<PAGE> 1
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)
March 19, 1998
Advanta Mortgage Loan Trust 1998-1
(Exact name of registrant as specified in its charter)
New York 333-37107-02 Application Pending
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
c/o Advanta Mortgage Conduit 92127
Services, Inc. (Zip Code)
Attention: Milton Riseman
16875 West Bernardo Drive
San Diego, California
- ---------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (619) 674-1800
-----------------------------------------------------------------
No change
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Advanta Mortgage Conduit Services, Inc. registered an issuance of
$3,500,000,000 in 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 Statement on Form S-3 (File
No. 333-37107-02) (the "Registration Statement"). Pursuant to the Registration
Statement, Advanta Mortgage Loan Trust 1998-1 (the "Registrant" or the "Trust")
issued approximately $900,000,000 in aggregate principal amount of its Mortgage
Loan Asset-Backed Certificates, Series 1998-1 (the "Certificates"), on March 19,
1998 (the "Closing Date"). 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 Statement.
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 March 1, 1998, among 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 thirteen
classes, the Class A-1 Group I Certificates, the Class A-2 Group I Certificates,
the Class A-3 Group I Certificates, the Class A-4 Group I Certificates, the
Class A-5 Group I Certificates, the Class A-6 Group I Certificates, the Class
A-IO Group I Certificates, the Class A-7 Combination Certificates*, the Class
A-8 Group II Certificates (collectively, the "Class A Certificates"), the Class
M-1 Group II Certificates, the Class M-2 Group II Certificates (together, the
"Mezzanine Certificates"), the Class B-1 Group II Certificates (the "Class B
Certificates" and together with the Mezzanine Certificates, the "Subordinate
Certificates") and the Class R Certificates (Residual Interest) (the "Class R
Certificates"). The Class A Certificates and the Subordinate Certificates,
collectively, are the "Offered Certificates". The Offered Certificates and the
Class R Certificates are together referred to herein as the "Certificates". The
Certificates initially evidence, in the aggregate, 100% of the undivided
beneficial ownership interests in the Trust.
*Owners of the Class A-7 Certificates will be purchasing two separate, undivided
interests in the Mortgage Loans, which interests are represented by the
Component I certificate ("Component I") and the Component II certificate
("Component II"), respectively. Component I represents the interest in Group I;
Component II represents the interest in Group II.
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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 Certificates (other than
the Class A-1 Certificates and Class A-7 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 Subordinate
Certificates, the Class A-1 Certificates and the Class A-7 Certificates
represent undivided ownership interests in a group of adjustable rate Mortgage
Loans secured by Mortgages which may be either in a first or in a junior lien
position.
Interest distributions on the Offered Certificates are based on the
Certificate Principal Balance thereof and the then applicable Pass-Through Rate
thereof.
The Class A-1 Certificates have an aggregate principal amount of
$143,000,000. The Class A-2 Certificates have an aggregate principal amount of
$89,000,000. The Class A-3 Certificates have an aggregate principal amount of
$64,000,000. The Class A-4 Certificates have an aggregate principal amount of
$42,000,000. The Class A-5 Certificates have an aggregate principal amount of
$68,000,000. The Class A-6 Certificates have an aggregate principal amount of
$50,000,000. The Class A-7 Certificates have an aggregate principal amount of
$330,000,000**. The Class A-8 Certificates have an aggregate principal amount of
$44,000,000. The Class M-1 Certificates have an aggregate principal amount of
$26,000,000. The Class M-2 Certificates have an aggregate principal amount of
$23,000,000. The Class B-1 Certificates have an aggregate principal amount of
$21,000,000. No principal payments are distributed with respect to the Class
A-IO Certificates. Interest on the Class A-IO will be distributed and calculated
on the basis of a notional principal balance equal to the aggregate outstanding
Principal Balance of the Class A-6 Certificates (the "Notional Principal
Balance").
As of the Closing Date, the Mortgage Loans had the characteristics
described in the Prospectus dated October 30, 1997 and the Prospectus Supplement
dated March 12, 1998 filed pursuant to Rule 424(b)(5) of the Act with the
Commission.
**Component I represents $44,000,000 of the original Certificate Principal
Balance of the Class A-7 Combination Certificates; Component II represents
$286,000,000 of the original Certificate Principal Balance of the Class A-7
Combination Certificates.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated March 12, 1998, among Advanta
Mortgage Conduit Services, Inc. and Morgan Stanley & Co. Incorporated, as
Representative of the Underwriters (the "Representative").
4.1 Pooling and Servicing Agreement, dated as of March 1, 1998,
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.
4.2 Master Loan Transfer Agreement, dated June 15, 1997, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta National Bank,
Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic II,
Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey, Advanta
Mortgage Corp. Northeast, Advanta Finance Corp. and Advanta Mortgage Corp.
USA (collectively, the "Affiliated Originators"), Advanta Conduit Receivables
Inc. and Bankers Trust Company of California, N.A., as Trustee.
4.3 Conveyance Agreement, dated March 19, 1998, among Advanta
Mortgage Conduit Services, Inc., the Affiliated Originators, Advanta Conduit
Receivables, Inc. and Bankers Trust Company of California, N.A.
4.4 Certificate Guaranty Insurance Policy delivered by MBIA
Insurance Corporation.
4.5 Advanta Mortgage Holding Company Guaranty.
10.1 Indemnification Agreement, dated March 12, 1998, among MBIA
Insurance Corporation, Advanta Mortgage Conduit Services Inc. and the
Representative.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial
statements of MBIA Insurance Corporation and their report.
<PAGE> 5
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 1998-1
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By:/s/ Mark T. Dunsheath
-----------------------------------
Name: Mark T. Dunsheath
Title: Vice President
Dated: March 19, 1998
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- ------------
<S> <C>
1.1 Underwriting Agreement, dated March 12, 1998, among Advanta Mortgage
Conduit Services, Inc. and Morgan Stanley & Co. Incorporated, as
Representative of the Underwriters (the "Representative").
4.1 Pooling and Servicing Agreement, dated as of March 1, 1998, 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.
4.2 Master Loan Transfer Agreement, dated June 15, 1997, among Advanta
Mortgage Conduit Services, Inc., as Sponsor, Advanta National Bank,
Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp.
Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage
Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta
Finance Corp. and Advanta Mortgage Corp. USA (collectively, the
"Affiliated Originators"), Advanta Conduit Receivables Inc. and
Bankers Trust Company of California, N.A., as Trustee.
4.3 Conveyance Agreement, dated March 19, 1998, among Advanta Mortgage
Conduit Services, Inc., the Affiliated Originators, Advanta Conduit
Receivables, Inc. and Bankers Trust Company of California, N.A.
4.4 Certificate Guaranty Insurance Policy delivered by MBIA Insurance
Corporation.
4.5 Advanta Mortgage Holding Company Guaranty.
10.1 Indemnification Agreement, dated March 12, 1998, among MBIA
Insurance Corporation, Advanta Mortgage Conduit Services Inc. and
the Representative.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial statements
of MBIA Insurance Corporation and their report.
</TABLE>
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Exhibit 1.1
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Mortgage Loan Asset-Backed Certificates,
Series 1998-1
UNDERWRITING AGREEMENT
March 12, 1998
MORGAN STANLEY & CO. INCORPORATED
As Representative of the Underwriters
named in Schedule I
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. (the "Company") has
authorized the issuance and sale of Mortgage Loan Asset-Backed Certificates,
Series 1998-1, (the "Certificates") consisting of (i) the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
A-4 Certificates, the Class A-5 Certificates, the Class A-6 Certificates, the
Class A-IO Certificates, the Class A-7 Certificates and the Class A-8
Certificates (collectively, the "Class A Certificates"), (ii) the Class M-1
Certificates (the "Class M-1 Certificates"), (iii) the Class M-2 Certificates
(the "Class M-2 Certificates", and collectively with the Class M-1 Certificates,
the "Mezzanine Certificates"), (iv) the Class B-1 Certificates (the "Class B
Certificates" and collectively with the Mezzanine Certificates, the "Subordinate
Certificates"), and (v) the residual class with respect to each REMIC held by
the Trust (the "Class R Certificates"). Only the Class A Certificates and the
Subordinate Certificates (collectively, the "Offered Certificates") are being
offered. The Certificates will be issued by the Advanta Mortgage Loan Trust
1998-1 (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
on March 19, 1998 (the "Closing Date"), an aggregate principal balance of
approximately $900,000,000. The certificates are to be issued under a pooling
and servicing agreement, to be dated as of March 1, 1998 (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 MBIA Insurance
Corporation (the "Insurer") which will unconditionally and irrevocably guarantee
to the Trustee for the benefit of the holders of the Group I Certificates
(including Component I of the Class A-7 Certificates) the amount by which the
sum of the Group I Interest Distribution
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Amount and the related Subordination Deficit, if any, exceeds the Group I 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 June 15, 1997 among the Trustee, the
Affiliate 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 March __, 1998 among the Underwriters,
the Company and the 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
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,
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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
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
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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
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 Indemnification Agreement and the Purchase Agreement,
and to cause the Certificates to be issued.
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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
Indemnification Agreement, the Purchase 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 Indemnification Agreement, the Purchase Agreement or this
Agreement, as the case may be, or (d) which might materially and
adversely affect the performance by the Company of its obligations
under, or the validity or enforceability of, the Pooling and
Servicing Agreement, the Indemnification Agreement, the Purchase
Agreement, this Agreement or the Certificates.
G. This Agreement has been, and the Pooling and Servicing
Agreement, the Indemnification Agreement and the Purchase 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 Indemnification Agreement and the Purchase 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 limitations of public policy under
applicable securities laws.
H. The execution, delivery and performance of this Agreement,
the Pooling and Servicing Agreement, the Indemnification Agreement
and the Purchase 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.
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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
Indemnification Agreement and the Purchase 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, 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
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Underwriters of the Offered Certificates, the Underwriters will have
good title to the Offered Certificates, free of any Liens.
N. As of the Cut-Off Date, each of the Mortgage Loans will
meet the eligibility criteria described in the Prospectus and will
conform to the descriptions thereof contained in the Prospectus.
O. Neither the Company nor the Trust created by the Pooling
and Servicing Agreement is an "investment company" within the
meaning of such term under the Investment Company Act of 1940 (the
"1940 Act") and the rules and regulations of the Commission
thereunder.
P. At the Closing Date, the Certificates and the Pooling and
Servicing Agreement will conform in all material respects to the
descriptions thereof contained in the Prospectus.
Q. At the Closing Date, the Offered Certificates shall have
been rated in the highest rating category by at least two nationally
recognized rating agencies.
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 Indemnification
Agreement, the Purchase 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 will be true and correct in all material respects.
Any certificate signed by an officer of the Company and delivered to
the Representative or counsel for the Underwriters in connection with an
offering of the Offered Certificates shall be deemed, and shall state that it
is, a representation and warranty as to the matters covered thereby to each
person to whom the representations and warranties in this Section I are made.
Section II. Purchase and Sale. The commitment of the Underwriters to
purchase the Offered Certificates pursuant to this Agreement shall be deemed to
have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth. The
Company agrees to instruct the Trustee to issue and agrees to sell to the
Underwriters, and the Underwriters agree (except as provided in Sections X and
XI hereof) to purchase from the Company the aggregate initial principal amounts
of Offered Certificates set forth on Schedule A, at the purchase price or prices
set forth in Schedule A.
The obligations of the Underwriters hereunder to purchase the
Offered Certificates of each Class shall be several and not joint. Each
Underwriter's obligation shall be to purchase the aggregate principal amount of
Offered Certificates of the related
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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 LLP, 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 March 19, 1998 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, 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
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<PAGE> 9
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
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
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<PAGE> 10
Prospectus that may, in the judgment of the Company or the
Representative, be required by the Securities Act or requested by
the Commission.
E. Prior to filing with the Commission any (i) Preliminary
Prospectus, (ii) amendment to the Registration Statement or
supplement to the Prospectus, or document incorporated by reference
in the Prospectus, or (iii) Prospectus pursuant to Rule 424 of the
Rules and Regulations, to furnish a copy thereof to the
Representative and counsel for the Underwriters and obtain the
consent of the Representative to the filing.
F. To make generally available to holders of the Offered
Certificates as soon as practicable, but in any event not later than
90 days after the close of the period covered thereby, a statement
of earnings of the Trust (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158) and covering a
period of at least twelve consecutive months beginning not later
than the first day of the first fiscal quarter following the Closing
Date.
G. To use its best efforts, in cooperation with the
Representative, to qualify the Offered Certificates for offering and
sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Representative may
designate, and maintain or cause to be maintained such
qualifications in effect for as long as may be required for the
distribution of the Offered Certificates. The Company will file or
cause the filing of such statements and reports as may be required
by the laws of each jurisdiction in which the Offered Certificates
have been so qualified.
H. Not, without the Representative's prior written consent, to
publicly offer or sell or contract to sell any mortgage pass-through
securities, collateralized mortgage obligations or other similar
securities representing interests in or secured by other
mortgage-related assets originated or owned by the Company for a
period of 5 business days following the commencement of the offering
of the Offered Certificates to the public.
I. So long as the Offered Certificates shall be outstanding,
to deliver to the Representative as soon as such statements are
furnished to the Trustee: (i) the annual statement as to compliance
delivered to the Trustee pursuant to Section 8.16 of the Pooling and
Servicing Agreement; (ii) the annual statement of a firm of
independent public accountants furnished to the Trustee pursuant to
Section 8.17 of the Pooling and Servicing Agreement; and (iii) the
Monthly Statement furnished to the Certificateholders pursuant to
Section 7.8 of the Pooling and Servicing Agreement.
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<PAGE> 11
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 LLP,
counsel for the Underwriters, is material and is required to be
stated therein or is necessary to make the statements therein not
misleading.
C. All corporate proceedings and other legal matters relating
to the authorization, form and validity of this Agreement, the
Pooling and Servicing Agreement, the Purchase Agreement, the
Indemnification Agreement, the Offered Certificates, the
Registration Statement and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all respects to counsel for the
Underwriters, and the Company shall have furnished to such counsel
all documents and information that they may reasonably request to
enable them to pass upon such matters.
D. The Representative shall have received the favorable
opinion of Dewey Ballantine LLP, 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
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<PAGE> 12
Servicing Agreement, the Indemnification Agreement and the Purchase
Agreement.
2. This Agreement, the Certificates, the Pooling and Servicing
Agreement, the Indemnification Agreement and the Purchase 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 Indemnification Agreement or the
Purchase Agreement (A) conflicts or will conflict with or results or
will result in a breach of, or constitutes or will constitute a
default under, (i) any term or provision of the certificate of
incorporation or bylaws of the Company; (ii) any term or provision
of any material agreement, contract, instrument or indenture, to
which the Company is a party or is bound and known to such counsel;
or (iii) any order, judgment, writ, injunction or decree of any
court or governmental agency or body or other tribunal having
jurisdiction over the Company and known to such counsel; or (B)
results in, or will result in the creation or imposition of any
lien, charge or encumbrance upon the Trust Estate or upon the
Certificates, except as otherwise contemplated by the Pooling and
Servicing Agreement.
4. The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment with respect to
each Mortgage is sufficient to fully transfer to the Trustee for the
benefit of the Owners all right, title and interest of the Company
in the Note and Mortgage, as noteholder and mortgagee or assignee
thereof, subject to any exceptions set forth in such opinion, and
will be sufficient to permit the Trustee to avail itself of all
protection available under applicable law against the claims of any
present or future creditors of the Company and to prevent any other
sale, transfer, assignment, pledge or other encumbrance of the
Mortgage Loans by the Company from being enforceable.
5. No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental
agency or body or other tribunal is required under the laws of the
State of New York, for the execution, delivery and performance of
the Pooling and Servicing Agreement, 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.
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<PAGE> 13
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
Indemnification Agreement, this 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, or this Agreement, (iii) which would
materially and adversely affect the performance by the Company of
obligations under, or the validity or enforceability of, the Pooling
and Servicing Agreement, the Indemnification Agreement, the
Certificates, the Purchase Agreement or this Agreement or (iv) that
would adversely affect the status of the Trust Estate as a "real
estate mortgage investment conduit" ("REMIC") as such term is
defined in the Internal Revenue Code of 1986, as amended.
7. To the best of the knowledge of such counsel, the
Commission has not issued any stop order suspending the
effectiveness of the Registration Statement or any order directed to
any prospectus relating to the Certificates (including the
Prospectus), and has not initiated or threatened any proceeding for
that purpose.
8. The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which
such counsel need express no opinion), including the Incorporated
Documents, as of the date on which the Registration Statement was
declared effective and as of the date hereof, comply as to form in
all material respects with the requirements of the 1933 Act and the
rules and regulations thereunder and the Exchange Act and the rules
and regulations thereunder, and such counsel does not know of any
amendment to the Registration Statement required to be filed, or of
any contracts, indentures or other documents of a character required
to be filed as an exhibit to the Registration Statement or required
to be described in the Registration Statement which has not been
filed or described as required.
9. Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the registration
of the Trust created by such Agreement under the Investment Company
Act of 1940 is presently required.
10. The statements in the Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES," "THE POOLING AND SERVICING
AGREEMENT" and the statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE CERTIFICATES," to the extent
such statements purport to summarize certain provisions of the
Certificates or of the Pooling and Servicing Agreement, are fair and
accurate in all material respects.
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<PAGE> 14
11. The statements in the Prospectus and Prospectus Supplement
set forth under the captions "ERISA CONSIDERATIONS," "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," and the statements in the
Prospectus set forth under the caption "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS AND RELATED MATTERS," to the extent that they
constitute matters of federal, New York or California law, or
federal, New York or California legal conclusions provide a fair and
accurate summary of such law or conclusions.
12. Assuming that (a) the Trustee causes the Trust created
under the Pooling and Servicing Agreement to elect, as the Trustee
has covenanted to do in the Pooling and Servicing Agreement, to be
treated as a REMIC and (b) the parties to the Pooling and Servicing
Agreement comply with the terms thereof, the Trust will be treated
as a REMIC, the Offered 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 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
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<PAGE> 15
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 received the ratings
listed on Schedule A hereto, 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, as of the Closing Date, and in the Pooling and Servicing
Agreement, the Indemnification Agreement, the Purchase Agreement and
in all related agreements, as of the date specified in such
agreements, are true and correct, and the Company has complied with
all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to the Closing Date;
2. there are no actions, suits or proceedings pending, or to
the best of such officer's knowledge, threatened against or
affecting the Company which if adversely determined, individually or
in the aggregate, would be reasonably likely to adversely affect the
Company's obligations under the Pooling and Servicing Agreement, the
Indemnification Agreement, this Agreement or the Purchase 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;
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<PAGE> 16
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 December 31, 1997, and no such amendment has been authorized.
No event has occurred since December 31, 1997, 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 December 31, 1997;
7. on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in
rating the direction of which has not been indicated, in the rating,
if any, accorded the Company or in any rating accorded any
securities of the Company, if any, by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act; and
8. each person who, as an officer or representative of the
Company, signed or signs the Registration Statement, the Pooling and
Servicing Agreement, the Indemnification Agreement, this 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 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
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<PAGE> 17
and has the power and authority to enter into and to take all
actions required of it under the Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the Pooling
and Servicing Agreement constitutes the legal, valid and binding
obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, except as enforceability thereof may be
limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the
Trustee, and (B) general principles of equity regardless of whether
such enforcement is sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the
part of the Trustee in connection with its execution and delivery of
the Pooling and Servicing Agreement or the performance of its
obligations thereunder;
4. the Certificates have been duly executed, authenticated and
delivered by the Trustee; and
5. the execution and delivery of, and performance by the
Trustee of its obligations under, the Pooling and Servicing
Agreement do not conflict with or result in a violation of any
statute or regulation applicable to the Trustee, or the charter or
bylaws of the Trustee, or to the best knowledge of such counsel, any
governmental authority having jurisdiction over the Trustee or the
terms of any indenture or other agreement or instrument to which the
Trustee is a party or by which it is bound.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Company, the Trustee and
public officials. Such opinion may also assume the due authorization, execution
and delivery 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.
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<PAGE> 18
J. The Policy relating to the Certificates shall have been
duly executed and issued at or prior to the Closing Date and shall
conform in all material respects to the description thereof in the
Prospectus.
K. The Representative shall have received a favorable opinion
of in-house counsel to the Insurer, dated the Closing Date and in
form and substance satisfactory to counsel for the Underwriters, to
the effect that:
1. The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of
Wisconsin. The Insurer is validly licensed to do business in New
York and is authorized to issue the Policy and perform its
obligations under the Policy in accordance with the terms thereof.
2. The execution and delivery by the Insurer of the Policy,
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 Indemnification
Agreement, and such agreement has 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 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 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 Policy is not required to be registered under the
Securities Act.
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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 Insurer's claims paying ability 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 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.
N. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since
December 31, 1997, of (A) the Company and its subsidiaries or (B)
the Insurer, that is in the Representative's judgment material and
adverse and that makes it in the Representative's judgment
impracticable to market the Offered Certificates on the terms and in
the manner contemplated in the Prospectus.
O. The Representative shall have received from the Insurer a
certificate, signed by the president, a senior vice president or a
vice president of the Insurer, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Policy, the 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 or the Indemnification
Agreement;
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<PAGE> 20
2. Each person who as an officer or representative of the
Insurer, signed or signs the Policy, 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 December 31, 1997;
5. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in
rating the direction of which has not been indicated, in the rating
accorded the claims paying ability of the Insurer by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of the 1933 Act;
6. The audited balance sheet of the Insurer as of December 31,
1997 and the related statement of income and retained earnings for
the fiscal year then ended, and the accompanying footnotes, together
with the related opinion of an independent certificated public
accountant, copies of which are incorporated by reference in the
Prospectus Supplement, 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.
7. to the best knowledge of such officer, since December 31,
1997, no material adverse change has occurred in the financial
position of the Insurer other than as set forth in the Prospectus
Supplement.
The officer of the Insurer certifying to items 5-7 shall be an
officer in charge of a principal financial function.
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<PAGE> 21
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 LLP, special counsel to the Company, a survey in form and
substance satisfactory to the Representative, indicating the
requirements of applicable local law which must be complied with in
order to transfer and service the Mortgage Loans pursuant to the
Pooling and Servicing Agreement and the Company shall have complied
with all such requirements.
Q. The Representative shall have received from Dewey
Ballantine LLP, special counsel to the Underwriters, such opinion or
opinions, dated the Closing Date, with respect to the issuance and
sale of the Certificates, the Prospectus and such other related
matters as the Representative shall reasonably require.
R. The Representative and counsel for the Underwriters shall
have received copies of any opinions of counsel to the Company
supplied to the Trustee relating to 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 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
21
<PAGE> 22
the conditions, herein contained, and all proceedings taken by the
Company in connection with the issuance and sale of the Certificates
as herein contemplated shall be satisfactory in form and substance
to the Representative and counsel for the Underwriters.
W. Subsequent to the execution and delivery of this Agreement
none of the following shall have occurred: (i) trading in securities
generally on the New York Stock Exchange, the American Stock
Exchange or the over-the-counter market shall have been suspended or
minimum prices shall have been established on either of such
exchanges or such market by the Commission, by such exchange or by
any other regulatory body or governmental authority having
jurisdiction; (ii) a banking moratorium shall have been declared by
Federal or state authorities; (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation
of hostilities involving the United States or there shall have been
a declaration of a national emergency or war by the United States;
or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect
of international conditions on the financial markets of the United
States shall be such) as to make it, in the judgment of the
Representative, impractical or inadvisable to proceed with the
public offering or delivery of the Certificates on the terms and in
the manner contemplated in the Prospectus.
X. The Certificates shall have received the ratings set forth
on Schedule A hereto.
If any condition specified in this Section VI shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representative by notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
Section VII. Payment of Expenses. The Company agrees to pay: (a) the
costs incident to the authorization, issuance, sale and delivery of the Offered
Certificates and any taxes payable in connection therewith; (b) the costs
incident to the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), the Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus or any document incorporated by reference therein,
all as provided in this Agreement; (d) the costs of reproducing and
22
<PAGE> 23
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 LLP,
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 LLP, counsel for the Underwriters.
Section VIII. Indemnification and Contribution.
A. The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Securities Act from and
against any and all loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the Offered Certificates), to which such
Underwriter or any such controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, (ii) the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (iii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus or (iv) the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading and shall reimburse such Underwriter and each such
controlling person promptly upon demand for any legal or other
expenses reasonably incurred by such Underwriter or such controlling
person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, 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
23
<PAGE> 24
Information) furnished to the Company through the Representative
specifically for inclusion therein; and provided, further, that as
to any Preliminary Prospectus this indemnity shall not inure to the
benefit of any Underwriter or any controlling person on account of
any loss, claim, damage, liability or action arising from the sale
of the Offered Certificates to any person by such Underwriter if
such Underwriter failed to send or give a copy of the Prospectus, as
amended or supplemented, to that person within the time required by
the Securities Act, and the untrue statement or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact in the Preliminary Prospectus was corrected in
the Prospectus, unless such failure resulted from non-compliance by
the Company with Section V(C). For purposes of the last proviso to
the immediately preceding sentence, the term "Prospectus" shall not
be deemed to include the documents incorporated therein by
reference, and none of the Underwriters shall be obligated to send
or give any supplement or amendment to any document incorporated
therein by reference to any person other than a person to whom such
Underwriter had delivered such incorporated document or documents in
response to a written request therefor. The foregoing indemnity
agreement is in addition to any liability which the Company may
otherwise have to any Underwriters or any controlling person of such
Underwriter.
B. Each Underwriter agrees severally, and not jointly to
indemnify and hold harmless the Company, each of its directors, each
of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act against any and all loss, claim,
damage or liability, or any action in respect thereof, to which the
Company or any such director, officer or controlling person may
become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, (ii) the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus or (iv) the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, 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
24
<PAGE> 25
action as such expenses are incurred. The foregoing indemnity
agreement is in addition to any liability which any Underwriter may
otherwise have to the Company or any such director, officer or
controlling person.
C. Promptly after receipt by any indemnified party under this
Section VIII of notice of any claim or the commencement of any
action, such indemnified party shall, if a claim in respect thereof
is to be made against any indemnifying party under this Section
VIII, notify the indemnifying party in writing of the claim or the
commencement of that action; provided, however, that the failure to
notify an indemnifying party shall not relieve it from any liability
which it may have under this Section VIII except to the extent it
has been materially prejudiced by such failure, and provided,
further, that the failure to notify any indemnifying party shall not
relieve it from any liability which it may have to any indemnified
party otherwise than under this Section VIII.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section VIII for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
Any indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different 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
25
<PAGE> 26
Section VIII consist of the Company or any of the Company's directors, officers
or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section VIII(A) and (B), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
D. Each Underwriter agrees to deliver to the Company no later
than the date on which the Prospectus Supplement is required to be
filed pursuant to Rule 424 with a copy of its Derived 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.
26
<PAGE> 27
The procedures set forth in Section VIII(C) shall be equally
applicable to this Section VIII(E).
F. For purposes of this Section VIII, the term "Derived
Information" means such portion, if any, of the information
delivered to the Company pursuant to Section VIII(D) for filing with
the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into account
information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
(iii) is of the type of information defined as Collateral term
sheets, Structural term sheets or Computational Materials (as
such terms are interpreted in the No-Action Letters).
"Company-Provided Information" means any computer tape furnished to
the 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 the statements or omissions which resulted in such
27
<PAGE> 28
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.
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.
28
<PAGE> 29
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(W) of this Agreement shall occur and be continuing. In the event of
any such termination, the covenant set forth in Section V(G), the provisions of
Section VII, the indemnity agreement set forth in Section VIII, and the
provisions of Sections IX and XIII shall remain in effect.
Section XI. Notices. All statements, requests, notices and
agreements hereunder shall be in writing, and:
A. if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Morgan Stanley & Co.
Incorporated, as Representative of the Underwriters, 1585 Broadway,
New York, New York, 10036, Attention: General Counsel (Fax:
212-761-0782);
B. if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to Advanta Mortgage Conduit
Services, Inc. 16875 West Bernardo Drive, San Diego, California
92127 Attention: General Counsel (Fax: 619-674-3592).
Section XII. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriters and
the Company, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the representations, warranties, indemnities and agreements contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control the Underwriters within the meaning of Section 15 of the
Securities Act, and for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section XII, any legal or equitable right,
remedy 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.
29
<PAGE> 30
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 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.
30
<PAGE> 31
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:
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
By:__________________________________
Name:
Title:
[Underwriting Agreement]
31
<PAGE> 32
<TABLE>
<CAPTION>
SCHEDULE A
- -------------------------------------------------------------------------------------------------------------------------------
INITIAL PRINCIPAL PURCHASE PRICE TO
AMOUNT OF OFFERED UNDERWRITERS
REQUIRED RATINGS CERTIFICATES PURCHASED DISREGARDING
CLASS S&P/MOODY'S/FITCH BY UNDERWRITERS COUPON ACCRUED INTEREST
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 AAA/Aaa/AAA $143,000,000 * 99.7500%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-2 AAA/Aaa/AAA $89,000,000 6.25% 99.7449%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-3 AAA/Aaa/AAA $64,000,000 6.27% 99.7325%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-4 AAA/Aaa/AAA $42,000,000 6.42% 99.7431%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-5 AAA/Aaa/AAA $68,000,000 6.60% 99.7128%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-6 AAA/Aaa/AAA $50,000,000 6.43% 99.7055%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-IO AAA/Aaa/AAA ($50,000,000)** 5.00% 11.2604%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-7 AAA/Aaa/AAA $330,000,000 * 99.7500%
- -------------------------------------------------------------------------------------------------------------------------------
Class A-8 AAA/Aaa/AAA $44,000,000 6.24% 99.7495%
- -------------------------------------------------------------------------------------------------------------------------------
Class M-1 AA/Aa2/AA $26,000,000 * 99.7500%
- -------------------------------------------------------------------------------------------------------------------------------
Class M-2 A/A2/A $23,000,000 * 99.7500%
- -------------------------------------------------------------------------------------------------------------------------------
Class B-1 BBB/Baa2/BBB $21,000,000 * 99.7500%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Floating
**Notional Balance
<PAGE> 33
EXHIBIT A
As of March __, 1998
Morgan Stanley & Co. Incorporated
As Representative of the Underwriters
named in Schedule I
1585 Broadway
New York, New York 10036
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Underwriting Agreement dated March __, 1998 (the
"Underwriting Agreement") between Advanta Mortgage
Conduit Services, Inc. ("Advanta") and Morgan Stanley
& Co. Incorporated (the "Representative") and
Indemnification Agreement dated as of March ___, 1998
(the "Indemnification Agreement") among MBIA
Insurance Corporation (the "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 the 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, the "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 Agreement, 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 Insurer
have required the undersigned, Advanta Mortgage Holding Company ("AMHC"), the
parent corporation of Advanta, to acknowledge its joint-and-several liability
with Advanta for the payment of the Joint and Several Obligations under the
Designated Agreements.
Now, therefore, the Underwriters, the Insurer and AMHC do hereby
agree that:
<PAGE> 34
(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 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
by Advanta or another affiliate of AMHC.
Capitalized terms used herein and not defined herein shall have
their respective meanings set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:___________________________________
Name: Mark T. Dunsheath
Title: Vice President
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
By:_______________________________
Name:
Title:
MBIA INSURANCE CORPORATION
By:________________________________
Name:
Title:
[AMHC Guarantee]
2
<PAGE> 35
SCHEDULE I
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities, Inc.
Salomon Brothers Inc
Greenwich Capital Markets, Inc.
