
engage in the transactions contemplated by, and perform and
observe the conditions of, this Agreement, the Pooling and
Servicing Agreement, the Insurance Agreement, the Purchase
Agreement and the Indemnification Agreement.
2. This Agreement, the Certificates, the Pooling and
Servicing Agreement, the Insurance Agreement, the Purchase
Agreement and the Indemnification Agreement have been duly and
validly authorized, executed and delivered by the Company, all
requisite corporate action having been taken with respect
thereto, and each (other than the Certificates) constitutes
the valid, legal and binding agreement of the Company.
3. Neither the transfer of the Mortgage Loans to the
Trust, the issuance or sale of the Certificates nor the
execution, delivery or performance by the Company of the
Pooling and Servicing Agreement, this Agreement, the Insurance
Agreement, the Purchase Agreement or the Indemnification
Agreement (A) conflicts or will conflict with or results or
will result in a breach of, or constitutes or will constitute
a default under, (i) any term or provision of the certificate
of incorporation or bylaws of the Company; (ii) any term or
provision of any material agreement, contract, instrument or
indenture, to which the Company is a party or is bound and
known to such counsel; or (iii) any order, judgment, writ,
injunction or decree of any court or governmental
14
<PAGE>
agency or body or other tribunal having jurisdiction over the
Company and known to such counsel; or (B) results in, or will
result in the creation or imposition of any lien, charge or
encumbrance upon the Trust Estate or upon the Certificates,
except as otherwise contemplated by the Pooling and Servicing
Agreement.
4. The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment with
respect to each Mortgage is sufficient to fully transfer to
the Trustee for the benefit of the Owners all right, title and
interest of the Company in the Note and Mortgage, as
noteholder and mortgagee or assignee thereof, subject to any
exceptions set forth in such opinion, and will be sufficient
to permit the Trustee to avail itself of all protection
available under applicable law against the claims of any
present or future creditors of the Company and to prevent any
other sale, transfer, assignment, pledge or other encumbrance
of the Mortgage Loans by the Company from being enforceable.
5. No consent, approval, authorization or order of,
registration or filing with, or notice to, courts,
governmental agency or body or other tribunal is required
under the laws of the State of New York, for the execution,
delivery and performance of the Pooling and Servicing
Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement, the Purchase Agreement or the
offer, issuance, sale or delivery of the Certificates or the
consummation of any other transaction contemplated thereby by
the Company, except such which have been obtained.
6. There are no actions, proceedings or
investigations, to such counsel's knowledge, pending or
threatened against the Company before any court, governmental
agency or body or other tribunal (i) asserting the invalidity
of the Pooling and Servicing Agreement, the Insurance
Agreement, this Agreement, the Indemnification Agreement, the
Purchase Agreement or the Certificates (ii) seeking to prevent
the issuance of the Certificates or the consummation of any of
the transactions contemplated by the Pooling and Servicing
Agreement, the Indemnification Agreement, the Insurance
Agreement or this Agreement, (iii) which would materially and
adversely affect the performance by the Company of obligations
under, or the validity or enforceability of, the Pooling and
15
<PAGE>
Servicing Agreement, the Certificates, the Indemnification
Agreement, the Insurance Agreement, the Purchase Agreement or
this Agreement or (iv) that would adversely affect the status
of the Trust Estate as a "real estate mortgage investment
conduit" ("REMIC") as such term is defined in the Internal
Revenue Code of 1986, as amended.
7. To the best of the knowledge of such counsel, the
Commission has not issued any stop order suspending the
effectiveness of the Registration Statement or any order
directed to any prospectus relating to the Certificates
(including the Prospectus), and has not initiated or
threatened any proceeding for that purpose.
8. The Registration Statement and the Prospectus
(other than the financial and statistical data included
therein, as to which such counsel need express no opinion),
including the Incorporated Documents, as of the date on which
the Registration Statement was declared effective and as of
the date hereof, comply as to form in all material respects
with the requirements of the 1933 Act and the rules and
regulations thereunder and the Exchange Act and the rules and
regulations thereunder, and such counsel does not know of any
amendment to the Registration Statement required to be filed,
or of any contracts, indentures or other documents of a
character required to be filed as an exhibit to the
Registration Statement or required to be described in the
Registration Statement which has not been filed or described
as required.
9. Neither the qualification of the Pooling and
Servicing Agreement under the Trust Indenture Act of 1939 nor
the registration of the Trust created by such Agreement under
the Investment Company Act of 1940 is presently required.
10. The statements in the Prospectus set forth under
the captions "DESCRIPTION OF THE SECURITIES," "THE POOLING AND
SERVICING AGREEMENT" and the statements in the Prospectus
Supplement set forth under the caption "DESCRIPTION OF THE
CERTIFICATES," to the extent such statements purport to
summarize certain provisions of the Certificates or of the
Pooling and Servicing Agreement, are fair and accurate in all
material respects.
11. The statements in the Prospectus and Prospectus
Supplement set forth under the captions
16
<PAGE>
"ERISA CONSIDERATIONS," "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," and the statements in the Prospectus set forth
under the caption "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
AND RELATED MATTERS," to the extent that they constitute
matters of federal, New York or California law, or federal,
New York or California legal conclusions provide a fair and
accurate summary of such law or conclusions.
12. Assuming that (a) the Trustee causes the Trust
created under the Pooling and Servicing Agreement to elect, as
the Trustee has covenanted to do in the Pooling and Servicing
Agreement, to be treated as a REMIC and (b) the parties to the
Pooling and Servicing Agreement comply with the terms thereof,
the Trust will be treated as a REMIC, the Class A-1 and the
A-2 Certificates issued pursuant to the Pooling and Servicing
Agreement will be treated as the "regular interests" in the
REMIC and the Class R Certificates issued pursuant to the
Pooling and Servicing Agreement will be treated as the sole
"residual interest" in the REMIC. The Trust will not be
subject to tax upon its income or assets by any taxing
authority of the State of New York or New York City or of the
State of California (except that no opinion need be expressed
with respect to any minimum tax).
13. Such opinion shall also relate to comparable
matters with respect to the Affiliated Originators and Advanta
Mortgage Holding Company.
14. No information has come to such counsel's
attention which causes them to believe that the Prospectus
(other than the financial statement and other financial and
statistical data contained therein, as to which such counsel
need express no opinion), as of the date thereof, contained
any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
15. Such other matters as the Representative may
reasonably request.
In rendering its opinions, the counsel described above may
rely, as to matters of fact, on certificates of responsible officers of the
Company, the Trustee and public officials. Such opinions may also assume the due
authorization, execution and delivery of the instruments and
17
<PAGE>
documents referred to therein by the parties thereto other than the Company.
E. The Representative shall have received letters,
including bring-down letters, from Arthur Andersen LLP, dated
on or before the Closing Date, in form and substance
satisfactory to the Representative and counsel for the
Underwriters, to the effect that they have performed certain
specified procedures requested by the Representative with
respect to the information set forth in the Prospectus and
certain matters relating to the Company.
F. The Offered Certificates shall have been rated in
the highest rating category by Standard & Poor's Ratings Group
and by Moody's Investors Service, Inc., and such ratings shall
not have been rescinded or downgraded. The Representative and
counsel for the Underwriters shall have received copies of any
opinions of counsel supplied to the rating organizations
relating to any matters with respect to the Certificates. Any
such opinions shall be dated the Closing Date and addressed to
the Underwriters or accompanied by reliance letters to the
Underwriters or shall state that the Underwriters may rely
upon them.
G. The Representative shall have received from the
Company a certificate, signed by the president, a senior vice
president or a vice president of the Company, dated the
Closing Date, to the effect that the signer of such
certificate has carefully examined the Registration Statement,
the Pooling and Servicing Agreement and this Agreement and
that, to the best of his or her knowledge based upon
reasonable investigation:
1. the representations and warranties of the Company
in this Agreement and in the Indemnification Agreement, as of
the Closing Date, and in the Pooling and Servicing Agreement,
the Insurance Agreement, the Purchase Agreement and in all
related agreements, as of the date specified in such
agreements, are true and correct, and the Company has complied
with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the
Closing Date;
2. there are no actions, suits or proceedings
pending, or to the best of such officer's knowledge,
threatened against or affecting the
18
<PAGE>
Company which if adversely determined, individually or in the
aggregate, would be reasonably likely to adversely affect the
Company's obligations under the Pooling and Servicing
Agreement, the Insurance Agreement, this Agreement, the
Purchase Agreement or under the Indemnification Agreement in
any material way; and no merger, liquidation, dissolution or
bankruptcy of the Company is pending or contemplated;
3. the information contained in the Registration
Statement and the Prospectus relating to the Company, the
Mortgage Loans or the servicing procedures of it or its
affiliates or subservicer is true and accurate in all material
respects and nothing has come to his or her attention that
would lead such officer to believe that the Registration
Statement or Prospectus includes any untrue statement of a
material fact or omits to state a material fact necessary to
make the statements therein not misleading;
4. the information set forth in the Schedule of
Mortgage Loans required to be furnished pursuant to the
Pooling and Servicing Agreement is true and correct in all
material respects;
5. there has been no amendment or other document
filed affecting the articles of incorporation or bylaws of the
Company since 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
19
<PAGE>
rating organization," as such term is defined for purposes of
the 1933 Act; and
8. each person who, as an officer or representative
of the Company, signed or signs the Registration Statement,
the Pooling and Servicing Agreement, this Agreement, the
Indemnification Agreement, the Insurance Agreement, or any
other document delivered pursuant hereto, on the date of such
execution, or on the Closing Date, as the case may be, in
connection with the transactions described in the Pooling and
Servicing Agreement, the Indemnification Agreement, the
Insurance Agreement, the Purchase Agreement and this Agreement
was, at the respective times of such signing and delivery, and
is now, duly elected or appointed, qualified and acting as
such officer or representative, and the signatures of such
persons appearing on such documents are their genuine
signatures.
The Company shall attach to such certificate a true and
correct copy of its certificate or articles of incorporation, as appropriate,
and bylaws which are in full force and effect on the date of such certificate
and a certified true copy of the resolutions of its Board of Directors with
respect to the transactions contemplated herein.
H. The Representative shall have received a favorable
opinion of counsel to the Trustee, dated the Closing Date and
in form and substance satisfactory to the Representative, to
the effect that:
1. the Trustee is a national banking association duly
organized, validly existing and in good standing under the
laws of the United States and has the power and authority to
enter into and to take all actions required of it under the
Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the
Pooling and Servicing Agreement constitutes the legal, valid
and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except as enforceability
thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement
of creditors' rights generally, as such laws would apply in
the event of a bankruptcy, insolvency or reorganization or
20
<PAGE>
similar occurrence affecting the Trustee, and (B) general
principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other
action by any governmental agency or body or other tribunal is
required on the part of the Trustee in connection with its
execution and delivery of the Pooling and Servicing Agreement
or the performance of its obligations thereunder;
4. the Certificates have been duly
executed, authenticated and delivered by the Trustee; and
5. the execution and delivery of, and performance by
the Trustee of its obligations under, the Pooling and
Servicing Agreement do not conflict with or result in a
violation of any statute or regulation applicable to the
Trustee, or the charter or bylaws of the Trustee, or to the
best knowledge of such counsel, any governmental authority
having jurisdiction over the Trustee or the terms of any
indenture or other agreement or instrument to which the
Trustee is a party or by which it is bound.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Trustee.
I. The Representative shall have received from the
Trustee a certificate, signed by the President, a senior vice
president or a vice president of the Trustee, dated the
Closing Date, to the effect that each person who, as an
officer or representative of the Trustee, signed or signs the
Certificates, the Pooling and Servicing Agreement or any other
document delivered pursuant hereto, on the date hereof or on
the Closing Date, in connection with the transactions
described in the Pooling and Servicing Agreement was, at the
respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such
officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
J. The Policy relating to the Certificates shall have
been duly executed and issued at or
21
<PAGE>
prior to the Closing Date and shall conform in all material
respects to the description thereof in the Prospectus.
K. The Representative shall have received a favorable
opinion of in-house counsel to the Insurer, dated the Closing
Date and in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
1. The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State
of New York. The Insurer is validly licensed and authorized to
issue the Policy and perform its obligations under the Policy
in accordance with the terms thereof, under the laws of the
State of New York.
2. The execution and delivery by the Insurer of the
Policy, the Insurance Agreement and the Indemnification
Agreement are within the corporate power of the Insurer and
have been authorized by all necessary corporate action on the
part of the Insurer; the Policy has been duly executed and is
the valid and binding obligation of the Insurer enforceable in
accordance with its terms except that the enforcement of the
Policy may be limited by laws relating to bankruptcy,
insolvency, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by
general principles of equity.
3. The Insurer is authorized to deliver the Insurance
Agreement and the Indemnification Agreement, and such
agreements have been duly executed and delivered and
constitute the legal, valid and binding obligations of the
Insurer enforceable in accordance with its terms except that
the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors'
rights generally and by general principles of equity and by
public policy considerations relating to indemnification for
securities law violations.
4. No consent, approval, authorization or order of
any state or federal court or governmental agency or body is
required on the part of the Insurer, the lack of which would
adversely affect the validity or enforceability of the Policy;
to the extent required by applicable legal
22
<PAGE>
requirements that would adversely affect validity or
enforceability of the Policy, the form of the Policy has been
filed with, and approved by, all governmental authorities
having jurisdiction over the Insurer in connection with the
Policy.
5. The Certificate Insurance Policy is not required
to be registered under the Securities Act.
6. The information set forth under the caption "THE
CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" in
the Prospectus forming a part of the Registration Statement,
insofar as such statements constitute a description of the
Policy, accurately summarizes the Policy.
In rendering this opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee, the Insurer and public officials. Such opinion may assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Insurer.
L. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended
or potential downgrading or (B) any review or possible changes
in rating the direction of which has not been indicated, in
the rating, if any, accorded the Company or in any rating
accorded any securities of the Company, if any, by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of the 1933 Act.
M. On or prior to the Closing Date there shall not
have occurred any downgrading, nor shall any notice have been
given of (A) any intended or potential downgrading or (B) any
review or possible change in rating the direction of which has
not been indicated, in the rating accorded the Insurer's
claims paying ability by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act.
N. There has not occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations, since September 30, 1996, of (A) the Company and
its subsidiaries or (B) the Insurer, that is in the
Representative's judgment material and adverse and that makes
it in the Representative's judgment impracticable to
23
<PAGE>
market the Offered Certificates on the terms and in the manner
contemplated in the Prospectus.
O. The Representative shall have received from the
Insurer a certificate, signed by the President, a senior vice
president or a vice president of the Insurer, dated the
Closing Date, to the effect that the signer of such
certificate has carefully examined the Policy, the Insurance
Agreement, the Indemnification Agreement and the related
documents and that, to the best of his or her knowledge based
on reasonable investigation:
1. there are no actions, suits or proceedings pending
or threatened against or affecting the Insurer which, if
adversely determined, individually or in the aggregate, would
adversely affect the Insurer's performance under the Policy,
the Insurance Agreement or the Indemnification Agreement;
2. each person who as an officer or representative of
the Insurer, signed or signs the Policy, the Insurance
Agreement, the Indemnification Agreement or any other document
delivered pursuant hereto, on the date thereof, or on the
Closing Date, in connection with the transactions described in
this Agreement was, at the respective times of such signing
and delivery, and is now, duly elected or appointed, qualified
and acting as such officer or representative, and the
signatures of such persons appearing on such documents are
their genuine signatures;
3. the information contained in the Prospectus under
the captions "THE CERTIFICATE INSURANCE POLICY" and "THE
CERTIFICATE INSURER" is true and correct in all material
respects and does not omit to state a material fact with
respect to the description of the Policy or the ability of the
Insurer to meet its payment obligations under the Policy;
4. the tables regarding the Insurer's capitalization
set forth under the heading "THE CERTIFICATE INSURANCE POLICY"
and "THE CERTIFICATE INSURER" presents fairly the
capitalization of the Insurer as of 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
24
direction of which has not been indicated, in the rating
accorded the claims paying ability of the Insurer by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of the 1933 Act;
6. the audited balance sheet of the Insurer as of
December 31, 1995 and the related statement of income and
retained earnings for the fiscal year then ended, and the
accompanying footnotes, together with opinion dated January
19, 1996 of KPMG Peat Marwick, an independent certificated
public accountant, copies of which are included in the
Prospectus, fairly present in all material respects the
financial condition of the Insurer as of such date and for the
period covered by such statements in accordance with generally
accepted accounting principles consistently applied; the
unaudited balance sheet of the Insurer as of 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 the Prospectus, fairly present in all material
respects the financial condition of the Insurer as of such
date and for the period covered by such statements in
accordance with generally accepted accounting principles
applied consistently with those principles applied in
preparing the December 31, 1995 audited statements.
7. to the best knowledge of such officer, since
September 30, 1996, no material adverse change has occurred in
the financial position of the Insurer other than as set forth
in the Prospectus.
The officer of the Insurer certifying to items 5-7 shall be an
officer in charge of a principal financial function.
The Insurer shall attach to such certificate a true and
correct copy of its certificate or articles of incorporation, as appropriate,
and its bylaws, all of which are in full force and effect on the date of such
certificate.
P. The Representative shall have received from Dewey
Ballantine, special counsel to the Company, a survey in form
and substance satisfactory to the Representative, indicating
the requirements of applicable local law which must be
complied with in order to transfer and service the Mortgage
Loans pursuant to the Pooling and
25
<PAGE>
Servicing Agreement and the Company shall have complied with
all such requirements.
Q. The Representative shall have received from Dewey
Ballantine, special counsel to the Underwriters, such opinion
or opinions, dated the Closing Date, with respect to the
issuance and sale of the Certificates, the Prospectus and such
other related matters as the Representative shall reason- ably
require.
R. The Representative and counsel for the
Underwriters shall have received copies of any opinions of
counsel to the Company or the Insurer supplied to the Trustee
relating to matters with respect to the Certificates or the
Policy. Any such opinions shall be dated the Closing Date and
addressed to the Underwriters or accompanied by reliance
letters to the Underwriters or shall state the Underwriters
may rely thereon.
S. The Representative shall have received such
further information, certificates and documents as the
Representative may reasonably have requested not fewer than
three (3) full business days prior to the Closing Date.
T. There shall have been executed and delivered by
Advanta Mortgage Holding Company, the corporate parent of the
Company ("AMHC"), a letter agreement with the Trustee and the
Insurer, pursuant to which AMHC agrees to become jointly and
severally liable with the Company and Advanta Mortgage Corp.
USA for the payment of the Joint and Several Obligations (as
defined in such letter agreement).
U. There shall have been executed and delivered by
AMHC, the corporate parent of the Company, a letter agreement
with the Underwriters substantially in the form of Exhibit A
hereto.
V. Prior to the Closing Date, counsel for the
Underwriters shall have been furnished with such documents and
opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the
Offered Certificates as herein contemplated and related
proceedings or in order to evidence the accuracy and
completeness of any of the representations and warranties, or
the fulfillment of any of the conditions, herein contained,
and all proceedings taken by the Company in connection with
the
26
<PAGE>
issuance and sale of the Certificates as herein contemplated
shall be satisfactory in form and substance to the
Representative and counsel for the Underwriters.
W. Subsequent to the execution and delivery of this
Agreement none of the following shall have occurred: (i)
trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the over-the-counter
market shall have been suspended or minimum prices shall have
been established on either of such exchanges or such market by
the Commission, by such exchange or by any other regulatory
body or governmental authority having jurisdiction; (ii) a
banking moratorium shall have been declared by Federal or
state authorities; (iii) the United States shall have become
engaged in hostilities, there shall have been an escalation of
hostilities involving the United States or there shall have
been a declaration of a national emergency or war by the
United States; or (iv) there shall have occurred such a
material adverse change in general economic, political or
financial conditions (or the effect of international
conditions on the financial markets of the United States shall
be such) as to make it, in the judgment of the Representative,
impractical or inadvisable to proceed with the public offering
or delivery of the Certificates on the terms and in the manner
contemplated in the Prospectus.
If any condition specified in this Section VI shall not have
been fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Representative by notice to the Company at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
SECTION VII. Payment of Expenses. The Company agrees to pay:
(a) the costs incident to the authorization, issuance, sale and delivery of the
Offered Certificates and any taxes payable in connection therewith; (b) the
costs incident to the preparation, printing and filing under the Securities Act
of the Registration Statement and any amendments and exhibits thereto; (c) the
costs of distributing the Registration Statement as originally filed and each
amendment thereto and any post-effective amendments thereof
27
<PAGE>
(including, in each case, exhibits), the Preliminary Prospectus, the Prospectus
and any amendment or supplement to the Prospectus or any document incorporated
by reference therein, all as provided in this Agreement; (d) the costs of
reproducing and distributing this Agreement; (e) the fees and expenses of
qualifying the Offered Certificates under the securities laws of the several
jurisdictions as provided in Section V(G) hereof and of preparing, printing and
distributing a Blue Sky Memorandum and a Legal Investment Survey (including
related fees and expenses of counsel to the Underwriters); (f) any fees charged
by securities rating services for rating the Offered Certificates; and (g) all
other costs and expenses incident to the performance of the obligations of the
Company; provided that, except as provided in this Section VII, the Underwriters
shall pay their own costs and expenses, including the costs and expenses of
Dewey Ballantine, any transfer taxes on the Offered Certificates which they may
sell and the expenses of advertising any offering of the Offered Certificates
made by the Underwriters.
If this Agreement is terminated by the Representative, in
accordance with the provisions of Section VI or Section X, the Company shall
reimburse the Underwriters for their respective reasonable out-of-pocket
expenses, including fees and disbursements of Dewey Ballantine, counsel for the
Underwriters.
SECTION VIII. Indemnification and Contribution. A. The Company
agrees to indemnify and hold harmless each Underwriter and each person, if any,
who controls such Underwriter within the meaning of Section 15 of the Securities
Act from and against any and all loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of the
Offered Certificates), to which such Underwriter or any such controlling person
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus or (iv) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading and shall reimburse such Underwriter
and each such controlling person promptly upon demand for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending or
28
<PAGE>
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Prospectus or the Registration Statement in reliance upon and in
conformity with written information (including any Derived Information)
furnished to the Company through the Representative specifically for inclusion
therein; and provided further that as to any Preliminary Prospectus this
indemnity shall not inure to the benefit of any Underwriter or any controlling
person on account of any loss, claim, damage, liability or action arising from
the sale of the Offered Certificates to any person by such Underwriter if such
Underwriter failed to send or give a copy of the Prospectus, as amended or
supplemented, to that person within the time required by the Securities Act, and
the untrue statement or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact in the Preliminary
Prospectus was corrected in the Prospectus, unless such failure resulted from
non-compliance by the Company with Section V(C). For purposes of the last
proviso to the immediately preceding sentence, the term "Prospectus" shall not
be deemed to include the documents incorporated therein by reference, and none
of the Underwriters shall be obligated to send or give any supplement or
amendment to any document incorporated therein by reference to any person other
than a person to whom such Underwriter had delivered such incorporated document
or documents in response to a written request therefor. The foregoing indemnity
agreement is in addition to any liability which the Company may otherwise have
to any Underwriters or any controlling person of such Underwriter.
B. Each Underwriter agrees severally, and not jointly to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
against any and all loss, claim, damage or liability, or any action in respect
thereof, to which the Company or any such director, officer or controlling
person may become subject, under the Securities Act or otherwise, insofar as
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
29
<PAGE>
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Underwriter specifically for
inclusion therein, and shall reimburse the Company and any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by the Company or any director, officer or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred. The
foregoing indemnity agreement is in addition to any liability which any
Underwriter may otherwise have to the Company or any such director, officer or
controlling person.
C. Promptly after receipt by any indemnified party under this
Section VIII of notice of any claim or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section VIII, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section VIII except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section
VIII.
If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section VIII for any legal or other expenses subsequently 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
30
<PAGE>
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel;
or (iii) the indemnifying party has failed to assume the defense of such action
and employ counsel reasonably satisfactory to the indemnified party, in which
case, if such indemnified party notifies the indemnifying party in writing that
it elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriters, if the indemnified
parties under this Section VIII consist of the Underwriters or any of their
controlling persons, or by the Company, if the indemnified parties under this
Section VIII consist of the Company or any of the Company's directors, officers
or controlling persons.
Each indemnified party, as a condition of the indemnity
agreements contained in Section VIII(A) and (B), shall use its best efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
D. Each Underwriter agrees to deliver to the Company
no later than the date on which the Prospectus Supplement is
required to be filed
31
<PAGE>
pursuant to Rule 424 with a copy of its Derived Information
(defined below) for filing with the Commission on Form 8-K.
E. Each Underwriter agrees, assuming all
Company-Provided Information (defined below) is accurate and
complete in all material respects, to severally and not
jointly indemnify and hold harmless the Company, each of the
Company's officers and directors and each person who controls
the Company within the meaning of Section 15 of the Securities
Act against any and all losses, claims, damages or
liabilities, joint or several, to which they may become
subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement
of a material fact contained in the Derived Information
provided by such Underwriter, or arise out of or are based
upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to
reimburse each such indemnified party for any legal or other
expenses reasonably incurred by him, her or it in connection
with investigating or defending or preparing to defend any
such loss, claim, damage, liability or action as such expenses
are incurred. The obligations of each of the Underwriters
under this Section VIII(E) shall be in addition to any
liability which such Underwriter may otherwise have.
The procedures set forth in Section VIII(C) shall be
equally applicable to this Section VIII(E).
F. For purposes of this Section VIII, the term
"Derived Information" means such portion, if any, of the
information delivered to the Company pursuant to Section
VIII(D) for filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without
taking into account information incorporated
therein by reference;
(ii) does not constitute Company-Provided
Information; and
32
<PAGE>
(iii) is of the type of information defined as
Collateral term sheets, Structural term sheets
or Computational Materials (as such terms are
interpreted in the No- Action Letters).
"Company-Provided Information" means any computer tape
furnished to the Underwriters by the Company concerning the
Mortgage Loans comprising the Trust.
The terms "Collateral term sheet" and "Structural
term sheet" shall have the respective meanings assigned to
them in the February 13, 1995 letter (the "PSA Letter") of
Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the SEC staff's
response thereto, were publicly available February 17, 1995).
The term "Collateral term sheet" as used herein includes any
subsequent Collateral term sheet that reflects a substantive
change in the information presented. The term "Computational
Materials" has the meaning assigned to it in the May 17, 1994
letter (the "Kidder letter" and together with the PSA Letter,
the "No-Action Letters") of Brown & Wood on behalf of Kidder,
Peabody & Co., Inc. (which letter, and the SEC staff's
response thereto, were publicly available May 20, 1994).
G. If the indemnification provided for in this
Section VIII shall for any reason be unavailable to or
insufficient to hold harmless an indemnified party under
Section VIII(A) or (B) in respect of any loss, claim, damage
or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such
loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering
of the Offered Certificates or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or if
the indemnified party failed to give the notice required under
Section VIII(C), in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the
one hand and the Underwriters on the other with respect to
33
<PAGE>
the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations.
The relative benefits of the Underwriters and the Company
shall be deemed to be in such proportion so that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the public
offering price appearing on the cover page of the Prospectus.
The relative fault of the Underwriters and the Company shall
be determined by reference to whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by one of the Underwriters, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission and other equitable
considerations.
The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section VIII(G) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section VIII(G) shall be deemed to include, for purposes of this Section
VIII(G), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
In no case shall any Underwriter be responsible for any amount
in excess of the underwriting discount applicable to the Certificates purchased
by such Underwriter hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
H. The Underwriters severally confirm that the
information set forth (i) in the Prospectus Supplement
relating to market making and (ii) in the fourth paragraph
under the caption "Underwriting" in the Prospectus Supplement,
together with the Derived Information, is correct and
constitutes the only information furnished in writing to the
Company by or on behalf of the Underwriters specifically for
inclusion in the Registration Statement and the Prospectus.
34
<PAGE>
SECTION IX. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or contained in certificates of officers of the Company submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Underwriters or controlling
persons thereof, or by or on behalf of the Company and shall survive delivery of
any Offered Certificates to the Underwriters.
SECTION X. Termination of Agreement. The Representative may
terminate this Agreement immediately upon notice to the Company, at any time at
or prior to the Closing Date if any of the events or conditions described in
Section VI(Y) of this Agreement shall occur and be continuing. In the event of
any such termination, the covenant set forth in Section V(G), the provisions of
Section VII, the indemnity agreement set forth in Section VIII, and the
provisions of Sections IX and XIII shall remain in effect.
SECTION XI. Notices. All statements, requests,
notices and agreements hereunder shall be in writing, and:
A. if to the Underwriters, shall be delivered or sent
by mail, telex or facsimile transmission to Prudential
Securities Incorporated, as Representative of the
Underwriters, One New York Plaza, 15th floor, New York, New
York, 10036, Attention: General Counsel (Fax: 212-778-7401);
B. if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to Advanta Mortgage
Conduit Services, Inc. 16875 West Bernardo Drive, San Diego,
California 92127 Attention: General Counsel (Fax:
619-674-3592).
SECTION XII. Persons Entitled to the Benefit of this
Agreement. This Agreement shall inure to the benefit of and be binding upon the
Underwriters and the Company, and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that the representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control the Underwriters within the meaning of
Section 15 of the Securities Act, and for the benefit of directors of the
Company, officers of the Company who have signed the Registration Statement and
any person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section XII, any
legal or equitable right, remedy
35
<PAGE>
or claim under or in respect of this Agreement or any provision contained
herein.
SECTION XIII. Default by One of the Underwriters. If one of
the Underwriters shall fail on the Closing Date to purchase the Offered
Certificates which it is obligated to purchase hereunder (the "Defaulted
Certificates"), the remaining Underwriters (the "Non-Defaulting Underwriter"),
shall have the right, but not the obligation within one (1) Business Day
thereafter, to make arrangements to purchase all, but not less than all, of the
Defaulted Certificates upon the terms herein set forth; if, however, the
Non-Defaulting Underwriter shall not have completed such arrangements within
such one (1) Business Day period, then this Agreement shall terminate without
liability on the part of the Non-Defaulting Underwriter.
No action taken pursuant to this Section XIII shall relieve the
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Non- Defaulting Underwriter or the
Company shall have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
SECTION XIV. Survival. The respective indemnities,
representations, warranties and agreements of the Company and the Underwriters
contained in this Agreement, or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Certificates and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.
SECTION XV. Definition of the Term "Business
Day". For purposes of this Agreement, "Business Day" means any
day on which the New York Stock Exchange, Inc. is open for
trading.
SECTION XVI. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND SHALL
BE CONSTRUED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION XVII. Counterparts. This Agreement may be executed in
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to
36
<PAGE>
be an original but all such counterparts shall together constitute one and the
same instrument.
SECTION XVIII. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
SECTION XIX. Representations of Underwriters. The
Representative will act for the several Underwriters in connection with the
transactions contemplated by this Agreement, and any action under this Agreement
taken by the Representative will be binding upon all of the Underwriters.
37
<PAGE>
If the foregoing correctly sets forth the agreement between
the Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By:______________________
Name: Mark T. Dunsheath
Title: Vice President
CONFIRMED AND ACCEPTED, as of
the date first above written:
PRUDENTIAL SECURITIES INCORPORATED
as Representative of the Underwriters
By:______________________
Name:
Title:
[Underwriting Agreement]
<PAGE>
===============================================================================
SCHEDULE A
- -------------------------------------------------------------------------------
Purchase Price
Initial Principal Amount to Underwriters
of Offered Certificates disregarding
Class Purchased by Underwriters accrued interest
- -------------------------------------------------------------------------------
Class A-1 $210,000,000 99.725000%
- -------------------------------------------------------------------------------
Class A-2 $120,000,000 99.750000%
===============================================================================
39
<PAGE>
EXHIBIT A
As of _______, 1996
Prudential Securities Incorporated
As Representative of the Underwriters
named in Schedule I
One New York Plaza, 15th floor
New York, New York 10292
Re: Underwriting Agreement dated December ___,
1996 (the "Underwriting Agreement") between
Advanta Mortgage Conduit Services, Inc. ("Advanta")
and Prudential Securities Incorporated (the
"Representative") and Indemnification
Agreement dated as of December ___, 1996 (the
"Indemnification Agreement") among Financial
Guaranty Insurance Company (the "Certificate
Insurer"), Advanta and the Representative
------------------------------
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement and the Indemnification
Agreement (together, the "Designated Agreements"), Advanta has undertaken
certain financial obligations with respect to the indemnification of the
Underwriters and of the Certificate Insurer with respect to the Registration
Statement, the Prospectus and the Prospectus Supplement described in the
Designated Agreements. Any financial obligations of Advanta under the Designated
Agreements, whether or not specifically enumerated in this paragraph, are
hereinafter referred to as the "Joint and Several Obligations"; provided,
however, that "Joint and Several Obligations" shall mean only the financial
obligations of Advanta under the Designated Agreements (including the payment of
money damages for a breach of any of Advanta's obligations under the Designated
Agreements, whether financial or otherwise) but shall not include any
obligations not relating to the payment of money.
As a condition of their respective executions of the
Underwriting Agreement and of the Indemnification Agreement, the Underwriters
and the Certificate Insurer have required the undersigned, Advanta Mortgage
Holding Company ("AMHC"), the parent corporation of Advanta, to acknowledge its
joint-and-
<PAGE>
several liability with Advanta for the payment of the Joint and Several
Obligations under the Designated Agreements.
Now, therefore, the Underwriters, the Certificate Insurer and
AMHC do hereby agree that:
(i) AMHC hereby agrees to be absolutely and
unconditionally jointly and severally liable with
Advanta to the Underwriters for the payment of the
Joint and Several Obligations under the Underwriting
Agreement.
(ii) AMHC hereby agrees to be absolutely and
unconditionally jointly and severally liable with
Advanta to the Certificate Insurer for the payment of
the Joint and Several Obligations under the
Indemnification Agreement.
(iii) AMHC may honor its obligations hereunder either by
direct payment of any Joint and Several Obligations
or by causing any Joint and Several Obligations to be
paid to the Underwriters or to the Certificate
Insurer, as applicable, by Advanta or another
affiliate of AMHC.
