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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 24, 1998
Advanta Revolving Home Equity Loan Trust 1998-A
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(Exact name of registrant as specified in its charter)
Delaware 333-37107 Application Pending
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(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
c/o Advanta Mortgage Conduit 92127
Services, Inc. -----
Attention: Milton Riseman (Zip Code)
16875 West Bernardo Drive
San Diego, California
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (619) 674-1800
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No change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
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Description of the Class A Notes 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) (the "Registration Statement"). Pursuant to the Registration
Statement, Advanta Revolving Home Equity Loan Trust 1998-A (the "Registrant" or
the "Trust") issued approximately $80,000,000 in aggregate principal amount of
its Revolving Home Equity Loan Asset-Backed Notes, Series 1998-A (the "Class A
Notes"), on June 24, 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 Class A Notes, the forms of
which were filed as Exhibits to the Registration Statement.
The Class A Notes were issued pursuant to an Indenture (the
"Indenture") attached hereto as Exhibit 4.1, dated as of June 1, 1998, between
Advanta Revolving Home Equity Loan Trust 1998-A (the "Trust") and Bankers Trust
Company of California, N.A., in its capacity as Indenture Trustee (the
"Trustee"). The Class A Notes evidence indebtedness of the Trust, the assets of
which consist primarily of certain home equity revolving credit line loan
agreements which are secured by first or junior mortgages on residential
properties. Also issued, but not offered, by the Trust are Certificates
("Certificates") evidencing the ownership interest in the Trust. The
Certificates will initially be retained by Advanta National Bank (the
"Originator").
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated June 19, 1998, among Advanta
Mortgage Conduit Services, Inc., as Sponsor, J.P. Morgan Securities Inc., as the
Underwriter, and Advanta National Bank, as Originator.
4.1 Indenture, dated as of June 1, 1998, between Advanta
Revolving Home Equity Loan Trust 1998-A and Bankers Trust Company of California,
N.A., as Indenture Trustee.
4.2. Trust Agreement, dated as of June 1, 1998, between
Advanta Mortgage Conduit Services, Inc., as Sponsor, and Wilmington Trust
Company, as Owner Trustee.
4.3. Sale and Servicing Agreement, dated as of June 1, 1998,
among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta Mortgage
Corp. USA, as Master Servicer, Advanta Revolving Home Equity Loan Trust 1998-A,
as Issuer, and Bankers Trust Company of California, N.A., as Indenture Trustee.
4.4 Certificate Guaranty Insurance Policy, dated
June 24, 1998, and issued and delivered by AMBAC Assurance Corporation.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters,
dated as of June 24, 1998.
10.1 Purchase Agreement, dated as of June 1, 1998, between
Advanta Mortgage Conduit Services, Inc., as Purchaser, and Advanta National
Bank, as Seller.
10.2 Indemnification Agreement, dated June 24, 1998, between
AMBAC Assurance Corporation and J.P. Morgan Securities Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANTA REVOLVING HOME
EQUITY LOAN TRUST 1998-A
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By:/s/ MARK T. DUNSHEATH
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Name: Mark T. Dunsheath
Title: Vice President
Dated: July 8, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
1.1 Underwriting Agreement, dated June 19, 1998, among Advanta
Mortgage Conduit Services, Inc., as Sponsor, J.P. Morgan
Securities Inc., as the Underwriter, and Advanta National
Bank, as Originator.
4.1 Indenture, dated as of June 1, 1998, between Advanta Revolving
Home Equity Loan Trust 1998-A and Bankers Trust Company of
California, N.A., as Indenture Trustee.
4.2 Trust Agreement, dated as of June 1, 1998, between Advanta
Mortgage Conduit Services, Inc., as Sponsor, and Wilmington
Trust Company, as Owner Trustee.
4.3 Sale and Servicing Agreement, dated as of June 1, 1998, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, Advanta Revolving Home
Equity Loan Trust 1998-A, as Issuer, and Bankers Trust Company
of California, N.A., as Indenture Trustee.
4.4 Certificate Guaranty Insurance Policy, dated June 24, 1998,
and issued and delivered by AMBAC Assurance Corporation.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters, dated
as of June 24, 1998.
10.1 Purchase Agreement, dated as of June 1, 1998, between Advanta
Mortgage Conduit Services, Inc., as Purchaser, and Advanta
National Bank, as Seller.
10.2 Indemnification Agreement, dated June 24, 1998, between
AMBAC Assurance Corporation and J.P. Morgan Securities Inc.
</TABLE>
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EXHIBIT 1.1
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ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA NATIONAL BANK
ADVANTA REVOLVING HOME EQUITY LOAN ASSET-BACKED NOTES,
SERIES 1998-A, CLASS A NOTES
UNDERWRITING AGREEMENT
June 19, 1998
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. as Sponsor (the "Sponsor") has
authorized the issuance and sale of Revolving Home Equity Loan Asset-Backed
Notes, Series 1998-A consisting of variable rate pass-through Class A Notes (the
"Notes"). The Notes will be issued pursuant to an Indenture (the "Indenture"),
dated as of June 1, 1998, between the Advanta Revolving Home Equity Loan Trust
1998-A (the "Trust") and Bankers Trust Company of California, N.A., as Indenture
Trustee (the "Indenture Trustee"). The Trust will be formed pursuant to a Trust
Agreement (the "Trust Agreement") to be dated as of June 1, 1998 and entered
into by and between the Sponsor and Wilmington Trust Company, as Owner Trustee.
The Notes will be secured by certain adjustable rate home equity revolving
credit line loans, made or to be made in the future (the "Mortgage Loans") under
certain home equity revolving credit line loan agreements (the "Credit Line
Agreements") to be transferred by the Sponsor to the Trust pursuant to a Sale
and Servicing Agreement (the "Sale and Servicing Agreement"), dated as of June
1, 1998, among the Sponsor, the Trust, Advanta Mortgage Corp. USA, as Master
Servicer (the "Master Servicer"), and the Indenture Trustee. Advanta National
Bank (the "Originator") will retain, initially, the remaining undivided interest
in the trust assets (the "Originator's Interest") which may be sold or pledged
at any time, subject to certain conditions specified in the Trust Agreement. The
Class A Principal Balance of the Notes as of the opening of business on June 24,
1998 (the "Closing Date") shall be $80,000,000.
On or prior to the date of issuance of the Notes, the Sponsor will obtain a
guaranty insurance policy (the "Policy") issued by AMBAC Assurance Corporation
(the "Insurer") which will unconditionally and irrevocably guarantee to the
Indenture Trustee
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for the benefit of the Noteholders on any Payment Date, the amount by which the
(i) Class A Principal Balance exceeds the (ii) Trust Collateral Value and (iii)
any accrued and unpaid interest due on the Notes.
The Notes and the Originator's Interest are more fully described in a
registration statement which the Sponsor has furnished to J.P. Morgan Securities
Inc. (the "Underwriter"). Capitalized terms used but not defined herein shall
have the meanings given to them in the Sale and Servicing Agreement.
The Sponsor will also enter into an Insurance and Indemnity Agreement,
dated as of June 24, 1998 (the "Insurance Agreement"), with the Indenture
Trustee 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. The Sponsor will also enter into an
Indemnification Agreement, dated as of June 24, 1998 (the "Indemnification
Agreement"), with the Underwriter 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. "Documents"
shall mean the Indenture, the Trust Agreement, the Sale and Servicing Agreement,
the Underwriting Agreement, the Insurance Agreement and the Indemnification
Agreement.
SECTION 1. Representations and Warranties of the Sponsor and the
Originator. The Sponsor and the Originator each represent and warrant to, and
agree with the Underwriter that:
A. The Sponsor has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement (No. 333-37107) on Form S-3
for the registration under the Act of 1933, as amended (the "Act"), of
Mortgage Loan Asset Backed Certificates and Notes (issuable in series),
which registration statement, as amended at the date hereof, has become
effective. Such registration statement, as amended to the date of this
Agreement, meets the requirements set forth in Rule 415(a)(1)(vii) under
the Act and complies in all other material respects with such Rule. The
Sponsor proposes to file with the Commission pursuant to Rule 424(b)(5)
under the act a supplement dated June 19, 1998 to the prospectus dated
October 30, 1997 relating to the Notes and the method of distribution
thereof and has previously advised the Underwriter of all further
information (financial and other) with respect to the Notes to be set forth
therein. Such registration statement, including the exhibits thereto, as
amended at the date hereof, is hereinafter called the "Registration
Statement"; such prospectus dated October 30, 1997, in the form in which it
will be filed with the Commission pursuant to Rule 424(b)(5) under the Act
is hereinafter called the "Basic Prospectus"; such supplement dated June
19, 1998 to the Basic Prospectus, in the form in which it will be filed
with the Commission pursuant to Rule 424(b)(5) of the Act, is hereinafter
called the "Prospectus Supplement"; and the Basic Prospectus and the
Prospectus Supplement together are hereinafter called the "Prospectus." The
Sponsor will file with the Commission (i) promptly after receipt from the
Underwriter of any Computational Material (as defined herein) a Form 8-K
incorporating such Computational Materials and (ii) within fifteen days
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of the issuance of the Securities a report on Form 8-K setting forth
specific information concerning the related Mortgage Loans (the "Form
8-K").
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 Act and the rules and regulations of the Commission thereunder. The
Registration Statement, as of the Effective Date thereof and of any
amendment thereto, did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Prospectus as of its
date, and as amended or supplemented as of the Closing Date (as hereinafter
defined) does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that no representation or warranty is made
as to information contained in or omitted from the Registration Statement
or the Prospectus in reliance upon and in conformity with written
information furnished to the Sponsor in writing by the Underwriter
expressly for use therein.
C. The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Securities Exchange Act of 1934 (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 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
Sponsor or the Originator, otherwise than as set forth or contemplated in
the Prospectus as supplemented or amended as of the Closing Date.
E. Each of the Sponsor and the Originator has been duly incorporated
and is validly existing as a corporation or national banking association,
as the case may be, in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as
a foreign corporation or national banking association in each jurisdiction
in which its ownership or lease of property or the conduct of its business
requires such qualification, and has all
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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 the Documents to which it is a party, and to cause the
Notes to be issued.
F. There are no actions, proceedings or investigations pending before
or threatened by any court, administrative agency or other tribunal to
which the Sponsor or the Originator is a party or of which any of its
properties is the subject (a) which if determined adversely to the Sponsor
or the Originator would have a material adverse effect on the business or
financial condition of the Sponsor or the Originator, (b) which asserts the
invalidity of the Documents or the Notes, (c) which seeks to prevent the
issuance of the Notes or the consummation by the Sponsor or the Originator
of any of the transactions contemplated by the Documents to which they are
a party or (d) which might materially and adversely affect the performance
by the Sponsor or the Originator of its obligations under, or the validity
or enforceability of, the Documents to which they are a party or the Notes.
G. The Documents, when executed and delivered as contemplated hereby
and thereby, will have been duly authorized, executed and delivered by the
Sponsor or the Originator, as the case may be, and will constitute legal,
valid and binding instruments enforceable against the Sponsor or the
Originator in accordance with their respective terms, subject as to
enforceability to (x) applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditors' rights generally, (y)
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law) and (z) with respect to rights of
indemnity under this Agreement, the Indemnification Agreement and the
Insurance Agreement, limitations of public policy under applicable
securities laws.
H. The execution, delivery and performance of the Documents by the
Sponsor and the Originator, as the case may be, and the consummation of the
transactions contemplated hereby and thereby, and the issuance and delivery
of the Notes 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 Sponsor or the Originator is a party,
by which the Sponsor or the Originator is bound or to which any of the
property or assets of the Sponsor, the Originator or any of their
subsidiaries are subject, nor will such actions result in any violation of
the provisions of the articles of incorporation or by-laws of the Sponsor
or of the Originator or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Sponsor
or the Originator or any of their properties or assets.
I. Arthur Andersen LLP are independent public accountants with respect
to the Sponsor and the Originator as required by the Act and the Rules and
Regulations.