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
POOLING AND SERVICING AGREEMENT
Relating to
ADVANTA MORTGAGE LOAN TRUST
1998-1
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 March 1, 1998
<PAGE> 2
TABLE OF CONTENTS
(Not a Part of this Agreement)
Page
Parties........................................................................1
Recitals.......................................................................1
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION........................1
Section 1.1. Definitions...............................................1
Section 1.2. Use of Words and Phrases.................................40
Section 1.3. Captions; Table of Contents..............................40
Section 1.4. Opinions.................................................40
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST..............40
Section 2.1. Establishment of the Trust...............................40
Section 2.2. Office...................................................41
Section 2.3. Purposes and Powers......................................41
Section 2.4. Appointment of the Trustee; Declaration of Trust.........41
Section 2.5. Expenses of the Trust....................................41
Section 2.6. Ownership of the Trust...................................41
Section 2.7. Situs of the Trust.......................................41
Section 2.8. Miscellaneous REMIC Provisions...........................41
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR
AND THE MASTER SERVICER; COVENANT OF SPONSOR TO CONVEY
MORTGAGE LOANS...........................................43
Section 3.1. Representations and Warranties of the Sponsor............43
Section 3.2. Representations and Warranties of the Master Servicer...45
Section 3.3. Representations and Warranties of the Sponsor with Respect
to the Mortgage Loans....................................47
Section 3.4. Covenants of Sponsor to Take Certain Actions with Respect
to the Mortgage Loans In Certain Situations..............49
Section 3.5. Conveyance of the Mortgage Loans.........................50
Section 3.6. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee.................52
Section 3.7. Cooperation Procedures...................................53
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES........................54
Section 4.1. Issuance of Certificates.................................54
Section 4.2. Sale of Certificates.....................................54
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS...................54
Section 5.1. Terms....................................................54
Section 5.2. Forms....................................................55
Section 5.3. Execution, Authentication and Delivery...................55
Section 5.4. Registration and Transfer of Certificates................55
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates........57
Section 5.6. Persons Deemed Owners....................................58
Section 5.7. Cancellation.............................................58
Section 5.8. Limitation on Transfer of Ownership Rights...............58
Section 5.9. Assignment of Rights.....................................59
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ARTICLE VI COVENANTS................................................59
Section 6.1. Distributions............................................59
Section 6.2. Money for Distributions to be Held in Trust; Withholding.60
Section 6.3. Protection of Trust Estate...............................60
Section 6.4. Performance of Obligations...............................61
Section 6.5. Negative Covenants.......................................61
Section 6.6. No Other Powers..........................................62
Section 6.7. Limitation of Suits......................................62
Section 6.8. Unconditional Rights of Owners to Receive Distributions..63
Section 6.9. Rights and Remedies Cumulative...........................63
Section 6.10. Delay or Omission Not Waiver.............................63
Section 6.11. Control by Owners........................................63
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES.....................64
Section 7.1. Collection of Money......................................64
Section 7.2. Establishment of Certificate Account.....................64
Section 7.3. The Group I Insurance Policy.............................64
Section 7.4. [RESERVED]...............................................65
Section 7.5. Flow of Funds............................................65
Section 7.6. Investment of Accounts...................................71
Section 7.7. Eligible Investments.....................................72
Section 7.8. Reports by Trustee.......................................73
Section 7.9. Additional Reports by Trustee............................77
Section 7.10. Supplemental Interest Payment Account, Supplement
Interest Payments and Class R Distribution Account.......77
ARTICLE VIII SERVICING AND ADMINISTRATION OF MORTGAGE LOANS...........78
Section 8.1. Master Servicer and Sub-Servicers........................78
Section 8.2. Collection of Certain Mortgage Loan Payments.............80
Section 8.3. Sub-Servicing Agreements Between Master Servicer
and Sub-Servicers........................................80
Section 8.4. Successor Sub-Servicers..................................81
Section 8.5. Liability of Master Servicer.............................81
Section 8.6. No Contractual Relationship Between Sub-Servicer
and Trustee or the Owners................................81
Section 8.7. Assumption or Termination of Sub-Servicing Agreement
by Trustee...............................................81
Section 8.8. Principal and Interest Account...........................81
Section 8.9. Delinquency Advances, Compensating Interest
and Servicing Advances...................................83
Section 8.10. Purchase of Mortgage Loans...............................84
Section 8.11. Maintenance of Insurance.................................84
Section 8.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements..................................85
Section 8.13. Realization Upon Defaulted Mortgage Loans................86
Section 8.14. Trustee to Cooperate; Release of Files...................87
Section 8.15. Servicing Compensation...................................89
Section 8.16. Annual Statement as to Compliance........................89
Section 8.17. Annual Independent Certified Public Accountants' Reports.89
Section 8.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans.............................89
Section 8.19. Assignment of Agreement..................................90
Section 8.20. Removal of Master Servicer; Resignation of
Master Servicer..........................................90
Section 8.21. Inspections by the Group I Insurer and the Trustee;
Errors and Omissions Insurance...........................94
Section 8.22. Merger, Conversion, Consolidation or Succession to
Business of Master Servicer..............................94
Section 8.23. Notices of Material Events...............................94
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ARTICLE IX TERMINATION OF TRUST.....................................95
Section 9.1. Termination of Trust.....................................95
Section 9.2. Termination Upon Option of Master Servicer...............95
Section 9.3. Termination Upon Loss of REMIC Status....................96
Section 9.4. Disposition of Proceeds..................................97
Section 9.5. Netting of Amounts.......................................97
ARTICLE X THE TRUSTEE..............................................97
Section 10.1. Certain Duties and Responsibilities......................97
Section 10.2. Removal of Trustee for Cause.............................99
Section 10.3. Certain Rights of the Trustee...........................100
Section 10.4. Not Responsible for Recitals or Issuance of
Certificates............................................101
Section 10.5. May Hold Certificates...................................101
Section 10.6. Money Held in Trust.....................................101
Section 10.7. No Lien for Fees........................................101
Section 10.8. Corporate Trustee Required; Eligibility.................101
Section 10.9. Resignation and Removal; Appointment of Successor.......102
Section 10.10. Acceptance of Appointment by Successor Trustee..........103
Section 10.11. Merger, Conversion, Consolidation or Succession to
Business of the Trustee.................................103
Section 10.12. Reporting; Withholding..................................104
Section 10.13. Liability of the Trustee................................104
Section 10.14. Appointment of Co-Trustee or Separate Trustee...........104
ARTICLE XI MISCELLANEOUS...........................................105
Section 11.1. Compliance Certificates and Opinions....................105
Section 11.2. Form of Documents Delivered to the Trustee..............106
Section 11.3. Acts of Owners..........................................106
Section 11.4. Notices, etc., to Trustee...............................107
Section 11.5. Notices and Reports to Owners; Waiver of Notices........107
Section 11.6. Rules by Trustee and Sponsor............................108
Section 11.7. Successors and Assigns..................................108
Section 11.8. Severability............................................108
Section 11.9. Benefits of Agreement...................................108
Section 11.10. Legal Holidays..........................................108
Section 11.11. Governing Law...........................................108
Section 11.12. Counterparts............................................108
Section 11.13. Usury...................................................109
Section 11.14. Amendment...............................................109
Section 11.15. REMIC Status; Taxes.....................................110
Section 11.16. Additional Limitation on Action and Imposition of Tax...111
Section 11.17. Appointment of Tax Matters Person.......................112
Section 11.18. The Group I Insurer.....................................112
Section 11.19. Maintenance of Records..................................112
Section 11.20. Notices.................................................112
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SCHEDULE I -- Schedules of Mortgage Loans
EXHIBIT A -- Form of Certificates
EXHIBIT B -- Contents of Mortgage Loan File
EXHIBIT C -- Form of Certificate Re: Mortgage Loans Prepaid in
Full After the Cut-Off Date
EXHIBIT D -- Form of Trustee's Acknowledgement of Receipt
EXHIBIT E -- Form of Certification
EXHIBIT F -- Form of Delivery Order
EXHIBIT G -- Form of Class R Tax Matters Transfer Certificate
EXHIBIT H -- Power of Attorney
EXHIBIT I -- Form of Monthly Report
EXHIBIT J -- Form of Master Servicer's Trust Receipt
EXHIBIT K -- Form of Lost Note Affidavit
ANNEX I -- Targeted Balances
Schedule I-a -- Exception Loans
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POOLING AND SERVICING AGREEMENT, relating to ADVANTA MORTGAGE LOAN
TRUST 1998-1, dated as of March 1, 1998, 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 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, MBIA Insurance Corporation (the "Group I 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:
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
Certificateholders' reliance on the Master Servicer.
"Account": Any account established in accordance with Sections 7.2,
7.10 or 8.8 hereof each of which shall be established at a Designated Depository
Institution.
"Accrual Period": With respect to the Group I Certificates (except the
Class A-1 Certificates and Component I of the Class A-7 Certificates) and the
Class A-8 Certificates and any Payment Date, the calendar month immediately
preceding the month in which the Payment Date occurs. A "calendar month" shall
be deemed to be 30 days. All calculations of interest on such Certificates will
be made on the basis of a 360-day year assumed to consist of twelve 30-day
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months. With respect to the Group II Certificates (except the Class A-8
Certificates, but including Component II of the Class A-7 Certificates), the
Class A-1 Certificates and Component I and any Payment Date, the period
commencing on the immediately preceding Payment Date (or the Startup Day in the
case of the first Payment Date) to and including the day prior to the current
Payment Date. Calculations of interest on such Certificates will be made on the
basis of the actual number of days elapsed in the related Accrual Period in a
year of 360 days.
"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 Master 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, a national banking association, Advanta
Finance Corp., a Nevada corporation.
"Aggregate Certificate Principal Balance": As of any date of
determination thereof, the sum of the then outstanding Certificate Principal
Balance of the Class A Certificates (other than the Class A-IO Certificates),
the Mezzanine Certificates and the Class B-1 Certificates.
"Agreement": This Pooling and Servicing Agreement, as it may be amended
from time to time, and including the Exhibits hereto.
"AMHC": Advanta Mortgage Holding Company, a Delaware corporation and
the corporate parent of Advanta Mortgage Corp. USA, and the indirect corporate
parent of Advanta Mortgage Conduit Services, Inc.
"Appraised Value": The appraised value of any Property based upon the
appraisal or other valuation made at the time of the origination of the related
Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase money
mortgage, the sales price of the Property at such time of origination, if such
sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person who is
authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Trustee, the
Sponsor and the Master Servicer, initially including those individuals whose
names appear on the lists of Authorized Officers delivered on the Startup Day.
"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.
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"Business Day": Any day that is not a Saturday, Sunday or other day on
which the Group I Insurer is closed or 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.
"Capped Certificate": As of any Payment Date, any Certificate the
Pass-Through Rate of which has been limited by the Group I Available Funds Cap
Rate or the Group II Available Funds Cap Rate, as applicable, for such Payment
Date.
"Capped Interest Shortfall": As defined in Section 7.10(b) hereof.
"Certificate": Any one of the Class A Certificates, Mezzanine
Certificates, Class B-1 Certificates, or 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 Group I Insurance Policy.
"Certificate Insurer": The Group I Insurer.
"Certificate Principal Balance": As of the Startup Day as to each of
the following Classes of Certificates and Component I and Component II, the
Certificate Principal Balances thereof, as follows:
<TABLE>
<S> <C>
Class A-1 Certificates = $ 143,000,000
Class A-2 Certificates = $ 89,000,000
Class A-3 Certificates = $ 64,000,000
Class A-4 Certificates = $ 42,000,000
Class A-5 Certificates = $ 68,000,000
Class A-6 Certificates = $ 50,000,000
Class A-8 Certificates = $ 44,000,000
Class M-1 Certificates = $ 26,000,000
Class M-2 Certificates = $ 23,000,000
Class B-1 Certificates = $ 21,000,000
Component I = $ 44,000,000
Component II = $ 286,000,000
</TABLE>
As of any Payment Date with respect to the Class A-1, A-2, A-3, A-4, A-5, A-6,
A-8, M-1, M-2 and B-1 Certificates and Component I and Component II, the Class
A-1 Certificate Principal Balance, the Class A-2 Certificate Principal Balance,
the Class A-3 Certificate Principal Balance, the Class A-4 Certificate Principal
Balance, the Class A-5 Certificate Principal Balance, the Class A-6 Certificate
Principal Balance, the Class A-8 Certificate Principal Balance, the Class M-1
Certificate Principal Balance, the Class M-2 Certificate Principal Balance, the
Class B-1 Certificate Principal Balance, the Component I Principal Balance and
the Component II Principal Balance, respectively, as of such Payment Date.
The Class A-IO Certificates and the Class R Certificates do not have a
Certificate Principal Balance.
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"Civil Relief Act": The Soldiers and Sailors' Civil Relief Act of 1940,
as amended from time to time.
"Civil Relief Act Shortfalls": Interest shortfalls resulting from the
application of the Civil Relief Act.
"Class": Any Class of the Class A Certificates, either Class of the
Mezzanine Certificates, the Class B-1 Certificates, or the Class R Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-6 Certificates, Class A-7 Certificates, Class A-8
Certificates or Class A-IO Certificates.
"Class A Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A Certificates less any amounts actually distributed on such Class A
Certificates with respect to the Class A Principal Distribution Amount pursuant
to Section 7.5(d) hereof with respect to principal thereon on all prior Payment
Dates.
"Class A Current Interest": With respect to any Payment Date, the Class
A-1 Current Interest, the Class A-2 Current Interest, the Class A-3 Current
Interest, the Class A-4 Current Interest, the Class A-5 Current Interest, the
Class A-6 Current Interest, the Class A-7 Current Interest, the Class A-8
Current Interest or the Class A-IO Current Interest.
"Class A Distribution Amount": The sum of the Class A-1 Distribution
Amount, the Class A-2 Distribution Amount, the Class A-3 Distribution Amount,
the Class A-4 Distribution Amount, the Class A-5 Distribution Amount, the Class
A-6 Distribution Amount, the Class A-7 Distribution Amount, the Class A-8
Distribution Amount and the Class A-IO Distribution Amount.
"Class A Interest Carry Forward Amount": With respect to any Payment
Date, the Class A-1 Interest Carry Forward Amount, the Class A-2 Interest Carry
Forward Amount, the Class A-3 Interest Carry Forward Amount, the Class A-4
Interest Carry Forward Amount, the Class A-5 Interest Carry Forward Amount, the
Class A-6 Interest Carry Forward Amount, the Class A-7 Interest Carry Forward
Amount, the Class A-8 Interest Carry Forward Amount or the Class A-IO Interest
Carry Forward Amount.
"Class A Principal Distribution Amount": Either the Group I Class A
Principal Distribution Amount or the Group II Class A Principal Distribution
Amount, as appropriate.
"Class A-1 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-1 Certificate, substantially in the form annexed
hereto as Exhibit A-1, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-1 Certificates less any amounts actually distributed with respect to the
Class A-1 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
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"Class A-1 Certificate Termination Date": The Payment Date on which the
Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued on the Class A-1
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-1 Pass-Through Rate and (ii) the Group I
Preference Amount related to interest previously paid on the Class A-1
Certificates to the extent such Group I Preference Amount has not been paid;
provided, that such amount will be reduced by the Class A-1 Certificates' pro
rata share of any Civil Relief Act Shortfalls relating to Group I during the
related Remittance Period.
"Class A-1 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-1 Current Interest, (y) the Class A-1 Interest Carry
Forward Amount, if any and (z) the Group I Class A Principal Distribution Amount
payable to the Owners of Class A-1 Certificates pursuant to Section 7.5 hereof.
"Class A-1 Formula Pass-Through Rate": The rate described in clause (i)
of the definition of "Class A-1 Pass-Through Rate".
"Class A-1 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-1 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-1 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class A-1 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class A-1 Pass-Through Rate.
"Class A-1 Pass-Through Rate": For any Payment Date, the lesser of (i)
LIBOR plus 0.10% per annum and (ii) the Group I Available Funds Cap Rate for
such Payment Date.
"Class A-2 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-2 Certificate, substantially in the form annexed
hereto as Exhibit A-2, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-2 Certificates less any amounts actually distributed with respect to the
Class A-2 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-2 Certificate Termination Date": The Payment Date on which the
Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued on the Class A-2
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-2 Pass-Through Rate and (ii) the Group
Preference Amount related to interest previously paid on the Class A-2
Certificates to the extent such Group I Preference Amount has not been paid;
provided, that such amount will be reduced by the Class A-2 Certificates' pro
rata share of any Civil Relief Act Shortfalls relating to Group I during the
related Remittance Period.
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"Class A-2 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-2 Current Interest, (y) the Class A-2 Interest Carry
Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-2 Certificates pursuant to Section 7.5
hereof.
"Class A-2 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-2 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-2 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class A-2 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class A-2 Pass-Through Rate.
"Class A-2 Pass-Through Rate": With respect to any Payment Date, 6.25%
per annum.
"Class A-3 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-3 Certificate, substantially in the form annexed
hereto as Exhibit A-3, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-3 Certificates less any amounts actually distributed with respect to the
Class A-3 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-3 Certificate Termination Date": The Payment Date on which the
Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued on the Class A-3
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-3 Pass-Through Rate and (ii) the Group I
Preference Amount related to interest previously paid on the Class A-3
Certificates to the extent such Group I Preference Amount has not been paid;
provided, that such amount will be reduced by the Class A-3 Certificates' pro
rata share of any Civil Relief Act Shortfalls relating to Group I during the
related Remittance Period.
"Class A-3 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-3 Current Interest, (y) the Class A-3 Interest Carry
Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-3 Certificates pursuant to Section 7.5
hereof.
"Class A-3 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-3 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-3 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class A-3 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class A-3 Pass-Through Rate.
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"Class A-3 Pass-Through Rate" With respect to any Payment Date, 6.27%
per annum.
"Class A-4 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-4 Certificate, substantially in the form annexed
hereto as Exhibit A-4, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-4 Certificates less any amounts actually distributed with respect to the
Class A-4 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-4 Certificate Termination Date": The Payment Date on which the
Class A-4 Certificate Principal Balance is reduced to zero.
"Class A-4 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued on the Class A-4
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-4 Pass-Through Rate and (ii) the group I
Preference Amount related to interest previously paid on the Class A-4
Certificates to the extent such Group I Preference Amount has not been paid;
provided, that such amount will be reduced by the Class A-4 Certificates' pro
rata share of any Civil Relief Act Shortfalls relating to Group I during the
related Remittance Period.
"Class A-4 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-4 Current Interest, (y) the Class A-4 Interest Carry
Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-4 Certificates pursuant to Section 7.5
hereof.
"Class A-4 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-4 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-4 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class A-4 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class A-4 Pass-Through Rate.
"Class A-4 Pass-Through Rate": With respect to any Payment Date, 6.42%
per annum.
"Class A-5 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-5 Certificate, substantially in the form annexed
hereto as Exhibit A-5, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-5 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-5 Certificates less any amounts actually distributed with respect to the
Class A-5 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
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"Class A-5 Certificate Termination Date": The Payment Date on which the
Class A-5 Certificate Principal Balance is reduced to zero.
"Class A-5 Current Interest": With respect to any Payment Date an
amount equal to the sum of (i), the amount of interest accrued on the Class A-5
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-5 Pass-Through Rate and (ii) the Group I
Preference Amount related to interest previously paid on the Class A-5
Certificates to the extent such Group I Preference Amount has not been paid;
provided, that such amount will be reduced by the Class A-5 Certificates' pro
rata share of any Civil Relief Act Shortfalls relating to Group I during the
related Remittance Period.
"Class A-5 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-5 Current Interest, (y) the Class A-5 Interest Carry
Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-5 Certificates pursuant to Section 7.5
hereof.
"Class A-5 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-5 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-5 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class A-5 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class A-5 Pass-Through Rate.
"Class A-5 Pass-Through Rate": With respect to any Payment Date, 6.60%
per annum.
"Class A-6 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-6 Certificate, substantially in the form annexed
hereto as Exhibit A-6, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-6 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-6 Certificates less any amounts actually distributed with respect to the
Class A-6 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-6 Certificate Termination Date": The Payment Date on which the
Class A-6 Certificate Principal Balance is reduced to zero.
"Class A-6 Current Interest": With respect to any Payment Date an
amount equal to the sum of (i), the amount of interest accrued on the Class A-6
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-6 Pass-Through Rate and (ii) the Group I
Preference Amount related to interest previously paid on the Class A-6
Certificates to the extent such Group I Preference Amount has not been paid;
provided, that such amount will be reduced by the Class A-6 Certificates' pro
rata share of any Civil Relief Act Shortfalls relating to Group I during the
related Remittance Period.
"Class A-6 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-6 Current Interest, (y) the Class A-6 Interest Carry
Forward Amount, if any, and (z) the sum of (i) the Class A-6 Lockout
Distribution Amount payable to the Owners of the Class
8
<PAGE> 14
A-6 Certificates pursuant to Section 7.5(d) and (ii) the portion, if any, of the
Group I Principal Distribution Amount payable to the Owners of the Class A-6
Certificates pursuant to Section 7.5(d)(v) hereof.
"Class A-6 Formula Pass-Through Rate": 6.43% per annum.
"Class A-6 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-6 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-6 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class A-6 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class A-6 Pass-Through Rate.
"Class A-6 Lockout Distribution Amount": With respect to any Payment
Date, the product of (i) the applicable Class A-6 Lockout Percentage for such
Payment Date and (ii) the Class A-6 Lockout Pro Rata Distribution Amount for
such Payment Date; provided, that in no event shall the Class A-6 Lockout
Distribution Amount exceed the Group I Principal Distribution Amount for the
related Payment Date or the Class A-6 Certificate Principal Balance.
"Class A-6 Lockout Percentage": For each Payment Date, the percentage
set forth below:
<TABLE>
<CAPTION>
CLASS A-6
PAYMENT DATES LOCKOUT PERCENTAGE
<S> <C>
April 1998-March 2001 0%
April 2001-March 2003 45%
April 2003-March 2004 80%
April 2004-March 2005 100%
April 2005 and thereafter 300%
</TABLE>
"Class A-6 Lockout Pro Rata Distribution Amount": With respect to any
Payment Date, an amount equal to the product of (x) a fraction, the numerator of
which is the Class A-6 Certificate Principal Balance immediately prior to such
Payment Date and the denominator of which is the aggregate Certificate Principal
Balance of the Group I Certificates (including the Component I Principal
Balance) immediately prior to such Payment Date and (y) the Group I Class A
Principal Distribution Amount for such Payment Date.
"Class A-6 Pass-Through Rate": With respect to any Payment Date, the
lesser of (x) 6.43% per annum and (y) the Group I Available Funds Cap Rate for
such Payment Date.
"Class A-7 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-7 Certificate, substantially in the form annexed
hereto as Exhibit A-7, authenticated and delivered by the Trustee, representing
the right to distributions, as set forth herein, related to the two certificates
Component I and Component II.
"Class A-7 Certificate Principal Balance": As of any time of
determination, the sum of the then outstanding Component I Principal Balance and
the Component II Principal Balance.
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<PAGE> 15
"Class A-7 Certificate Termination Date": The Payment Date on which the
Class A-7 Certificate Principal Balance is reduced to zero.
"Class A-7 Current Interest": With respect to any Payment Date, the sum
of the Component I Current Interest and the Component II Current Interest.
"Class A-7 Distribution Amount": With respect to any Payment Date, the
sum of (i) the Component I Current Interest, (ii) the Component II Current
Interest, (iii) the Component I Interest Carry Forward Amount, if any, (iv) the
Component II Interest Carry Forward Amount, if any, (v) the Group I Class A
Principal Distribution Amount payable with respect to Component I on such
Payment Date pursuant to Section 7.5 hereof and (vi) the Group II Class A
Principal Distribution Amount Payable with respect to Component II on such
Payment Date pursuant to Section 7.5 hereof.
"Class A-7 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the Component I Interest Carry Forward Amount and (y) the
Component II Interest Carry Forward Amount.
"Class A-8 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-8 Certificate, substantially in the form annexed
hereto as Exhibit A-8, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-8 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-8 Certificates less any amounts actually distributed with respect to the
Class A-8 Certificates pursuant to Section 7.5(e) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-8 Certificate Termination Date": The Payment Date on which the
Class A-8 Certificate Principal Balance is reduced to zero.
"Class A-8 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-8 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-8 Pass-Through Rate.
"Class A-8 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-8 Current Interest, (y) the Class A-8 Interest Carry
Forward Amount, if any, (y) the Class A-8 Lockout Distribution Amount payable to
Owners of the Class A-8 Certificates pursuant to Section 7.5 and (z) the Group
II Class A Principal Distribution Amount payable to the Owners of Class A-8
Certificates pursuant to Section 7.5 hereof.
"Class A-8 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-8 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-8 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class A-8 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class A-8 Pass-Through Rate.
10
<PAGE> 16
"Class A-8 Interest Distribution Amount": With respect to the Class A-8
Certificates for any Payment Date, the sum of (x) the Class A-8 Current Interest
and (y) the Class A-8 Interest Carry Forward Amount.
"Class A-8 Lockout Distribution Amount": With respect to any Payment
Date, the product of (i) the applicable Class A-8 Lockout Percentage for such
Payment Date and (ii) the Class A-8 Lockout Pro Rata Distribution Amount for
such Payment Date; provided, that in no event shall the Class A-8 Lockout
Distribution Amount exceed the Group II Principal Distribution Amount for the
related Payment Date "Z" FROM P. 11?.
"Class A-8 Lockout Percentage": The "Class A-8 Lockout Percentage" for
each Payment Date is as follows:
<TABLE>
<CAPTION>
CLASS A-8
PAYMENT DATES LOCKOUT PERCENTAGE
<S> <C>
April 1998-December 1999 0%
January 2000-May 2003 500%
June 2003 and thereafter 100%
</TABLE>
"Class A-8 Lockout Pro Rata Distribution Amount": For any Payment Date,
an amount equal to the product of (x) a fraction, the numerator of which is the
Certificate Principal Balance of the Class A-8 Certificates immediately prior to
such Payment Date and the denominator of which is the Aggregate Certificate
Principal Balance of all Classes of the Class A Certificates relating to Group
II (including the Component II Principal Balance of the Class A-7 Certificates)
immediately prior to such Payment Date and (y) the Group II Class A Principal
Distribution Amount for such Payment Date.
"Class A-8 Pass-Through Rate": For any Payment Date, 6.24%.
"Class A-IO Certificate": Any one of the Certificates designated on the
face thereof as a Class A-IO Certificate, substantially in the form annexed
hereto as Exhibit A-1O, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-IO Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued on the Class A-IO
Notional Certificate Principal Balance immediately prior to such Payment Date
during the related Accrual Period at the Class A-IO Pass-Through Rate and (ii)
the Group I Preference Amount related to interest previously paid on the Class
A-IO Certificates to the extent such Group I Preference Amount has not been
paid; provided, that such amount will be reduced by the Class A-IO Certificates'
pro rata share of any Civil Relief Act Shortfalls during the related Remittance
Period.
"Class A-IO Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-IO Current Interest and (y) the Class A-IO Interest Carry
Forward Amount.
"Class A-IO Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-IO Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-IO Interest
11
<PAGE> 17
Carry Forward Amount outstanding on such immediately preceding Payment Date
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-IO Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-IO
Pass-Through Rate.
"Class A-IO Notional Certificate Principal Balance": With respect to
any date on or prior to the 30th Payment Date, the Class A-6 Certificate
Principal Balance as of such date. With respect to any date after the 30th
Payment Date, zero.
"Class A-IO Pass-Through Rate": 5.00% per annum.
"Class B-1 Applied Realized Loss Amount": As to any Payment Date, the
lesser of (x) the Class B-1 Certificate Principal Balance (after taking into
account the distribution of the Group II Principal Distribution Amount on such
Payment Date, but prior to the application of the Class B-1 Applied Realized
Loss Amount, if any, on such Payment Date) and (y) the Group II Applied Realized
Loss Amount as of such Payment Date.
"Class B-1 Certificate": Any one of the Certificates designated on the
face thereof as a Class B-1 Certificate, substantially in the form annexed
hereto as Exhibit A-11, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class B-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class B-1 Certificates less the sum of (x) any amounts actually distributed to
the Owners of the Class B-1 Certificates pursuant to Section 7.5 hereof with
respect to principal on all prior Payment Dates and (y) the aggregate cumulative
amount of the Class B-1 Applied Realized Loss Amounts on all prior Payment
Dates.
"Class B-1 Certificate Termination Date": The Payment Date on which the
Class B-1 Certificate Principal Balance is reduced to zero.
"Class B-1 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class B-1 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class B-1 Pass-Through Rate.
"Class B-1 Distribution Amount": With respect to any Payment Date, the
sum of (w) the Class B-1 Current Interest, (x) the Class B-1 Principal
Distribution Amount, if any, (y) the Class B-1 Interest Carry Forward Amount, if
any, and (z) the Class B-1 Realized Loss Amortization Amount, if any.
"Class B-1 Formula Pass-Through Rate": The rate described in clause (x)
of the definition of "Class B-1 Pass-Through Rate."
"Class B-1 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
B-1 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class B-1 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class B-1 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class B-1 Pass-Through Rate.
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<PAGE> 18
"Class B-1 Pass-Through Rate": With respect to any Payment Date, the
lesser of (x) with respect to any Payment Date which occurs on or prior to the
Clean-up Call Date, LIBOR plus 1.15% per annum and for any Payment Date
thereafter, LIBOR plus 1.725% per annum (the "Class B-1 Formula Pass-Through
Rate") and (y) the Group II Available Funds Cap Rate applicable to such Payment
Date.
"Class B-1 Principal Distribution Amount": With respect to any Payment
Date on or after the Stepdown Date with respect to Group II, and as long as a
Group II Delinquency Trigger Event is not in effect, the excess of (x) the sum
of (i) the Class A-8 Certificate Principal Balance plus the Component II
Principal Balance of Component II (after taking into account the payment of the
Group II Class A Principal Distribution Amount on such Payment Date), (ii) the
Class M-1 Certificate Principal Balance (after taking into account the payment
of the Class M-1 Principal Distribution Amount on such Payment Date), (iii) the
Class M-2 Certificate Principal Balance (after taking into account the payment
of the Class M-2 Principal Distribution Amount on such date) and (iv) the Class
B-1 Certificate Principal Balance immediately prior to such Payment Date over
(y) the product of (i) as long as no Stepup Trigger Event is in effect 94.00%,
or, if any Stepup Trigger Event is in effect, 92.00% and (ii) the outstanding
aggregate Loan Balance of the Mortgage Loans in Group II as of the last day of
the related Remittance Period.
"Class B-1 Realized Loss Amortization Amount": As of any Payment Date,
the lesser of (x) the Unpaid Realized Loss Amount with respect to the Class B-1
Certificates as of such Payment Date and (y) the excess of (i) the Group II
Monthly Excess Cashflow Amount over (ii) the sum of the Class A Interest Carry
Forward Amount with respect to Group II, the Group II Extra Principal
Distribution Amount, the Class M-1 Realized Loss Amortization Amount, the Class
M-2 Realized Loss Amortization Amount, the Class M-1 Interest Carry Forward
Amount, the Class M-2 Interest Carry Forward Amount and the Class B-1 Interest
Carry Forward Amount in each case for such Payment Date.
"Class M-1 Applied Realized Loss Amount": As to any Payment Date, the
lesser of (x) the Class M-1 Certificate Principal Balance (after taking into
account the distribution of the Group II Principal Distribution Amount on such
Payment Date, but prior to the application of the Class M-1 Applied Realized
Loss Amount, if any, on such Payment Date) and (y) the excess of (i) the Group
II Applied Realized Loss Amount as of such Payment Date over (ii) the sum of the
Class M-2 Applied Realized Loss Amount and the Class B-1 Applied Realized Loss
Amount, in each case as of such Payment Date.
"Class M-1 Certificate": Any one of the Certificates designated on the
face thereof as a Class M-1 Certificate, substantially in the form annexed
hereto as Exhibit A-12, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class M-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class M-1 Certificates less the sum of (x) any amounts actually distributed to
the Owners of the Class M-1 Certificates pursuant to Section 7.5 hereof with
respect to the principal on all prior Payment Dates and (y) the aggregate
cumulative amount of Class M-1 Applied Realized Loss Amounts on all prior
Payment Dates.
"Class M-1 Certificate Termination Date": The Payment Date on which the
Class M-1 Certificate Principal Balance is reduced to zero.
13
<PAGE> 19
"Class M-1 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class M-1 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class M-1 Pass-Through Rate.
"Class M-1 Distribution Amount": With respect to any Payment Date, the
sum of (w) the Class M-1 Current Interest, (x) the Class M-1 Principal
Distribution Amount, if any, (y) the Class M-1 Interest Carry Forward Amount, if
any, and (z) the Class M-1 Realized Loss Amortization Amount, if any.
"Class M-1 Formula Pass-Through Rate": The rate described in clause (x)
of the definition of "Class M-1 Pass-Through Rate."
"Class M-1 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
M-1 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class M-1 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class M-1 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class M-1 Pass-Through Rate.
"Class M-1 Pass-Through Rate": With respect to any Payment Date, the
lesser of (x) with respect to any Payment Date which occurs on or prior to the
Clean-up Call Date, LIBOR plus 0.40% per annum and for any Payment Date
thereafter, LIBOR plus 0.60% per annum (the "Class M-1 Formula Pass-Through
Rate") and (y) the Group II Available Funds Cap Rate applicable to such Payment
Date.
"Class M-1 Principal Distribution Amount": With respect to any Payment
Date on or after the Stepdown Date with respect to Group II and as long as a
Group II Delinquency Trigger Event is not effect, the excess of (x) the sum of
(i) the Class A-8 Certificate Principal Balance plus the Component II Principal
Balance (after taking into account the payment of the Class A Principal
Distribution Amount for Group II on such Payment Date) and (ii) the Class M-1
Certificate Principal Balance immediately prior to such Payment Date over (y)
the product of (i) as long as no Stepup Trigger Event is in effect, 72.00%, or
if any Stepup Trigger Event is in effect, 70.00% and (ii) the outstanding Loan
Balance of the Mortgage Loans in Group II as of the last day of the related
Remittance Period.