2
<PAGE>
Capitalized terms used herein and not defined herein shall
have their respective meanings as set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:
----------------------------------
Name: Mark T. Dunsheath
Title: Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
FINANCIAL GUARANTY INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
PRUDENTIAL SECURITIES INCORPORATED
as Representative of the Underwriters
By:
-----------------------------------
Name:
Title:
[AMHC Guarantee]
<PAGE>
SCHEDULE I
Prudential Securities Incorporated
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
<PAGE>
POOLING AND SERVICING AGREEMENT
Relating to
ADVANTA MORTGAGE LOAN TRUST
1996-4
Among
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
Dated as of December 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
Account.................................................... 2
Advanta Mortgage Files..................................... 2
Advanta Servicing Fee...................................... 2
Affiliated Originators..................................... 2
Agreement.................................................. 2
AMHC....................................................... 3
Appraised Value............................................ 3
Authorized Officer......................................... 3
Available Funds............................................ 3
Balloon Loan............................................... 3
Bulk Acquisition Loan...................................... 3
Business Day............................................... 3
Certificate................................................ 3
Certificate Account........................................ 3
Certificate Insurance Policy............................... 3
Certificate Insurer........................................ 4
Certificate Insurer Default................................ 4
Certificate Insurer Premium Rate........................... 4
Certificate Principal Balance.............................. 4
Class...................................................... 4
Class A Certificate........................................ 4
Class A-1 Available Funds Pass-Through
Rate................................................... 4
Class A-1 Certificate...................................... 5
Class A-1 Distribution Account............................. 5
Class A-1 Distribution Amount.............................. 5
Class A-1 Formula Distribution Amount...................... 5
Class A-1 Formula Interest Shortfall....................... 5
Class A-1 Formula Pass-Through Rate........................ 5
Class A-1 Full Distribution Amount......................... 5
Class A-1 Full Interest Distribution
Amount................................................. 5
Class A-1 Interest Carry-Forward Amount.................... 5
Class A-1 Interest Distribution Amount..................... 6
Class A-1 Pass-Through Rate................................ 6
Class A-1 Principal Distribution Amount.................... 6
Class A-2 Available Funds Pass-Through
Rate................................................... 6
Class A-2 Certificate...................................... 7
Class A-2 Distribution Account............................. 7
Class A-2 Distribution Amount.............................. 7
Class A-2 Formula Interest Shortfall....................... 7
Class A-2 Formula Pass-Through Rate........................ 7
i
<PAGE>
Page
Class A-2 Full Distribution Amount......................... 7
Class A-2 Full Interest Distribution
Amount................................................. 7
Class A-2 Interest Carry-Forward Amount.................... 8
Class A-2 Pass-Through Rate................................ 8
Class A-2 Principal Distribution Amount.................... 8
Class R Certificate........................................ 8
Class RS Certificate....................................... 8
Class RS Distribution Account.............................. 8
Clean-Up Call Date......................................... 8
Closing Day................................................ 8
Code....................................................... 8
Combined Loan-to-Value Ratio............................... 8
Compensating Interest...................................... 9
Conduit Acquisition Trust.................................. 9
Coupon Rate................................................ 9
Cut-Off Date............................................... 9
Date-of-Payment Loan....................................... 9
Delinquency Advance........................................ 9
Delinquent................................................. 9
Delivery Order............................................. 10
Deposit Premium............................................ 10
Depository................................................. 10
Designated Advanta Mortgage Files.......................... 10
Designated Depository Institution.......................... 10
Designated Residual Owner.................................. 10
Determination Date......................................... 11
Direct Participant" or "DTC Participant.................... 11
Disqualified Organization.................................. 11
Document Delivery Requirements............................. 11
Eligible Investments....................................... 11
Excess Subordinated Amount................................. 11
Event of Default........................................... 11
FDIC....................................................... 11
Freddie Mac................................................ 11
File....................................................... 11
Final Determination........................................ 11
Final Scheduled Payment Date............................... 12
First Mortgage Loan........................................ 12
FNMA....................................................... 12
Gross Margin............................................... 12
Group I.................................................... 12
Group I Amortized Subordinated Amount
Requirement............................................ 12
Group I Available Funds.................................... 12
Group I Certificates....................................... 12
Group I Certificate Principal Balance...................... 12
Group I Deficiency Amount.................................. 12
Group I Formula Distribution Amount........................ 12
Group I Initial Specified Subordinated
Amount................................................. 12
Group I Insured Distribution Amount........................ 12
Group I Insured Payment.................................... 13
ii
<PAGE>
Page
Group I Interest Distribution Amount....................... 13
Group I Interest Remittance Amount......................... 13
Group I Monthly Remittance Amount.......................... 13
Group I Pass-Through Rate.................................. 13
Group I Preference Amount.................................. 13
Group I Premium Amount..................................... 13
Group I Principal Carry-Forward Amount..................... 13
Group I Principal Distribution Amount...................... 14
Group I Principal Remittance Amount........................ 15
Group I Reimbursement Amount............................... 15
Group I Specified Subordinated Amount...................... 15
Group I Subordinated Amount................................ 15
Group I Subordination Deficit.............................. 15
Group I Total Available Funds.............................. 16
Group I Total Monthly Excess Spread........................ 16
Group II................................................... 16
Group II Amortized Subordinated Amount
Requirement............................................ 16
Group II Available Funds................................... 16
Group II Certificates...................................... 16
Group II Certificate Principal Balance..................... 16
Group II Deficiency Amount................................. 16
Group II Formula Distribution Amount....................... 16
Group II Initial Specified Subordinated
Amount................................................. 17
Group II Insured Distribution Amount....................... 17
Group II Insured Payment................................... 17
Group II Interest Distribution Amount...................... 17
Group II Interest Remittance Amount........................ 17
Group II Monthly Remittance Amount......................... 17
Group II Preference Amount................................. 17
Group II Premium Amount.................................... 17
Group II Principal Carry-Forward Amount.................... 18
Group II Principal Distribution Amount..................... 18
Group II Principal Remittance Amount....................... 19
Group II Reimbursement Amount.............................. 19
Group II Specified Subordinated Amount..................... 19
Group II Subordinated Amount............................... 19
Group II Subordination Deficit............................. 20
Group II Total Available Funds............................. 20
Group II Total Monthly Excess Spread....................... 20
Indemnification Agreement.................................. 20
Index...................................................... 20
Indirect Participant....................................... 20
Initial Premiums........................................... 20
Insurance Agreement........................................ 20
Insurance Policy........................................... 20
Insured Payment............................................ 21
Interest Accrual Period.................................... 21
Interest Advance........................................... 21
Interest Determination Date................................ 21
Interest Rate Adjustment Date.............................. 21
Late Payment Rate.......................................... 21
iii
<PAGE>
Page
LIBOR...................................................... 21
Liquidated Loan............................................ 22
Liquidation Expenses....................................... 22
Liquidation Proceeds....................................... 22
Loan Balance............................................... 22
Loan Purchase Price........................................ 22
London Business Day........................................ 23
Master Servicer............................................ 23
Master Servicer's Trust Receipt............................ 23
Master Servicing Fee....................................... 23
Master Transfer Agreement.................................. 23
Monthly Remittance Amount.................................. 23
Moody's.................................................... 23
Mortgage................................................... 23
Mortgage Loan Group........................................ 23
Mortgage Loans............................................. 24
Mortgagor.................................................. 24
Net Liquidation Proceeds................................... 24
Net Monthly Excess Cashflow................................ 24
Nonrecoverable Advance..................................... 24
Note....................................................... 24
Officer's Certificate...................................... 24
Operative Documents........................................ 24
Original Aggregate Loan Balance............................ 25
Original Certificate Principal Balance..................... 25
Original Principal Amount.................................. 25
Originator................................................. 25
Outstanding................................................ 25
Owner...................................................... 26
Pass-Through Rate.......................................... 26
Payment Date............................................... 26
Percentage Interest........................................ 26
Person..................................................... 26
Pool Cumulative Realized Losses............................ 26
Pool Delinquency Rate...................................... 26
Pool Principal Balance..................................... 26
Pool Rolling Three Month Delinquency Rate.................. 26
Premium Amount............................................. 26
Premium Percentage......................................... 26
Prepaid Installment........................................ 27
Prepayment................................................. 27
Preservation Expenses...................................... 27
Principal and Interest Account............................. 27
Principal Remittance Amount................................ 27
Prohibited Transaction..................................... 27
Property................................................... 27
Purchase Option Period..................................... 27
Qualified Liquidation...................................... 27
Qualified Mortgage......................................... 27
Qualified Replacement Mortgage............................. 28
Realized Loss.............................................. 28
Record Date................................................ 28
iv
<PAGE>
Page
Reference Banks............................................ 28
Register................................................... 29
Registrar.................................................. 29
Registration Statement..................................... 29
Reimbursement Amount....................................... 29
REMIC...................................................... 29
REMIC Provisions........................................... 29
REMIC Trust................................................ 29
Remittance Date............................................ 29
Remittance Period.......................................... 29
REO Property............................................... 30
Replacement Cut-Off Date................................... 30
Representation Letter...................................... 30
Representative............................................. 30
Reserve Interest Rate...................................... 30
Residual Net Monthly Excess Cashflow....................... 30
Schedules of Mortgage Loans................................ 30
Second Mortgage Loan....................................... 30
Securities Act............................................. 30
Senior Lien................................................ 30
Servicer Affiliate......................................... 31
Servicing Advance.......................................... 31
Servicing Fee.............................................. 31
Specified Subordinated Amount.............................. 31
Sponsor.................................................... 31
Standard & Poor's.......................................... 31
Step-up Payment Date....................................... 31
Subordinated Amount........................................ 31
Subordination Deficiency Amount............................ 31
Subordination Increase Amount.............................. 31
Subordination Reduction Amount............................. 32
Substitution Amount........................................ 32
Sub-Servicer............................................... 32
Sub-Servicing Agreement.................................... 32
Supplemental Interest Payment Account...................... 32
Supplemental Interest Payment Amount
Available.............................................. 32
Supplemental Interest Trust................................ 32
Tax Matters Person......................................... 32
Termination Notice......................................... 32
Termination Price.......................................... 32
Third Mortgage Loan........................................ 32
Total Monthly Excess Cashflow.............................. 32
Total Monthly Excess Spread................................ 33
Transaction Documents...................................... 33
Trust...................................................... 33
Trust Estate............................................... 33
Trustee.................................................... 33
Trustee's Fees............................................. 33
Unaffiliated Originator Loan............................... 33
Unaffiliated Originators................................... 33
Underwriters............................................... 34
1.2. Use of Words and Phrases................................... 34
v
<PAGE>
Page
1.3. Captions; Table of Contents................................ 34
1.4. Opinions ................................................. 34
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST.................... 34
2.1. Establishment of the Trust................................. 34
2.2. Office ................................................. 34
2.3. Purposes and Powers........................................ 35
2.4. Appointment of the Trustee; Declaration of
Trust............................................. 35
2.5. Expenses of the Trust...................................... 35
2.6. Ownership of the Trust..................................... 35
2.7. Situs of the Trust......................................... 35
2.8. Miscellaneous REMIC Provisions............................. 36
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS............ 36
3.1. Representations and Warranties of the
Sponsor........................................... 36
3.2. Representations and Warranties of the
Master Servicer................................... 39
3.3. Representations and Warranties of the
Sponsor with Respect to the Mortgage
Loans............................................. 42
3.4. Covenants of Sponsor to Take Certain
Actions with Respect to the Mortgage Loans In
Certain Situations................................ 44
3.5. Conveyance of the Mortgage Loans............................ 45
3.6. Acceptance by Trustee; Certain
Substitutions of Mortgage Loans; Certification by
Trustee........................................... 48
3.7. Cooperation Procedures...................................... 49
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES.................. 50
4.1. Issuance of Certificates.................................... 50
4.2. Sale of Certificates........................................ 50
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS............. 50
5.1. Terms .................................................. 50
5.2. Forms .................................................. 51
5.3. Execution, Authentication and Delivery...................... 51
5.4. Registration and Transfer of Certificates................... 52
5.5. Mutilated, Destroyed, Lost or Stolen
Certificates...................................... 54
5.6. Persons Deemed Owners....................................... 55
5.7. Cancellation................................................ 55
vi
<PAGE>
Page
5.8. Limitation on Transfer of Ownership Rights.................. 55
5.9. Assignment of Rights........................................ 56
ARTICLE VI
COVENANTS............................. 57
6.1. Distributions............................................... 57
6.2. Money for Distributions to be Held in
Trust; Withholding................................ 57
6.3. Protection of Trust Estate.................................. 58
6.4. Performance of Obligations.................................. 59
6.5. Negative Covenants.......................................... 59
6.6. No Other Powers............................................. 60
6.7. Limitation of Suits......................................... 60
6.8. Unconditional Rights of Owners to Receive
Distributions..................................... 61
6.9. Rights and Remedies Cumulative.............................. 61
6.10. Delay or Omission Not Waiver............................... 61
6.11. Control by Owners.......................................... 61
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES............... 62
7.1. Collection of Money......................................... 62
7.2. Establishment of Accounts................................... 62
7.3. The Certificate Insurance Policy............................ 63
7.4. Reserved .................................................. 65
7.5. Flow of Funds............................................... 65
7.6. Investment of Accounts...................................... 69
7.7. Eligible Investments........................................ 70
7.8. Reports by Trustee.......................................... 71
7.9. Additional Reports by Trustee............................... 74
7.10. Supplemental Interest Payment Account,
Supplement Interest Payments and Class
RS Distribution Account........................... 75
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS........................... 77
8.1. Master Servicer and Sub-Servicers........................... 77
8.2. Collection of Certain Mortgage Loan Payments................ 79
8.3. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers........................ 80
8.4. Successor Sub-Servicers..................................... 80
8.5. Liability of Master Servicer................................ 80
8.6. No Contractual Relationship Between
Sub-Servicer and Trustee or the Owners............ 80
8.7. Assumption or Termination of Sub-Servicing
Agreement by Trustee.............................. 80
8.8. Principal and Interest Account.............................. 81
vii
<PAGE>
Page
8.9. Delinquency Advances, Compensating Interest
and Servicing Advances............................ 83
8.10. Purchase of Mortgage Loans................................. 84
8.11. Maintenance of Insurance................................... 84
8.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements........................... 85
8.13. Realization Upon Defaulted Mortgage Loans.................. 86
8.14. Trustee to Cooperate; Release of Files..................... 88
8.15. Servicing Compensation..................................... 90
8.16. Annual Statement as to Compliance.......................... 90
8.17. Annual Independent Certified Public
Accountants' Reports.............................. 90
8.18. Access to Certain Documentation and
Information Regarding the Mortgage Loans.......... 90
8.19. Assignment of Agreement.................................... 91
8.20. Removal of Master Servicer; Resignation of
Master Servicer................................... 91
8.21. Inspections by Certificate Insurer; Errors
and Omissions Insurance........................... 96
8.22. Merger, Conversion, Consolidation or
Succession to Business of Master Servicer......... 97
8.23. Notices of Material Events................................. 97
ARTICLE IX
TERMINATION OF TRUST............................ 98
9.1. Termination of Trust........................................ 98
9.2. Termination Upon Option of Master Servicer.................. 98
9.3. Termination Upon Loss of REMIC Status....................... 99
9.4. Disposition of Proceeds.....................................101
9.5. Netting of Amounts..........................................101
ARTICLE X
THE TRUSTEE..................................102
10.1. Certain Duties and Responsibilities........................102
10.2. Removal of Trustee for Cause...............................103
10.3. Certain Rights of the Trustee..............................105
10.4. Not Responsible for Recitals or Issuance
of Certificates...................................106
10.5. May Hold Certificates......................................106
10.6. Money Held in Trust........................................106
10.7. No Lien for Fees...........................................106
10.8. Corporate Trustee Required; Eligibility....................107
10.9. Resignation and Removal; Appointment of
Successor.........................................107
10.10. Acceptance of Appointment by Successor
Trustee...........................................109
10.11. Merger, Conversion, Consolidation or
Succession to Business of the Trustee.............109
10.12. Reporting; Withholding....................................110
10.13. Liability of the Trustee..................................110
viii
<PAGE>
Page
10.14. Appointment of Co-Trustee or Separate
Trustee...........................................110
ARTICLE XI
MISCELLANEOUS...........................112
11.1. Compliance Certificates and Opinions.......................112
11.2. Form of Documents Delivered to the Trustee.................113
11.3. Acts of Owners.............................................114
11.4. Notices, etc. to Trustee...................................114
11.5. Notices and Reports to Owners; Waiver of
Notices...........................................114
11.6. Rules by Trustee and Sponsor...............................115
11.7. Successors and Assigns.....................................115
11.8. Severability...............................................115
11.9. Benefits of Agreement......................................115
11.10. Legal Holidays............................................116
11.11. Governing Law.............................................116
11.12. Counterparts..............................................116
11.13. Usury ..................................................116
11.14. Amendment.................................................117
11.15. REMIC Status; Taxes.......................................118
11.16. Additional Limitation on Action and
Imposition of Tax.................................120
11.17. Appointment of Tax Matters Person.........................120
11.18. The Certificate Insurer...................................120
11.19. Maintenance of Records....................................121
11.20. Notices ..................................................121
ix
<PAGE>
SCHEDULE I -- Schedules of Mortgage Loans
EXHIBIT A-1 -- Form of Class A-1 Certificate
EXHIBIT A-2 -- Form of Class A-2 Certificate
EXHIBIT B -- Contents of Mortgage Loan File
EXHIBIT C -- Form of Class RS Certificate
EXHIBIT D -- Form of Certificate Re: Mortgage Loans
Prepaid in full After the Cut-Off Date
EXHIBIT E -- Form of Trustee's Acknowledgement of
Receipt
EXHIBIT F -- Form of Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Form of Class RS Tax Matters Transfer
Certificate
EXHIBIT I -- Power of Attorney
EXHIBIT J -- Form of Monthly Report
EXHIBIT K -- Form of Master Servicer's Trust Receipt
x
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to ADVANTA MORTGAGE
LOAN TRUST 1996-4, dated as of December 1, 1996, by and among ADVANTA MORTGAGE
CONDUIT SERVICES, INC., a Delaware corporation, in its capacity as Sponsor of
the Trust (the "Sponsor"), ADVANTA MORTGAGE CORP. USA, a Delaware corporation,
in its capacity as master servicer (the "Master Servicer"), and BANKERS TRUST
COMPANY OF CALIFORNIA, N.A., a national banking association, in its capacity as
trustee (the "Trustee").
WHEREAS, the Sponsor wishes to establish a trust and two
subtrusts, and to provide for the allocation and sale of the beneficial
interests therein and the maintenance and distribution of the trust estate;
WHEREAS, the Master Servicer has agreed to service the
Mortgage Loans, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done;
WHEREAS, Bankers Trust Company of California, N.A. is willing
to serve in the capacity of Trustee hereunder; and
WHEREAS, Financial Guaranty Insurance Company (the
"Certificate Insurer") is intended to be a third party beneficiary of this
Agreement and is hereby recognized by the parties hereto to be a third-party
beneficiary of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Sponsor, the Master Servicer and the
Trustee hereby agree as follows:
1
<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": 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 Properties are located and will give due consideration to the
Certificate Insurer's and the Certificateholders' reliance on the Master
Servicer.
"Account": Any account established in accordance with Section
7.2 or 8.8 hereof each of which shall be established at a Designated Depository
Institution.
"Advanta Mortgage Files": For any Mortgage Loan identified on
the related Schedule of Mortgage Loans with an "A" code, the items listed as
(a), (b), (c), (d) and (f) on Exhibit B hereto.
"Advanta Servicing Fee": With respect to any Mortgage Loan
that is not an Unaffiliated Originator Loan, an amount retained by the Servicer
or by any successor thereto as compensation for servicing and administration
duties relating to such Mortgage Loan pursuant to Section 8.15 hereof and equal
to 0.50% per annum of the then outstanding Loan Balance of such Mortgage Loan as
of the opening of business on the first day of each calendar month payable on a
monthly basis.
"Affiliated Originators": Advanta Mortgage Corp. USA, a
Delaware corporation, Advanta Mortgage Corp. Midatlantic, a Pennsylvania
corporation, Advanta Mortgage Corp. Midatlantic II, a Pennsylvania corporation,
Advanta Mortgage Corp. Midwest, a Pennsylvania corporation, Advanta Mortgage
Corp. of New Jersey, a New Jersey corporation, Advanta Mortgage Corp. Northeast,
a New York corporation, Advanta National Bank USA, a national banking
association, Advanta Finance Corp., a Nevada corporation, and Advanta Mortgage
Corp. of New Jersey II, a New Jersey corporation.
"Agreement": This Pooling and Servicing Agreement, as it may
be amended from time to time, and including the Exhibits hereto.
2
<PAGE>
"AMHC": Advanta Mortgage Holding Company, a Delaware
corporation and the corporate parent of Advanta Mortgage Corp. USA, and the
indirect corporate parent of Advanta Mortgage Conduit Services, Inc.
"Appraised Value": The appraised value of any Property based
upon the appraisal or other valuation made at the time of the origination of the
related Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase
money mortgage, the sales price of the Property at such time of origination, if
such sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person
who is authorized to act for such Person in matters relating to this Agreement,
and whose action is binding upon such Person and, with respect to the Trustee,
the Sponsor and the Master Servicer, initially including those individuals whose
names appear on the lists of Authorized Officers delivered on the Closing Day.
"Available Funds": With respect to the Group I Certificates,
the Group I Available Funds and with respect to the Group II Certificates, the
Group II Available Funds.
"Balloon Loan": Any Mortgage Loan which has an amortization
schedule which extends beyond its maturity date, resulting in a relatively large
unamortized principal balance due in a single payment at maturity.
"Bulk Acquisition Loan": Any Mortgage Loan purchased by the
Sponsor or by an Affiliated Originator from another, unaffiliated Originator as
part of a bulk portfolio acquisition; such Mortgage Loans shall be identified on
the related Schedule of Mortgage Loans with a "B" code.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York, the
State of California or in the city in which the principal corporate trust office
of the Trustee is located, are authorized or obligated by law or executive order
to be closed.
"Certificate": Any one of the Class A Certificates, or the
Class R Certificates, each representing the interests and the rights described
in this Agreement.
"Certificate Account": The Certificate Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Certificate Insurance Policy": The certificate guaranty
insurance policy dated December 19, 1996 issued by
3
<PAGE>
the Certificate Insurer to the Trustee for the benefit of the Owners of the
Class A Certificates.
"Certificate Insurer": Financial Guaranty Insurance Company or
any successor thereto, as issuer of the Certificate Insurance Policy.
"Certificate Insurer Default": Any period during which the
Certificate Insurer has failed (or continued to fail) to honor a proper claim
made under the Certificate Insurance Policy and as to which the Certificate
Insurer has not provided a reasonable explanation regarding the invalidity of
such claim to the Sponsor.
"Certificate Insurer Premium Rate": As defined in the
Insurance Agreement.
"Certificate Principal Balance": As to the Class A-1
Certificates, the Class A-1 Certificate Principal Balance; as to the Class A-2
Certificates, the Class A-2 Certificate Principal Balance. As to any particular
Class A Certificate, the product of the Percentage Interest evidenced thereby
and the Certificate Principal Balance of the respective Class A Certificates.
The Class R Certificates do not have a "Certificate Principal Balance".
"Class": All of the Class A-1 Certificates, all of the Class
A-2 Certificates or all of the Class R Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates
or the Class A-2 Certificates.
"Class A-1 Available Funds Pass-Through Rate": With respect to
any Payment Date an amount, expressed as a per annum rate, equal to:
(a) (i) without duplication the aggregate amount of interest
due on all of the Mortgage Loans in Group I for the related Remittance Period
minus,
(ii) the aggregate of the Servicing Fee, the Trustee's Fee and
the premium due to the Certificate Insurer, in each case relating to Group I, on
such Payment Date minus,
(iii) commencing on the Closing Day, an amount equal to 0.75%
per annum times the aggregate Principal Balance of the Mortgage Loans in Group I
as of the beginning of such related Remittance Period, divided by
(b) the aggregate principle balance of the Mortgage Loans in
Group I immediately prior to such Payment Date, calculated on the basis of a 360
day year and the actual number of days elapsed.
4
<PAGE>
"Class A-1 Certificate": Any Certificate designated as a
"Class A-1 Certificate" on the face thereof, in the form of Exhibit A-1 hereto.
The Class A-1 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
"Class A-1 Distribution Account": The Class A-1 Distribution
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Class A-1 Distribution Amount": With respect to the Class A-1
Certificates for any Payment Date, the amount actually distributed to the Owners
of the Class A-1 Certificates on such Payment Date, which amount shall be the
lesser of (x) the Class A-1 Formula Distribution Amount for such Payment Date
and (y) the amount (including any applicable portion of any Group I Insured
Payment) available for distribution on account of the Class A-1 Certificates for
such Payment Date.
"Class A-1 Formula Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date, the sum of (x) the Class A-1
Interest Distribution Amount for such Payment Date and (y) the Class A-1
Principal Distribution Amount for such Payment Date.
"Class A-1 Formula Interest Shortfall": As defined in Section
7.10(b) hereof.
"Class A-1 Formula Pass-Through Rate": As of any Payment Date,
the rate described in clause (i) of the definition of "Class A-1 Pass-Through
Rate".
"Class A-1 Full Distribution Amount": With respect to any
Payment Date, the sum of (x) the Class A-1 Full Interest Distribution Amount for
such Payment Date and (y) the Class A-1 Principal Distribution Amount for such
Payment Date.
"Class A-1 Full Interest Distribution Amount": With respect to
any Payment Date, the Class A-1 Interest Distribution Amount for such Payment
Date calculated using the Class A-1 Formula Pass-Through Rate for such Payment
Date rather than the Class A-1 Pass-Through Rate for such Payment Date plus, if
the full amount of the Class A-1 Formula Interest Shortfall, if any, was not
funded on any prior Payment Date and remains unpaid on such Payment Date, such
amount, together with interest thereon (from the Payment Date on which such
Class A-1 Formula Interest Shortfall was calculated) at the Class A-1 Formula
Pass-Through Rate for such Payment Date.
"Class A-1 Interest Carry-Forward Amount": With respect to any
Payment Date, the sum of (i) the amount, if
5
<PAGE>
any, by which (x) the Class A-1 Interest Distribution Amount as of the
immediately preceding Payment Date exceeded (y) the amount of the actual
distribution made to the Owners of the Class A-1 Certificates on such
immediately preceding Payment Date on account of the Class A-1 Interest
Distribution Amount and (ii) 30 days' interest on such amount at the Class A-1
Formula Pass-Through Rate applicable to such Payment Date.
"Class A-1 Interest Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (the actual
number of days elapsed assuming a 360-day year) on
the Class A-1 Certificate Principal Balance
immediately prior to such Payment Date during the
related Interest Accrual Period at the Class A-1
Pass-Through Rate applicable to such Interest Accrual
Period; and
(ii) the Class A-1 Interest Carry-Forward Amount.
"Class A-1 Pass-Through Rate": As of any Payment Date, the per
annum rate equal to the lesser of (i)(a) with respect to any Payment Date which
occurs on or prior to the Step-up Payment Date, the London interbank offering
rate for one-month United States dollar deposits ("LIBOR") plus 0.295% per annum
or (b) in the case of any Payment Date after the Step-up Payment Date, LIBOR
plus 0.59% per annum and (ii) the Class A-1 Available Funds Pass-Through Rate
for such Payment Date.
"Class A-1 Principal Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date, an amount equal to the lesser of
(x) the Group I Principal Distribution Amount as of such Payment Date and (y)
the Class A-1 Certificate Principal Balance as of such Payment Date.
"Class A-2 Available Funds Pass-Through Rate": With respect to
any Payment Date, an amount, expressed as a per annum rate, equal to:
(a) (i) without duplication, the aggregate amount of interest
due on all of the Mortgage Loans in Group II for the related Remittance Period
minus,
(ii) the aggregate of the Servicing Fee, the Trustee's Fee and
the premium due to the Certificate Insurer, in each case relating to Group II,
on such Payment Date minus,
(iii) commencing on the ninth Payment Date following the
Closing Date, an amount equal to 0.75% per annum times the
6
<PAGE>
aggregate Principal Balances of the Mortgage Loans in Group II as of the
beginning of such related Remittance Date, divided by
(b) the aggregate principle balance of the Mortgage Loans in
Group II immediately prior to such Payment Date, calculated on the basis of a
360 day year and the actual number of days elapsed.
"Class A-2 Certificate": Any Certificate designated as a
"Class A-2 Certificate" on the face thereof, in the form of Exhibit A-2 hereto.
The Class A-2 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
"Class A-2 Distribution Account": The Class A-2 Distribution
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Class A-2 Distribution Amount": With respect to the Class A-2
Certificates for any Payment Date, the amount actually distributed to the Owners
of the Class A-2 Certificates on such Payment Date, which amount shall be the
lesser of (x) the Class A-2 Formula Distribution Amount for such Payment Date
and (y) the amount (including any applicable portion of any Group II Insured
Payment) available for distribution on account of the Class A-2 Certificates for
such Payment Date.
"Class A-2 Formula Interest Shortfall": As defined in Section
7.10(b) hereof.
"Class A-2 Formula Pass-Through Rate": As of any Payment Date,
the rate described in clause (i) of the definition of "Class A-2 Pass-Through
Rate".
"Class A-2 Full Distribution Amount": With respect to any
Payment Date, the sum of (x) the Class A-2 Full Interest Distribution Amount for
such Payment Date and (y) the Class A-2 Principal Distribution Amount for such
Payment Date.
"Class A-2 Full Interest Distribution Amount": With respect to
any Payment Date, the Class A-2 Interest Distribution Amount for such Payment
Date calculated using the Class A-2 Formula Pass-Through Rate for such Payment
Date rather than the Class A-2 Pass-Through Rate for such Payment Date plus, if
the full amount of the Class A-2 Formula Interest Shortfall, if any, was not
funded on any prior Payment Date and remains unpaid on such Payment Date, such
amount, together with interest thereon (from the Payment Date on which such
Class A-2 Formula Interest Shortfall was calculated) at the Class A-2 Formula
Pass-Through Rate for such Payment Date.
7
<PAGE>
"Class A-2 Interest Carry-Forward Amount": With respect to any
Payment Date, the sum of (i) the amount, if any, by which (x) the Class A-2
Interest Distribution Amount as of the immediately preceding Payment Date
exceeded (y) the amount of the actual distribution made to the Owners of the
Class A-2 Certificates on such immediately preceding Payment Date on account of
the Class A-2 Interest Distribution Amount and (ii) 30 days' interest on such
amount at the Class A-2 Formula Pass-Through Rate applicable to such Payment
Date.
"Class A-2 Pass-Through Rate": As of any Payment Date, the per
annum rate equal to the lesser of (i)(a) with respect to any Payment Date which
occurs on or prior to the Step-up Payment Date, the London interbank offering
rate for one-month United States dollar deposits ("LIBOR") plus 0.22% per annum,
or (b) in the case of any Payment Date after the Step-up Payment Date, LIBOR
plus 0.44% per annum and (ii) the Class A-2 Available Funds Pass-Through Rate
for such Payment Date.
"Class A-2 Principal Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, an amount equal to the lesser of
(x) the Group II Principal Distribution Amount as of such Payment Date and (y)
the Class A-2 Certificate Principal Balance as of such Payment Date.
"Class R Certificate": Any of those Certificates representing
certain residual rights to distributions from the REMIC and designated as the
"Class R Certificate" on the face thereof.
"Class RS Certificate": Any of those Certificates representing
the right to receive excess amounts in the Supplemental Interest Payment
Account, and designated as the "Class RS Certificate" on the face thereof, in
the form of Exhibit C hereto.
"Class RS Distribution Account": The Class RS Distribution
Account established in accordance with Section 7.10(a) hereof and maintained by
the Trustee.
"Clean-Up Call Date": The first Remittance Date following the
date on which the aggregate Loan Balances of all Mortgage Loans has declined to
10% or less of the aggregate principal balance of the Mortgage Loans as of the
Closing Day.
"Closing Day": December 19, 1996.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Combined Loan-to-Value Ratio": With respect to any First
Mortgage Loan, the percentage equal to the Original
8
<PAGE>
Principal Amount of the related Note divided by the Appraised Value of the
related Property and with respect to any Second Mortgage Loan or Third Mortgage
Loan, the percentage equal to (a) the sum of (i) the remaining principal
balance, as of origination of the Second Mortgage Loan or Third Mortgage Loan,
as appropriate, of the Senior Lien note(s) relating to such Second Mortgage Loan
or Third Mortgage Loan, as appropriate, and (ii) the Original Principal Amount
of the Note relating to such Second Mortgage Loan or Third Mortgage Loan, as
appropriate, divided by (b) the Appraised Value.
"Compensating Interest": As defined in Section 8.9(b) hereof.
"Conduit Acquisition Trust": The trust described in the
Pooling and Servicing Agreement dated as of February 15, 1995 among the Sponsor,
Bankers Trust Company of California, N.A., as trustee, and Advanta Mortgage
Corp. USA, as the master servicer.
"Conduit Mortgage Files": For any Mortgage Loan identified on
the related Schedule of Mortgage Loans with a "B" or a "C" code, the items
listed on Exhibit B hereto.
"Coupon Rate": The rate of interest borne by each Note.
"Cut-Off Date": The opening of business December 1, 1996.
"Date-of-Payment Loan": Any Mortgage Loan as to which,
pursuant to the Note relating thereto, interest is computed and charged to the
Mortgagor at the Coupon Rate on the outstanding principal balance of such Note
based on the number of days elapsed between receipt of the Mortgagor's last
payment through receipt of the Mortgagor's most current payment.
"Delinquency Advance": As defined in Section 8.9(a) hereof.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
9
<PAGE>
"Delivery Order": The delivery order in the form set forth as
Exhibit G hereto and delivered by the Sponsor to the Trustee on the Closing Day
pursuant to Section 4.1 hereof.
"Deposit Premium": As defined in the Insurance Agreement.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Advanta Mortgage Files": Any Advanta Mortgage File
relating to a Property located in any of the following jurisdictions: Alaska,
Florida, Hawaii, Idaho, Louisiana, Maine, Missouri, New Hampshire, New Mexico,
Nevada, Oregon, Texas, Utah, West Virginia and Vermont.
"Designated Depository Institution": With respect to each
Account, an institution whose deposits are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund of the FDIC, the long-term deposits of
which shall be rated (x) A or better by Standard & Poor's and (y) A2 or better
by Moody's and in one of the two highest short-term rating categories for S&P
and the highest short-term rating category for Moody's, unless otherwise
approved in writing by the Certificate Insurer and each of Moody's and Standard
& Poor's, and which is any of the following: (i) a federal savings and loan
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a bank
holding company, or (v) approved in writing by the Certificate Insurer, Moody's
and Standard & Poor's and, in each case acting or designated by the Master
Servicer as the depository institution for the Principal and Interest Account;
provided, however, that any such institution or association shall have combined
capital, surplus and undivided profits of at least $100,000,000. Notwithstanding
the foregoing, an Account may be held by an institution otherwise meeting the
preceding requirements except that the only applicable rating requirement shall
be that the unsecured and uncollateralized debt obligations thereof shall be
rated Baa3 or better by Moody's if such institution has trust powers and the
Principal and Interest Account is held by such institution in its corporate
trust department.
"Designated Residual Owner": Advanta Mortgage Corp. USA. and
Advanta Finance Corp.
10
<PAGE>
"Determination Date": As to each Payment Date, the third
Business Day preceding such Payment Date or such earlier day as shall be agreed
by the Certificate Insurer and Trustee.
"Direct Participant" or "DTC Participant": Any broker-dealer,
bank or other financial institution for which the Depository holds Class A
Certificates from time to time as a securities depository.
"Disqualified Organization": As set forth from time to time in
the definition thereof at Section 860E(e)(5) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Document Delivery Requirements": The Sponsor's obligations to
deliver certain legal documents, to prepare and record certain Mortgage
assignments or to deliver certain opinions relating to Mortgage assignments, in
each case with respect to the Mortgage Loans and as set forth in Section 3.5
hereof.
"Eligible Investments": Those investments so designated
pursuant to Section 7.7 hereof.
"Excess Subordinated Amount": With respect to any Mortgage
Loan Group and Payment Date, the excess, if any, of (x) the Subordinated Amount
that would apply to the related Mortgage Loan Group on such Payment Date after
taking into account the payment of the related Group Principal Distribution
Amount on such Payment Date (except for any distributions of related
Subordination Reduction Amounts on such Payment Date) over (y) the related
Specified Subordinated Amount for such Payment Date.
"Event of Default": Any event described in clauses (a) or (b)
of Section 8.20 hereof.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"Freddie Mac": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Trustee pursuant to
Section 3.5 hereof pertaining to a particular Mortgage Loan and any additional
documents required to be added to the Mortgage File pursuant to this Agreement.
"Final Determination": As defined in Section 9.3(a) hereof.
11
<PAGE>
"Final Scheduled Payment Date": November 25, 2026.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Property.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"Gross Margin": With respect to each Mortgage Loan with an
adjustable rate, the fixed percentage amount set forth in the related Mortgage
Note which amount is added to the Index in accordance with the terms of the
related Mortgage Note to determine, on each Interest Rate Adjustment Date, the
Coupon Rate for such Mortgage Loan, subject to any maximum.
"Group I": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group I, including
any Qualified Replacement Mortgages delivered in replacement thereof.
"Group I Amortized Subordinated Amount Requirement": As
defined in the Insurance Agreement.
"Group I Available Funds": As defined in Section 7.3(a)
hereof.
"Group I Certificates": The Class A-1 Certificates.
"Group I Certificate Principal Balance": As of any date of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed as part of the Class A-1
Distribution Amount pursuant to Section 7.5 hereof made with respect to
principal thereon on all prior Payment Dates; provided, that, this amount is
exclusive of Insured Payments for the sole purpose of effecting the Certificate
Insurer's subrogation rights.
"Group I Deficiency Amount": As defined in Section 7.3(b)(i)
hereof.
"Group I Formula Distribution Amount": With respect to the
Group I Certificates for any Payment Date, the Class A-1 Formula Distribution
Amount for such Payment Date.
"Group I Initial Specified Subordinated Amount": As defined in
the Insurance Agreement.
"Group I Insured Distribution Amount": As to the Class A-1
Certificates and any Payment Date except the Final
12
<PAGE>
Scheduled Payment Date, the sum of (x) the Group I Interest Distribution Amount
for such Payment Date and (y) the Group I Subordination Deficit, if any, as of
such Payment Date.
"Group I Insured Payment": An amount equal to the sum of (i)
as of each Payment Date, the Group I Deficiency Amount and (ii) any unpaid Group
I Preference Amount.
"Group I Interest Distribution Amount": As of any Payment Date
the Class A-1 Interest Distribution Amount for such Payment Date.
"Group I Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all interest collected by the Master
Servicer during the related Remittance Period with respect to the Mortgage Loans
in Group I, (ii) all Delinquency Advances made by the Master Servicer on such
Remittance Date with respect to Group I and (iii) all Compensating Interest paid
by the Master Servicer on such Remittance Date with respect to Group I, net of
amounts allowed to be retained pursuant to Section 8.8(c).
"Group I Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group I Interest Remittance Amount for such Remittance
Date and (ii) the Group I Principal Remittance Amount for such Remittance Date.
"Group I Pass-Through Rate": As to the Group I Certificates
and any Payment Date, the Class A-1 Pass-Through Rate prior to taking into
account any distributions to be made on such Payment Date.
"Group I Preference Amount": As defined in the Certificate
Insurance Policy.
"Group I Premium Amount": As to any Payment Date, the product
of (x) one-twelfth of the Premium Percentage and (y) the Group I Certificate
Principal Balance on such Payment Date (after taking into account any
distributions of the Group I Principal Distribution Amount to be made on such
Payment Date).
"Group I Principal Carry-Forward Amount": With respect to any
Payment Date, the amount, if any, by which (x) the Group I Subordination Deficit
(prior to taking into account any distribution of principal on such Payment
Date), if any, as of the immediately preceding Payment Date exceeded (y) the
amount of the actual distribution made to the Class A-1 Distribution Account on
such immediately preceding Payment Date on account of the Group I Principal
Distribution Amount.
13
<PAGE>
"Group I Principal Distribution Amount": With respect to the
Group I Certificates for any Payment Date, the lesser of:
(i) the excess of (a) the sum, as of such Payment Date,
of (x) the Group I Total Available Funds and (y) any
Group I Insured Payment over (b) the Group I Interest
Distribution Amount; and
(ii) the sum, without duplication, of:
(a) the Group I Principal Carry-Forward Amount,
(b) the principal actually collected by the Master Servicer
with respect to the Mortgage Loans in Group I during the related Remittance
Period,
(c) the Loan Balance of each Mortgage Loan in Group I that
either was repurchased by an Originator or by the Sponsor or purchased by the
Master Servicer on the related Remittance Date, to the extent such Loan Balance
is actually received by the Trustee,
(d) any Substitution Amounts delivered by the Sponsor on the
related Remittance Date in connection with a substitution of a Mortgage Loan in
Group I, to the extent such Substitution Amounts are actually received by the
Trustee,
(e) all Net Liquidation Proceeds actually collected by the
Master Servicer with respect to the Mortgage Loans in Group I during the related
Remittance Period (to the extent such Net Liquidation Proceeds related to
principal),
(f) the amount of any Group I Subordination Deficit for such
Payment Date,
(g) the proceeds received by the Trustee of any termination of
Group I (to the extent such proceeds related to principal),
(h) the amount of any Subordination Increase Amount with
respect to Group I for such Payment Date, to the extent of any Net Monthly
Excess Cashflow available for such purpose;
minus
(i) the amount of any Subordination Reduction Amount with
respect to Group I for such Payment Date.
In addition, on the Final Scheduled Payment Date, the Group I
Principal Distribution Amount will be the amount
14
<PAGE>
necessary to reduce the Class A-1 Certificate Principal Balance to zero.
"Group I Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Master Servicer with respect to Mortgage Loans in Group I during the related
Remittance Period, (ii) the Loan Balance of each such Mortgage Loan in Group I
that either was repurchased by an Originator or by the Sponsor or purchased by
the Master Servicer on such Remittance Date, to the extent such Loan Balance was
actually deposited in the Principal and Interest Account, (iii) any Substitution
Amounts delivered by the Sponsor in connection with a substitution of a Mortgage
Loan in Group I, to the extent such Substitution Amounts were actually deposited
in the Principal and Interest Account on such Remittance Date, and (iv) all Net
Liquidation Proceeds actually collected by the Master Servicer with respect to
such Mortgage Loans in Group I during the related Remittance Period (to the
extent such Liquidation Proceeds related to principal) net of amounts allowed to
be retained pursuant to Section 8.8(c).
"Group I Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group I Insured Payments previously received by the Trustee
and all Group I Preference Amounts previously paid by the Certificate Insurer
and in each case not previously repaid to the Certificate Insurer pursuant to
Section 7.5(c)(iv)(C) or Section 7.5(c)(iv)(D) hereof plus (ii) interest accrued
on each such Group I Insured Payment not previously repaid calculated at the
Class A-1 Pass-Through Rate from the date the Trustee received the related Group
I Insured Payment and (y)(i) any amounts then due and owing to the Certificate
Insurer relating to Class A-1 Certificates under the Insurance Agreement plus
(ii) interest on such amounts at the Late Payment Rate. The Certificate Insurer
shall notify the Trustee and the Sponsor of the amount of any Group I
Reimbursement Amount.
"Group I Specified Subordinated Amount": As defined in the
Insurance Agreement.
"Group I Subordinated Amount": As of any Payment Date, the
excess, if any, of (x) the aggregate Loan Balances of the Mortgage Loans in
Group I as of the close of business on the last day of the related Remittance
Period over (y) the Group I Certificate Principal Balance as of such Payment
Date (after taking into account the payment of the Group I Principal
Distribution Amount on such Payment Date except for any portion thereof related
to a Group I Insured Payment).
"Group I Subordination Deficit": With respect to Mortgage Loan
Group I as of any Payment Date, the amount, if any, by which (x) the aggregate
Group I Certificate Principal
15
<PAGE>
Balance, after taking into account the payment of the Group I Principal
Distribution Amount (calculated for this purpose only without regard to clause
(ii)(f) thereof) on such Payment Date, exceeds (y) the aggregate Loan Balances
of the Mortgage Loans in Mortgage Loan Group I as of the close of business on
the last day of the prior Remittance Period.
"Group I Total Available Funds": As defined in Section 7.3(a)
hereof.
"Group I Total Monthly Excess Spread": With respect to
Mortgage Loan Group I as of any Payment Date, the excess of (i) the interest
which is collected on the Mortgage Loans in Mortgage Loan Group I during the
prior Remittance Period, less the related Servicing Fees, less the Trustee's
Fees, plus any Delinquency Advances and Compensating Interest paid by the Master
Servicer with respect to Mortgage Loan Group I with respect to such Remittance
Period over (ii) the sum of (x) the interest due on the Group I Certificates on
such Payment Date and (y) the Group I Premium Amount for such Payment Date.
"Group II": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group II,
including any Qualified Replacement Mortgages delivered in replacement thereof.
"Group II Amortized Subordinated Amount Requirement": As
defined in the Insurance Agreement.
"Group II Available Funds": As defined in Section 7.3(a)(ii)
hereof.
"Group II Certificates": The Class A-2 Certificates.
"Group II Certificate Principal Balance": As of any date of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less any amounts actually distributed as part of the Class A-2
Distribution Amount pursuant to Section 7.5 hereof made with respect to
principal thereon on all prior Payment Dates; provided, that, this amount is
exclusive of Insured Payments for the sole purpose of effecting the Certificate
Insurer's subrogation rights.
"Group II Deficiency Amount": As defined in Section
7.3(b)(ii).
"Group II Formula Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, the sum of (x) the Class A-2
Interest Distribution Amount for such Payment Date and (y) the Class A-2
Principal Distribution Amount for such Payment Date.
16
<PAGE>
"Group II Initial Specified Subordinated Amount": As defined
in the Insurance Agreement.
"Group II Insured Distribution Amount": As to the Class A-2
Certificates for any Payment Date except the Final Scheduled Payment Date, the
sum of (x) the Class A-2 Interest Distribution Amount for such Payment Date and
(y) the Group II Subordination Deficit as of such Payment Date.
"Group II Insured Payment": An amount equal to the sum of (i)
as of each Payment Date, the Group II Deficiency Amount and (ii) any unpaid
Class A-2 Preference Amount.
"Group II Interest Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued (for the
actual number of days elapsed assuming a 360-day
year) on the Class A-2 Certificate Principal Balance
immediately prior to such Payment Date during the
related Interest Accrual Period at the Class A-2
Pass-Through Rate applicable to such Interest Accrual
Period; and
(ii) the Class A-2 Interest Carry-Forward Amount.
"Group II Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all interest collected by the Master
Servicer during the related Remittance Period with respect to the Mortgage Loans
in Group II, (ii) all Delinquency Advances made by the Master Servicer on such
Remittance Date with respect to Group II and (iii) all Compensating Interest
paid by the Master Servicer on such Remittance Date with respect to Group II net
of amounts allowed to be retained in Section 8.8(c).
"Group II Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group II Interest Remittance Amount for such Remittance
Date and (ii) the Group II Principal Remittance Amount for such Remittance Date.
"Group II Preference Amount": As defined in the Certificate
Insurance Policy.
"Group II Premium Amount": As to any Payment Date, the product
of (x) one-twelfth of the Premium Percentage and (y) the Group II Certificate
Principal Balance on such Payment Date (after taking into account any
distributions of the Group II Principal Distribution Amount on such Payment
Date).
17
<PAGE>
"Group II Principal Carry-Forward Amount": With respect to any
Payment Date, the amount, if any, by which (x) the Group II Subordination
Deficit, (prior to taking into account any distribution of principal on such
Payment Date) if any, as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Class A-2 Distribution Account
on such immediately preceding Payment Date on account of the Group II Principal
Distribution Amount.