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J. The direction by the Sponsor to the Indenture Trustee to execute,
authenticate, issue and deliver the Notes has been duly authorized by the
Sponsor, and assuming the Indenture Trustee has been duly authorized to do
so, when executed, authenticated, issued and delivered by the Indenture
Trustee in accordance with the Indenture, the Notes will be validly issued
and outstanding and will be entitled to the benefits provided by the
Indenture.
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 Notes and the sale of the
Notes to the Underwriter, or the consummation by the Sponsor or the
Originator of the other transactions contemplated by the Documents, 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 Notes by the Underwriter or as
have been obtained.
L. The Originator possesses all material licenses, certificates,
authorities or permits issued by the appropriate State, Federal or foreign
regulatory agencies or bodies necessary to conduct the business now
conducted by it and as described in the Prospectus, and the Originator has
not received notice of any proceedings relating to the revocation or
modification of any such license, certificate, authority or permit which if
decided adversely to the Originator would, singly or in the aggregate,
materially and adversely affect the conduct of its business, operations or
financial condition.
M. At the time of execution and delivery of the Sale and Servicing
Agreement, the Sponsor will: (i) have good title to the interest in the
Mortgage Loans conveyed by the Sponsor, 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 Sale and
Servicing Agreement or in the Notes being issued pursuant thereto; and
(iii) have the power and authority to sell its interest in the Mortgage
Loans to the Indenture Trustee and to sell the Notes to the Underwriter.
Upon execution and delivery of the Sale and Servicing Agreement by the
Indenture Trustee, the Indenture Trustee will have acquired all of the
Sponsor's right, title and interest in and to the Mortgage Loans. Upon
delivery to the Underwriter of the Notes, the Underwriter will have good
title to the Notes, free of any Liens.
N. As of the close of business on June 5, 1998 (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. None of the Sponsor, the Originator or the Trust created by the
Trust 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.
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P. At the Closing Date, the Notes and the Indenture will conform in
all material respects to the descriptions thereof contained in the
Prospectus.
Q. At the Closing Date, the Notes 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 the Documents and the Notes 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 Sponsor set forth in the Sale and Servicing Agreement, the Insurance
Agreement and the Indemnification Agreement will be true and correct in all
material respects.
Any certificate signed by an officer of the Sponsor or the Originator and
delivered to the Underwriter or counsel for the Underwriter in connection with
an offering of the Notes 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 1 are made.
SECTION 2. Purchase and Sale. The commitment of the Underwriter to purchase
the Notes 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 Sponsor agrees to
instruct the Indenture Trustee to issue and agrees to sell to the Underwriter,
and the Underwriter agrees (except as provided in Sections 6 and 10 hereof) to
purchase from the Sponsor the aggregate initial principal amount of the Notes
set forth on Schedule A, at the purchase price or prices set forth in Schedule
A.
SECTION 3. Delivery and Payment. Delivery of and payment for the Notes to
be purchased by the Underwriter shall be made at the offices of Dewey Ballantine
LLP, 1301 Avenue of the Americas, New York, New York 10019, at 10:00 A.M. New
York City time on the Closing Date or at such other time or date as shall be
agreed upon in writing by the Underwriter, the Sponsor and the Originator.
Payment shall be made to the Originator by wire transfer of same day funds
payable to the account of the Originator. Delivery of the Notes shall be made to
the Underwriter against payment of the purchase price thereof. The Notes shall
be in such denominations and registered in such names as the Underwriter may
request in writing at least two business days prior to the Closing Date. The
Notes will be made available for examination by the Underwriter no later than
4:00 P.M. New York City time on the first business day prior to the Closing
Date.
SECTION 4. Offering by the Underwriter. It is understood that, subject to
the terms and conditions hereof, the Underwriter proposes to offer the Notes for
sale to the public as set forth in the Prospectus.
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SECTION 5. Covenants of the Sponsor. The Sponsor and the Originator agree
as follows:
A. To prepare the Prospectus in a form approved by the Underwriter and
to file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the delivery of the Prospectus to the Noteholders; to make no
further amendment or any supplement to the Registration Statement or to the
Prospectus prior to the Closing Date except as permitted herein; to advise
the Underwriter, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has
been filed and to furnish the Underwriter with copies thereof; to file
promptly all reports and any definitive proxy or information statements
required to be filed by the Sponsor 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 Notes, to promptly advise the
Underwriter of its receipt of notice of the issuance by the Commission of
any stop order or of: (i) any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus; (ii) the suspension of the
qualification of the Notes for offering or sale in any jurisdiction; (iii)
the initiation of or threat of any proceeding for any such purpose; (iv)
any request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information. In
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or
suspending any such qualification, the Sponsor promptly shall use its best
efforts to obtain the withdrawal of such order or suspension.
B. To furnish promptly to the Underwriter and to counsel for the
Underwriter a signed copy of the Registration Statement as originally filed
with the Commission, and of each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith.
C. To deliver promptly to the Underwriter such number of the following
documents as the Underwriter shall reasonably request: (i) conformed copies
of the Registration Statement as originally filed with the Commission and
each amendment 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 Notes, 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
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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 Act
or the Exchange Act, the Sponsor shall notify the Underwriter and, upon the
Underwriter's request, shall file such document and prepare and furnish
without charge to the Underwriter and to any dealer in securities as many
copies as the Underwriter may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case the
Underwriter is required to deliver a Prospectus in connection with sales of
any of the Notes at any time nine months or more after the Effective Time,
upon the request of the Underwriter but at the expense of the Underwriter,
the Sponsor shall prepare and deliver to the Underwriter as many copies as
the Underwriter may reasonably request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act.
D. To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Sponsor or the Underwriter, be
required by the 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 Underwriter and counsel for the Underwriter
and obtain the consent of the Underwriter to the filing.
F. To make generally available to holders of the Notes 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 Act and the Rules and
Regulations (including, at the option of the Sponsor, Rule 158) and
covering a period of at least twelve consecutive months beginning not later
than the first day of the first fiscal quarter following the Closing Date.
G. To use their best efforts, in cooperation with the Underwriter, to
qualify the Notes for offering and sale under the applicable securities
laws of such states and other jurisdictions of the United States as the
Underwriter may designate, and maintain or cause to be maintained such
qualifications in effect for as long as may be required for the
distribution of the Notes. The Sponsor will file or cause the filing of
such statements and reports as may be required by the laws of each
jurisdiction in which the Notes have been so qualified.
H. Not, without the Underwriter's prior written consent, to publicly
offer or sell or contract to sell any mortgage pass-through securities,
collateralized mortgage obligations or other similar securities
representing interests in or secured by other mortgage-related assets
originated or owned by the Sponsor for a
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period of 5 business days following the commencement of the offering of the
Notes to the public.
I. So long as the Notes shall be outstanding, to deliver to the
Underwriter as soon as such statements are furnished to the Indenture
Trustee the annual statement as to compliance delivered to the Indenture
Trustee pursuant to Section 3.9 of the Indenture.
J. To apply the net proceeds from the sale of the Notes in the manner
set forth in the Prospectus.
SECTION 6. Conditions to the Underwriter's Obligation. The obligation of
the Underwriter to purchase the Notes 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 Sponsor and the Originator herein contained; (ii)
the performance by the Sponsor and the Originator of all of their respective
obligations hereunder; and (iii) the following conditions as of the Closing
Date:
A. The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission. Any request of the Commission for inclusion
of additional information in the Registration Statement or the Prospectus
shall have been complied with.
B. The Underwriter shall not have discovered and disclosed to the
Sponsor 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 Underwriter, is material and is required to
be stated therein or is necessary to make the statements therein not
misleading.
C. All corporate proceedings and other legal matters relating to the
authorization, form and validity of the Documents, the Notes, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall
be satisfactory in all respects to counsel for the Underwriter, and the
Sponsor shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.
D. The Underwriter shall have received the favorable opinion of Dewey
Ballantine LLP, special counsel to the Sponsor and the Originator with
respect to the following items, dated the Closing Date, to the effect that:
1. Each of the Sponsor and the Originator has been duly organized
and is validly existing as a corporation or national banking
association, as the case may be, in good standing under the laws of
its jurisdiction of incorporation, and is
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qualified to do business in each state necessary to enable it to
perform its obligations as Sponsor or Originator, as the case may be,
under the Documents to which they are a party. Each of the Sponsor and
the Originator has the requisite power and authority to execute and
deliver, engage in the transactions contemplated by, and perform and
observe the conditions of the Documents to which they are a party.
2. The Documents to which they are a party to have been duly and
validly authorized, executed and delivered by the Sponsor and the
Originator, as the case may be, and all requisite corporate action
having been taken with respect thereto, and the Notes constitute the
valid, legal and binding agreement of the Sponsor or the Originator,
as the case may be.
3. Neither the transfer of the Mortgage Loans to the Trust, the
issuance or sale of the Notes nor the execution, delivery or
performance by the Sponsor or the Originator of the Documents to which
they are a party to, (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 by-laws of the Sponsor or the Originator; (ii) any
term or provision of any material agreement, contract, instrument or
indenture, to which the Sponsor or the Originator is a party or is
bound and known to such counsel; or (iii) any order, judgment, writ,
injunction or decree of any court or governmental agency or body or
other tribunal having jurisdiction over the Sponsor or the Originator
and known to such counsel; or (B) results in, or will result in the
creation or imposition of any lien, charge or encumbrance upon any of
the Trust's assets or upon the Notes, except as otherwise contemplated
by the Sale and Servicing Agreement.
4. The endorsement and delivery of each Credit Line Agreement,
and the preparation, delivery and recording of an Assignment with
respect to each Mortgage is sufficient to fully transfer to the
Indenture Trustee for the benefit of the Noteholders all right, title
and interest of the Sponsor in the Credit Line Agreement and Mortgage,
as noteholder and mortgagee or assignee thereof, subject to any
exceptions set forth in such opinion, and will be sufficient to permit
the Indenture Trustee to avail itself of all protection available
under applicable law against the claims of any present or future
creditors of the Sponsor and to prevent any other sale, transfer,
assignment, pledge or other encumbrance of the Mortgage Loans by the
Sponsor 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 Documents or the
offer, issuance, sale or delivery of the Notes or the consummation of
any other transaction contemplated thereby by the Sponsor and the
Originator, except such which have been obtained.
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<PAGE> 12
6. There are no actions, proceedings or investigations, to such
counsel's knowledge, pending or threatened against the Sponsor or the
Originator before any court, governmental agency or body or other
tribunal (i) asserting the invalidity of the Documents to which they
are a party to or the Notes, (ii) seeking to prevent the issuance of
the Notes or the consummation of any of the transactions contemplated
by the Documents or (iii) which would materially and adversely affect
the performance by the Sponsor or the Originator of obligations under,
or the validity or enforceability of, the Notes or Documents to which
they are a party.
7. To the best 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
Notes (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. The Indenture, when executed and delivered, will have been
duly qualified under the Trust Indenture Act.
10. 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.
11. 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.
12. Such other matters as the Underwriter may reasonably request.
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In rendering its opinions, the counsel described above may rely, as to
matters of fact, on certificates of responsible officers of the Sponsor and the
Originator, the Indenture 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 Sponsor and
the Originator.
E. The Underwriter shall have received letters, including
bring-down letters, from Arthur Andersen LLP, dated on or before the
Closing Date, in form and substance satisfactory to the Underwriter
and counsel for the Underwriter, to the effect that they have
performed certain specified procedures requested by the Underwriter
with respect to the information set forth in the Prospectus and
certain matters relating to the Originator.
F. The Notes shall have been rated in the highest rating category
by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies and by Moody's Investors Service, Inc., and such ratings
shall not have been rescinded or downgraded. The Underwriter and
counsel for the Underwriter shall have received copies of any opinions
of counsel supplied to the rating organizations relating to any
matters with respect to the Notes. Any such opinions shall be dated
the Closing Date and addressed to the Underwriter or accompanied by
reliance letters to the Underwriter or shall state that the
Underwriter may rely upon them.