"Class M-1 Realized Loss Amortization Amount": As of any Payment Date,
the lesser of (x) the Unpaid Realized Loss Amount with respect to the Class M-1
Certificates as of such Payment Date and (y) the excess of (i) the Group II
Monthly Excess Cashflow Amount over (ii) the sum of the Class A Interest Carry
Forward Amount with respect to Group II, the Group II Extra Principal
Distribution Amount and the Class M-1 Interest Carry Forward Amount, in each
case for such Payment Date.
"Class M-2 Applied Realized Loss Amount": As to any Payment Date, the
lesser of (x) the Class M-2 Certificate Principal Balance (after taking into
account the distribution of the Group II Principal Distribution Amount on such
Payment Date, but prior to the application of the Class M-2 Applied Realized
Loss Amount, if any, on such Payment Date) and (y) the excess of (i) the Group
II Applied Realized Loss Amount as of such Payment Date over (ii) the Class B-1
Applied Realized Loss Amount as of such Payment Date.
14
<PAGE> 20
"Class M-2 Certificate": Any one of the Certificates designated on the
face thereof as a Class M-2 Certificate, substantially in the form annexed
hereto as Exhibit A-13, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class M-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class M-2 Certificates less the sum of (x) any amounts actually distributed to
the Owners of the Class M-2 Certificates, pursuant to Section 7.5 hereof on all
prior Payment Dates and (y) the aggregate, cumulative amount of Class M-2
Applied Realized Loss Amounts on all prior Payment Dates.
"Class M-2 Certificate Termination Date": The Payment Date on which the
Class M-2 Certificate Principal Balance is reduced to zero.
"Class M-2 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class M-2 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class M-2 Pass-Through Rate.
"Class M-2 Distribution Amount": With respect to any Payment Date, the
sum of (w) the Class M-2 Current Interest, (x) the Class M-2 Principal
Distribution Amount, if any, (y) the Class M-2 Interest Carry Forward Amount, if
any, and (z) the Class M-2 Realized Loss Amortization Amount, if any.
"Class M-2 Formula Pass-Through Rate": The rate described in clause (x)
of the definition of "Class M-2 Pass-Through Rate."
"Class M-2 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
M-2 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class M-2 Interest Carry Forward Amount outstanding on such immediately
preceding Payment Date exceeds (ii) the amount of the actual distribution with
respect to interest made to the Owners of the Class M-2 Certificates on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Class M-2 Pass-Through Rate.
"Class M-2 Pass-Through Rate": With respect to any Payment Date, the
lesser of (x) with respect to any Payment Date which occurs on or prior to the
Clean-up Call Date, LIBOR plus 0.60% per annum and for any Payment Date
thereafter, LIBOR plus 0.90% per annum (the "Class M-1 Formula Pass-Through
Rate") and (y) the Group II Available Funds Cap Rate applicable to such Payment
Date.
"Class M-2 Principal Distribution Amount": With respect to any Payment
Date on or after the Stepdown Date with respect to Group II, and as long as a
Group II Delinquency Trigger Event is not in effect, the excess of (x) the sum
of (i) the Class A-8 Certificate Principal Balance plus the Component II
Principal Balance (after taking into account the payment of the Class A
Principal Distribution Amount for Group II on such Payment Date), (ii) the Class
M-1 Certificate Principal Balance (after taking into account the payment of the
Class M-1 Principal Distribution Amount on such Payment Date) and (iii) the
Class M-2 Certificate Principal Balance immediately prior to such Payment Date
over (y) the product of (i) as long as no Stepup Trigger Event is in effect
83.50%, or if any Stepup Trigger Event is in effect, 81.50% and (ii) the
outstanding aggregate Loan Balance of the Mortgage Loans in Group II as of the
last day of the related Remittance Period.
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<PAGE> 21
"Class M-2 Realized Loss Amortization Amount": As of any Payment Date,
the lesser of (x) the Unpaid Realized Loss Amount with respect to the Class M-2
Certificates as of such Payment Date and (y) the excess of (i) the Group II
Monthly Excess Cashflow Amount over (ii) the sum of the Class A Interest Carry
Forward Amount with respect to Group II, Group II Extra Principal Distribution
Amount, the Class M-1 Realized Loss Amortization Amount, the Class M-1 Interest
Carry Forward Amount and the Class M-2 Interest Carry Forward Amount, in each
case for such Payment Date.
"Class R Certificate": Any one of the Certificates designated on the
face thereof as a Class R Certificate, substantially in the form annexed hereto
as Exhibit A-14, authenticated and delivered by the Trustee, representing the
right to distributions as set forth herein, and evidencing an interest
designated as the "residual interest" in the Upper-Tier REMIC for the purposes
of the REMIC Provisions.
"Clean-Up Call Date": The first Remittance Date following the date on
which the aggregate Loan Balances of all Mortgage Loans has declined to 10% or
less of the aggregate principal balance of the Mortgage Loans as of the Startup
Day.
"Code": The Internal Revenue Code of 1986, as amended and any successor
statute.
"Combined Loan-to-Value Ratio": With respect to any First Mortgage
Loan, the percentage equal to the Original Principal Amount of the related Note
divided by the Appraised Value of the related Property and with respect to any
Second Mortgage Loan or any 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.
"Commitment": The Commitment to Issue a Certificate Guaranty Insurance
Policy dated March 19, 1998 and issued by the Group I Insurer.
"Compensating Interest": As defined in Section 8.9(b) hereof.
"Component I": The component certificate that represents the interest
of the Owners of the Class A-7 Certificates in Group I which is a regular
interest in the Upper-Tier REMIC that together with Component II comprises the
Class A-7 Certificates.
"Component I Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued on the Component I
Principal Balance immediately prior to such Payment Date during the related
Accrual Period at the Component I Pass-Through Rate and (ii) the Group I
Preference Amount related to interest previously paid on Component I to the
extent such Group I Preference Amount has not been paid; provided, that such
amount will be reduced by Component I's pro rata share of any Civil Relief Act
Shortfalls relating to Group I during the related Remittance Period.
"Component I Formula Pass-Though Rate": The rate described in clause
(x) of the definition of "Component I Pass-Through Rate."
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<PAGE> 22
"Component I Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Component I Current Interest as of the immediately preceding Payment Date and
(B) any unpaid Component I Interest Carry Forward Amount outstanding on such
immediately preceding Payment Date exceeds (ii) the amount of the actual
distribution with respect to interest made with respect to Component I on such
immediately preceding Payment Date and (y) 30 days' interest on such amount at
the Component I Pass-Through Rate.
"Component I Principal Balance": As of any time of determination, the
Certificate Principal Balance as of the Startup Day of Component I less any
amounts actually distributed with respect to Component I pursuant to Section
7.5(d) hereof with respect to principal on all prior Payment Dates.
"Component II Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Component II Principal Balance immediately
prior to such Payment Date during the related Accrual Period at the Component II
Pass-Through Rate.
"Component II Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Component II Current Interest as of the immediately preceding Payment Date and
(B) any unpaid Component II Interests Carry Forward Amount from all previous
Payment Dates exceeds (ii) the amount of the actual distribution with respect to
interest made with respect to Component II on such immediately preceding Payment
Date and (y) 30 days' interest on such amount at the Component II Pass-Through
Rate.
"Component II Principal Balance": As of any time of determination, the
Certificate Principal Balance of Component II as of the Startup Day less any
amounts actually distributed with respect to Component II pursuant to Section
7.5(e) hereof with respect to principal on all prior Payment Dates.
"Component I Pass-Through Rate": With respect to any Payment Date, the
lesser of (x) with respect to any Payment Date which occurs on or prior to the
Clean-up Call Date, LIBOR plus 0.21% per annum and for any Payment Date
thereafter, LIBOR plus 0.42% per annum (the "Component I Formula Pass-Through
Rate") and (y) the Group I Available Funds Cap Rate applicable to Component I.
"Component II": The component certificate that represents the interest
of the Owners of the Class A-7 Certificates in Group II which is a regular
interest in the Upper-Tier REMIC that together with Component I comprises the
Class A-7 Certificates.
"Component II Formula Pass-Through Rate": The rate described in clause
(x) of the definition of "Component II Pass-Through Rate."
"Component II Pass-Through Rate": With respect to any Payment Date, the
lesser of (x) with respect to any Payment Date which occurs on or prior to the
Clean-up Call Date, LIBOR plus 0.21% per annum and for any Payment Date
thereafter, LIBOR plus 0.42% per annum (the "Component II Pass-Through Rate")
and (y) the Group II Available Funds Cap Rate.
"Conduit Acquisition Trust": The trust described in the Pooling and
Servicing Agreement dated as of May 1, 1997 among the Sponsor, Bankers Trust
Company of California,
17
<PAGE> 23
N.A., as trustee, Advanta Mortgage Corp. USA, as the master servicer, and the
"Borrowers" named therein.
"Conduit Mortgage Files": For any Mortgage Loan identified on the
related Schedule of Mortgage Loans with a "B" code, the items listed on Exhibit
B hereto.
"Control Party": Until the last sentence of Section 11.18 hereof is
applicable and so long as no Group I Insurer Default has occurred and is
continuing, the Group I Insurer, and thereafter, the Trustee.
"Coupon Rate": The rate of interest borne by each Note.
"Current Interest": With respect to any Payment Date, the sum of the
Class A-1 Current Interest, the Class A-2 Current Interest, the Class A-3
Current Interest, the Class A-4 Current Interest, the Class A-5 Current
Interest, the Class A-6 Current Interest, the Class A-7 Current Interest, the
Class A-8 Current Interest, the Class A-IO Current Interest, the Class M-1
Current Interest, the Class M-2 Current Interest and the Class B-1 Current
Interest.
"Cut-Off Date": The date as of which Mortgage Loans are transferred and
assigned to the Trust; the opening of business March 1, 1998.
"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.
"Deficiency Amount": The excess, if any, of the Required Distributions
over the Net Available Distribution Amount.
"Delinquency Advance": As defined in Section 8.9(a) hereof.
"Delinquent": A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as Exhibit F
hereto and delivered by the Sponsor to the Trustee on the Startup Day pursuant
to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover Square, New York,
New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to each Account, an
institution whose deposits are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, the long-term deposits of which shall be
rated A2 or better by Moody's and in the highest short-term rating category for
Moody's, unless otherwise approved in writing by the Trustee, the Group I
Insurer and Moody's, and which is any of the following: (i) a federal savings
18
<PAGE> 24
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 Trustee, the Group I Insurer
and Moody'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 Conduit Receivables, Inc.
"Determination Date": As to each Payment Date, the third Business Day
preceding such Payment Date or such earlier day as shall be agreed to by the
Group I Insurer and the Trustee.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or
other financial institution for which the Depository holds Offered Certificates
from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall have the
meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Document Delivery Requirements": The Sponsor's obligations to deliver
certain legal documents, to prepare and record certain Mortgage assignments or
to deliver certain opinions relating to Mortgage assignments, in each case with
respect to the Mortgage Loans and as set forth in Section 3.5 hereof.
"Eligible Investments": Those investments so designated pursuant to
Section 7.7 hereof.
"Event of Default": Any event described in clauses (a) or (b) of
Section 8.20 hereof.
"Fannie Mae": 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.
"FDIC": The Federal Deposit Insurance Corporation, or any successor thereto.
"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 Advanta Mortgage File or Conduit Mortgage File, as
appropriate, pursuant to this Agreement.
"Final Determination": As defined in Section 9.3(a) hereof.
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<PAGE> 25
"First Mortgage Loan": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Property.
"Fitch": Fitch IBCA Inc.
"Formula Interest Shortfall": As defined in Section 7.10(b) hereof.
"Formula Rate": As appropriate, the Class A-1 Formula Pass-Through
Rate, the Component I Formula Pass-Through Rate, the Component II Formula
Pass-Through Rate, the Class M-1 Formula Pass-Through Rate, the Class M-2
Formula Pass-Through Rate or the Class B-1 Formula Pass-Through Rate.
"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.
"Full Interest Distribution Amount": With respect to any Class of
Capped Certificates and any Payment Date, the interest due with respect to such
Class of Capped Certificates, calculated using the Formula Pass-Through Rate
with respect thereto.
"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": Group I or Group II.
"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 and assigned to
Group I.
"Group I Applied Realized Loss Amount": As of any Payment Date, the
excess of (x) the aggregate Certificate Principal Balance of the Group I
Certificates on such Payment Date, after taking into account the distribution of
the Group I Principal Distribution Amount on such Payment Date but prior to the
application of the Group I Applied Realized Loss Amount, if any, on such Payment
Date over (y) the aggregate outstanding Loan Balance of the Mortgage Loans in
Group I as of the last day of the related Remittance Period.
"Group I Available Funds": As defined in Section 7.3(a) hereof.
"Group I Available Funds Cap Rate": With respect to any Payment Date,
an amount, expressed as a per annum rate, equal to the lesser of (x) the Group I
Maximum Rate and (v)(a)(i) the aggregate amount of interest due and collected
(or advanced) on all of the Mortgage Loans in Group I for the related Remittance
Period minus (ii) the aggregate of the Trustee's Fee Premium Amount and the
Servicing Fee for Group I with respect to such Payment Date minus (iii) the
product of (x) one-twelfth of 5.00% for the first 30 Payment Dates, and 0%
there-off and (i) the Lower-Tier Interest #1 Balance immediately prior to such
Payment Date, divided by (b) the Loan Balances of the Mortgage Loans in Group I
as of the beginning of the prior Remittance Period, calculated on the basis of a
360-day year consisting of twelve 30-day months (or, in the case of such
calculation being made with respect to the Class A-1 Certificates or Component
I, calculated on the basis of a 360-day year and the actual number of days
elapsed); provided, that
20
<PAGE> 26
the "Group I Available Funds Cap Rate" insofar as it applies to Component I of
the "Class A-1 Certificates only will be for each Payment Date commencing on
__________.
"Group I Certificate Principal Balance": As of any date of
determination, the aggregate Certificate Principal Balances of all Group I
Certificates (including Component I).
"Group I Certificates": The Class A Certificates (other than the Class
A-8 Certificates and Component II of the Class A-7 Certificates).
"Group I Class A Principal Distribution Amount": As of any Payment
Date, 100% of the Group I Principal Distribution Amount.
"Group I Deficiency Amount": As defined in Section 7.3(b).
"Group I Extra Principal Distribution Amount": As of any Payment Date,
the lesser of (x) the Group I Monthly Excess Interest Amount for such Payment
Date plus any Group II Monthly Excess Cashflow Amount available from Group II
and (y) the Group I Overcollateralization Deficiency for such Payment Date.
"Group I Insurance Policy": The certificate guaranty insurance policy
dated March 19, 1998 issued by the Group I Insurer to the Trustee for the
benefit of the Owners of the Group I Certificates.
"Group I Insured Distribution Amount": As to the Group I Certificates
and any Payment Date, the sum of (x) the Group I Interest Distribution Amount
for such Payment Date and (y) the Group I Applied Realized Loss Amount, 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 Insurer": MBIA Insurance Corporation, a New York stock
insurance company.
"Group I Insurer Default": Any one of the following events shall have
occurred and be continuing:
(a) The Group I Insurer shall have failed to make a payment required
under the Group I Insurance Policy;
(b) The Group I Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar Federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar Federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) A court of competent jurisdiction, the New York Department of
Insurance, or other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Group I Insurer or for all or any material portion of
its property or (ii) authorizing the taking of possession
21
<PAGE> 27
by a custodian, trustee, agent or receiver of the Group I Insurer (or the taking
of possession of all or any material portion of the property of the Group I
Insurer).
"Group I Interest Amount Available": As of any Payment Date, the Group
I Interest Remittance Amount less the portion of the Trustee's Fees related to
Group I and the Premium Amount for such Payment Date.
"Group I Interest Distribution Amount": As of any Payment Date, the sum
of (i) the Class A-1 Interest, Class A-2 Current Interest, Class A-3 Current
Interest, Class A-4 Current Interest, Class A-5 Current Interest, Class A-6
Current Interest, Class A-IO Current Interest and the Component I Current
Interest and (ii) any Class A-1 Interest Carry-Forward Amount, Class A-2
Interest Carry Forward Amount, Class A-3 Interest Carry Forward Amount, Class
A-4 Interest Carry Forward Amount, Class A-5 Interest Carry Forward Amount,
Class A-6 Interest Carry Forward Amount, Class A-IO Interest Carry Forward
Amount and Component I Interest Carry Forward Amount.
"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 (less the Servicing Fee with respect to such Mortgage Loans), (ii) all
Delinquency Advances and all Special Advances made by the Master Servicer on
such Remittance Date with respect to Group I, (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), (iv) the portion
of the Loan Purchase Price and the Substitution Amount relating to interest on
the Mortgage Loans in Group I and (v) the portion of any Net Liquidation
Proceeds relating to interest with respect to Group I and (vi) the proceeds of
any liquidation of the Trust Estate related to Group I (to the extent such
proceeds relate to interest and Group I).
"Group I Maximum Rate": 14.00% per annum.
"Group I Monthly Excess Cashflow Amount": For any Payment Date, the sum
of (x) the Group I Monthly Excess Interest Amount and (y) the Group I
Overcollateralization Release Amount for such Payment Date.
"Group I Monthly Excess Interest Amount": With respect to any Payment
Date, the excess, if any, of (i) the Group I Interest Amount Available for the
related Remittance Period over (ii) the Current Interest on the Group I
Certificates on such Payment Date.
"Group I Monthly Remittance Amount": As of any Remittance Date, the sum
of (i) the Group I Interest Remittance Amount for such Remittance Date and (ii)
the Group I Principal Remittance Amount for such Remittance Date.
"Group I Net Weighted Average Coupon Rate": With respect to any Payment
Date, the weighted average of the Coupon Rates of the Mortgage Loans in Group I
(weighted by the Loan Balances of the Mortgage Loans in Group I), less the
Servicing Fee.
"Group I Original Pool Balance": The aggregate principal balances of
the Mortgage Loans in Group I as of the Startup Day, which sum is $500,000,000.
"Group I Overcollateralization Amount": As of any Payment Date, the
difference between (x) the aggregate Loan Balance of the Mortgage Loans in Group
I as of the
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<PAGE> 28
last day of the immediately preceding Remittance Period and (y) the aggregate
Certificate Principal Balance of the Group I Certificates (after taking into
account all distributions of principal on such Group I Certificates as of such
Payment Date).
"Group I Overcollateralization Deficiency": As of any Payment Date, the
excess, if any, of (x) the Group I Targeted Overcollateralization Amount for
such Payment Date over (y) the Group I Overcollateralization Amount for such
Payment Date, calculated for this purpose after taking into account the
reduction on such Payment Date of the aggregate Certificate Principal Balance of
the Group I Certificates (including the Component I Principal Balance) resulting
from the distribution of the Group I Principal Distribution Amount (but not the
Group I Extra Principal Distribution Amount) on such Payment Date, but prior to
taking into account any Group I Applied Realized Loss Amount on such Payment
Date.
"Group I Overcollateralization Release Amount": As of any Payment Date,
the lesser of (x) the Group I Principal Remittance Amount for such Payment Date
and (y) the excess of (i) the Group I Overcollateralization Amount for such
Payment Date, assuming that 100% of the Group I Distribution Remittance Amount
is applied on such Payment Date to the payment of principal on the Group I
Certificates over (ii) the Group I Targeted Overcollateralization Amount for
such Payment Date.
"Group I Preference Amount": Any amount previously distributed to an
Owner on the Group I Certificates (including Component I) that is recoverable
and sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code (11 U.S.C.), as amended from time
to time, in accordance with a final nonappealable order of a court having
competent jurisdiction.
"Group I Principal Distribution Amount": As of any Payment Date, the
sum (without duplication) of (i) the Group I Principal Remittance Amount (minus,
for Payment Dates occurring on and after the Group I Stepdown Date, the Group I
Overcollateralization Release Amount, if any), (ii) the Group I Extra Principal
Distribution Amount, if any and (iii) the Group I Applied Realized Loss Amount
for such Payment Date.
"Group I Principal Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) the principal actually collected by the Master
Servicer with respect to Mortgage Loans in Group I during the related Remittance
Period, (ii) the Loan Balance of each such Mortgage Loan in Group I that was
purchased from the Trustee on or prior to such Remittance Date, to the extent
such Loan Balance was actually deposited in the Principal and Interest Account,
(iii) any Substitution Amounts relating to principal 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, (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 Net Liquidation
Proceeds related to principal) net of amounts allowed to be retained pursuant to
Section 8.8(c) and (v) the proceeds of any liquidation of the Trust Estate
related to Group I (to the extent such proceeds related to principal).
"Group I Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all Group I Insured Payments previously received by the Trustee not
previously repaid to the Group I Insurer pursuant to Sections 7.5(f)(B) and
7.5(f)(D) hereof plus (ii) interest accrued on each such Group I Insured Payment
not previously repaid calculated from the date the Trustee received the related
Group II Insured Payment at the Late Payment Rate applicable to such date
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<PAGE> 29
and (y)(i) any amounts then due and owing to the Group I Insurer relating to the
Group I Certificates under the Insurance Agreement plus (ii) interest on such
amounts at the Late Payment Rate. The Group I Insurer shall notify the Trustee
and the Sponsor of the amount of any Group I Reimbursement Amount.
"Group I Stepdown Date": The later to occur of (x) the 30th Payment
Date from the Startup Day and (y) the date on which principal received on the
Group I Certificates is equal to 50% of the Group I Original Pool Balance.
"Group I Targeted Overcollateralization Amount": As defined in the
Insurance Agreement.
"Group I Total Available Funds": As defined in Section 7.3(a) hereof.
"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 Applied Realized Loss Amount": As of any Payment Date, the
excess of (x) the aggregate Certificate Principal Balance of the Group II
Certificates on such Payment Date, after taking into account the distribution of
the Group II Principal Distribution Amount on such Payment Date but prior to the
application of the Group II Applied Realized Loss Amount, if any, on such
Payment Date over (y) the aggregate outstanding Loan Balance of the Mortgage
Loans in Group II as of the last day of the related Remittance Period. Group II
Applied Realized Loss Amounts shall be applied against the Certificate Principal
Balances of the Class B-1, Class M-2 and Class M-1 Certificates as provided
herein; no Group II Applied Realized Loss Amounts shall be applied against the
Certificate Principal Balance of any Class A Certificates relating to Group II
except if any balance is outstanding on the last Payment Date.
"Group II Available Funds Cap Rate": With respect to any Payment Date,
an amount, expressed as a per annum rate, equal to the lesser of (x) the Group
II Maximum Rate applicable to such Payment Date and (y)(a)(i) the aggregate
amount of interest due and collected (or advanced) on all of the Mortgage Loans
in Group II for the related Remittance Period (using such Mortgage Loans'
applicable Coupon Rate) minus (ii) the aggregate of the Trustee's Fee and the
Servicing Fee for Group II with respect to such Payment Date divided by (b) the
aggregate Loan Balances of the Mortgage Loans in Group II as of the beginning of
prior Remittance Period, calculated on the basis of a 360-day year and the
actual number of days elapsed (or, in the case of such calculation being made
with respect to the Class A-8 Certificates, on the basis of a 360-day year
assumed to consist of twelve 30-day months).
"Group II Certificates": The Class A-8 Certificates, Component II of
the Class A-7 Certificates, the Mezzanine Certificates and the Class B-1
Certificates.
"Group II Certificate Principal Balance": With respect to any Payment
Date, the sum of (i) the Class A-8 Certificate Principal Balance as of such
Payment Date, the Component II Principal Balance, the Class M-1 Certificate
Principal Balance, the Class M-2 Certificate Principal Balance and the Class B-1
Certificate Principal Balance, as of such Payment Date.
"Group II Class A Principal Distribution Amount": As of any Payment
Date (a) prior to the Stepdown Date with respect to Group II, or with respect to
which a Group II Delinquency Trigger Event is in effect, 100% of the Group II
Principal Distribution Amount and
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<PAGE> 30
(b) on or after the Stepdown Date with respect to Group II, and as long as a
Group II Delinquency Trigger Event is not in effect, an amount equal to (x) the
aggregate Certificate Principal Balance of the Class A Certificates (including
the Component II Principal Balance), related to Group II immediately prior to
such Payment Date minus (y) the product of (i) (1) as long as no Stepup Trigger
Event is in effect, 59.00%, and (2) if any Stepup Trigger Event is in effect,
57.00% and (ii) the outstanding Loan Balance of the Mortgage Loans in Group II
as of the last day of the related Remittance Period.
"Group II Cumulative Realized Losses": As of any date of determination,
the aggregate amount of Realized Losses with respect to the Mortgage Loans in
Group II since the Cut-Off Date.
"Group II Cumulative Realized Loss Trigger Event": A Group II
Cumulative Realized Loss Trigger Event has occurred on any date of determination
if the amount of Group II Cumulative Realized losses expressed as a percentage
of the Group II Original Pool Balance on any date of determination equals or
exceeds the percentage for such date set below:
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
April 1998 - October 1999 0.75%
November 1999 - March 2000 1.65%
April 2000 - March 2001 2.10%
April 2001 - March 2002 3.60%
April 2002 - March 2003 4.50%
April 2003 and thereafter 4.75%
</TABLE>
"Group II Delinquency Trigger Event": A Group II Delinquency Trigger
Event has occurred with respect to any Payment Date on or after the Group II
Stepdown Date if the Group II 60+ Delinquency Percentage exceeds 40% of the
Group II Senior Enhancement Percentage as of the last day of the immediately
preceding Remittance Period.
"Group II Extra Principal Distribution Amount": As of any Payment Date,
the lesser of (x) the Group II Monthly Excess Interest Amount for such Payment
Date plus any Group I Monthly Excess Cashflow Amount available from Group I, and
(y) the Group II Overcollateralization Deficiency for such Payment Date.
"Group II Interest Amount Available": As of any Payment Date, the Group
II Interest Remittance Amount less the portion of the Trustee's Fees related to
Group II.
"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 (less the Servicing Fee with respect to such Mortgage Loans), (ii) all
Delinquency Advances and all Special Advances made by the Master Servicer on
such Remittance Date with respect to Group II, (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 pursuant to Section 8.8(c), (iv) the
portion of the Substitution Amount relating to interest on the Mortgage Loans in
Group II, the portion of any Net Liquidation Proceeds relating to interest with
respect to Group II and (vi) the proceeds of any liquidation of the Trust Estate
related to Group II (to the extent such proceeds relate to principal).
"Group II Maximum Rate" for any Payment Date is an amount, expressed as
a per annum rate, equal to (a)(i) the aggregate amount due and collected (or
advanced) on all of the
25
<PAGE> 31
Mortgage Loans in Group II for the related Remittance Period (using such
Mortgage Loans' maximum lifetime Coupon Rate) minus (ii) the aggregate of the
Servicing fee and the Trustee's Fee, in each case relating to Group II, on such
Payment Date divided by (b) the aggregate Principal Balance of the Mortgage
Loans in Group II as of the beginning of such related Remittance Period,
calculated on the basis of a 360-day year and the actual number of days elapsed
(or, in the case of such calculation being made with respect to the Class A-8
Certificates, calculated on the basis of a 360-day year assumed to consist of
twelve 30-day months).
"Group II Monthly Excess Cashflow Amount": For any Payment Date, the
sum of (x) the Group II Monthly Excess Interest Amount and (y) the Group II
Overcollateralization Release Amount for such Payment Date.
"Group II Monthly Excess Interest Amount": With respect to any Payment
Date, the excess, if any, of (i) the Group II Interest Amount Available for the
related Remittance Period over (ii) the Current Interest on the Group II
Certificates on such Payment Date.
"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 Net Weighted Average Coupon Rate": With respect to any
Payment Date, the weighted average of the Coupon Rates of the Mortgage Loans in
Group II (weighted by the Loan Balances of the Mortgage Loans in Group II), less
the Servicing Fee.
"Group II Original Pool Balance": The aggregate principal balances of
the Mortgage Loans in Group II as of the Startup Day, which sum is $400,000,000.
"Group II Overcollateralization Amount": As of any Payment Date, the
difference between (x) the aggregate Loan Balance of the Mortgage Loans in Group
II as of the last day of the immediately preceding Remittance Period and (y) the
aggregate Certificate Principal Balance of the Group II Certificates (after
taking into account all distributions of principal on such Group II Certificates
as of such Payment Date).
"Group II Overcollateralization Deficiency": As of any Payment Date,
the excess, if any, of (x) the Group II Targeted Overcollateralization Amount
for such Payment Date over (y) the Group II Overcollateralization Amount for
such Payment Date, calculated for this purpose after taking into account the
reduction on such Payment Date of the Aggregate Certificate Principal Balance of
the Group II Certificate resulting from the distribution of the Group II
Principal Distribution Amount (but not the Group II Extra Principal Distribution
Amount) on such Payment Date, but prior to taking into account any Group II
Applied Realized Loss Amount on such Payment Date.
"Group II Overcollateralization Release Amount": As of any Payment
Date, the lesser of (x) the Group II Principal Remittance Amount for such
Payment Date and (y) the excess of (i) the Group II Overcollateralization Amount
for such Payment Date, assuming that 100% of the Group II Principal Remittance
Amount is applied on such Payment Date to the payment of principal on the Group
II Certificates and (ii) the Group II Targeted Overcollateralization Amount for
such Payment Date.
"Group II Principal Distribution Amount": As of any Payment Date, the
sum of (i) the Group II Principal Remittance Amount minus, for Payment Dates
occurring on and after
26
<PAGE> 32
the Group II Stepdown Date and with respect to which a Group II Delinquency
Trigger Event is not in effect, the Group II Overcollateralization Release
Amount, if any and (ii) the Group II Extra Principal Distribution Amount, if
any.
"Group II Principal Remittance Amount": As of any Monthly 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 Mortgage Loan in Group
II that was purchased from the Trustee on or prior to such Remittance Date, to
the extent such Loan Balance was actually deposited in the Principal and
Interest Account, (iii) any Substitution Amounts relating to principal 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 or prior to such Remittance Date, (iv) 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) and (v) the proceeds
of any liquidation of the Trust Estate related to Group II (to the extent such
proceeds relate to principal).
"Group II Senior Enhancement Percentage": For any Payment Date, the
percentage obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal Balance of the Subordinate Certificates relating to Group II and (ii)
the Group II Overcollateralization Amount, in each case after taking into
account the distribution of the Group II Principal Distribution Amount on such
Payment Date by (y) the Loan Balance of the Mortgage Loans in Group II in each
case as of the last day of the related Remittance Period.
"Group II Senior Specified Enhancement Percentage": On any date of
determination thereof, (1) if no Stepup Trigger Event is in effect, 41.00% or
(2) if any Stepup Trigger Event is in effect, 43.00%.
"Group II 60+ Delinquency Percentage": For any Payment Date, the
percentage obtained by dividing (x) the aggregate Loan Balance of Mortgage Loans
in Group II that are sixty days or more delinquent including any such Mortgage
Loans relating to REO Properties or to Properties in foreclosure as of the end
of the related Remittance Period by (y) the aggregate outstanding Loan Balance
of the Mortgage Loans in Group II as of the last day of the immediately
preceding Remittance Period.
"Group II Stepdown Date": The latest to occur of (x) the Payment Date
in April 2001, (y) the first date on which principal equal to 50% of the Group
II Original Pool Balance has been received by the Trust and (z) the first
Payment Date on which the Group II Senior Enhancement Percentage equals (1) as
long as no Stepup Trigger Event is in effect, 41.00%, and (2) if any Stepup
Trigger Event is in effect, 43.00%.
"Group II Targeted Overcollateralization Amount": As of any Payment
Date, (x) prior to the Stepdown Date with respect to Group II and (i) if none of
the Stepup Trigger Events (as defined below) has occurred and is in effect,
3.00% of the Group II Original Pool Balance and (ii) if any of the Stepup
Trigger Events has occurred and is in effect, 4.00% of the Group II Original
Pool Balance, and (y) on and after the Stepdown Date with respect to Group II
and (i) if none of the Stepup Trigger Events has occurred and is in effect, the
greater of (1) 6.00% of the aggregate outstanding Loan Balance of the Group II
Mortgage Loans as of the end of the related Remittance Period and (2) $2,000,000
and (ii) if any of the Stepup Trigger Events has occurred and is in effect, the
greater of (1) 8.00% of the aggregate outstanding Loan Balance of the Group II
Mortgage Loans as of the end of the related Remittance Period and (2)
$2,000,000; provided,
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that if, on and after the Stepdown Date, both a Group II Delinquency Trigger
Event and a Group II Cumulative Realized Loss Trigger Event have occurred and
are in effect, the Targeted Overcollateralization Amount shall be equal to the
level thereof immediately prior to the occurrence of both such events.
"Indemnification Agreement": The Indemnification Agreement dated as of
March 12, 1998 among the Group I Insurer, the Sponsor and the Representative as
may be amended from time to time.