"Group II Principal Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, the lesser of:
(i) the excess of (a) the sum, as of such Payment Date, of (x)
the Group II Total Available Funds and (y) any Group II
Insured Payment over (b) the Group II Interest Distribution
Amount; and
(ii) the sum, without duplication, of:
(a) the Group II Principal Carry-Forward Amount,
(b) the principal actually collected by the Master Servicer
with respect to the Mortgage Loans in Group II during the related Remittance
Period,
(c) the Loan Balance of each Mortgage Loan in Group II that
either was repurchased by an Originator or by the Sponsor or purchased by the
Master Servicer on the related Remittance Date, to the extent such Loan Balance
is actually received by the Trustee,
(d) any Substitution Amounts delivered by the Sponsor on the
related Remittance Date in connection with a substitution of a Mortgage Loan in
Group II, to the extent such Substitution Amounts are actually received by the
Trustee,
(e) all Net Liquidation Proceeds actually collected by the
Master Servicer with respect to the Mortgage Loans in Group II during the
related Remittance Period (to the extent such Net Liquidation Proceeds related
to principal),
(f) the amount of any Group II Subordination Deficit for such
Payment Date,
(g) the proceeds received by the Trustee of any termination of
Group II (to the extent such proceeds relate to principal),
(h) the amount of any Subordination Increase Amount with
respect to Group II for such Payment Date, to the extent of any Net Monthly
Excess Cashflow available for such purpose;
18
<PAGE>
minus
(i) the amount of any Subordination Reduction Amount with
respect to Group II for such Payment Date.
In addition, on the Final Scheduled Payment Date, the Group II
Principal Distribution Amount will be the amount necessary to reduce the Class
A-2 Certificate Principal Balance to zero.
"Group II Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Master Servicer with respect to Mortgage Loans in Group II during the
related Remittance Period, (ii) the Loan Balance of each such Mortgage Loan in
Group II that either was repurchased by an Originator or by the Sponsor or
purchased by the Master Servicer on such Remittance Date, to the extent such
Loan Balance was actually deposited in the Principal and Interest Account, (iii)
any Substitution Amounts delivered by the Sponsor in connection with a
substitution of a Mortgage Loan in Group II, to the extent such Substitution
Amounts were actually deposited in the Principal and Interest Account on such
Remittance Date, and (iv) all Net Liquidation Proceeds actually collected by the
Master Servicer with respect to such Mortgage Loans in Group II during the
related Remittance Period (to the extent such Liquidation Proceeds related to
principal) net of amounts allowed to be retained pursuant to Section 8.8(c).
"Group II Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group II Insured Payments previously received by the Trustee
not previously repaid to the Certificate Insurer pursuant to Sections
7.5(c)(iv)(C) and 7.5(c)(iv)(D) hereof plus (ii) interest accrued on each such
Group II Insured Payment not previously repaid calculated from the date the
Trustee received the related Group II Insured Payment at the Class A-2
Pass-Through Rate applicable to such date and (y)(i) any amounts then due and
owing to the Certificate Insurer relating to the Class A-2 Certificates under
the Insurance Agreement plus (ii) interest on such amounts at the Late Payment
Rate. The Certificate Insurer shall notify the Trustee and the Sponsor of the
amount of any Group II Reimbursement Amount.
"Group II Specified Subordinated Amount": As defined in the
Insurance Agreement.
"Group II Subordinated Amount": As of any Payment Date, the
excess, if any, of (x) the aggregate Loan Balances of the Mortgage Loans in
Group II as of the close of business on the last day of the related Remittance
Period over (y) the Group II Certificate Principal Balance as of such Payment
Date (after taking into account the payment of the Group II
19
<PAGE>
Principal Distribution Amount on such Payment Date except for any portion
thereof related to a Group II Insured Payment).
"Group II Subordination Deficit": With respect to Mortgage
Loan Group II as of any Payment Date, the amount, if any, by which (x) the Group
II Certificate Principal Balance, after taking into account the payment of the
Group II Principal Distribution Amount (calculated for this purpose only without
regard to clause (ii)(f) thereof) on such Payment Date, exceeds (y) the
aggregate Loan Balances of the Mortgage Loans in Mortgage Loan Group II as of
the close of business on the last day of the prior Remittance Period.
"Group II Total Available Funds": As defined in Section
7.3(a)(ii) hereof.
"Group II Total Monthly Excess Spread": With respect to
Mortgage Loan Group II as of any Payment Date, the difference between (i) the
interest which is collected on the Mortgage Loans in Mortgage Loan Group II
during the prior Remittance Period, less the related Servicing Fees, less the
Trustee's Fees, plus any Delinquency Advances and Compensating Interest paid by
the Master Servicer with respect to Mortgage Loan Group II and such Remittance
Period and (ii) the sum of (x) the interest due on the Class A-2 Certificates at
the Class A-2 Pass-Through Rate on such Payment Date, and (y) the Group II
Premium Amount for such Payment Date.
"Indemnification Agreement": The Indemnification Agreement
dated as of December 1, 1996 among the Certificate Insurer, the Sponsor, and the
Underwriters.
"Index": With respect to any adjustable rate Mortgage Note,
the applicable index set forth therein.
"Indirect Participant" shall mean any financial institution
for whom any Direct Participant holds an interest in a Class A Certificate.
"Initial Premiums": The initial premiums payable by the
Sponsor on behalf of the Trust to the Certificate Insurer in consideration of
the delivery to the Trustee of the Certificate Insurance Policy.
"Insurance Agreement": The Insurance and Indemnity Agreement
dated as of December 1, 1996 among the Sponsor, the Master Servicer and the
Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage
insurance policy relating to a Mortgage Loan.
20
<PAGE>
"Insured Payment": With respect to the Group I Certificates,
the Group I Insured Payment and with respect to the Group II Certificates, the
Group II Insured Payment.
"Interest Accrual Period": With respect to the Class A-1
Certificates and the Class A-2 Certificates, the period commencing on the prior
Payment Date (or on December 19, 1996 with respect to the January 27, 1997
Payment Date) and ending on the day immediately preceding such Payment Date.
"Interest Advance": As defined in Section 7.10(b) hereof.
"Interest Determination Date": With respect to any Interest
Accrual Period for the Group I and Group II Certificates, the second London
Business Day preceding the first day of such Interest Accrual Period.
"Interest Rate Adjustment Date": The date on which an
adjustment to the Coupon Rate on a Mortgage Note becomes effective.
"Late Payment Rate": For any Payment Date, means the lesser of
(a) the greater of (x) the then applicable highest rate of interest on the
Certificates or (y) the prime rate as published in the Wall Street Journal on
the related due date of amounts owed to the Certificate Insurer under the
Insurance Agreement (including such amounts owed pursuant to Section 3.03(c) of
the Insurance Agreement) and (b) the maximum rate permissible under applicable
usury or similar laws limiting interest rates. The Late Payment Rate shall be
computed on the basis of the actual number of days elapsed over a year of 360
days.
"LIBOR": With respect to any Interest Accrual Period for the
Group I Certificates and Group II Certificates, the rate determined by the
Trustee on the related Interest Determination Date on the basis of the offered
rates of the Reference Banks for one-month U.S. dollar deposits, as such rates
appear on the Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such
Interest Determination Date. On each Interest Determination Date, LIBOR for the
related Interest Accrual Period will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such
offered quotations (rounded upwards if necessary to the
nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered
21
<PAGE>
quotations, LIBOR for the related Interest Accrual Period
shall be the higher of (i) LIBOR as determined on the previous
Interest Determination Date and (ii) the Reserve Interest
Rate.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A
Mortgage Loan which is purchased from the Trust pursuant to Section 3.3, 3.4,
3.6(b) or 8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the
Master Servicer or any Sub-servicer in connection with the liquidation of any
defaulted Mortgage Loan, such expenses, including, without limitation, legal
fees and expenses, and any unreimbursed Servicing Advances expended by the
Master Servicer or any Sub-servicer pursuant to Section 8.9 with respect to the
related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan,
any amounts (including the proceeds of any Insurance Policy) recovered by the
Master Servicer in connection with such Liquidated Loan, whether through
trustee's sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, the
outstanding principal balance thereof as of the Cut-Off Date, less any related
Principal Remittance Amounts relating to such Mortgage Loan included in previous
related Monthly Remittances that were transferred by the Master Servicer or any
Sub-servicer to the Trustee for deposit in the related Certificate Account;
provided, however, (x) that the Loan Balance for any Mortgage Loan which has
become a Liquidated Loan shall be zero as of the first day of the Remittance
Period following the Remittance Period in which such Mortgage Loan becomes a
Liquidated Loan, and at all times thereafter and (y) the Loan Balance "as of the
Cut-Off Date" for any Mortgage Loan originated during the period from the
Cut-Off Date to the Closing Date shall be the Original Loan Balance thereof.
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Section 3.3, 3.4,
3.6(b) or 8.10 hereof, an amount equal to the Loan Balance of such Mortgage Loan
as of the date of purchase, plus one month's interest on the outstanding Loan
Balance thereof as of the beginning of the preceding Remittance Period computed
at the Coupon Rate less the Servicing Fee (expressed as an annual percentage
rate), if any, together with, without duplication, the aggregate amount of (i)
all delinquent interest, all Delinquency Advances and Servicing Advances
theretofore made with respect to such Mortgage Loan and not subsequently
recovered from the related Mortgage Loan, (ii) all Delinquency Advances which
the Master
22
<PAGE>
Servicer or any Sub-servicer has theretofore failed to remit with respect to
such Mortgage Loan and (iii) any Reimbursement Amount relating to such Mortgage
Loan.
"London Business Day": A day on which banks are open for
dealing in foreign currency, and exchange in London and New York City.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Master Servicer's Trust Receipt": The Master Servicer's trust
receipt in the form set forth as Exhibit K hereto.
"Master Servicing Fee": As to any Payment Date the product of
(x) one-twelfth of 0.50% and (y) the aggregate Loan Balances of the Unaffiliated
Originator Loans as of the opening of business on the first day of the preceding
calendar month.
"Master Transfer Agreement": Any one of the Master Loan
Transfer Agreements among the Sponsor and/or the Conduit Acquisition Trust, the
Trustee and one or more Originators. For purposes of this Agreement the Master
Loan Transfer Agreements are (x) the Master Loan Transfer Agreement dated as of
February 15, 1995 among the Sponsor, the Trustee and the Affiliated Originators
named therein and (y) any similar agreement with an Unaffiliated Originator
designated as a "Master Transfer Agreement" with the written consent of the
Certificate Insurer, together, in either case, with any related Conveyance
Agreements (as defined therein).
"Monthly Remittance Amount": With respect to Group I, the
Group I Monthly Remittance Amount, and with respect to Group II, the Group II
Monthly Remittance Amount.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second or third lien on an estate in fee simple interest in
real property securing a Note.
"Mortgage Loan Group": Either Group I or Group II. References
herein to the related Class of Class A Certificates, when used with respect to a
Mortgage Loan Group, shall mean (A) in the case of Group I, the Group I
Certificates, and (B) in the case of Group II, the Group II Certificates.
23
<PAGE>
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 3.5(a) hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedule of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan",
"Second Mortgage Loan" and "Third Mortgage Loan". The term "Mortgage Loan"
includes any Mortgage Loan which is Delinquent, which relates to a foreclosure
or which relates to a Property which is REO Property prior to such Property's
disposition by the Trust. Any mortgage loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred and assigned
to the Trust by the Sponsor, in fact was not transferred and assigned to the
Trust for any reason whatsoever shall nevertheless be considered a "Mortgage
Loan" for all purposes of this Agreement. The term "Mortgage Loan" includes the
term "Bulk Acquisition Loan".
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances, unreimbursed Delinquency Advances and accrued
and unpaid Servicing Fees through the date of liquidation relating to such
Liquidated Loan. In no event shall Net Liquidation Proceeds with respect to any
Liquidated Loan be less than zero.
"Net Monthly Excess Cashflow": As defined in Section 7.5(c)(v)
hereof.
"Nonrecoverable Advance": With respect to any Mortgage Loan,
any Delinquency Advance and 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.
"Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Trustee.
"Operative Documents": Collectively, this Agreement, the
Master Transfer Agreements, the Certificate
24
<PAGE>
Insurance Policy, the Certificates, the Indemnification Agreement and the
Insurance Agreement.
"Original Aggregate Loan Balance": As defined in the Insurance
Agreement.
"Original Certificate Principal Balance": As of the Closing
Day and as to each Class of Class A Certificates, the original Certificate
Principal Balances thereof, are as follows:
Class A-1 Certificates $210,000,000
Class A-2 Certificates $120,000,000
The Class RS Certificates do not have an Original Certificate
Principal Balance.
"Original Principal Amount": With respect to each Note, the
principal amount of such Note or the mortgage note relating to a Senior Lien, as
the case may be, on the date of origination thereof.
"Originator": Any entity from which the Sponsor has purchased
Mortgage Loans. The Originators are Advanta Mortgage Corp. USA, Advanta Mortgage
Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp.
Midwest, Advanta Mortgage Corp. of New Jersey, Advanta Mortgage Corp. of New
Jersey II, Advanta Mortgage Corp. Northeast, Advanta National Bank USA, Advanta
Finance Corp. and any Unaffiliated Originator.
"Outstanding": With respect to all Certificates of a Class, as
of any date of determination, all such Certificates theretofore executed and
delivered hereunder except:
(i) Certificates theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full
and final payment money in the necessary amount has been theretofore
deposited with the Trustee in trust for the Owners of such
Certificates;
(iii) Certificates in exchange for or in lieu of
which other Certificates have been executed and delivered pursuant to
this Agreement, unless proof satisfactory to the Trustee is presented
that any such Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed,
lost or stolen for which replacement Certificates have been issued as
provided for in Section 5.5 hereof.
25
<PAGE>
"Owner": The Person in whose name a Certificate is registered
in the Register, to the extent described in Section 5.6.
"Pass-Through Rate": As to the Class A-1 Certificates, the
Class A-1 Pass-Through Rate; as to the Class A-2 Certificates, the Class A-2
Pass-Through Rate.
"Payment Date": Any date on which the Trustee is required to
make distributions to the Owners, which shall be the 25th day of each month,
commencing in the month following the Closing Day or, if the 25th day is not a
Business Day, the first Business Day thereafter.
"Percentage Interest": As to any Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Certificate
Principal Balance of such Certificate as of the Cut-Off Date and the denominator
of which is the Original Certificate Principal Balance of all Class A
Certificates of the same Class; and as to any Class RS Certificate, that
Percentage Interest set forth on such Class RS Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Cumulative Realized Losses": With respect to any period,
the sum of all Realized Losses with respect to the Mortgage Loans experienced
during such period.
"Pool Delinquency Rate": With respect to any Remittance
Period, the fraction, expressed as a percentage, equal to (x) the aggregate
principal balances of all Mortgage Loans 90 or more days Delinquent (including
all foreclosures and REO Properties) as of the close of business on the last day
of such Remittance Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Remittance Period.
"Pool Principal Balance": The aggregate principal balances of
all Mortgage Loans.
"Pool Rolling Three Month Delinquency Rate": As of any Payment
Date, the fraction, expressed as a percentage, equal to the average of the Pool
Delinquency Rates for each of the three (or one and two, in the case of the
first and second Payment Dates) immediately preceding Remittance Periods.
"Premium Amount": As to any Payment Date, the sum of (i) the
Group I Premium Amount on such Payment Date and (ii) the Group II Premium Amount
on such Payment Date.
"Premium Percentage": As defined in the Insurance Agreement.
26
<PAGE>
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan
which is received by the Master Servicer in advance of the scheduled due date
for the payment of such principal (other than the principal portion of any
Prepaid Installment), and the proceeds of any Insurance Policy which are to be
applied as a payment of principal on the related Mortgage Loan shall be deemed
to be Prepayments for all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Master
Servicer or any Sub-servicer in connection with a foreclosed Mortgage Loan prior
to the liquidation thereof, including, without limitation, expenditures for real
estate property taxes, hazard insurance premiums, property restoration or
preservation.
"Principal and Interest Account": Collectively, each principal
and interest account created by the Master Servicer or any Sub-servicer pursuant
to Section 8.8(a) hereof, or pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": As applicable, the Group I
Principal Remittance Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": As set forth from time to time in
the definition thereof at Section 860F(a)(2) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Property": The underlying property securing a Mortgage Loan.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": "Qualified liquidation" shall have
the meaning set forth from time to time in the definition thereof at Section
860F(a)(4) of the Code (or any successor statute thereto) and applicable to the
Trust and the Tax Estates.
"Qualified Mortgage": "Qualified mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto) and applicable to the
Trust and the Mortgage Loan Groups.
27
<PAGE>
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 3.3, 3.4 or 3.6(b) hereof, which (i) bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II or bears a fixed rate of interest if the Mortgage Loan to be substituted for
is in Group I, (ii) has a Coupon Rate at least equal to the Coupon Rate of the
Mortgage Loan being replaced, (which, in the case of a Mortgage Loan in Group
II, shall mean a Mortgage Loan having the same interest rate index, a margin
over such index and a maximum interest rate at least equal to those applicable
to the Mortgage Loan being replaced), (iii) is of the same or better property
type and the same or better occupancy status as the replaced Mortgage Loan, (iv)
shall be of the same or better credit quality classification (determined in
accordance with the Originators' credit underwriting guidelines) as the Mortgage
Loan being replaced, (v) shall mature no later than December 31, 2026, (vi) has
a Combined Loan-to-Value Ratio as of the Cut-Off Date no higher than the
Combined Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (vii)
has a Loan Balance as of the related Replacement Cut-Off Date equal to or less
than the Loan Balance of the replaced Mortgage Loan as of such Replacement
Cut-Off Date, (viii) satisfies all of the representations and warranties set
forth in Section 3.3 and the criteria set forth from time to time in the
definition thereof at Section 860G(a)(4) of the Code (or any successor statute
thereto) and applicable to the Trust, all as evidenced by an Officer's
Certificate of the Sponsor delivered to the Trustee and the Certificate Insurer
prior to any such substitution and (ix) is a valid First Mortgage Loan if the
Mortgage Loan to be substituted for is a valid First Mortgage Loan or, Second
Mortgage Loan if the Mortgage Loan to be substituted for is a Second Mortgage
Loan, or Third Mortgage Loan if the Mortgage Loan to be substituted for is a
Third Mortgage Loan. In the event that one or more mortgage loans are proposed
to be substituted for one or more mortgage loans, the Certificate Insurer may
allow the foregoing tests to be met on a weighted average basis or other
aggregate basis acceptable to the Certificate Insurer, as evidenced by a written
approval delivered to the Trustee by the Certificate Insurer, except that the
requirement of clauses (vi) and (viii) hereof must be satisfied as to each
Qualified Replacement Mortgage.
"Realized Loss": As to any Liquidated Loan, the amount, if
any, by which the Loan Balance thereof as of the date of liquidation is in
excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last day
of the calendar month immediately preceding the calendar month in which such
Payment Date occurs or, if such day is not a Business Day, the next preceding
Business Day.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Bank or Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable
28
to serve as a Reference Bank, then any leading banks selected by the Trustee
which are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Sponsor
or any affiliate thereof, (iii) whose quotations appear on the Reuters Screen
LIBO Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Trustee.
"Register": The register maintained by the Trustee in
accordance with Section 5.4 hereof, in which the names of the Owners are set
forth.
"Registrar": The Trustee, acting in its capacity as Trustee
appointed pursuant to Section 5.4 hereof, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by
the Sponsor with the Securities and Exchange Commission, including all
amendments thereto and including the Prospectus and Prospectus Supplement
relating to the Class A Certificates constituting a part thereof.
"Reimbursement Amount": A Group I Reimbursement Amount or a
Group II Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time.
"REMIC Trust": The segregated pool of assets consisting of the
Trust Estate except for the Supplemental Interest Payment Account, the Class RS
Distribution Account, the Class A-1 Distribution Account and the Class A-2
Distribution Account.
"Remittance Date": Any date on which the Master Servicer is
required to remit monies on deposit in the Principal and Interest Account to the
Trustee, which shall be no later than the 18th day of each month, or, if such
day is not a Business Day, the next preceding Business Day, commencing in the
month following the month in which the Closing Day occurs.
"Remittance Period": The period (inclusive) beginning on the
first day of the calendar month immediately preceding the month in which a
Remittance Date occurs and ending on the last day of such immediately preceding
calendar month.
29
<PAGE>
"REO Property": A Property acquired by the Master Servicer or
any Sub-servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter": 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.
"Representative": Prudential Securities Incorporated, as
representative of the Underwriters.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which three New
York City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which three
New York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residual Net Monthly Excess Cashflow": With respect to any
Payment Date, the aggregate Net Monthly Excess Cashflow, if any, remaining with
respect to both Mortgage Loan Groups after the making of all applications
described in Section 7.5(c) hereof.
"Schedules of Mortgage Loans": The Schedules of Mortgage
Loans, attached hereto as Schedule I. Such Schedules shall also contain one of
the following codes for each Mortgage Loan: "B" if such Mortgage Loan is a Bulk
Acquisition Loan, "C" if such Mortgage Loan is an Unaffiliated Originator Loan
or "A" for all other Mortgage Loans. The information contained on each Mortgage
Loan Schedule shall be delivered to the Trustee on a computer readable magnetic
tape or disk.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Property
30
<PAGE>
having a first priority lien; and with respect to any Third Mortgage Loan, the
mortgage loans relating to the corresponding Property having first and second
priority liens.
"Servicer Affiliate": A Person (i) controlling, controlled by
or under common control with the Master Servicer and (ii) which is qualified to
service residential mortgage loans.
"Servicing Advance": As defined in Section 8.9(c) and Section
8.13 hereof.
"Servicing Fee": With respect to any Mortgage Loan which is an
Unaffiliated Originator Loan, the sum of any servicing fee relating to such
Unaffiliated Originator Loan and the Master Servicing Fee. With respect to any
Mortgage Loan other than an Unaffiliated Originator Loan, the Advanta Servicing
Fee. The Sponsor shall inform the Trustee as to the level of any servicing fee
relating to an Unaffiliated Originator Loan, which shall not be in excess of
0.50% per month, unless otherwise approved by the Certificate Insurer in
writing.
"Specified Subordinated Amount": As applicable, the Group I
Specified Subordinated Amount or the Group II Specified Subordinated Amount.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware
corporation.
"Standard & Poor's": Standard & Poor's Ratings Group, a
division of The McGraw Hill Companies.
"Step-up Payment Date": The second Payment Date which follows
the Clean-up Call Date.
"Subordinated Amount": As applicable, the Group I Subordinated
Amount or the Group II Subordinated Amount.
"Subordination Deficiency Amount": With respect to any
Mortgage Loan Group and Payment Date, the excess, if any, of (i) the Specified
Subordinated Amount applicable to such Mortgage Loan Group and Payment Date over
(ii) the Subordinated Amount applicable to such Mortgage Loan Group and Payment
Date prior to taking into account the payment of any related Subordination
Increase Amounts on such Payment Date.
"Subordination Increase Amount": With respect to any Mortgage
Loan Group and Payment Date, the lesser of (i) the Subordination Deficiency
Amount as of such Payment Date (after taking into account the payment of the
related Group Principal Distribution Amount on such Payment Date (except for any
Subordination Increase Amount)) and (ii) the aggregate amount of Net Monthly
Excess Cashflow to be allocated to such Mortgage Loan Group pursuant to Sections
7.5(c)(v)(A) and 7.5(c)(v)(B) on such Payment Date.
31
<PAGE>
"Subordination Reduction Amount": With respect to any Mortgage
Loan Group and Payment Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Mortgage Loan Group and Payment Date and (y) the
Principal Remittance Amount with respect to such Mortgage Loan Group for the
related Remittance Period.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Loan Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Coupon Rate net of
the Servicing Fee of the Mortgage Loan being replaced.
"Sub-Servicer": Any Person with whom the Master Servicer has
entered into a Sub-Servicing Agreement and who satisfies any requirements set
forth in Section 8.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and any Sub-Servicer relating to servicing and/or administration
of certain Mortgage Loans as permitted by Section 8.3.
"Supplemental Interest Payment Account": The Supplemental
Interest Payment Account established in accordance with Section 7.10(a) hereof
and maintained by the Trustee.
"Supplemental Interest Payment Amount Available": As defined
in Section 7.10(b) hereof.
"Supplemental Interest Trust": The Advanta Supplemental
Interest Trust 1996-4 created pursuant to Section 7.10(a) hereof.
"Tax Matters Person": The Tax Matters Person appointed
pursuant to Section 11.17 hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Third Mortgage Loan": A Mortgage Loan which constitutes a
third priority mortgage lien with respect to the related Property.
"Total Monthly Excess Cashflow": As defined in Section
7.5(c)(iv) hereof.
32
<PAGE>
"Total Monthly Excess Spread": Either the Group I Total
Monthly Excess Spread or the Group II Total Monthly Excess Spread, as
appropriate.
"Transaction Documents": Collectively this Agreement, the
Insurance Agreement, the Underwriting Agreement relating to the Class A
Certificates, the Master Transfer Agreements, any Sub-Servicing Agreement, the
Indemnification Agreement relating to the Prospectus offering the Class A
Certificates, the Registration Statement relating to the Class A Certificates
and the Certificates.
"Trust": Advanta Mortgage Loan Trust 1996-4, the trust created
under this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts (except the Supplemental Interest Account),
(iii) any Property, the ownership of which has been effected on behalf of the
Trust as a result of foreclosure or acceptance by the Master Servicer of a deed
in lieu of foreclosure and that has not been withdrawn from the Trust, (iv) any
Insurance Policies relating to the Mortgage Loans and any rights of the Sponsor
under any Insurance Policies, (v) Net Liquidation Proceeds with respect to any
Liquidated Loan, (vi) the Certificate Insurance Policy, and (vii) the rights of
the Sponsor against any Originator pursuant to the related Master Transfer
Agreement.
"Trustee": Bankers Trust Company of California, N.A., located
on the date of execution of this Agreement at Bankers Trust Company, 3 Park
Plaza, Irvine, California 92714, a national banking association, not in its
individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"Trustee's Fees": With respect to any Payment Date and
Mortgage Loan Group, the Product of (x) one-twelfth of .01% and (y) the
aggregate Loan Balance of the Mortgage Loan in the related Mortgage Loan Group
as of the beginning of the related Remittance Period.
"Unaffiliated Originator Loan": Any Mortgage Loan purchased by
the Sponsor from an Unaffiliated Originator and sold to the Trust by the
Sponsor.
"Unaffiliated Originators": Any Originator (x) who is not
affiliated with the Sponsor and (y) who has been previously communicated by the
Sponsor to the Certificate Insurer, including without limitation Mortgage
Corporation of America.
33
<PAGE>
"Uncertificated Interest": As defined in Section 2.8(b)
hereof.
"Underwriters": Prudential Securities Incorporated, Morgan
Stanley & Co. Incorporated, and Salomon Brothers Inc.
Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or
headings in this Agreement and the Table of Contents are for convenience only
and in no way define, limit or describe the scope and intent of any provisions
of this Agreement.
Section 1.4. Opinions. Each opinion with respect to the
validity, binding nature and enforceability of documents or Certificates may be
qualified to the extent that the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law) and may state
that no opinion is expressed on the availability of the remedy of specific
enforcement, injunctive relief or any other equitable remedy. Any opinion
required to be furnished by any Person hereunder must be delivered by counsel
upon whose opinion the addressee of such opinion may reasonably rely, and such
opinion may state that it is given in reasonable reliance upon an opinion of
another, a copy of which must be attached, concerning the laws of a foreign
jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust. The parties hereto do
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "Advanta
Mortgage Loan Trust 1996-4". Each Mortgage Loan Group shall constitute a
sub-trust of the Trust.
Section 2.2. Office. The office of the Trust shall be in care
of the Trustee, addressed to Bankers Trust Company of California, N.A., Three
Park Plaza, Irvine, California 92714, or at such other address as the Trustee
may designate by notice to the Sponsor, the Master Servicer, the Owners and to
the Certificate Insurer.
34
<PAGE>
Section 2.3. Purposes and Powers. The purpose of the Trust is
to engage in the following activities, and only such activities: (i) the
issuance of the Certificates and the acquiring, owning and holding of Mortgage
Loans and the Trust Estate in connection therewith; (ii) activities that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith, including the investment of monies in accordance
with this Agreement; and (iii) such other activities as may be required in
connection with conservation of the Trust Estate and distributions to the
Owners; provided, however, that nothing contained herein shall permit the
Trustee to take any action which would result in the loss of REMIC status for
the REMIC Trust.
Section 2.4. Appointment of the Trustee; Declaration of Trust.
The Sponsor hereby appoints the Trustee as trustee of the Trust effective as of
the 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 Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners.
Section 2.5. Expenses of the Trust. The expenses of the Trust
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 other expenses shall not relieve the Trustee of its obligations
hereunder. The Trustee hereby covenants with the Owners that every material
contract or other material agreement entered into by the Trustee on behalf of
the Trust shall expressly state therein that no Owner shall be personally liable
in connection with such contract or agreement.
Section 2.6. Ownership of the Trust. On the 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 (other than property acquired pursuant to Section 8.13 hereof) located
in any state other than in the State of New York and payments will be received
by
35
<PAGE>
the Trust only in the State of New York and payments from the Trust will be made
only from the State of New York. The Trust's only office will be at the office
of the Trustee as set forth in Section 2.2 hereof.
Section 2.8. Miscellaneous REMIC Provisions. (a) The REMIC
Trust shall elect to be treated as a REMIC under Section 860D of the Code, as
described in Section 11.15. Any inconsistencies or ambiguities in this Agreement
or in the administration of the Trust shall be resolved in a manner that
preserves the validity of the election of the REMIC Trust to be treated as a
REMIC.
(b) Each of the Class A Certificates and the related rights to
receive Supplemental Interest Payments will be comprised of (i) a "regular
interest" in the REMIC which will be treated as a debt instrument of the Trust
for federal income tax purposes and (ii) and the right to receive Supplemental
Interest Payments described in Section 7.10(b) herein. Each of the Class R
Certificates will be designated as a "residual interest" in the REMIC.
(c) The Closing Day is hereby designated as the "startup day"
of the REMIC within the meaning of Section 860G(a)(9) of the Code.
(d) The Final Scheduled Payment Date for any Class of
Certificates is hereby established as follows:
Class Final Scheduled Payment Date
----- ----------------------------
Class A-1 Certificates November 25, 2026
Class A-2 Certificates November 25, 2026
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS
Section 3.1. Representations and Warranties of the Sponsor.
The Sponsor hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer and to the Owners as of the Closing Day that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or leased
by it make such qualification necessary. The Sponsor has all requisite
corporate power and authority to own and operate its properties, to
carry out its business as presently conducted and as proposed to be
conducted and
36
<PAGE>
to enter into and discharge its obligations under this Agreement and the other
Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Sponsor is a party by the Sponsor and
its performance and compliance with the terms of this Agreement and of
the other Operative Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of the Sponsor
and will not violate the Sponsor's Articles of Incorporation or Bylaws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach of, any material contract, agreement or other instrument to
which the Sponsor is a party or by which the Sponsor is bound, or
violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over
the Sponsor or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Sponsor is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Sponsor, enforceable against
it in accordance with the terms hereof and thereof, except as the
enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Sponsor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which might have consequences
that would materially and adversely affect the condition (financial or
other) or operations of the Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a
party.
(e) No litigation is pending or, to the best of the Sponsor's
knowledge, threatened against the Sponsor which litigation might have
consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or that would
materially and adversely affect the condition (financial or otherwise)
or operations of the Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a
party.
37
<PAGE>
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Sponsor
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report
not misleading.
(g) The statements contained in the Registration Statement
which describe the Sponsor or matters or activities for which the
Sponsor is responsible in accordance with the Operative Documents or
which are attributed to the Sponsor therein are true and correct in all
material respects, and the Registration Statement does not contain any
untrue statement of a material fact with respect to the Sponsor or omit
to state a material fact required to be stated therein or necessary in
order to make the statements contained therein with respect to the
Sponsor not misleading. To the best of the Sponsor's knowledge and
belief, the Registration Statement does not contain any untrue
statement of a material fact required to be stated therein or omit to
state any material fact required to be stated therein or necessary to
make the statements contained therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Sponsor makes no such representation or warranty), that are
necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Sponsor of the
Operative Documents to which it is a party, have been duly taken, given
or obtained, as the case may be, are in full force and effect on the
date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative
Documents on the part of the Sponsor and the performance by the Sponsor
of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Sponsor.
(j) The Sponsor received fair consideration and reasonably
equivalent value in exchange for the sale of
38
<PAGE>
the interests in the Mortgage Loans evidenced by the Certificates.
(k) The Sponsor did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any intent to hinder, delay or
defraud any of its respective creditors.
(l) The Sponsor is solvent and the Sponsor will not be
rendered insolvent as a result of the sale of the Mortgage Loans to the
Trust or the sale of the Certificates.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the Mortgage
Loans to the Trustee.
Section 3.2. Representations and Warranties of the Master
Servicer. The Master Servicer hereby represents, warrants and covenants to the
Trustee, 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 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
39
<PAGE>
other tribunal having jurisdiction over the Master Servicer or any of
its properties.
(c) This Agreement and the other Operative Documents to which
the Master Servicer is a party, assuming due authorization, execution
and delivery by the other parties hereto and thereto, each constitutes
a valid, legal and binding obligation of the Master Servicer,
enforceable against it in accordance with the terms hereof, except as
the enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Master Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other
Operative Documents to which the Master Servicer is a party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
litigation might have consequences that would prohibit its entering
into this Agreement or any other Operative Document to which it is a
party or that would materially and adversely affect the condition
(financial or otherwise) or operations of the Master Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other
Operative Documents to which the Master Servicer is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Master
Servicer contains any untrue statement of a material fact or omits to
state any material fact necessary to make the certificate, statement or
report not misleading.
(g) The statements contained in the Registration Statement
which describe the Master Servicer or matters or activities for which
the Master Servicer is responsible in accordance with the Operative
Documents or which are attributed to the Master Servicer therein are
true and correct in all material respects, and the Registration
Statement does not contain any untrue statement of a material fact with
respect to the Master Servicer or omit to state a material fact
required to be stated therein or necessary to make the statements
40
<PAGE>
contained therein with respect to the Master Servicer not misleading.
To the best of the Master Servicer's knowledge and belief, the
Registration Statement does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein not
misleading.
(h) The Servicing Fee is a "current (normal) servicing fee
rate" as that term is used in Statement of Financial Accounting
Standards No. 65 issued by the Financial Accounting Standards Board.
Neither the Master Servicer nor any affiliate thereof will report on
any financial statements any part of the Servicing Fee as an adjustment
to the sales price of the Mortgage Loans.
(i) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Master Servicer makes no such representation or warranty),
that are necessary or advisable in connection with the execution and
delivery by the Master Servicer of the Operative Documents to which it
is a party, have been duly taken, given or obtained, as the case may
be, are in full force and effect on the date hereof, are not subject to
any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review
thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this
Agreement and the other Operative Documents on the part of the Master
Servicer and the performance by the Master Servicer of its obligations
under this Agreement and such of the other Operative Documents to which
it is a party.
(j) The collection practices used by the Master Servicer with
respect to the Mortgage Loans directly serviced by it have been, in all
material respects, legal, proper, prudent and customary in the mortgage
loan servicing business.
(k) The transactions contemplated by this Agreement are in the
ordinary course of business of the Master Servicer.
(l) The terms of each existing Sub-Servicing Agreement and
each designated Sub-servicer are acceptable to the Master Servicer and
any new Sub-Servicing Agreements or Sub-servicers will comply with the
provisions of Section 8.3.
41
<PAGE>
It is understood and agreed that the representations and
warranties set forth in this Section 3.2 shall survive delivery of the Mortgage
Loans to the Trustee.
Upon discovery by any of the Originators, the Master Servicer,
the Sponsor, any Sub-Servicer, the Certificate Insurer or the Trustee of a
breach of any of the representations and warranties set forth in this Section
3.2 which materially and adversely affects the interests of the Owners or of the
Certificate Insurer, the party discovering such breach shall give prompt written
notice to the other parties. Within 30 days of its discovery or its receipt of
notice of breach, the Master Servicer shall cure such breach in all material
respects and, upon the Master Servicer's continued failure to cure such breach,
may thereafter be removed by the Trustee pursuant to Section 8.20 hereof;
provided, however, that if the Master Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing remedial
action, then the cure period may be extended with the written approval of the
Certificate Insurer.
Section 3.3. Representations and Warranties of the Sponsor
with Respect to the Mortgage Loans.
(a) The Sponsor makes the following representations and
warranties as to the Mortgage Loans on which the Trustee relies in accepting the
Mortgage Loans in trust and executing and authenticating the Certificates. Such
representations and warranties speak as of the respective dates indicated below,
but shall survive the sale, transfer, and assignment of the Mortgage Loans to
the Trustee:
(i) The information with respect to each Mortgage Loan
(including any Unaffiliated Originator Loans) set forth in the
Schedules of Mortgage Loans is true and correct as of the Cut-Off Date;
(ii) All of the original or certified documentation set
forth in Section 3.5 (including all material documents related thereto)
with respect to each Mortgage Loan (including any Unaffiliated
Originator Loans) has been or will be delivered to the Trustee on the
Closing Day, or as otherwise provided in Section 3.5;
(iii) Except for any Unaffiliated Originator Loans being
serviced by a servicer other than the Master Servicer, each Mortgage
Loan is being serviced by the Master Servicer or a Person controlling,
controlled by or under common control with the Master Servicer and
qualified to service mortgage loans;
(iv) The Note related to each Mortgage Loan in Group I
bears a Coupon Rate of at least 7.50% per annum;
42
<PAGE>
(v) As of the Cut-Off Date, no more than 1.00% of the
Original Aggregate Loan Balance of the Mortgage Loans are 30-59 days
Delinquent;
(vi) As of the Cut-Off Date, no more than 0.050% of the
Original Aggregate Loan Balance of the Mortgage Loans is secured by
Properties located within any single zip code area, and no more than
4.00% of the Original Aggregate Loan Balance of the Mortgage Loans
consists of Date-of-Payment Loans;
(vii) Each Mortgage Loan conforms, and all such Mortgage
Loans in the aggregate conform, in all material respects to the
description thereof set forth in the Registration Statement;
(viii) Except for the Bulk Acquisition Loans and any
Unaffiliated Originator Loans, as of the Cut-Off Date, no more than
4.1% of the Loan Balance of the Mortgage Loans relates to Mortgage
Loans originated under the Originators' non-income verification program
for self-employed borrowers;
(ix) The credit underwriting guidelines applicable to
each Mortgage Loan conform in all material respects to the description
thereof set forth in the Prospectus; and
(x) Each Mortgage Loan is a Qualified Mortgage.
(b) The Sponsor hereby assigns to the Trustee for the benefit
of the Owners of the Certificates and the Certificate Insurer all of its right,
title and interest in respect of each Master Transfer Agreement applicable to
the related Mortgage Loan. Insofar as such Master Transfer Agreement provides
for representations and warranties made by the related Originator in respect of
a Mortgage Loan and any remedies provided thereunder for any breach of such
representations and warranties, such right, title and interest may be enforced
by the Master Servicer or by the Trustee on behalf of the Owners and the
Certificate Insurer. Upon the discovery by the Sponsor, the Master Servicer, the
Certificate Insurer or the Trustee of a breach of any of the representations and
warranties made in a Master Transfer Agreement in respect of any Mortgage Loan
which materially and adversely affects the interests of the Owners or of the
Certificate Insurer in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties. The Master Servicer shall
promptly notify the related Originator of such breach and request that such
Originator cure such breach or take the actions described in Section 3.4(b)
hereof within the time periods required thereby, and if such Originator does not
cure such breach in all material respects, the Sponsor shall cure such breach or
take such actions. The obligations of the Sponsor or Master Servicer, as the
case may be, set forth herein with respect to any Mortgage Loan as to which such
a breach has occurred and
43
<PAGE>
is continuing shall constitute the sole obligations of the Master Servicer and
of the Sponsor in respect of such breach.
Section 3.4. Covenants of Sponsor to Take Certain Actions with
Respect to the Mortgage Loans In Certain Situations. (a) With the provisos and
limitations as to remedies set forth in this Section 3.4, upon the discovery by
any Originator, the Sponsor, the Master Servicer, the Certificate Insurer, any
Sub-Servicer or the Trustee that the representations and warranties set forth in
Section 3.3 of this Agreement or in the Master Transfer Agreement were untrue in
any material respect as of the respective dates indicated therein and such
breaches of the representations and warranties materially and adversely affect
the interests of the Owners or of the Certificate Insurer, the party discovering
such breach shall give prompt written notice to the other parties.
The Sponsor acknowledges that a breach of any representation
or warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan, (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Property or (z) set forth in
clauses (viii) or (x) of Section 3.3(a) above constitutes breach of a
representation or warranty which "materially and adversely affects the interests
of the Owners or of the Certificate Insurer" in such Mortgage Loan.