G. The Underwriter shall have received from the Sponsor a
certificate, signed by the president, a senior vice president or a
vice president of the Sponsor, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Registration Statement, the Sale 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 Sponsor in this
Agreement, as of the Closing Date, and in the Sale and Servicing
Agreement, the Insurance Agreement, and in all related agreements, as
of the date specified in such agreements, are true and correct, and
the Sponsor 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
Sponsor which if adversely determined, individually or in the
aggregate, would be reasonably likely to adversely affect the
Sponsor's obligations under the Documents to which it is a party in
any material way; and no merger, liquidation, dissolution or
bankruptcy of the Sponsor is pending or contemplated;
3. the information contained in the Registration Statement and
the Prospectus relating to the Sponsor, the Mortgage Loans or the
servicing procedures of it or its affiliates or subservicer is true
and accurate in all material
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respects and nothing has come to his or her attention that would lead
such officer to believe that the Registration Statement or Prospectus
includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein not misleading;
4. the information set forth in the Schedule of Mortgage Loans
required to be furnished pursuant to the Sale 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 by-laws of the Sponsor since March
31, 1998, and no such amendment has been authorized. No event has
occurred since March 31, 1998, which has affected the good standing of
the Sponsor 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 Sponsor and its subsidiaries, taken as a whole, from
March 31, 1998;
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 Sponsor or in any rating accorded any securities of the
Sponsor, 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
Sponsor, signed or signs the Registration Statement, the Documents 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 Documents 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 Sponsor shall attach to such certificate a true and correct copy of its
certificate or articles of incorporation, as appropriate, and by-laws which are
in full force and effect on the date of such certificate and a certified true
copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
H. The Underwriter shall have received a favorable opinion of
counsel to the Indenture Trustee, dated the Closing Date and in form
and substance satisfactory to the Underwriter, to the effect that:
1. the Indenture Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United
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<PAGE> 15
States and has the power and authority to enter into and to take all
actions required of it under the Documents to which it is a party to;
2. the Documents to which the Indenture Trustee is a party have
been duly authorized, executed and delivered by the Indenture Trustee
and such Documents constitute the legal, valid and binding obligation
of the Indenture Trustee, enforceable against the Indenture 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 Indenture 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 Indenture Trustee in connection with its execution and delivery
of the Documents to which it is a party or the performance of its
obligations thereunder;
4. the Notes have been duly executed, authenticated and delivered
by the Indenture Trustee; and
5. the execution and delivery of, and performance by the
Indenture Trustee of its obligations under, the Documents to which it
is a party do not conflict with or result in a violation of any
statute or regulation applicable to the Indenture Trustee, or the
charter or by-laws of the Indenture Trustee, or to the best knowledge
of such counsel, any governmental authority having jurisdiction over
the Indenture Trustee or the terms of any indenture or other agreement
or instrument to which the Indenture 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 Sponsor, the Indenture 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 Indenture Trustee.
I. The Underwriter shall have received from the Indenture Trustee
a certificate, signed by the President, a senior vice president or a
vice president of the Indenture Trustee, dated the Closing Date, to
the effect that each person who, as an officer or representative of
the Indenture Trustee, signed or signs the Notes, the Sale and
Servicing Agreement, the Indenture, the Insurance 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
Sale and Servicing Agreement and the Indenture 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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J. The Policy relating to the Notes shall have been duly executed
and issued at or prior to the Closing Date and shall conform in all
material respects to the description thereof in the Prospectus.
K. The Underwriter shall have received a favorable opinion of
Thacher Proffitt & Wood, counsel to the Insurer, dated the Closing
Date and in form and substance satisfactory to counsel for the
Underwriter, to the effect that:
1. The Insurer is a Wisconsin-domiciled 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, the
Insurance Agreement and the Indemnification Agreement are within the
corporate power of the Insurer and have been authorized by all
necessary corporate action on the part of the Insurer; the Policy has
been duly executed and is the valid and binding obligation of the
Insurer enforceable in accordance with its terms except that the
enforcement of the Policy may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by
general principles of equity.
3. The Insurer is authorized to deliver the Insurance Agreement
and the Indemnification Agreement, and such agreements have been duly
executed and delivered and constitute the legal, valid and binding
obligations of the Insurer enforceable in accordance with its terms
except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by
general principles of equity and by public policy considerations
relating to indemnification for securities law violations.
4. No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part
of the Insurer, the lack of which would adversely affect the validity
or enforceability of the Policy; to the extent required by applicable
legal 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 Act.
6. The information set forth under the caption "THE INSURER AND
THE POLICY" in the Prospectus Supplement, insofar as such statements
constitute a description of the Policy, accurately summarizes the
Policy.
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<PAGE> 17
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Sponsor, the Originator,
the Indenture 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. Except for the downgrading of Advanta National Bank on March 17,
1997, 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 Sponsor or the
Originator or in any rating accorded any securities of the Sponsor, if any,
by any "nationally recognized statistical rating organization," as such
term is defined for purposes of the 1933 Act.
M. On or prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the
Insurer's claims paying ability by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the 1933 Act.
N. There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since March 31, 1998, of (A) the Sponsor,
the Originator and any subsidiaries or (B) the Insurer, that is in the
Underwriter's judgment material and adverse and that makes it in the
Underwriter's judgment impracticable to market the Notes on the terms and
in the manner contemplated in the Prospectus.
O. The Underwriter shall have received from the Insurer a certificate,
signed by the president, a senior vice president or a vice president of the
Insurer, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Policy, the Insurance Agreement, the
Indemnification Agreement and the related documents and that, to the best
of his or her knowledge based on reasonable investigation:
1. There are no actions, suits or proceedings pending or threatened
against or affecting the Insurer which, if adversely determined,
individually or in the aggregate, would adversely affect the Insurer's
performance under the Policy, the Indemnification Agreement or the
Insurance Agreement;
2. Each person who as an officer or representative of the Insurer,
signed or signs the Policy, the Insurance Agreement, the Indemnification
Agreement or any other document delivered pursuant hereto, on the date
thereof, or on the Closing Date, in connection with the transactions
described in this Agreement was, at the respective times of such signing
and delivery, and is now, duly elected or appointed, qualified and acting
as such officer or representative,
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and the signatures of such persons appearing on such documents are their
genuine signatures;
3. The information contained in the Prospectus Supplement under the
caption "THE INSURER AND THE POLICY" 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 INSURER AND THE POLICY" in the Prospectus Supplement
presents accurately and fairly the capitalization of the Insurer as of
March 31, 1998;
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; the
unaudited balance sheet of the Insurer as of March 31, 1998 and the related
statement of income and retained earnings for the three-month period then
ended, copies of which are included 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 applied consistently with
those principles applied in preparing the December 31, 1997 audited
statements;
7. To the best knowledge of such officer, since March 31, 1998, 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.
The Insurer shall attach to such certificate a true and correct copy of its
certificate or articles of incorporation, as appropriate, and its by-laws, all
of which are in full force and effect on the date of such certificate.
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P. The Underwriter shall have received from Dewey Ballantine LLP,
special counsel to the Sponsor and the Originator, a survey in form and
substance satisfactory to the Underwriter, indicating the requirements of
applicable local law which must be complied with in order to transfer and
service the Mortgage Loans pursuant to the Sale and Servicing Agreement and
the Originator shall have complied with all such requirements.
Q. The Underwriter shall have received from Dewey Ballantine LLP,
special counsel to the Underwriter, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Notes, the
Prospectus and such other related matters as the Underwriter shall
reasonably require.
R. The Underwriter and counsel for the Underwriter shall have received
copies of any opinions of counsel to the Sponsor, the Originator or the
Insurer supplied to the Indenture Trustee relating to matters with respect
to the Notes or the Policy. Any such opinions shall be dated the Closing
Date and addressed to the Underwriter or accompanied by reliance letters to
the Underwriter or shall state the Underwriter may rely thereon.
S. The Underwriter shall have received such further information, Notes
and documents as the Underwriter may reasonably have requested not fewer
than three (3) full business days prior to the Closing Date.
T. There shall have been executed and delivered by Advanta Mortgage
Holding Company, the corporate parent of the Sponsor ("AMHC"), a letter
agreement with the Indenture Trustee and the Insurer, pursuant to which
AMHC agrees to become jointly and severally liable with the Sponsor, the
Originator and the Master Servicer 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 Sponsor, a letter agreement with the Underwriter and the
Insurer substantially in the form of Exhibit A hereto.
V. Prior to the Closing Date, counsel for the Underwriter shall have
been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale
of the Notes as herein contemplated and related proceedings or in order to
evidence the accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained,
and all proceedings taken by the Originator in connection with the issuance
and sale of the Notes as herein contemplated shall be satisfactory in form
and substance to the Underwriter and counsel for the Underwriter.
W. Subsequent to the execution and delivery of this Agreement none of
the following shall have occurred: (i) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the
over-the-counter
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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; (i) 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 (iii) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the
financial markets of the United States shall be such) as to make it, in the
judgment of the Underwriter, impractical or inadvisable to proceed with the
public offering or delivery of the Notes on the terms and in the manner
contemplated in the Prospectus.
If any condition specified in this Section 6 shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriter by notice to the Sponsor and the Originator at any time at or prior
to the Closing Date, and such termination shall be without liability of any
party to any other party except as provided in Section 7.
All opinions, letters, evidence and Notes mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Underwriter.
SECTION 7. Payment of Expenses. The Sponsor and the Originator agree to
pay: (a) the costs incident to the authorization, issuance, sale and delivery of
the Notes and any taxes payable in connection therewith; (b) the costs incident
to the preparation, printing and filing under the Act of the Registration
Statement and any amendments and exhibits thereto; (c) the costs of distributing
the Registration Statement as originally filed and each amendment thereto and
any post-effective amendments thereof (including, in each case, exhibits), the
Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus or any document incorporated by reference therein, all as provided in
this Agreement; (d) the costs of reproducing and distributing this Agreement;
(e) the fees and expenses of qualifying the Notes under the securities laws of
the several jurisdictions as provided in Section 5(G) hereof and of preparing,
printing and distributing a Blue Sky Memorandum and a Legal Investment Survey
(including related fees and expenses of counsel to the Underwriter); (f) any
fees charged by securities rating services for rating the Notes; (g) half of the
costs and expenses of Dewey Ballantine LLP; and (h) all other costs and expenses
incident to the performance of the obligations of the Sponsor and the
Originator; provided that, except as provided in this Section 7, the Underwriter
shall pay its own costs and expenses, including half of the costs and expenses
of Dewey Ballantine LLP, any transfer taxes on the Notes which they may sell and
the expenses of advertising any offering of the Notes made by the Underwriter.
If this Agreement is terminated by the Underwriter, in accordance with
the provisions of Section 6 or Section 10, the Sponsor and the Originator shall
reimburse the
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Underwriter for its respective reasonable out-of-pocket expenses, including fees
and disbursements of Dewey Ballantine LLP, counsel for the Underwriters.
SECTION 8. Indemnification and Contribution.
A. The Sponsor and the Originator agree to indemnify and hold harmless
the Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the 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 Notes), to which
the Underwriter or any such controlling person may become subject, under
the Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue statement or alleged
untrue statement of a material fact contained in the Prospectus or (iv) the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading and shall
reimburse the Underwriter and each such controlling person promptly upon
demand for any legal or other expenses reasonably incurred by the
Underwriter or such controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that
neither the Sponsor nor the Originator shall be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Prospectus or the Registration Statement in reliance upon and in conformity
with written information (including any Derived Information) furnished to
the Sponsor by the Underwriter specifically for inclusion therein; and
provided, further, that as to any Preliminary Prospectus this indemnity
shall not inure to the benefit of the Underwriter or any controlling person
on account of any loss, claim, damage, liability or action arising from the
sale of the Notes to any person by the Underwriter if the Underwriter
failed to send or give a copy of the Prospectus, as amended or
supplemented, to that person within the time required by the 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 Sponsor or the Originator with Section 5(C). For
purposes of the last proviso to the immediately preceding sentence, the
term "Prospectus" shall not be deemed to include the documents incorporated
therein by reference, and the Underwriter shall not be obligated to send or
give any supplement or amendment to any document incorporated therein by
reference to any person other than a person to whom the Underwriter had
delivered such incorporated document or documents in response to a written
request therefor. The foregoing indemnity agreement is in addition to any
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<PAGE> 22
liability which the Sponsor or the Originator may otherwise have to the
Underwriter or any controlling person of the Underwriter.