"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 Lower-Tier Balance": As set forth in Section 2.8(a) hereof.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as
of March 1, 1998 between the Sponsor, the Master Servicer, AMHC, the Trustee and
the Group I Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage insurance
policy relating to a Mortgage Loan.
"Insured Payment": The Group I Insured Payment.
"Interest Advance": As defined in Section 7.10(b) hereof.
"Interest Determination Date": With respect to any Accrual Period for
the Class A-1 Certificates, Component I, Component II and the Subordinate
Certificates, the second London Business Day preceding the first day of such
Accrual Period.
"Interest Rate Adjustment Date": The date on which an adjustment to the
Coupon Rate on a Note becomes effective.
"IO Period": The period from the Startup Day through and including the
30th Payment Date.
"Late Payment Rate": For any Payment Date, the lesser of (a) the
greater of (x) the per annum rate of interest publicly announced from time to
time by Citibank, N.A. as its prime or base lending rate (any change in such
rate of interest to be effective on the date such change is announced by
Citibank, N.A.), plus 2% per annum and (y) the then applicable highest rate of
interest on the Certificates 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 Accrual Period for the Class A-1
Certificates, Component I, Component II or the Subordinate 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 Telerate Page 3750, as of 11:00 a.m.
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(London time) on such Interest Determination Date. On each Interest
Determination Date, LIBOR for the related 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 Accrual Period shall
be the arithmetic mean of such offered quotations (rounded upwards if
necessary to the nearest 1/100,000 of 1% (0.0000001) with five
one-millionths of a percentage point rounded upward, of all such
quotations).
(ii) If on such Interest Determination Date fewer than two Reference
Banks provide such offered quotations, LIBOR for the related Interest
Accrual Period shall be the arithmetic mean, rounded upward, if necessary,
to the nearest 1/100,000 of 1% (0.0000001), with five one-millionths of a
percentage point rounded upward, of the offered per annum rates that one or
more leading banks in New York City, selected by the Indenture Trustee, are
quoting as of approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date to leading European Banks for United States dollar
deposits for the Index Maturity; provided, that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, LIBOR in effect for
the applicable Interest Period will be LIBOR in effect for the previous
Interest Period.
"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 Remittance Amounts 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 Startup Day 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
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Delinquency Advances and Servicing Advances theretofore made with respect to
such Mortgage Loan and not subsequently recovered from the related Mortgage
Loan, (ii) all Delinquency Advances which the Master Servicer or any
Sub-servicer has theretofore failed to remit with respect to such Mortgage Loan
and (iii) any Group I Reimbursement Amount relating to such Mortgage Loan
relating to Group I.
"London Business Day": A day on which banks are open for dealing in
foreign currency, and exchange in London and New York City.
"Lower-Tier Balance": As to each Class of Lower-Tier Interests and any
Payment Date, the Initial Lower-Tier Balance as set forth in Section 2.8(a)
minus all amounts distributed as principal of such Class on previous Payment
Dates pursuant to Section 7.5(d) or (e).
"Lower-Tier Group I Distribution Amount": With respect to any Payment
Date, the sum of the Lower-Tier Interest 1 Monthly Interest, the Lower-Tier
Interest 2 Monthly Interest and the Group I Principal Distribution Amount.
"Lower-Tier Group II Distribution Amount": With respect to any Payment
Date, the sum of the Lower-Tier Interest 3 Monthly Interest and the Group II
Principal Distribution Amount.
"Lower-Tier Interest 1": The interest of that name established pursuant
to Section 2.08(a) hereof.
"Lower-Tier Interest 2": The interest of that name established pursuant
to Section 2.08(a) hereof.
"Lower-Tier Interest 3": The interest of that name established pursuant
to Section 2.08(a) hereof.
"Lower-Tier Interest 1 Monthly Interest": With respect to any Payment
Date, the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest 1 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier Interest 1 Pass-Through Rate.
"Lower-Tier Interest 1 Pass-Through Rate": For any Payment Date, the
Group I Net Weighted Average Coupon Rate.
"Lower-Tier Interest 2 Monthly Interest": With respect to any Payment
Date, the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest 2 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier Interest 2 Pass-Through Rate.
"Lower-Tier Interest 2 Pass-Through Rate": For any Payment Date, the
Group I Net Weighted Average Coupon Rate.
"Lower-Tier Interest 3 Monthly Interest": With respect to any Payment
Date, the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest 3 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier Interest 3 Pass-Through Rate.
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"Lower-Tier Interest 3 Pass-Through Rate": For any Payment Date, the
Group II Net Weighted Average Coupon Rate.
"Lower-Tier Pass-Through Rate": As to each of the respective Lower-Tier
Interests, the applicable "Lower-Tier Pass-Through Rate" set forth in Section
2.08 hereof.
"Lower-Tier REMIC": The segregated pool of assets referred to as the
Trust Estate, other than the Upper-Tier Group I Distribution Account and the
Upper-Tier Group II Distribution Account which are assets of the Upper-Tier
REMIC.
"Lower-Tier REMIC Residual Class": With respect to the Lower-Tier
REMIC, the interest therein designated as the "residual interest" therein for
purposes of the REMIC Provisions. The Lower-Tier REMIC Residual Class shall be
uncertificated, and shall be issuable only in Percentage Interest of 100% to
Advanta Conduit Receivables, Inc. as Tax Matters Person. Such interests shall be
non-transferable, except that Advanta Conduit Receivables, Inc. may assign such
interest to another person who accepts such assignment and the designation as
Tax Matters Person pursuant to Section 11.17 hereof. The Lower-Tier REMIC
Residual Class is entitled only to any amounts at any time held in the
Certificate Account and not required to be paid to the Upper-Tier REMIC, which
is expected to be zero at all times during the term of this Agreement.
"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 J 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 calendar
month preceding such Payment Date.
"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 June
15, 1997 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" together, in either case, with any related
Conveyance Agreements (as defined therein).
"Mezzanine Certificates": Collectively, the Class M-1 Certificates and
the Class M-2 Certificates.
"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.
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"Mortgage Loan Group": Either Group I or Group II. References herein to
the related Class of Class A Certificates, when used with respect to a Mortgage
Loan Group, shall mean (A) in the case of Group I, the Group I Certificates, and
(B) in the case of Group II, the Group II Certificates.
"Mortgage Loans": Such of the mortgage loans transferred and assigned
to the Trust pursuant to Section 3.5(a) hereof, together with any Qualified
Replacement Mortgages substituted therefor in accordance with this Agreement, as
from time to time are held as a part of the Trust Estate, the Mortgage Loans
originally so held being identified in the Schedule of Mortgage Loans. The term
"Mortgage Loan" includes the terms "First Mortgage Loan", "Second Mortgage Loan"
and "Third Mortgage Loan". The term "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.
"Mortgagor": The obligor on a Note.
"Net Available Distribution Amount": The Group I Total Available Funds.
"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.
"Nonrecoverable Advances": With respect to any Mortgage Loan, (a) any
Delinquency Advance or Servicing Advance previously made and not reimbursed
pursuant to Sections 7.5, 8.9(a) or 8.9(c) or (b) a Delinquency Advance or
Servicing Advance proposed to be made in respect of a Mortgage Loan or REO
Property either of which, in the good faith business judgment of the Master
Servicer, as evidenced by an Officer's Certificate delivered no later than 1
Business Day prior to the related Determination Date to the Group I Insurer and
the Trustee would not be ultimately recoverable pursuant to Sections 7.5, 8.9(a)
or 8.9(c).
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
"Offered Certificates": Collectively, the Class A Certificates, the
Mezzanine Certificates and the Subordinate Certificates.
"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 Group I Insurance Policy, the Insurance Agreement, the
Indemnification Agreement and Certificates.
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"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, or 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 National
Bank and Advanta Finance Corp.
"Outstanding": With respect to all Certificates of a Class, as of any
date of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final payment
money in the necessary amount has been theretofore deposited with the
Trustee in trust for the Owners of such Certificates;
(iii)Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement,
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or stolen for
which replacement Certificates have been issued as provided for in Section
5.5 hereof.
"Owner": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.6.
"Pass-Through Rate": As to the each Class of Certificates, the related
Pass-Through Rate.
"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 25th day of each month,
commencing in the month following the Startup Day or if the 25th day is not a
Business Day, then the next succeeding Business Day.
"Percentage Interest": As to any Offered 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 Certificate Principal Balance of all Certificates of the same Class as of
the Cut-Off Date; and as to any Class R Certificate, that Percentage Interest
set forth on such Class R 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 in the related Group
experienced during such period.
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"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 Six Month Delinquency Rate": As of any Payment Date
commencing with the seventh Payment Date, the fraction, expressed as a
percentage, equal to the average of the Pool Delinquency Rates for each of the
six immediately preceding Remittance Periods with respect to the Mortgage Loans.
"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 on such Payment Date).
"Premium Percentage": As defined in the Commitment.
"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": "Prohibited transaction" shall have the
meaning set forth from time to time in the definition thereof at Section
860F(a)(2) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Property": The underlying property securing a Mortgage Loan.
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"Prospectus": Such final prospectus dated October 30, 1997, as
supplemented by a prospectus supplement dated March 12, 1998 relating to the
Offered Certificates.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": "Qualified liquidation" shall have the meaning
set forth from time to time in the definition thereof at Section 860F(a)(4) of
the Code (or any successor statute thereto) and applicable to the Trust and the
Tax Estates.
"Qualified Mortgage": "Qualified mortgage" shall have the meaning set
forth from time to time in the definition thereof at Section 860G(a)(3) of the
Code (or any successor statute thereto) and applicable to the Trust and the
Mortgage Loan Groups.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 3.3, 3.4 or 3.6(b) hereof, which (i) bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II or bears a fixed rate of interest if the Mortgage Loan to be substituted for
is in Group I, (ii) has a Coupon Rate at least equal to the Coupon Rate of the
Mortgage Loan being replaced, (which, in the case of a Mortgage Loan in Group
II, shall mean a Mortgage Loan having the same interest rate index, a margin
over such index and a maximum interest rate at least equal to those applicable
to the Mortgage Loan being replaced), (iii) is of the same or better property
type and the same or better occupancy status as the replaced Mortgage Loan, (iv)
shall be of the same or better credit quality classification (determined in
accordance with the Originators' credit underwriting guidelines) as the Mortgage
Loan being replaced, (v) shall mature no later than February 25, 2028, (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)
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 Group I Insurer and the Trustee prior to any such substitution and (viii) 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 Group I Insurer may allow the foregoing tests to be met on a
weighted average basis with respect to the Mortgage Loans in Group I only or
other aggregate basis acceptable to the Group I Insurer, as evidenced by a
written consent delivered to the Trustee by the Group I Insurer, except that the
requirement of clauses (vi) and (vii) hereof must be satisfied as to each
Qualified Replacement Mortgage.
"Rating Agency": Each of Standard & Poor's, Moody's and Fitch.
"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, (a) with respect to
the Group I Certificates (other than the Class A-1 Certificates and Component I)
and the Class A-8 Certificates, the last Business Day of the calendar month
immediately preceding the calendar month in which such Payment Date occurs and
(b) with respect to the Class A-1 Certificates, the
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Class A-7 Certificates and the Subordinate Certificates, the Business day
immediately preceding such Payment Date.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The Bank
of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Trustee which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Sponsor or any affiliate thereof, (iii) whose quotations
appear on the Telerate Page 3750 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 relating to the Offered Certificates
constituting a part thereof.
"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 Trust and the Supplemental Interest
Payment 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 immediately preceding Business Day, commencing in the month
following the month in which the Startup Day occurs.
"Remittance Period": The period (inclusive) beginning on the first day
of the calendar month immediately preceding the month in which a Remittance Date
occurs and ending on the last day of such immediately preceding calendar month.
"REO Property": A Property acquired by the Master Servicer or any
Sub-servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
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"Representation Letter" The letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Offered
Certificates registered in the Register under the nominee name of the
Depository.
"Representative": Morgan Stanley & Co., Incorporated, as representative
of the Underwriters.
"Required Distributions": The Group I Insured Distribution Amount.
"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: "C" if such Mortgage Loan is an
Unaffiliated Originator Loan or "A" for all other Mortgage Loans. The
information contained on each Mortgage Loan Schedule shall be delivered to the
Trustee on a computer readable magnetic tape or disk.
"Second Mortgage Loan": A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien; and
with respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
"Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Master Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": As defined in Section 8.9(c) and Section 8.13
hereof.
"Servicing Fee": With respect to any Mortgage Loan which is an
Unaffiliated Originator Loan, the sum of any servicing fee relating to such
Unaffiliated Originator Loan and the Master Servicing Fee. With respect to any
Mortgage Loan other than an Unaffiliated Originator Loan, the Advanta Servicing
Fee. The Sponsor shall inform the Trustee as to the level of any servicing fee
relating to an Unaffiliated Originator Loan, which shall not be in excess of
0.50% per month, unless otherwise approved by the Control Party in writing.
"Servicer Termination Loss Trigger": As defined in the Insurance
Agreement.
"Special Advance": Any advance made by the Master Servicer pursuant to
Section 8.9(d) hereof.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware
corporation.
"Standard & Poor's": Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies.
"Startup Day": March 19, 1998.
"Stepup Trigger Event": With respect to any Payment Date commencing
with the second Payment Date: (A) the Group II Monthly Excess Cashflow Amount as
of such
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Payment Date (net of any Group II Realized Loss Amortization Amounts to be paid
on such Payment Date), expressed as an annualized percentage rate of the
aggregate Loan Balance of the Group II Mortgage Loans as of the end of the
related Remittance Period is less than 2.00% per annum, or (B) the percentage
obtained by dividing (x) the aggregate Loan Balance of Group II Mortgage Loans
which are 90 or more days Delinquent (including any such Mortgage Loans which
relate to REO Properties or Properties in foreclosure) as of the end of the
related Remittance Period by (y) the aggregate Loan Balance of the Group II
Mortgage Loans as of the end of the related Remittance Period exceeds 10% or (C)
the Group II Delinquency Percentage with respect to such Payment Date equals or
exceeds 50% of the Group II Senior Enhancement Percentage.
"Subordinate Certificates": The Class M-1 Certificates, the Class M-2
Certificates and the Class B-1 Certificates.
"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 Amount": The excess, if any, of (x) the interest
due on each Class of Certificates on any Payment Date calculated at the lesser
of (1) the related Formula Pass-Through Rate applicable to such Payment Date or
(2) the related Maximum Rate applicable to such Payment Date over (y) the
interest due on such Class calculated at the applicable Available Funds Cap Rate
applicable to such Payment Date.
"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
1998-1 created pursuant to Section 7.10(a) hereof.
"Targeted Balance(s)": With respect to the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates or the Class A-5 Certificates
and any Payment Date, the "Targeted Balance" set forth with respect thereto on
Annex I hereto.
"Tax Matters Person": The Tax Matters Person appointed pursuant to
Section 11.17 hereof.
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"Tax Matters Person Residual Interest": The 100% interest in the Class
R Certificates and the Lower-Tier REMIC Residual Class, each of which shall be
issued to and held by Advanta Conduit Receivables, Inc. throughout the term
hereof unless another Person shall accept an assignment of such interest and the
designation of Tax Matters Person 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.
"Transaction Documents": Collectively this Agreement, the Insurance
Agreement, the Underwriting Agreement relating to the Offered Certificates, the
Master Transfer Agreements, any Sub-Servicing Agreement, the Indemnification
Agreement, the Registration Statement relating to the Offered Certificates and
the Certificates.
"Trust": Advanta Mortgage Loan Trust 1998-1, 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, (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) with respect
to the Group I Certificates only, the rights of the Trustee under the Group I
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 92614, 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 0.00800% 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 who is not affiliated with
the Sponsor.
"Uncertificated Interest": As defined in Section 2.8(b) hereof.
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<PAGE> 45
"Underwriters": Morgan Stanley & Co. Incorporated, Greenwich Capital
Markets, Inc., J.P. Morgan & Co. and Salomon Brothers Inc.
"Unpaid Realized Loss Amount": For any Class of the Subordinate
Certificates and as to any Payment Date, the excess of (x) the aggregate
cumulative amount of the related Applied Realized Loss Amounts with respect to
such Class for all prior Payment Dates over (y) the aggregate, cumulative amount
of the related Realized Loss Amortization Amounts with respect to such Class for
all prior Payment Dates.
"Upper-Tier Group I Distribution Account": The Upper-Tier Group I
Distribution Account established pursuant to Section 7.2 hereof.
"Upper-Tier Group II Distribution Account": The Upper-Tier Group II
Distribution Account established pursuant to Section 7.2 hereof.
"Upper-Tier REMIC": The REMIC established pursuant to Section 2.8
hereof with respect to the Offered Certificates. The assets of the Upper-Tier
REMIC shall include the Upper-Tier Group I Distribution Account, the Upper-Tier
Group II Distribution Account and the right to receive the distributions
deposited therein with respect to each Lower-Tier Interest.
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 1998-1". Each Mortgage Loan Group shall constitute a
sub-trust of the Trust.
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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 92614, or at such other address as the Trustee may
designate by notice to the Sponsor, the Master Servicer, the Owners and the
Group I Insurer.
SECTION 2.3. PURPOSES AND POWERS. The purpose of the Trust is to
engage in the following activities, and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of Mortgage Loans and
the Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of monies in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing contained herein shall permit the Trustee to take any
action which would result in the loss of REMIC status for the REMIC Trust.
SECTION 2.4. APPOINTMENT OF THE TRUSTEE; DECLARATION OF TRUST. The
Sponsor hereby appoints the Trustee as trustee of the Trust effective as of the
Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners and the Group I Insurer, as their interests may appear.
SECTION 2.5. EXPENSES OF THE TRUST. Any expenses of the Trust that
have been reviewed and approved by the Sponsor (which approval shall not be
unreasonably withheld), including the reasonable expenses of the Trustee shall
be paid by the Sponsor to the Trustee or to such other Person to whom such
amounts may be due. Failure by the Sponsor to pay any such fees or other
expenses shall not relieve the Trustee of its obligations hereunder. The Trustee
hereby covenants with the Owners that every material contract or other material
agreement entered into by the Trustee on behalf of the Trust shall expressly
state therein that no Owner shall be personally liable in connection with such
contract or agreement.
SECTION 2.6. OWNERSHIP OF THE TRUST. On the Startup Day the ownership
interests in the Trust and the subtrusts shall be transferred as set forth in
Section 4.2 hereof, such transfer to be evidenced by sale of the Certificates as
described therein. Thereafter, transfer of any ownership interest shall be
governed by Sections 5.4 and 5.8 hereof.
SECTION 2.7. SITUS OF THE TRUST. It is the intention of the parties
hereto that the Trust constitute a trust under the laws of the State of New
York. The Trust will be created in, and all Accounts maintained by the Trustee
on behalf of the Trust will be located in, the State of New York. The Trust will
not have any employees and will not have any real or personal property (other
than property acquired pursuant to Section 8.13 hereof) located in any state
other than in the State of New York and payments will be received by the Trust
only in the State of New York and payments from the Trust will be made only from
the State of New York. The Trust's only office will be at the office of the
Trustee as set forth in Section 2.2 hereof.
SECTION 2.8. MISCELLANEOUS REMIC PROVISIONS.
(a) The beneficial ownership interest in the Lower-Tier REMIC shall be
evidenced by the interests having the characteristics and terms as follows:
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<TABLE>
<CAPTION>
Class Designation Initial Lower- Lower-Tier Pass Final Scheduled
Tier Balance Through Rate Payment Dates
- ------------------------------------ ---------------------- --------------------- ------------------------
<S> <C> <C> <C>
Lower-Tier Interest 1 $ 50,000,000 (1) 01/25/2029
Lower-Tier Interest 2 $450,000,000 (1) 01/25/2029
Lower-Tier Interest 3 $400,000,000 (2) 01/25/2029
Lower-Tier REMIC Residual (3) (3) 01/25/2029
</TABLE>
(1) On any Payment Date, the Group I Net Weighted Average Coupon Rate.
(2) On any Payment Date, the Group II Net Weighted Average Coupon Rate.
(3) The Lower-Tier REMIC Residual Class is not issued with a Lower-Tier
Balance or a Lower-Tier Pass Through Rate.
(b) The Lower-Tier Interests shall be issued as non-certified
interests. The Lower-Tier Interests (other than the Lower-Tier REMIC Residual)
shall be issued and held by the Trustee as assets of the Upper-Tier REMIC.
(c) Lower-Tier Interest 1 has an initial principal balance equal to
initial balance of the Class A-6 Certificate Principal Balance. Lower-Tier
Interest 2 has an initial balance equal to the excess of the Group I Original
Pool Balance over the Class A-6 Certificate Principal Balance. Lower-Tier
Interest 3 has an initial balance equal to the initial Group II Certificate
Principal Balance. On each Payment Date, the Group 1 Principal Distribution
Amount shall be allocated as follows: an amount equal to the principal payable
on the Class A-6 Certificates shall be payable on Lower-Tier Interest 1 and the
remaining amount shall be payable on Lower-Tier Interest 2. On each Payment
Date, to the extent that the Monthly Excess Interest Amount is paid to the Class
A-6 Certificates, an amount of interest otherwise payable on Lower-Tier Interest
2 shall instead by paid as principal on Lower-Tier Interest 1 (and will be
accrued and added to principal on Lower-Tier Interest 2). Group I Applied
Realized Losses shall be allocated as follows: an amount equal to the Group I
Applied Realized Losses allocable to the Class A-6 Certificates shall be
allocable to Lower-Tier Interest 1 and the remaining Group I Applied Realized
Losses shall be allocable to Lower-Tier Interest 2. On each Payment Date, the
Group II Principal Distribution Amount shall be payable to Lower-Tier Interest
3. Any Group II Realized Losses shall be allocable in the same fashion.
(d) The Sponsor hereby designates Lower-Tier Interest 1, Lower-Tier
Interest 2 and Lower-Tier Interest 3 as "regular interests" in the Lower-Tier
REMIC and the Lower-Tier REMIC Residual as the single class of "residual
interests" in the Lower-Tier REMIC.
(e) The Sponsor hereby designates the Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Component I, Component II, Class A-8, Class
A-IO, Class M-1, Class M-2 and Class B-1 Certificates as "regular interests,"
and the Class R Certificates as the single class of "residual interests" in the
Upper-Tier REMIC for purposes of the REMIC Provisions.
(f) The Startup Day is hereby designated as the "startup day" of the
Upper-Tier REMIC and the Lower-Tier REMIC within the meaning of Section
860G(a)(9) of the Code.
(g) The Owner of the Tax Matters Person Residual Interests in the
Upper-Tier REMIC and the Lower-Tier REMIC is hereby designated as "tax matters
person" as defined in the REMIC Provisions with respect to each such REMIC.
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<PAGE> 48
(h) The Trust and each REMIC shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an accrual basis.
(i) The Trustee shall cause the Upper-Tier REMIC and the Lower-Tier
REMIC each to elect to be treated as a REMIC under Section 860D of the Code. 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 such election
to be treated as a REMIC. The Trustee shall report all expenses of the Trust
Estate to the Lower-Tier REMIC.
(j) For all Federal tax law purposes amounts transferred by the Trustee
to the Owners of the Class R Certificates shall be treated as distributions by
the Upper-Tier REMIC and amounts, if any, distributed on the Lower-Tier REMIC
Residual Class, if any, shall be treated as distributions by the Lower-Tier
REMIC. It is expected that there shall not be any distributions to the
Lower-Tier REMIC Residual Class.
(k) The Trustee shall provide to the Internal Revenue Service and to
the person described in Section 860(E)(e)(3) and (6) of the Code the information
described in Treasury Regulation Section 1.860D-1(b)(5)(ii), or any successor
regulation thereto with respect to both the Lower-Tier REMIC and the Upper-Tier
REMIC. Such information will be provided in the manner described in Treasury
Regulation Section 1.860E-2(a)(5), or any successor regulation thereto.
(l) The final scheduled Payment Date for any Class of Certificates is
hereby established as follows:
CLASS FINAL SCHEDULE PAYMENT DATE
Class A-1 Certificates 05/25/2012
Class A-2 Certificates 02/25/2014
Class A-3 Certificates 12/25/2017
Class A-4 Certificates 09/25/2021
Class A-5 Certificates 03/25/2028
Class A-6 Certificates 03/25/2028
Component I 03/25/2028
Component II 03/25/2028
Class A-8 Certificates 02/25/2013
Class A-IO Certificates 10/25/2000
Class M-1 Certificates 03/25/2028
Class M-2 Certificates 03/25/2028
Class B-1 Certificates 03/25/2028
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 Group I
Insurer and to the Owners as of the Startup Day that:
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<PAGE> 49
(a) The Sponsor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is in good standing
as a foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it make such qualification
necessary. The Sponsor has all requisite corporate power and authority to own
and operate its properties, to carry out its business as presently conducted and
as proposed to be conducted and to enter into and discharge its obligations
under this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Sponsor is a party by the Sponsor and its
performance and compliance with the terms of this Agreement and of the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Sponsor and will not violate the
Sponsor's Articles of Incorporation or Bylaws or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or other
instrument to which the Sponsor is a party or by which the Sponsor is bound, or
violate any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Sponsor or any of
its properties.
(c) This Agreement and the other Operative Documents to which the
Sponsor is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Sponsor, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement hereof and thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law).
(d) The Sponsor is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which might have consequences that would materially and
adversely affect the condition (financial or other) or operations of the Sponsor
or its properties or might have consequences that would materially and adversely
affect its performance hereunder and under the other Operative Documents to
which it is a party.
(e) No litigation is pending or, to the best of the Sponsor's
knowledge, threatened against the Sponsor which litigation might have
consequences that would prohibit its entering into this Agreement or any other
Operative Document to which it is a party or that would materially and adversely
affect the condition (financial or otherwise) or operations of the Sponsor or
its properties or might have consequences that would materially and adversely
affect its performance hereunder and under the other Operative Documents to
which it is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Sponsor contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Sponsor or matters or activities for which the Sponsor is
responsible in accordance with the Operative Documents or which are attributed
to the Sponsor therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Sponsor or omit to state a material fact required to be
stated
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<PAGE> 50
therein or necessary in order to make the statements contained therein with
respect to the Sponsor not misleading. To the best of the Sponsor's knowledge
and belief, the Registration Statement does not contain any untrue statement of
a material fact required to be stated therein or omit to state any material fact
required to be stated therein or necessary to make the statements contained
therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Sponsor makes no such representation or warranty),
that are necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Sponsor of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of the Sponsor and the performance by the Sponsor of its obligations
under this Agreement and such of the other Operative Documents to which it is a
party.
(i) The transactions contemplated by this Agreement are in the ordinary
course of business of the Sponsor.
(j) The Sponsor received fair consideration and reasonably equivalent
value in exchange for the sale of the interests in the Mortgage Loans evidenced
by the Certificates.
(k) The Sponsor did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any 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 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.
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<PAGE> 51
(a) The execution and delivery of this Agreement by the Master Servicer
and its performance and compliance with the terms of this Agreement and the
other Operative Documents to which it is a party have been duly authorized by
all necessary corporate action on the part of the Master Servicer and will not
violate the Master Servicer's Articles of Incorporation or Bylaws or constitute
a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any material contract,
agreement or other instrument to which the Master Servicer is a party or by
which the Master Servicer is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over the Master Servicer or any of its properties.
(b) 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).
(c) 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.
(d) 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.
(e) 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.
(f) The statements contained in the Registration Statement which
describe the Master Servicer or matters or activities for which the Master
Servicer is responsible in accordance with the Operative Documents or which are
attributed to the Master Servicer therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue statement
of a material fact with respect to the Master Servicer or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein with respect to the Master Servicer not misleading. To the
best of the Master Servicer's knowledge and belief, the Registration Statement
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(g) [Reserved.]
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<PAGE> 52
(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 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.
(i) 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.
(j) The transactions contemplated by this Agreement are in the ordinary
course of business of the Master Servicer.
(k) The terms of each existing Sub-Servicing Agreement and each
designated Sub-servicer are acceptable to the Master Servicer and any new
Sub-Servicing Agreements or Sub-servicers will comply with the provisions of
Section 8.3.
It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive delivery of the Mortgage Loans to the
Trustee.
Upon discovery by any of the Originators, the Master Servicer, the
Sponsor, any Sub-Servicer, the Group I 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 Group I
Insurer, the party discovering such breach shall give prompt written notice to
the other parties. Within 30 days of its discovery or its receipt of notice of
breach, the Master Servicer shall cure such breach in all material respects and,
upon the Master Servicer's continued failure to cure such breach, may thereafter
be removed by the Trustee or the Group I Insurer pursuant to Section 8.20
hereof; provided, however, that if the Master Servicer can demonstrate to the
reasonable satisfaction of the Group I Insurer and the Trustee that it is
diligently pursuing remedial action, then the cure period may be extended with
the written approval of the Group I Insurer and the Trustee.
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 Group I Insurer relies and the Trustee relies
in accepting the Mortgage Loans in trust and executing and authenticating the
Certificates. Such representations and warranties speak as of the Startup Day
with respect to the Mortgage Loans, or as of the date upon which any Qualified
Replacement Mortgage is added to the Trust, but shall survive the sale,
transfer, and assignment of the Mortgage Loans to the Trustee:
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(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 Notes and other original or certified documentation set
forth in Section 3.5 (including all material documents related thereto) with
respect to each Mortgage Loan, except the Mortgage Loans listed on Schedule
I-a (the "Exception Loans") hereto, has been delivered to the Trustee on the
Startup Day, or as otherwise provided in Section 3.5. The Sponsor hereby
covenants to deliver, or cause to be delivered, the File (including the
original Note) for each Exception Loan to the Trustee on or before April 2,
1998 or shall repurchase such Exception Loan from the Trust (without regard
to any cure period) by remitting the Loan Purchase Price therefore to the
Trustee on or before April 2, 1998;
(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 6.69% per annum;
(v) As of the Cut-Off Date, no more than 0.68% of the aggregate Loan
Balance of the Mortgage Loans are 30-59 days Delinquent and no Mortgage Loan
is 60 or more days' Delinquent;
(vi) As of the Cut-Off Date, no more than 1.00% of the aggregate Loan
Balance of the Mortgage Loans is secured by Properties located within any
single zip code area and less than 8.58% of the aggregate Loan Balance of
the Mortgage Loans consists of Date of Payment Loans or "simple interest"
Mortgage 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; and
(viii) The credit underwriting guidelines applicable to each Mortgage
Loan conform in all material respects to the description thereof set forth
in the Prospectus.
(b) The Sponsor hereby assigns to the Trustee for the benefit of the
Owners of the Certificates and the Group I Insurer (so long as a Group I Insurer
Default had not occurred and is continuing) 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 Group I Insurer. Upon
the discovery by the Sponsor, the Master Servicer, the Group I 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 Group I 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
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periods required thereby, and if such Originator does not cure such breach in
all material respects, the Sponsor shall cure such breach or take such actions.
The obligations of the Sponsor or Master Servicer, as the case may be, set forth
herein with respect to any Mortgage Loan as to which such a breach has occurred
and is continuing shall constitute the sole obligations of the Master Servicer
and of the Sponsor in respect of such breach.
SECTION 3.4. COVENANTS OF SPONSOR TO TAKE CERTAIN ACTIONS WITH RESPECT
TO THE MORTGAGE LOANS IN CERTAIN SITUATIONS.
(a) With the provisos and limitations as to remedies set forth in this
Section 3.4, upon the discovery by any Originator, the Sponsor, the Master
Servicer, the Group I Insurer, any Sub-Servicer or the Trustee that the
representations and warranties set forth in Section 3.3 of this Agreement or in
the Master Transfer Agreement were untrue in any material respect as of the
Startup Day and such breaches of the representations and warranties materially
and adversely affect the interests of the Owners or of the Group I Insurer, the
party discovering such breach shall give prompt written notice to the other
parties.
The Sponsor acknowledges that a breach of any representation or
warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan, (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Property or (z) set forth in
clause (viii) of Section 3.3 above constitutes breach of a representation or
warranty which "materially and adversely affects the interests of the Owners or
of the Group I 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 Group I
Insurer or such time as a breach of any representation and warranty materially
and adversely affects the interests of the Owners or of the Group I Insurer as
set forth above, the Sponsor hereby covenants and warrants that it shall
promptly cure such breach in all material respects or it shall (or shall cause
an affiliate of the Sponsor to or an Originator to), subject to the further
requirements of this paragraph, on the second Remittance Date next succeeding
such discovery, receipt of notice or such other time (i) substitute in lieu of
each Mortgage Loan in the related Mortgage Loan Group which has given rise to
the requirement for action by the Sponsor a Qualified Replacement Mortgage and
deliver the Substitution Amount applicable thereto, together with the aggregate
amount of all Delinquency Advances and Servicing Advances theretofore made with
respect to such Mortgage Loan, to the Master Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Mortgage Loan from the
REMIC Trust at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Principal and Interest Account. In connection with any such proposed purchase or
substitution, the Sponsor at its expense, shall cause to be delivered to the
Trustee and the Group I 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, (ii) the delivery of such opinion or (iii) at the direction
of the Control Party. 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
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in any material respect and has not been remedied shall constitute the sole
remedy available to the Owners, the Trustee and the Group I 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 Group I 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 Group I Insurer in the related Qualified
Replacement Mortgage are materially and adversely affected; provided, however,
that for the purposes of this subsection (c) the representations and warranties
in the related Master Transfer Agreement or as set forth in Section 3.3 above
referring to items "as of the Cut-Off Date" or "as of the Startup Day" shall be
deemed to refer to such items as of the date such Qualified Replacement Mortgage
is conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth in this
Section 3.4 shall survive delivery of the respective Mortgage Loans (including
Qualified Replacement Mortgage Loans) to the Trustee.