(b) Upon the earliest to occur of the Sponsor's discovery, its
receipt of notice of breach from any one of the other parties hereto or from the
Certificate Insurer or such time as a breach of any representation and warranty
materially and adversely affects the interests of the Owners or of the
Certificate Insurer as set forth above, the Sponsor hereby covenants and
warrants that it shall promptly cure such breach in all material respects or it
shall (or shall cause an affiliate of the Sponsor to or an Originator to),
subject to the further requirements of this paragraph, on the second Remittance
Date next succeeding such discovery, receipt of notice or such other time (i)
substitute in lieu of each Mortgage Loan in the related Mortgage Loan Group
which has given rise to the requirement for action by the Sponsor a Qualified
Replacement Mortgage and deliver the Substitution Amount applicable thereto,
together with the aggregate amount of all Delinquency Advances and Servicing
Advances theretofore made with respect to such Mortgage Loan, to the Master
Servicer for deposit in the Principal and Interest Account or (ii) purchase such
Mortgage Loan from the REMIC Trust at a purchase price equal to the Loan
Purchase Price thereof, which purchase price shall be delivered to the Master
Servicer for deposit in the Principal and Interest Account. In the case of a
breach of the representation or warranty set forth in clause (x) or Section
3.3(a) above, any such substitution or purchase shall occur within 90 days after
the date on which such breach is discovered. In connection with any such
proposed purchase or substitution, the Sponsor at its expense, shall cause to be
44
<PAGE>
delivered to the Trustee and to the Certificate Insurer an opinion of counsel
experienced in federal income tax matters stating whether or not such a proposed
purchase or substitution would constitute a Prohibited Transaction for the REMIC
Trust or would jeopardize the status of the REMIC Trust as a REMIC, and the
Sponsor shall only be required to take either such action to the extent such
action would not constitute a Prohibited Transaction for the REMIC Trust or
would not jeopardize the status of the REMIC Trust as a REMIC. Any required
purchase or substitution, if delayed by the absence of such opinion shall
nonetheless occur if so directed by the Certificate Insurer upon the earlier of
(i) the occurrence of a default or imminent default with respect to the Mortgage
Loan or (ii) the delivery of such opinion. It is understood and agreed that the
obligation of the Sponsor to cure the defect, or substitute for, or purchase any
Mortgage Loan as to which a representation or warranty is untrue in any material
respect and has not been remedied shall constitute the sole remedy available to
the Owners, the Trustee or the Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by an Originator or by the Sponsor (or by an affiliate of the Sponsor,
as the case may be) to the Trust pursuant to Section 3.3, Section 3.4 or Section
3.6 hereof, the related Originator and the Sponsor shall be obligated to take
the actions described in Section 3.4(b) with respect to such Qualified
Replacement Mortgage upon the discovery by any of the Owners, the Sponsor, the
Master Servicer, the Certificate Insurer, any Sub-Servicer or the Trustee that
the representations and warranties set forth in the related Master Transfer
Agreement or in Section 3.3 above are untrue in any material respect on the date
such Qualified Replacement Mortgage is conveyed to the Trust such that the
interests of the Owners or the Certificate Insurer in the related Qualified
Replacement Mortgage are materially and adversely affected; provided, however,
that for the purposes of this subsection (c) the representations and warranties
in the related Master Transfer Agreement or as set forth in Section 3.3 above
referring to items "as of the Cut-Off Date" or "as of the Closing Day" shall be
deemed to refer to such items as of the date such Qualified Replacement Mortgage
is conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth
in this Section 3.4 shall survive delivery of the respective Mortgage Loans
(including Qualified Replacement Mortgage Loans) to the Trustee.
Section 3.5. Conveyance of the Mortgage Loans. (a) The
Sponsor, concurrently with the execution and delivery hereof, and on behalf of
the Conduit Acquisition Trust, hereby transfers, sells, assigns, sets over and
otherwise conveys without recourse, to the Trustee, all right, title and
interest of the Conduit Acquisition Trust in and to each Mortgage Loan listed on
the Schedule of Mortgage Loans
45
<PAGE>
delivered by the Sponsor on the Closing Day, all its right, title and interest
in and to principal collected and interest accruing on each such Mortgage Loan
on and after the Cut-Off Date and all its right, title and interest in and to
all Insurance Policies. The transfer by the Conduit Acquisition Trust of the
Mortgage Loans set forth on the Schedule of Mortgage Loans to the Trustee is
absolute and is intended by the Owners and all parties hereto to be treated as a
sale by the Conduit Acquisition Trust.
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Sponsor agrees to:
(i) cause to be delivered, on the Closing Day, without
recourse, to the Trustee the items listed in the definitions of
"Advanta Mortgage Files" and "Conduit Mortgage Files," as appropriate;
provided that the assignments of mortgage listed in clause (e) of
Exhibit B hereto shall be delivered to the Trustee with respect to the
Designated Advanta Mortgage Files within 75 Business Days of the
Closing Day.
(ii) cause, within 75 Business Days following the Closing Day
the 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
related Originator to the Trustee; provided, however, that, for
administrative convenience and facilitation of servicing and to reduce
closing costs, assignments of mortgage shall not be required to be
submitted for recording with respect to any Mortgage Loan which relates
to an Advanta Mortgage File, unless (x) otherwise directed in writing
by the Certificate Insurer, (y) upon the occurrence of any Event of
Default or (z) the long-term unsecured debt of Advanta National Bank
USA is assigned ratings of less than BBB by Standard & Poor's or Baa2
by Moody's or the long-term unsecured debt of some other entity
approved by the Certificate Insurer is assigned comparable ratings.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Originators or of the Sponsor.
Notwithstanding anything to the contrary contained in this Section 3.5, in those
instances where the public recording office retains the original Mortgage, the
assignment of a Mortgage or the intervening assignments of the Mortgage after it
has been recorded, the Sponsor shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Trustee
shall be kept in the related file.
46
<PAGE>
Such assignments of mortgage shall, in addition to the
requirements specified in Exhibit B, be in recordable form. On or before the
Closing Day, the Sponsor shall deliver to the Trustee original executed powers
of attorney, from the current recordholders of the related Mortgage
substantially in the form of Exhibit I, authorizing the Master Servicer on
behalf of the Trustee to record the assignments of mortgage as provided in
clause (ii) above. Pursuant to such power of attorney, the Trustee also may
execute a new assignment of mortgage for any Mortgage Loan if the original
assignment of mortgage delivered by the Sponsor to the Trustee is not in
recordable form at such time as the assignment of mortgage is to be recorded by
the Trustee.
(c) In the case of Mortgage Loans which have been prepaid in
full on or after the Cut-Off Date and prior to the Closing Day, the Sponsor, in
lieu of the foregoing, will deliver within 15 Business Days after the Closing
Day, to the Trustee a certification of an Authorized Officer in the form set
forth in Exhibit D.
(d) The Sponsor (or the Conduit Acquisition Trust or an
affiliate of the Sponsor) shall transfer, sell, assign, set over and otherwise
convey without recourse, to the Trustee all right, title and interest of the
Sponsor (or the Conduit Acquisition Trust or of such affiliate) in and to any
Qualified Replacement Mortgage delivered to the Trustee pursuant to Section 3.3,
Section 3.4 or Section 3.6 hereof and all its right, title and interest to
principal collected and interest accruing on such Qualified Replacement Mortgage
on and after the applicable Replacement Cut-Off Date; provided, however, that
the Sponsor (or the Conduit Acquisition or such affiliate) shall reserve and
retain all right, title and interest in and to payments of principal and
interest due on such Qualified Replacement Mortgage prior to the applicable
Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage therefor, the
Trustee will transfer, sell, assign, set over and otherwise convey without
recourse, on the Sponsor's order, all of its right, title and interest in and to
such released Mortgage Loan and all the Trust's right, title and interest to
principal collected and interest accruing on such released Mortgage Loan on and
after the applicable Replacement Cut-Off Date; provided, however, that the Trust
shall reserve and retain all right, title and interest in and to payments of
principal collected and interest accruing on such released Mortgage Loan prior
to the applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Trustee on behalf of the Trust, the
Sponsor agrees to cause to be delivered to the Trustee the items described in
Section 3.5(b) on the date of such transfer and assignment or, if a later
delivery time
47
<PAGE>
is permitted by Section 3.5(b), then no later than such later delivery time.
(g) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the Trustee
shall deliver on the date of conveyance of such Qualified Replacement Mortgage
and on the order of the Sponsor (i) the original Note, or the certified copy,
relating thereto, endorsed without recourse, to the Sponsor and (ii) such other
documents as constituted the File with respect thereto.
(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Sponsor shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
(i) The Sponsor shall cause to be reflected on the records of
the Conduit Acquisition Trust that the Mortgage Loans have been sold to the
Trust.
(j) To the extent that the ratings, if any, then assigned to
the unsecured debt of the Sponsor or of the Sponsor's ultimate corporate parent
are satisfactory to the Certificate Insurer, Moody's and Standard & Poor's, then
any of the Document Delivery Requirements described above may be waived by an
instrument signed by the Certificate Insurer, Standard & Poor's and Moody's (or
any documents theretofore delivered to the Trustee returned to the Sponsor) on
such terms and subject to such conditions as the Certificate Insurer, Moody's
and Standard & Poor's may permit.
Section 3.6. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee. (a) The Trustee agrees to execute and
deliver on the Closing Day an acknowledgment of receipt of the Notes delivered
by the Sponsor in the form attached as Exhibit E hereto, and declares that it
will hold such documents and any amendments, replacement or supplements thereto,
as well as any other assets included in the definition of Trust Estate and
delivered to the Trustee, as Trustee in trust upon and subject to the conditions
set forth herein for the benefit of the Owners. The Trustee further agrees to
review any other documents delivered by the Sponsor within 90 days after the
Closing Day (or within 90 days with respect to any Qualified Replacement
Mortgage after the assignment thereof) and to deliver to the Sponsor, the Master
Servicer and the Certificate Insurer a Certification in the form attached as
Exhibit F hereto. The Trustee shall be under no duty or obligation to inspect,
review or examine any such documents, instruments, certificates or other papers
to determine that they are genuine, enforceable, or appropriate for the
represented purpose or that they are other than what they purport to be on their
face, nor shall the Trustee be under
48
<PAGE>
any duty to determine independently whether there are any intervening
assignments or assumption or modification agreements with respect to any
Mortgage Loan.
(b) If the Trustee during such 90-day period finds any
document constituting a part of a File which is not properly executed, has not
been received within the specified period, or is unrelated to the Mortgage Loans
identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does
not conform in a material respect to the description thereof as set forth in the
Schedules of Mortgage Loans, the Trustee shall promptly so notify the Sponsor
and the Certificate Insurer. In performing any such review, the Trustee may
conclusively rely on the Sponsor as to the purported genuineness of any such
document and any signature thereon. The Sponsor agrees to use reasonable efforts
to remedy a material defect in a document constituting part of a File of which
it is so notified by the Trustee. If, however, within 60 days after the
Trustee's notice to it respecting such defect the Sponsor has not remedied or
caused to be remedied the defect and the defect materially and adversely affects
the interest in the related Mortgage Loan of the Owners or of the Certificate
Insurer, the Sponsor will (or will cause the related Originator or an affiliate
of the Sponsor to) on the next succeeding Remittance Date (i) substitute in lieu
of such Mortgage Loan a Qualified Replacement Mortgage and, deliver the
Substitution Amount applicable thereto to the Master Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Mortgage Loan at a purchase
price equal to the Loan Purchase Price thereof, which purchase price shall be
delivered to the Master Servicer for deposit in the Principal and Interest
Account. In connection with any such proposed purchase or substitution the
Sponsor shall cause at the Sponsor's expense to be delivered to the Trustee and
to the Certificate Insurer an opinion of counsel experienced in federal income
tax matters stating whether or not such a proposed purchase or substitution
would constitute a Prohibited Transaction for the REMIC Trust or would
jeopardize the status of the REMIC Trust as a REMIC, and the Sponsor shall only
be required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the REMIC Trust or would not jeopardize
the status of the REMIC Trust as a REMIC. Any required purchase or substitution,
if delayed by the absence of such opinion shall nonetheless occur upon the
earlier of (i) the occurrence of a default or imminent default with respect to
the Mortgage Loan or (ii) the delivery of such opinion or (iii) at the direction
of the Certificate Insurer.
Section 3.7. Cooperation Procedures. (a) The Sponsor shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Trustee, provide the Trustee with the information set forth in the Schedules of
Mortgage Loans with respect to such Qualified Replacement Mortgage.
49
<PAGE>
(b) The Sponsor, the Master Servicer and the Trustee covenant
to provide each other with all data and information required to be provided by
them hereunder at the times required hereunder, and additionally covenant
reasonably to cooperate with each other in providing any additional information
required by any of them in connection with their respective duties hereunder.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Closing Day,
upon the Trustee's receipt from the Sponsor of an executed Delivery Order in the
form set forth as Exhibit G hereto, the Trustee shall execute, authenticate and
deliver the Certificates on behalf of the Trust in accordance with the
directions set forth in such Delivery Order.
Section 4.2. Sale of Certificates. At 11 a.m. New York City
time on the Closing Date, at the offices of Dewey Ballantine, 1301 Sixth Avenue,
New York, New York, the Sponsor will sell and convey the Mortgage Loans and the
money, instruments and other property related thereto to the Trustee, and the
Trustee will (i) deliver to the Representative, 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 Representative shall direct,
against payment of the purchase price thereof by wire transfer of immediately
available funds to the Trustee and (ii) deliver to the Sponsor, the Class RS
Certificates, with an aggregate Percentage Interest in each Class equal to 100%,
registered as the Sponsor shall request. Upon receipt of the proceeds of the
sale of the Certificates, the Trustee shall, from the proceeds of the sale of
the Certificates, pay other fees and expenses identified by the Sponsor and pay
to the Sponsor the balance after deducting such amounts. The Sponsor shall pay
directly to the Certificate Insurer the Initial Premiums.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms. (a) The Certificates are pass-through
securities having the rights described therein and herein. Notwithstanding
references herein or therein with respect to the Certificates as to "principal"
and "interest" no debt of any Person is represented thereby, nor are the
Certificates or the underlying Notes guaranteed by any Person (except that the
Notes may be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the Certificate
Insurance Policy). Distributions on the Certificates are payable solely from
payments received on or with respect to
50
<PAGE>
the Mortgage Loans (other than the Servicing Fees), monies in the Principal and
Interest Account, the Supplemental Interest Payment Account, the Class A-1
Distribution Account and the Class A-2 Distribution Account, except as otherwise
provided herein, from earnings on monies and the proceeds of property held as a
part of the Trust Estate and, upon the occurrence of certain events, from
Insured Payments. Each Certificate entitles the Owner thereof to receive
monthly, on each Payment Date, in order of priority of distributions with
respect to such Class of Certificates, a specified portion of such payments with
respect to the Mortgage Loans in the related Mortgage Loan Group, certain
related Insured Payments, pro rata in accordance with such Owner's Percentage
Interest and in the case of the Class A-1 and the Class A-2 Certificates,
certain amounts payable from the Group I Supplemental Interest Payment Account,
the Group II Supplemental Interest Payment Account, the Class A-1 Distribution
Account and from the Class A-2 Distribution Account, respectively.
(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-1 Certificates, the Class A-2
Certificates and the Class RS Certificates shall be in substantially the forms
set forth in Exhibits A-1, A-2, and Exhibit C hereof, respectively, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Agreement or as may in the Sponsor's judgment be
necessary, appropriate or convenient to comply, or facilitate compliance, with
applicable laws, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any applicable securities laws or as may,
consistently herewith, be determined by the Authorized Officer of the Sponsor
executing such Certificates, as evidenced by his execution thereof.
Section 5.3. Execution, Authentication and Delivery. Each
Certificate shall be executed on behalf of the Trust, by the manual signature of
one of the Trustee's Authorized Officers and shall be authenticated by the
manual signature of one of the Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who
were at any time the proper officers of the Trustee shall, upon proper
authentication by the Trustee, bind the Trust, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
execution and delivery of such Certificates or did not hold such offices at the
date of authentication of such Certificates.
51
<PAGE>
The initial Certificates 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.
Section 5.4. Registration and Transfer of Certificates. (a)
The Trustee, as registrar, shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby appointed registrar for the
purpose of registering Certificates and transfers of Certificates as herein
provided. The Owners shall have the right to inspect the Register at all
reasonable times and to obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon
surrender for registration of transfer of any Certificate at the office
designated as the location of the Register, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the aggregate
principal amount of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class
owned by such Owner may be exchanged for other Certificates authorized of like
Class, tenor and a like aggregate original principal amount and bearing numbers
not contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever any
Certificate is so surrendered for exchange, the Trustee shall execute,
authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(d) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust and entitled to the same benefits under this Agreement as
the Certificates surrendered upon such registration of transfer or exchange.
(e) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of
52
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository, as set
forth herein. Each Class of Class A Certificates shall, except as otherwise
provided in the next paragraph, be initially issued in the form of a single
fully registered Class A Certificate with a denomination equal to the Original
Aggregate Loan Balance. Upon initial issuance, the ownership of each such Class
A Certificate shall be registered in the Register in the name of Cede & Co., or
any successor thereto, as nominee for the Depository.
The Sponsor and the Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the
Register in the name of Cede & Co., as nominee of the Depository, the Sponsor,
the Master Servicer and the Trustee shall have no responsibility or obligation
to Direct or Indirect Participants or beneficial owners for which the Depository
holds Class A Certificates from time to time as a Depository. Without limiting
the immediately preceding sentence, the Sponsor, the Master Servicer and the
Trustee shall have no responsibility or obligation with respect to (i) the
accuracy of the records of the Depository, Cede & Co., or any Direct or Indirect
Participant with respect to the ownership interest in the Class A Certificates,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a registered Owner of a Class A Certificate 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
53
<PAGE>
responsibilities as nominee and depository with respect to the Class A
Certificates and the Sponsor or the Trustee is unable to locate a qualified
successor or (ii) the Sponsor at its sole option elects to terminate the
book-entry system through the Depository, the Class A Certificates shall no
longer be restricted to being registered in the Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that time, the
Sponsor may determine that the Class A Certificates shall be registered in the
name of and deposited with a successor depository operating a global book-entry
system, as may be acceptable to the Sponsor, or such depository's agent or
designee but, if the Sponsor does not select such alternative global book-entry
system, then the Class A Certificates may be registered in whatever name or
names registered Owners of Class A Certificates transferring Class A
Certificates shall designate, in accordance with the provisions hereof;
provided, that the cost of any such re-registration shall be paid by the
Sponsor.
(i) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates as the case may be and all notices with
respect to such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(j) Neither the Sponsor, the Master Servicer nor the Trustee
will have any liability for any actions taken by DTC or its nominee, Euroclear
or CEDEL, including, without limitation, actions for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Class A Certificates held by Euroclear, CEDEL or Cede & Co., as nominee for DTC,
or for maintaining supervising or reviewing any records relating to such
beneficial ownership interests.
Section 5.5. Mutilated, Destroyed, Lost or Stolen
Certificates. If (i) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (ii) in the case of any mutilated Certificate,
such mutilated Certificate shall first be surrendered to the Trustee, and in the
case of any destroyed, lost or stolen Certificate, there shall be first
delivered to the Trustee such security or indemnity as may be reasonably
required by it to hold the Trustee harmless (provided, that with respect to an
Owner which is an insurance company, a letter of indemnity furnished by it shall
be sufficient for this purpose; provided, that such insurance company possesses
at least an investment grade rating from either Standard & Poor's or Moody's),
then, in the absence of notice to the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated,
54
<PAGE>
destroyed, lost or stolen Certificate, a new Certificate of like Class, tenor
and aggregate principal amount, bearing a number not contemporaneously
outstanding.
Upon the issuance of any new Certificate under this Section,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto; any other
expenses in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in
exchange for or in lieu of any mutilated, destroyed, lost or stolen Certificate
shall constitute evidence of a substitute interest in the Trust, and shall be
entitled to all the benefits of this Agreement equally and proportionately with
any and all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.6. Persons Deemed Owners. The Trustee and any agent
of the Trustee may treat the Person in whose name any Certificate is registered
as the Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
Section 5.7. Cancellation. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate cancelled as provided in this Section, except as expressly permitted
by this Agreement. All cancelled Certificates may be held by the Trustee in
accordance with its standard retention policy.
Section 5.8. Limitation on Transfer of Ownership Rights. (a)
No sale or other transfer of any Class A Certificate shall be made to the
Sponsor, any Originator or any of their respective affiliates.
(b) No sale or other transfer of record or beneficial
ownership of a Class RS Certificate (whether pursuant to a purchase, a transfer
resulting from a default under a secured lending agreement or otherwise) shall
be made to a Disqualified Organization or agent of a Disqualified Organization.
The transfer, sale or other disposition of a Class RS Certificate (whether
pursuant to a purchase, a
55
<PAGE>
transfer resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Class RS Certificates. Furthermore, in no event shall the
Trustee accept surrender for transfer, registration of transfer, or register the
transfer, of any Class RS Certificates nor authenticate and make available any
Class RS Certificates unless the Trustee has received an affidavit from the
proposed transferee in the form attached hereto as Exhibit H. Each holder of a
Class RS Certificate, by his acceptance thereof, shall be deemed for all
purposes to have consented to the provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial
ownership of a Class RS Certificate shall be made unless such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made in accordance with said Act
and laws. In the event such a transfer is to be made within three years from the
Closing Day, (i) the Trustee or the Sponsor shall require a written opinion of
counsel acceptable to and in form and substance satisfactory to the Sponsor that
such transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which opinion of counsel shall not be an expense
of the Trustee or the Sponsor, and (ii) the Trustee shall require the Transferee
to execute an investment letter acceptable to and in form and substance
satisfactory to the Sponsor certifying to the Trustee and the Sponsor the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or the Sponsor. The Owner of a Class RS Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
the Sponsor against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws. No Class
RS Certificate shall be acquired by or transferred to (i) an employee benefit
plan (as defined in section 3(3) of the Employee Retirement Security Act of
1974, as amended ("ERISA")) subject to the provisions of Title I of ERISA, (ii)
a plan described in section 4975(e)(1) of the Internal Revenue Code of 1986, or
(iii) an entity whose underlying assets are deemed to be assets of a plan
described in (i) or (ii) above by reason of such plan's investment in the
entity. Any Class RS Certificate transferred shall (x) certify that it is not
any of the above and (y) deliver an opinion of counsel to that effect.
Section 5.9. Assignment of Rights. An Owner may pledge,
encumber, hypothecate or assign all or any part of its right to receive
distributions hereunder, but such pledge, encumbrance, hypothecation or
assignment shall not constitute a transfer of an ownership interest sufficient
to render the
56
<PAGE>
transferee an Owner of the Trust without compliance with the provisions of
Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. The Trustee will duly and
punctually pay distributions with respect to the Certificates in accordance with
the terms of the Certificates and this Agreement. Such distributions shall be
made (i) by check mailed on each Payment Date or (ii) if requested by any Owner,
to such Owner by wire transfer to an account within the United States designated
no later than five Business Days prior to the related Record Date, made on each
Payment Date, in each case to each Owner of record on the immediately preceding
Record Date; provided, however, that an Owner of a Class A Certificate shall
only be entitled to payment by wire transfer if such Owner owns Class A
Certificates in the aggregate denomination of at least $5,000,000.
Section 6.2. Money for Distributions to be Held in Trust;
Withholding. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
and on behalf of the Trustee, and no amounts so withdrawn from the Certificate
Account for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of
any amount due with respect to any Class A Certificate and remaining unclaimed
by the Owner of such Class A Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first, to the
Certificate Insurer on account of any Reimbursement Amounts, and second to the
Owners of the Class RS Certificates; and the Owner of such Class A Certificate
shall thereafter, as an unsecured general creditor, look only to the Certificate
Insurer or the Owners of the Class RS Certificates for payment thereof (but only
to the extent of the amounts so paid to the Certificate Insurer or the Owners of
the Class RS Certificates), and all liability of the Trustee with respect to
such trust money shall thereupon cease; provided, however, that the Trustee,
before being required to make any such payment, shall at the expense of the
57
<PAGE>
Sponsor cause to be published once, in the eastern edition of The Wall Street
Journal, notice that such money remains unclaimed and that, after a date
specified therein, which shall be not fewer than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be paid to
the Certificate Insurer or the Owners of the Class RS Certificates. The Trustee
shall, at the direction of the Sponsor, also adopt and employ, at the expense of
the Sponsor, any other reasonable means of notification of such payment
(including but not limited to mailing notice of such payment to Owners whose
right to or interest in monies due and payable but not claimed is determinable
from the Register at the last address of record for each such Owner).
Section 6.3. Protection of Trust Estate. (a) The Trustee will
hold the Trust Estate in trust for the benefit of the Owners and the Certificate
Insurer, as their interests may appear, and, upon request of the Certificate
Insurer, or, with the consent of the Certificate Insurer, at the request and
expense of the Sponsor, will from time to time execute and deliver all such
supplements and amendments hereto pursuant to Section 11.14 hereof and all
instruments of further assurance and other instruments, and will take such other
action upon such request as it deems reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any
portion of the Trust Estate;
(ii) perfect, publish notice of, or protect the
validity of any grant made or to be made by this
Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the
rights of the Trustee, and the ownership interests of the Owners
represented thereby, in such Trust Estate against the claims of all
Persons and parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Sponsor to take any action pursuant to this Section
6.3 to the other party.
(b) The Trustee shall have the power to enforce, and shall
enforce the obligations of the other parties to this Agreement and of the
Certificate Insurer, by action, suit or proceeding at law or equity, and shall
also have the power to enjoin, by action or suit in equity, any acts or
occurrences which may be unlawful or in violation of the rights of the Owners;
provided, however, that nothing in this Section shall require any action by the
Trustee unless the Trustee shall first (i) have been furnished indemnity
satisfactory to it and (ii) when required by this Agreement, have been requested
to
58
<PAGE>
take such action by a majority of the Percentage Interests represented by the
affected Class or Classes of Class A Certificates then Outstanding or, if there
are no longer any affected Class A Certificates then outstanding, by such
majority of the Percentage Interests represented by the Class RS Certificates.
(c) The Trustee shall execute any instrument required pursuant
to this Section so long as such instrument does not conflict with this Agreement
or with the Trustee's fiduciary duties.
Section 6.4. Performance of Obligations. The Trustee will not
take any action that would release the Sponsor or the Certificate Insurer from
any of their respective covenants or obligations under any instrument or
document relating to the Trust Estate or the Certificates or which would result
in the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or document, except
as expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in
performing its duties hereunder.
Section 6.5. Negative Covenants. The Trustee will not, to the
extent within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of
the Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Owner by reason of the payment
of any taxes levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in
part, except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this
Agreement, or release any Person from any covenants or obligations with
respect to the Trust or to the Certificates under this Agreement,
except as may be expressly permitted hereby or (B) create or extend any
lien, charge, adverse claim, security interest, mortgage
59
<PAGE>
or other encumbrance to or upon the Trust Estate or any part thereof
or any interest therein or the proceeds thereof.
Section 6.6. No Other Powers. The Trustee will not, to the
extent within the control of the Trustee, permit the Trust to engage in any
business activity or transaction other than those activities permitted by
Section 2.3 hereof.
Section 6.7. Limitation of Suits. No Owner shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Agreement or the Certificate Insurance Policy or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the Sponsor
and the Trustee of such Owner's intention to institute such
proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the affected Class or Classes of Certificates
then Outstanding or, if there are no affected Classes of Class
A Certificates then Outstanding, by such percentage of the
Percentage Interests represented by the Class RS Certificates,
shall have made written request to the Trustee to institute
such proceeding in respect of such Event of Default;
(3) such Owner or Owners have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
proceeding;
(5) as long as any Class A Certificates are Outstanding, the
Certificate Insurer consented in writing thereto; and
(6) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the
Certificate Insurer or by the Owners of a majority of the
Percentage Interests represented by the Class A Certificates
or, if there are no Class A Certificates then Outstanding, by
such majority of the Percentage Interests represented by the
Class RS Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or
60
<PAGE>
preference over any other Owner of the same Class or to enforce any right under
this Agreement, except in the manner herein provided and for the equal and
ratable benefit of all the Owners of the same Class.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Owners, each
representing less than a majority of the applicable Class of Certificates, the
Trustee shall act at the direction of the Certificate Insurer, notwithstanding
any other provision of this Agreement.
Section 6.8. Unconditional Rights of Owners to Receive
Distributions. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.9. Rights and Remedies Cumulative. Except as
otherwise provided herein, no right or remedy herein conferred upon or reserved
to the Trustee, the Certificate Insurer or to the Owners is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. Except as otherwise provided herein, the assertion or employment of
any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver. No delay of the
Trustee, the Certificate Insurer or any Owner of any Certificate to exercise any
right or remedy under this Agreement to any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article VI or by law
to the Trustee, the Certificate Insurer or to the Owners may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee, the
Certificate Insurer or by the Owners, as the case may be.
Section 6.11. Control by Owners. The Certificate Insurer or
the Owners of a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding, with the consent of the Certificate Insurer
(which may not be unreasonably withheld) or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class RS Certificates then Outstanding, with the consent of
the Certificate Insurer (which may not be unreasonably withheld) may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee with
61
<PAGE>
respect to the Certificates or exercising any trust or power conferred on the
Trustee with respect to the Certificates or the Trust Estate, including, but not
limited to, those powers set forth in Section 6.3 and Section 8.20 hereof;
provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Agreement;
(2) the Trustee shall have been provided with indemnity
satisfactory to it; and
(3) the Trustee may take any other action deemed proper by the
Trustee, which is not inconsistent with such direction;
provided, however, that the Trustee need not take any action
which it determines might involve it in liability or may be
unjustly prejudicial to the Owners not so directing; provided,
further, that in the event that any directions provided by the
Trustee and the Certificate Insurer conflict with each other,
the Certificate Insurer's direction shall prevail.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Master Servicer or by any
Sub-Servicer and (b) Insured Payments. The Trustee shall hold all such money and
property received by it, other than pursuant to or as contemplated by Section
6.2(b) hereof, as part of the Trust Estate and shall apply it as provided in
this Agreement.
Section 7.2. Establishment of Accounts. (a) The Sponsor shall
cause to be established, and the Trustee shall maintain, at the corporate trust
office of the Trustee, a Certificate Account, to be held by the Trustee in the
name of the Trust for the benefit of the Owners of the Certificates and the
Certificate Insurer, as their interests may appear.
(b) The Sponsor shall cause to be established, and the Trustee
shall maintain, at the corporate trust office of the Trustee, a Class A-1
Distribution Account to be held by the Trustee in trust for the benefit of the
Class A-1 Certificates and the Certificate Insurer, as their interests may
appear, and a Class A-2 Distribution Account to be held by the Trustee in trust
for the benefit of the Class A-2 Certificates and the Certificate Insurer, as
their interests
62
<PAGE>
may appear. Neither the Class A-1 Distribution Account nor the Class A-2
Distribution Account shall be considered assets of the REMIC, and any amounts
transferred to such accounts from the REMIC shall be treated as distributions
with respect to the related Class A Certificates.
(c) The Sponsor shall cause to be established, and the Trustee
shall maintain, at the corporate trust office of the Trustee, a Class R
Distribution Account to be held by the Trustee in trust for the benefit of the
Owners of the Class R Certificates and the Certificate Insurer, as their
interests may appear. The Class R Distribution Account will be treated as an
asset of the REMIC.
Section 7.3. The Certificate Insurance Policy.
(a) On each Determination Date the Trustee shall determine
with respect to the immediately following Payment Date:
(i) the amounts to be on deposit in the Certificate Account
on such Payment Date with respect to Group I (disregarding the amounts
of any Group I Insured Payments) and equal to the sum of (x) such
amounts excluding the amount of any Total Monthly Excess Cashflow
amounts included in such amounts and excluding an amount equal to the
Group I Premium Amount together with any Master Servicing Fees
described in 7.5(c)(i) and Trustee's Fees described in 7.5(c)(iii) for
the related Payment Date plus (y) any amounts of Total Monthly Excess
Cashflow to be applied on account of Group I on such Payment Date; the
amounts described in the preceding clause (x) with respect to each
Mortgage Loan Group and Payment Date after taking into account the
portion of the Group I Principal Distribution Amount to be actually
distributed on such Payment Date without regard to any Group I Insured
Payment to be made with respect to such Payment Date, are the "Group I
Available Funds"; the sum of the amounts described in the preceding
clauses (x) and (y) are the "Group I Total Available Funds";
(ii) the amounts to be on deposit in the Certificate
Account on such Payment Date with respect to Group II (disregarding the
amounts of any Group II Insured Payments) and equal to the sum of (x)
such amounts excluding the amount of any Total Monthly Excess Cashflow
amounts included in such amounts and excluding an amount equal to the
Group II Premium Amount together with any Master Servicing Fees
described in 7.5(c)(i) and Trustee's Fees described in 7.5(c)(iii) for
the related Payment Date, plus (y) any amounts of Total Monthly Excess
Cashflow to be applied on account of Group II on such Payment Date; the
amounts described in the preceding clause (x) with respect to each
Group II and Payment Date, after taking into account the portion of the
Group II Principal Distribution Amount to be actually
63
<PAGE>
distributed on such Payment Date without regard to any Group II
Insured Payment to be made with respect to such Payment Date, are the
"Group II Available Funds"; the sum of the amounts described in the
preceding clauses (x) and (y) are the "Group II Total Available Funds";
and
(b) (i) If the Group I Insured Distribution Amount for any
Payment Date exceeds the Group I Total Available Funds for such Payment Date
after taking into account the portion of the Group I Principal Distribution
Amount to be actually distributed on such Payment Date without regard to any
Group I Insured Payment to be made with respect to such Payment Date (such event
being a "Group I Deficiency Amount"), the Trustee shall complete a Notice in the
form of Exhibit A to the Certificate Insurance Policy and submit such notice to
the Certificate Insurer no later than 12:00 noon New York City time on the
second Business Day preceding such Payment Date as a claim for a Insured Payment
in an amount equal to such Group I Deficiency Amount. Upon receipt of Insured
Payments from the Certificate Insurer under the Certificate Insurance Policy,
the Trustee shall deposit such Insured Payments in the Certificate Account.
(ii) If the Group II Insured Distribution Amount for any,
Payment Date exceeds the Group II Total Available Funds for such Payment Date
(after taking into account the portion of the Group II Principal Distribution
Amount to be actually distributed on such Payment Date without regard to any
Group II Insured Payment to be made with respect to such Payment Date) (such
event being a "Group II Deficiency Amount"), the Trustee shall complete a Notice
in the form of Exhibit A to the Certificate Insurance Policy and submit such
notice to the Certificate Insurer no later than 12:00 noon New York City time on
the second Business Day preceding such Payment Date as a claim for an Insured
Payment in an amount equal to such Group II Deficiency Amount. Upon receipt of
Insured Payments from the Certificate Insurer under the Certificate Insurance
Policy, the Trustee shall deposit such Insured Payments in the Certificate
Account.
(c) The Trustee shall distribute all Insured Payments
received, or the proceeds thereof, in accordance with Section 7.5(c) to the
Owners of the Class A Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the related Class
receiving any Insured Payment from the Certificate Insurer and (ii) disburse
such Insured Payment to the Owners of the related Class A Certificates as set
forth in Section 7.5(c). The Certificate Insurer shall be entitled to receive
the related Reimbursement Amount pursuant to Sections 7.5(c)(iv)(C) and
7.5(c)(iv)(D) hereof with respect to each Insured Payment made by the
Certificate Insurer. The Trustee hereby agrees on behalf of each Owner of Class
A Certificates and the Trust for the benefit of the Certificate Insurer that
64
<PAGE>
it recognizes that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the Owners
of such Class A Certificates, the Certificate Insurer will be entitled to
receive the related Reimbursement Amount pursuant to Sections 7.5(c)(iv)(C) and
7.5(c)(iv)(D) hereof.
(e) The Trustee shall receive, as attorney-in-fact of each
Owner of an Class A Certificate, any Insured Payment from the Certificate
Insurer and disburse the same to each Owner of an insured Certificate in
accordance with the provisions of Section 7.3. Insured Payments disbursed by the
Trustee from proceeds of the Certificate Insurance Policy shall not be
considered payment by the Trust Fund nor shall such payments discharge the
obligation of the Trust Fund with respect to such insured Certificates, and the
Certificate Insurer shall become the owner of such unpaid amounts due from the
Trust Fund in respect of insured Certificates. The Trustee hereby agrees on
behalf of each Holder of an insured Certificate for the benefit of the
Certificate Insurer that it recognizes that to the extent the Certificate
Insurer makes any Group I Insured Payment or Group II Insured Payment, as
applicable, either directly or indirectly (as by paying through the Trustee), to
the insured Certificateholders, the Certificate Insurer will be subrogated to
the rights of the insured Certificateholders with respect to such Insured
Payment, shall be deemed to the extent of payments so made to be a registered
insured Certificateholder and shall receive all future distributions until all
such Insured Payments by the Certificate Insurer, together with interest thereon
at the interest rate borne by the insured Certificates, have been fully
reimbursed. To evidence such subrogation, the Trustee shall, or shall cause the
Certificate Registrar to, note the Certificate Insurer's rights as subrogee on
the registration books maintained by the Trustee or the Certificate Registrar
upon receipt from the Certificate Insurer of proof of payment of any Group I
Insured Payment or Group II Insured Payment, as applicable. The effect of the
foregoing provisions is that, to the extent of Insured Payments made by it, the
Certificate Insurer shall be paid before payment of the balance of the
distributions are made to the other Owners of the insured Certificates.
Section 7.4. Reserved.
Section 7.5. Flow of Funds. (a) On each Remittance Date, the
Trustee shall deposit to the Certificate Account with respect to Group I,
without duplication, upon receipt, any Insured Payments relating to Group I, the
proceeds of any liquidation of the assets of the Trust, insofar as such assets
relate to Group I, the Group I Monthly Remittance Amount remitted by the Master
Servicer or any Sub-servicer.
(b) On each Remittance Date, the Trustee shall deposit to the
Certificate Account with respect to Group II,
65
<PAGE>
without duplication, upon receipt, any Insured Payments relating to Group II,
the proceeds of any liquidation of the assets of the Trust, insofar as such
assets relate to Group II, the Group II Monthly Remittance Amount remitted by
the Master Servicer or any Sub-servicer.
(c) Subject to any superseding provisions of clause (d) below
during the continuance of a Certificate Insurer Default, on each Payment Date
the Trustee shall make the following allocations, disbursements and transfers of
amounts then on deposit in the Certificate Account for each Mortgage Loan Group
in the following order of priority, and each such allocation, transfer and
disbursement shall be treated as having occurred only after all preceding
allocations, transfers and disbursements have occurred:
(i) first, from amounts then on deposit in the Certificate Account
to the Master Servicer, an amount equal to any Master
Servicing Fees then due to it on account of the Unaffiliated
Originator Loans not theretofore received by the Master
Servicer pursuant to Section 8.8(c)(i) hereof, as reported by
the Master Servicer to the Trustee;
(ii) second, (x) from amounts then on deposit therein with respect
to Group I, the Group I Premium Amount for such Payment Date
and (y) from amounts then on deposit therein with respect to
Group II, the Group II Premium Amount for such Payment Date;
(iii) third, from amounts then on deposit in the Certificate Account
to the Trustee, an amount equal to the Trustee's Fees then due
to it;
(iv) fourth, on each Payment Date, the Trustee shall allocate an
amount equal to the excess of (a) the sum of (x) the Total
Monthly Excess Spread with respect to such Mortgage Loan Group
and Payment Date plus (y) any Subordination Reduction Amount
with respect to such Mortgage Loan Group and Payment Date
(such sum being the "Total Monthly Excess Cashflow" with
respect to such Mortgage Loan Group and Payment Date) with
respect to each Mortgage Loan Group in the following order of
priority:
(A) first, such Total Monthly Excess Cashflow shall be
allocated on such Payment Date with respect to the
related Mortgage Loan Group in an amount equal to the
excess, if any, of (x) the related Group Insured
Distribution Amount for such Payment Date over (y)
the Available Funds with respect to such Mortgage
Loan Group for such Payment Date (the amount of such
difference being the "Available Funds
66
<PAGE>
Shortfall" with respect to the related Mortgage Loan
Group);
(B) second, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the application described in clause
(A) above shall be allocated against any Available
Funds Shortfall with respect to the other Mortgage
Loan Group;
(C) third, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the allocations described in clauses
(A) and (B) above shall be paid to the Certificate
Insurer in respect of amounts owed on account of any
Reimbursement Amount with respect to the related
Mortgage Loan Group;
(D) fourth, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the allocations described in clauses
(A), (B) and (C) above shall be paid to the
Certificate Insurer in respect of any Reimbursement
Amount with respect to the other Mortgage Loan Group;
(v) fifth, the amount, if any, of the Total Monthly Excess
Cashflow with respect to a Mortgage Loan Group on a Payment
Date remaining after the allocations described in clause (iv)
above is the "Net Monthly Excess Cashflow" with respect to
such Mortgage Loan Group for such Payment Date; such amount is
required to be applied in the following order of priority:
(A) first, such Net Monthly Excess Cashflow shall be used
to reduce to zero, through the payment of a
Subordination Increase Amount, any Subordination
Deficiency Amount with respect to the related
Mortgage Loan Group as of such Payment Date;
(B) second, any portion of the Net Monthly Excess
Cashflow remaining after the application described in
clause (A) above shall be used to reduce to zero,
through the payment of a Subordination Increase
Amount, any Subordination Deficiency Amounts with
respect to the other Mortgage Loan Group; and
(C) third, any remaining Net Monthly Excess Cashflow
remaining after the applications described in clauses
(A) and (B) above shall be paid to the Master
Servicer to the extent
67
<PAGE>
of any unreimbursed Delinquency Advances,
unreimbursed Servicing Advances and accrued and
unpaid Servicing Fees, in each case as certified to
the Trustee by the Master Servicer to be owing to it
as of such Payment Date.