B. The Underwriter agrees to indemnify and hold harmless the Sponsor,
the Originator, each of their respective directors, each of their
respective officers who signed the Registration Statement, and each person,
if any, who controls the Sponsor or the Originator within the meaning of
Section 15 of the Act against any and all loss, claim, damage or liability,
or any action in respect thereof, to which the Sponsor or the Originator or
any such director, officer or controlling person may become subject, under
the 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 (excluding any Derived Information
which is covered in paragraph (E) below) furnished to the Sponsor by or on
behalf of the Underwriter specifically for inclusion therein, and shall
reimburse the Sponsor, the Originator and any such director, officer or
controlling person for any legal or other expenses reasonably incurred by
the Sponsor or the Originator or any director, officer or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses
are incurred. The foregoing indemnity agreement is in addition to any
liability which the Underwriter may otherwise have to the Sponsor, the
Originator or any such director, officer or controlling person.
C. Promptly after receipt by any indemnified party under this Section
8 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 8, 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 8 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 8.
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
21
<PAGE> 23
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 8 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 Underwriter, if the indemnified
parties under this Section 8 consist of the Underwriter or any of its
controlling persons, or by the Sponsor or the Originator, as the case may be, if
the indemnified parties under this Section 8 consist of the Sponsor or the
Originator, as the case may be, or any of the Sponsor's directors, officers or
controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(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.
22
<PAGE> 24
D. The Underwriter agrees to deliver to the Sponsor a copy of its
Derived Information no later than one (1) business day prior to the date
such information is required to be filed, pursuant to the No-Action Letters
(as defined herein), with the Commission on Form 8-K.
E. The Underwriter agrees, assuming all Sponsor-Provided Information
(defined below) is accurate and complete in all material respects, to
indemnify and hold harmless the Sponsor, the Originator, each of the
Sponsor's and the Originator's respective officers and directors and each
person who controls the Sponsor or the Originator within the meaning of
Section 15 of the Act against any and all losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
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 the Underwriter, or arise out of or are based upon the omission or
alleged omission to state therein, a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by him, her or it in connection with investigating or
defending or preparing to defend any such loss, claim, damage, liability or
action as such expenses are incurred. The obligations of the Underwriter
under this Section 8(E) shall be in addition to any liability which the
Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally applicable
to this Section 8(E).
F. For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Sponsor
pursuant to Section 8(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 Sponsor-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).
"Sponsor-Provided Information" means any computer tape furnished to the
Underwriter by the Sponsor and the Originator concerning the Mortgage Loans
comprising the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995
letter (the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf
of the Public Securities Association (which letter, and the SEC staff's
response thereto, were
23
<PAGE> 25
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 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(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, in such proportion as shall be appropriate to reflect the relative
benefits received by the Sponsor and the Originator on the one hand and the
Underwriter on the other from the offering of the Notes or 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 8(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 Sponsor and the Originator on the one hand and the Underwriter
on the other with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations.
The relative benefits of the Underwriter and the Sponsor and the Originator
shall be deemed to be in such proportion so that the Underwriter is responsible
for that portion represented by the percentage that the underwriting discount
appearing on the cover page of the Prospectus bears to the public offering price
appearing on the cover page of the Prospectus.
The relative fault of the Underwriter and the Sponsor and the Originator
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Sponsor and the Originator or by the
Underwriter, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission and
other equitable considerations.
The Sponsor, the Originator and the Underwriter agree that it would not be
just and equitable if contributions pursuant to this Section 8(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 8(G) shall be deemed to include, for purposes of this Section 8(G), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
24
<PAGE> 26
In no case shall the Underwriter be responsible for any amount in
excess of the underwriting discount applicable to the Notes purchased by the
Underwriter hereunder. 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.
H. The Underwriter confirms that the information set forth (i) in the
Prospectus Supplement relating to market making and (ii) in the third
paragraph under the caption "UNDERWRITING" in the Prospectus Supplement,
together with the Derived Information, is correct and constitutes the only
information furnished in writing to the Sponsor and the Originator by or on
behalf of the Underwriter specifically for inclusion in the Registration
Statement and the Prospectus.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or
contained in Notes of officers of the Sponsor or the Originator submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Underwriter or controlling
persons thereof, or by or on behalf of the Sponsor or the Originator and shall
survive delivery of any Notes to the Underwriter.
SECTION 10. Termination of Agreement. The Underwriter may terminate this
Agreement immediately upon notice to the Sponsor and the Originator, at any time
at or prior to the Closing Date if any of the events or conditions described in
Section 6(W) of this Agreement shall occur and be continuing. In the event of
any such termination, the covenant set forth in Section 5(G), the provisions of
Section 7, the indemnity agreement set forth in Section 8, and the provisions of
Sections 9 and 13 shall remain in effect.
SECTION 11. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A. if to the Underwriter, shall be delivered or sent by mail, telex or
facsimile transmission to J.P. Morgan Securities Inc., 60 Wall Street, New
York, New York 10260, Attention: Syndicate Desk (Fax: 212-648-5909);
B. if to the Sponsor, 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); and
C. if to Advanta National Bank, shall be delivered or sent by mail to
Advanta National Bank, One Righter Parkway, Wilmington, Delaware 19803
(Telephone: 302-266-5600);
SECTION 12. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriter, the
Sponsor, the Originator and their respective successors. This Agreement and the
terms
25
<PAGE> 27
and provisions hereof are for the sole benefit of only those persons, except
that the representations, warranties, indemnities and agreements contained in
this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control the Underwriter within the meaning of Section 15 of
the Act, and for the benefit of directors of the Sponsor or of the Originator,
officers of the Sponsor who have signed the Registration Statement and any
person controlling the Sponsor or the Originator within the meaning of Section
15 of the 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 13. Survival. The respective indemnities, representations,
warranties and agreements of the Sponsor, the Originator and the Underwriter
contained in this Agreement, or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Notes 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 14. 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 15. 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 16. 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 17. 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.
[Signature Page Follows]
26
<PAGE> 28
If the foregoing correctly sets forth the agreement between the Sponsor and
the Underwriter, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By: /s/ JAMES L. SHREERO
---------------------------
Name: James L. Shreero
Title: Senior Vice President
CONFIRMED AND ACCEPTED, as of
the date first above written:
J.P. MORGAN SECURITIES INC.
By: /s/ JAMES POMPOSELLI
--------------------------------
Name: James Pomposelli
Title: Vice President
ADVANTA NATIONAL BANK
By: /s/ JAMES L. SHREERO
--------------------------------
Name: James L. Shreero
Title: Senior Vice President
[Signature Page to the Underwriting Agreement]
<PAGE> 29
<TABLE>
<CAPTION>
===========================================================================================================================
SCHEDULE A
======================================== =============================================== ==================================
Purchase Price
to Underwriter
Initial Principal Amount of Notes disregarding
Class Purchased by the Underwriter accrued interest
======================================== =============================================== ==================================
<S> <C> <C>
Class A $80,000,000 99.6875%
======================================== =============================================== ==================================
</TABLE>
<PAGE> 30
EXHIBIT A
As of June 24, 1998
J.P. Morgan & Co.
60 Wall Street
New York, New York 10260
AMBAC Assurance Corporation
One State Street Plaza
New York, New York 10004
Re: Underwriting Agreement dated June 19, 1998 (the "Underwriting
Agreement") among Advanta Mortgage Conduit Services, Inc. (the
"Sponsor"), Advanta National Bank (the "Originator") and J.P.
Morgan & Co. (the "Underwriter"); Indemnification Agreement
dated as of June 24, 1998 (the "Indemnification Agreement")
among the Sponsor, the Underwriter and AMBAC Indemnity
Corporation (the "Insurer"); the Insurance and Indemnity
Agreement dated as of June 24, 1998 (the "Insurance
Agreement") among the Insurer, the Sponsor, and the Indenture
Trustee
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, the Indemnification Agreement
and the Insurance Agreement (together, the "Designated Agreements"), the Sponsor
and the Originator have undertaken certain financial obligations with respect to
the indemnification of the Underwriter and of the Insurer with respect to the
Registration Statement, the Prospectus and the Prospectus Supplement described
in the Designated Agreements. Any financial obligations of the Sponsor and the
Originator under the Designated Agreements, whether or not specifically
enumerated in this paragraph, are hereinafter referred to as the "Joint and
Several Obligations"; provided, however, that "Joint and Several Obligations"
shall mean only the financial obligations of the Sponsor and the Originator
under the Designated Agreements (including the payment of money damages for a
breach of any of the Sponsor's and the Originator's obligations under the
Designated Agreements, whether financial or otherwise) but shall not include any
obligations not relating to the payment of money.
<PAGE> 31
As a condition of their respective executions of the Designated Agreements,
the Underwriter and the Insurer have required the undersigned, Advanta Mortgage
Holding Company ("AMHC"), the parent corporation of the Sponsor and the
Originator, to acknowledge its joint-and-several liability with the Sponsor and
the Originator for the payment of the Joint and Several Obligations under the
Designated Agreements.
Now, therefore, the Underwriter, the Insurer and AMHC do hereby agree that:
(i) AMHC hereby agrees to be absolutely and unconditionally jointly
and severally liable with the Sponsor and the Originator to the Underwriter
for the payment of the Joint and Several Obligations under the Underwriting
Agreement.
(ii) AMHC may honor its obligations hereunder either by direct payment
of any Joint and Several Obligations or by causing any Joint and Several
Obligations to be paid to the Underwriter or to the Insurer, as applicable,
by the Sponsor or another affiliate of AMHC. This letter and the respective
obligations and rights hereunder and thereunder shall not be delegated or
assigned by you without the prior written consent of the Insurer.
This letter may not be amended or otherwise modified except pursuant to a
writing signed by each of the parties hereto. This letter may be executed by the
signatories hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute one and the same letter. THIS
LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK. EACH OF THE UNDERSIGNED PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF OR IN CONNECTION WITH, THIS
LETTER, AND ANY OTHER COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF ANY OF THE UNDERSIGNED PARTIES IN CONNECTION
HEREWITH OR THEREWITH.
A-2
<PAGE> 32
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:
------------------------------------
Authorized Signatory
CONFIRMED AND ACCEPTED,
as of the date first above written:
AMBAC ASSURANCE CORPORATION
By:
--------------------------------
Authorized Signatory
J.P. MORGAN SECURITIES INC.