(e) Notwithstanding anything to the contrary contained herein, the
Sponsor shall deliver, or cause to be delivered, the File (including the
original Note) for each Mortgage Loan to the Trustee on or before April 2, 1998
or shall repurchase such Mortgage Loan from the Trust (without regard to any
cure period) by remitting the Loan Purchase Price on or before April 2, 1998.
SECTION 3.5. CONVEYANCE OF THE MORTGAGE LOANS.
(a) The Sponsor and its Affiliate, Advanta Conduit Receivables, Inc.,
concurrently with the execution and delivery hereof, and on behalf of the
Conduit Acquisition Trust, hereby each transfers, sells, assigns, sets over and
otherwise conveys without recourse, to the Trustee, all right, title and
interest of the Conduit Acquisition Trust in and to each Mortgage Loan listed on
the Schedule of Mortgage Loans delivered by the Sponsor on the Startup Day, all
its right, title and interest in and to principal collected and interest
accruing on each such Mortgage Loan on and after the Cut-Off Date and all its
right, title and interest in and to all Insurance Policies and any other assets
included or to be included in the Trust for the benefit of Owners and the Group
I Insurer. The transfer by the Conduit Acquisition Trust of the Initial Mortgage
Loans set forth on the Schedule of Initial 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) The Sponsor agrees to take or cause to be taken such actions and
execute such documents (including, without limitation, the filing of all
necessary continuation statements for the UCC-1 financing statements filed in
the State of New York (which shall have been filed within 90 days of the Startup
Day) describing the Mortgage Loans and naming the Conduit Acquisition Trust as
debtor and the Trustee as the secured party and any amendments to UCC-1
financing statements required to reflect a change in the name or corporate
structure of the debtor or the filing of any additional UCC-1 financing
statements due to a change in the principal officer of the debtor (within 90
days of any event necessitating such filing) as are necessary to perfect
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and protect the Owners' and the Group I Insurer's interests in each Mortgage
Loan and the proceeds thereof.
(c) In connection with the transfer and assignment of the Mortgage
Loans, the Sponsor agrees to:
(i) cause to be delivered, on the Startup Day, without recourse, to the
Trustee the items listed in the definitions of "Advanta Mortgage Files" and
"Conduit Mortgage Files," as appropriate; provided that the assignments of
mortgage listed in clause (e) of Exhibit B hereto shall be delivered to the
Trustee within 75 Business Days of the Startup Day.
(ii) cause, within 75 Business Days following the Startup Day the
assignments of Mortgage to be submitted 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 only if the
Trustee, the Group I Insurer and each Rating Agency has received an Opinion
of Counsel, satisfactory in form and substance to the Group I Insurer and to
each Rating Agency, to the effect that the recordation of such assignments
in any specific jurisdiction is not necessary to protect the Trustee's
interest in the related Mortgage.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Originators or of the Sponsor.
Notwithstanding anything to the contrary contained in this Section 3.5, in those
instances where the public recording office retains the original Mortgage, the
assignment of a Mortgage or the intervening assignments of the Mortgage after it
has been recorded, the Sponsor shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Trustee shall be
kept in the related file.
Such assignments of mortgage shall, in addition to the requirements
specified in Exhibit B, be in recordable form. On or before the Startup Day, the
Sponsor shall deliver to the Trustee original executed powers of attorney, from
the current recordholders of the related Mortgage substantially in the form of
Exhibit H, 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.
(d) In the case of Mortgage Loans which have been prepaid in full on or
after the Cut-Off Date and prior to the Startup Day, the Sponsor, in lieu of the
foregoing, will deliver within 15 Business Days after the Startup Day, to the
Trustee a certification of an Authorized Officer in the form set forth in
Exhibit C.
(e) 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
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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.
(f) 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.
(g) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Sponsor agrees
to cause to be delivered to the Trustee the items described in Section 3.5(b) on
the date of such transfer and assignment or, if a later delivery time is
permitted by Section 3.5(b), then no later than such later delivery time.
(h) 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.
(i) 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.
(j) 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.
(k) 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 Control Party and each of the Rating Agencies, then any of
the Document Delivery Requirements described above may be waived by an
instrument signed by the Control Party and each of the Rating Agencies (or any
documents theretofore delivered to the Trustee returned to the Sponsor) on such
terms and subject to such conditions as the Control Party, and each of the
Rating Agencies may permit.
SECTION 3.6. ACCEPTANCE BY TRUSTEE; CERTAIN SUBSTITUTIONS OF MORTGAGE
LOANS; CERTIFICATION BY TRUSTEE.
(a) The Trustee agrees to execute and deliver on the Startup Day an
acknowledgment of receipt in the form attached as Exhibit D hereto of the Files
delivered by the
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Sponsor, 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 and the Group I Insurer. On or before the tenth Business Day after the
Startup Day, the Trustee shall execute and deliver to the Group I Insurer and
the Master Servicer an acknowledgement of receipt of the original Notes for each
Mortgage Loan. The Trustee further agrees to review any documents delivered by
the Sponsor within 90 days after the Startup Day (or within 90 days with respect
to any Qualified Replacement Mortgage after the assignment thereof) and to
deliver to the Sponsor, the Group I Insurer and the Master Servicer a
Certification in the form attached as Exhibit E hereto. The Trustee shall be
under no duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face, nor shall the Trustee be under any
duty to determine independently whether there are any intervening assignments or
assumption or modification agreements with respect to any Mortgage Loan.
(b) If the Trustee during such 90-day period finds any document
constituting a part of a File which is not properly executed, has not been
received within the specified period, or is unrelated to the Mortgage Loans
identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does
not conform in a material respect to the description thereof as set forth in the
Schedules of Mortgage Loans, the Trustee shall promptly so notify the Sponsor
and the Group I 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 Group I
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
the Group I 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 Upper-Tier REMIC or Lower-Tier REMIC
or would jeopardize the status of the Upper-Tier REMIC or Lower-Tier REMIC 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
Upper-Tier REMIC or Lower-Tier REMIC or would not jeopardize the status of the
Upper-Tier REMIC or Lower-Tier REMIC 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 Control Party.
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.
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(b) The Sponsor, the Master Servicer and the Trustee covenant to
provide each other and to the Group I Insurer with all data and information
required to be provided by them hereunder at the times required hereunder, and
additionally covenant reasonably to cooperate with each other in providing any
additional information required by any of them in connection with their
respective duties hereunder.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
SECTION 4.1. ISSUANCE OF CERTIFICATES. On the Startup Day, upon the
Trustee's receipt from the Sponsor of an executed Delivery Order in the form set
forth as Exhibit F hereto, the Trustee shall execute, authenticate and deliver
the Certificates on behalf of the Trust in accordance with the directions set
forth in such Delivery Order.
SECTION 4.2. SALE OF CERTIFICATES. At 11 a.m. New York City time on
the Startup Date, at the offices of Dewey Ballantine, 1301 Sixth Avenue, New
York, New York, the Sponsor will sell and convey the Mortgage Loans and the
money, instruments and other property related thereto to the Trustee, and the
Trustee will (i) deliver to the Representative, the Offered 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 R
Certificates, with an aggregate Percentage Interest 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.
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 Group I Insurance Policy). Distributions on the
Certificates are payable solely from payments received on or with respect to the
Mortgage Loans (other than the Servicing Fees), monies in the Principal and
Interest Account, and the Supplemental Interest Payment Account, except as
otherwise provided herein, from earnings on monies and the proceeds of property
held as a part of the Trust Estate and, with respect to the Group I Certificates
upon the occurrence of certain events, from Group I 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 and (i) with respect to the Group I
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Certificates, the Group I Insured Payments, pro rata in accordance with such
Owner's Percentage Interest and (ii) certain amounts payable from the
Supplemental Interest Payment Account.
(b) Each Owner is required, and hereby agrees, to return to the Trustee
any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
SECTION 5.2. FORMS. The Certificates shall be in substantially the
forms set forth in Exhibit A hereof 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 Delivery Order, 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.
(a) 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.
(b) The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.2 hereof.
(c) 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 and the Group I Insurer 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.
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(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) 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) Any Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Certificates; any
other expenses in connection with such transfer or exchange shall be an expense
of the Trust.
(g) It is intended that the Offered Certificates be registered so as to
participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Offered Certificates shall, except as otherwise provided
in the next paragraph, be initially issued in the form of a single fully
registered Offered Certificate with a denomination equal to the Aggregate
Certificate Principal Balance. Upon initial issuance, the ownership of each such
Offered 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 Offered Certificates registered in the Register in the
name of Cede & Co., as nominee of the Depository, the Sponsor, the Master
Servicer, the Group I Insurer and the Trustee shall have no responsibility or
obligation to Direct or Indirect Participants or beneficial owners for which the
Depository holds Offered Certificates from time to time as a Depository. Without
limiting the immediately preceding sentence, the Sponsor, the Master Servicer,
the Group I Insurer 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 Offered Certificates, (ii) the delivery to any Direct or Indirect
Participant or any other Person, other than a registered Owner of a Offered
Certificate as shown in the Register, of any notice with respect to the Offered
Certificates or (iii) the payment to any Direct or Indirect Participant or any
other Person, other than a registered Owner of a Offered Certificate as shown in
the Register, of any amount with respect to any distribution of principal or
interest on the Offered Certificates. No Person other than a registered Owner of
a Offered Certificate as shown in the Register shall receive a certificate
evidencing such Offered Certificate.
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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
Offered 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 and the Group I Insurer in writing that the Depository is no longer
willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Offered 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 Offered 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 Offered
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 Offered Certificates
may be registered in whatever name or names registered Owners of Offered
Certificates transferring Offered 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 Offered Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Offered Certificates as the case may be and all notices with respect to
such Offered 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, the Group I Insurer, 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 Offered 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 any of the Rating Agencies), then, in the absence
of notice to the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute, authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Class, tenor and aggregate principal amount, bearing a
number not contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may
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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 Offered 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 R Certificate or assignment of an interest in the Lower-Tier REMIC
Residual Class (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 an agent of a Disqualified Organization. The
transfer, sale or other disposition of a Class R Certificate or assignment of an
interest in the Lower-Tier REMIC Residual Class (whether pursuant to a purchase,
a transfer resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Class R Certificate or Lower-Tier REMIC Residual Class.
Furthermore, in no event shall the Trustee accept surrender for transfer,
registration of transfer, or register the transfer, of any Class R Certificate
nor authenticate and make available any new Class R Certificate unless the
Trustee has received an affidavit from the proposed transferee in the form
attached hereto as Exhibit I. Each holder of a Class R Certificate by his
acceptance thereof, shall be deemed for all purposes to have consented to the
provisions of this Section 5.08(b). The Lower-Tier REMIC Residual Class is not
transferable except that the Owner of the Tax Matters Person Residual Interest
in the Lower-Tier REMIC may assign its interest to another Person who accepts
such assignment and the designation as Tax Matters Person pursuant to Section
11.17 hereof.
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(c) No other sale or other transfer of record or beneficial ownership
of a Class R Certificate shall be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event such a transfer is to be made within three years from the
Startup Day, (i) the Trustee or the Sponsor shall require a written opinion of
counsel acceptable to and in form and substance satisfactory to the Sponsor that
such transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which opinion of counsel shall not be an expense
of the Trustee or the Sponsor, and (ii) the Trustee shall require the Transferee
to execute an investment letter acceptable to and in form and substance
satisfactory to the Sponsor certifying to the Trustee and the Sponsor the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or the Sponsor. The Owner of a Class R 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 R
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
(as defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the
Code, 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 (each, a "Benefit Plan Entity"). Any transferee of a Class R Certificate
shall (x) certify that it is not any of the above and (y) deliver an opinion of
counsel to that effect.
(d) No Subordinate Certificate shall be acquired by or transferred to a
Benefit Plan Entity other than an insurance company using the assets of its
general account under circumstances whereby the exemptive relief granted in
Prohibited Transaction Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) ("PTE
95-60") is available with respect to the purchase and holding of such
Subordinate Certificate. Each transferee of a Subordinate Certificate shall
represent (or, in the case of any transfer of beneficial ownership in a
book-entry certificate, shall be deemed to represent) that either (i) it is not
a Benefit Plan Entity or (ii) it is an insurance company using the assets of its
general account and that the exemptive relief granted in PTE 95-60 is available
with respect to the transferee's purchase and holding of the Subordinate
Certificate.
SECTION 5.9. ASSIGNMENT OF RIGHTS. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute a transfer of an ownership interest sufficient to render the
transferee an Owner of the Trust without compliance with the provisions of
Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
SECTION 6.1. DISTRIBUTIONS. The Trustee will duly and punctually pay
distributions with respect to the Certificates in accordance with the terms of
the Certificates and this Agreement. Such distributions shall be made (i) by
check mailed on each Payment Date or (ii) if requested by any Owner, to such
Owner by wire transfer to an account within the United States designated no
later than five Business Days prior to the related Record Date, made on each
Payment Date, in each case to each Owner of record on the immediately preceding
Record Date;
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provided, however, that an Owner of a Offered Certificate shall only be entitled
to payment by wire transfer if such Owner owns Offered 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, with respect to the Group I
Certificates, from Group I 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 Group I 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 Offered Certificate and remaining unclaimed by
the Owner of such Offered 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 Group I
Insurer on account of any Group I Reimbursement Amount, and second to the Owners
of the Class R Certificates; and the Owner of such Offered Certificate shall
thereafter, as an unsecured general creditor, look only to the Owners of the
Class R Certificates, or in the case of the Group I Certificates, the Group I
Insurer for payment thereof (but only to the extent of the amounts so paid to
the Group I Insurer or the Owners of the Class R Certificates), and all
liability of the Trustee with respect to such trust money shall thereupon cease;
provided, however, that the Trustee, before being required to make any such
payment, shall at the expense of the Sponsor cause to be published once, in the
eastern edition of The Wall Street Journal, notice that such money remains
unclaimed and that, after a date specified therein, which shall be not fewer
than 30 days from the date of such publication, any unclaimed balance of such
money then remaining will be paid to the Group I Insurer or the Owners of the
Class R Certificates as provided above. 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 Group I Insurer as their interests may appear, and, upon
request of the Group I Insurer, or with the consent of the Group I Insurer, at
the request and expense of the Sponsor, will from time to time execute and
deliver all such supplements and amendments hereto pursuant to Section 11.14
hereof and all instruments of further assurance and other instruments, and will
take such other action upon such request as it deems reasonably necessary or
advisable, to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
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(ii) perfect, publish notice of, or protect the validity of any grant
made or to be made by this Agreement;
(iii)enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Trustee, and the ownership interests of the Owners represented thereby,
in such Trust Estate against the claims of all Persons and parties.
The Trustee shall send copies of any request received from the Group I
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 Group I Insurer by
action, suit or proceeding at law or equity, and shall also have the power to
enjoin, by action or suit in equity, any acts or occurrences which may be
unlawful or in violation of the rights of the Owners; provided, however, that
nothing in this Section shall require any action by the Trustee unless the
Trustee shall first (i) have been furnished indemnity satisfactory to it and
(ii) when required by this Agreement, have been requested to take such action by
a majority of the Percentage Interests represented by the affected Class or
Classes of Offered Certificates then Outstanding or, if there are no longer any
affected Offered Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class R 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.
(a) The Trustee will not take any action that would release the Sponsor
or the Group I 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;
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(iii)incur, assume or guaranty on behalf of the Trust any indebtedness
of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in part, except
pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this Agreement, or
release any Person from any covenants or obligations with respect to the
Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any lien, charge, adverse
claim, security interest, mortgage or other encumbrance to or upon the Trust
Estate or any part thereof or any interest therein or the proceeds thereof.
SECTION 6.6. NO OTHER POWERS. The Trustee will not, to the extent
within the control of the Trustee, permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.3
hereof.
SECTION 6.7. LIMITATION OF SUITS. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Group I Insurance Policy or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless:
(A) 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 Offered
Certificates then Outstanding, by such percentage of the Percentage
Interests represented by the Class R Certificates, shall have made
written request to the Trustee to institute such proceeding in respect
of such Event of Default;
(B) 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;
(C) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such proceeding;
(D) as long as any Group I Certificates, or any Group I
Reimbursement Amount are outstanding, the Group I Insurer consented in
writing thereto; and
(E) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Group I
Insurer or by the Owners of a majority of the Percentage Interests
represented by the Offered Certificates or, if there are no Offered
Certificates then Outstanding, by such majority of the Percentage
Interests represented by the Class R Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
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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 Group I 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 Group I 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 Group I 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 Group I Insurer or to the Owners may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee, the Group I
Insurer or by the Owners, as the case may be.
SECTION 6.11. CONTROL BY OWNERS. The Group I Insurer (so long as a
Group I Insurer Default has not occurred and is continuing) or the Owners of a
majority of the Percentage Interests represented by the Offered Certificates
then Outstanding, with the consent of the Control Party (which may not be
unreasonably withheld) or, if there are no longer any Offered Certificates then
Outstanding, by such majority of the Percentage Interests represented by the
Class R Certificates then Outstanding, with the consent of the Control Party
(which may not be unreasonably withheld) may direct the time, method and place
of conducting any proceeding for any remedy available to the Control Party with
respect to the Certificates or exercising any trust or power conferred on the
Control Party 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:
(A) such direction shall not be in conflict with any rule of
law or with this Agreement;
(B) the Control Party shall have been provided with indemnity
satisfactory to it; and
(C) 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
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Group I Insurer conflict with each other, the Group I Insurer's
direction shall prevail.
So long as a Group I Insurer Default has not occurred and is
continuing, the Group I Insurer shall act as the Control Party until all Group I
Reimbursement Amounts have been paid.
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 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. 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 CERTIFICATE ACCOUNT. The Sponsor shall
cause to be established, and the Trustee shall maintain, at the corporate trust
office of the Trustee, a Certificate Account, the Upper-Tier Group I
Distribution Account and the Upper Tier Group II Distribution Account each of
which is to be held by the Trustee in the name of the Trust for the benefit of
the Owners of the Certificates and the Group I Insurer, as their interests may
appear.
SECTION 7.3. THE GROUP I INSURANCE POLICY.
(a) With respect to the Group I Certificates only, on each
Determination Date the Trustee shall determine with respect to the immediately
following Payment Date: the Group I Monthly Remittance Amount on deposit in the
Certificate Account on such Payment Date (disregarding the amounts of any Group
I Insured Payment) and equal to the sum of (x) such amounts excluding the amount
of any Group I Monthly Excess Cashflow amounts included in such amounts and
excluding an amount equal to the Premium Amount together with any Trustee's Fees
described in 7.5(b)(i) for the related Payment Date, plus (y) any amounts of
Group I Monthly Excess Cashflow to be applied on such Payment Date and any
amounts available from Group II Monthly Excess Cashflow pursuant to Section
7.5(g)(I); the amounts described in the preceding clause (x) with respect to
Group I and Payment Date, and 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".
(b) 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 amount being a
"Group I Deficiency Amount"), the Trustee shall complete a Notice in the form of
Exhibit A to the Group I Insurance Policy and submit such notice to the Group I
Insurer no later than 12:00 noon New York City time on the third Business Day
preceding such Payment Date as a claim for a Group I Insured Payment in an
amount equal to such Group I
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Deficiency Amount. Upon receipt of Group I Insured Payments from the Group I
Insurer under the Group I Insurance Policy, the Trustee shall deposit such Group
I Insured Payments in the Certificate Account.
(c) The Trustee shall distribute all Group I Insured Payments received,
or the proceeds thereof, in accordance with Sections 7.5(b) and (d) to the
Owners of the Group I Certificates.
(d) The Trustee shall (i) receive Group I Insured Payments as
attorney-in-fact of each Owner of the Group I Certificates of the related Class
receiving any Group I Insured Payment from the Group I Insurer and (ii) disburse
such Group I Insured Payment to the Owners of the Group I Certificates as set
forth in Sections 7.5(b) and (d). The Group I Insurer shall be entitled to
receive the related Group I Reimbursement Amount pursuant to Sections 7.5(f)
hereof with respect to each Group I Insured Payment made by the Group I Insurer.
The Trustee hereby agrees on behalf of each Owner of Group I Certificates and
the Trust for the benefit of the Group I Insurer that it recognizes that to the
extent the Group I Insurer makes Group I Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Owners of such Group I
Certificates, the Group I Insurer will be entitled to receive the Group I
Reimbursement Amount pursuant to Sections 7.5(f).
(e) The Trustee shall receive, as attorney-in-fact of each Owner of a
Group I Certificate, any Group I Insured Payment from the Group I Insurer and
disburse the same to each Owner of a Group I Certificate in accordance with the
provisions of Section 7.3. Group I Insured Payments disbursed by the Trustee
from proceeds of the Group I 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 the Group I Certificates, and the Group I Insurer shall
become the owner of such unpaid amounts due from the Trust Fund in respect of
the Group I Certificates. The Trustee hereby agrees on behalf of each Owner of a
Group I Certificate for the benefit of the Group I Insurer that it recognizes
that to the extent the Group I Insurer makes any Group I Insured Payment, either
directly or indirectly (as by paying through the Trustee), to the Group I
Certificateholders, the Group I Insurer will be subrogated to the rights of the
Group I Certificateholder with respect to such Group I Insured Payment, shall be
deemed to the extent of payments so made to be a registered Owner of any Group I
Certificates and shall receive all future distributions until all such Group I
Insured Payments by the Group I Insurer, together with interest thereon at the
interest rate borne by the related Group I Certificates applicable of such date
(including any interest on such amounts at the Late Payment Rate), have been
fully reimbursed. To evidence such subrogation, the Trustee shall, or shall
cause the Certificate Registrar to, note the Group I Insurer's rights as
subrogee on the registration books maintained by the Trustee or the Certificate
Registrar upon receipt from the Group I Insurer of proof of payment of any Group
I Insured Payment. The effect of the foregoing provisions is that, to the extent
of Group I Insured Payments made by it, the Group I Insurer shall be paid before
payment of the balance of the distributions are made to the other Owners of the
Group I Certificates.
SECTION 7.4. [RESERVED]
SECTION 7.5. FLOW OF FUNDS.
(a) (i) The Trustee shall deposit to the Certificate Account with
respect to each Mortgage Loan Group, without duplication, upon receipt, the
proceeds of any liquidation of the assets of the Trust, all remittances made to
the Trustee pursuant to Section 8.08(d)(iii) and the Monthly Remittance Amount
remitted by the Master Servicer.
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(ii) On each Payment Date, the Trustee shall transfer the Lower-Tier
Group I Distribution Amount from the Certificate Account to the Upper-Tier
Group I Distribution Account.
(iii) On each Payment Date, the Trustee shall transfer the Lower-Tier
Group II Distribution Amount from the Certificate Account to the Upper-Tier
Group II Distribution Account.
(b) With respect to the Upper-Tier Group I Distribution Account on each
Payment Date, the Trustee shall make the following disbursements from the Group
I Interest Remittance Amount transferred thereto pursuant to subsection (a), in
the following order of priority, and each such disbursement shall be treated as
having occurred only after all preceding disbursements have occurred:
(i) First, to the Trustee, the portion of the Trustee's Fee relating to
Group I;
(ii) Second, to the Group I Insurer, the Premium Amount;
(iii)Third, to the Owners of the Class A Certificates related to Group
I, the related Class A Current Interest plus the related Class A Interest
Carry Forward Amount with respect to each such Class of Class A Certificates
(including, with respect to the Class A-7 Certificates, the Component I
Current Interest and the Component I Interest Carry Forward Amount) without
any priority among such Class A Certificates; provided, that if the Group I
Interest Amount Available is not sufficient to make a full distribution of
interest with respect to all Classes of the Class A Certificates related to
Group I, the Group I Interest Amount Available will be distributed among the
outstanding Classes of Class A Certificates related to Group I pro rata
based on the aggregate amount of interest due on each such Class, and the
amount of the shortfall will be carried forward; and
(iv) Fourth, the Group I Monthly Excess Cashflow Amount shall be
applied or distributed as provided in subsection (f) of this Section 7.5.
(c) With respect to the Upper Tier Group II Distribution Account on
each Payment Date, the Trustee shall make the following disbursements from the
Group II Interest Remittance Amount transferred thereto pursuant to subsection
(a), in the following order of priority, and each such disbursement shall be
treated as having occurred only after all preceding disbursements have occurred:
(i) First, to the Trustee, the portion of the Trustee's Fee relating to
Group II;
(ii) Second, to the Owners of the Class A-8 Certificates, the Class A-8
Current Interest and the Class A-8 Interest Carry Forward Amount and to the
Class A-7 Certificates, the Component II Current Interest and the Component
II Interest Carry Forward Amounts related to Component II, without any
priority among such Class A Certificates; provided, that if the Group II
Interest Amount Available is not sufficient to make a full distribution of
interest with respect to all Classes of the Class A Certificates related to
Group II, the Group II Interest Amount Available will be distributed among
the outstanding Classes of Class A Certificates related to Group II pro rata
based on the aggregate amount of interest due on each such Class, and the
amount of the shortfall will be carried forward;
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(iii) Third, to the extent of the Group II Interest Amount Available
remaining, to the Owners of the Class M-1 Certificates, the Class M-1
Current Interest;
(iv) Fourth, to the extent of the Group II Interest Amount Available
then remaining, to the Owners of the Class M-2 Certificates, the Class M-2
Current Interest;
(v) Fifth, to the extent of the Group II Interest Amount Available then
remaining, to the Owners of the Class B-1 Certificates, the Class B-1
Current Interest; and
(vi) Sixth, the Group II Monthly Excess Cashflow Amount shall be
applied or distributed as provided in subsection (g) of this Section 7.5.
(d) With respect to the Upper Tier Group I Distribution Account, on
each Payment Date, the Trustee shall make the following disbursements from
amounts relating to principal transferred to the Certificate Account pursuant to
subsection (a), in the following order of priority, and each such disbursement
shall be treated as having occurred only after all preceding disbursements have
occurred:
(i) the Group I Principal Distribution Amount shall be distributed to
the Owners of the Class A-6 Certificates in an amount equal to the Class A-6
Lockout Distribution Amount, with the remainder paid to the Owners of the
Class A-1 Certificates until the Class A-1 Certificate Principal Balance has
been reduced to zero;
(ii) the excess of (x) the Group I Principal Distribution Amount over
(y) the amount distributed in clause (d)(i) above shall be distributed to
the Owners of the Class A-2 Certificates, the Class A-3 Certificates, the
Class A-4 Certificates and the Class A-5 Certificates, sequentially in that
order, until the Certificate Principal Balance of each Class (in ascending
order of numerical designation) has been reduced to its Targeted Balance (as
set forth in Annex I hereto) for such Payment Date;
(iii) the excess of (x) the Group I Principal Distribution Amount over
(y) the amounts distributed in clauses (d)(i) and (ii) above shall be
distributed to the Owners of the Class A-7 Certificates as payment with
respect to Component I until the Component I Principal Balance has been
reduced to zero;
(iv) the excess of (x) the Group I Principal Distribution Amount over
(y) the amounts distributed in clauses (d)(i), (ii) and (iii) above shall be
distributed to the Owners of the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates and the Class A-5 Certificates,
sequentially in that order, until the Certificate Principal Balance of each
Class (in ascending order of numerical designation) has been reduced to
zero;
(v) the excess of (i) the Group I Principal Distribution Amount over
(ii) the amounts distributed in clauses (d)(i), (ii), (iii) and (iv) above
shall be distributed to the Owners of the Class A-6 Certificates until the
Class A-6 Certificate Principal Balance has been reduced to zero; and
(vi) any amount of the Group I Principal Distribution Amount remaining
after making all of the distributions in clauses (d)(i), (ii), (iii), (iv)
and (v) above shall be distributed as provided in subsection (f) of this
Section 7.5.
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(vii) Notwithstanding the foregoing, on any Payment Date on which the
Group I Overcollateralization Amount is zero and a Group I Insurer Default
has occurred and is continuing, any amounts of principal payable to the
Owners of the Group I Certificates (other than the Class A-IO Certificates)
(including the Class A-7 Certificates to the extent of the Component I
Principal Balance) on such Payment Date shall be distributed pro rata and
not in accordance with the above priorities.
(e) With respect to the Upper-Tier Group II Distribution Account, on
each Payment Date, the Trustee shall make the following disbursements in the
following amounts:
(i) either (x) before the Stepdown Date with respect to Group II or (y)
with respect to which a Group II Delinquency Trigger Event is in effect, the
Owners of the Class A-8 Certificates and the Class A-7 Certificates (with
respect to Component II) will be entitled to receive payment of 100% of the
Group II Principal Distribution Amount for such Payment Date as follows:
first, to the Owners of the Class A-8 Certificates, the Class A-8 Lockout
Distribution Amount and then to the Owners of the Class A-7 Certificates
until the Component II Principal Balance has been reduced to zero;
(ii) on or after the Stepdown Date with respect to Group II, and if a
Group II Delinquency Trigger Event is not in effect, the Owners of all
Classes of the Group II Certificates will be entitled to receive payments of
principal, in the following order of priority, in the amounts set forth
below and to the extent of the Group II Principal Distribution Amount, as
follows:
(A) the lesser of (x) the Group II Principal Distribution
Amount and (y) the Group II Class A Principal Distribution Amount shall
be distributed to the Owners of the Class A-8 Certificates, in an
amount equal to the Class A-8 Lockout Distribution Amount, with the
remainder paid to the Owners of the Class A-7 Certificates until the
Component II Principal Balance of the Class A-7 Certificates has been
reduced to zero;
(B) the lesser of (x) the excess of (i) the Group II Principal
Distribution Amount over (ii) the amount distributed in clause
(e)(ii)(A) above and (y) the Class M-1 Principal Distribution Amount
shall be distributed to the Owners of the Class M-1 Certificates, until
the Class M-1 Certificate Principal Balance has been reduced to zero;
(C) the lesser of (x) the excess of (i) the Group II Principal
Distribution Amount over (ii) the sum of the amount distributed in
clause (e)(ii)(A) above and the amount distributed in clause (e)(ii)(B)
above and (y) the Class M-2 Principal Distribution Amount shall be
distributed to the Owners of the Class M-2 Certificates, until the
Class M-2 Certificate Principal Balance has been reduced to zero;
(D) the lesser of (x) the excess of (i) the Group II Principal
Distribution Amount over (ii) the sum of the amount distributed in
clause (e)(ii)(A) above, the amount distributed in clause (e)(ii)(B)
above and the amount distributed in clause (e)(ii)(C) above and (y) the
Class B-1 Principal Distribution Amount shall be distributed to the
Owners of the Class B-1 Certificates, until the Class B-1 Certificate
Principal Balance has been reduced to zero; and
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(E) the lesser of (x) any amount of the Group II Principal
Distribution Amount remaining after making all of the distributions in
clauses (e)(ii)(A), (B), (C) and (D) above and (y) the positive
difference, if any, of (A) $2,000,000 minus (B) the Group II Targeted
Overcollateralization Amount for such Payment Date (calculated for this
purpose only without regard to clauses (y)(i)(2) and (y)(ii)(2) of the
definition of "Group II Targeted Overcollateralization Amount:"), shall
be applied as a payment of principal with respect to the Subordinate
Certificates in reverse order of seniority (i.e., first to the Class
B-1 Certificates, second to the Class M-2 Certificates, third to the
Class M-1 Certificates and fourth, to the Class A-8 Certificates and
the Class A-7 Certificates (but only with respect to Component II)
until their respective Certificate Principal Balances have been reduced
to zero.
(iii) any amount of the Group II Principal Distribution Amount
remaining after making all of the distributions in clauses (e)(ii)(A), (B),
(C), (D) and (E) above shall be distributed as provided in subsection (g) of
this Section 7.5.