(vi) sixth, following the making by the Trustee of all allocations,
transfers and disbursements described above under Sections 7.3
and 7.10 hereof and the prior clauses of this Section 7.5,
from amounts (including any related Insured Payment) then on
deposit in the Certificate Account, the Trustee shall transfer
(i) to the Class A-1 Distribution Account the Class A-1
Distribution Amount for such Payment Date; (ii) to the Class
A-2 Distribution Account, the Class A-2 Distribution Amount
for such Payment Date; and (iii) to the Class R Distribution
Account, the Residual Net Monthly Excess Cashflow, if any, for
such Payment Date.
(vii) seventh, on each Payment Date, the Trustee shall transfer all
monies then on deposit in the Class R Distribution Account to
the Supplemental Interest Payment Account; such transfer shall
be deemed to be a distribution on the Class R Certificates.
(d) On any Payment Date during the continuance of any
Certificate Insurer Default:
No Premium Amounts or Reimbursement Amounts shall be paid to
the Certificate Insurer, and any amounts otherwise payable to
the Certificate Insurer as Premium Amounts or Reimbursement
Amounts shall be retained in the Certificate Account as Group
I Total Available Funds or Group II Total Available Funds, as
appropriate.
(e) The Trustee shall distribute on each Payment Date to the
Owners of the Class A-1 Certificates, from the amount then on deposit in the
Class A-1 Distribution Account, the lesser of (x) such amount on deposit in such
Account and (y) the Class A-1 Full Distribution Amount on such Payment Date. Any
application of such amount shall be first made to interest and then to principal
(subject to the requirements of paragraph (d)(ii) above).
(f) The Trustee shall distribute on each Payment Date to the
Owners of the Class A-2 Certificates, from the amount then on deposit in the
Class A-2 Distribution Account, the lesser of (x) such amount on deposit in such
Account and (y) the Class A-2 Full Distribution Amount on such Payment Date. Any
application of such amount shall be first made to interest and then to principal
(subject to the requirements of paragraph (d)(ii) above).
68
<PAGE>
(g) Notwithstanding any of the foregoing provisions, the
aggregate amount distributed to the Owners of any Class A Certificates on
account of principal shall not exceed the Original Certificate Principal Balance
for the related Class.
Section 7.6. Investment of Accounts. (a) So long as no event
described in Sections 8.20(a) or (b) hereof shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of the Accounts held by the Trustee shall be invested and reinvested by the
Trustee in the name of the Trustee for the benefit of the Owners and the
Certificate Insurer, as their interests may appear, as directed in writing by
the Master Servicer, in one or more Eligible Investments bearing interest or
sold at a discount. During the continuance of an event described in Sections
8.20(a) or (b) hereof and following any removal of the Master Servicer, the
Certificate Insurer shall direct such investments. No investment in any Account
shall mature later than the Business Day immediately preceding the next Payment
Date.
(b) If any amounts are needed for disbursement from any
Account held by the Trustee and sufficient uninvested funds are not available to
make such disbursement, the Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. No
investments will be liquidated prior to maturity unless the proceeds thereof are
needed for disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account held by the
Trustee resulting from any loss on any Eligible Investment included therein
(except to the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held by the
Trustee uninvested upon the occurrence of either of the following events:
(i) the Master Servicer or the Certificate Insurer, as the
case may be, shall have failed to give investment directions to the
Trustee within ten days after receipt of a written request for such
directions from the Trustee; or
(ii) the Master Servicer or the Certificate Insurer, as the
case may be, shall have failed to give investment directions to the
Trustee during the ten-day period described in clause (i) preceding, by
11:15 a.m. New York time (or such other time as may be agreed by the
Master Servicer or the Certificate Insurer, as the case may be, and the
Trustee) on any Business Day (any such investment by the Trustee
pursuant to this clause (ii) to
69
<PAGE>
mature on the next Business Day after the date of such investment).
(e) For purposes of investment, the Trustee shall aggregate
all amounts on deposit in the Accounts. All income or other gain from
investments in the Accounts shall be deposited, pro rata, in the Accounts
immediately on receipt, and any loss resulting from such investments shall be
charged, pro rata, to the Accounts.
Section 7.7. Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(b) Federal Housing Administration debentures and rated Aa2 or
higher by Moody's.
(c) Freddie Mac senior debt obligations and rated Aa2 or
higher by Moody's.
(d) Federal Home Loan Banks' consolidated senior debt
obligations and rated Aa2 or higher by Moody's.
(e) FNMA senior debt obligations and rated Aa2 or higher by
Moody's.
(f) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated A-1 or better by Standard & Poor's and P-1 by Moody's.
(g) Investment agreements approved by the Certificate Insurer
provided:
1. The agreement is with a bank or insurance company which has
an unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by Standard &
Poor's and
2. Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice
(provided such notice may be amended or canceled at any time prior to
the withdrawal date), and
3. The agreement is not subordinated to any other obligations
of such insurance company or bank, and
70
<PAGE>
4. The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
5. The Trustee and the Certificate Insurer receive an opinion
of counsel that such agreement is an enforceable obligation of such
insurance company or bank.
(h) Commercial paper (having original maturities of not more
than 365 days) rated A-1 or better by Standard & Poor's and P-1 or better by
Moody's.
(i) Investments in money market funds rated AAAm or AAAm-G by
Standard & Poor's and Aaa or P-1 by Moody's.
(j) Investments approved in writing by the Certificate
Insurer and acceptable to Moody's and Standard & Poor's;
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
Section 7.8. Reports by Trustee. (a) On each Payment Date the
Trustee shall provide to each Owner, to the Master Servicer, to the Certificate
Insurer, to each Underwriter, to the Sponsor, to Standard & Poor's and to
Moody's a written report in substantially the form set forth as Exhibit J hereto
with respect to each Mortgage Loan Group, as such form may be revised by the
Trustee, the Master Servicer, Moody's and Standard & Poor's from time to time,
but in every case setting forth the information requested on Exhibit J hereto
and the following information:
(i) the amount of the distribution with
respect to the related Class of the Class A Certificates and
the Class RS Certificates;
(ii) the amount of such distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments or other unscheduled recoveries of principal included
therein and separately identifying any Subordination Increase
Amounts;
(iii) the amount of such distributions allocable
to interest;
71
<PAGE>
(iv) the Certificate Principal Balance for each Class of
Class A Certificates as of such Payment Date, together with the
principal amount of such Class of Class A Certificates (based on a
Certificate in an original principal amount of $1,000) then
outstanding, in each case after giving effect to any payment of
principal on such Payment Date;
(v) the amount of any Insured Payment included in the
amounts distributed to any Class of Certificates on such Payment Date;
(vi) information furnished by the Sponsor pursuant to
Section 6049(d)(7)(C) of the Code and the regulations promulgated
thereunder to assist the Owners in computing their market discount;
(vii) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(viii) the amount of any Supplemental Interest Payment,
Class RS Certificate distribution and any Interest Advance on such
Distribution Date, together with the amount of any unreimbursed
Interest Advance then owed to the Trustee;
(ix) the amount of any Subordination Reduction Amount
with respect to each Mortgage Loan Group;
(x) the amounts, if any, of any Realized Losses in each
Mortgage Loan Group for the related Remittance Period;
(xi) the Pool Rolling Three-Month Delinquency Rate and
the Pool Cumulative Realized Losses (x) as a percentage of the average
Pool Principal Balance as of the close of business on the last day of
each of the twelve preceding Remittance Periods and (y) as a percentage
of the Original Aggregate Loan Balance; and
(xii) a number with respect to each Class (the "Pool
Factor" for such Class) computed by dividing the Certificate Loan
Balance for such Class (after giving effect to any distribution of
principal to be made on such Payment Date) by the Original Certificate
Principal Balance for such Class on the Closing Day.
Items (i) through (iii) above shall, with respect to each
Class of Class A Certificates, be presented on the basis of a Certificate having
a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Certificates are outstanding, the Trustee
shall furnish a report to each Owner of record at any time during each calendar
year as to the aggregate of amounts reported
72
<PAGE>
pursuant to (i), (ii) and (iii) with respect to the Certificates for such
calendar year.
(b) In addition, on each Payment Date the Trustee will
distribute to each Owner, to the Certificate Insurer, to each Underwriter, to
the Master Servicer, to the Sponsor, to Standard & Poor's and to Moody's,
together with the information described in Subsection (a) preceding, the
following information with respect to each Mortgage Loan Group as of the close
of business on the last Business Day of the prior calendar month, which is
hereby required to be prepared by the Master Servicer and furnished to the
Trustee for such purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each Mortgage
Loan Group and the aggregate Loan Balances thereof, together with the
number, aggregate principal balances of such Mortgage Loans in such
Mortgage Loan Group and the percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group (a)
30-59 days Delinquent, (b) 60-89 days Delinquent and (c) 90 or more
days Delinquent;
(ii) the number, aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the
aggregate Loan Balances of the Mortgage Loans in such Mortgage Loan
Group) of the aggregate Loan Balances of such Mortgage Loans to the
aggregate Loan Balance of all Mortgage Loans in the related Mortgage
Loan Group in foreclosure proceedings (and whether any such Mortgage
Loans are also included in any of the statistics described in the
foregoing clause (i));
(iii) the number, aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the
aggregate Loan Balances of the Mortgage Loans in such Mortgage Loan
Group) of the aggregate Loan Balances of such Mortgage Loans to the
aggregate Loan Balance of all Mortgage Loans in the related Mortgage
Loan Group relating to Mortgagors in bankruptcy proceedings (and
whether any such Mortgage Loans are also included in any of the
statistics described in the foregoing clause (i));
(iv) the number, aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the
aggregate Loan Balances of the Mortgage Loans in such Mortgage Loan
Group) of the aggregate Loan Balances of such Mortgage Loans to the
aggregate Loan Balance of all Mortgage Loans in the related Mortgage
Loan Group relating to REO Properties (and whether any such Mortgage
Loans are also included in any of the statistics described in the
foregoing clause (i)); and
73
<PAGE>
(v) the loan number of the related Mortgage Loan and
the book value of any REO Property in each Mortgage Loan Group.
(c) The foregoing reports shall be sent be to an Owner only
insofar as such Owner owns a Certificate with respect to the related Mortgage
Loan Group.
(d) The Sponsor and the Master Servicer, on behalf of
Certificateholders and the Trust (the "Trust Parties") hereby authorize the
Trustee to include the loan level information with respect to the Mortgage
Loans, excluding any information relating to the fees or amounts due to the
Certificate Insurer, contained in reports provided to the Certificate Insurer or
the Trustee by the Servicer hereunder and, if so directed by an Authorized
Officer of the Sponsor in writing to the Trustee, the monthly report to the
Owners prepared by the Trustee (the "Information") on The Bloomberg, an on-line
computer based on-line information network maintained by Bloomberg L.P.
("Bloomberg") or on any other on-line computer based on-line information
network or service ("Information Network"), or in other electronic or print
information services deemed acceptable by the Sponsor or the Master Servicer as
designated in writing to the Trustee by an Authorized Officer of the Master
Servicer. The Trust Parties agree not to commence any actions or proceedings, or
otherwise assert any claims, against the Trustee or its affiliates or any of the
Trustee's or its affiliates' respective agents, representatives, directors,
officers or employees (collectively, the "Designated Parties"), arising out of,
or related to or in connection with the dissemination and/or use of any
Information by the Trustee, including, but not limited to, claims based on
allegations of inaccurate or incomplete information by the Trustee to Bloomberg
or to any Information Network or otherwise (other than in connection with the
Trustee's negligence or willful misconduct). The Trust Parties waive their
rights to assert any such claims against the Designated Parties and fully and
finally release the Designated Parties from any and all such claims, demands,
obligations, actions and liabilities (other than in connection with such
Designated Parties' negligence or willful misconduct). The Trustee makes no
representations or warranties, expressed or implied, of any kind whatsoever with
respect to the accuracy, adequacy, timeliness, completeness, merchantability or
fitness for any particular purpose of any Information in any form or manner. The
authorizations, covenants and obligations of the Trust Parties under this
section shall be irrevocable and shall survive the termination of this
Agreement.
Section 7.9. Additional Reports by Trustee. (a) The Trustee
shall report to the Sponsor, the Master Servicer and the Certificate Insurer
with respect to the amount then held in each Account (including investment
earnings accrued or scheduled to accrue) held by the Trustee and the identity of
the investments included therein, as the
74
<PAGE>
Sponsor, the Master Servicer or the Certificate Insurer may from time to time
request. Without limiting the generality of the foregoing, the Trustee shall, at
the request of the Sponsor, the Master Servicer or the Certificate Insurer,
transmit promptly to the Sponsor, the Master Servicer and the Certificate
Insurer copies of all accounting of receipts in respect of the Mortgage Loans
furnished to it by the Master Servicer and shall notify the Sponsor, the Master
Servicer and the Certificate Insurer if any such receipts have not been received
by the Trustee.
(b) The Trustee shall immediately report to the Certificate
Insurer, Sponsor and Master Servicer with respect to its actual knowledge,
without independent investigation, of any breach of any of the representations
or warranties relating to individual Mortgage Loans set forth in any Master
Transfer Agreement or in Section 3.3(a) hereof. On the date that is eighteen
months after the 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 and/or the Sponsor under the related Master Transfer Agreement
or under Section 3.4(b) hereof with respect thereto.
Section 7.10. Supplemental Interest Payment Account,
Supplement Interest Payments and Class RS Distribution Account.
(a) The parties hereto do hereby create and establish a trust,
the "Advanta Supplemental Interest Trust 1996-4" (the "Supplemental Interest
Trust"). The Supplemental Interest Trust shall hold three trust accounts, the
"Group I Supplemental Interest Payment Account", the "Group II Supplemental
Interest Payment Account" and a "Class RS Distribution Account" to be held by
the Trustee in its name on behalf of the Supplemental Interest Trust. None of
the assets of the Supplemental Interest Trust shall be considered assets of the
REMIC, and any amounts transferred from the REMIC to the Supplemental Interest
Trust shall be treated as distributions with respect to the Class RS
Certificates.
(b) The amount, if any, on deposit in the Group I Supplemental
Interest Payment Account on any Payment Date is the "Group I Supplemental
Interest Payment Amount Available" on such Payment Date.
If, on any Determination Date, the Trustee determines that the
Group I Supplemental Interest Payment Amount Available to be available on the
next Payment Date is less than the excess of (x) the excess of (i) the Class A-1
Full Interest Distribution Amount over (ii) the Class A-1 Interest Distribution
Amount over (y) the Group I Supplemental Interest Payment Amount Available as of
such Payment Date (the "Class A-1 Formula Interest Shortfall"), the Trustee
shall
75
<PAGE>
demand that the Designated Residual Owner fund the Class A-1 Formula
Interest Shortfall on the related Payment Date.
(c) The amount, if any, on deposit in the Group II
Supplemental Payment Account on any Payment Date is the "Group II Supplemental
Interest Payment Amount Available" on such Payment Date.
If, on any Determination Date, the Trustee determines that the
Group II Supplemental Interest Payment Amount Available to be available on the
next Payment Date is less than the excess of (x) the excess of (i) the Class A-2
Full Interest Distribution Amount over (ii) the Class A-2 Interest Distribution
Amount over (y) the Group II Supplemental Interest Payment Amount Available as
of such Payment Date (the "Class A-2 Formula Interest Shortfall"), the Trustee
shall demand that the Designated Residual Owner fund the Class A-2 Formula
Interest Shortfall on the related Payment Date.
The amount so funded by the Designated Residual Owner on any
such Payment Date is the "Interest Advance" for such Payment Date.
On each Payment Date, the Trustee shall withdraw from the
Group I Supplemental Interest Payment Account and deposit in the Class A-1
Distribution Account the lesser of (x) the amount by which the Class A-1 Full
Interest Distribution Amount exceeds the Class A-1 Interest Distribution Amount
and (y) the Group I Supplemental Interest Payment Amount Available.
On each Payment Date, the Trustee shall withdraw from the
Group II Supplemental Interest Payment Account and deposit in the Class A-2
Distribution Account the lesser of (x) the amount by which the Class A-2 Full
Interest Distribution Amount exceeds the Class A-2 Interest Distribution Amount
and (y) the Group II Supplemental Interest Payment Amount Available.
(d) Any portion of either the Group I Supplemental Interest
Payment Available Amount or the Group II Supplemental Interest Payment Amount
Available after application of clause (b) or (c) above shall be applied in
the following order of priority:
(i) first, to the Designated Residual Owner, as
reimbursement for unpaid Interest Advances, together with interest
thereon, with the earliest Interest Advances being deemed to be paid
first;
(ii) second, to the Class RS Distribution Account, the
remainder.
(e) the Trustee shall on each Payment Date and
76
<PAGE>
after making all other transfers and distributions distribute the amount on
deposit in the Class RS Distribution Account to the Owners of the Class RS
Certificates, pro rata in accordance with their Percentage Interests.
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 8.1. Master Servicer and Sub-Servicers. (a) Acting
directly or through one or more Sub-Servicers as provided in Section 8.3, the
Master Servicer, as master servicer, shall service and administer the Mortgage
Loans in accordance with this Agreement and with Accepted Servicing Practices,
and shall have full power and authority, acting alone, to do or cause to be done
any and all things in connection with such servicing and administration which it
may deem necessary or desirable.
(b) The duties of the Master Servicer shall include collecting
and posting of all payments, responding to inquiries of Mortgagors or by
federal, state or local government authorities with respect to the Mortgage
Loans, investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Trustee with respect to
distributions, paying Compensating Interest and making Delinquency Advances and
Servicing Advances pursuant hereto. The Master Servicer shall follow its
customary standards, policies and procedures in performing its duties as Master
Servicer. The Master Servicer shall cooperate with the Trustee and furnish to
the Trustee with reasonable promptness information in its possession as may be
necessary or appropriate to enable the Trustee to perform its tax reporting
duties hereunder. The Trustee shall furnish the Master Servicer or any
Sub-servicer with any powers of attorney and other documents necessary or
appropriate to enable the Master Servicer or any Sub-servicer to carry out its
servicing and administrative duties hereunder.
(c) Without limiting the generality of the foregoing, the
Master Servicer (i) shall continue, and is hereby authorized and empowered by
the Trustee, to execute and deliver, on behalf of itself, the Owners and the
Trustee or any of them, any and all instruments of satisfaction or cancellation,
or of full release or discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the related Properties; (ii)
may consent to any modification of the terms of any Note not expressly
prohibited hereby if the effect of any such modification (x) will not be to
affect materially and adversely the security afforded by the related Property,
the timing of receipt of any payments required hereby or the interests of
77
<PAGE>
the Certificate Insurer and (y) will not cause the REMIC Trust to fail to
qualify as a REMIC.
(d) The Master Servicer shall have the right using that degree
of skill and attention that the Master Servicer exercises with respect to
comparable mortgage loans that it services for itself or others, to approve
applications of Mortgagors for consent to (i) partial releases of Mortgages,
(ii) alterations to Properties and (iii) removal, demolition or division of
Properties. No application for approval shall be considered by the Master
Servicer unless: (x) the provisions of the related Note and Mortgage have been
complied with; (y) the Combined Loan-to-Value Ratio and the Mortgagor's
debt-to-income ratio after any release does not exceed the Combined
Loan-to-Value Ratio and debt-to-income ratio applicable to such Mortgage Loan at
origination and (z) the lien priority of the related Mortgage is not adversely
affected; provided, however, that the foregoing requirements (x), (y) and (z)
shall not apply to any such situation described in this paragraph if such
situation results from any condemnation or easement activity by a governmental
entity.
(e) The parties intend that the REMIC Trust shall constitute,
and that the affairs of REMIC Trust shall be conducted so as to qualify it as a
REMIC. In furtherance of such intention, the Master Servicer covenants and
agrees that it shall act as agent (and the Master Servicer is hereby appointed
to act as agent) on behalf of the REMIC Trust and that in such capacity it
shall: (i) use its best efforts to conduct the affairs of the REMIC Trust at all
times that any Class of Certificates are outstanding so as to maintain the
status of the REMIC Trust as a REMIC under the REMIC Provisions; (ii) not
knowingly or intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of REMIC Trust or that would subject
the Trust to tax and (iii) exercise reasonable care not to allow the REMIC Trust
to receive income from the performance of services or from assets not permitted
under the REMIC Provisions to be held by a REMIC.
(f) The Master Servicer may, and is hereby authorized to,
perform any of its servicing responsibilities with respect to all or certain of
the Mortgage Loans through a Sub-Servicer as it may from time to time designate,
but no such designation of a Sub-Servicer shall serve to release the Master
Servicer from any of its obligations under this Agreement. Such Sub-Servicer
shall have all the rights and powers of the Master Servicer with respect to such
Mortgage Loans under this Agreement.
(g) Without limiting the generality of the foregoing, but
subject to Sections 8.13 and 8.14, the Master Servicer in its own name or in the
name of a Sub-Servicer may be authorized and empowered pursuant to a power of
attorney executed and delivered by the Trustee to execute and deliver, and may
be authorized and empowered by the Trustee, to execute
78
<PAGE>
and deliver, on behalf of itself, the Owners and the Trustee or any of them, (i)
any and all instruments of satisfaction or cancellation or of partial or full
release or discharge and all other comparable instruments with respect to the
Mortgage Loans and with respect to the Properties, (ii) and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Property on behalf of the Trustee, and (iii) to hold title to
any Property upon such foreclosure or deed in lieu of foreclosure on behalf of
the Trustee; provided, however, that Section 8.14(a) shall constitute a power of
attorney from the Trustee to the Master Servicer or any Sub-servicer to execute
an instrument of satisfaction (or assignment of mortgage without recourse) with
respect to any Mortgage Loan paid in full (or with respect to which payment in
full has been escrowed). Subject to Sections 8.13 and 8.14, the Trustee shall
furnish the Master Servicer and any Sub-servicer with any powers of attorney and
other documents as the Master Servicer or such Sub-Servicer shall reasonably
request to enable the Master Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
(h) The Master Servicer shall give prompt notice to the
Trustee of any action, of which the Master Servicer has actual knowledge, to (i)
assert a claim against the Trust or (ii) assert jurisdiction over the Trust.
(i) Servicing Advances incurred by the Master Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Property shall be recoverable by the Master Servicer or
such Sub-Servicer to the extent described in Section 8.9(c) and in Section
7.5(c)(v)(C) hereof.
Section 8.2. Collection of Certain Mortgage Loan Payments. (a)
The Master Servicer shall, to the extent such procedures shall be consistent
with this Agreement and the terms and provisions of any applicable Insurance
Policies, follow such collection procedures in accordance with Accepted
Servicing Practices. Consistent with the foregoing, the Master Servicer may in
its discretion (i) waive any assumption fees, late payment charges, charges for
checks returned for insufficient funds, prepayment fees, if any, or other fees
which may be collected in the ordinary course of servicing the Mortgage Loans,
(ii) if a Mortgagor is in default or about to be in default because of a
Mortgagor's financial condition, arrange with the Mortgagor a schedule for the
payment of delinquent payments due on the related Mortgage Loan; provided,
however, the Master Servicer shall not reschedule the payment of delinquent
payments more than one time in any twelve consecutive months with respect to any
Mortgagor.
(b) The Master Servicer shall hold in escrow on behalf of the
related Mortgagor all Prepaid Installments received by it, and shall apply such
Prepaid Installments as
79
<PAGE>
directed by such Mortgagor and as set forth in the related Note.
Section 8.3. Sub-Servicing Agreements Between Master Servicer
and Sub-Servicers. The Master Servicer may enter into Sub-Servicing Agreements
for any servicing and administration of Mortgage Loans with any institution
which is in compliance with the laws of each state necessary to enable it to
perform its obligations under such Sub-Servicing Agreement. The Master Servicer
shall give notice to the Certificate Insurer of the appointment of any
Sub-Servicer and shall furnish to the Certificate Insurer a copy of the
Subservicing Agreement. For purposes of this Agreement, the Master Servicer
shall be deemed to have received payments on Mortgage Loans when any
Sub-Servicer has received such payments. Any such Sub-Servicing Agreement shall
be consistent with and not violate the provisions of this Agreement.
Section 8.4. Successor Sub-Servicers. The Master Servicer may
terminate any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement and to either itself directly service
the related Mortgage Loans itself or enter into a Sub-Servicing Agreement with a
successor Sub-Servicer that qualifies under Section 8.3.
Section 8.5. Liability of Master Servicer. The Master Servicer
shall not be relieved of its obligations under this Agreement notwithstanding
any Sub-Servicing Agreement or any of the provisions of this Agreement relating
to agreements or arrangements between the Master Servicer and a Sub-Servicer or
otherwise, and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in such Sub-Servicing
Agreement shall be deemed to limit or modify this Agreement. The Trust shall not
indemnify the Master Servicer for any losses due to the Master Servicer's
negligence.
Section 8.6. No Contractual Relationship Between Sub-Servicer
and Trustee or the Owners. Any Sub-Servicing Agreement and any other
transactions or services relating to 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
80
<PAGE>
of the authority, power and rights of the Master Servicer hereunder by the
Trustee pursuant to Section 8.20, it is understood and agreed that the Master
Servicer's rights and obligations under any Sub-Servicing Agreement then in
force between the Master Servicer and a Sub-Servicer may be assumed or
terminated by the Trustee at its option. Any termination fee due under any such
sub-servicing agreement shall be paid by the preceding Master Servicer but in no
event shall the Trustee be liable for any such fee.
The Master Servicer shall, upon request of the Trustee, but at
the expense of the Master Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party, without the payment of any fee by the Trustee, notwithstanding
any contrary provision in any Sub-Servicing Agreement.
Section 8.8. Principal and Interest Account.
(a) The Master Servicer and/or each Sub-servicer, as
applicable, shall establish in the name of the Trust for the benefit of the
Owners of the Certificates and the Certificate Insurer, as their interests may
appear, and maintain at one or more Designated Depository Institutions the
Principal and Interest Account.
Subject to Subsections (c) and (e) below, the Master Servicer
and any Sub-servicer shall deposit all receipts related to the Mortgage Loans to
the Principal and Interest Account on a daily basis (but no later than the first
Business Day after receipt).
On the Closing Day the Sponsor and/or the Master Servicer
shall deposit to the Principal and Interest Account all receipts related to the
Mortgage Loans which relate to or are received on or after the Cut-Off Date.
(b) All funds in the Principal and Interest Account may only
be held (i) uninvested, up to the limits insured by the FDIC or (ii) invested in
Eligible Investments. The Principal and Interest Account shall be held in trust
in the name of the Trust and for the benefit of the Owners of the Certificates.
Any investment earnings on funds held in the Principal and Interest Account
shall be for the account of the Master Servicer and may only be withdrawn from
the Principal and Interest Account by the Master Servicer immediately following
the remittance of the Monthly Remittance Amounts by the Master Servicer. Any
references herein to amounts on deposit in the Principal and Interest Account
shall refer to amounts net of such investment earnings. Any investment losses
are at the expense of the Master Servicer and shall be replaced on or prior to
the Remittance Date.
81
<PAGE>
(c) Subject to Subsection (e) below, the Master Servicer shall
deposit to the Principal and Interest Account all principal and interest
collections on the Mortgage Loans received on or after the Cut-Off Date
including any Prepaid Installments, Prepayments and Net Liquidation Proceeds,
all Loan Purchase Prices and Substitution Amounts received or paid by the Master
Servicer with respect to the Mortgage Loans, other recoveries or amounts related
to the Mortgage Loans received by the Master Servicer, Compensating Interest and
Delinquency Advances together with any amounts which are reimbursable from the
Principal and Interest Account, but net of (i) the Servicing Fee with respect to
each Mortgage Loan and other servicing compensation to the Master Servicer as
permitted by Section 8.15 hereof, (ii) principal (including Prepayments)
collected on the related Mortgage Loans prior to the Cut-Off Date, (iii)
interest accruing on the related Mortgage Loans prior to the Cut-Off Date and
(iv) Net Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed
the Loan Balance of the related Mortgage Loan.
(d) (i) The Master Servicer may make withdrawals from the
Principal and Interest Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of the
Monthly Remittance Amounts due on the Remittance
Date;
(B) to reimburse itself pursuant to Section 8.9 hereof
for unrecovered Delinquency Advances and Servicing
Advances;
(C) to withdraw investment earnings on amounts on deposit
in the Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest
Account following the termination of the Trust Estate
pursuant to Article X.
(ii) On the tenth day of each month, the Master Servicer
shall send to the Trustee a report, in the form of a computer tape, detailing
the payments on the Mortgage Loans during the prior Remittance Period. Such tape
shall be in the form and have the specifications as may be agreed to between the
Master Servicer and the Trustee from time to time.
(iii) On each Remittance Date the Master Servicer shall remit
to the Trustee by wire transfer, or otherwise make funds available in
immediately available funds, (x) for Group I, the Group I Interest Remittance
Amount and the Group I Principal Remittance Amount and (y) for Group II,
the Group II
82
<PAGE>
Interest Remittance Amount and the Group II Principal Remittance Amount.
(e) To the extent that the ratings, if any, then assigned to
the unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are satisfactory to the Certificate Insurer, Moody's and
Standard & Poor's, then the requirement to maintain the Principal and Interest
Account may be waived by an instrument signed by the Certificate Insurer,
Standard & Poor's and Moody's, and the Master Servicer may be allowed to
co-mingle with its general funds the amounts otherwise required to be deposited
to the Principal and Interest Account, on such terms and subject to such
conditions as the Certificate Insurer, Moody's and Standard & Poor's may permit.
Section 8.9. Delinquency Advances, Compensating Interest and
Servicing Advances. (a) The Master Servicer is required, not later than each
Remittance Date, to deposit into the Principal and Interest Account an amount
equal to the sum of the interest portions (net of the Servicing Fees) due, but
not collected, with respect to Delinquent Mortgage Loans during the prior
Remittance Period, but only if, in its good faith business judgment, the Master
Servicer reasonably believes that such amount will ultimately be recovered from
the related Mortgage Loan. Such amounts are "Delinquency Advances".
The Master Servicer shall be permitted to fund its payment of
Delinquency Advances on any Remittance Date and to reimburse itself for any
Delinquency Advances paid from the Master Servicer's own funds, from collections
on the related Mortgage Loan. The Master Servicer may use funds deposited to the
Principal and Interest Account subsequent to the related Remittance Period and
shall deposit into the Principal and Interest Account with respect thereto (i)
collections from the Mortgagor whose Delinquency gave rise to the shortfall
which resulted in such Delinquency Advance and (ii) Net Liquidation Proceeds
recovered on account of the related Mortgage Loan to the extent of the amount of
aggregate Delinquency Advances related thereto or (iii) from its own funds. If
not therefore recovered from the related Mortgagor or the related Net
Liquidation Proceeds, Delinquency Advances shall be recoverable pursuant to
Section 7.5(c)(v)(C).
(b) On or prior to each Remittance Date, the Master Servicer
shall deposit in the Principal and Interest Account with respect to any full
Prepayment received on a Mortgage Loan during the related Remittance Period out
of its own funds without any right of reimbursement therefor, an amount equal to
the difference between (x) 30 days' interest at the Mortgage Loan's Coupon Rate
(less the Servicing Fee) on the Loan Balance of such Mortgage Loan as of the
first day of the related Remittance Period and (y) to the extent not previously
advanced, the interest (less the Servicing Fee) paid by the Mortgagor with
respect to the Mortgage Loan during such
83
<PAGE>
Remittance Period (any such amount paid by the Master Servicer, "Compensating
Interest"). The Master Servicer shall in no event be required to pay
Compensating Interest with respect to any Remittance Period in an amount in
excess of the aggregate Servicing Fee received by the Master Servicer with
respect to all Mortgage Loans for such Remittance Period.
(c) The Master Servicer will pay all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations, including,
but not limited to, the cost of (i) Preservation Expenses, (ii) any enforcement
or judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Master Servicer reasonably believes such costs and expenses
will increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
amount so paid will constitute a "Servicing Advance". The Master Servicer may
recover Servicing Advances (x) from the Mortgagors to the extent permitted by
the Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of
the related Mortgage Loan and (y) as provided in Section 7.5(c)(v)(C) hereof. In
no case may the Master Servicer recover Servicing Advances from principal and
interest payments on any Mortgage Loan or from any amounts relating to any other
Mortgage Loan except as provided pursuant to Section 7.5(c)(v)(C) hereof.
Section 8.10. Purchase of Mortgage Loans. The Master Servicer
may, but is not obligated to, purchase for its own account any Mortgage Loan
which becomes Delinquent, in whole or in part, as to four consecutive monthly
installments or any Mortgage Loan as to which enforcement proceedings have been
brought by the Master Servicer or by any Sub-servicer pursuant to Section 8.13.
Any such Loan so purchased shall be purchased by the Master Servicer on a
Remittance Date at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be deposited in the Principal and Interest Account.
Section 8.11. Maintenance of Insurance. (a) The Master
Servicer shall cause to be maintained with respect to each Mortgage Loan a
hazard insurance policy with a generally acceptable carrier that provides for
fire and extended coverage, and which provides for a recovery by the Master
Servicer on behalf of the Trust of insurance proceeds relating to such Mortgage
Loan in an amount not less than the least of (i) the outstanding principal
balance of the Mortgage Loan, (ii) the minimum amount required to compensate for
damage or loss on a replacement cost basis and (iii) the full insurable value of
the premises.
(b) If the Mortgage Loan at the time of origination relates to
a Property in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards, the Master Servicer
will cause to be maintained with respect thereto a flood insurance policy in a
84
<PAGE>
form meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier in an amount representing
coverage, and which provides for a recovery by the Master Servicer on behalf of
the Trust of insurance proceeds relating to such Mortgage Loan of not less than
the least of (i) the outstanding principal balance of the Mortgage Loan, (ii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify the
Trust and the Certificate Insurer out of the Master Servicer's own funds for any
loss to the Trust and the Certificate Insurer resulting from the Master
Servicer's failure to maintain the insurance required by this Section.
(c) In the event that the Master Servicer shall obtain and
maintain a blanket policy insuring against fire, flood and hazards of extended
coverage on all of the Mortgage Loans, then, to the extent such policy names the
Master Servicer as loss payee and provides coverage in an amount equal to the
aggregate unpaid principal balance on the Mortgage Loans without co-insurance,
and otherwise complies with the requirements of this Section 8.11, the Master
Servicer shall be deemed conclusively to have satisfied its obligations with
respect to fire and hazard insurance coverage under this Section 8.11, it being
understood and agreed that such blanket policy may contain a deductible clause,
in which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Property a policy complying with the preceding
paragraphs of this Section 8.11, and there shall have been a loss which would
have been covered by such policy, deposit in the Principal and Interest Account
from the Master Servicer's own funds the difference, if any, between the amount
that would have been payable under a policy complying with the preceding
paragraphs of this Section 8.11 and the amount paid under such blanket policy.
Upon the request of the Trustee or the Certificate Insurer, the Master Servicer
shall cause to be delivered to the Trustee or the Certificate Insurer, a
certified true copy of such policy.
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Property has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Note; provided, however, that the Master Servicer
shall not exercise any such right if (i) the "due-on-sale" clause, in the
reasonable belief of the Master Servicer, is not enforceable under applicable
law or (ii) the Master Servicer reasonably believes that to permit an assumption
of the Mortgage Loan would not materially and adversely affect the interest of
the Owners or of the Certificate Insurer. In such event, the Master Servicer
shall enter into an assumption and modification agreement with the
85
<PAGE>
person to whom such property has been or is about to be conveyed, pursuant to
which such person becomes liable under the Note and, unless prohibited by
applicable law or the Mortgage Documents, the Mortgagor remains liable thereon.
If the foregoing is not permitted under applicable law, the Master Servicer is
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Note; provided,
however, that to the extent any such substitution of liability agreement would
be delivered by the Master Servicer outside of its usual procedures for mortgage
loans held in its own portfolio the Master Servicer shall, prior to executing
and delivering such agreement, obtain the prior written consent of the
Certificate Insurer. The Mortgage Loan, as assumed, shall conform in all
respects to the requirements, representations and warranties of this Agreement.
The Master Servicer shall notify the Trustee that any such assumption or
substitution agreement has been completed by forwarding to the Trustee the
original copy of such assumption or substitution agreement, which copy shall be
added by the Trustee to the related File and which shall, for all purposes, be
considered a part of such File to the same extent as all other documents and
instruments constituting a part thereof. The Master Servicer shall be
responsible for recording any such assumption or substitution agreements. In
connection with any such assumption or substitution agreement, the required
monthly payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the
stated maturity or outstanding principal amount of such Mortgage Loan shall not
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Master Servicer or the
Sub-Servicer for consenting to any such conveyance or entering into an
assumption or substitution agreement shall be retained by or paid to the Master
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or any assumption which the
Master Servicer may be restricted by law from preventing, for any reason
whatsoever.
Section 8.13. Realization Upon Defaulted Mortgage Loans. (a)
The Master Servicer shall foreclose upon or otherwise comparably effect the
ownership on behalf of the Trust of Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Master Servicer has not purchased pursuant to
Section 8.10. In connection with such foreclosure or other conversion, the
Master Servicer shall exercise such of the rights and powers vested in it
hereunder, and use the same degree of care and skill in their exercise or
86
<PAGE>
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(c) hereof. The Master Servicer shall
sell any REO Property within 23 months of its acquisition by the Trust, unless
the Master Servicer obtains for the Trustee an opinion of counsel experienced in
federal income tax matters, addressed to the Trustee, the Certificate Insurer
and the Master Servicer, to the effect that the holding by the Trust of such REO
Property for any greater period will not result in the imposition of taxes on
"Prohibited Transactions" of the REMIC Trust as defined in Section 860F of the
Code or cause the Trust to fail to qualify as a REMIC under the REMIC Provisions
at any time that any Certificates are outstanding, in which case the Master
Servicer shall sell any REO Property by the end of any extended period specified
in any such opinion.
Notwithstanding the generality of the foregoing provisions,
the Master Servicer shall manage, conserve, protect and operate each REO
Property for the Owners solely for the purpose of its prompt disposition and
sale in a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by the Trust of any "income from non-permitted assets"
within the meaning of Section 860F(a)(2)(B) of the Code or any "net income from
foreclosure property" which is subject to taxation under the REMIC Provisions.
Pursuant to its efforts to sell such REO Property, the Master Servicer shall
either itself or through an agent selected by the Master Servicer protect and
conserve such REO Property in the same manner and to such extent as is customary
in the locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Owners, rent the same, or
any part thereof, as the Master Servicer deems to be in the best interest of the
Owners for the period prior to the sale of such REO Property. The Master
Servicer shall take into account the existence of any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation, on a Property in determining whether to foreclose upon or otherwise
comparably convert the ownership of such Property.
(b) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan".
87
<PAGE>
Section 8.14. Trustee to Cooperate; Release of Files. (a) Upon
the payment in full of any Mortgage Loan (including the repurchase of any
Mortgage Loan or any liquidation of such Mortgage Loan through foreclosure or
otherwise), or the receipt by the Master Servicer or any Sub-servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Master Servicer or any Sub-servicer shall deliver to the
Trustee a Master Servicer's Trust Receipt. Upon receipt of such Master
Servicer's Trust Receipt, the Trustee shall promptly release the related File,
in trust to (i) the Master Servicer, (ii) an escrow agent or (iii) any employee,
agent or attorney of the Trustee, in each case pending its release by the Master
Servicer, such escrow agent or such employee, agent or attorney of the Trustee,
as the case may be. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Master Servicer or
any Sub-servicer is authorized to give, as attorney-in-fact for the Trustee and
the mortgagee under the Mortgage which secured the Note, an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account. In lieu of executing any such satisfaction or assignment, as
the case may be, the Master Servicer or any Sub-servicer may prepare and submit
to the Trustee, a satisfaction (or assignment without recourse, if requested by
the Person or Persons entitled thereto) in form for execution by the Trustee
with all requisite information completed by the Master Servicer or any
Sub-servicer; in such event, the Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy, the Trustee shall (except in the case of the payment or
liquidation pursuant to which the related File is released to an escrow agent or
an employee, agent or attorney of the Trustee), upon request of the Master
Servicer or any Sub-servicer and delivery to the Trustee of a Master Servicer's
Trust Receipt, release the related File to the Master Servicer and shall execute
such documents as shall be necessary to the prosecution of any such proceedings,
including, without limitation, an assignment without recourse of the related
Mortgage to the Master Servicer; provided that there shall not be released and
unreturned at any one time more than 10% of the entire number of Files. The
Trustee shall complete in the name of the Trustee any endorsement in blank on
any Note prior to releasing such Note to the Master Servicer or any Sub-
88
<PAGE>
servicer. Such receipt shall obligate the Master Servicer or any Sub-servicer to
return the File to the Trustee when the need therefor by the Master Servicer or
any Sub-servicer no longer exists unless the Mortgage Loan shall be liquidated,
in which case, upon receipt of the liquidation information, in physical or
electronic form, the Master Servicer's Trust Receipt shall be released by the
Trustee to the Master Servicer or any Sub-servicer.