By:
--------------------------------
Authorized Signatory
A-3
<PAGE> 1
EXHIBIT 4.1
<PAGE> 2
EXECUTION COPY
--------------
- --------------------------------------------------------------------------------
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1998-A
Class A Asset Backed Notes
----------
INDENTURE
Dated as of June 1, 1998
----------
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Indenture Trustee
- --------------------------------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................2
SECTION 1.1. Definitions..............................................................................2
SECTION 1.2. Incorporation by Reference of the Trust Indenture Act...................................24
SECTION 1.3. Rules of Construction...................................................................24
SECTION 1.4. Action by or Consent of Noteholders.....................................................24
SECTION 1.5. Conflict with TIA.......................................................................24
ARTICLE II. THE NOTES ...........................................................................................25
SECTION 2.1. Form....................................................................................25
SECTION 2.2. Execution, Authentication and Delivery..................................................25
SECTION 2.3. Registration; Registration of Transfer and Exchange.....................................26
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes..............................................27
SECTION 2.5. Persons Deemed Owners...................................................................28
SECTION 2.6. Payment of Principal and Interest; Defaulted Interest...................................28
SECTION 2.7. Cancellation............................................................................29
SECTION 2.8. Release of Collateral...................................................................29
SECTION 2.9. Book-Entry Notes........................................................................29
SECTION 2.10. Notices to Clearing Agency..............................................................30
SECTION 2.11. Definitive Notes........................................................................30
ARTICLE III. COVENANTS...........................................................................................31
SECTION 3.1. Payment of Principal and Interest.......................................................31
SECTION 3.2. Maintenance of Office or Agency.........................................................31
SECTION 3.3. Money for Payments to be Held in Trust..................................................31
SECTION 3.4. Existence...............................................................................32
SECTION 3.5. Protection of Trust Estate..............................................................33
SECTION 3.6. Opinions as to Trust Estate.............................................................33
SECTION 3.7. Performance of Obligations; Servicing of Mortgage Loans.................................34
SECTION 3.8. Negative Covenants......................................................................35
SECTION 3.9. Annual Statement as to Compliance.......................................................36
SECTION 3.10. Issuer May Not Consolidate or Transfer Assets...........................................36
SECTION 3.11. No Other Business.......................................................................36
SECTION 3.12. No Borrowing............................................................................36
SECTION 3.13. Guarantees, Loans, Advances and Other Liabilities.......................................36
SECTION 3.14. Capital Expenditures....................................................................37
SECTION 3.15. Compliance with Laws....................................................................37
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 3.16. Restricted Payments.....................................................................37
SECTION 3.17. Notice of Rapid Amortization Events and Events of Servicing Termination.................37
SECTION 3.18. Further Instruments and Acts............................................................37
SECTION 3.19. Amendments of Sale and Servicing Agreement and Trust Agreement..........................37
SECTION 3.20. Income Tax Characterization.............................................................37
ARTICLE IV. SATISFACTION AND DISCHARGE...........................................................................38
SECTION 4.1. Satisfaction and Discharge of Indenture.................................................38
SECTION 4.2. Application of Trust Money..............................................................39
SECTION 4.3. Repayment of Monies Held by Note Paying Agent...........................................39
ARTICLE V. REMEDIES..............................................................................................39
SECTION 5.1. Rights Upon a Rapid Amortization Event..................................................39
SECTION 5.2. Limitation of Suits.....................................................................39
SECTION 5.3. Unconditional Rights of Noteholders To Receive Principal and Interest...................40
SECTION 5.4. Restoration of Rights and Remedies......................................................40
SECTION 5.5. Rights and Remedies Cumulative..........................................................41
SECTION 5.6. Delay or Omission Not a Waiver..........................................................41
SECTION 5.7. Control by Noteholders..................................................................41
SECTION 5.8. Undertaking for Costs...................................................................41
SECTION 5.9. Waiver of Stay or Extension Laws........................................................42
SECTION 5.10. Action on Notes.........................................................................42
SECTION 5.11. Performance and Enforcement of Certain Obligations......................................42
SECTION 5.12. Subrogation.............................................................................42
SECTION 5.13. Preference Claims.......................................................................43
ARTICLE VI. THE INDENTURE TRUSTEE................................................................................44
SECTION 6.1. Duties of Indenture Trustee.............................................................44
SECTION 6.2. Rights of Indenture Trustee.............................................................46
SECTION 6.3. Individual Rights of Indenture Trustee..................................................47
SECTION 6.4. Indenture Trustee's Disclaimer..........................................................47
SECTION 6.5. Notice of Defaults......................................................................47
SECTION 6.6. Reports by Indenture Trustee to Holders.................................................47
SECTION 6.7. Compensation and Indemnity..............................................................47
SECTION 6.8. Replacement of Indenture Trustee........................................................48
SECTION 6.9. Successor Indenture Trustee by Merger...................................................50
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.......................50
SECTION 6.11. Eligibility: Disqualification...........................................................51
SECTION 6.12. Preferential Collection of Claims Against Issuer........................................52
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 6.13. Appointment and Powers..................................................................52
SECTION 6.14. Performance of Duties...................................................................52
SECTION 6.15. Limitation on Liability.................................................................52
SECTION 6.16. Reliance Upon Documents.................................................................52
SECTION 6.17. Representations and Warranties of the Indenture Trustee.................................53
SECTION 6.18. Waiver of Setoffs.......................................................................53
SECTION 6.19. Control by the Controlling Party........................................................53
SECTION 6.20. Trustee May Enforce Claims Without Possession of Notes..................................53
SECTION 6.21. Suits for Enforcement...................................................................54
SECTION 6.22. Mortgagor Claims........................................................................54
ARTICLE VII. NOTEHOLDERS' LISTS AND REPORTS......................................................................55
SECTION 7.1. Issuer To Furnish To Indenture Trustee Names and Addresses of Noteholders...............55
SECTION 7.2. Preservation of Information; Communications to Noteholders..............................55
SECTION 7.3. Reports by Issuer.......................................................................55
SECTION 7.4. Reports by Indenture Trustee............................................................56
ARTICLE VIII. PAYMENTS AND STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS; ACCOUNTS,
DISBURSEMENTS AND RELEASES..............................................................56
SECTION 8.1. Collection of Money.....................................................................56
SECTION 8.2. Release of Trust Estate.................................................................56
SECTION 8.3. Establishment of Accounts...............................................................57
SECTION 8.4. The Policy..............................................................................57
SECTION 8.5. Pre-Funding Account and Capitalized Interest Account....................................58
SECTION 8.6. Flow of Funds...........................................................................58
SECTION 8.7. Investment of Accounts..................................................................59
SECTION 8.8. Eligible Investments....................................................................60
SECTION 8.9. Reports by Indenture Trustee............................................................61
SECTION 8.10. Additional Reports by Indenture Trustee.................................................64
SECTION 8.11. Opinion of Counsel......................................................................65
ARTICLE IX. SUPPLEMENTAL INDENTURES..............................................................................65
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders..................................65
SECTION 9.2. Supplemental Indentures with Consent of Noteholders.....................................66
SECTION 9.3. Execution of Supplemental Indentures....................................................68
SECTION 9.4. Effect of Supplemental Indenture........................................................68
SECTION 9.5. Conformity With Trust Indenture Act.....................................................68
SECTION 9.6. Reference in Notes to Supplemental Indentures...........................................68
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C>
ARTICLE X. REDEMPTION OF NOTES...................................................................................68
SECTION 10.1. Redemption..............................................................................68
SECTION 10.2. Surrender of Notes......................................................................70
SECTION 10.3. Form of Redemption Notice...............................................................70
SECTION 10.4. Notes Payable on Redemption Date........................................................71
ARTICLE XI. MISCELLANEOUS........................................................................................71
SECTION 11.1. Compliance Certificates and Opinions, etc...............................................71
SECTION 11.2. Form of Documents Delivered to Indenture Trustee........................................72
SECTION 11.3. Acts of Noteholders.....................................................................73
SECTION 11.4. Notices, etc. to Indenture Trustee, Issuer and Rating Agencies..........................73
SECTION 11.5. Notices to Noteholders; Waiver..........................................................74
SECTION 11.6. Alternate Payment and Notice Provisions.................................................75
SECTION 11.7. Conflict with Trust Indenture Act.......................................................75
SECTION 11.8. Effect of Headings and Table of Contents................................................75
SECTION 11.9. Successors and Assigns..................................................................75
SECTION 11.10. Separability............................................................................75
SECTION 11.11. Benefits of Indenture...................................................................75
SECTION 11.12. Legal Holidays..........................................................................76
SECTION 11.13. Governing Law...........................................................................76
SECTION 11.14. Counterparts............................................................................76
SECTION 11.15. Recording of Indenture..................................................................76
SECTION 11.16. Trust Obligation........................................................................76
SECTION 11.17. No Petition.............................................................................76
SECTION 11.18. Inspection..............................................................................77
SECTION 11.19. Limitation of Liability.................................................................77
ARTICLE XII. RAPID AMORTIZATION EVENTS...........................................................................77
SECTION 12.1. Rapid Amortization Events...............................................................77
</TABLE>
EXHIBITS
Exhibit A -- Form of Class A Note
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INDENTURE dated as of June 1, 1998, between ADVANTA REVOLVING HOME EQUITY
LOAN TRUST 1998-A, a Delaware business trust (the "Issuer"), and BANKERS TRUST
COMPANY OF CALIFORNIA, N.A., a national banking association, as trustee (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's Class A Asset Backed
Notes (the "Class A Notes"):
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Class A Notes, the Issuer has agreed to
assign the Collateral (as defined below) to the Indenture Trustee on behalf of
the Noteholders.
Ambac Assurance Corporation (the "Insurer") has issued and delivered a
financial guaranty insurance policy, dated as of the Closing Date (the
"Policy"), pursuant to which the Insurer guarantees the Guaranteed Distributions
(as defined below).
As an inducement to the Insurer to issue and deliver the Policy, the Issuer
and the Insurer have executed and delivered the Insurance Agreement, dated as of
June 24, 1998 (as amended from time to time, the "Insurance Agreement"), among
the Insurer, the Issuer, Advanta Mortgage Conduit Services, Inc. and the
Indenture Trustee.
As an additional inducement to the Insurer to issue the Policy, and as
security for the performance by the Issuer of the Insurer Issuer Secured
Obligations and as security for the performance by the Issuer of the Indenture
Trustee Issuer Secured Obligations, the Issuer has agreed to grant and assign
the Collateral (as defined below) to the Indenture Trustee for the benefit of
the Issuer Secured Parties, as their respective interests may appear.
<PAGE> 8
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date, for
the benefit of the Issuer Secured Parties, all of the Issuer's right, title and
interest in and to the following (collectively, the "Collateral"): (i) certain
adjustable rate home equity revolving credit line loans (the "Mortgage Loans")
(including any Additional Balances) made or to be made under certain Credit Line
Agreements and conveyed to the Issuer; (ii) collections in respect of the
Mortgage Loans with due dates after the Initial Cut-Off Date, (iii) property
that secured a Mortgage Loan that has been acquired by foreclosure or deed in
lieu of foreclosure; (iv) rights of the Sponsor under hazard insurance policies
covering the Mortgaged Properties; (v) the Policy; (vi) amounts on deposit in
the Note Account; (vii) amounts on deposit in the Pre-Funding Account; (viii)
amounts on deposit in the Capitalized Interest Account; (ix) amounts on deposit
in the Principal and Interest Account; (x) any and all Subsequent Mortgage Loans
(including any Additional Balances related thereto); (xi) all rights under the
Purchase Agreement assigned to the Issuer (including all representations and
warranties of the Originator contained therein) and all rights of the Issuer
under the Sale and Servicing Agreement; and (xii) any and all proceeds of the
foregoing.
The foregoing Grant is made in trust to the Indenture Trustee, for the
benefit, first, of the Holders of the Notes, and second, of the Insurer. The
Indenture Trustee hereby acknowledges such Grant, accepts the trusts under this
Indenture in accordance with the provisions of this Indenture and agrees to
perform the duties required of it by this Indenture to the best of its ability
to the end that the interests of such parties, recognizing the priorities of
their respective interests, may be adequately and effectively protected.
ARTICLE I.
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Except as otherwise specified herein, the
following terms have the respective meanings set forth below for all purposes of
this Indenture. In addition, other capitalized terms used herein and not defined
herein shall have their respective meanings as set forth in the Sale and
Servicing Agreement.
"Accelerated Principal Payments": With respect to any Payment Date, a
payment received as a payment of principal by the Noteholders of the Class A
Notes, for the purpose of increasing the Overcollateralization Amount to the
Specified Overcollateralization Amount applicable to such Payment Date, and to
be paid from amounts remaining in the Note Account on such Payment Date, after
deduction of the amounts described in clauses (i) through (vii) of Section
8.6(b) hereof on such Payment Date;
"Account": Any account established in accordance with Section 8.3 hereof or
Section 4.8 of the Sale and Servicing Agreement.
"Act" has the meaning specified in Section 11.3(a).
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"Affiliate" means, with respect to any specified Person, any other Person
controlling, controlled by or under common control with such Person. For the
purposes of this definition, "control" means the power to direct the management
and policies of a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"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.