(iv) Notwithstanding the foregoing, (x) in the event that the
Certificate Principal Balance of all of the Class A-8 Certificates and the
Component II Principal Balance of the Class A-7 Certificates have been
reduced to zero, all amounts of principal that would have been distributed
to such Certificates will be distributed to the related Subordinate
Certificates of such Group sequentially in the following order: Class M-1,
Class M-2 and Class B-1. Similarly, if the Certificate Principal Balance of
the Class M-1 Certificates has been reduced to zero, all amounts of
principal that would have been distributed to such Class M-1 Certificates
will be distributed to the related Class M-2 and Class B-1 Certificates in
that order. Finally, if the Certificate Principal Balance of the Class M-2
Certificates has been reduced to zero, all amounts of principal that would
have been distributed on such Class M-2 Certificates will be distributed to
the related Class B-1; and (y) on any Payment Date on which the sum of the
Certificate Principal Balance of the Subordinate Certificates and the Group
II Overcollateralization Amount is zero, any amounts of principal payable to
the Owners of the Group II Certificates on such Payment Date shall be
distributed pro rata.
(f) On any Payment Date, the Group I Monthly Excess Cashflow Amount is
required to be applied in the following order of priority on such Payment Date:
(A) to fund any remaining Class A Interest Carry Forward
Amount, if any, with respect to Group I;
(B) to the Group I Insurer, any Group I Reimbursement Amount;
(C) to fund the Overcollateralization Deficiency for Group I,
if any, for such Payment Date;
(D) to reimburse the Group I Insurer for any amounts due and
owing to the Group I Insurer under the Insurance Agreement;
(E) to fund any unpaid Current Interest with respect to the
Group II Certificates and any amounts listed in clauses (1) through (8)
of Section 7.5(g) for such Payment Date to the extent such amounts have
not been funded in full
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through the application of Group II Monthly Excess Cashflow Amounts on
such Payment Date; and
(F) as provided in Section 7.5(h)(i) hereof.
(g) On any Payment Date, the Group II Monthly Excess Cashflow Amount is
required to be applied in the following order of priority on such Payment Date:
(A) to fund any remaining Class A Interest Carry Forward
Amount, if any, with respect to Group II;
(B) to fund the Overcollateralization Deficiency for Group II,
if any;
(C) to fund the Class M-1 Interest Carry Forward Amount, if
any;
(D) to fund the Class M-1 Realized Loss Amortization Amount
for such Payment Date;
(E) to fund the Class M-2 Interest Carry Forward Amount, if
any;
(F) to fund the Class M-2 Realized Loss Amortization Amount
for such Payment Date;
(G) to fund the Class B-1 Interest Carry Forward Amount, if
any;
(H) to fund the Class B-1 Realized Loss Amortization Amount
for such Payment Date;
(I) to fund any unpaid Current Interest with respect to the
Group I Certificates (including Component I) and amounts listed in
clauses (A), (B), (C) and (D) of Section 7.5(g) for such Payment Date
to the extent such amounts have not been funded in full through the
application of Group I Monthly Excess Cashflow Amounts on such Payment
Date; and
(J) as provided in Section 7.5(h)(ii) hereof.
(h) (i) On any Payment Date, any Group I Monthly Excess Cashflow Amount
remaining after the application of Section 7.5(f) shall be distributed as
follows:
(A) to the Master Servicer to the extent of any unreimbursed
or unrecoverable Delinquency Advances or Servicing Advances (including
Nonrecoverable Advances and Special Advances);
(B) to make payment of any Supplemental Interest Amount then
due to the owners of the Group I Certificates (including the Class A-7
Certificates with respect to Component I); and
(C) to fund a distribution to the Owners of the Class R
Certificates.
(ii) On any Payment Date, any Group II Monthly Excess Cashflow Amount
remaining after the application of Section 7.5(g) shall be distributed as
follows:
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(A) to the Master Servicer to the extent of any unreimbursed
or unrecoverable Delinquency Advances or Servicing Advances (including
Nonrecoverable Advances and Special Advances); and
(B) to the Supplemental Interest Payment Account, the
Supplemental Interest Amount then due to the Owners of the Group II
Certificates (including the Class A-7 Certificates with respect to
Component II); and
(C) to fund a distribution to the Owners of the Class R
Certificates.
(iii) On each Payment Date, and after taking into account all
distributions on such Payment Date, the Trustee shall allocate the excess of
the Group II Certificate Principal Balance over the aggregate Loan Balance
of the Mortgage Loans in Group II as of the end of the related Remittance
Period to reduce the Certificate Principal Balances of the Subordinate
Certificates related to Group II in the following order of priority:
(A) to the Class B-1 Certificates until the Class B-1
Certificate Principal Balance is reduced to zero;
(B) to the Class M-2 Certificates until the Class M-2
Certificate Principal Balance is reduced to zero; and
(C) to the Class M-1 Certificates until the Class M-1
Certificate Principal Balance is reduced to zero.
(i) [reserved].
(j) Notwithstanding anything above, the aggregate amounts distributed
on all Payment Dates to the Owners of the Certificates on account of principal
pursuant to clauses (d) and (e) shall not exceed the original Certificate
Principal Balance of the related Certificates.
(k) The rights of the Owners to receive distributions from the proceeds
of the Trust Estate and all ownership interests of the Owners in such
distributions, shall be as set forth in this Agreement. In this regard, all
rights of the Owners of the Class R Certificates to receive distributions in
respect of the Class R Certificates, and all ownership interests of the Owners
of the Class R Certificates in and to such distributions, shall be subject and
subordinate to the preferential rights of the holders of the Offered
Certificates to receive distributions thereon and the ownership interests of
such Owners in such distributions, as described herein. In accordance with the
foregoing, the ownership interests of the Owners of the Class R Certificates in
amounts deposited in the Accounts from time to time shall not vest unless and
until such amounts are distributed in respect of the Class R Certificates in
accordance with the terms of this Agreement. Notwithstanding anything contained
in this Agreement to the contrary, the Owners of the Class R Certificates shall
not be required to refund any amount properly distributed on the Class R
Certificates pursuant to this Section 7.5.
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 Group I Insurer, as their interests may appear, as
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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 Control Party 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 and
only 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 Control Party, 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 Control Party, as the case may be,
shall have failed to give investment directions to the Trustee during the
ten-day period described in clause (d)(i) preceding, by 11:15 a.m. New York
time (or such other time as may be agreed by the Master Servicer and the
Trustee) on any Business Day (any such investment by the Trustee pursuant to
this clause (d)(ii) to mature on the next Business Day after the date of
such investment).
(e) For purposes of investment, the Trustee shall aggregate all amounts
on deposit in the Accounts. All income or other gain from investments in the
Accounts shall be deposited, pro rata, in the Accounts immediately on receipt,
and any loss resulting from such investments shall be charged, pro rata, to the
Accounts.
SECTION 7.7. ELIGIBLE INVESTMENTS. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the obligations
of any agency or instrumentality of the United States fully and unconditionally
guaranteed, the timely payment or the guarantee of which constitutes a full
faith and credit obligation of the United States.
(b) Federal Housing Administration debentures and rated Aa2 or higher
by Moody's and AA or better by Standard & Poor's.
(c) Freddie Mac senior debt obligations and rated Aa2 or higher by
Moody's and AA or better by Standard & Poor's.
(d) Federal Home Loan Banks' consolidated senior debt obligations and
rated Aa2 or higher by Moody's and AA or better by Standard & Poor's.
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(e) Fannie Mae 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 Control Party provided:
1. The agreement is with a bank or insurance company which has
an unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by Standard &
Poor's, and
2. Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice
(provided such notice may be amended or canceled at any time prior to
the withdrawal date), and
3. The agreement is not subordinated to any other obligations
of such insurance company or bank, and
4. The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
5. The Trustee and the Group I 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 Control Party and acceptable
to the Rating Agencies;
SECTION 7.8. REPORTS BY TRUSTEE.
(a) On each Payment Date the Trustee shall provide to each Owner, to
the Master Servicer, to the Group I Insurer, to each Underwriter, to the Sponsor
and to each Rating Agency a written report in substantially the form set forth
as Exhibit I hereto with respect to each Mortgage Loan Group, as such form may
be revised by the Trustee, the Master Servicer and the Rating Agencies from time
to time, but in every case setting forth the information requested on Exhibit I
hereto and the following information:
(i) the amount of the distribution with respect to the related Class of
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;
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(iii) the amount of such distributions allocable to interest;
(iv) the Interest Carry Forward Amount for each Class;
(v) the Certificate Principal Balance for each Class of Offered
Certificates (other than the Class A-IO Certificates) and the Class A-IO
Notional Principal Balance of the Class A-IO Certificates as of such Payment
Date, together with the principal amount of such Class of Offered
Certificates (other than the Class A-IO 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;
(vi) with respect to the Group I Certificates, the amount of any Group
I Insured Payment included in the amounts distributed in respect of the
Group I Certificates;
(vii) the aggregate Loan Balance of all Mortgage Loans after giving
effect to any payment of principal on such Payment Date both in the
aggregate and in each of the Mortgage Loan Groups;
(viii) 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;
(ix) the total of any Substitution Amounts and any Loan Purchase Price
amounts included in such distribution;
(x) the weighted average Coupon Rate of the Mortgage Loans with respect
to each Group;
(xi) whether a Group II Delinquency Trigger Event has occurred;
(xii) the amount of any Supplemental Interest Amount, Group I Extra
Principal Distribution Amount or any Group II Extra Principal Distribution
Amount;
(xiii) the Group II Senior Enhancement Percentage;
(xiv) the Group I Overcollateralization Amount, the Group II
Overcollateralization Amount after giving effect to any payment of principal
on such Payment Date;
(xv) the amount of any Group I or Group II Applied Realized Loss
Amount, Group II Realized Loss Amortization Amount and Unpaid Realized Loss
Amount for each Class as of the close of such Payment Date;
(xvi)the aggregate Loan Balances of all Mortgage Loans in each Mortgage
Loan Group that were repurchased during the related Remittance Period and
any repurchases pursuant to Section 8.10;
(xvii) the amounts, if any, of any Realized Losses in each Mortgage
Loan Group for the related Remittance Period;
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(xviii) the Pool Rolling Six-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 sum of the
aggregate Loan Balances of the Mortgage Loans as of the Cut-Off Date;
(xix) a number with respect to each Class (the "Pool Factor" for such
Class) computed by dividing the Certificate Principal Balance for such Class
(after giving effect to any distribution of principal to be made on such
Payment Date) by the Certificate Principal Balance for such Class on the
Startup Day;
(xx) whether a Group II Cumulative Realized Loss Trigger Event, a Group
II Delinquency Trigger Event, or a Step Up Trigger Event has occurred;
(xxi) whether a Servicer Termination Delinquency Rate Trigger or a
Servicer Termination Loss Trigger has occurred, as such terms are defined in
the Insurance Agreement.
Items (i) through (iii) above shall, with respect to each Class of
Offered Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to
the Certificates for such calendar year.
(b) In addition, on each Payment Date the Trustee will distribute to
each Owner, to the Group I Insurer, to each Underwriter, to the Master Servicer,
to the Sponsor and to each Rating Agency, 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
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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));
(v) the loan number of the related Mortgage Loan and the book value of
any REO Property in each Mortgage Loan Group;
(vi) the amount of Group I Cumulative Realized Losses and Group II
Cumulative Realized Losses; and
(vii) the aggregate Loan Balance of 60+ Day Delinquent Mortgage Loans
with respect to each 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
Group I Insurer, contained in reports provided to the Group I Insurer or the
Trustee by the Master 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.
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SECTION 7.9. ADDITIONAL REPORTS BY TRUSTEE.
(a) The Trustee shall report to the Sponsor, the Group I Insurer and
the Master Servicer with respect to the amount then held in each Account
(including investment earnings accrued or scheduled to accrue) held by the
Trustee and the identity of the investments included therein, as the Sponsor,
the Master Servicer or the Group I 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 Group I Insurer, transmit
promptly to the Sponsor, the Group I Insurer and the Master Servicer 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 Group I Insurer and the
Master Servicer if any such receipts have not been received by the Trustee.
(b) The Trustee shall immediately report to the Group I 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.
SECTION 7.10. SUPPLEMENTAL INTEREST PAYMENT ACCOUNT, SUPPLEMENT
INTEREST PAYMENTS AND CLASS R DISTRIBUTION ACCOUNT.
(a) The parties hereto do hereby create and establish a trust, the
"Advanta Supplemental Interest Trust 1998-1" (the "Supplemental Interest
Trust"). The Supplemental Interest Trust shall hold a trust account, the
"Supplemental Interest Payment 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 either REMIC, and any
amounts transferred from the Upper-Tier REMIC to the Supplemental Interest Trust
shall be treated as distributions with respect to the Class R Certificates.
(b) The amount, if any, on deposit in the Supplemental Interest Payment
Account on any Payment Date is the "Supplemental Interest Payment Amount
Available" on such Payment Date.
If, on any Determination Date the Trustee determines that the
Supplemental Interest Payment Amount Available to be available on the next
Payment Date is less than the excess of (x) the excess of (i) the Full Interest
Distribution Amount over (ii) the Current Interest over (y) the Supplemental
Interest Payment Amount Available as of such Payment Date (the "Formula Interest
Shortfall"), the Trustee shall demand that the Designated Residual Owner fund
the Formula Interest Shortfall on the related Payment Date.
The amount so funded by the Designated Residual Owner on any such
Payment Date is the "Interest Advance" for such Payment Date.
On each Payment Date, the Trustee shall withdraw from the Supplemental
Interest Payment Account and pay to the Owners of the Capped Certificates which
are not receiving the Full Interest Distribution Amount with respect to such
Class on such Distribution Date the amount by which such Full Interest
Distribution Amount with respect to such Class exceeds the Current Interest with
respect to such Class on such Payment Date (the "Capped Interest Shortfall"). To
the extent that the Supplemental Interest Payment Amount Available is less than
the Formula Interest Shortfall, the Supplemental Interest Payment Amount
Available shall be applied on a pro rata basis to the Capped Certificates with
respect to Group I (as a group) and to the Capped Certificates with respect to
Group II (as a group) in amounts equal to the
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product of (a) a fraction, the numerator of which is the Capped Interest
Shortfall with respect to such Group and the denominator of which is the Formula
Interest Shortfall and (b) the Supplemental Interest Payment Amount Available.
To the extent that the Supplemental Interest Payment Amount so allocated to the
Capped Certificates with respect to Group I is less than the Formula Interest
Shortfall with respect to Group I, the Supplemental Interest Payment Amount so
allocated shall be applied on a pro rata basis to the Capped Certificates with
respect to Group I, in amounts equal to the product of (a) a fraction, the
numerator of which is the Capped Interest Shortfall with respect to such Class
and the denominator of which is the Capped Interest Shortfall with respect to
such Group and (b) the Supplement Interest Payment Amount Available allocated to
Group I. To the extent that the Supplemental Interest Payment Amount so
allocated to the Capped Certificates with respect to Group II is less than the
Formula Interest Shortfall with respect to Group II, the Supplemental Interest
Payment Amount so allocated shall be applied to the Capped Certificates with
respect to Group II, in direct order of such Class's seniority (i.e., Component
II, Class M-1 and Class B-1, if any of such Classes are Capped Certificates).
(c) Any portion of the Supplemental Interest Payment Amount Available
after application of clause (b) above shall be applied in the following order of
priority:
(i) first, to the Designated Residual Owner, as reimbursement for
unpaid Interest Advances, together with interest thereon, with the earliest
Interest Advances being deemed to be paid first;
(ii) second, to the owners of the Class R Certificates the remainder
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 on behalf of
the Trustee and the Group I Insurer and with reasonable care, and using that
degree of skill and attention that the Master exercises with respect to
comparable mortgage loans that it services for itself or others, and shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable.
(b) The duties of the Master Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Trustee and the Group I Insurer,
as applicable, 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
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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, the Group I
Insurer and the Trustee or any of them, any and all instruments of satisfaction
or cancellation, or of full release or discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the related
Properties; (ii) may consent to any modification of the terms of any Note not
expressly prohibited hereby if the effect of any such modification (x) will not
be to affect materially and adversely the security afforded by the related
Property, the timing of receipt of any payments required hereby or the interests
of the Group I Insurer and (y) will not cause the Upper-Tier REMIC or the
Lower-Tier REMIC to fail to qualify as a REMIC.
(d) The Master Servicer shall have the right using that degree of skill
and attention that the Master Servicer exercises with respect to comparable
mortgage loans that it services for itself or others, to approve applications of
Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations to
Properties and (iii) removal, demolition or division of Properties. No
application for approval shall be considered by the Master Servicer unless: (x)
the provisions of the related Note and Mortgage have been complied with; (y) the
Combined Loan-to-Value Ratio (which may, for this purpose, be determined at the
time of any such action in a manner reasonably acceptable to the Trustee) 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 each of the Lower-Tier REMIC and the
Upper-Tier REMIC shall constitute, and that the affairs of each shall be
conducted so as to qualify each 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 each such
REMIC and that in such capacity it shall: (i) use its best efforts to conduct
the affairs of each such REMIC at all times that any Class of Certificates are
outstanding so as to maintain the status of each such REMIC 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 either
such REMIC or that would subject the Trust to tax and (iii) exercise reasonable
care not to allow either such REMIC to receive income from the performance of
services or from assets not permitted under the REMIC Provisions to be held by
each 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
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authorized and empowered pursuant to a power of attorney executed and delivered
by the Trustee to execute and deliver, and may be authorized and empowered by
the Trustee, to execute and deliver, on behalf of itself, the Owners, the Group
I Insurer 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 Sections
7.5(h)(i)(A) and 7.5(h)(ii)(B).
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 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 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 Group I Insurer and the Trustee of the appointment of any
Sub-Servicer and shall furnish to the Group I Insurer and the Trustee a copy of
the Subservicing Agreement. For purposes of this Agreement, the Master shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments.
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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-Servicers 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 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
Group I Insurer, the Trustee and the Owners shall not be deemed parties thereto
and shall have no claims, rights, obligations, duties or liabilities with
respect to any Sub-Servicer except as set forth in Section 8.7.
SECTION 8.7. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENT BY
TRUSTEE. In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Master Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Master Servicer and a Sub-Servicer may be
assumed or terminated by the Trustee at its option. Any termination fee due
under any such Sub-Servicing agreement shall be paid by the preceding Master
Servicer but in no event shall the Trustee be liable for any such fee.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party, without the payment of any fee by the Trustee, notwithstanding
any contrary provision in any Sub-Servicing Agreement.
SECTION 8.8. PRINCIPAL AND INTEREST ACCOUNT.
(a) The Master Servicer and/or each Sub-servicer, as applicable, shall
establish in the name of the Trust for the benefit of the Owners of the
Certificates and the Group I Insurer, as their interests may appear, and
maintain at one or more Designated Depository Institutions the Principal and
Interest Account.
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Subject to Subsections (c) and (e) below, the Master Servicer and any
Sub-servicer shall deposit all receipts related to the Mortgage Loans to the
Principal and Interest Account on a daily basis (but no later than the first
Business Day after receipt).
On the Startup Day and each day thereafter, as applicable, 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
and the Group I Insurer. Any investment earnings on funds held in the Principal
and Interest Account shall be for the account of the Master Servicer and may
only be withdrawn from the Principal and Interest Account by the Master Servicer
immediately following the remittance of the Monthly Remittance Amounts by the
Master Servicer. Any references herein to amounts on deposit in the Principal
and Interest Account shall refer to amounts net of such investment earnings. Any
investment losses are at the expense of the Master Servicer and shall be
replaced on or prior to the Remittance Date.
(c) Subject to Subsection (e) below, the Master Servicer shall deposit
to the Principal and Interest Account all principal and interest collections on
the Mortgage Loans received on or after the Cut-Off Date including any Prepaid
Installments, Prepayments and Net Liquidation Proceeds, all Loan Purchase Prices
and Substitution Amounts received or paid by the Master Servicer with respect to
the Mortgage Loans, other recoveries or amounts related to the Mortgage Loans
received by the Master Servicer, Compensating Interest and Delinquency Advances
together with any amounts which are reimbursable from the Principal and Interest
Account, but net of (i) the Servicing Fee with respect to each Mortgage Loan and
other servicing compensation to the Master Servicer as permitted by Section 8.15
hereof, (ii) principal (including Prepayments) collected on the related Mortgage
Loans prior to the Cut-Off Date, (iii) interest accruing on the related Mortgage
Loans prior to the Cut-Off Date and (iv) Net Liquidation Proceeds to the extent
such Net Liquidation Proceeds exceed the sum of the Loan Balance of the related
Mortgage Loan and accrued and unpaid interest thereon.
(d) (i) The Master Servicer may make withdrawals from the Principal and
Interest Account only for the following purposes:
(1) to effect the timely remittance to the Trustee of the
Monthly Remittance Amounts due on the Remittance Date;
(2) to reimburse itself pursuant to Section 8.9(a) hereof for
unreimbursed Delinquency Advances and Servicing Advances and
Nonrecoverable Advances;
(3) to withdraw investment earnings on amounts on deposit in
the Principal and Interest Account;
(4) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(5) to clear and terminate the Principal and Interest Account
following the termination of the Trust Estate pursuant to Article X.
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(ii) On the tenth day of each month, the Master Servicer shall send to
the Trustee a report, in the form of a computer tape, detailing the payments
on the Mortgage Loans during the prior Remittance Period. Such tape shall be
in the form and have the specifications as may be agreed to between the
Master Servicer and the Trustee from time to time. The Group I Insurer shall
have the right to request this computer tape upon providing 3 Business Days
written notice to the Master Servicer.
(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 for deposit in the Certificate Account pursuant to Section
7.5 of this Agreement, (x) for Group I, the Group I Interest Remittance
Amount and the Group I Principal Remittance Amount and (y) for Group II, the
Group II Interest Remittance Amount and the Group II Principal Remittance
Amount.
(e) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are satisfactory to the Group I Insurer, the Trustee and each
Rating Agency, then the requirement to maintain the Principal and Interest
Account may be waived by an instrument signed by the Group I Insurer, Trustee
and each Rating Agency, 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 Group I Insurer, the Trustee and each Rating Agency 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)
late 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 constituting Nonrecoverable Advances
shall be recoverable pursuant to Sections 7.5(h)(i)(A) and 7.5(h)(ii)(A) hereof.
(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
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advanced, the interest (less the Servicing Fee) paid by the Mortgagor with
respect to the Mortgage Loan during such Remittance Period (any such amount paid
by the Master Servicer, "Compensating Interest"). The Master Servicer shall in
no event be required to pay Compensating Interest with respect to any Remittance
Period in an amount in excess of the aggregate Servicing Fee received by the
Master Servicer with respect to all Mortgage Loans for such Remittance Period.
(c) The Master Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, the cost of (i) Preservation Expenses, (ii) any enforcement or
judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Master Servicer reasonably believes such costs and expenses
will increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
amount so paid will constitute a "Servicing Advance". The Master Servicer may
recover Servicing Advances (x) from the Mortgagors to the extent permitted by
the Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of
the related Mortgage Loan and (y) as provided in Sections 7.5(h)(i)(A) and
7.5(h)(ii)(A) 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
Sections 7.5(h)(i)(A) and 7.5(h)(ii)(A) hereof.
(d) On each Remittance Date in April and May of 1998, the Master
Servicer shall make two Special Advances, one with respect to Group I and one
with respect to Group II equal to the sum of (x) one-month's interest,
calculated at the weighted average Pass-Through Rate (applicable to the April or
May 1998 Payment Date, as the case may be, for the classes of Offered
Certificates related to such Group) with respect to all Mortgage Loans not
having a payment due during March or April 1998, as the case may be, (y) with
respect to Group I, the Premium Amount with respect to such Mortgage Loans for
the April or May 1998 Payment Date, as the case may be, and (z) the Trustee's
Fee with respect to such Mortgage Loans for the April or May 1998 Payment Date,
as the case may be; the amounts of such advances shall be included in the
related Interest Remittance Amount. Reimbursement of Special Advances shall be
made only as provided in Sections 7.5(h)(i)(A) and 7.5(h)(ii)(A).
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.
Notwithstanding the foregoing, the Master Servicer may not purchase any such
Mortgage Loan unless the Master Servicer has delivered to the Trustee an opinion
of counsel experienced in federal income tax matters acceptable to the Trustee
to the effect that such a purchase would not constitute a Prohibited Transaction
for the Trust or otherwise subject the Trust to tax and would not jeopardize the
status of either the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC.
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
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Trust of insurance proceeds relating to such Mortgage Loan in an amount not less
than the least of (i) the outstanding principal balance of the Mortgage Loan,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to a
Property in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Master Servicer will
cause to be maintained with respect thereto a flood insurance policy in a form
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier in an amount representing
coverage, and which provides for a recovery by the Master Servicer on behalf of
the Trust of insurance proceeds relating to such Mortgage Loan of not less than
the least of (i) the outstanding principal balance of the Mortgage Loan, (ii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify the
Trust and the Group I Insurer out of the Master Servicer's own funds for any
loss to the Trust and the Group I 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 Group I Insurer, the Master Servicer
shall cause to be delivered to the Trustee and the Group I 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 Group I Insurer. In such event, the Master Servicer shall
enter into an assumption and modification agreement with the person to whom such
property has been or is about to be conveyed, pursuant to which such person
becomes liable under the Note and, unless prohibited by applicable law or the
Mortgage Documents, the Mortgagor remains liable thereon. If the foregoing is
not permitted under applicable law, the Master Servicer is authorized to enter
into a substitution of liability agreement with such person, pursuant to which
the original Mortgagor is released from liability and such person is substituted
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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 Control Party. 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 or causing the
recordation 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 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 35 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 Group I
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 Trust or any REMIC therein as defined
in Section 860F of the Code or cause either the Lower-Tier REMIC or the
Upper-Tier REMIC to fail to qualify as a REMIC under the REMIC Provisions at any
time that any Certificates are outstanding. Notwithstanding the generality of
the foregoing provisions, the Master Servicer shall manage, conserve, protect
and operate each REO Property for the Owners and the Group I Insurer 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
Lower-Tier REMIC or the Upper Tier REMIC of any "income from non-permitted
assets" within the meaning of Section 860F(a)(2)(B)
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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 REO Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such REO
Property. With respect to any Mortgage Loan secured by a mixed use REO Property,
the Master Servicer shall, prior to foreclosing upon or otherwise comparably
effecting the ownership in the name of the Master Servicer on behalf of the
Trust, either (x) perform a "phase one environmental study" of such REO Property
or (y) repurchase such REO Property at the Loan Purchase Price.
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" and shall promptly deliver to the Group I Insurer a
related liquidation report with respect to such Liquidated Loan.
SECTION 8.14. TRUSTEE TO COOPERATE; RELEASE OF FILES.
(a) Upon the payment in full of any Mortgage Loan (including the
repurchase of any Mortgage Loan or any liquidation of such Mortgage Loan through
foreclosure or otherwise), or the receipt by the Master Servicer or any
Sub-servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer or any Sub-servicer shall
deliver to the Trustee a Master Servicer's Trust Receipt. Upon receipt of such
Master Servicer's Trust Receipt, the Trustee shall promptly release the related
File, in trust to (i) the Master Servicer, (ii) an escrow agent or (iii) any
employee, agent or attorney of the
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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 the Master Servicer shall not
have received and not returned at any one time more than 10% of the entire
number of Files. The Trustee shall complete in the name of the Trustee any
endorsement in blank on any Note prior to releasing such Note to the Master
Servicer or any Sub-servicer. Such receipt shall obligate the Master Servicer or
any Sub-servicer to return the File to the Trustee when the need therefor by the
Master Servicer or any Sub-servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of the liquidation information,
in physical or electronic form, the Master Servicer's Trust Receipt shall be
released by the Trustee to the Master Servicer or any Sub-servicer.
(c) No costs associated with the procedures described in this Section
8.14 shall be an expense of the Trust.
(d) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given by
the Group I Insurer and the Rating Agencies 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)
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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 Master Servicer remits to the Trustee Master
Servicer's Trust Receipts pursuant to clauses (ii) or (iii) above, the Master
Servicer or any Sub-servicer shall also submit to the Trustee a summary of the
total amount of such Master Servicer's Trust Receipts requested on such day by
the same method as described in such clauses (ii) or (iii) above.
SECTION 8.15. SERVICING COMPENSATION. As compensation for its
activities hereunder, the Master Servicer shall be entitled to retain the amount
of the Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, 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, the Group I Insurer and each
Rating Agency, on or before the last day of March of each year, commencing in
1998, 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 1998, the
Master Servicer, at its own expense, shall cause to be delivered to the Trustee,
the Group I Insurer and each Rating Agency a letter or letters of a firm of
independent, nationally recognized certified public accountants reasonably
acceptable to the Control Party 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 Group
I 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.
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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 the Group I
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 Group I Insurer and
Moody's.
SECTION 8.20. REMOVAL OF MASTER SERVICER; RESIGNATION OF MASTER
SERVICER.
(a) The Trustee, with the consent of the Group I Insurer (or the Owners
pursuant to Section 6.11 hereof) may remove the Master Servicer upon the
occurrence of any of the following events:
(i) The Master Servicer shall fail to deliver to the Trustee any
proceeds or required payment, which failure continues unremedied for five
Business Days following written notice to an Authorized Officer of the
Master Servicer from the Trustee or from any Owner.
(ii) The Master Servicer shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (ii) admit in writing its
inability to pay its debts generally as they become due, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a
bankrupt or insolvent, (v) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a voluntary petition
or answer seeking reorganization, an arrangement with creditors or an order
for relief or seeking to take advantage of any insolvency law or file an
answer admitting the material allegations of a petition filed against it in
any bankruptcy, reorganization or insolvency proceeding or (vi) take
corporate action for the purpose of effecting any of the foregoing;
(iii) If without the application, approval or consent of the Master
Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Master
Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement 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 Group I Insurer of said
failure; provided, however, that if the Master Servicer can demonstrate to
the reasonable satisfaction of the Control Party that it is diligently
pursuing remedial action, then the cure period may be extended with the
written approval of the Control Party; or
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(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 the Group I 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 Control Party that it is
diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Control Party.
(b) The Control Party also may remove the Master Servicer upon the
occurrence of any of the following events:
(i) a Group I Deficiency Amount; provided, however, that the Group I
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 Group I 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 or under the Insurance Agreement, which failure
materially and adversely affects the interests of the Group I Insurer and
the Trustee; or
(iv) the failure by the Master Servicer to make any required
Delinquency Advance, any Special Advance or to pay any Compensating
Interest; or
(v) the occurrence of a Servicer Termination Delinquency Rate Trigger
or a Servicer Termination Loss Trigger, as such terms are defined in the
Insurance Agreement; or
(vi) the enactment of any law by a legislative body that declares, or
any finding or ruling by a court of competent jurisdiction, that the
Insurance Agreement or this Agreement is not valid and binding on the
Sponsor or the Master Servicer;
provided, however, with respect to clause (iv), if the Master Servicer can
demonstrate to the reasonable satisfaction of the Control Party that any such
event was due to circumstances beyond the control of the Master Servicer, such
event shall not be considered an event of termination of the Master Servicer;
provided, however, that (x) prior to any removal of the Master Servicer by the
Control Party pursuant to clauses (i) or (ii) of this Section 8.20(b), the
Master Servicer shall first have been given by the Control Party 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
Control Party 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 Control Party that it is diligently pursuing
remedial action, then the cure period in each case may be extended with the
written approval of the Control Party) and (v) in the event of the refusal or
inability of the Master Servicer to make any required Delinquency Advance or
Special 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 Group I Insurer or of the
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Trustee) at 4 p.m. on the second Business Day following the day on which the
Trustee or the Group I Insurer notifies an Authorized Officer of the Master
Servicer that a required Delinquency Advance or Special Advance has not been
received by the Trustee. Upon the Trustee's determination that a required
Delinquency Advance or Special 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 Group I 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 Group I 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 $10,000,000, as determined in accordance
with generally accepted accounting principles, and acceptable to the Group I
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
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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 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 Master 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 each Rating Agency of the transfer of the
servicing to the successor.
(l) The Trustee shall give notice to the Group I Insurer, each Rating
Agency and to the Owners of the occurrence of any event specified in Section
8.20(a) of which the Trustee has knowledge.
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(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 THE GROUP I INSURER AND THE TRUSTEE;
ERRORS AND OMISSIONS INSURANCE.
(a) At any reasonable time and from time to time upon reasonable
notice, the Group I Insurer, the Trustee, or any agents or representatives
thereof may inspect the Master Servicer's servicing operations and discuss the
servicing operations of the Master Servicer with any of its officers or
directors. The costs and expenses incurred by the Master Servicer or its agents
or representatives in connection with any such examinations or discussions shall
be paid by the Master Servicer.
(b) The Master Servicer agrees to maintain errors and omissions
coverage and a fidelity bond, each at least to the extent generally maintained
by prudent mortgage loan servicers having servicing portfolios of a similar
size.
SECTION 8.22. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF MASTER SERVICER. Any corporation into which the Master Servicer may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer shall be a party, or any corporation succeeding to all or substantially
all of the business of the Master Servicer, shall be the successor of the Master
Servicer hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto provided that such corporation
meets the qualifications set forth in Section 8.20(g).