(c) No costs associated with the procedures described in this
Section 8.14 shall be an expense of the Trust.
(d) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given by
the Certificate Insurer, Moody's and Standard & Poor's pursuant to Section
3.5(j) hereof.
(e) Each Master Servicer's Trust Receipt may be delivered to
the Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such other
means, including, without limitation, electronic or computer readable medium, as
the Master Servicer and the Trustee shall mutually agree. The Trustee shall
promptly release the related File(s) within five (5) to seven (7) business days
of receipt of a properly completed Master Servicer's Trust Receipt pursuant to
clauses (i), (ii) or (iii) above or such shorter period as may be agreed upon by
the Master Servicer and the Trustee. Receipt of a Master Servicer's Trust
Receipt pursuant to clauses (i), (ii) or (iii) above shall be authorization to
the Trustee to release such Files, provided the Trustee has determined that such
Master Servicer's Trust Receipt has been executed, with respect to clauses (i)
or (ii) above, or approved, with respect to clause (iii) above, by an Authorized
Officer of the Master Servicer or any Sub-servicer, and so long as the Trustee
complies with its duties and obligations under this Agreement. If the Trustee is
unable to release the Files within the time frames previously specified, the
Trustee shall immediately notify the Master Servicer or any Sub-servicer
indicating the reason for such delay, but in no event shall such notification be
later than five business days after receipt of a Master Servicer's Trust
Receipt. If the Master Servicer is required to pay penalties or damages due
solely to the Trustee's negligent failure to release the related File or the
Trustee's negligent failure to execute and release documents in a timely manner,
the Trustee shall be liable for such penalties or damages.
On each day that the Servicer remits to the Trustee Master Servicer's
Trust Receipts pursuant to clauses (ii) or (iii) above, the Master Servicer or
any Sub-servicer shall also submit to the Trustee a summary of the total amount
of such Master Servicer's Trust Receipts requested on such day by the same
method as described in such clauses (ii) or (iii) above.
89
<PAGE>
Section 8.15. Servicing Compensation. As compensation for
its activities hereunder, the Master Servicer shall be entitled to retain the
amount of the Servicing Fee with respect to each Mortgage Loan. Additional
servicing compensation in the form of prepayment charges, release fees, bad
check charges, assumption fees, late payment charges, or any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Principal and Interest Account pursuant to Section 8.8(c)(v) and similar
items may, to the extent collected from Mortgagors, be retained by the Master
Servicer.
Section 8.16. Annual Statement as to Compliance. The Master
Servicer, at its own expense, will deliver to the Trustee, Certificate Insurer,
Standard & Poor's and Moody's, on or before the last day of March of each year,
commencing in 1997, an Officer's Certificate stating, as to each signer thereof,
that (i) a review of the activities of the Master Servicer during such preceding
calendar year and of performance under this Agreement has been made under such
officers' supervision, and (ii) to the best of such officers' knowledge, based
on such review, the Master Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officers and
the nature and status thereof including the steps being taken by the Master
Servicer to remedy such defaults.
Section 8.17. Annual Independent Certified Public Accountants'
Reports. On or before the last day of March of each year, commencing in 1997,
the Master Servicer, at its own expense, shall cause to be delivered to the
Trustee, the Certificate Insurer, Standard & Poor's and Moody's a letter or
letters of a firm of independent, nationally recognized certified public
accountants reasonably acceptable to the Certificate Insurer stating that such
firm has, with respect to the Master Servicer's overall servicing operations (i)
performed applicable tests in accordance with the compliance testing procedures
as set forth in Appendix 3 of the Audit Guide for Audits of HUD Approved
Nonsupervised Mortgagees or (ii) examined such operations in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers, and in
either case stating such firm's conclusions relating thereto.
Section 8.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans. The Master Servicer shall provide to the Trustee,
the Certificate Insurer, the FDIC and the supervisory agents and examiners of
each of the foregoing access to the documentation regarding the Mortgage Loans
required by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Master Servicer designated by it.
90
<PAGE>
Upon any change in the format of the computer tape maintained
by the Master Servicer in respect of the Mortgage Loans, the Master Servicer
shall deliver a copy of such computer tape to the Trustee and in addition shall
provide a copy of such computer tape to the Trustee and the Certificate Insurer
at such other times as the Trustee or the Certificate Insurer may reasonably
request.
Section 8.19. Assignment of Agreement. The Master Servicer may
not assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Trustee and Certificate
Insurer, which such consent shall not be unreasonably withheld; provided,
however, that any assignee must meet the eligibility requirements set forth in
Section 8.20(g) hereof for a successor servicer. Notice of any such assignment
shall be given by the Master Servicer to the Trustee, the Certificate Insurer
and Moody's.
Section 8.20. Removal of Master Servicer; Resignation of
Master Servicer. (a) The Trustee with the consent of the Certificate Insurer, or
the Certificate Insurer (or the Owners pursuant to Section 6.11 hereof) may
remove the Master Servicer upon the occurrence of any of the following events:
(i) The Master Servicer shall fail to deliver to the
Trustee any proceeds or required payment, which failure continues
unremedied for five Business Days following written notice to an
Authorized Officer of the Master Servicer from the Trustee or from any
Owner.
(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
91
<PAGE>
adjudication in bankruptcy, reorganization, dissolution, winding up,
liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver,
liquidator or custodian or similar entity with respect to the Master
Servicer or of all or any substantial part of its assets, or other like
relief in respect thereof under any bankruptcy or insolvency law, and,
if such proceeding is being contested by the Master Servicer in good
faith, the same shall (A) result in the entry of an order for relief or
any such adjudication or appointment or (B) continue undismissed or
pending and unstayed for any period of seventy-five (75) consecutive
days; or
(iv) The Master Servicer shall fail to perform any one or
more of its obligations hereunder other than the obligations
contemplated by Subsection 8.20(i) above, and shall continue in default
thereof for a period of sixty (60) days after notice by the Trustee or
the Certificate Insurer of said failure; provided, however, that if the
Master Servicer can demonstrate to the reasonable satisfaction of the
Certificate Insurer that it is diligently pursuing remedial action,
then the cure period may be extended with the written approval of the
Certificate Insurer; or
(v) The Master Servicer shall fail to cure any breach of
any of its representations and warranties set forth in Section 3.2
which materially and adversely affects the interests of the Owners or
Certificate Insurer for a period of thirty (30) days after the Master
Servicer's discovery or receipt of notice thereof; provided, however,
that if the Master Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing
remedial action, then the cure period may be extended with the written
approval of the Certificate Insurer.
(b) The Certificate Insurer also may remove the Master
Servicer upon the occurrence of any of the following events:
(i) a Group I Total Available Funds Shortfall or a Group II
Total Available Funds Shortfall; provided, however, that the
Certificate Insurer shall have no right to remove the Master Servicer
under this clause (i) if the Master Servicer can demonstrate to the
reasonable satisfaction of the Certificate Insurer that such event was
due to circumstances beyond the control of the Master Servicer; or
(ii) the failure by the Master Servicer to make any
required Servicing Advance; or
(iii) the failure by the Master Servicer to perform any one
or more of its obligations hereunder,
92
<PAGE>
which failure materially and adversely affects the interests of the
Certificate Insurer; or
(iv) the failure by the Master Servicer to make any
required Delinquency Advance or to pay any Compensating Interest; or
(v) if on any Payment Date the Pool Rolling Three-Month
Delinquency Rate exceeds 7%;
(vi) if on any Payment Date occurring in December of any
year, commencing in December 1997, the aggregate Pool Cumulative
Realized Losses over the prior twelve month period exceed 3% of the
average Pool Principal Balance as of the close of business on the last
day of each of the twelve preceding Remittance Periods; or
(vii) (a) if on any Payment Date of the first sixty Payment
Dates after the Closing Day the aggregate Pool Cumulative Realized
Losses for all prior Remittance Periods since the Closing Day exceed 8%
of the Original Aggregate Loan Balance and (b) if on any Payment Date
thereafter the aggregate Pool Cumulative Realized Losses for all prior
Remittance Periods since the Closing Day exceed 12.5% of the Original
Aggregate Loan Balance; provided, however, with respect to clauses (v),
(vi) and (vii), if the Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that any such event was due to
circumstances beyond the control of the Servicer, such event shall not
be considered an event of termination of the Servicer;
provided, however, that (x) prior to any removal of the Master Servicer by the
Certificate Insurer pursuant to clauses (i), (ii) or (iii) of this Section
8.20(b), the Master Servicer shall first have been given by the Certificate
Insurer and by registered or certified mail, notice of the occurrence of one or
more of the events set forth in clauses (i), (ii) or (iii) above and the Master
Servicer shall not have remedied, or shall not have taken actions satisfactory
to the Certificate Insurer to remedy, such event or events within 30 days (60
days with respect to clause (iii)) after the Master Servicer's receipt of such
notice (provided, however, that if the Master Servicer can demonstrate to the
reasonable satisfaction of the Certificate Insurer that it is diligently
pursuing remedial action, then the cure period in each case may be extended with
the written approval of the Certificate Insurer) and (y) in the event of the
refusal or inability of the Master Servicer to make any required Delinquency
Advance or to pay any Compensating Interest or Monthly Remittance, such removal
shall be effective (without the requirement of any action on the part of the
Certificate Insurer or of the Trustee) at 4 p.m. on the second Business Day
following the day on which the Trustee or the Certificate Insurer notifies an
Authorized Officer of the Master Servicer that a required Delinquency Advance
has not been received by the Trustee. Upon the
93
<PAGE>
Trustee's determination that a required Delinquency Advance or payment of
Compensating Interest has not been made by the Master Servicer, the Trustee
shall so notify in writing an Authorized Officer of the Master Servicer and the
Certificate Insurer as soon as is reasonably practical.
(c) The Master Servicer shall not resign from the obligations
and duties hereby imposed on it, except upon determination that its duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it,
the other activities of the Master Servicer so causing such a conflict being of
a type and nature carried on by the Master Servicer at the date of this
Agreement. Any such determination permitting the resignation of the Master
Servicer shall be evidenced by an opinion of counsel to such effect which shall
be delivered to the Trustee and the Certificate Insurer.
(d) No removal or resignation of the Master Servicer shall
become effective until the Trustee or a successor servicer shall have assumed
the Master Servicer's responsibilities and obligations in accordance with this
Section. If no successor servicer is available, the Trustee shall act as
successor servicer and perform all of the obligations of this Section,
including, without limitation, making Delinquency Advances and paying
Compensating Interest; provided, however, that the Trustee will not be obligated
to act as successor servicer if it is legally unable to perform its duties
hereunder.
(e) Upon removal or resignation of the Master Servicer, the
Master Servicer also shall promptly deliver or cause to be delivered to a
successor servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Master Servicer has
maintained for the Mortgage Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Master Servicer's possession.
(f) Any collections received by the Master Servicer after
removal or resignation shall be endorsed by it to the Trustee and remitted
directly and immediately to the Trustee or the successor Master Servicer.
(g) Upon removal or resignation of the Master Servicer, the
Trustee (x) may solicit bids for a successor 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
94
<PAGE>
$10,000,000, as determined in accordance with generally accepted accounting
principles, and acceptable to the Certificate Insurer as the successor to the
Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder. The
compensation of any successor servicer (including, without limitation, the
Trustee) so appointed shall be the aggregate Servicing Fees, together with the
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in Sections 8.8 and 8.15; provided, however,
that if the Trustee acts as successor Master Servicer then the Sponsor agrees to
pay to the Trustee at such time that the Trustee becomes such successor Master
Servicer a fee of twenty-five dollars ($25.00) for each Mortgage Loan then
included in the Trust Estate. The Trustee shall be obligated to serve as
successor Master Servicer whether or not the $25.00 fee described in the
preceding sentence is paid by the Sponsor, but shall in any event be entitled to
receive, and to enforce payment of, such fee from the Sponsor.
(h) In the event the Trustee solicits bids as provided above,
the Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid. The Trustee shall
deduct from any sum received by the Trustee from the successor to the Master
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities hereunder. After such deductions, the
remainder of such sum shall be paid by the Trustee to the Master Servicer at the
time of such sale, transfer and assignment to the Master Servicer's successor.
(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
95
<PAGE>
amounts which then have been or should have been deposited in the Principal and
Interest Account by the Master Servicer or which are thereafter received with
respect to the Mortgage Loans. Neither the Trustee nor any other successor
Master Servicer shall be held liable by reason of any failure to make, or any
delay in making, any distribution hereunder or any portion thereof caused by (i)
the failure of the Master Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Master Servicer or (iii) any breaches of
a predecessor Servicer.
(j) The Trustee or any other successor Master Servicer, upon
assuming the duties of Master Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the Master Servicer
has theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Trustee is acting as successor Master Servicer, the Trustee
shall only be required to make Delinquency Advances (including the Delinquency
Advances described in this clause (j)) if, in the Trustee's reasonable good
faith judgment, such Delinquency Advances will ultimately be recoverable from
the related Mortgage Loans.
(k) The Master Servicer which is being removed or is resigning
shall give notice to the Mortgagors and to Moody's and Standard & Poor's of the
transfer of the servicing to the successor.
(l) The Trustee shall give notice to the Certificate Insurer,
Moody's and Standard & Poor's and to the Owners of the occurrence of any event
specified in Section 8.20(a) of which the Trustee has knowledge.
(m) Notwithstanding anything herein to the contrary, upon
termination of the Master Servicer hereunder, any liabilities of the Master
Servicer which accrued prior to such termination shall survive such termination.
Section 8.21. Inspections by Certificate Insurer; Errors and
Omissions Insurance. (a) At any reasonable time and from time to time upon
reasonable notice, the Certificate Insurer, the Trustee, or any agents or
representatives thereof may inspect the Master Servicer's servicing operations
and discuss the servicing operations of the Master Servicer with any of its
officers or directors. The costs and expenses incurred by the Master Servicer or
its agents or representatives in connection with any such examinations or
discussions shall be paid by the Master Servicer.
(b) The Master Servicer agrees to maintain errors and
omissions coverage and a fidelity bond, each at least to the extent generally
maintained by prudent mortgage loan servicers having servicing portfolios of a
similar size.
96
<PAGE>
Section 8.22. Merger, Conversion, Consolidation or Succession
to Business of Master Servicer. Any corporation into which the Master Servicer
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer shall be a party, or any corporation succeeding to all or
substantially all of the business of the Master Servicer, shall be the successor
of the Master Servicer hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto provided that such
corporation meets the qualifications set forth in Section 8.20(g).
Section 8.23. Notices of Material Events. The Master Servicer
shall give prompt notice to the Certificate Insurer, the Trustee, Moody's and
Standard & Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which
with notice or the passage of time, or both, would result in the occurrence of a
default by the Sponsor, any Originator or the Master Servicer under any
Transaction Document or would constitute a material breach of a representation,
warranty or covenant under any Transaction Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Sponsor, the Master Servicer or AMHC in any federal, state or local court or
before any governmental body or agency, or before any arbitration board, or any
such proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse effect upon any the Sponsor's, the
Master Servicer's or AMHC's ability to perform its obligations under any
Transaction Document;
(c) The commencement of any proceedings by or against the
Sponsor, the Master Servicer or AMHC under any applicable bankruptcy,
reorganization, liquidation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator, trustee or other
similar official shall have been, or may be, appointed or requested for the
Sponsor, the Master Servicer or AMHC; and
(d) The receipt of notice from any agency or governmental body
having authority over the conduct of any of the Sponsor's the Master Servicer's
or the AMHC's business that the Sponsor, the Master Servicer or AMHC is to cease
and desist, or to undertake any practice, program, procedure or policy employed
by the Sponsor, the Master Servicer or AMHC in the conduct of the business of
any of them, and such cessation or undertaking will materially adversely affect
the conduct of the Sponsor's, the Master Servicer's or AMHC's business or its
ability to perform under the Transaction Documents or
97
<PAGE>
materially adversely affect the financial affairs of the Sponsor, the Master
Servicer or AMHC.
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust created hereunder
and all obligations created by this Agreement will terminate upon the earlier of
(i) the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policy of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
the REMIC Trust is effected as described below or (iii) as described in Section
9.2 or 9.3 hereof. To effect a termination of this Agreement pursuant to clause
(ii) above, the Owners of all Certificates then Outstanding shall (x)
unanimously direct the Trustee on behalf of the Trust to adopt a plan of
complete liquidation with respect to the REMIC Trust, as contemplated by Section
860F(a)(4) of the Code and (y) provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such liquidation
constitutes a Qualified Liquidation, and the Trustee either shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, or shall distribute equitably in kind all of the assets of the Trust
Estate to the remaining Owners of the Certificates based on their interests in
the Trust, each in accordance with such plan, so that the liquidation or
distribution of the Trust Estate, the distribution of any proceeds of the
liquidation and the termination of this Agreement occur no later than the close
of the 90th day after the date of adoption of the plan of liquidation and such
liquidation qualifies as a Qualified Liquidation. In no event, however, will the
Trust created by this Agreement continue beyond the expiration of twenty-one
(21) years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the United Kingdom, living
on the date hereof. The Trustee shall give written notice of termination of the
Agreement to each Owner in the manner set forth in Section 11.5.
Section 9.2. Termination Upon Option of Master Servicer. (a)
On any Remittance Date on or after the Clean-Up Call Date, the Master Servicer
acting directly or through one or more affiliates may determine to purchase and
may cause the purchase from the Trust of all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired in respect of
any such Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise
then
98
<PAGE>
remaining in the Trust Estate at a price equal to the sum of (v) the greater of
(i) 100% of the aggregate Loan Balances of the related Mortgage Loans as of the
day of purchase minus (a) the amount actually remitted by the Master Servicer
representing the related Monthly Remittance Amount on such Remittance Date for
the related Remittance Period and (b) any unreimbursed Delinquency Advances,
Servicing Advances and Nonrecoverable Advances and (ii) the fair market value of
such Mortgage Loans, (w) the amount of any difference between the related
Monthly Interest Remittance Amount actually remitted by the Master Servicer on
such Remittance Date and the related Monthly Interest Remittance Amount due on
such Remittance Date and (x) the related Reimbursement Amount, if any, as of
such Remittance Date (such amount, the "Termination Price"). In connection with
such purchase, the Master Servicer shall remit to the Trustee all amounts then
on deposit in the Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase. Notwithstanding the above, in the event that, on the Remittance
Date immediately preceding the Final Scheduled Payment Date, the Trust has not
yet been terminated, the Master Servicer, on such Remittance Date, shall
exercise the purchase option described in this Section 9.2(a).
(b) In connection with any such purchase, the Master Servicer
shall provide to the Trustee an opinion of counsel experienced in federal income
tax matters to the effect that such purchase constitutes a Qualified Liquidation
of the REMIC Trust.
(c) Promptly following any such purchase, the Trustee will
release the Files to the Master Servicer, or otherwise upon their order, in a
manner similar to that described in Section 8.14 hereof.
(d) If the Master Servicer does not fulfill its obligation to
terminate the Trust pursuant to the last sentence of Section 9.2(a), then the
Certificate Insurer shall do so on the same terms.
Section 9.3. Termination Upon Loss of REMIC Status. (a)
Following a (x) final determination by the Internal Revenue Service, or by a
court of competent jurisdiction, in either case from which no appeal is taken
within the permitted time for such appeal, or (y) if any appeal is taken,
following a final determination of such appeal from which no further appeal can
be taken, to the effect that the REMIC Trust does not and will no longer qualify
as a "REMIC" pursuant to Section 860D of the Code (the "Final Determination") or
(z) following the delivery of an opinion of counsel ("REMIC Opinion") to the
effect that the effect of the Final Determination is to increase substantially
the probability that the REMIC Trust will no longer qualify as a "REMIC"
pursuant to Section 860D of the Code, on any Remittance Date
99
<PAGE>
on or after the date which is 30 calendar days following such Final
Determination, (i) the Owners of a majority in Percentage Interest represented
by the Class A Certificates then Outstanding may direct the Trustee to adopt a
plan of complete liquidation with respect to the Trust Estate and (ii) the
Certificate Insurer may notify the Trustee of the Certificate Insurer's
determination to purchase from the Trust all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the Trust Estate at a price equal to the Termination Price. In
connection with such purchase, the Master Servicer shall remit to the Trustee
all amounts then on deposit in the Principal and Interest Account for deposit in
the Certificate Account, which deposit shall be deemed to have occurred
immediately preceding such purchase.
(b) Upon receipt of such direction from the Owners of such
Class A Certificates or such notice from the Certificate Insurer, the Trustee
shall notify the holders of the Class R Certificates of such election to
liquidate or such determination to purchase, as the case may be, (the
"Termination Notice"). The Owner of a majority of the Percentage Interest of the
Class R Certificates then Outstanding may, on any Remittance Date, within 60
days from the date of receipt of the Termination Notice (the "Purchase Option
Period"), at their option, purchase from the Trust all (but not fewer than all)
Mortgage Loans in the Trust Estate, and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure, or otherwise in respect of any
Mortgage Loan then remaining in the Trust Estate at a purchase price equal to
the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the
Class RS Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Owners of the Class A Certificates have given the Trustee
the direction described in clause (a)(i) above, the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, such that, if so directed, the liquidation of the Trust Estate, the
distribution of the proceeds of such liquidation occur no later than the close
of the 60th day, or such later day as the Owners of the Class A Certificates
shall permit or direct in writing, after the expiration of the Purchase Option
Period and (ii) in the event that the Certificate Insurer has given the Trustee
notice of the Certificate Insurer's determination to purchase the Mortgage Loans
in the Trust Estate described in clause (a)(ii) preceding, the Certificate
Insurer shall, on any Remittance Date within 60 days, purchase all (but not
fewer than all) Mortgage Loans in the Trust Estate, and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure or otherwise in respect of
any Mortgage Loan then remaining in the Trust Estate. In connection with such
purchase, the Master Servicer shall remit to the Trustee all
100
<PAGE>
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(d) Following a Final Determination, the Owners of a majority
of the Percentage Interest of the Class RS Certificates then Outstanding may, at
their option on any Remittance Date and upon delivery to the Owners of the Class
A Certificates and the Certificate Insurer of an opinion of counsel experienced
in federal income tax matters selected by the Owners of such Class RS
Certificates which opinion shall be reasonably satisfactory in form and
substance to a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding and the Certificate Insurer, to the effect that
the effect of the Final Determination is to increase substantially the
probability that the gross income of the REMIC Trust will be subject to federal
taxation, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price. In
connection with such purchase, the Master Servicer shall remit to the Trustee
all amounts then on deposit in the Principal and Interest Account for deposit to
the Certificate Account, which deposit shall be deemed to have occurred
immediately preceding such purchase. The foregoing opinion shall be deemed
satisfactory unless the Owners of a majority of the Percentage Interest
represented by the Class A Certificates then Outstanding or the Certificate
Insurer give the Owners of a majority of the Percentage Interest of the Class RS
Certificates notice that such opinion is not satisfactory within thirty days
after receipt of such opinion.
Section 9.4. Disposition of Proceeds. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article IX to the Certificate Account; provided, however, that
any amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Master Servicer from
the Master Servicer's own funds shall be paid by the Trustee to the Master
Servicer.
Section 9.5. Netting of Amounts. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
101
<PAGE>
ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities.
(a) The Trustee (i) undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Trustee
and (ii) in the absence of bad faith on its part, may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished pursuant to and conforming to
the requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.
(b) Notwithstanding the appointment of the Master Servicer
hereunder, the Trustee is hereby empowered to perform the duties of the Master
Servicer hereunder whether following the failure of the Master Servicer to
perform, pursuant to Section 8.20 hereof or otherwise. Specifically, and not in
limitation of the foregoing, the Trustee shall have the power:
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into
assumption and substitution agreements as permitted
by Section 8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant to
Section 8.14;
(v) to make Delinquency Advances and Servicing Advances
and to pay Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own 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
102
<PAGE>
that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good
faith in accordance with the direction of the
Certificate Insurer or of the Owners of a majority in
Percentage Interest of the Certificates of the
affected Class or Classes and the Certificate Insurer
relating to the time, method and place of conducting
any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement relating to
such Certificates.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
(e) No provision of this Agreement shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The permissive right of the Trustee to take actions
enumerated in this Agreement shall not be construed as a duty and the Trustee
shall not be answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Agreement, or to take any
steps in the execution of the trusts hereby created or in the enforcement of any
rights and powers hereunder until it shall be indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees and other
reasonable disbursements and against all liability, except liability which is
adjudicated to have resulted from its negligence or willful misconduct, in
connection with any action so taken. The Trustee shall receive from the Sponsor
promptly upon demand therefor, reimbursement of expenses as are described in the
fee quote letter, dated December 6, 1996 and executed by the Sponsor.
Section 10.2. Removal of Trustee for Cause. (a) The Trustee
may be removed pursuant to paragraph (b) hereof upon the occurrence of any of
the following events (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
103
<PAGE>
(1) the Trustee shall fail to distribute to the Owners entitled
thereto on any Payment Date amounts available for distribution
in accordance with the terms hereof; or
(2) the Trustee shall fail in the performance of, or breach, any
covenant or agreement of the Trustee in this Agreement, or if
any representation or warranty of the Trustee made in this
Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall prove to be
incorrect in any material respect as of the time when the same
shall have been made, and such failure or breach shall
continue or not be cured for a period of 30 days after there
shall have been given, by registered or certified mail, to the
Trustee by the Sponsor, the Certificate Insurer or by the
Owners of at least 25% of the aggregate Percentage Interests
represented by the Class A Certificates then Outstanding, or,
if there are no Class A Certificates then Outstanding, by such
Percentage Interests represented by any Class B Certificates,
a written notice specifying such failure or breach and
requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Trustee, and
such decree or order shall have remained in force undischarged
or unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or sequestrator or
custodian of the property of the Trustee is appointed in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the
Trustee or relating to all or substantially all of its
property; or
(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.
104
<PAGE>
The Sponsor shall give to the Certificate Insurer and Moody's
and Standard & Poor's notice of the occurrence of any such event of which the
Sponsor is aware.
(b) If any event described in Paragraph (a) occurs and is
continuing, then and in every such case (i) the Certificate Insurer or (ii) with
the prior written consent (which shall not be unreasonably withheld) of the
Certificate Insurer (x) the Sponsor or (y) the Owners of a majority of the
Percentage Interests represented by the Class A Certificates, or, if there are
no Class A Certificates then Outstanding, by such Percentage Interest
represented by any Class of Class RS Certificates then Outstanding may, whether
or not the Trustee resigns pursuant to Section 10.9 hereof, immediately,
concurrently with the giving of notice to the Trustee, and without delaying the
30 days required for notice therein, appoint a successor Trustee pursuant to the
terms of Section 10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except as
otherwise provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Sponsor, the Certificate
Insurer or the Owners of any Class of Certificates mentioned herein
shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel, and the written
advice of such counsel shall be full and complete authorization and
protection in respect of any action 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
105
<PAGE>
which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document, but the Trustee
in its discretion may make such further inquiry or investigation into
such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed and supervised with due care by it hereunder; and
(h) the Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized by the Authorized Officer of any Person or within its rights
or powers under this Agreement other than as to validity and
sufficiency of its authentication of the Certificates.
Section 10.4. Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates, except any
such recitals relating to the Trustee, shall be taken as the statements of the
Sponsor and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representation as to the validity or sufficiency of this
Agreement or of the Certificates other than as to validity and sufficiency of
its authentication of the Certificates.
Section 10.5. May Hold Certificates. The Trustee or any agent
of the Trust, in its individual or any other capacity, may become an Owner or
pledgee of Certificates and may otherwise deal with the Trust with the same
rights it would have if it were not Trustee or such agent.
Section 10.6. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other trust funds except to the
extent required herein or required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Sponsor and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
Section 10.7. No Lien for Fees. The Trustee shall have no lien
on the Trust Estate for the payment of any fees and expenses.
106
<PAGE>
Section 10.8. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which shall be a corporation or
association organized and doing business under the laws of the United States of
America or of any State authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $100,000,000, subject
to supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Certificate Insurer and having (x)
long-term, unsecured debt rated at least A2 by Moody's (or such lower rating as
may be acceptable to Moody's) and (y) a long-term deposit rating of at least A
from Standard & Poor's (or such lower rating as may be acceptable to Standard &
Poor's). If such Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall, upon the request of the Sponsor
with the consent of the Certificate Insurer (which consent shall not be
unreasonably withheld) or of the Certificate Insurer, resign immediately in the
manner and with the effect hereinafter specified in this Article X.
Section 10.9. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice of resignation to the
Sponsor and by mailing notice of resignation by first-class mail, postage
prepaid, to the Certificate Insurer and the Owners at their addresses appearing
on the Register. A copy of such notice shall be sent by the resigning Trustee to
Moody's and Standard & Poor's. Upon receiving notice of resignation, the Sponsor
shall promptly appoint a successor trustee or trustees by written instrument, in
duplicate, executed on behalf of the Trust by an Authorized Officer of the
Sponsor, one copy of which instrument shall be delivered to the Trustee so
resigning and one copy to the successor trustee or trustees. 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.
107
<PAGE>
(c) If at any time the Trustee shall cease to be eligible
under Section 10.8 hereof and shall fail to resign after written request
therefor by the Sponsor or by the Certificate Insurer, the Certificate Insurer
or the Sponsor with the written consent of the Certificate Insurer may remove
the Trustee and appoint a successor trustee by written instrument, in duplicate,
executed on behalf of the Trust by an Authorized Officer of the Sponsor, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests
represented by the Class A Certificates, or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by Class RS Certificates then Outstanding may at any time, with the
prior written consent of the Certificate Insurer, remove the Trustee and appoint
a successor trustee by delivering to the Trustee to be removed, to the successor
trustee so appointed, to the Sponsor and to the Certificate Insurer, copies of
the record of the act taken by the Owners, as provided for in Section 11.3
hereof.
(e) If the Trustee fails to perform its duties in accordance
with the terms of this Agreement or becomes ineligible to serve as Trustee, the
Certificate Insurer may remove the Trustee and appoint a successor trustee by
written instrument, in triplicate, signed by the Certificate Insurer duly
authorized, one complete set of which instruments shall be delivered to the
Sponsor, one complete set to the Trustee so removed and one complete set to the
successor Trustee so appointed.
(f) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Sponsor shall promptly appoint a successor Trustee acceptable
to the Certificate Insurer. If within one year after such resignation, removal
or incapability or the occurrence of such vacancy, a successor Trustee shall be
appointed by act of the Owners of a majority of the Percentage Interests
represented by the Class A Certificates then Outstanding or, if there are no
Class A Certificates then Outstanding, by such majority of the Percentage
Interest of the Class RS Certificates delivered to the Sponsor and the retiring
Trustee, the successor Trustee so appointed shall forthwith upon its acceptance
of such appointment become the successor Trustee and supersede the successor
Trustee appointed by the Sponsor. If no successor Trustee shall have been so
appointed by the Sponsor or the Owners and shall have accepted appointment in
the manner hereinafter provided, any Owner may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor Trustee.
108
<PAGE>
(g) The Sponsor shall give notice of any removal of the
Trustee by mailing notice of such event by first-class mail, postage prepaid, to
the Certificate Insurer and to the Owners as their names and addresses appear in
the Register. Each notice shall include the name of the successor Trustee and
the address of its corporate trust office.
Section 10.10. Acceptance of Appointment by Successor Trustee.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Sponsor on behalf of the Trust and to its predecessor Trustee an
instrument accepting such appointment hereunder and stating its eligibility to
serve as Trustee hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts, duties and obligations of its predecessor hereunder; but, on
request of the Sponsor or the successor Trustee, such predecessor Trustee shall,
upon payment of its charges then unpaid, execute and deliver an instrument
transferring to such successor Trustee all of the rights, powers and trusts of
the Trustee so ceasing to act, and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such Trustee so ceasing to
act hereunder. Upon request of any such successor Trustee, the Sponsor on behalf
of the Trust shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
Upon acceptance of appointment by a successor Trustee as
provided in this Section, the Sponsor shall mail notice thereof by first-class
mail, postage prepaid, to the Owners at their last addresses appearing upon the
Register. The Sponsor shall send a copy of such notice to Moody's and Standard &
Poor's. If the Sponsor fails to mail such notice within ten days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of the Trust.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor shall be qualified and eligible under
this Article X.
Section 10.11. Merger, Conversion, Consolidation or Succession
to Business of the Trustee. Any corporation or 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
109
<PAGE>
eligible under this Article X. In case any Certificates have been executed, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such Trustee may adopt such execution and deliver
the Certificates so executed with the same effect as if such successor Trustee
had itself executed such Certificates.
Section 10.12. Reporting; Withholding. The Trustee shall
timely provide to the Owners the Internal Revenue Service's Form 1099 and any
other statement required by applicable Treasury regulations as determined by the
Sponsor, and shall withhold, as required by applicable law, federal, state or
local taxes, if any, applicable to distributions to the Owners, including but
not limited to backup withholding under Section 3406 of the Code and the
withholding tax on distributions to foreign investors under Sections 1441 and
1442 of the Code.
Section 10.13. Liability of the Trustee. The Trustee shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Sponsor, the
Master Servicer or any Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Trustee
or any such Person against any liability which would otherwise be imposed by
reason of negligent action, negligent failure to act or bad faith in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Subject to the foregoing sentence, the Trustee shall not be
liable for losses on investments of amounts in any Account (except for any
losses on obligations on which the bank serving as Trustee is the obligor). In
addition, the Sponsor and Master Servicer covenant and agree to indemnify the
Trustee, and its officers, directors, employees and agents including, without
limitation, when the Trustee is acting as Master Servicer, and hold it harmless
against, any and all losses, liabilities, damages, claims or expenses (including
legal fees and expenses) other than those resulting from the negligence or bad
faith of the Trustee. The Trustee and any director, officer, employee or agent
of the Trustee may rely and shall be protected in acting or refraining from
acting in good faith on any certificate, notice or other document of any kind
prima facie properly executed and submitted by the Authorized Officer of any
Person respecting any matters arising hereunder.
Section 10.14. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the Master Servicer
and the Trustee acting jointly shall have the
110
<PAGE>
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee and the Certificate Insurer to act as co-Trustee
or co-Trustees, jointly with the Trustee, of all or any part of the Trust Estate
or separate Trustee or separate Trustees of any part of the Trust Estate, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Owners, such title to the Trust Estate, or any part thereof, and, subject to the
other provisions of this Section 10.14, such powers, duties, obligations, rights
and trusts as the Master Servicer and the Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, or in the case any
event indicated in Sections 8.20(a) or 8.20(b) shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment with
the consent of the Certificate Insurer. No co-Trustee or separate Trustee
hereunder shall be required to meet the terms of eligibility as a successor
Trustee under Section 10.8 and no notice to Owner of the appointment of any
co-Trustee or separate Trustee shall be required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate Trustee or
co-Trustee jointly (it being understood that such separate Trustee or
co-Trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Trustee or co-Trustee, but solely at
the direction of the Trustee;
(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
111
<PAGE>
Trustee or co-Trustee shall refer to this Agreement and the conditions of this
Section 10.14. Each separate Trustee and co-Trustee, upon its acceptance of the
trusts conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately, as may
be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer.
Any separate Trustee or co-Trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate Trustee
or co-Trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
The Trustee shall give to Moody's, the Sponsor and the
Certificate Insurer notice of the appointment of any Co-Trustee or separate
Trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions. Upon any
application or request by the Sponsor, the Certificate Insurer or the Owners to
the Trustee to take any action under any provision of this Agreement, the
Sponsor, the Certificate Insurer or the Owners, as the case may be, shall
furnish to the Trustee a certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action have been
complied with, except that in the case of any such application or request as to
which the furnishing of any documents is specifically required by any provision
of this Agreement relating to such 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;
112
<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 Sponsor or of the
Master Servicer, stating that the information with respect to such factual
matters is in the possession of the Sponsor or of the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any opinion of counsel may also be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Trustee, stating that the
information with respect to such matters is in the possession of the Trustee,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may be based on the written opinion of
other counsel, in which event such opinion of counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee may reasonably rely
upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
113
<PAGE>
Section 11.3. Acts of Owners. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Sponsor and/or the Certificate Insurer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Owners signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and the Trust, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Owner of any Certificate shall bind the
Owner of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.4. Notices, etc. to Trustee. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with the Trustee by any Owner, the Certificate Insurer or
by the Sponsor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
Section 11.5. Notices and Reports to Owners; Waiver of
Notices. Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless
114
<PAGE>
otherwise herein expressly provided) if mailed, first-class postage prepaid, to
each Owner affected by such event or to whom such report is required to be
mailed, at the address of such Owner as it appears on the Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice or the mailing of such report. In any case where a notice
or report to Owners is mailed in the manner provided above, neither the failure
to mail such notice or report nor any defect in any notice or report so mailed
to any particular Owner shall affect the sufficiency of such notice or report
with respect to other Owners, and any notice or report which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given or
provided.
Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Owners shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Owners when such notice is required
to be given pursuant to any provision of this Agreement, then any manner of
giving such notice as shall be satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency
that rated any Certificates, failure to give such notice shall not affect any
other rights or obligations created hereunder.
Section 11.6. Rules by Trustee and Sponsor. The Trustee may
make reasonable rules for any meeting of Owners. The Sponsor may make reasonable
rules and set reasonable requirements for its functions.
Section 11.7. Successors and Assigns. All covenants and
agreements in this Agreement by any party hereto shall bind its successors and
assigns, whether so expressed or not.
Section 11.8. Severability. In case any provision in this
Agreement or in the Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
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
115
<PAGE>
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
Section 11.10. Legal Holidays. In any case where the date of
any Remittance Date, any Payment Date, any other date on which any distribution
to any Owner is proposed to be paid, or any date on which a notice is required
to be sent to any Person pursuant to the terms of this Agreement shall not be a
Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made or mailed on the nominal date of any such Remittance Date, such Payment
Date, or such other date for the payment of any distribution to any Owner or the
mailing of such notice, as the case may be, and no interest shall accrue for the
period from and after any such nominal date, provided such payment is made in
full on such next succeeding Business Day.
Section 11.11. Governing Law. In view of the fact that Owners
are expected to reside in many states and outside the United States and the
desire to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Certificate shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
Section 11.12. Counterparts. This instrument may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.13. Usury. The amount of interest payable or paid
on any Certificate under the terms of this Agreement shall be limited to an
amount which shall not exceed the maximum nonusurious rate of interest allowed
by the applicable laws of the State of New York or any applicable law of the
United States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error 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
116
<PAGE>
paid to the Trustee for the benefit of Owners of Certificates for the use,
forbearance or detention of money shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such Certificates.
Section 11.14. Amendment. (a) The Trustee, the Sponsor and the
Master Servicer, may at any time and from time to time, with the prior written
approval of the Certificate Insurer but without the giving of notice to or the
receipt of the consent of the Owners, amend this Agreement, and the Trustee
shall consent to such amendment, for the purpose of (i) curing any ambiguity, or
correcting or supplementing any provision hereof which may be inconsistent with
any other provision hereof, or to add provisions hereto which are not
inconsistent with the provisions hereof, (ii) upon receipt of an opinion of
counsel experienced in federal income tax matters to the effect that no
entity-level tax will be imposed on the REMIC Trust or upon the transferor of a
Class RS Certificate as a result of the ownership of any Class RS Certificate by
a Disqualified Organization, removing the restriction on transfer set forth in
Section 5.8(b) hereof or (iii) complying with the requirements of the Code and
the regulations proposed or promulgated thereunder; provided, however, that any
such action shall not, as evidenced by an opinion of counsel delivered to the
Trustee, materially and adversely affect the interests of any Owner (without its
written consent).
(b) The Trustee, the Sponsor and the Master Servicer may, at
any time and from time to time, with the prior written approval of the
Certificate Insurer but without the giving of notice to or the receipt of the
consent of the Owners, amend this Agreement, and the Trustee shall consent to
such amendment, for the purpose of changing the definition of "Specified
Subordinated Amount" with respect to any Mortgage Loan Group; provided, however,
that no such change shall affect the weighted average life of the related Class
of Class A Certificates (assuming an appropriate prepayment speed as determined
by the Representative) by more than five percent, as determined by the
Representative.