"Authorized Newspapers": Any of the following, The Wall Street Journal, the
New York Times, the Washington Post, the Los Angeles Times or such other
newspaper determined by the Indenture Trustee in its sole judgment.
"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 Indenture
Trustee, the Master Servicer and the Sponsor, initially including those
individuals whose names appear on the lists of Authorized Officers delivered on
the Closing Date.
"Available Funds": As defined in Section 8.4(a) hereof.
"Available Funds Shortfall": As defined in Section 8.4(b) hereof.
"Billing Cycle": With respect to any Mortgage Loan and Remittance Period,
the billing period specified in the related Credit Line Agreement and with
respect to which amounts billed are received during such Remittance Period.
"Book Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.9.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the State of New York or in the city in
which the principal Corporate Trust Office of the Indenture Trustee is located,
are authorized or obligated by law or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 8.3 hereof and maintained by the
Indenture Trustee.
"Capitalized Interest Account Deposit": $35,296.04.
"Capitalized Interest Amount": With respect to any Determination Date, the
amount on deposit in the Capitalized Interest Account.
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<PAGE> 10
"Capitalized Interest Requirement": As to any Payment Date occurring during
the Pre-Funding Period, the difference, if any, between (x) the interest due on
the Class A Notes on such Payment Date plus the Premium Amount, the Indenture
Trustee's Fee and the Owner Trustee's Fee as of such Payment Date and (y) the
sum of (i) one month's interest on the aggregate Principal Balances of all
Mortgage Loans as of the close of business on the last day of the immediately
preceding Remittance Period, calculated at the Class A Interest Rate, plus the
Premium Amount, the Indenture Trustee's Fee and the Owner Trustee's Fee as of
such Payment Date and (ii) any Pre-Funding Earnings to be transferred to the
Note Account on such Payment Date pursuant to Section 8.5(c) hereof.
"Certificate": As defined in the Trust Agreement.
"Certificate of Trust": means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Certificateholders": The holders of the Certificates issued pursuant to
the Trust Agreement.
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
"Class A Formula Rate": For any Interest Accrual Period, (x) with respect
to any Payment Date which occurs on or prior to the Optional Redemption Date,
LIBOR plus 0.17% per annum and (y) for any Payment Date thereafter, LIBOR plus
0.34% per annum.
"Class A Interest Distribution Amount": With respect to any Payment Date,
the product of (x) one-twelfth of the Class A Interest Rate applicable to such
Payment Date and (y) the Class A Principal Balance immediately prior to such
Payment Date (based on a 360-day year and the actual number of days in the prior
calendar month).
"Class A Interest Rate": As to any Payment Date, the lesser of (i) the
Class A Formula Rate and (ii) the Net Funds Cap Rate.
"Class A Note": Any Note designated as a "Class A Asset Backed Note" on the
face thereof in substantially the form of Exhibit A hereto.
"Class A Note Balance": The Class A Principal Balance.
"Class A Principal Balance": As of any time of determination, the Original
Class A Principal Balance of the Class A Notes less any amounts actually
distributed theretofore as principal thereon to the Class A Notes on all prior
Payment Dates.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
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"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date": June 24, 1998.
"Code": The Internal Revenue Code of 1986, as amended, and any successor
statute.
"Collateral": As defined in the Recitals hereof.
"Combined Loan-to-Value Ratio": With respect to any Mortgage Loan as of
any date, the percentage equivalent of a fraction, the numerator of which is the
sum of (i) the Credit Limit and (ii) the outstanding principal balance as of the
date of execution of the related Credit Line Agreement (or as of any subsequent
date, if any, as of which such outstanding principal balance may be determined
in connection with an increase in the Credit Limit for such Mortgage Loan) of
any mortgage loan or mortgage loans that are senior in priority to the Mortgage
Loan and which is secured by the same Mortgaged Property and the denominator of
which is the lesser of (i) the Appraised Value of the related Mortgaged Property
as set forth in the Mortgage File on such date of execution or on such
subsequent date, if any, or (ii) in the case of a Mortgaged Property purchased
within one year of such date of execution, the purchase price thereof.
"Controlling Party" means the Insurer, so long as no Insurer Default shall
have occurred and be continuing, and the Indenture Trustee, for so long as an
Insurer Default shall have occurred and be continuing.
"Corporate Trust Office": The Indenture Trustee's office at 3 Park Plaza,
16th Floor, Irvine, California 92614.
"Credit Limit": As to any Mortgage Loan, the maximum principal balance
permitted under the terms of the related Credit Line Agreement.
"Credit Limit Utilization Rate": As to any Mortgage Loan, the percentage
equivalent of a fraction the numerator of which is the Principal Balance for
such Mortgage Loan and the denominator of which is the related Credit Limit.
"Credit Line Agreement": With respect to any Mortgage Loan, the related
home equity line of credit agreement, security instrument and promissory note
executed by the related Mortgagor and any amendment or modification thereof.
"Cut-Off Date": With respect to each Initial Mortgage Loan, the Initial
Cut-Off Date. With respect to any Subsequent Mortgage Loan, the Subsequent
Cut-Off Date related to such Subsequent Mortgage Loan. With respect to each
Qualified Replacement Mortgage, the Replacement Cut-off Date related to such
Qualified Replacement Mortgage.
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"Cut-Off Date Pool Balance": The aggregate Principal Balances of all the
Mortgage Loans as of the related Cut-Off Date; as of the Initial Cut-Off Date,
$75,130,216.06.
"Cut-Off Date Principal Balance": With respect to any Mortgage Loan, the
unpaid principal balance thereof as of the related Cut-Off Date.
"Debt Service Reduction": With respect to any Mortgage Loan, a reduction by
a court of competent jurisdiction of the Minimum Monthly Payment due on such
Mortgage Loan.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, a Rapid Amortization Event.
"Deficiency Amount": (a) For any Payment Date, any shortfalls in amounts
available in the Note Account to pay, in full on such Payment Date, the Class A
Interest Distribution Amount (excluding any Net Funds Cap Carry-Forward Amounts,
any Prepayment Interest Shortfalls and any Relief Act Shortfalls), and (b) for
any Payment Date, any shortfalls in amounts available in the Note Account to pay
the Overcollateralization Deficit and (c) on the Final Scheduled Payment Date,
any shortfall in amounts available in the Note Account to pay the outstanding
Class A Principal Balance.
"Deficient Valuation": With respect to any Mortgage Loan, a valuation of
the related Mortgaged Property by a court of competent jurisdiction in an amount
less than the then outstanding Principal Balance of the Mortgage Loan, which
valuation results from a proceeding initiated under the United States Bankruptcy
Code.
"Definitive Notes" has the meaning specified in Section 2.9.
"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.
"Depository": The Depository Trust Company, 7 Hanover Square, New York, New
York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the Principal and
Interest Account, an institution whose deposits are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
long-term deposits of which shall be rated (x) A or better by S&P and (y) A2 or
better by Moody's and in one of the two highest short-term rating categories,
unless otherwise approved in writing by the Insurer and each of Moody's and S&P,
and which is any of the following: (i) a federal savings and loan association
duly organized, validly existing and in good standing under the federal banking
laws, (ii) an institution duly
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<PAGE> 13
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 Insurer,
Moody's and S&P and, in each case acting or designated by the Master Servicer as
the depository institution for the Principal and Interest Account; provided,
however, that any such institution or association shall have combined capital,
surplus and undivided profits of at least $100,000,000. Notwithstanding the
foregoing, the Principal and Interest Account may be held by an institution
otherwise meeting the preceding requirements except that the only applicable
rating requirement shall be that the unsecured and uncollateralized debt
obligations thereof shall be rated Baa3 or better by Moody's if such institution
has trust powers and the Principal and Interest Account is held by such
institution in its trust capacity and not in its commercial capacity.
"Determination Date": As to each Payment Date, the third Business Day next
preceding such Payment Date or such earlier day as shall be agreed to by the
Insurer and Indenture Trustee.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or other
financial institution for which the Depository holds the Class A Notes from time
to time as a securities depository.
"Draw": With respect to any Mortgage Loan, an additional borrowing by the
Mortgagor subsequent to the related Cut-Off Date in accordance with the related
Credit Line Agreement.
"Draw Period": With respect to any Mortgage Loan, the period of time
specified in the related Credit Line Agreement whereby a Mortgagor may make a
Draw under the related Credit Line Agreement, not to exceed three years unless
extended pursuant to such Credit Line Agreement.
"Eligible Investments": Those investments so designated pursuant to Section
8.8 hereof.
"ERISA" means Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"Final Scheduled Payment Date": The Payment Date in August, 2023 whereby
the Class A Noteholders of the Class A Notes shall be entitled to receive a
payment of principal in an amount equal to the outstanding Class A Principal
Balance. The Final Scheduled Payment
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<PAGE> 14
Date is the date which is one year after the date which is the latest possible
maturity date of a Mortgage Loan which amortizes according to its terms.
"First Mortgage Loan": A Mortgage Loan which constitutes a first priority
mortgage lien with respect to any Mortgaged Property.
"Fixed Allocation Percentage": 98%.
"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.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Indemnification Agreement": The Indemnification Agreement dated as of June
24, 1998 among the Sponsor, the Insurer and the Underwriter.
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"Indenture" means this Indenture as amended and supplemented from time to
time.
"Indenture Trustee": Bankers Trust Company of California, N.A., located on
the date of execution of this Agreement at 3 Park Plaza, 16th Floor, Irvine,
California 92614, not in its individual capacity but solely as Indenture Trustee
under this Agreement, and any successor hereunder.
"Indenture Trustee's Fee": With respect to any Payment Date, the product of
(x) one-twelfth of .015% and (y) the Pool Balance as of the end of the
immediately preceding Remittance Period.
"Indenture Trustee Issuer Secured Obligations" means all amounts and
obligations which the Issuer may at any time owe to the Indenture Trustee for
the benefit of the Noteholders under this Indenture or the Notes.
"Independent" means, when used with respect to any specified Person, that
the person (a) is in fact independent of the Issuer, any other obligor upon the
Notes, the Sponsor and any Affiliate of any of the foregoing persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Sponsor or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Sponsor or any Affiliate of any of the foregoing Persons as
an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1, prepared by an
Independent appraiser or other expert appointed pursuant to an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Indirect Participant" shall mean any financial institution for whom any
Direct Participant holds an interest in the Class A Notes.
"Initial Cut-Off Date": With respect to the Initial Mortgage Loans, the
close of business on June 5, 1998.
"Initial Mortgage Loans": Mortgage Loans delivered by the Sponsor to the
Trust on the Closing Date.
"Initial Premium": The initial premium payable by the Sponsor on behalf of
the Trust to the Insurer in consideration of the delivery to the Indenture
Trustee of the Policy.
"Initial Specified Overcollateralization Amount": As defined in the
Insurance Agreement.
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"Insurance Agreement": The Insurance Agreement dated as of June 24, 1998
among the Sponsor, the Master Servicer, the Indenture Trustee and the Insurer,
as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage insurance policy
relating to a Mortgage Loan.
"Insurance Proceeds": Proceeds paid by any insurer (other than the Insurer)
pursuant to any Insurance Policy covering a Mortgage Loan, or amounts required
to be paid by the Master Servicer pursuant to the last sentence of the first
paragraph of Section 4.11(b) of the Sale and Servicing Agreement, or the
penultimate sentence of Section 4.11(c) of the Sale and Servicing Agreement, net
of any component thereof (i) covering any expenses incurred by or on behalf of
the Master Servicer in connection with obtaining such proceeds, (ii) that is
applied to the restoration or repair of the related Mortgaged Property, (iii)
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures, or (iv) required to be paid to any holder of a mortgage
senior to such Mortgage Loan.
"Insured Payment": As of any Payment Date, (i) any Deficiency Amount and
(ii) any Preference Amount.
"Insurer": Ambac Assurance Corporation or any successor thereto, as issuer
of the Policy.
"Insurer Default" means the failure by the Insurer to make a payment
required under the Policy in accordance with the terms thereof.
"Insurer Issuer Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Insurer under this
Indenture, the Insurance Agreement or any other Operative Document.