SECTION 8.23. NOTICES OF MATERIAL EVENTS. The Master Servicer shall
give prompt notice to the Group I Insurer, the Trustee, and each Rating Agency
of the occurrence of any of the following events:
(a) 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;
(b) 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
(c) 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
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ability to perform under the Transaction Documents or materially adversely
affect the financial affairs of the Sponsor, the Master Servicer or AMHC.
ARTICLE IX
TERMINATION OF TRUST
SECTION 9.1. TERMINATION OF TRUST. The Trust created hereunder and all
obligations created by this Agreement will terminate upon the earlier of (i) the
payment to the Owners of all Certificates from amounts other than those
available under the Group I 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 Lower-Tier REMIC and the Upper-Tier REMIC to adopt a
plan of complete liquidation with respect to each of the Mortgage Loan Groups 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 remaining in the Trust Estate at a price equal to the sum of
(v) the greater of (i) 100% of the aggregate Loan Balances of the related
Mortgage Loans as of the day of purchase minus the amount actually remitted by
the Master Servicer representing the related Monthly Principal Remittance Amount
on such Remittance Date for the related Remittance Period and (ii) the fair
market value of such Mortgage Loans (disregarding accrued interest), (w) the
amount of any difference between the related Monthly Interest Remittance Amount
actually remitted by the Master Servicer on such Remittance Date and the related
Monthly Interest Remittance Amount due on such Remittance Date, (x) the related
Group II Reimbursement Amount, if any, and (y) the aggregate amount of any
Delinquency Advances and Servicing Advances remaining unreimbursed, together
with any accrued and unpaid Servicing Fees, as of such Remittance Date (such
amount, the "Termination Price"). In connection with
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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 foregoing, the Master Servicer or its
affiliate may not terminate the Trust pursuant to this Section 9.2 without the
consent of the Group I Insurer, if termination would result in a draw on the
Group I Insurance Policy.
(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 Lower-Tier REMIC and Upper-Tier REMIC.
(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) Upon such purchase, the Group I Insurance Policy will terminate and
shall be returned to the Group I Insurer.
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 either the Upper-Tier REMIC or
Lower-Tier REMIC do 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 either the Upper-Tier REMIC or Lower-Tier REMIC will no longer qualify as a
"REMIC" pursuant to Section 860D of the Code, on any Remittance Date on or after
the date which is 30 calendar days following such Final Determination, the
Owners of a majority in Percentage Interest represented by the Offered
Certificates then Outstanding may direct the Trustee to adopt a plan of complete
liquidation with respect to the Trust Estate. In connection with such purchase,
the Master Servicer shall remit to the Trustee all amounts then on deposit in
the Principal and Interest Account for deposit 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 Offered
Certificates or such notice from the Group I 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 R
Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period in
the event that the Owners of the Offered
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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
Offered Certificates shall permit or direct in writing, after the expiration of
the Purchase Option Period.
(d) Following a Final Determination, the Owners of a majority of the
Percentage Interest of the Class R Certificates then Outstanding may, at their
option on any Remittance Date and upon delivery to the Owners of the Offered
Certificates and the Trustee of an opinion of counsel experienced in federal
income tax matters selected by the Owners of such Class R Certificates which
opinion shall be reasonably satisfactory in form and substance to a majority of
the Percentage Interests represented by the Offered Certificates then
Outstanding and the Trustee, to the effect that the effect of the Final
Determination is to increase substantially the probability that the gross income
of either the Upper-Tier REMIC or Lower-Tier REMIC 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 Offered Certificates then Outstanding or the Trustee give the
Owners of a majority of the Percentage Interest of the Class R Certificates
notice that such opinion is not satisfactory within thirty days after receipt of
such opinion.
SECTION 9.4. DISPOSITION OF PROCEEDS. The Trustee shall, upon receipt
thereof, deposit the proceeds of any liquidation of the Trust Estate pursuant to
this Article IX to the Certificate Account; provided, however, that any amounts
representing Servicing Fees, unreimbursed Delinquency Advances or unreimbursed
Servicing Advances theretofore funded by the Master Servicer from the Master
Servicer's own funds shall be paid by the Trustee to the Master Servicer.
SECTION 9.5. NETTING OF AMOUNTS. If any Person paying the Termination
Price would receive a portion of the amount so paid, such Person may net any
such amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
SECTION 10.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee (i) undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof
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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) his subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by an Authorized Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Group I Insurer or of the Owners of a majority in Percentage Interest
of the Certificates of the affected Class or Classes and the Group I 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.
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(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 August 28, 1997 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):
(A) 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
(B) 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 Group I Insurer or by the Owners of at
least 25% of the aggregate Percentage Interests represented by the
Offered Certificates then Outstanding, or, if there are no Offered
Certificates then Outstanding, by such Percentage Interests represented
by any Class B-1 Certificates, a written notice specifying such failure
or breach and requiring it to be remedied; or
(C) 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
(D) a conservator or receiver or liquidator or sequestrator or
custodian of the property of the Trustee is appointed in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Trustee or relating to all
or substantially all of its property; or
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(E) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due, file or
consent to the filing of a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, voluntarily suspend payment of its
obligations, or take corporate action for the purpose of any of the
foregoing.
The Sponsor shall give to the Group I Insurer and each Rating Agency
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 Group I Insurer or (ii) with the prior
written consent (which shall not be unreasonably withheld) of the Group I
Insurer (x) the Sponsor or (y) the Owners of a majority of the Percentage
Interests represented by the Offered Certificates, or, if there are no Offered
Certificates then Outstanding, by such Percentage Interest represented by any
Class of Class R 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 Group I Insurer or the
Owners of any Class of Certificates mentioned herein shall be sufficiently
evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction of
any of the Owners pursuant to this Agreement, unless such Owners shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document, but the Trustee in its discretion may make such further
inquiry or investigation into such facts or matters as it may see fit;
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(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.
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 Group I Insurer or, if the last
sentence of Section 11.18 hereof is applicable, the Sponsor and having (x)
long-term, unsecured debt rated at least A-1 by Moody's (or such lower rating as
may be acceptable to Moody's) and (y) a short-term deposit rating of at least
A-1 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 Group I Insurer) (which consent shall not
be unreasonably withheld) or of the Group I Insurer, resign immediately in the
manner and with the effect hereinafter specified in this Article X.
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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 Group
I Insurer and the Owners at their addresses appearing on the Register. A copy of
such notice shall be sent by the resigning Trustee to each Rating Agency. Upon
receiving notice of resignation, the Sponsor shall promptly appoint a successor
trustee or trustees by written instrument, in duplicate, executed on behalf of
the Trust by an Authorized Officer of the Sponsor, one copy of which instrument
shall be delivered to the Trustee so resigning and one copy to the successor
trustee or trustees. If no successor trustee shall have been appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Owner may, on
behalf of himself and all others similarly situated, petition any such court for
the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(c) If at any time the Trustee shall cease to be eligible under Section
10.8 hereof and shall fail to resign after written request therefor by the
Sponsor or by the Group I Insurer, the Group I Insurer or the Sponsor (with the
written consent of the Group I 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 Offered Certificates, or, if there are no Offered Certificates then
Outstanding, by such majority of the Percentage Interests represented by Class R
Certificates then Outstanding may at any time, with the prior written consent of
the Group I 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 Group I 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 Group I
Insurer or, if the last sentence of Section 11.18 hereof is applicable, the
Sponsor may remove the Trustee and appoint a successor trustee by written
instrument, in triplicate, signed by the Group I Insurer and the Sponsor duly
authorized, one complete set of which instruments shall be delivered to the
Sponsor, one complete set to the Group I Insurer, 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 Group I
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 Offered
Certificates then Outstanding or, if there are no Offered Certificates then
Outstanding, by such majority of the Percentage Interest of the Class R
Certificates delivered to the Sponsor and
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the retiring Trustee, the successor Trustee so appointed shall forthwith upon
its acceptance of such appointment become the successor Trustee and supersede
the successor Trustee appointed by the Sponsor. If no successor Trustee shall
have been so appointed by the Sponsor or the Owners and shall have accepted
appointment in the manner hereinafter provided, any Owner may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
(g) The Sponsor shall give notice of any removal of the Trustee by
mailing notice of such event by first-class mail, postage prepaid, to the Group
I 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 each of the Rating Agencies and the
Group I Insurer. If the Sponsor fails to mail such notice within ten days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of the Trust.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor shall be qualified and eligible under this
Article X.
SECTION 10.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF THE TRUSTEE. Any corporation or association into which the Trustee
may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation or
association shall be otherwise qualified and eligible under this Article X. In
case any Certificates have been executed, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such Trustee
may adopt such execution and deliver the Certificates so executed with the same
effect as if such successor Trustee had itself executed such Certificates.
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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 indemnification provided in this Section 10.13 shall
survive the termination of this Agreement or the resignation or removal of the
Trustee hereunder. The Trustee and any director, officer, employee or agent of
the Trustee may rely and shall be protected in acting or refraining from acting
in good faith on any certificate, notice or other document of any kind prima
facie properly executed and submitted by the Authorized Officer of any Person
respecting any matters arising hereunder.
SECTION 10.14. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the Master Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
and the Group I 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
Group I 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:
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(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate Trustee or co-Trustee jointly (it
being understood that such separate Trustee or co-Trustee is not authorized
to act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed (whether as Trustee hereunder or as successor to
the Master Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Estate
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Trustee or co-Trustee, but solely at the
direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally liable by reason
of any act or omission of any other co-Trustee hereunder; and
(iii) The Master Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate Trustee or co-Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate Trustees and co-Trustees,
as effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to this Agreement and the conditions
of this Section 10.14. Each separate Trustee and co-Trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the 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 Group I 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 Group I Insurer or the Owners to the
Trustee to take any action under any provision of this Agreement, the Sponsor,
the Group I 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
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specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 11.2. FORM OF DOCUMENTS DELIVERED TO THE TRUSTEE. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be based,
insofar as it relates to legal matters, upon an opinion of counsel, unless such
Authorized Officer knows, or in the exercise of reasonable care should know,
that the opinion is erroneous. Any such certificate of an Authorized Officer of
the Trustee or any opinion of counsel may be based, insofar as it relates to
factual matter upon a certificate or opinion of, or representations by, one or
more Authorized Officers of the Sponsor or of the Master Servicer, stating that
the information with respect to such factual matters is in the possession of the
Sponsor or of the Master Servicer, unless such Authorized Officer or counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous. Any
opinion of counsel may also be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an Authorized Officer
of the Trustee, stating that the information with respect to such matters is in
the possession of the Trustee, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any opinion of counsel may be based
on the written opinion of other counsel, in which event such opinion of counsel
shall be accompanied by a copy of such other counsel's opinion and shall include
a statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
SECTION 11.3. ACTS OF OWNERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Owners may be embodied in
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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 Group I 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 Group I Insurer or by
the Sponsor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
SECTION 11.5. NOTICES AND REPORTS TO OWNERS; WAIVER OF NOTICES. Where
this Agreement provides for notice to Owners of any event or the mailing of any
report to Owners, such notice or report shall be sufficiently given (unless
otherwise herein expressly provided) if mailed, first-class postage prepaid, to
each Owner affected by such event or to whom such report is required to be
mailed, at the address of such Owner as it appears on the Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice or the mailing of such report. In any case where a notice
or report to Owners is mailed in the manner provided above, neither the failure
to mail such notice or report nor any defect in any notice or report so mailed
to any particular Owner shall affect the sufficiency of such notice or report
with respect to other Owners, and any notice or report which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given or
provided.
Where this Agreement provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
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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 Group I Insurer and the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
SECTION 11.10. LEGAL HOLIDAYS. In any case where the date of any
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 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.
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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 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 consent of the Group I 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 R Certificate as a result of the
ownership of any Class R 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 consent of the Group I 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 definitions of "Group I Targeted Overcollateralization
Amount" and "Group II Targeted Overcollateralization Amount"; provided, however,
that no such change shall affect the weighted average life of the related Class
of Offered 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 Group I 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 amendments or (c)
result in a down-rating or withdrawal of any ratings then assigned to the
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Offered 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 Group I Insurer to the effect that such
amendment would not adversely affect the status of either the Upper-Tier REMIC
or Lower-Tier REMIC as a REMIC. Neither such opinion of counsel nor any expense
of any such proposed amendment shall be at the Trustee's expense.
(e) The Group I Insurer, the Owners and each Rating Agency 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 Upper-Tier REMIC and Lower-Tier REMIC 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 each of
the Upper-Tier REMIC and Lower-Tier REMIC as a REMIC (which election shall apply
to the taxable period ending December 31, 1998 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 R 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 Matters Person by the
Sponsor with respect to such allocation of expenses. The Tax Matters Person
shall collect any forms or reports from the Owners determined by the Sponsor to
be required under applicable federal, state and local tax laws.
(c) The Tax Matters Person shall provide to the Internal Revenue
Service and to persons described in Section 860E(e)(3) and (6) of the Code the
information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
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(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 Upper-Tier REMIC and Lower-Tier REMIC,
(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 Upper-Tier REMIC and Lower-Tier REMIC of any
other taxes under the Code.
(f) The Upper-Tier REMIC and Lower-Tier REMIC 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
Group I 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 either the Upper-Tier
REMIC or Lower-Tier REMIC; provided, however, that such transaction is otherwise
permitted under this Agreement.
SECTION 11.16. ADDITIONAL LIMITATION ON ACTION AND IMPOSITION OF TAX.
(a) Any provision of this Agreement to the contrary notwithstanding,
the Trustee shall not, without having obtained, and delivered to the Group I
Insurer, an opinion of counsel experienced in federal income tax matters (which
opinion shall be at the expense of the Sponsor) to the effect that such
transaction does not result in a tax imposed on the Trust or cause a termination
of REMIC status for either the Upper-Tier REMIC or Lower-Tier REMIC, (i) sell
any assets in the Trust Estate, (ii) accept any contribution of assets after the
Startup Day or (iii) agree to any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited transactions"
of either the Upper-Tier REMIC or Lower-Tier REMIC 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 either the Upper-Tier
REMIC or Lower-Tier REMIC after the Startup Day pursuant to Section 860G(d) of
the Code, or any other tax (other than any minimum tax imposed by Sections
23151(a) or 23153(a) of the California Revenue and Taxation Code) is imposed,
such tax shall be paid by (i) the Trustee, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Agreement,
(ii) the Master Servicer, if such tax arises out of or results from a breach by
the Master Servicer of any of its obligations under this Agreement, or
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otherwise (iii) the Owners of the Lower-Tier Residual Class and the Class R
Certificates in proportion to their Percentage Interests. To the extent such tax
is chargeable against the Owners of the Lower-Tier Residual Class and the Class
R 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 R 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 GROUP I INSURER. The Group I Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the Group I
Insurer shall be suspended during any period in which the Group I Insurer is in
default in its payment obligations under the Group I Insurance Policy, except
with respect to amendments to this Agreement pursuant to Section 11.14. During
the continuance of a Group I Insurer Default, the Group I Insurer's rights
hereunder shall vest in the Trustee on behalf of the Owners of the Group II
Certificates and shall be exercisable by the Owners of at least a majority in
Percentage Interest of the Group II Certificates then Outstanding or, if there
are no Group II Certificates then Outstanding and the Group I Insurance Policy
has expired or a Group I Insurer Default has occurred and is continuing, by at
least a majority of the Subordinate Certificates then Outstanding or if there
are no Group II Certificates or Subordinate Certificates outstanding and any and
all amounts due and owing the Group I Insurer under the Insurance Agreement have
been paid in full, and the Group I Insurance Policy has expired or is
unavailable due to a Group I Insurer Default, by at least a majority of the
Class R Certificates then Outstanding. At such time as the Group II Certificates
are no longer Outstanding hereunder and the Group I Insurer has been reimbursed
for all Group II Reimbursement Amounts to which it is entitled hereunder and the
Group I Insurance Policy has expired, the Group I 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, 16th Floor
Irvine, CA 92614
Attention: Advanta 1998-1
Tel: (714) 253-7575
Fax: (714) 253-7577
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The Sponsor: Advanta Mortgage Conduit Services Inc.
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Attention: Structured Finance
The Master Servicer: Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Fax: (619) 674-3592
The Certificate
Insurer: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management -
SF (Advanta Mortgage Loan Trust
Series 1998-1)
Telecopy No.: (914) 765-3919
Confirmation: (914) 765-3111
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Mortgage Monitoring
Department
Standard & Poor's: Standard & Poor's Ratings Group
26 Broadway, 15th Floor
New York, New York 10004
Attention: Manager, Structured Finance
Operations Group
Fitch: Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: Structured Finance
Underwriters: Morgan Stanley & Co. Incorporated
as Representative of the Underwriters
1585 Broadway
New York, New York 10036
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IN WITNESS WHEREOF, the Sponsor, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
as Sponsor
By: _______________________________
Mark 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: _______________________________
[POOLING AND SERVICING AGREEMENT]
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STATE OF CALIFORNIA )
: ss.:
COUNTY OF _________________)
On the ____ day of _________, 1998, before me personally came
___________ to me known, who, being by me duly sworn did depose and say that
his/her office is located at Three Park Plaza, Irvine, California 92714; that
s/he is ________________ of Bankers Trust Company of California, N.A., the
national banking corporation described in and that executed the above instrument
as Trustee; and that s/he signed his/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> 1
Exhibit 4.2
EXECUTION COPY
MASTER LOAN TRANSFER AGREEMENT
Dated as of June 15, 1997
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
ADVANTA NATIONAL BANK
ADVANTA FINANCE CORP.,
as Affiliated Originators
ADVANTA CONDUIT RECEIVABLES, INC.
as an Affiliate
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
and
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor
<PAGE> 2
TABLE OF CONTENTS
Page
----
Section 1. Definitions..............................................1
Section 2. Interest Calculations....................................3
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...........................................8
Section 6. Authorized Representatives..............................14
Section 7. Notices.................................................14
Section 8. Governing Law...........................................15
Section 9. Assignment..............................................15
Section 10. Counterparts............................................15
Section 11. Amendment...............................................15
Section 12. Severability of Provisions..............................15
Section 13. No Agency; No Partnership or Joint
Venture.................................................15
Section 14. Further Assurances......................................15
Section 15. The Certificate Insurer.................................15
Section 16. Maintenance of Records..................................16
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<PAGE> 3
THIS MASTER LOAN TRANSFER AGREEMENT, dated as of June 15,
1997, 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 Advanta National Bank, each a seller (each an
"Affiliated Originator" and collectively, the "Affiliated
Originators"), Advanta Conduit Receivables, Inc. (the "Affiliate"),
Bankers Trust Company of California, N.A., as trustee ("Trustee") and
Advanta Mortgage Conduit Services, Inc., as sponsor ("Sponsor");
I. BACKGROUND
A. Each Affiliated Originator is an originator or purchaser of
mortgage loans which such Affiliated Originator may, from time to time,
convey to the Conduit Acquisition Trust, or cause the Conduit
Acquisition Trust to acquire;
B. The Affiliated Originators and the Sponsor expect, from time to time, to
cause that such mortgage loans to be conveyed to an Advanta Trust in connection
with a securitization transaction sponsored by the Sponsor.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
Section 1. Definitions. Whenever used in this Agreement or in any Conveyance
Agreement, the following words and phrases, unless the context otherwise
requires, shall have the meanings specified in this Article; provided, however,
that any capitalized terms used herein or in any conveyance Agreement and not
defined herein shall have their respective meanings as set forth in the related
Advanta Pooling Agreement.
Advanta Pooling Agreement: Any Pooling and Servicing
Agreement entered into by Advanta Mortgage Conduit Services, Inc. as
Sponsor, Advanta Mortgage Corp. USA, as Master Servicer and a trustee,
as it may be amended and supplemented from time to time by the parties
thereto.
Advanta Trust: A securitization trust created by the
Sponsor into which Mortgage Loans described in this Agreement and the
Conveyance Agreements are deposited.
Agreement: This Master Loan Transfer Agreement as it may
be amended from time to time, including the exhibits and supplements
hereto.
Bulk Acquisition Loan: Any Mortgage Loan purchased by an Affiliated
Originator from another Originator (other than any other Affiliated Originator)
as part of a bulk portfolio acquisition.
<PAGE> 4
Conduit Acquisition P&S: The Pooling and Servicing Agreement dated
as of May 1, 1997 by and between the Sponsor and the Trustee relating to the
Conduit Acquisition Trust.
Conduit Acquisition Trust: The trust created pursuant to
the Conduit Acquisition P&S.
Conveyance Agreement: Any Conveyance Agreement relating to
a Pool, in substantially the form set forth as Exhibit A hereto.
Coupon Rate: The rate of interest borne by each Note.
Cut-Off Date: With respect to any Pool, as defined in the
related Conveyance Agreement.
FDIC: The Federal Deposit Insurance Corporation, or any
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
File: The documents delivered to the Trustee pursuant to the
document delivery provisions of the Conduit Acquisition P&S pertaining to a
particular Mortgage Loan, together with any additional documents required to be
added to the File pursuant to the Conduit Acquisition P&S.
First Mortgage Loan: A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Property.
FNMA: The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
Loan Balance: With respect to each Mortgage Loan, the outstanding
principal balance thereof on the related Cut Off 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.
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<PAGE> 5
Note: The note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Offered Certificates: Any securities issued by an Advanta
Trust which are not retained by the Sponsor or any Originator.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool: Any group of Mortgage Loans transferred to the
Sponsor pursuant to a specific Conveyance Agreement.
Property: The underlying property securing a Mortgage Loan.
Qualified Mortgage: "Qualified Mortgage" shall have the
meaning set forth from time to time in the definition thereof at
Section 860G(a)(3) of the Code (or any successor statute thereto) and
applicable to the related Advanta Trust.
Schedules of Mortgage Loans: The Schedules of Mortgage
Loans required to be delivered pursuant to the related Advanta Pooling
Agreement.
Second Mortgage Loan: A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Property.
Senior Lien: With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien; and
with respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
Third Mortgage Loan: A Mortgage Loan which constitutes a
third priority mortgage lien with respect to the related Property.
Trustee: Bankers Trust Company of California, N.A., located on the
date of execution of this Agreement at 3 Park 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.
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 either (i)
a 360-day year comprised of twelve 30-day months or (ii) a 360-day year and
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<PAGE> 6
the actual number of days elapsed in the applicable interest period, as required
by the related Note.
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 Advanta 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
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).
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<PAGE> 7
(iv) Such Affiliated Originator is not in default with respect
to any order or decree of any court or any order, regulation or demand
of any federal, state, municipal or governmental agency, which might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of such Affiliated
Originator or its properties, or might have consequences that would
materially and adversely affect its performance hereunder and under the
other Conveyance Agreements to which such Affiliated Originator is a
party, or which would draw into question the validity of this Agreement
or the Mortgage Loans taken as a whole or of any action taken or to be
taken in connection with the obligations of the Affiliated Originator
contemplated herein.
(v) No litigation is pending or, to the best of such
Affiliated Originator's knowledge, threatened against such Affiliated
Originator which litigation might have consequences that would prohibit
its entering into this Agreement or any Conveyance Agreements to which
it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of such Affiliated
Originator or its properties or might have consequences that would
materially and adversely affect its performance hereunder and under the
Conveyance Agreements to which such Affiliated Originator is a party.
(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
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<PAGE> 8
hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the conveyance
Agreements on the part of such Affiliated Originator and the
performance by such Affiliated Originator of its obligations under this
Agreement and such of the Conveyance Agreements to which it is a party.
(x) The origination practices used by such Affiliated
Originator with respect to the Mortgage Loans originated by such
Affiliated Originator have been, (i) in all material respects, legal,
proper, prudent and customary in the mortgage loan lending business and
(ii) in compliance with the Servicer's underwriting criteria as
described in the Prospectus.
(xi) The transactions contemplated by this Agreement are in
the ordinary course of business of such Affiliated Originator. The
transfer, assignment and conveyance of the Mortgage Notes and the
Mortgages by the Servicer pursuant to this Agreement are not subject to
the bulk transfer laws or any similar statutory provisions in effect in
any applicable jurisdiction.
(xii) Such Affiliated Originator received fair consideration
and reasonably equivalent value in exchange for the sale of the
interests in the Mortgage Loans.
(xiii) Such Affiliated Originator did not sell any interest in
any Mortgage Loan with any intent to hinder, delay or defraud any of
its respective creditors.
(xiv) Such Affiliated Originator is solvent, and such
Affiliated Originator will not be rendered insolvent as a result of the
sale of the Mortgage Loans to the related Advanta Trust.
The representations and warranties set forth in this paragraph (a) shall survive
the sale and assignment of the Mortgage Loans to the Sponsor.
In addition, each Affiliated Originator hereby covenants to perform
the obligations, if any, imposed upon it by the related Advanta Pooling
Agreement.
(b) The Sponsor hereby represents and warrants to each Affiliated
Originator and the Trustee that, as of the date hereof:
(i) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all licenses and qualifications necessary to carry on its
business as now being conducted and to perform its obligations
hereunder; the Sponsor has the power and authority to execute and
deliver this Agreement and to perform its obligations in accordance
herewith; the execution, delivery and performance of this Agreement
(including
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<PAGE> 9
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 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.
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Section 5. Representations and Warranties of the Affiliated Originators
Regarding the Mortgage Loans. (a) Set forth in paragraph (b) below is a listing
of representations and warranties which will be deemed to have been made by each
Affiliated Originator in connection with each conveyance of a Pool from the
Conduit Acquisition Trust to the related Advanta Trust. In addition, a
Conveyance Agreement may, with respect to the Mortgage Loans in the related
Pool, delete or modify any of such representations and warranties, or may add
additional representations and warranties ("Additional Representations and
Warranties"). The representations and warranties listed in paragraph (b) below,
together with any Additional Representations and Warranties, are the
"Representations and Warranties". Reference to the Cut-Off Date are as of the
Cut-Off Date set forth in the related Conveyance Agreement with respect to a
Mortgage Loan.
(b) With respect to each Mortgage Loan, each Affiliated Originator
hereby represents, warrants and covenants to the Sponsor and the Trustee, as of
the related Cut-Off Date, as follows, on which representations, warranties and
covenants the Trustee relies in accepting the Mortgage Loans:
(i) The information with respect to each Mortgage Loan set
forth in the Schedules of Mortgage Loans is true and correct as of the
Cut-Off Date;
(ii) All of the original or certified documentation required
to be delivered to the Trustee pursuant to the related Advanta Pooling
Agreement (including all material documents related thereto) with
respect to each Mortgage Loan has been or will be delivered to the
Trustee in accordance with the terms of such Advanta Pooling Agreement.
Each of the documents and instruments specified to be included therein
has been duly executed and in due and proper form, and each such
document or instrument is in a form generally acceptable to prudent
mortgage lenders that regularly originate or purchase mortgage loans
comparable to the Mortgage Loans for sale to prudent investors in the
secondary market that invest in mortgage loans such as the Mortgage
Loans.
(iii) Each Mortgage Loan being transferred to the Sponsor is a
Qualified Mortgage and is a Mortgage;
(iv) Each Property is improved by a single (one-to-four)
family residential dwelling, which may include manufactured homes which
qualify as eligible for inclusion in a REMIC, 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
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respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular
mortgage lending activities, and such other exceptions to which similar
properties are commonly subject and which do not individually, or in
the aggregate, materially and adversely affect the benefits of the
security intended to be provided by such Mortgage;
(vii) Immediately prior to the transfer and assignment herein
contemplated, each Affiliated Originator held good and indefeasible
title to, and was the sole owner of, each Mortgage Loan conveyed by
such Affiliated Originator subject to no liens, charges, mortgages,
encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trustee will hold
good and indefeasible title to, and be the sole owner of, each Mortgage
Loan subject to no liens, charges, mortgages, encumbrances or rights of
others except liens which will be released simultaneously with such
transfer and assignment;
(viii) As of the related Cut-Off Date, no Mortgage Loan is 30
or more days Delinquent, except for any portion of the Mortgage Loans
which the related Advanta Pooling Agreement permits to be more than 30
days Delinquent;
(ix) There is no delinquent tax or assessment lien or
mechanic's lien on any Property, and each Property is free of
substantial damage and is in good repair;
(x) There is no valid and enforceable right of rescission
offset, defense or counterclaim to any Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or
interest on such Note or the defense of usury, nor will the operation
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;
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(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, second or third
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 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,
(which may be a blanket policy of the type described in the related
Advanta Pooling Agreement) a flood insurance policy in a form meeting
the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier is in effect with
respect to such Property in an amount representing coverage, and which
provides for a recovery by the Master Servicer 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;
(xvi) Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether considered in a proceeding or
action in equity or at law), and all parties to each Mortgage Loan had
full legal capacity to execute all documents relating to such Mortgage
Loan and convey the estate therein purported to be conveyed;
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(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 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;
11
<PAGE> 14
(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, 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 and each
Third Mortgage Loan, either (A) no consent for such Mortgage Loan was
required by the holder of the related Senior Lien (and, in the case of
a Third Mortgage Loan, the holder of the related second lien) prior to
the making of such Mortgage Loan or (B) such consent has been obtained
and is contained in the related File;
(xxxii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Property of the
benefits of the security, including
12
<PAGE> 15
(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 or a Third
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) 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
(xxxviii) 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
13
<PAGE> 16
Mortgage Loans, the party discovering such breach shall give prompt written
notice to the other party, and the related Affiliated Originator shall be
required to take the remedial actions required by the related Advanta Pooling
Agreement within the time periods required thereto. Each Affiliated Originator
hereby acknowledges that a breach of any of the Representations and Warranties
listed in clauses (iii), (x), (xvi) and (xxxviii) above a priori materially and
adversely affects the interests of the related Advanta Trust, the related Owners
and the Certificate Insurer.
Section 6. Authorized Representatives. The names of the officers of the
Affiliated Originators and of the Sponsor who are authorized to give and receive
notices, requests and instructions and to deliver certificates and documents in
connection with this Agreement on behalf of the Affiliated Originator and of the
Sponsor ("Authorized Representatives") are set forth on Exhibit B. From time to
time, the Affiliated Originator and the Sponsor may, by delivering to the
Trustee a revised exhibit, change the information previously given, but the
Trustee shall be entitled to rely conclusively on the last exhibit until receipt
of a superseding exhibit.
Section 7. Notices. All demands, notices and communications relating to
this Agreement shall be in writing and shall be deemed to have been duly given
when received by the other party or parties at the address shown below, or such
other address as may hereafter be furnished to the other party or parties by
like notice. Any such demand, notice or communication hereunder shall be deemed
to have been received on the date delivered to or received at the premises of
the addressee.
If to the Trustee:
Bankers Trust Company of California, N.A.
3 Park Plaza
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: Treasurer
Telecopy: (215) 283-4745
Telephone: (215) 283-4376
14
<PAGE> 17
Section 8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of laws rules applied in the State of New York.
Section 9. Assignment. No party to this Agreement may assign its rights
or delegate its obligations under this Agreement without the express written
consent of the other parties, except as otherwise set forth in this Agreement.
Section 10. Counterparts. For the purpose of facilitating the execution
of this Agreement and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed to
be an original, and together shall constitute and be one and the same
instrument.
Section 11. Amendment. This Agreement may be amended from time to time
by the Affiliated Originators, the Sponsor and the Trustee only by a written
instrument executed by such parties and with the prior written consent of the
Certificate Insurer.
Section 12. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 13. No Agency; No Partnership or Joint Venture. Neither the
Affiliated Originators nor the Sponsor is the agent or representative of the
other, and nothing in this Agreement shall be construed to make either the
Affiliated Originator nor the Sponsor liable to any third party for services
performed by it or for debts or claims accruing to it against the other party.
Nothing contained herein nor the acts of the parties hereto shall be construed
to create a partnership or joint venture between the Sponsor and the Affiliated
Originator.
Section 14. Further Assurances. The Affiliated Originators and Sponsor
agree to cooperate reasonably and in good faith with one another in the
performance of this Agreement.
Section 15. The Certificate Insurer. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligation's under the related
Certificate Insurance Policies. During any period of suspension, the Certificate
Insurer's rights hereunder shall vest in the Owners of the related Offered
Certificates and shall be exercisable by the owners of at least a majority in
Percentage Interest of the related Offered Certificates then outstanding. At
such time as the related Offered Certificates are no longer Outstanding under
the related Advanta Pooling Agreement and the Certificate Insurer has been
reimbursed for all Insured
15
<PAGE> 18
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.
16
<PAGE> 19
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 NATIONAL BANK
The Sellers and
ADVANTA CONDUIT RECEIVABLES, INC.
An Affiliate
By:_____________________________________________
Name: Mark Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee and not in its individual
capacity
By:_____________________________________________
Name:
Title:
ADVANTA MORTGAGE CONDUIT SERVICES,
INC. as Sponsor
By:_____________________________________________
Name: Mark Dunsheath
Title: Vice President
ADVANTA FINANCE CORP.