(c) This Agreement may also be amended by the Trustee, the
Sponsor, and the Master Servicer at any time and from time to time, with the
prior written approval of the Certificate Insurer and not less than a majority
of the Percentage Interest represented by each affected Class of Certificates
then Outstanding, for the purpose of adding any provisions or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Owners hereunder; provided, however, that no such
amendment shall (a) change in any manner the amount of, or change the timing of,
payments which are required to be distributed to any Owner without the consent
of the Owner of such Certificate, (b) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such
117
<PAGE>
amendments or (c) result in a down-rating or withdrawal of any ratings then
assigned to the Class A Certificates, without the consent of the Owners of all
Certificates of the Class or Classes affected then Outstanding.
(d) Each proposed amendment to this Agreement shall be
accompanied by an opinion of counsel nationally recognized in federal income tax
matters addressed to the Trustee and to the Certificate Insurer to the effect
that such amendment would not adversely affect the status of the REMIC Trust as
a REMIC.
(e) The Certificate Insurer, the Owners, Moody's and Standard
& Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
Section 11.15. REMIC Status; Taxes. (a) The Tax Matters Person
shall prepare and file or cause to be filed with the Internal Revenue Service
Federal tax or information returns with respect to the REMIC Trust and the
Certificates containing such information and at the times and in such manner as
may be required by the Code or applicable Treasury regulations, and shall
furnish to Owners such statements or information at the times and in such manner
as may be required thereby. For this purpose, the Tax Matters Person may, but
need not, rely on any proposed regulations of the United States Department of
the Treasury. The Tax Matters Person shall indicate the election to treat the
REMIC Trust as a REMIC (which election shall apply to the taxable period ending
[December 31, 1996] and each calendar year thereafter) in such manner as the
Code or applicable Treasury regulations may prescribe. The Trustee, as Tax
Matters Person appointed pursuant to Section 11.17 hereof shall sign all tax
information returns filed pursuant to this Section 11.15. The Tax Matters Person
shall provide information necessary for the computation of tax imposed on the
transfer of a Class RS Certificate to a Disqualified Organization, or an agent
of a Disqualified Organization, or a pass-through entity in which a Disqualified
Organization is the record holder of an interest. The Tax Matters Person shall
provide the Trustee with copies of any Federal tax or information returns filed,
or caused to be filed, by the Tax Matters Person with respect to the REMIC Trust
or the Certificates.
(b) The Tax Matters Person shall timely file all reports
required to be filed by the Trust with any federal, state or local governmental
authority having jurisdiction over the Trust, including other reports that must
be filed with the Owners, such as the Internal Revenue Service's Form 1066 and
Schedule Q and the form required under Section 6050K of the Code, if applicable
to REMICs. Furthermore, the Tax Matters Person shall report to Owners, if
required, with respect to the allocation of expenses pursuant to Section 212 of
the Code in accordance with the specific instructions to the Tax
118
<PAGE>
Matters Person by the Sponsor with respect to such allocation of expenses. The
Tax Matters Person shall collect any forms or reports from the Owners determined
by the Sponsor to be required under applicable federal, state and local tax
laws.
(c) The Tax Matters Person shall provide to the Internal
Revenue Service and to persons described in Section 860E(e)(3) and (6) of the
Code the information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E-Z(a)(5), or any successor regulation thereto.
(d) The Sponsor covenants and agrees that within ten Business
Days after receiving a written request from the Trustee it shall provide to the
Trustee any information necessary to enable the Trustee to meet its obligations
under subsections (b) and (c) above.
(e) The Trustee, the Sponsor and the Master Servicer each
covenants and agrees for the benefit of the Owners (i) to take no action which
would result in the termination of "REMIC" status for the REMIC Trust, (ii) not
to engage in any "prohibited transaction", as such term is defined in Section
860F(a)(2) of the Code and (iii) not to engage in any other action which may
result in the imposition on the REMIC Trust of any other taxes under the Code.
(f) The REMIC Trust shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b), no
Eligible Investment shall be sold prior to its stated maturity (unless sold
pursuant to a plan of liquidation in accordance with Article IX hereof).
(h) Neither the Sponsor nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the
Trustee or the Sponsor may engage in any of the transactions prohibited by such
clauses, provided that the Trustee shall have received the prior written consent
of the Certificate Insurer and an opinion of counsel experienced in federal
income tax matters to the effect that such transaction does not result in a tax
imposed on the Trustee or cause a termination of REMIC status for the REMIC
Trust; provided, however, that such transaction is otherwise permitted under
this Agreement.
119
<PAGE>
Section 11.16. Additional Limitation on Action and Imposition
of Tax. (a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters to the effect that such transaction does not result
in a tax imposed on the Trust or cause a termination of REMIC status for the
REMIC Trust, (i) sell any assets in the Trust Estate, (ii) accept any
contribution of assets after the Closing Day or (iii) agree to any modification
of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust as defined in Section 860F(a)(2) of the Code,
on the "net income from foreclosure property" as defined in Section 860G(c) of
the Code, on any contribution to the REMIC Trust after the Closing Day pursuant
to Section 860G(d) of the Code, or any other tax (other than any minimum tax
imposed by Sections 23151(a) or 23153(a) of the California Revenue and Taxation
Code) is imposed, such tax shall be paid by (i) the Trustee, if such tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement, (ii) the Master Servicer, if such tax arises out of or results
from a breach by the Master Servicer of any of its obligations under this
Agreement, or otherwise (iii) the Owners of the Class RS Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the Owners of the Class RS Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Owners of the Class RS Certificates on
any Payment Date sufficient funds to reimburse the Trustee for the payment of
such tax (to the extent that the Trustee has not been previously reimbursed or
indemnified therefor).
Section 11.17. Appointment of Tax Matters Person. The Owners
of the Class R Certificates hereby appoint the Trustee as their agent to act as
the Tax Matters Person for REMIC Trust for all purposes of the Code and such Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the Code.
Section 11.18. The Certificate Insurer. The Certificate
Insurer is a third-party beneficiary of this Agreement. Any right conferred to
the Certificate Insurer shall be suspended during the continuance of a
Certificate Insurer Default. During the continuance of a Certificate Insurer
Default the Certificate Insurer's rights hereunder shall vest in the Owners of
the Class A Certificates and shall be exercisable by the Owners of at least a
majority in Percentage Interest of the Class A Certificates then Outstanding or,
if there are no Class A Certificates then Outstanding, by at least a majority of
the Class R Certificates then Outstanding. At such time as the Class A
Certificates are no longer Outstanding hereunder and the
120
Certificate Insurer has been reimbursed for all Insured Payments to which it is
entitled hereunder, the Certificate Insurer's rights hereunder shall terminate.
Section 11.19. Maintenance of Records. Each Originator and
Owner of a Class R Certificate shall each continuously keep an original executed
counterpart of this Agreement in its official records.
Section 11.20. Notices. All notices hereunder shall be given
as follows, until any superseding instructions are given to all other Persons
listed below:
The Trustee: Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92714
Attention: Advanta 1996-4
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: Advanta Mortgage Conduit
Services Inc.
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Attention:
The Master Advanta Mortgage Corp. USA
Servicer: 16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Fax: (619) 674-3592
The Certificate
Insurer : Financial Guaranty Insurance
Company
115 Broadway
New York, New York 10006
Attention: Risk Management
Tel: (212) 312-3000
Fax: (212) 312-3090
with a copy to the General Counsel
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring
Department
121
<PAGE>
Standard & Poor's: Standard & Poor's Ratings Group
26 Broadway
15th Floor
New York, New York 10004
Attention: Surveillance Dept.
Underwriters: Prudential Securities Incorporated
Representative of the
Underwriters
One New York Plaza
New York, New York 10292
122
<PAGE>
IN WITNESS WHEREOF, the Sponsor, the Master Servicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
as Sponsor
By:_____________________________
Mark T. Dunsheath
Vice President
ADVANTA MORTGAGE CORP. USA
as Master Servicer
By:_____________________________
Mark T. Dunsheath
Vice President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:_____________________________
Erin Deegan
Assistant Vice President
[Pooling and Servicing Agreement]
<PAGE>
STATE OF CALIFORNIA )
: ss.:
COUNTY OF )
On the 19th day of December, 1996, before me personally came
Erin Deegan to me known, who, being by me duly sworn did depose and say that her
office is located at Three Park Plaza, Irvine, California 92714; that she is an
Assistant Vice President of Bankers Trust Company of California, N.A., the
national banking corporation described in and that executed the above instrument
as Trustee; and that she signed her name thereto under authority granted by the
Board of Directors of said national banking association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
------------------------------
Notary Public
<PAGE>
EXECUTION COPY
- -------------------------------------------------------------------------------
MASTER LOAN TRANSFER AGREEMENT
Dated as of February 15, 1995
by and among
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
COLONIAL NATIONAL BANK USA
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.,
as Affiliated Originators,
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
and
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions.................................................. 1
Section 2. Interest Calculations........................................ 4
Section 3. Transfers of Mortgage Loans.................................. 4
Section 4. Representations, Warranties and Covenants
Regarding the Affiliated Originators and the
Sponsor...................................................... 4
Section 5. Representations and Warranties of the
Affiliated Originators Regarding the Mortgage
Loans........................................................ 9
Section 6. Authorized Representatives................................... 16
Section 7. Notices...................................................... 16
Section 8. Governing Law................................................ 17
Section 9. Assignment................................................... 17
Section 10. Counterparts................................................. 17
Section 11. Amendment.................................................... 17
Section 12. Severability of Provisions................................... 17
Section 13. No Agency; No Partnership or Joint Venture................... 17
Section 14. Further Assurances........................................... 18
Section 15. The Certificate Insurer...................................... 18
Section 16. Maintenance of Records....................................... 18
i
<PAGE>
THIS MASTER LOAN TRANSFER AGREEMENT, dated as of February 15, 1995,
between Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta
Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage
Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Mortgage Conduit
Services, Inc., Advanta Finance Corp. and Colonial National Bank USA, each a
seller (each an "Affiliated Originator" and collectively, the "Affiliated
Originators"), Bankers Trust Company of California, N.A., as trustee
("Trustee") and Advanta Mortgage Conduit Services, Inc., as sponsor
("Sponsor");
I. BACKGROUND
A. Each Affiliated Originator is an originator or purchaser of
mortgage loans which such Affiliated Originator may, from time to time, convey
to the Conduit Acquisition Trust, or cause the Conduit Acquisition Trust to
acquire;
B. The Affiliated Originators and the Sponsor expect, from time to
time, to cause that such mortgage loans to be conveyed to an Advanta Trust in
connection with a securitization transaction sponsored by the Sponsor.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
Section 1. Definitions. Whenever used in this Agreement or in any
Conveyance Agreement, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this Article;
provided, however, that any capitalized terms used herein or in any conveyance
Agreement and not defined herein shall have their respective meanings as set
forth in the related Advanta Pooling Agreement.
Advanta Pooling Agreement: Any Pooling and Servicing Agreement entered
into by Advanta Mortgage Conduit Services, Inc. as Sponsor, Advanta Mortgage
Corp. USA, as Master Servicer and a trustee, as it may be amended and
supplemented from time to time by the parties thereto.
<PAGE>
Advanta Trust: A securitization trust created by the Sponsor into
which Mortgage Loans described in this Agreement and the Conveyance Agreements
are deposited.
Agreement: This Master Loan Transfer Agreement as it may be amended
from time to time, including the exhibits and supplements hereto.
Bulk Acquisition Loan: Any Mortgage Loan purchased by an Affiliated
Originator from another Originator (other than any other Affiliated Originator)
as part of a bulk portfolio acquisition.
Conduit Acquisition P&S: The Pooling and Servicers Agreement dated as
of February 15, 1995 by and between the Sponsor and the Trustee relating to the
Conduit Acquisition Trust.
Conduit Acquisition Trust: The trust created pursuant to the Conduit
Acquisition P&S.
Conveyance Agreement: Any Conveyance Agreement relating to a Pool, in
substantially the form set forth as Exhibit A hereto.
Coupon Rate: The rate of interest borne by each Note.
Cut-Off Date: With respect to any Pool, as defined in the related
Conveyance Agreement.
FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
File: The documents delivered to the Trustee pursuant to the document
delivery provisions of the Conduit Acquisition P&S pertaining to a particular
Mortgage Loan, together with any additional documents required to be added to
the File pursuant to the Conduit Acquisition P&S.
2
<PAGE>
First Mortgage Loan: A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Property.
FNMA: The Federal National Mortgage Association, a federally-chartered
and privately-owned corporation existing under the Federal National Mortgage
Association Charter Act, as amended, or any successor thereof.
Loan Balance: With respect to each Mortgage Loan, the outstanding
principal balance thereof on the related CutOff Date, less any related
Principal Remittance Amounts relating to such Mortgage Loan included in
previous related Monthly Remittance Amounts that were transferred by the Master
Servicer or any Sub-Servicer to the Trustee for deposit in the related
Certificate Account.
Master Servicer: Advanta Mortgage Corp. USA, a Delaware corporation,
and its permitted successors and assigns.
Mortgage Loans: Each of the mortgage loans subject hereto, together
with any Qualified Replacement Mortgages substituted therefor in accordance
with the related Advanta Pooling Agreement.
Note: The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
Offered Certificates: Any securities issued by an Advanta Trust which
are not retained by the Sponsor or any Originator.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool: Any group of Mortgage Loans transferred to the Sponsor pursuant
to a specific Conveyance Agreement.
Property: The underlying property securing a Mortgage Loan.
3
<PAGE>
Qualified Mortgage: "Qualified Mortgage" shall have the meaning set
forth from time to time in the definition thereof at Section 860G(a)(3) of the
Code (or any successor statute thereto) and applicable to the related Advanta
Trust.
Schedules of Mortgage Loans: The Schedules of Mortgage Loans required
to be delivered pursuant to the related Advanta Pooling Agreement.
Second Mortgage Loan: A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Property.
Senior Lien: With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien; and
with respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
Third Mortgage Loan: A Mortgage Loan which constitutes a third
priority mortgage lien with respect to the related Property.
Trustee: Bankers Trust Company of California, N.A., located on the
date of execution of this Agreement at 3 Park Plaza, Irvine, California 92714,
a national banking association, not in its individual capacity but solely as
Trustee, and any successor hereunder.
Unaffiliated Originator Loan: Any Mortgage Loan purchased by an
Affiliated Originator from an Unaffiliated Originator.
Unaffiliated Originators: Any Originator (x) not affiliated with the
Sponsor and (y) approved in writing by the Certificate Insurer.
Section 2. Interest Calculations. All calculations of interest
hereunder, including, without limitation, calculations of interest at the
Coupon Rate, which are made in respect of the Loan Balance of a Mortgage Loan
shall be made on a daily basis using a 360-day year comprised of twelve 30-day
months.
4
<PAGE>
Section 3. Transfers of Mortgage Loans. From time to time in
connection with the establishment of Advanta Trusts the Affiliated Originators
and the Sponsor, intend to transfer Mortgage Loans from the Conduit Acquisition
Trust to the related Advanta Trust. Each such transfer will be evidenced by a
Conveyance Agreement in substantially the form of Exhibit A hereto.
Section 4. Representations, Warranties and Covenants Regarding the
Affiliated Originators and the Sponsor. (a) Each Affiliated Originator
hereby represents and warrants to the Sponsor, the Trustee and their
respective successors and assigns that, as of the date hereof;
(i) Such Affiliated Originator is a corporation (or, in the
case of Colonial National Bank USA, a national banking association)
duly organized, validly existing and in good standing under the laws
governing its creation and existence and is in good standing as a
foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it make such
qualification necessary. Such Affiliated Originator has all requisite
corporate power and authority to own and operate its properties, to
carry out its business as presently conducted and as proposed to be
conducted, to enter into and discharge its obligations under this
Agreement and the Conveyance Agreements.
(ii) The execution and delivery of this Agreement by such
Affiliated Originator and its performance and compliance with the
terms of this Agreement and the Conveyance Agreements to which it is a
party have been duly authorized by all necessary corporate action on
the part of such Affiliated Originator and will not violate such
Affiliated Originator's Articles of Incorporation, Articles of
Association or Bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under,
or result in a breach of, any material contract, agreement or other
instrument to which such Affiliated Originator or its properties is a
party or by which such Affiliated Originator is bound or violate any
statute or any
5
<PAGE>
order, rule or regulation of any court, governmental agency or body or
other tribunal having jurisdiction over such Affiliated Originator or
any of its properties.
(iii) This Agreement and the Conveyance Agreements to which
such Affiliated Originator is a party, assuming due authorization,
execution and delivery by the other parties hereto and thereto, each
constitutes a valid, legal and binding obligation of such Affiliated
Originator, enforceable against it in accordance with the terms
hereof, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles
of equity (whether considered in a proceeding or action in equity or
at law).
(iv) Such Affiliated Originator is not in default with
respect to any order or decree of any court or any order, regulation
or demand of any federal, state, municipal or governmental agency,
which might have consequences that would materially and adversely
affect the condition (financial or other) or operations of such
Affiliated Originator or its properties, or might have consequences
that would materially and adversely affect its performance hereunder
and under the other Conveyance Agreements to which such Affiliated
Originator is a party, or which would draw into question the validity
of this Agreement or the Mortgage Loans taken as a whole or of any
action taken or to be taken in connection with the obligations of the
Affiliated Originator contemplated herein.
(v) No litigation is pending or, to the best of such
Affiliated Originator's knowledge, threatened against such Affiliated
Originator which litigation might have consequences that would
prohibit its entering into this Agreement or any Conveyance Agreements
to which it is a party or that would materially and adversely affect
the condition (financial or otherwise) or operations of such
Affiliated Originator or its properties or might have consequences
that would materially and adversely affect
6
<PAGE>
its performance hereunder and under the Conveyance Agreements to which
such Affiliated Originator is a party.
(vi) Neither this Agreement nor any certificate of an
officer, statement furnished in writing or report delivered pursuant
to the terms hereof by such Affiliated Originator contains any untrue
statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(vii) Upon the receipt of each Mortgage Loan and other items
of the Mortgage by the Trustee under this Agreement, the related
Advanta Trust will have good and marketable title to such Mortgage
Loan and such other items of the related Trust Estate free and clear
of any lien (other than liens which will be simultaneously released).
(viii) Neither such Affiliated Originator nor any affiliate
thereof will report on any financial statement any part of the
Servicing Fee as an adjustment to the sales price of the Mortgage
Loans.
(ix) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or
agency (other than any such actions, approvals, etc., under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which such Affiliated Originator makes no such representation or
warranty), that are necessary or advisable in connection with the sale
of the Mortgage Loans and the execution and delivery by such
Affiliated Originator of this Agreement and the Conveyance Agreements
to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are
not subject to any pending proceedings or appeals (administrative,
judicial or otherwise) and either the time within which any appeal
7
<PAGE>
therefrom may be taken or review thereof may be obtained has expired
or no review thereof may be obtained or appeal therefrom taken, and
are adequate to authorize the consummation of the transactions
contemplated by this Agreement and the conveyance Agreements on the
part of such Affiliated Originator and the performance by such
Affiliated Originator of its obligations under this Agreement and such
of the Conveyance Agreements to which it is a party.
(x) The origination practices used by such Affiliated
Originator with respect to the Mortgage Loans originated by such
Affiliated Originator have been, (i) in all material respects, legal,
proper, prudent and customary in the mortgage loan lending business
and (ii) in compliance with the Servicer's underwriting criteria as
described in the Prospectus.
(xi) The transactions contemplated by this Agreement are in
the ordinary course of business of such Affiliated Originator. The
transfer, assignment and conveyance of the Mortgage Notes and the
Mortgages by the Servicer pursuant to this Agreement are not subject
to the bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction.
(xii) Such Affiliated Originator received fair consideration
and reasonably equivalent value in exchange for the sale of the
interests in the Mortgage Loans.
(xiii) Such Affiliated Originator did not sell any interest
in any Mortgage Loan with any intent to hinder, delay or defraud any
of its respective creditors.
(xiv) Such Affiliated Originator is solvent, and such
Affiliated Originator will not be rendered insolvent as a result of
the sale of the Mortgage Loans to the related Advanta Trust.
The representations and warranties set forth in this paragraph (a) shall
survive the sale and assignment of the Mortgage Loans to the Sponsor.
8
<PAGE>
In addition, each Affiliated Originator hereby covenants to perform
the obligations, if any, imposed upon it by the related Advanta Pooling
Agreement.
(b) The Sponsor hereby represents and warrants to each Affiliated
Originator and the Trustee that, as of the date hereof:
(i) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all licenses and qualifications necessary to carry on its
business as now being conducted and to perform its obligations
hereunder; the Sponsor has the power and authority to execute and
deliver this Agreement and to perform its obligations in accordance
herewith; the execution, delivery and performance of this Agreement
(including any Conveyance Agreement and any other instruments of
transfer to be delivered pursuant to this Agreement) by the Sponsor
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action and do
not violate the organization documents of the Sponsor, contravene or
violate any law, regulation, rule, order, judgement or decree to which
the Sponsor or its properties are subject or contravene, violate or
result in any breach of any provision of, or constitute a default
under, or result in the imposition of any lien on any assets of the
Sponsor pursuant to the provisions of, any mortgage, indenture,
contract, agreement or other undertaking to which the Sponsor is a
party or which purports to be binding upon Sponsor or any of Sponsor's
assets; this Agreement evidences the valid and binding obligation of
the Sponsor enforceable against the Sponsor in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditor's rights generally or the application of equitable
principles in any proceeding, whether at law or in equity;
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or
9
<PAGE>
from any federal, state or other governmental authority or agency,
that are necessary in connection with the execution and delivery by
the Sponsor of this Agreement, have been duly taken, given or
obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings or appeals (administrative,
judicial or otherwise) and either the time within which any appeal
therefrom may be taken or review thereof may be obtained has expired
or no review thereof may be obtained or appeal therefrom taken, and
are adequate to authorize the consummation of the transactions
contemplated by this Agreement on the part of the Sponsor and the
performance by the Sponsor of its obligations under this Agreement;
and
(iii) There is no action, suit, proceeding or investigation
pending or, to the best of the Sponsor's knowledge, threatened against
the Sponsor which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Sponsor or in any
material impairment of the right or ability of the Sponsor to carry on
its business substantially as now conducted, or in any material
liability on the part of the Sponsor or which would draw into question
the validity of this Agreement or of any action taken or to be taken
in connection with the obligations of the Sponsor contemplated herein,
or which would be likely to impair the ability of the Sponsor to
perform under the terms of this Agreement.
The representations and warranties set forth in this paragraph (b) shall
survive the sale and assignment of the Mortgage Loans to the Sponsor. Upon
discovery of a breach of any of the foregoing representations and warranties
which materially and adversely affects the interests of the Affiliated
Originator, the Affiliated Originator shall give prompt written notice to the
Sponsor. Within 30 days of its receipt of notice of breach, the Sponsor shall
cure such breach in all material respects.
Section 5. Representations and Warranties of the Affiliated
Originators Regarding the Mortgage Loans. (a) Set forth in paragraph (b) below
is a listing of
10
<PAGE>
representations and warranties which will be deemed to have been made by each
Affiliated Originator in connection with each conveyance of a Pool from the
Conduit Acquisition Trust to the related Advanta Trust. In addition, a
Conveyance Agreement may, with respect to the Mortgage Loans in the related
Pool, delete or modify any of such representations and warranties, or may add
additional representations and warranties ("Additional Representations and
Warranties"). The representations and warranties listed in paragraph (b) below,
together with any Additional Representations and Warranties, are the
"Representations and Warranties". Reference to the Cut-Off Date are as of the
Cut-Off Date set forth in the related Conveyance Agreement with respect to a
Mortgage Loan.
(b) With respect to each Mortgage Loan, each Affiliated Originator
hereby represents, warrants and covenants to the Sponsor and the Trustee, as of
the related Cut-Off Date, as follows, on which representations, warranties and
covenants the Trustee relies in accepting the Mortgage Loans:
(i) The information with respect to each Mortgage Loan set
forth in the Schedules of Mortgage Loans is true and correct as of the
Cut-Off Date;
(ii) All of the original or certified documentation required
to be delivered to the Trustee pursuant to the related Advanta Pooling
Agreement (including all material documents related thereto) with
respect to each Mortgage Loan has been or will be delivered to the
Trustee in accordance with the terms of such Advanta Pooling
Agreement. Each of the documents and instruments specified to be
included therein has been duly executed and in due and proper form,
and each such document or instrument is in a form generally acceptable
to prudent mortgage lenders that regularly originate or purchase
mortgage loans comparable to the Mortgage Loans for sale to prudent
investors in the secondary market that invest in mortgage loans such
as the Mortgage Loans.
(iii) Each Mortgage Loan being transferred to the Sponsor is
a Qualified Mortgage and is a Mortgage;
11
<PAGE>
(iv) Each Property is improved by a single (one-to-four)
family residential dwelling, which may include condominiums and
townhouses but shall not include cooperatives;
(v) No Mortgage Loan had a Combined Loan-to-Value Ratio in
excess of 100%;
(vi) Each Mortgage is either a valid and subsisting first,
second or third lien of record on the Property (subject in the case of
any Second Mortgage Loan or Third Mortgage Loan only to a Senior Lien
on such Property) and subject in all cases to the exceptions to title
set forth in the title insurance policy, with respect to the related
Mortgage Loan, which exceptions are generally acceptable to banking
institutions in connection with their regular mortgage lending
activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate,
materially and adversely affect the benefits of the security intended
to be provided by such Mortgage;
(vii) Immediately prior to the transfer and assignment herein
contemplated, each Affiliated Originator held good and indefeasible
title to, and was the sole owner of, each Mortgage Loan conveyed by
such Affiliated Originator subject to no liens, charges, mortgages,
encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trustee will hold
good and indefeasible title to, and be the sole owner of, each
Mortgage Loan subject to no liens, charges, mortgages, encumbrances or
rights of others except liens which will be released simultaneously
with such transfer and assignment;
(viii) As of the related Cut-Off Date, no Mortgage Loan is 30
or more days Delinquent, except for any portion of the Mortgage Loans
which the related Advanta Pooling Agreement permits to be more than 30
days Delinquent;
12
<PAGE>
(ix) There is no delinquent tax or assessment lien or
mechanic's lien on any Property, and each Property is free of
substantial damage and is in good repair;
(x) There is no valid and enforceable right of rescission
offset, defense or counterclaim to any Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or
interest on such Note or the defense of usury, nor will the operation
of any of the terms of the Mortgage Note or the Mortgage, or the
exercise of any right thereunder, render either the Mortgage Note or
the Mortgage unenforceable in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;
(xi) There is no mechanics' lien or claim for work, labor or
material affecting any Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are
insured against by any title insurance policy referred to in paragraph
(xiii) below;
(xii) Each Mortgage Loan at the time it was made complied in
all material respects with all applicable state and federal laws and
regulations, including, without limitation, the federal
Truth-in-Lending Act and other consumer protection laws, real estate
settlement procedure, usury, equal credit opportunity, disclosure and
recording laws;
(xiii) With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard California Land Title Association
form or American Land Title Association form, or other form acceptable
in a particular jurisdiction by a title insurance company authorized
to transact business in the state in which the related Property is
situated, in an amount at least equal to the Original Principal Amount
of such Mortgage Loan insuring the mortgagee's interest under the
related Mortgage Loan as the holder of a valid first or
13
<PAGE>
second mortgage lien of record on the real property described in the
related Mortgage, as the case may be, subject only to exceptions of
the character referred to in paragraph (vi) above, was effective on
the date of the origination of such Mortgage Loan, and, as of the
Cut-Off Date such policy will be valid and thereafter such policy
shall continue in full force and effect;
(xiv) The improvements upon each Property are covered by a
valid and existing hazard insurance policy (which may be a blanket
policy of the type described in the related Advanta Pooling Agreement)
with a generally acceptable carrier that provides for fire and
extended coverage representing coverage not less than the least of (A)
the outstanding principal balance of the related Mortgage Loan
(together, in the case of a Second Mortgage Loan, with the outstanding
principal balance of the Senior Lien), (B) the minimum amount required
to compensate for damage or loss on a replacement cost basis or (C)
the full insurable value of the Property;
(xv) If any Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy
of the type described in the Advanta Pooling Agreement) in a form
meeting the requirements of the current guidelines of the Federal
Insurance Administration is in effect with respect to such Property
with a generally acceptable carrier in an amount representing coverage
not less than the least of (A) the outstanding principal balance of
the related Mortgage Loan (together, in the case of a Second Mortgage
Loan, with the outstanding principal balance of the Senior Lien), (B)
the minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973;
(xvi) Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights
14
<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;
(xvii) Each Affiliated Originator has caused and will cause
to be performed any and all acts required to be performed to preserve
the rights and remedies of the servicer in any Insurance Policies
applicable to any Mortgage Loans delivered by such Affiliated
Originator including, to the extent such Mortgage Loan is not covered
by a blanket policy described in the Advanta Pooling Agreement, any
necessary notifications of insurers, assignments of policies or
interests therein, and establishments of co-insured, joint loss payee
and mortgagee rights in favor of the servicer;
(xviii) Each original Mortgage was recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof for
the benefit of the applicable Affiliated Originator, subject to the
provisions of Section 3.5(b) of the Advanta Pooling Agreement, (or are
in the process of being recorded);
(xix) The terms of each Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the
interest of the owners and which has been delivered to the Trustee.
The substance of any such alteration or modification is reflected on
the related Schedule of Mortgage Loans and has been approved by the
primary mortgage guaranty insurer, if any;
(xx) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been
15
<PAGE>
complied with. All costs, fees and expenses incurred in making or
closing or recording such Mortgage Loans were paid;
(xxi) Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related
Note is not and has not been secured by any collateral, pledged
account or other security except the lien of the corresponding
Mortgage;
(xxii) No Mortgage Loan was originated under a buydown plan;
(xxiii) No Mortgage Loan provides for negative amortization,
has a shared appreciation feature, or other contingent interest
feature;
(xxiv) Each Property is located in the state identified in
the Schedule of Mortgage Loans and consists of one or more parcels of
real property with a residential dwelling erected thereon;
(xxv) Each Mortgage contains a provision for the acceleration
of the payment of the unpaid principal balance of the related Mortgage
Loan in the event the related Property is sold without the prior
consent of the mortgagee thereunder;
(xxvi) Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-Off Date, have been consolidated
with the outstanding principal amount secured by the related Mortgage,
and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Schedule of
Mortgage Loans. The consolidated principal amount does not exceed the
original principal amount of the related Mortgage Loan. No Note
permits or obligates the Master Servicer, the Sub-Servicer or the
Sponsor to make future advances to the related Mortgagor at the option
of the Mortgagor;
(xxvii) There is no proceeding pending or threatened for the
total or partial condemnation of any Property, nor is such a
proceeding currently occurring,
16
<PAGE>
and each Property is undamaged by waste, fire, earthquake or earth
movement, flood, tornado or other casualty, so as to affect adversely
the value of the Property as security for the Mortgage Loan or the use
for which the premises were intended;
(xxviii) All of the improvements which were included for the
purposes of determining the Appraised Value of any Property lie wholly
within the boundaries and building restriction lines of such Property,
and no improvements on adjoining properties encroach upon such
Property, and, if a title insurance policy exists with respect to such
Property, are stated in such title insurance policy and affirmatively
insured;
(xxix) No improvement located on or being part of any
Property is in violation of any applicable zoning law or regulation.
All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of each Property and,
with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities and such Property is lawfully occupied under the
applicable law;
(xxx) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by the Sponsor or the related Trust to the trustee under the
deed of trust, except in connection with a trustee's sale after
default by the related Mortgagor;
(xxxi) With respect to each Second Mortgage Loan, either (A)
no consent for such Mortgage Loan was required by the holder of the
related Senior Lien prior to the making of such Mortgage Loan or (B)
such consent has been obtained and is contained in the related File;
(xxxii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the
17
<PAGE>
realization against the related Property of the benefits of the
security, including (A) in the case of a Mortgage designated as a deed
of trust, by trustee's sale and (B) otherwise by judicial foreclosure.
There is no homestead or other exemption available which materially
interferes with the right to sell the related Property at a trustee's
sale or the right to foreclose the related Mortgage;
(xxxiii) Except as provided by clause (viii) of this Section,
there is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Note and no event which,
with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration; and the applicable Affiliated Originator has
not waived any default, breach, violation or event of acceleration;
(xxxiv) Except for any Bulk Acquisition Loan, no instrument
of release or waiver has been executed in connection with any Mortgage
Loan, and no Mortgagor has been released, in whole or in part, except
in connection with an assumption agreement which has been approved by
the primary mortgage guaranty insurer, if any, and which has been
delivered to the Trustee;
(xxxv) Except for any Bulk Acquisition Loan, the maturity
date of each Mortgage Loan which is a Second Mortgage Loan is at least
twelve months prior to the maturity date of the related first mortgage
loan if such first mortgage loan provides for a balloon payment;
(xxxvi) The credit underwriting guidelines applicable to each
Mortgage Loan which is not a Bulk Acquisition Loan or an Unaffiliated
Originator Loan conform in all material respects to the Sponsor's
underwriting guidelines;
(xxxvii) The credit underwriting guidelines applicable to
each Mortgage Loan conform in all material respects to the Sponsor's
underwriting guidelines;
18
<PAGE>
(xxxviii) All parties to the Note and the Mortgage had legal
capacity to execute the Note and the Mortgage and each Note and
Mortgage have been duly and properly executed by such parties; and
(xxxix) The related Affiliated Originator has no actual
knowledge that there exist on any Property any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act,
the Resource Conservation and Recovery Act of 1976, or other federal,
state or local environmental legislation.
(c) No Originator Payment Obligations. There is no obligation on the
part of the Servicer or any other party to make payments in addition to those
made by the Mortgagor except for delinquency.
The Representations and Warranties shall survive the transfer and
assignment of the Mortgage Loans to the related Advanta Trust. Upon discovery
by the Affiliated Originator or the Sponsor of a breach of any of the
Representations and Warranties, without regard to any limitation set forth in
such Representation or Warranty concerning the knowledge of the Affiliated
Originator as to the facts stated therein, which breach, in the opinion of the
Sponsor, materially and adversely affects the interests of the Sponsor, the
Owners or of the Certificate Insurer in the related Mortgage Loan or Mortgage
Loans, the party discovering such breach shall give prompt written notice to
the other party, and the related Affiliated Originator shall be required to
take the remedial actions required by the related Advanta Pooling Agreement
within the time periods required thereto. Each Affiliated Originator hereby
acknowledges that a breach of any of the Representations and Warranties listed
in clauses (iii), (x), (xvi) and (xxxviii) above a priori materially and
adversely affects the interests of the related Advanta Trust, the related
Owners and the Certificate Insurer.
Section 6. Authorized Representatives. The names of the officers of
the Affiliated Originators and of the Sponsor who are authorized to give and
receive notices, requests and instructions and to deliver certificates and
19
<PAGE>
documents in connection with this Agreement on behalf of the Affiliated
Originator and of the Sponsor ("Authorized Representatives") are set forth on
Exhibit B. From time to time, the Affiliated Originator and the Sponsor may, by
delivering to the Trustee a revised exhibit, change the information previously
given, but the Trustee shall be entitled to rely conclusively on the last
exhibit until receipt of a superseding exhibit.
Section 7. Notices. All demands, notices and communications relating
to this Agreement shall be in writing and shall be deemed to have been duly
given when received by the other party or parties at the address shown below,
or such other address as may hereafter be furnished to the other party or
parties by like notice. Any such demand, notice or communication hereunder
shall be deemed to have been received on the date delivered to or received at
the premises of the addressee.
If to the Trustee:
Bankers Trust Company of California, N.A.
3 Park Plaza
Irvine, CA 92714
Telecopy: (714) 253-7577
Telephone: (714) 253-7575
If to the Affiliated Originators or the Sponsor:
Advanta Mortgage Corp. USA
500 Office Center Drive
Suite 400
Ft. Washington, PA 19034
Attention: Mark Casale - Vice President
Telecopy: (215) 283-4639
Telephone: (215) 283-4376
Section 8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of laws rules applied in the State of New York.
Section 9. Assignment. No party to this Agreement may assign its
rights or delegate its obligations under this
20
<PAGE>
Agreement without the express written consent of the other parties, except as
otherwise set forth in this Agreement.
Section 10. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which shall be
deemed to be an original, and together shall constitute and be one and the same
instrument.
Section 11. Amendment. This Agreement may be amended from time to time
by the Affiliated Originators, the Sponsor and the Trustee only by a written
instrument executed by such parties and with the prior written consent of the
Certificate Insurer.
Section 12. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 13. No Agency; No Partnership or Joint Venture. Neither the
Affiliated Originators nor the Sponsor is the agent or representative of the
other, and nothing in this Agreement shall be construed to make either the
Affiliated Originator nor the Sponsor liable to any third party for services
performed by it or for debts or claims accruing to it against the other party.
Nothing contained herein nor the acts of the parties hereto shall be construed
to create a partnership or joint venture between the Sponsor and the Affiliated
Originator.
Section 14. Further Assurances. The Affiliated Originators and Sponsor
agree to cooperate reasonably and in good faith with one another in the
performance of this Agreement.
Section 15. The Certificate Insurer. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate
21
<PAGE>
Insurer is in default in its payment obligation's under the related
Certificate Insurance Policies. During any period of suspension, the
Certificate Insurer's rights hereunder shall vest in the Owners of the related
Offered Certificates and shall be exercisable by the owners of at least a
majority in Percentage Interest of the related Offered Certificates then
outstanding. At such time as the related Offered Certificates are no longer
Outstanding under the related Advanta Pooling Agreement and the Certificate
Insurer has been reimbursed for all Insured Payments to which it is entitled
under the related Advanta Pooling Agreement, the Certificate Insurer's rights
hereunder shall terminate.
Section 16. Maintenance of Records. Each Affiliated Originator shall
each continuously keep an original executed counterpart of this Agreement in
its official records.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers, all as of the day and year first
above written.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.
COLONIAL NATIONAL BANK USA
The Sellers
BY: _____________________________________
Name: Mark Casale
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee and not in its
individual capacity
By: _____________________________________
Name: Holly Holland
Title: Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC. as Sponsor
By: _____________________________________
Name: Mark Casale
Title: Vice President
23
<PAGE>
EXHIBIT A
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic,
Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta
Mortgage Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta
Mortgage Conduit Services, Inc., Advanta Finance Corp. and Colonial National
Bank USA, as Affiliated Originators and Advanta Mortgage Conduit Services,
Inc., as Sponsor, pursuant to the Master Loan Transfer Agreement dated as of
February 15, 1995 among themselves and Bankers Trust Company of California,
N.A. as Trustee (the "Mortgage Transfer Agreement"), hereby confirm their
understanding with respect to the conveyance by each Affiliated Originator and
the Sponsor of those Mortgage Loans listed on the attached Schedule of Mortgage
Loans (the "Transferred Mortgage Loans") from the Conduit Acquisition Trust to
the Advanta Mortgage Loan Trust ____-__.
Conveyance of Transferred Mortgage Loans. Each Affiliated Originator
and the Sponsor, concurrently with the execution and delivery of this
Conveyance Agreement, does hereby irrevocably transfer, assign, set over and
otherwise convey, and does direct the Trustee to convey from the Conduit
Acquisition Trust to the Advanta Mortgage Loan Trust ____-__, without recourse
(except as otherwise explicitly provided for herein) all of its right, title
and interest in and to the Transferred Mortgage Loans being conveyed by it,
including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling Agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes,
including all interest and principal received by such Affiliated Originator on
or with respect to such Transferred Mortgage Loans on or after the related
Cut-off Date, together with all of its right, title and interest in and to the
proceeds received on or after the related Cut-off Date of any related insurance
policies.
If an Affiliated Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused
A-1
<PAGE>
by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, such Affiliated Originator shall
promptly deliver to the Trustee such original Mortgage or mortgage assignment
with evidence of recording indicated thereon upon receipt thereof from the
public recording official.
The costs relating to the delivery of the documents specified in this
Conveyance Agreement shall be borne by each Affiliated Originator.
The Affiliated Originators hereby make the Representations and
Warranties set forth in Section 5(b) of the Master Transfer Agreement with
respect to the Transferred Mortgage Loans.
The "Cut-Off Date" with respect to such Transferred Mortgage Loans shall
be ____________ __, _____.
All terms and conditions of the Mortgage Transfer Agreement are hereby
incorporated herein, provided that in the event of any conflict the provisions
of this Conveyance Agreement shall control over the conflicting provisions of
the Mortgage Transfer Agreement.
For purposes of this Conveyance Agreement, the "related Advanta
Pooling Agreement" is the Pooling and Servicing Agreement dated as of
____________ __, _____ relating to Advanta Mortgage Loan Trust ____-__.
A-2
<PAGE>
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Mortgage Transfer Agreement.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.