"Interest Accrual Period": With respect to the Class A Notes, the period
commencing on the prior Payment Date (or on the Closing Date with respect to the
July 27, 1998 Payment Date) and ending on the day immediately preceding such
Payment Date.
"Interest Collections": For any Payment Date, amounts collected during the
related Remittance Period, including the portion of Net Liquidation Proceeds
allocated to interest pursuant to the terms of the Credit Line Agreements, less
the Servicing Fee for the related Remittance Period.
"Interest Determination Date": With respect to any Interest Accrual Period
for the Class A Notes (other than the initial Interest Accrual Period), the
second London Business Day preceding such first day of such Interest Accrual
Period.
"Interest Remittance Amount": As of any Remittance Date, the sum, without
duplication, of (i) all interest collected by the Master Servicer during the
related Remittance Period with respect to the Mortgage Loans (net of the
Servicing Fee), except that with respect to
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Prepaid Installments, interest shall be remitted in the related Remittance
Period and (ii) all Net Liquidation Proceeds actually collected by the Master
Servicer with respect to the Mortgage Loans during the related Remittance Period
(to the extent such Net Liquidation Proceeds relate to interest).
"Issuer" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Issuer Secured Obligations" means the Insurer Issuer Secured Obligations
and the Indenture Trustee Issuer Secured Obligations.
"Issuer Secured Parties" means each of the Indenture Trustee in respect of
the Indenture Trustee Issuer Secured Obligations and the Insurer in respect of
the Insurer Issuer Secured Obligations.
"Late Payment Rate": For any Payment Date, the rate of interest, as it is
publicly announced by Citibank, N.A. at its principal office in New York, New
York as its prime rate (any change in such prime rate of interest to be
effective on the date such change is announced by Citibank, N.A.) plus 2%. The
Late Payment Rate shall be computed on the basis of a year of 365 days
calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"LIBOR": With respect to any Interest Accrual Period for the Class A Notes,
the rate determined by the Indenture Trustee on the related Interest
Determination Date appearing on the Telerate Screen Page 3750, as of 11:00 AM,
London Time, on the second LIBOR Business Day prior to the first day of such
Interest Accrual Period. If such rate does not appear on such page (or such
other page as may replace that page on that service, or if such service is no
longer offered, such other service for displaying LIBOR or comparable rates as
may be selected by the Sponsor after consultation with the Indenture Trustee),
the rate will be the Reference Bank Rate.
"LIBOR Business Day": Any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the State of New York or in the city of
London, England are required or authorized by law to be closed.
"Lifetime Rate Cap": With respect to each Mortgage Loan with respect to
which the related Credit Line Agreement provides for a lifetime rate cap, the
maximum Loan Rate permitted over the life of such Mortgage Loan under the terms
of the related Credit Line Agreement.
"Liquidated Mortgage Loan": As defined in the Sale and Servicing Agreement.
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"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 4.9 of the Sale and Servicing Agreement with
respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Mortgage Loan, any
amounts (including the proceeds of any Insurance Policy but excluding any
amounts drawn on the Policy) recovered by the Master Servicer in connection with
such Liquidated Mortgage Loan, whether through Indenture Trustee's sale,
foreclosure sale or otherwise.
"Loan Rate": With respect to any Mortgage Loan and as of any day, the per
annum rate of interest applicable under the related Credit Line Agreement to the
calculation of interest for such day on the Principal Balance of such Mortgage
Loan.
"Loan Rate Cap": With respect to each Mortgage Loan, the lesser of (i) the
Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling, if any.
"London Business Day": A day on which banks are open for dealing in foreign
currency, and exchange in London and New York City.
"Managed Amortization Period": The Period commencing on July 27, 1998 and
ending on the earlier to occur of (x) the July, 2001 Payment Date and (y) the
Payment Date which immediately precedes the occurrence of a Rapid Amortization
Event.
"Margin": With respect to each Mortgage Loan with an adjustable rate, the
fixed percentage amount set forth in the related Credit Line Agreement which
amount is added to Prime in accordance with the terms of the related Credit Line
Agreement to determine, on each Interest Determination Date, the Loan Rate for
such Mortgage Loan, subject to any maximum.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware corporation, and
its permitted successors and assigns.
"Master Servicer Affiliate": A Person (i) controlling, controlled by or
under common control with the Master Servicer and (ii) which is qualified to
service residential mortgage loans.
"Maximum Principal Payment": With respect to any Payment Date, the Fixed
Allocation Percentage of the Principal Collections relating to such Payment
Date.
"Maximum Step-Down Amount": As of any Payment Date, the excess of (i) the
aggregate, cumulative amount of Overcollateralization Reduction Amount for such
current, and all prior, Payment Dates over (ii) the aggregate, cumulative amount
of all payments made with respect to Step-Down Amounts for all prior Payment
Dates; provided, that for any Payment Date on which the Specified
Overcollateralization Amount exceeds the Overcollateralization Amount, the
Step-Down Amount will be reduced (but not below zero) by the amount of any such
excess.
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"Minimum Monthly Payment": With respect to any Mortgage Loan and any month,
the minimum amount required to be paid by the related Mortgagor in that month.
"Minimum Originator's Interest": With respect to any date, an amount equal
to 2% of the Trust Collateral Value.
"Monthly Remittance Amount": As of any Remittance Date, the sum of (i) the
Interest Remittance Amount for such Remittance Date and (ii) the Principal
Remittance Amount for such Remittance Date.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first or junior lien on an estate in fee simple interest in real property
securing a Credit Line Agreement.
"Mortgage Files": As defined in the Sale and Servicing Agreement.
"Mortgage Loans": As defined in the Sale and Servicing Agreement.
"Mortgagor": The obligor on a Credit Line Agreement.
"Net Funds Cap Carry-Forward Amount": In the event that, on any Payment
Date, the Net Funds Cap Rate is less than the Class A Formula Rate (i.e., the
Class A Interest Rate equals the Net Funds Cap Rate), the excess of the amount
of interest due based on the Class A Formula Rate, over the interest due based
on the Net Funds Cap Rate, together with interest thereon at the then-applicable
Class A Formula Rate.
"Net Funds Cap Rate": For any Interest Accrual Period, (x) the fraction,
expressed as an annual percentage rate, (i) the numerator of which is twelve
times the interest due on the Mortgage Loans during the prior Remittance Period,
net of the amount of Prepayment Interest Shortfalls, Relief Act Shortfalls,
Servicing Fee, Indenture Trustee's Fee, Owner Trustee's Fee and Premium Amount
for the related Remittance Period and (ii) the denominator of which is the Trust
Collateral Value immediately prior to the related Payment Date (y) less,
commencing on the tenth Payment Date, 0.50%.
"Net Liquidation Proceeds": As to any Liquidated Mortgage Loan, Liquidation
Proceeds net of, without duplication, Liquidation Expenses and unreimbursed
Servicing Advances and accrued and unpaid Servicing Fees through the date of
liquidation relating to such Liquidated Mortgage Loan. In no event shall Net
Liquidation Proceeds with respect to any Liquidated Mortgage Loan be less than
zero.
"Net Principal Collections": With respect to any Payment Date, the excess
of (x) Principal Collections with respect to the related Remittance Period over
(y) the aggregate principal amount of all Additional Balances arising during
such related Remittance Period; provided that in no event will Net Principal
Collections be less than zero with respect to any Payment Date.
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"Note" means a Class A Note.
"Note Account": The Note Account established in accordance with Section 8.3
hereof and maintained by the Indenture Trustee.
"Note Owner" means, with respect to a Book-Entry Note, the person who is
the owner of such Book-Entry Note or following the issuance of Definitive Notes,
the registered owner of the Notes.
"Note Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make payments to and distributions from
the Note Account, including payment of principal of or interest on the Notes on
behalf of the Issuer.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.3.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1 and TIA Section 314,
and delivered to the Indenture Trustee.
"Operative Documents": Collectively, this Indenture, the Trust Agreement,
the Sale and Servicing Agreement, the Subsequent Transfer Agreements, the
Policy, the Class A Notes, the Indemnification Agreement and the Insurance
Agreement.
"Opinion of Counsel" means one or more opinions of counsel who may, except
as otherwise expressly provided in this Indenture, be employees of or counsel to
the Issuer and, if addressed to the Insurer, satisfactory to the Insurer, and
which shall comply with any applicable requirements of Section 11.1, and if
addressed to the Insurer, satisfactory to the Insurer.
"Optional Redemption Date": The date on which the Sponsor exercises its
right of optional redemption of the Class A Notes pursuant to Section 10.1(b)
herein.
"Original Class A Principal Balance": $80,000,000.
"Original Cut-Off Date Pool Balance": The Pool Balance calculated as of the
Initial Cut-Off Date.
"Original Pre-Funded Amount": The amount deposited in the Pre-Funding
Account on the Closing Date, from the proceeds of the sale of the Class A Notes,
which amount is $6,502,437.00.
"Original Principal Amount": With respect to any particular Class A Note,
an amount equal to the product of (i) the Percentage Interest of such Class A
Note and (ii) the Original Class A Principal Balance.
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"Original Principal Balance": With respect to each Credit Line Agreement,
the principal amount of such Credit Line Agreement or the mortgage note relating
to a Senior Lien, as the case may be, on the date of origination thereof.
"Originator": Advanta National Bank.
"Originator's Interest": As of any Payment Date, is the excess, if any, of
(x) the Trust Collateral Value as of such Payment Date over (y) the Class A
Principal Balance as of such Payment Date (after taking into account reductions
therein on such Payment Date).
"Outstanding": With respect to all Notes, as of any date of determination,
all such Notes theretofore executed and delivered hereunder except:
(i) Notes theretofore cancelled by the Indenture Trustee or delivered
to the Indenture Trustee for cancellation;
(ii) Notes or portions thereof for which full and final payment money
in the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Class A Noteholders of such Notes;
(iii) Notes in exchange for or in lieu of which other Notes have been
executed and delivered pursuant to this Agreement, unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser; and
(iv) Notes alleged to have been destroyed, lost or stolen for which
replacement Notes have been issued as provided for in Section 2.4 hereof.
"Overcollateralization Amount": As of any Payment Date, the lesser of (x)
the Originator's Interest as of such date and (y) the Specified
Overcollateralization Amount for such Payment Date.
"Overcollateralization Deficiency Amount": With respect to any Payment
Date, the difference, if any, between (i) the Specified Overcollateralization
Amount applicable to such Payment Date and (ii) the Overcollateralization Amount
applicable to such Payment Date.
"Overcollateralization Deficit": With respect to any Payment Date, the
amount, if any, by which (i) the aggregate Class A Principal Balance, after
taking into account the payment to the Class A Noteholders of the Class A Notes
of all principal from sources other than the Policy on such Payment Date,
exceeds (ii) the Trust Collateral Value as of such Payment Date.
"Overcollateralization Reduction Amount": With respect to any Payment Date
on which the Originator's Interest is greater than the Specified
Overcollateralization Amount, the amount of any decrease in the Specified
Overcollateralization Amount that is permitted by the Insurer.
"Owner Trustee": Wilmington Trust Company, not in its individual capacity
but solely as Owner Trustee under the Trust Agreement, its successors in
interest or any successor Owner Trustee under the Trust Agreement.
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"Owner Trustee's Fee": A fee which is separately agreed to between the
Sponsor and the Owner Trustee.
"Payment Date": Any date on which the Indenture Trustee is required to make
distributions to the Class A Noteholders, which shall be the 25th day of each
month, commencing in the month following the Closing Date or, if such day is not
a Business Day, then on the succeeding Business Day.
"Percentage Interest": As to any Class A Note that percentage, expressed as
a fraction, the numerator of which is the Class A Principal Balance of such
Class A Note as of the related Cut-Off Date and the denominator of which is the
Original Class A Principal Balance of all Class A Notes; and as to any
Certificate, that Percentage Interest set forth on such Certificate.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy": The financial guaranty insurance policy dated June 24, 1998,
issued by the Insurer to the Indenture Trustee for the benefit of the
Noteholders.