By:_____________________________________________
Name: Charles G. Dahl
Title: Vice President
[MASTER LOAN TRANSFER AGREEMENT]
17
<PAGE> 20
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 Finance Corp. and
Advanta National Bank, as Affiliated Originators, Advanta Conduit Receivables,
Inc., as an Affiliate, and Advanta Mortgage Conduit Services, Inc., as Sponsor,
pursuant to the Master Loan Transfer Agreement dated as of June 15, 1997 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, the Affiliate 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,
the Affiliate and the Sponsor, concurrently with the execution and delivery of
this Conveyance Agreement, does hereby irrevocably transfer, assign, set over
and otherwise convey, and does direct the Trustee to convey from the Conduit
Acquisition Trust to the Advanta Mortgage Loan Trust________-________, without
recourse (except as otherwise explicitly provided for herein) all of its right,
title and interest in and to the Transferred Mortgage Loans being conveyed by
it, including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling Agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes, including
all interest and principal received by such Affiliated Originator on or with
respect to such Transferred Mortgage Loans on or after the related Cut-off Date,
together with all of its right, title and interest in and to the proceeds
received on or after the related Cut-off Date of any related insurance policies.
If an Affiliated Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, such Affiliated Originator shall
promptly deliver to the Trustee such original Mortgage or mortgage assignment
with evidence of recording indicated thereon upon receipt thereof from the
public recording official.
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.
A-1
<PAGE> 21
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> 22
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 NATIONAL BANK,
as Affiliated Originators
and
ADVANTA CONDUIT RECEIVABLES, INC.
as an Affiliate
By:_____________________________________________
Mark Dunsheath, Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC., as Sponsor
By:_____________________________________________
Mark Dunsheath, Vice President
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., as Trustee
By:_____________________________________________
Name:
Title:
ADVANTA FINANCE CORP.
By:_____________________________________________
Name:
Title:
Dated:
A-3
<PAGE> 23
EXHIBIT B
AUTHORIZED REPRESENTATIVES
Reference is hereby made to the Master Loan Transfer
Agreement, dated as of June 15, 1997 (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
Finance Corp. and Advanta National Bank, as Affiliated Originators,
Advanta Conduit Receivables, Inc., as an Affiliate, Advanta Mortgage
Conduit Services, Inc., as Sponsor and Bankers Trust Company of
California, N.A., as Trustee:
The following are the Affiliated Originators' Authorized
Representatives for purposes of the Agreement:
Name Title
[Annette Aguirre] [Senior Vice President, General
Counsel and Secretary]
[Mark Dunsheath] [Treasurer]
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 Dunsheath] [Treasurer]
B-1
<PAGE> 1
Exhibit 4.3
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA ("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 Finance Corp. and Advanta National Bank, as Affiliated Originators,
Advanta Conduit Receivables, Inc., as an Affiliate, Advanta Mortgage Conduit
Services, Inc. as Sponsor (the "Sponsor"), pursuant to the Master Loan Transfer
Agreement dated as of June 15, 1997 (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, the Affiliate and the Sponsor of those
Mortgage Loans listed on the Schedule of Mortgage Loans (the "Transferred
Mortgage Loans") (attached as Schedule I to the Pooling and Servicing Agreement
dated as of March 1, 1998 among the Sponsor, USA and Bankers Trust Company of
California, N.A., as Trustee) from the Conduit Acquisition Trust to the Advanta
Mortgage Loan Trust 1998-1 (the "Trust").
Conveyance of Transferred Mortgage Loans. Each Affiliated
Originator, the Affiliate 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:
(i) to convey to Advanta Conduit Receivables, Inc., 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;
and (ii) to convey, from Advanta Conduit Receivables, Inc. 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 Advanta Conduit Receivables, Inc. 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, N.A., in its capacity
as Trustee (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.
<PAGE> 2
The Affiliated Originators hereby make the Representations and
Warranties set forth in Section 5(b) of the Master Transfer Agreement with
respect to the Transferred Mortgage Loans, together with the following
additional representation and warranty:
As of the Startup Day, no Mortgagor is currently a debtor in a case
under Title 11 of the United States Code, or any similar state insolvency
proceeding.
The 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 March 1, 1998.
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 March 1, 1998 by and among the Sponsor, USA
and the Trustee.
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Mortgage Transfer Agreement.
2
<PAGE> 3
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 NATIONAL BANK,
as Affiliated Originators
and
ADVANTA CONDUIT RECEIVABLES, INC.,
as an Affiliate
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:
ADVANTA FINANCE CORP.
By: ___________________
Name: Mark T. Dunsheath
Title: Vice President
Dated: March 19, 1998
[Conveyance Agreement]
3
<PAGE> 1
Exhibit 4.4
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: Advanta Mortgage Loan Trust 1998-1, POLICY NUMBER: 25971
Mortgage Loan Asset-Backed Certificates, Series 1998-1,
$143,000,000 Adjustable Rate Class A-1 Group I Certificates,
$89,000,000 6.25% Class A-2 Group I Certificates,
$64,000,000 6.27% Class A-3 Group I Certificates,
$42,000,000 6.42% Class A-4 Group I Certificates,
$68,000,000 6.60% Class A-5 Group I Certificates,
$50,000,000 6.43% Class A-6 Group I Certificates,
5.00% Class A-IO Group I Certificates, and
$44,000,000 Component I of Adjustable Rate Class A-7 Combination
Certificates (collectively, the "Obligations")
MBIA Insurance Corporation (the "Certificate Insurer"), in
consideration of the payment of the premium and subject to the terms of this
Certificate Guaranty Insurance Policy (this "Policy"), hereby unconditionally
and irrevocably guarantees to any Owner that an amount equal to each full and
complete Insured Payment will be received by Bankers Trust Company of
California, N.A. or its successors, as trustee for the Owners (the "Trustee"),
on behalf of the Owners, from the Certificate Insurer, for distribution by the
Trustee to each Owner of each Owner's proportionate share of the Insured
Payment. The Certificate Insurer's obligations hereunder with respect to a
particular Insured Payment shall be discharged to the extent funds equal to the
applicable Insured Payment are received by the Trustee, whether or not such
funds are properly applied by the Trustee. Insured Payments shall be made only
at the time set forth in this Policy and no accelerated Insured Payments shall
be made regardless of any acceleration of the Obligations, unless such
acceleration is at the sole option of the Certificate Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust or the Trustee
for withholding taxes, if any (including interest and penalties in respect of
any such liability). This Policy does not cover, and Insured Payments do not
include, any Civil Relief Act Shortfalls or any Supplemental Interest Amounts.
The Certificate Insurer will pay any Insured Payment that is a
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent (as described below) of (i) a certified copy of the order requiring
the return of such a preference payment, (ii) an opinion of counsel satisfactory
to the Certificate Insurer that such order is final and not subject to appeal,
(iii) an assignment in such form as is reasonably required by the Certificate
Insurer, irrevocably assigning to the Certificate Insurer all rights and claims
of the Owner relating to or arising under the Obligations against the debtor
which made such preference payment or otherwise with respect to such preference
payment and (iv) appropriate instruments to effect the appointment of the
<PAGE> 2
Certificate Insurer as agent for such Owner in any legal proceeding related to
such preference payment, such instruments being in a form satisfactory to the
Certificate Insurer, provided that if such documents are received after 12:00
noon New York City time on such Business Day, they will be deemed to be received
on the following Business Day. Such payments shall be disbursed to the receiver
or trustee in bankruptcy named in the final order of the court exercising
jurisdiction on behalf of the Owner and not to any Owner directly unless such
Owner has returned principal or interest paid on the Obligations to such
receiver or trustee in bankruptcy, in which case such payment shall be disbursed
to such Owner.
The Certificate Insurer will pay any other amount payable hereunder no
later than 12:00 noon New York City time on the later of the Payment Date on
which the related Deficiency Amount is due or the third Business Day following
receipt in New York, New York on a Business Day by State Street Bank and Trust
Company, N.A., as Fiscal Agent for the Certificate Insurer or any successor
fiscal agent appointed by the Certificate Insurer (the "Fiscal Agent") of a
Notice (as described below); provided that if such Notice is received after
12:00 noon New York City time on such Business Day, it will be deemed to be
received on the following Business Day. If any such Notice received by the
Fiscal Agent is not in proper form or is otherwise insufficient for the purpose
of making claim hereunder it shall be deemed not to have been received by the
Fiscal Agent for purposes of this paragraph, and the Certificate Insurer or the
Fiscal Agent, as the case may be, shall promptly so advise the Trustee and the
Trustee may submit an amended Notice.
Insured Payments due hereunder unless otherwise stated herein will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Certificate Insurer only and the
Fiscal Agent shall in no event be liable to Owners for any acts of the Fiscal
Agent or any failure of the Certificate Insurer to deposit or cause to be
deposited, sufficient funds to make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Pooling and Servicing Agreement, dated as of
March 1, 1998, among Advanta Mortgage Corp. USA, as Master Servicer, Advanta
Mortgage Conduit Services, Inc., as Sponsor, and Bankers Trust Company of
California, N.A., as Trustee, without regard to any amendment or supplement
thereto.
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which the Certificate Insurer is closed or banking institutions in
the State of New York, the State of California or the city in which the
principal corporate trust office of the Trustee under the Agreement is located,
are authorized or obligated by law or executive order to be closed.
"Deficiency Amount" means the excess, if any, of Required Distributions
over the Net Available Distribution Amount.
<PAGE> 3
"Insured Payment" means (i) as of any Payment Date, any Deficiency
Amount and (ii) any Preference Amount (without duplication).
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by fax substantially in the form of Exhibit A attached hereto, the
original of which is subsequently delivered by registered or certified mail,
from the Trustee specifying the Insured Payment which shall be due and owing on
the applicable Payment Date.
"Owner" means each Owner (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Required Distributions" means, as of any Payment Date, the sum of (i)
the Class A-1 Current Interest, Class A-2 Current Interest, Class A-3 Current
Interest, Class A-4 Current Interest, Class A-5 Current Interest, Class A-6
Current Interest, Class A-IO Current Interest and the Component I Current
Interest, (ii) any Class A-1 Interest Carry Forward Amount, Class A-2 Interest
Carry Forward Amount, Class A-3 Interest Carry Forward Amount, Class A-4
Interest Carry Forward Amount, Class A-5 Interest Carry Forward Amount, Class
A-6 Interest Carry Forward Amount, Class A-IO Interest Carry Forward Amount and
Component I Interest Carry Forward Amount, and (iii) any Group I Applied
Realized Loss Amount as of such Payment Date.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment to
or modification of the Agreement unless such amendment or modification has been
approved in writing by the Certificate Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be
made at the address listed below for the Fiscal Agent or such other address as
the Certificate Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
THIS POLICY IS BEING ISSUED UNDER AND PURSUANT TO, AND SHALL BE
CONSTRUED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
<PAGE> 4
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Certificate Insurer has caused this Policy to
be executed and attested this 19th day of March, 1998.
MBIA INSURANCE CORPORATION
By ________________________________
Title _____________________________
Attest:
By _______________________________
Secretary
<PAGE> 5
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 25971
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 25971
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF TRUSTEE], as
trustee (the "Trustee"), hereby certifies to State Street Bank and Trust
Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Certificate Insurer"), with reference to Certificate Guaranty Insurance Policy
Number: 25971 (the "Policy") issued by the Certificate Insurer in respect of the
Advanta Mortgage Loan Trust 1998-1, Mortgage Loan Asset-Backed Certificates,
Series 1998-1, $143,000,000 Adjustable Rate Class A-1 Group I Certificates,
$89,000,000 6.25% Class A-2 Group I Certificates, $64,000,000 6.27% Class A-3
Group I Certificates, $42,000,000 6.42% Class A-4 Group I Certificates,
$68,000,000 6.60% Class A-5 Group I Certificates, $50,000,000 6.43% Class A-6
Group I Certificates, 5.00% Class A-IO Group I Certificates, and $44,000,000
Component I of Adjustable Rate Class A-7 Combination Certificates.
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of March 1, 1998 among Advanta Mortgage Corp. USA,
as Master Servicer, Advanta Mortgage Conduit Services, Inc., as
Sponsor, and the Trustee, as trustee for the Owners;
(ii) the amount due under the definition of Deficiency Amount
for the Payment Date occurring on (the "Applicable Payment
Date") is $ (the "Deficiency Amount");
(iii) the amount of previously distributed payments on the
Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the
Bankruptcy Code in accordance with a final nonappealable order of a
court having competent jurisdiction is $ (the "Preference
Amount");
<PAGE> 6
(iv) the total Insured Payment due is $ , which amount
equals the sum of the Deficiency Amount and the Preference Amount;
(v) the Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Insured Payment set
forth in (ii) above to be applied to the payment of the Deficiency
Amount for the Applicable Payment Date in accordance with the Agreement
and for the dollar amount of the Insured Payment set forth in (iii)
above to be applied to the payment of any Preference Amount; and
(vi) the Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy: [TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
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 And The Stated Value Of The Claim
For Each Such Violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
[NAME OF TRUSTEE], as Trustee
By
Title
<PAGE> 1
Exhibit 4.5
March 19, 1998
Morgan Stanley & Co. Incorporated
As Representative of the Underwriters
named in Schedule I
1585 Broadway
New York, New York 10036
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Underwriting Agreement dated March 12, 1998 (the
"Underwriting Agreement") between Advanta Mortgage
Conduit Services, Inc. ("Advanta") and Morgan Stanley
& Co. Incorporated (the "Representative") and
Indemnification Agreement dated as of March 12, 1998
(the "Indemnification Agreement") among MBIA
Insurance Corporation (the "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 the 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, the "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 Agreement, 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 Insurer
have required the undersigned, Advanta Mortgage Holding Company ("AMHC"), the
parent corporation of Advanta, to acknowledge its joint-and-several liability
with Advanta for the payment of the Joint and Several Obligations under the
Designated Agreements. Now, therefore, the Underwriters, the 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
<PAGE> 2
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 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
by Advanta or another affiliate of AMHC.
Capitalized terms used herein and not defined herein shall have
their respective meanings set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:___________________________________
Name: Mark T. Dunsheath
Title: Vice President
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
By:________________________________
Name:
Title:
MBIA INSURANCE CORPORATION
By:________________________________
Name:
Title:
[AMHC Guaranty]
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
MBIA INSURANCE CORPORATION,
as Certificate Insurer,
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
and
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
INDEMNIFICATION AGREEMENT
Advanta Mortgage Loan Trust 1998-1,
Mortgage Loan Asset-Backed Certificates, Series 1998-1,
$143,000,000 Adjustable Rate Class A-1 Group I Certificates,
$89,000,000 6.25% Class A-2 Group I Certificates,
$64,000,000 6.27% Class A-3 Group I Certificates,
$42,000,000 6.42% Class A-4 Group I Certificates,
$68,000,000 6.60% Class A-5 Group I Certificates,
$50,000,000 6.43% Class A-6 Group I Certificates,
5.00% Class A-IO Group I Certificates, and
$44,000,000 Component I of Adjustable Rate Class A-7 Combination Certificates
Dated as of March 12, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions................................................... 1
Section 2. Representations and Warranties of the Certificate
Insurer....................................................... 3
Section 3. Agreements, Representations and Warranties of the
Underwriters.................................................. 4
Section 4. Agreements, Representations and Warranties of the
Sponsor....................................................... 4
Section 5. Indemnification............................................... 5
Section 6. Notice To Be Given............................................ 5
Section 7. Contribution.................................................. 7
Section 8. Notices....................................................... 8
Section 9. Governing Law, Etc............................................ 8
Section 10. Insurance Agreement; Underwriting Agreement;
Pooling and Servicing Agreements.............................. 9
Section 11. Limitations................................................... 9
Section 12. Counterparts.................................................. 9
</TABLE>
TESTIMONIUM ................................................... SIGNATURE PAGE
SIGNATURES AND SEALS........................................... SIGNATURE PAGE
<PAGE> 3
INDEMNIFICATION AGREEMENT
This Agreement, dated as of March 12, 1998, is by and among MBIA Insurance
Corporation (the "Certificate Insurer"), as the Certificate Insurer under the
Certificate Guaranty Insurance Policy (the "Policy") issued in connection with
the Advanta Mortgage Loan Trust 1998-1, Mortgage Loan Asset-Backed Certificates,
Series 1998-1, $143,000,000 Adjustable Rate Class A-1 Group I Certificates,
$89,000,000 6.25% Class A-2 Group I Certificates, $64,000,000 6.27% Class A-3
Group I Certificates, $42,000,000 6.42% Class A-4 Group I Certificates,
$68,000,000 6.60% Class A-5 Group I Certificates, $50,000,000 6.43% Class A-6
Group I Certificates, 5.00% Class A-IO Group I Certificates, and $44,000,000
Component I of Class A-7 Adjustable Rate Combination Certificates described
below, Advanta Mortgage Conduit Services, Inc. (the "Sponsor") and Morgan
Stanley & Co. Incorporated, as Representative of the Underwriters (the
"Representative").
Section 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings stated herein, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.
Capitalized terms used in this Agreement but not otherwise defined herein will
have the meanings ascribed to such terms in the Pooling and Servicing Agreements
(as described below).
"Act" means the Securities Act of 1933, as amended, together with all
related rules and regulations.
"Agreement" means this Indemnification Agreement by and among the
Insurer, the Sponsor and the Underwriters.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 5 below, as the context requires.
"Insurance Agreement" means the Insurance Agreement, dated as of March 1,
1998, by and among the Certificate Insurer, the Sponsor, the Master Servicer,
the Joint Obligor, and the Trustee.
"Insured Certificates" means the Group I Certificates (including Component
I of the Class A-7 Certificates).
"Insurer Party" means the Certificate Insurer and its respective parents,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or any "controlling person" (as such term is used in the Act) of any of
the foregoing.
"Losses" means (i) any actual out-of-pocket loss paid by the party
entitled to indemnification or contribution hereunder and (ii) any actual
out-of-pocket costs and expenses paid by such party, including reasonable fees
and expenses of its counsel, to the extent not paid, satisfied
<PAGE> 4
or reimbursed from funds provided by any other Person (provided that the
foregoing shall not create or imply any obligation to pursue recourse against
any such other Person).
"Master Servicer" means Advanta Mortgage Corp. USA, as Master Servicer.
"Offered Certificates" means the Advanta Mortgage Loan Trust 1998-1,
Mortgage Loan Asset-Backed Certificates, Series 1998-1, $143,000,000 Adjustable
Rate Class A-1 Group I Certificates, $89,000,000 6.25% Class A-2 Group I
Certificates, $64,000,000 6.27% Class A-3 Group I Certificates, $42,000,000
6.42% Class A-4 Group I Certificates, $68,000,000 6.60% Class A-5 Group I
Certificates, $50,000,000 6.43% Class A-6 Group I Certificates, 5.00% Class A-IO
Group I Certificates, $330,000,000 Adjustable Rate Class A-7 Combination
Certificates, $44,000,000 6.24% Class A-8 Group II Certificates, $26,000,000
Adjustable Rate Class M-1 Group II Certificates, $23,000,000 Adjustable Rate
Class M-2 Group II Certificates, and $21,000,000 Adjustable Rate Class B-1 Group
II Certificates issued pursuant to the Pooling and Servicing Agreement.
"Person" means any individual, partnership, joint venture, corporation,
trust or unincorporated organization or any government or agency or political
subdivision thereof.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of March 1, 1998 by and among the Sponsor, the Master
Servicer and the Trustee.
"Prospectus" means the form of final Prospectus included in the
Registration Statement on each date that the Registration Statement and any post
effective amendment or amendments thereto became effective.
"Prospectus Supplement" means the form of final Prospectus Supplement
dated March 12, 1998.
"Registration Statement" means the registration statement on Form S-3 of
the Sponsor relating to the Offered Certificates.
"Sponsor Party" means the Sponsor, 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.
"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.
"Trustee" means Bankers Trust Company of California, N.A., or any
successor thereto.
"Underwriter Party" means each Underwriter and each of 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
<PAGE> 5
"Underwriters" means Morgan Stanley and Co. Incorporated, Greenwich
Capital Markets, Inc., J.P. Morgan Securities, Inc. and Salomon Brothers Inc.
"Underwriting Agreement" means the Underwriting Agreement by and between
the Sponsor and the Representative, dated March 12, 1998.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE CERTIFICATE INSURER.
The Certificate Insurer represents and warrants to the Underwriters and the
Sponsor as follows:
(a) Organization and Licensing. The Certificate Insurer is a duly
incorporated and existing New York stock insurance company licensed to do
business in the State of New York.
(b) Corporate Power. The Certificate Insurer has the corporate power
and authority to issue the Policies and to execute and deliver this
Agreement and the Insurance Agreement and to perform all of its
obligations hereunder and thereunder.
(c) Authorization; Approvals. The issuance of the Policies and the
execution, delivery and performance of this Agreement and the Insurance
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 filings with any
governmental agency or other governmental authority, or any approval of
the Insurer's board of directors or stockholders, are necessary for the
Policies, this Agreement and the Insurance Agreement to constitute the
legal, valid and binding obligations of the Certificate Insurer.
(d) Enforceability. The Policies, when issued, and this Agreement
and the Insurance Agreement will each constitute a legal, valid and
binding obligation of the Certificate Insurer, enforceable in accordance
with its terms, subject to applicable laws affecting the enforceability of
creditors' rights generally.
(e) Financial Information. The consolidated financial statements of
the Certificate Insurer as of December 31, 1996 and December 31, 1995 and
for the three years ended December 31, 1996 incorporated by reference in
the Prospectus Supplement (the "Certificate Insurer Audited Financial
Statements"), fairly present in all material respects the financial
condition of the Certificate Insurer as of such date and for the period
covered by such statements in accordance with generally accepted
accounting principles consistently applied. The consolidated financial
statements of the Certificate Insurer and its subsidiaries for the nine
months ended September 30, 1997 incorporated by reference in the
Prospectus Supplement (the "Certificate Insurer Unaudited Financial
Statements") fairly present in all material respects the financial
condition of the Certificate Insurer as of such date and for the period
covered by such statements in accordance with generally accepted
accounting principles applied in a manner consistent with the accounting
principles used in preparing the Certificate Insurer Audited Financial
Statements, and, since September 30, 1997, there has been no material
change in such financial condition of the Certificate Insurer which would
materially and adversely affect its ability to perform its obligations
under the Policy.
3
<PAGE> 6
(f) Certificate Insurer Information. The information in the
Prospectus Supplement as of the date hereof under the captions "THE GROUP
I INSURER" and "THE GROUP I INSURANCE POLICY" (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 Certificate Insurer's
ability to perform its obligations under the Policy.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Certificate Insurer's
knowledge, threatened against it at law or in equity or before or by any
court, governmental agency, board or commission or any arbitrator which,
if decided adversely, would materially and adversely affect its condition
(financial or otherwise) or operations or which would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Policy or the Insurance Agreement.
Section 3. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS.
Each Underwriter represents and warrants to and agrees with the Sponsor and the
Insurer that the statements in the Prospectus Supplement made in reliance upon
and in conformity with written information relating to such Underwriter
furnished to the Sponsor specifically for use in the preparation of the
Prospectus Supplement, and acknowledged in writing as described in Section
VIII.H of the Underwriting Agreement (referred to herein as the "Underwriter
Information"), are true and correct in all material respects.
Section 4. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE SPONSOR.
The Sponsor represents and warrants to and agrees with the Certificate
Insurer and the Underwriters as follows:
(a) Registration Statement. The information in the Registration
Statement, the Prospectus and the Prospectus Supplement, 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 Sponsor is duly incorporated and existing
under the laws of the State of Delaware and is in good standing as a
foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it, makes such
qualification necessary.
(c) Corporate Power. The Sponsor has the corporate power and
authority to execute and deliver this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement, the Master Transfer
Agreements and the Insurance Agreement and to perform all of its
obligations hereunder and thereunder.
(d) Authorization; Approvals. The execution, delivery and
performance of this Agreement, the Underwriting Agreement, the Master
Transfer Agreements, the Pooling and Servicing Agreement and the Insurance
Agreement by the Sponsor 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
4
<PAGE> 7
governmental agency or other governmental authority, or any approval of
the Sponsor's board of directors or stockholders, are necessary for this
Agreement, the Underwriting Agreement, the Pooling and Servicing Agreement
and the Insurance Agreement to constitute the legal, valid and binding
obligations of the Sponsor.
(e) Enforceability. This Agreement, the Pooling and Servicing
Agreement, the Master Transfer Agreements, the Underwriting Agreement and
the Insurance Agreement will each constitute a legal, valid and binding
obligation of the Sponsor, each enforceable in accordance with its terms,
subject, as to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of
the bankruptcy, insolvency or reorganization of the Sponsor and to general
principles of equity.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Sponsor'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, the Master Transfer Agreements, the
Pooling and Servicing Agreement or the Insurance Agreement.
Section 5. INDEMNIFICATION. (a) The Certificate Insurer hereby agrees,
upon the terms and subject to the conditions of this Agreement, to indemnify,
defend and hold harmless each Sponsor Party and each Underwriter Party against
any and all Losses incurred by them with respect to the offer and sale of any of
the Insured Certificates and resulting from the Certificate Insurer's breach of
any of its representations and warranties set forth in Section 2 of this
Agreement.
(b) Each Underwriter 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 it with respect to the
offer and sale of any of the Offered Certificates and resulting from such
Underwriter's breach of any of its representations and warranties set forth in
Section 3 of this Agreement.
(c) The Sponsor 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 it with respect to the
offer and sale of any of the Offered Certificates and resulting from the
Sponsor's breach of any of its representations and warranties set forth in
Section 4 of this Agreement.
(d) Upon the incurrence of any Losses entitled to indemnification
hereunder, the Indemnifying Party shall reimburse the Indemnified Party promptly
upon establishment by the Indemnified Party to the Indemnifying Party of the
Losses incurred.
Section 6. NOTICE TO BE GIVEN. (a) Except as provided in Section 7 below
with respect to contribution, the indemnification provided herein by the
Indemnifying Party shall be the exclusive remedy of each Indemnified Party for
the Losses resulting from the Indemnifying
5
<PAGE> 8
Party's breach of a representation, warranty or agreement hereunder; provided,
however, that each Indemnified 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.
(b) In the event that any action or regulatory proceeding shall be
commenced or claim asserted which may entitle an Indemnified Party to be
indemnified under this Agreement, such party shall give the Indemnifying Party
written or facsimile notice of such action or claim reasonably promptly after
receipt of written notice thereof.
(c) Upon request of the Indemnified Party, the Indemnifying Party shall
retain counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Indemnifying Party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. The Indemnifying Party may, at its option, at any time upon
written notice to the Indemnified Party, assume the defense of any proceeding
and may designate counsel reasonably satisfactory to the Indemnified Party in
connection therewith provided that the counsel so designated would have no
actual or potential conflict of interest in connection with such representation.
Unless it shall assume the defense of any proceeding, the Indemnifying Party
shall not be liable for any settlement of any proceeding, effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. The Indemnifying Party shall be entitled to participate
in the defense of any such action or claim in reasonable cooperation with, and
with the reasonable cooperation of, each Indemnified Party.
(d) The Indemnified Party will have the right to employ its own counsel in
any such action, 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 the Indemnifying Party's expense has been authorized in
writing by the Indemnifying Party, (2) the Indemnifying Party 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 Indemnifying Party on the one hand and,
on the other hand, the Indemnified Party, and representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them (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 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 Indemnifying
Party, and all such fees and expenses will be reimbursed promptly as they are
incurred. In the event that any expenses so paid by the Indemnifying Party are
subsequently determined to not be required to be borne by the Indemnifying Party
hereunder, the party which received such payment shall promptly refund to the
Indemnifying Party the amount so paid by such Indemnifying Party.
Notwithstanding the foregoing, 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 Indemnifying Party shall not
be liable for the fees
6
<PAGE> 9
and expenses of more than one counsel for all Seller Parties, more than one
counsel for all Underwriters Parties and more than one counsel for all Insurer
Parties, as applicable.
(e) The Indemnified Parties shall cooperate with the Indemnifying Parties
in resolving any event which would give rise to an indemnity obligation pursuant
to Section 5 hereof in the most efficient manner.
(f) No settlement of any such claim or action shall be entered into
without the consent of each Indemnified Party who is subject to such claim or
action, on the one hand, and each Indemnifying Party who is subject to such
claim or action, on the other hand; provided, however, that the consent of such
Indemnified Party shall not be required if such settlement fully discharges,
with prejudice against the plaintiff, the claim or action against such
Indemnified Party.
(g) Any failure by an Indemnified Party to comply with the provisions of
this Section shall relieve the Indemnifying Party of liability only if such
failure is materially prejudicial to any legal pleadings, grounds, defenses or
remedies in respect thereof or the Indemnifying Party's financial liability
hereunder, and then only to the extent of such prejudice.
Section 7. CONTRIBUTION. (a) To provide for just and equitable
contribution if the indemnification provided by the Certificate Insurer is
determined to be unavailable for any Underwriter Party or Sponsor Party (other
than pursuant to Section 5 or 6 of this Agreement), the Certificate Insurer
shall contribute to the aggregate costs of liabilities arising from any breach
of a representation or warranty set forth in this Agreement on the basis of the
relative fault of all Underwriter Parties, all Sponsor Parties and all Insurer
Parties, respectively.
(b) To provide for just and equitable contribution if the indemnification
provided by the Sponsor is determined to be unavailable for any Insurer Party
(other than pursuant to Section 5 or 6 of this Agreement), the Sponsor 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 Sponsor Parties and all Insurer
Parties.
(c) To provide for just and equitable contribution if the indemnification
provided by each Underwriter is determined to be unavailable for any Insurer
Party (other than pursuant to Section 5 or 6 of this Agreement), such
Underwriter shall contribute to the aggregate costs of liabilities arising from
any breach of a representation or warranty set forth in this Agreement on the
basis of the relative fault of all Underwriter Parties, all Sponsor Parties and
all Insurer Parties. In no case shall any Underwriter be responsible for any
amount in excess of the Underwriting discount applicable to the Certificates
purchased by such Underwriters pursuant to the Underwriting Agreement.
(d) The relative fault of each Indemnifying Party, on the one hand, and of
each Indemnified Party, on the other hand, shall be determined by reference to,
among other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth in Section 2, 3 or 4 of this Agreement
relates to information supplied by, or action within the control
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of, the Indemnifying Party or the Indemnified Party and the Parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such breach.
(e) The Parties agree that the Certificate Insurer shall be solely
responsible for the Insurer Information and for the Insurer Financial
Statements, that each Underwriter shall be solely responsible for the
Underwriter Information provided by such Underwriter in writing for use in the
Prospectus Supplement and that the Sponsor shall be responsible for all other
information in the Registration Statement and the Prospectus Supplement.
(f) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(g) The indemnity and contribution agreements contained in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter Party, any Sponsor Party
or any Insurer Party, (ii) the issuance of any Offered Certificates or the
Policy or (iii) any termination of this Agreement.
(h) Upon the incurrence of any Losses entitled to contribution hereunder,
the contributor shall reimburse the party entitled to contribution promptly upon
establishment by the party entitled to contribution to the contributor of the
Losses incurred.
Section 8. NOTICES. All notices and other communications provided for
under this Agreement shall be addressed to the address set forth below as to
each party or at such other address as shall be designated by a party in a
written notice to the other party.
If to the Certificate Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio Management
-- Structured Finance (IPM-SF)
If to the Sponsor: Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: General Counsel
If to the Underwriters: Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Attention: General Counsel
Section 9. 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
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Agreement may not be assigned by any party without the express written consent
of each other party. Amendments of this Agreement shall be in writing signed by
each party. This Agreement shall not be effective until executed by each of the
Certificate Insurer, the Sponsor and the Representative of the Underwriters.
Section 10. INSURANCE AGREEMENT; UNDERWRITING AGREEMENT; POOLING AND
This Agreement in no way limits or otherwise affects the indemnification
obligations of the Sponsor under (a) the Insurance Agreement, (b) the
Underwriting Agreement or (c) the Pooling and Servicing Agreement.
Section 11. LIMITATIONS. Nothing in this Agreement shall be construed as a
representation or undertaking by the Certificate Insurer concerning maintenance
of the rating currently assigned to its claims-paying ability by Moody's
Investors Service, Inc. ("Moody's") and/or Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P") or any other rating agency
(collectively, the "Rating Agencies").
Section 12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, all as of the date first above written.
MBIA INSURANCE CORPORATION,
as Certificate Insurer
By______________________________________
Title___________________________________
ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Sponsor
By______________________________________
Title___________________________________
MORGAN STANLEY & CO. INCORPORATED
as Representative of the Underwriters
By______________________________________
Title___________________________________
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Advanta Mortgage Loan Trust 1998-1, of our report dated February 3, 1997, on
our audits of the consolidated financial statements of MBIA Insurance
Corporation and Subsidiaries as of December 31, 1996 and 1995 and for each of
the three years in the period ended December 31, 1996. We also consent to the
reference to our firm under the caption "Experts" in such Prospectus
Supplement.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
New York, New York
March 17, 1998