COLONIAL NATIONAL BANK USA,
as Affiliated Originators
By:_____________________________
Mark Casale
Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC.
as Sponsor
By:_____________________________
Mark Casale
Vice President
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.,
as Trustee
By:_____________________________
Holly Holland
Vice President
Dated:
A-3
<PAGE>
EXHIBIT B
AUTHORIZED REPRESENTATIVES
Reference is hereby made to the Master Loan Transfer Agreement, dated
as of February 15, 1995 (the "Agreement"), among Advanta Mortgage Corp. USA,
Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic II,
Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey, Advanta
Mortgage Corp. Northeast, Advanta Mortgage Conduit Services, Inc., Advanta
Finance Corp. and Colonial National Bank USA, as Affiliated Originators,
Advanta Mortgage Conduit Services, Inc., as Sponsor and Bankers Trust Company
of California, N.A., as Trustee:
The following are the Affiliated Orginators' Authorized
Representatives for purposes of the Agreement:
Name Title
- ---- -----
Annette Aguirre Senior Vice President, General Counsel and
Secretary
Mark Casale Vice President
The following are the Sponsor's Authorized Representatives for
purposes of the Agreement:
Name Title
- ---- -----
Annette Aguirre Senior Vice President, General Counsel and
Secretary
Mark Casale Vice President
B-1
<PAGE>
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA, Advanta Mortgage Corp.
Midatlantic, Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp.
Midwest, Advanta Mortgage Corp. of New Jersey, Advanta Mortgage Corp. Northeast,
Advanta Mortgage Conduit Services, Inc., Advanta Finance Corp., Advanta Mortgage
Receivables, Inc. and Advanta National Bank USA, as Affiliated Originators and
Advanta Mortgage Conduit Services, Inc., as Sponsor, pursuant to the Master Loan
Transfer Agreement dated as of February 15, 1995 (the "Mortgage Transfer
Agreement") among themselves and Bankers Trust Company of California, N.A. as
conduit trustee (the "Conduit Trustee"), hereby confirm their understanding with
respect to the conveyance by each Affiliated Originator and the Sponsor of those
Mortgage Loans listed on the attached Schedule of Mortgage Loans (the
"Transferred Mortgage Loans") from the Conduit Acquisition Trust to the Advanta
Mortgage Loan Trust 1996-4 (the "Trust").
Conveyance of Transferred Mortgage Loans. Each Affiliated
Originator and the Sponsor, concurrently with the execution and delivery of this
Conveyance Agreement, does hereby irrevocably transfer, assign, set over and
otherwise convey, and does direct the Conduit Trustee to convey:
(i) from the Conduit Acquisition Trust to the Trust, without
recourse (except as otherwise explicitly provided for herein) all of its right,
title and interest in and to the Transferred Mortgage Loans being conveyed by
it, including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling Agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes, including
all interest and principal received by such Affiliated Originator on or with
respect to such Transferred Mortgage Loans on or after the related Cut-off Date,
together with all of its right, title and interest in and to the proceeds
received on or after the related Cut-off Date of any related insurance policies.
If an Affiliated Originator cannot deliver the original
Mortgage or mortgage assignment with evidence of recording thereon concurrently
with the execution and delivery of this Conveyance Agreement solely because of a
delay caused by the public recording office where such original Mortgage or
mortgage assignment has been delivered for recordation, such Affiliated
Originator shall promptly deliver to Bankers Trust Company of California, in its
capacity as Trustee (the "Trustee") such original Mortgage or mortgage
assignment with
<PAGE>
evidence of recording indicated thereon upon receipt thereof from the public
recording official.
The costs relating to the delivery of the documents specified
in this Conveyance Agreement shall be borne by each Affiliated Originator.
The Affiliated Originators hereby make the Representations and
Warranties set forth in Section 5(b) of the Master Transfer Agreement with
respect to the Transferred Mortgage Loans, together with the following
additional representation and warranty:
As of the Closing Day, no Mortgagor is currently a debtor in a
case under Title 11 of the United States Code, or any similar state insolvency
proceeding.
Bankers Trust Company of California, N.A., in its capacity as
Trustee, and the Trust are intended beneficiaries of this Agreement and of the
foregoing representations, warranties and agreements.
The "Cut-Off Date" with respect to such Transferred Mortgage
Loans shall be December 1, 1996.
All terms and conditions of the Master Transfer Agreement are
hereby incorporated herein; provided that in the event of any conflict the
provisions of this Conveyance Agreement shall control over the conflicting
provisions of the Master Transfer Agreement.
For purposes of this Conveyance Agreement, the "related
Advanta Pooling Agreement" with respect to the Transferred Mortgage Loans is the
Pooling and Servicing Agreement dated as of December 1, 1996 by and among the
Sponsor, Advanta Mortgage Corp. USA and Bankers Trust Company of California,
N.A.
2
<PAGE>
Terms capitalized herein and not defined herein shall have
their respective meanings as set forth in the Mortgage Transfer Agreement.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE RECEIVABLES, INC.
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA FINANCE CORP.
ADVANTA NATIONAL BANK USA,
as Affiliated Originators
By:
-------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC., as Sponsor
By:
-------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A. as Trustee
By:
-------------------------------------
Name:
Title:
Dated: December 19, 1996
3
<PAGE>
December 19, 1996
Prudential Securities Incorporated
As Representative of the Underwriters
named in Schedule I
One New York Plaza, 15th floor
New York, New York 10292
Re: Underwriting Agreement dated December 6, 1996
(the "Underwriting Agreement") between Advanta
Mortgage Conduit Services, Inc. ("Advanta") and
Prudential Securities Incorporated (the
"Representative") and Indemnification Agreement
dated as of December 1, 1996 (the "Indemnifica-
tion Agreement") among Financial Guaranty
Insurance Company (the "Certificate Insurer"),
Advanta and the Representative
------------------------------------------------
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement and the Indemnification
Agreement (together, the "Designated Agreements"), Advanta has undertaken
certain financial obligations with respect to the indemnification of the
Underwriters and of the Certificate Insurer with respect to the Registration
Statement, the Prospectus and the Prospectus Supplement described in the
Designated Agreements. Any financial obligations of Advanta under the Designated
Agreements, whether or not specifically enumerated in this paragraph, are
hereinafter referred to as the "Joint and Several Obligations"; provided,
however, that "Joint and Several Obligations" shall mean only the financial
obligations of Advanta under the Designated Agreements (including the payment of
money damages for a breach of any of Advanta's obligations under the Designated
Agreements, whether financial or otherwise) but shall not include any
obligations not relating to the payment of money.
As a condition of their respective executions of the
Underwriting Agreement and of the Indemnification Agreement, the Underwriters
and the Certificate Insurer have required the undersigned, Advanta Mortgage
Holding Company ("AMHC"), the parent corporation of Advanta, to acknowledge its
joint-and-
<PAGE>
several liability with Advanta for the payment of the Joint and Several
Obligations under the Designated Agreements.
Now, therefore, the Underwriters, the Certificate Insurer and
AMHC do hereby agree that:
(i) AMHC hereby agrees to be absolutely and
unconditionally jointly and severally liable with
Advanta to the Underwriters for the payment of the
Joint and Several Obligations under the Underwriting
Agreement.
(ii) AMHC hereby agrees to be absolutely and
unconditionally jointly and severally liable with
Advanta to the Certificate Insurer for the payment of
the Joint and Several Obligations under the
Indemnification Agreement.
(iii) AMHC may honor its obligations hereunder either by
direct payment of any Joint and Several Obligations
or by causing any Joint and Several Obligations to be
paid to the Underwriters or to the Certificate
Insurer, as applicable, by Advanta or another
affiliate of AMHC.
2
<PAGE>
Capitalized terms used herein and not defined herein shall
have their respective meanings as set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:
------------------------
Name: Mark T. Dunsheath
Title: Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
FINANCIAL GUARANTY INSURANCE COMPANY
By:
----------------------------------
Name:
Title:
PRUDENTIAL SECURITIES INCORPORATED
as Representative of the Underwriters
By:
----------------------------------
Name:
Title:
[AMHC Guarantee]
<PAGE>
SCHEDULE I
Prudential Securities Incorporated
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
Issuer: Advanta Mortgage Loan Trust 1996-4 Policy Number: 96010690
Insured Obligations: $330,000,000 in aggregate Control Number: 0010001
principal amount of Mortgage Loan Asset Backed
Certificates, Series 1996-4, Class A-1 Group I
Certificates (the "Group I Certificates") and
Class A-2 Group II Certificates (the "Group II
Certificates and together with the Group I
Certificates, the "Certificates")
Trustee: Bankers Trust Company of California, N.A.
Financial Guaranty Insurance Company ("Financial Guaranty"), a New
York stock insurance company, in consideration of its receipt of the Deposit
Premium and subject to the terms of this Surety Bond, hereby unconditionally
and irrevocably agrees to pay each Insured Payment to the Trustee named above
or its successor, as trustee for the Certificates, to the extent set forth in
the Pooling and Servicing Agreement.
Financial Guaranty will make an Insured Payment (other than that
portion of an Insured Payment constituting a Preference Amount) out of its own
funds by 11:00 a.m. (New York City Time) in immediately available funds to the
Trustee on the later of (i) the Business Day next following the day on which
Financial Guaranty shall have received Notice that an Insured Payment is due
and (ii) the Payment Date on which the Insured Payment is distributable to
Certificateholders pursuant to the Pooling and Servicing Agreement, for
disbursement to such Certificateholders in the same manner as other payments
with respect to the Certificates are required to be made. Any Notice received
by Financial Guaranty after 2:00 p.m. New York City time on a given Business
Day or on any day that is not a Business Day shall be deemed to have been
received by Financial Guaranty on the next succeeding Business Day.
Upon such payment, Financial Guaranty shall be fully subrogated to the
rights of the Certificateholders to receive the amount so paid. Financial
Guaranty's obligations hereunder with respect to each Payment Date shall be
discharged to the extent funds consisting of the Insured Payment are received
by the Trustee on behalf of the Certificateholders for distribution to such
holders, as provided in the Pooling and Servicing Agreement and herein, whether
or not such funds are properly applied by the Trustee.
Form 9109
Page 1 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
If the payment of any portion or all of any amount that is insured
hereunder is voided pursuant to a final order of a court exercising proper
jurisdiction in an insolvency proceeding to the effect that the Trustee or the
Certificateholder, as the case may be, is required to return any such payment
or portion thereof prior to the expiration date of this Surety Bond because
such payment was voided under the U.S. Bankruptcy Code, with respect to which
order the appeal period has expired without an appeal having been filed (a
"Final Order"), and, as a result, the Trustee or any Certificateholders is
required to return such voided payment, or any portion of such voided payment
made in respect of the Certificates (a "Preference Amount"), Financial Guaranty
will pay on the guarantee described in the first paragraph hereof, an amount
equal to each such Preference Amount, on the second Business Day following
receipt by Financial Guaranty of (x) a certified copy of the Final Order, (y)
an assignment, in form reasonably satisfactory to Financial Guaranty,
irrevocably assigning to Financial Guaranty all rights and claims of the
Trustee and/or such Certificateholder relating to or arising under such
Preference Amount and appointing Financial Guaranty as the agent of the Trustee
and/or such Certificateholder in respect of such Preference Amount, and (z) a
Notice appropriately completed and executed by the Trustee or such
Certificateholder, as the case may be. Such payment shall be made to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Final Order and not to the Trustee or Certificateholder directly (unless a
Certificateholder has previously paid such amount to such receiver,
conservator, debtor-in-possession, or trustee named in such Final Order in
which case payment shall be made to the Trustee for distribution to the
Certificateholder upon proof of such payment reasonably satisfactory to
Financial Guaranty). Notwithstanding the foregoing, in no event shall Financial
Guaranty be (i) required to make any payment under this Surety Bond in respect
of any Preference Amount to the extent such Preference Amount is comprised of
amounts previously paid by Financial Guaranty hereunder, or (ii) obligated to
make any payment in respect of any Preference Amount, which payment represents
a payment of the principal amount of the Certificates, prior to the time
Financial Guaranty otherwise would have been required to make a payment in
respect of such principal.
Financial Guaranty shall make payments due in respect of Preference
Amounts prior to 2:00 p.m. New York City time on the second Business Day
following Financial Guaranty's receipt of the documents required under clauses
(x) through (z) of the preceding paragraph. Any such documents received by
Financial Guaranty after 2:00 p.m. New York City time on a given Business Day
or on any day that is not a Business Day shall be deemed to have been received
by Financial Guaranty on the next succeeding Business Day. All
Form 9109
Page 2 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
payments made by Financial Guaranty hereunder in respect of Preference
Amounts will be made with Financial Guaranty's own funds.
This Surety Bond is non-cancelable for any reason, including
nonpayment of any premium. The premium on this Surety Bond is not refundable
for any reason, including the payment of the Certificates prior to their
respective maturities. This Surety Bond shall expire and terminate without any
action on the part of Financial Guaranty or any other Person on the date that
is one year and one day following the date on which the Certificates shall have
been paid in full.
The Deposit Premium shall be due and payable on the date hereof, and a
monthly premium shall be due and payable as provided in the Pooling and
Servicing Agreement.
The Surety Bond is subject to and shall be governed by the laws of the
State of New York. The proper venue for any action or proceeding on this Surety
Bond shall be the County of New York, State of New York. The insurance provided
by this Surety Bond is not covered by the New York Property/Casualty Insurance
Security Fund (New York Insurance Code, Article 76).
Capitalized terms used and not defined herein shall have respective
meanings set forth in the Pooling and Servicing Agreement. "Notice" means
written notice in the form of Exhibit A to this Surety Bond by registered or
certified mail or telephonic or telegraphic notice, subsequently confirmed by
written notice delivered via telecopy, telex or hand delivery from the Trustee
to Financial Guaranty specifying the information set forth therein.
"Certificateholder" means, as to a particular Certificate, the person, other
than the Trust, the Master Servicer, any Subservicer or Underwriter or the
Sponsor who, on the applicable Payment Date is entitled under the terms of such
Certificate to payment thereof. "Pooling and Servicing Agreement" means the
Pooling and Servicing Agreement by and among Advanta Mortgage Conduit Services,
Inc., as Sponsor, Advanta Mortgage Corp. USA, as Master Servicer, and Bankers
Trust Company of California, N.A., as Trustee, dated as of December 1, 1996.
In the event that payments under any Certificate is accelerated,
nothing herein contained shall obligate Financial Guaranty to make any payment
of principal or interest on
Form 9109
Page 3 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
such Certificates on an accelerated basis, unless such acceleration of payment
by Financial Guaranty is at the sole option of Financial Guaranty.
IN WITNESS WHEREOF, Financial Guaranty has caused this Surety Bond to
be affixed with its corporate seal and to be signed by its duly authorized
officer in facsimile to become effective and binding upon Financial Guaranty by
virtue of the countersignature of its duly authorized representative.
_________________________________ _________________________________
President Authorized Representative
Effective Date: December 19, 1996
Form 9109
Page 4 of 4
<PAGE>
EXHIBIT A
NOTICE
To: Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
Attention: General Counsel
Telephone: (212) 312-3000
Telecopier: (212) 312-3093
Re: Advanta Mortgage Loan Trust 1996-4, Mortgage
Loan Asset-Backed Certificates,
Class A-1 Group I Certificates and Class A-2
Group II Certificates, Series 1996-4
Payment Date: ___________________________________
We refer to that certain Pooling and Servicing Agreement date as of
December 1, 1996 by and among Advanta Mortgage Conduit Services, Inc., as
Sponsor, Advanta Mortgage Corp. USA, as Master Servicer, and Bankers Trust
Company of California, N.A., as Trustee (the "Pooling and Servicing Agreement")
relating to the above referenced Mortgage Loan Asset-Backed Certificates. All
capitalized terms not otherwise defined herein or in the Surety Bond shall have
the same respective meanings assigned to such terms in the Pooling and
Servicing Agreement.
(a) The Trustee has determined under the Pooling and Servicing
Agreement that in respect of the Payment Date set forth above:
(i) The Group I Interest Distribution Amount is $_______
and the Group II Interest Distribution Amount is
$_________;
(ii) The Group I Subordination Deficit is $________ and
the Group II Subordination Deficit is $_________;
(iii) The unpaid Group I Preference Amount is $__________
and the unpaid Group II Preference Amount is
$_________;
(iv) Group I Total Available Funds is $________ and the
Group II Total Available Funds is $__________.
A-1
<PAGE>
Please be advised that the amount set forth in (a) (iv) above is not
sufficient to pay all of the following amounts in full: the Group I Interest
Distribution Amount, the Group II Interest Distribution amount, the Group I
Subordination Deficit, the Group II Subordination Deficit, the unpaid Group I
Preference Amount and the unpaid Group II Preference Amount in respect of the
Payment Date set forth above.
Accordingly, pursuant to the Pooling and Servicing Agreement, this
statement constitutes a notice for payment of [Group I] [Group II] Insured
Payment in the amount of $___________ (the difference between (1) the amount
set forth in (a)(iv) above and (2) the sum of the amounts set forth in (a)(i),
(a)(ii) and (a)(iii) above in respect of the Certificates of such Group under
the Surety Bond.
(b) No payment claimed hereunder is in excess of the amount payable
under the [Surety Bond].
The amount requested in this Notice should be paid to: [Payment
Instructions]
[Attached hereto is a copy of the Final Order (as defined in the
Surety Bond) in connection with a Preference Amount in the amount set forth
therein, together with an assignment of rights and appointment of agent.]
Any person who knowingly and with intent to defraud any insurance
company or other person files an application for insurance or statement of
claim containing any materially false information or conceals for the purpose
of misleading, information concerning any fact material thereto, commits a
fraudulent insurance act, which is a crime, and shall also be subject to a
civil penalty not to exceed Five Thousand Dollars ($5,000.00) and the stated
value of the claim for each such violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
this ______ day of _____.
__________________________________,
as Trustee
By: _______________________________
Title: ____________________________
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Financial Guaranty Insurance Company
We consent to the use of our report dated January 19, 1996 on the financial
statements of Financial Guaranty Insurance Company as of December 31, 1995 and
1994, and for each of the years in the three-year period ended December 31, 1995
included in the Form 8-K of Advanta Mortgage Loan Trust 1996-4, and to reference
to our firm under the heading "Experts" in the Prospectus Supplement.
Our report refers to changes, in 1993, in accounting methods for multiple-year
retrospectively rated reinsurance contracts and for the adoption of the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities.
/s/ KPMG Peat Marwick LLP
New York, New York
December 13, 1996
<PAGE>
INDEMNIFICATION AGREEMENT
This Agreement, dated as of December 1, 1996, is by and among
Financial Guaranty Insurance Company (the "Insurer"), as the Insurer under the
certificate guaranty surety bonds (the "Policy") to be issued in connection with
the Certificates described below, ADVANTA Mortgage Conduit Services, Inc. (the
"Issuer") and Prudential Securities Incorporated , as Representative (the
"Representative") of itself, Morgan Stanley & Co. Incorporated and Salomon
Brothers Inc (collectively, the "Underwriters").
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings stated below:
"Act" means the Securities Act of 1933, as amended, together
with all related rules and regulations.
"Agreement" means this Indemnification Agreement by and among
the Insurer, the Issuer and the Underwriters.
"Certificates" means ADVANTA Mortgage Loan Asset-Backed
Certificates, Series 1996-4, Class A-1 and Class A-2 issued pursuant to
a Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") dated as of December 1, 1996 among the Issuer, as Sponsor,
ADVANTA Mortgage Corp. USA, as Servicer and Bankers Trust Company of
California, N.A., as Trustee.
"Class A Certificates" means the ADVANTA Mortgage Loan Asset-
Backed Certificates, Series 1996-4, Class A-1 and Class A-2 issued
pursuant to the Pooling and Servicing Agreement.
"Indemnified Party" means any party entitled to any
indemnification pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 5 below, as the context requires.
"Insurer Party" means the Insurer and its respective parents,
subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or any "controlling person" (as such term is used in
the Act) of any of the foregoing.
"Issuer Party" means the Issuer, each of its parents,
subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or any "controlling person" (as such term is used in
the Act) of any of the foregoing.
<PAGE>
"Losses" means (i) any actual out-of-pocket loss paid by the
party entitled to indemnification or contribution hereunder, and (ii)
any actual out-of-pocket costs and expenses paid by such party,
including reasonable fees and expenses of its counsel, to the extent
not paid, satisfied or reimbursed from funds provided by any other
Person (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person).
"Person" means any individual, partnership, joint venture,
corporation, trust or unincorporated organization or any government or
agency or political subdivision thereof.
"Prospectus" means the form of final Prospectus, dated
September 6, 1996 as supplemented by the Prospectus Supplement included
in the Registration Statement on each date that the Registration
Statement and any post-effective amendment or amendments thereto became
effective.
"Prospectus Supplement" means the form of final Prospectus
Supplement, dated December 6, 1996 relating to the offer and sale of
the Class A-1 and Class A-2 Certificates.
"Registration Statement" means the registration statement on
Form S-3 of the Issuer (Registration No. 33-99510) relating to the
Certificates in the form in which it has become effective.
"State Securities Law" means any state, local or foreign
statute, and any rule or regulation thereunder, regulating (i)
transactions and dealings in securities, (ii) any person or entity
engaging in such transactions or advising with respect to securities or
(iii) investment companies.
"Underwriting Agreement" means the Underwriting Agreement by
and between the Issuer and the Representative, dated December 6, 1996.
"Underwriter Party" means the Underwriter and its parents,
subsidiaries and affiliates and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the
Act) of any of the foregoing.
2. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Underwriter and the Issuer as follows:
(a) Organization and Licensing. The Insurer is a duly
incorporated and existing New York stock insurance company licensed to
do business in the State of New York.
2
<PAGE>
(b) Corporate Power. The Insurer has the corporate power and
authority to issue the Policy and execute and deliver this Agreement
and to perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. The issuance of the Policy and
the execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate proceedings. No further
approvals or filings of any kind, including, without limitation, any
further approvals of or further filing with any governmental agency or
other governmental authority, or any approval of the Insurer's board of
directors or stockholders, are necessary for the Policy and this
Agreement to constitute the legal, valid and binding obligations of the
Insurer.
(d) No Conflicts. The execution and delivery of this Agreement
and consummation of the transactions contemplated hereunder will not
result in the breach of any terms or provisions of the certificate of
incorporation or by-laws of Insurer, or result in the breach of a term
or provision of, or conflict with or constitute a default under or
result in the acceleration of any obligation under, any material
agreement or other material instrument to which the Insurer or its
property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Insurer or any of
its property is subject or result in the creation of any lien on any of
Insurer's assets or property (other than pursuant to this Agreement).
(e) Enforceability. The Policy, when issued, and this
Agreement, will each constitute a legal, valid and binding obligation
of the Insurer, enforceable in accordance with its terms subject to
applicable laws affecting the enforceability of creditors' rights
generally and general principles of equity.
(f) Financial Information. The balance sheet of the Insurer as
of December 31, 1995 and the related statements of income,
stockholders' equity and cash flows for the fiscal year then ended, and
the accompanying footnotes, a copy of which is attached as Appendix A
to the Prospectus (the "Insurer Financial Statements"), fairly present
in all material respects the financial condition of the Insurer as of
such date and for the period covered by such statements in accordance
with generally accepted accounting principles consistently applied,
and, since December 31, 1995, there has been no material change in such
financial condition of the Insurer which would materially and adversely
affect its ability to perform its obligations under the Policy. The
balance sheet of the Insurer as of September 30, 1996 and the related
statements of income, stockholders' equity and cash flows for the
period then ended, a copy of which is attached as Appendix B to the
Prospectus Supplement (the "Insurer Unaudited Financial Statements")
fairly present in all material respects the financial condition of the
Insurer as of such date and for the period covered by
3
<PAGE>
such statements in accordance with generally accepted accounting
principles consistently applied, and, since September 30, 1996, there
has been no material change in such financial condition of the Insurer
which would materially and adversely affect its ability to perform its
obligations under the Policy.
(g) Insurer Information. The information in the Prospectus as
of the date hereof under the captions "The Certificate Insurer" and
"The Certificate Insurance Policy" (collectively, the "Insurer
Information") is true and correct in all material respects and does not
contain any untrue statement of a fact that is material to the
Insurer's ability to perform its obligations under the Policy.
(h) Limitations. Nothing in this Agreement shall be construed
as a representation or undertaking by the Insurer concerning
maintenance of the rating currently assigned to its claims-paying
ability by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Group, a division of The McGraw Hill Companies ("Standard &
Poor's"), or any other rating agency (collectively, the "Rating
Agencies"). The Rating Agencies, in assigning such rating, may take
into account facts and assumptions not described in the Prospectus, and
the facts and assumptions which are considered by the Rating Agencies
are subject to change over time. The Insurer has not attempted to
disclose all facts and assumptions which the Rating Agencies deem
relevant in assigning a rating within a particular rating category to
the Insurer's claims-paying ability. Notwithstanding the foregoing, the
Insurer is not aware of any facts that, if disclosed to Moody's, or
Standard & Poor's, would be reasonably expected to result in a
downgrade of the rating of the claims-paying ability of the Insurer by
either of such Rating Agencies.
(i) No Litigation. There are no actions, suits, proceedings or
investigations pending, or to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would materially and adversely affect its condition
(financial or otherwise) or operations of it or would materially and
adversely affect its ability to perform its obligations under this
Agreement or the Policy.
(j) 1933 Act Registration. The Policy is exempt from
registration under the Act.
3. Agreements, Representations and Warranties of the
Underwriters. The Underwriters represent and warrant to and agree with the
Issuer and the Insurer that the statements contained in the Prospectus under the
caption "Underwriting" (referred to herein as the "Underwriters Information")
are true and correct in all material respects.
4
<PAGE>
4. Agreements, Representations and Warranties of the Issuer.
The Issuer represents and warrants to and agrees with the Insurer and the
Underwriters as follows:
(a) Registration Statement. The information in the
Registration Statement, other than the Insurer Information, is true and
correct in all material respects and does not contain any untrue
statement of a fact that is material or omit to state a fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) Organization. The Issuer is duly incorporated and existing
under the laws of the State of Delaware and is in good standing as a
foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it make such
qualification necessary.
(c) Corporate Power. The Issuer has the corporate power and
authority to execute and deliver this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and to perform all of
its obligations hereunder and thereunder.
(d) Authorization; Approvals. The execution, delivery and
performance of this Agreement, the Underwriting Agreement and the
Pooling and Servicing Agreement by the Issuer have been duly authorized
by all necessary corporate proceedings. No further approvals or filings
of any kind, including, without limitation, any further approvals of or
further filing with any governmental agency or other governmental
authority, or any approval of the Issuer's board of directors or
stockholders, are necessary for this Agreement, the Underwriting
Agreement and the Pooling and Servicing Agreement to constitute the
legal, valid and binding obligations of the Issuer.
(e) No Conflicts. The execution and delivery of this Agreement
and consummation of the transactions contemplated hereunder will not
result in the breach of any terms or provisions of the certificate of
incorporation or by-laws of Issuer or result in the breach of a term or
provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any material agreement or
other material instrument to which the Issuer or its property is
subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Issuer or any of its property is
subject or result in the creation of any lien on any of Issuer's assets
or property (other than pursuant to this Agreement).
(f) Enforceability. This Agreement, the Pooling and Servicing
Agreement and the Underwriting Agreement, will each constitute a legal,
valid and binding obligation of the Issuer, enforceable in accordance
with its terms subject, as to the enforcement of remedies, to
bankruptcy, insolvency,
5
<PAGE>
reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event
of the bankruptcy, insolvency or reorganization of the Issuer and to
general principles of equity.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending, or to the best of the Issuer's knowledge,
threatened against it at law or in equity or before any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would materially and adversely affect its condition
(financial or otherwise) or operations of it or would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Underwriting Agreement or the Pooling and Servicing
Agreement.
5. Indemnification.
(a) The Insurer hereby agrees, upon the terms and subject to
the conditions of this Agreement, to indemnify, defend and hold
harmless each Issuer Party and each Underwriter Party against any and
all Losses incurred by them with respect to the offer and sale of the
Certificates and resulting from the Insurer's breach of any of its
representations and warranties set forth in Section 2 of this
Agreement.
(b) The Underwriters hereby severally, and not jointly agree,
upon the terms and subject to the conditions of this Agreement, to
indemnify, defend and hold harmless each Insurer Party against any and
all Losses incurred by them which arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact in
the Underwriters Information or (ii) the omission or alleged omission
to state in the Underwriters Information a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(c) The Issuer hereby agrees, upon the terms and subject to
the conditions of this Agreement, to indemnify, defend and hold
harmless each Insurer Party against any and all losses incurred by them
with respect to the offer and sale of the Certificates and resulting
from the Issuer's breach of any of its representations and warranties
set forth in Section 4 of this Agreement.
(d) Upon the incurrence of any Losses entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party
to the Indemnifying Party of the Losses incurred.
6. Insurer Undertaking. The Insurer hereby agrees that, for so
long as the Underwriters are required under the Act to deliver a Prospectus in
connection with the sale of the Class A Certificates, the Insurer will furnish
to either the Representative
6
<PAGE>
or the Issuer, or both, upon written request of such party or parties and at the
expense of the Underwriters or the Issuer, as the case may be, copies of the
Insurer's most recent financial statements (annual or interim, as the case may
be) prepared in accordance with generally accepted accounting principles
(subject, as to interim statements, to normal year-end adjustments and to the
absence of footnotes) within a reasonable time after they are available.
7. Notice to be Given to the Insurer. Except as provided in
Section 10 below with respect to contribution, the indemnification provided
herein by the Insurer shall be the exclusive remedy of the Underwriter Party or
Issuer Party for the Losses resulting from the Insurer's breach of a
representation, warranty or agreement hereunder; provided, however, that the
Underwriter Party or Issuer Party shall be entitled to pursue any other remedy
at law or in equity for any such breach so long as the damages sought to be
recovered shall not exceed the Losses incurred thereby resulting from such
breach. In the event that any action or regulatory proceeding shall be commenced
or claim asserted which may entitle the Underwriter Party or Issuer Party to be
indemnified under this Agreement, such party shall give the Insurer written or
telegraphic notice of such action or claim reasonably promptly after receipt of
written notice thereof. The Insurer shall be entitled to participate in the
defense of any such action or claim in reasonable cooperation with, and with the
reasonable cooperation of, the Issuer Party or Underwriter Party, as the case
may be. The Indemnified Party will have the right to employ its own counsel in
any such action in addition to counsel for the Insurer, but the fees and
expenses of such counsel will be at the expense of such Indemnified Party unless
(1) the employment of counsel by the Indemnified Party at its expense has been
authorized in writing by the Insurer, or (2) the Insurer has not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, or (3) the named
parties to any such action include the Insurer on the one hand, and, on the
other hand, the Indemnified Party, and such Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Insurer (in
which case, if such Indemnified Party notifies the Insurer in writing that it
elects to employ separate counsel at the expense of the Insurer, the Insurer
shall not have the right to assume the defense of such action or proceeding on
such Indemnified Party's behalf), in each of which cases the reasonable fees and
expenses of counsel (including local counsel) will be at the expense of the
Insurer and all such fees and expenses will be reimbursed promptly as they are
incurred but, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, the Insurer shall not be liable for the
fees and expenses of more than one counsel for all Issuer Parties and more than
one counsel for all Underwriter Parties. The Underwriter Parties and Issuer
Parties shall cooperate with the Insurer Parties in resolving any event which
would give rise to an indemnity obligation pursuant to Section 5(a) hereof in
the most efficient manner. No settlement of any such claim or action shall be
entered into without the consent of the Issuer Party or Underwriter Party, as
the case may be, who is subject to such claim or action, on the one hand and the
Insurer Party who is subject to such claim or action on
7
<PAGE>
the other hand; provided, however, that the consent of such Issuer Party or such
Underwriter Party, as applicable, shall not be required if such settlement fully
discharges, with prejudice against the plaintiff, the claim or action against
such Issuer Party or Underwriter Party. Any failure by an Issuer Party or
Underwriter Party, as the case may be, to comply with the provisions of this
Section shall relieve the Insurer of liability only if such failure is
materially prejudicial to any legal pleadings, grounds, defenses or remedies in
respect thereof or the Insurer's financial liability hereunder and then only to
the extent of such prejudice.
8. Notice to be Given to the Representative. Except as
provided below in Section 10 with respect to contribution, the indemnification
provided herein by the Underwriters shall be the exclusive remedy of any Insurer
Party for the Losses resulting from the Underwriter's breach of a
representation, warranty or agreement hereunder; provided, however, that the
Insurer Party shall be entitled to pursue any other remedy at law or in equity
for any such breach so long as the damages sought to be recovered shall not
exceed the Losses incurred thereby resulting from such breach. In the event that
any action or regulatory proceeding shall be commenced or claim asserted which
may entitle an Insurer Party to be indemnified under this Agreement, such party
shall give the Representative written or telegraphic notice of such action or
claim reasonably promptly after receipt of written notice thereof. The
Underwriters shall be entitled to participate in the defense of any such action
or claim in reasonable cooperation with, and with the reasonable cooperation of,
the Insurer Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to counsel for the Underwriters, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party unless (1) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Representative, or (2) the
Underwriters have not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, or (3) the named parties to any such action include the Underwriters
on the one hand, and on the other hand, the Indemnified Party, and such
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Underwriters (in which case, if such Indemnified Party
notifies the Representative in writing that it elects to employ separate counsel
at the expense of the Underwriters, the Underwriters shall not have the right to
assume the defense of such action or proceeding on such Indemnified Party's
behalf), in each of which cases the reasonable fees and expenses of counsel will
be at the expense of the Underwriters and all such fees and expenses will be
reimbursed promptly as they are incurred but, in connection with any one action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, the
Underwriters shall not be liable for the fees and expenses of more than one
counsel for all Insurer Parties. The Insurer Party shall cooperate with the
Underwriter Party and the Issuer Party in resolving any event which would give
rise to an indemnification obligation pursuant to Section 5(b) hereof in the
most efficient manner. No settlement of any such claim or action shall be
entered into without the consent of the Insurer Party who is subject to such
claim or action, on the one hand and
8
<PAGE>
the Underwriter Party who is subject to such claim or action on the other hand;
provided, however, that the consent of such Insurer Party shall not be required
if such settlement fully discharges, with prejudice against the plaintiff, the
claim or action against such Insurer Party. Any failure by an Insurer Party to
comply with the provisions of this Section shall relieve the Underwriters of
liability only if such failure is materially prejudicial to any legal pleadings,
grounds, defenses or remedies in respect thereof or the Underwriters' liability
hereunder and then only to the extent of such prejudice.
9. Notice to be Given to the Issuer. Except as provided below
in Section 10 with respect to contribution, the indemnification provided herein
by the Issuer shall be the exclusive remedy of any Insurer Party for the Losses
resulting from the Issuer's breach of a representation, warranty or agreement
hereunder; provided, however, that the Insurer Party shall be entitled to pursue
any other remedy at law or in equity for any such breach so long as the damages
sought to be recovered shall not exceed the Losses incurred thereby resulting
from such breach. In the event that any action or regulatory proceeding shall be
commenced or claim asserted which may entitle an Insurer Party to be indemnified
under this Agreement, such party shall give the Issuer written or telegraphic
notice of such action or claim reasonably promptly after receipt of written
notice thereof. The Issuer shall be entitled to participate in the defense of
any such action or claim in reasonable cooperation with, and with the reasonable
cooperation of, the Insurer Party. The Indemnified Party will have the right to
employ its own counsel in any such action in addition to counsel for the Issuer,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party unless (1) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Issuer, or (2) the Issuer
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or (3)
the named parties to any such action include the Issuer on the one hand, and on
the other hand, the Indemnified Party, and such Indemnified Party shall have
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Issuer
(in which case, if such Indemnified Party notifies the Issuer in writing that it
elects to employ separate counsel at the expense of the Issuer, the Issuer shall
not have the right to assume the defense of such action or proceeding on such
Indemnified Party's behalf), in each of which cases the reasonable fees and
expenses of counsel will be at the expense of the Issuer and all such fees and
expenses will be reimbursed promptly as they are incurred but, in connection
with any one action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, the Issuer shall not be liable for the fees and expenses of more
than one counsel for all Insurer Parties. The Insurer Party shall cooperate with
the Issuer Party and the Underwriter Party in resolving any event which would
give rise to an indemnification obligation pursuant to Section 5(c) hereof in
the most efficient manner. No settlement of any such claim or action shall be
entered into without the consent of the Insurer Party, who is subject to such
claim or action, on the one hand and the Issuer Party on the other hand;
provided, however, that the consent of such Insurer Party shall not be required
if such settlement fully discharges, with prejudice against the plaintiff,
9
<PAGE>
the claim or action against such Insurer Party. Any failure by an Insurer Party
to comply with the provisions of this Section shall relieve the Issuer of
liability only if such failure is materially prejudicial to any legal pleadings,
grounds, defenses, or remedies in respect thereof or the Issuer's liability
hereunder and then only to the extent of such prejudice.
10. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by the Insurer is determined to be unavailable
for any Underwriter Party or Issuer Party (other than pursuant to
Section 5 or 7 of this Agreement), the Insurer shall contribute to the
aggregate costs of liabilities arising from any breach of a
representation or warranty set forth in this Agreement on the basis of
the relative fault of all Underwriter Parties, all Issuer Parties and
all Insurer Parties, respectively.
(b) To provide for just and equitable contribution if the
indemnification provided by the Issuer is determined to be unavailable
for any Insurer Party (other than pursuant to Section 5 or 9 of this
Agreement), the Issuer shall contribute to the aggregate costs of
liabilities arising from any breach of a representation or warranty set
forth in this Agreement on the basis of the relative fault of all
Underwriter Parties, all Issuer Parties and all Insurer Parties.
(c) To provide for just and equitable contribution if the
indemnification provided by the Underwriters is determined to be
unavailable for any Insurer Party (other than pursuant to Section 5 or
8 of this Agreement), the Underwriters shall contribute to the
aggregate costs of liabilities arising from (i) any untrue statement or
alleged untrue statement of a material fact in the Underwriters
Information or (ii) the omission or alleged omission to state in the
Underwriters Information a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading on the basis
of the relative fault of all Underwriter Parties, all Issuer Parties
and all Insurer Parties; provided however, that the Underwriter Party
shall not be liable for any amount in excess of (i) the excess of the
sales prices of the Class A Certificates to the public over the prices
paid therefor by the Underwriters, over (ii) the aggregate amount of
any damages which the Underwriter Party has been otherwise required to
pay in respect of the same or any substantially similar claim.
(d) The relative fault of each Indemnifying Party, on the one
hand, and of each Indemnified Party, on the other, shall be determined
by reference to, among other things, whether the breach of, or alleged
breach of, any of its representations and warranties set forth in
Section 2, 3 or 4 of this Agreement relates to information supplied by,
or action within the control of, the Indemnifying Party or the
Indemnified Party and the parties' relative intent,
10
<PAGE>
knowledge, access to information and opportunity to correct or prevent
such breach.
(e) The parties agree that the Insurer shall be solely
responsible for the Insurer Information and for the Insurer Financial
Statements, that the Underwriters shall be solely responsible for the
Underwriter Information and that the Issuer shall be responsible for
all other information in the Registration Statement and in the
Prospectus.
(f) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(g) The indemnity and contribution agreements contained in
this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any
Underwriter Party, any Issuer Party or any Insurer Party, (ii) the
issuance of the Certificates or the Policy or (iii) any termination of
this Agreement.
(h) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to
contribution promptly upon establishment by the party entitled to
contribution to the contributor of the Losses incurred.
It is understood and agreed that the indemnities set forth in
this Agreement shall service the execution and delivery of this
Agreement and the issuance, sale and delivery of the Class A
Certificates.
11. Notices. All notices and other communications provided for
under this Agreement shall be addressed to the address set forth below
as to each party or at such other address as shall be designated by a
party in a written notice to the other party.
If to the Insurer: Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
Attention: General Counsel
11
<PAGE>
If to the Issuer: ADVANTA Mortgage
Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
If to the Underwriter: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292
12. Governing Law, Etc. This Agreement shall be deemed to be a
contract under the laws of the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its conflicts of laws provisions. This Agreement may not be assigned by any
party without the express written consent of each other party. Amendments of
this Agreement shall be in writing signed by each party. This Agreement shall
not be effective until executed by each of the Insurer, the Issuer and the
Representative.
13. Underwriting Agreement; Pooling and Servicing Agreement.
This Agreement in no way limits or otherwise affects the indemnification
obligations of the Issuer under (a) the Underwriting Agreement or (b) the
Pooling and Servicing Agreement.
14. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall together constitute but one and the same
instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized, all as of the date first above written.
FINANCIAL GUARANTY INSURANCE
COMPANY
By:
---------------------------------
Name:
Title:
ADVANTA MORTGAGE CONDUIT
SERVICES, INC.
By:
---------------------------------
Name: Mark T. Dunsheath
Title: Vice President
PRUDENTIAL SECURITIES
INCORPORATED, as Representative
of the Underwriters
By:
---------------------------------
Name:
Title:
[INDEMNIFICATION AGREEMENT]