"Policy Claim Amount": With respect to any Payment Date, an amount equal to
the related Available Funds Shortfall plus the related Preference Amount.
"Pool Balance": With respect to any date, the Principal Balances of the
Mortgage Loans as of such date.
"Pool Factor": A seven-digit decimal which the Indenture Trustee shall
compute monthly expressing the Class A Principal Balance as of each Payment Date
(after giving effect to any distribution of principal on such Payment Date) as a
proportion of the Original Class A Principal Balance. On the Closing Date, the
Pool Factor will be 1.0000000. Thereafter, the Pool Factor shall decline to
reflect reductions in the related Class A Principal Balance resulting from
distributions of principal to the Class A Notes.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.4 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Preference Amount": As defined in the Policy.
"Pre-Funded Amount": With respect to any Determination Date, the amount on
deposit in the Pre-Funding Account.
"Pre-Funded Mortgage Loans": Subsequent Mortgage Loans assigned to the
Trust in consideration of amounts released to the Originator from the
Pre-Funding Account.
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"Pre-Funding Account": The Pre-Funding Account established in accordance
with Section 8.3 hereof and maintained by the Indenture Trustee.
"Pre-Funding Earnings": With respect to any Payment Date, the actual
investment earnings then on deposit in the Pre-Funding Account.
"Pre-Funding Period": The period commencing on the Closing Date and ending
on the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any investment earnings) is less than
$100,000, (ii) the date on which a Rapid Amortization Event occurs and (iii)
July 20, 1998.
"Pre-Funding Transfer Date": Any Subsequent Transfer Date on which
Pre-Funded Mortgage Loans are assigned to the Trust.
"Premium Amount": As to any Payment Date, the product of (x) one-twelfth of
the Premium Percentage and (y) the Class A Principal Balance on such Payment
Date (before taking into account any distributions of the Scheduled Principal
Distribution Amount to be made on such Payment Date).
"Premium Percentage": As defined in the Insurance Agreement.
"Prepaid Installment": With respect to any Mortgage Loan, any installment
of principal thereof and interest thereon received prior to the scheduled due
date for such installment, intended by the Mortgagor as an early payment thereof
and not as a Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan which is received
by the Master Servicer in advance of the scheduled due date for the payment of
such principal (other than the principal portion of any Prepaid Installment),
and the proceeds of any Insurance Policy which are to be applied as a payment of
principal on the related Mortgage Loan shall be deemed to be Prepayments for all
purposes of this Agreement.
"Prepayment Interest Shortfall": With respect to any Remittance Period, for
each Mortgage Loan that was the subject during the related Remittance Period of
a Prepayment, an amount equal to the excess, if any, of (i) 30 days' interest on
the Principal Balance of such Mortgage Loan as of the first day of such
Remittance Period at a per annum rate equal to the Loan Rate (or at such lower
rate as may be in effect for such Mortgage Loan pursuant to application of the
Civil Relief Act, any Deficient Valuation and/or any Debt Service Reduction)
minus the Servicing Fee over (ii) the amount of interest actually remitted by
the Mortgagor in connection with such Prepayment less the Servicing Fee for such
Mortgage Loan in such month.
"Preservation Expenses": Expenditures made by the Master Servicer or any
Sub-Servicer in connection with a foreclosed Mortgage Loan prior to the
liquidation thereof, including, without limitation, expenditures for real estate
property taxes, hazard insurance premiums, property restoration or preservation.
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"Prime": The Prime rate of interest charged from time to time as set forth
in the related Credit Line Agreement.
"Principal and Interest Account": Collectively, each principal and interest
account created by the Master Servicer or any Sub-Servicer pursuant to Section
4.8(a) of the Sale and Servicing Agreement.
"Principal Balance": As to any Mortgage Loan, other than a Liquidated
Mortgage Loan, and as of any date, the related Cut-Off Date Principal Balance,
plus (i) any Additional Balance in respect of such Mortgage Loan, minus (ii) all
collections credited as principal against the Principal Balance of any such
Mortgage Loan in accordance with the related Credit Line Agreement prior to such
day. For purposes of this definition, a Liquidated Mortgage Loan shall be deemed
to have a Principal Balance of zero as of the first day of the Remittance Period
following the Remittance Period in which such Mortgage Loan becomes a Liquidated
Mortgage Loan and at all times thereafter.
"Principal Collections": As to any Payment Date, the sum of all payments by
or on behalf of Mortgagors and any other amounts constituting principal
(including, but not limited to Substitution Amounts and any portion of Insurance
Proceeds or Net Liquidation Proceeds allocable to principal of the applicable
Mortgage Loan, but excluding Foreclosure Profits) collected by the Master
Servicer under the Mortgage Loans during the related Remittance Period. The
terms of the related Credit Line Agreement shall determine the portion of each
payment in respect of a Mortgage Loan that constitutes principal or interest.
"Principal Remittance Amount": As of any Remittance Date, the sum, without
duplication, of (i) the principal actually collected by the Master Servicer with
respect to Mortgage Loans during the related Remittance Period, (ii) the
Principal Balance of each such Mortgage Loan that either was repurchased by the
Originator or purchased by the Master Servicer on such Remittance Date, to the
extent such Principal Balance was actually deposited in the Principal and
Interest Account, (iii) any Substitution Amounts delivered by the Originator in
connection with a substitution of a Mortgage Loan, to the extent such
Substitution Amounts were actually deposited in the Principal and Interest
Account on such Remittance Date, and (iv) all Net Liquidation Proceeds actually
collected by the Master Servicer with respect to the Mortgage Loans during the
related Remittance Period (to the extent such Liquidation Proceeds related to
principal).
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Prospectus": That certain Prospectus dated October 30, 1997 naming Advanta
Mortgage Conduit Services, Inc. and Advanta Mortgage Corp. USA as registrants
and describing certain mortgage loan asset-backed securities to be issued from
time to time as described in related Prospectus Supplements.
"Prospectus Supplement": That certain Prospectus Supplement dated June 19,
1998, describing the Class A Notes issued by the Trust.
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"Purchase Agreement" means the Mortgage Loan Purchase Agreement dated as of
June 1, 1998 between the Originator and the Sponsor with respect to the Mortgage
Loans.
"Rapid Amortization Commencement Date": The earlier of (i) the Payment Date
in July, 2001 and (ii) the Payment Date next succeeding the Remittance Period in
which a Rapid Amortization Event is deemed to occur pursuant to Section 12.1.
"Rapid Amortization Event": As defined in Section 12.1.
"Rapid Amortization Period": The period which follows the earlier to occur
of (x) the end of the Managed Amortization Period and (y) the occurrence of a
Rapid Amortization Event.
"Rating Agency" means Moody's and Standard & Poor's. If such agency or a
successor is no longer in existence, "Rating Agency" shall be such statistical
credit rating agency, or other comparable Person, designated by the Sponsor and
the Insurer, notice of which designation shall be given to the Indenture
Trustee. References herein to the highest short term unsecured rating category
of a Rating Agency shall means A1+ or better in the case of Standard & Poor's
and P1 or better in the case of Moody's, and in the case of any other Rating
Agency shall mean the ratings such other Rating Agency deems equivalent to the
foregoing ratings. References herein to the highest long-term rating category of
a Rating Agency shall mean "AAA" in the case of Standard & Poor's and "Aaa" in
the case of Moody's, and in the case of any other Rating Agency, the rating such
other Rating Agency deems equivalent to the foregoing ratings.
"Realized Loss": As to any Liquidated Mortgage Loan, the amount, if any, by
which the Principal Balance thereof as of the date of liquidation is in excess
of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last Business Day of
the calendar month immediately preceding the calendar month in which such
Payment Date occurs.
"Redemption Date" means, in the case of a redemption of the Notes pursuant
to Section 10.1(a), the Payment Date specified by the Master Servicer or the
Issuer pursuant to Section 10.2(a).
"Redemption Price" means, in the case of a redemption of the Notes pursuant
to Section 10.1(a), an amount equal to the unpaid principal amount of the then
outstanding principal amount of each class of Notes being redeemed plus accrued
and unpaid interest thereon to but excluding the Redemption Date.
"Reference Bank Rate" shall be determined on the basis of the rates at
which deposits in U.S. Dollars are offered by the reference banks (which shall
be three major banks that are engaged in transactions in the London interbank
market, selected by the Sponsor after consultation with the Indenture Trustee)
as of 11:00 A.M., London time, on the day that is two LIBOR Business Days prior
to the immediately preceding Payment Date to prime banks in the
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London interbank market for a period of one month in amounts approximately equal
to the principal amount of the Class A Notes then outstanding. The Indenture
Trustee will request the principal London office of each of the Reference Banks
to provide a quotation of its rate. If at least two such quotations are
provided, the rate will be the arithmetic mean of the quotations. If on such
date fewer than two quotations are provided as requested, the rate will be the
arithmetic mean of the rates quoted by one or more major banks in New York City,
selected by the Sponsor after consultation with the Indenture Trustee, as of
11:00 A.M., New York City time, on such date for loans in U.S. Dollars to
leading European banks for a period of one month in amounts approximately equal
to the principal amount of the Class A Notes then outstanding. If no such
quotations can be obtained, the rate will be LIBOR for the prior 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 Indenture Trustee which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London, (ii) not controlling, under the control
of or under common control with the Originator or any affiliate thereof, (iii)
whose quotations appear on the Telerate Screen Page 3750 on the relevant
Interest Determination Date and (iv) which have been designated as such by the
Indenture Trustee.
"Registration Statement": The Registration Statement filed by the Sponsor
with the Securities and Exchange Commission, including all amendments thereto
and including the Prospectus and the Prospectus Supplement relating to the Class
A Notes constituting a part thereof.
"Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all
payments made pursuant to the Policy previously received by the Indenture
Trustee and all Preference Amounts previously paid to the Indenture Trustee by
the Insurer and in each case not previously repaid to the Insurer pursuant to
Section 8.6(b)(vii) hereof plus (ii) interest accrued on each such payment made
pursuant to the Policy not previously repaid calculated at the Late Payment Rate
from the date the Indenture Trustee received the related payment made pursuant
to the Policy and (y)(i) any amounts then due and owing to the Insurer under the
Insurance Agreement plus (ii) interest on such amounts at the Late Payment Rate.
The Insurer shall notify the Indenture Trustee and the Sponsor of the amount of
any Reimbursement Amount.
"Relief Act Shortfall": With respect to any Remittance Period, for any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended Remittance Period as a result of
the application of the Civil Relief Act, the amount, if any, by which (i)
interest collectible on such Mortgage Loan during the most recently ended
calendar month is less than (ii) the sum of (a) one month's interest on the
Principal Balance of such Mortgage Loan at the rate equal to the sum of the
Class A Interest Rate, the rate at which the Indenture Trustee's Fee is
calculated and the Premium Percentage, plus (b) the aggregate Servicing Fee for
such Mortgage Loan payable to the Master Servicer in such calendar month.
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"Remittance Date": Any date on which the Master Servicer is required to
remit monies on deposit in the Principal and Interest Account to the Indenture
Trustee, which shall be the 18th day or, if such day is not a Business Day, the
next preceding Business Day, of each month, commencing in the month following
the month in which the Closing Date occurs.
"Remittance Period": As to any Payment Date, the calendar month preceding
the month of such Payment Date.
"REO Property": A Mortgaged Property acquired by the Master Servicer or any
Sub-Servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A Notes
registered in the Register under the nominee name of the Depository.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement dated
as of June 1, 1998, among the Issuer, the Sponsor, the Master Servicer and the
Indenture Trustee, as the same may be amended or supplemented from time to time.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans, attached
hereto as Schedule II, as it may be further supplemented in connection with
Subsequent Transfers.
"Scheduled Principal Distribution Amount": On any Payment Date during the
Managed Amortization Period, the excess (but in no event less than zero) of (x)
the lesser of (i) the Maximum Principal Payment and (ii) the Net Principal
Collections over (y) the Step-Down Amount, if any, with respect to such Payment
Date. Beginning with the first Payment Date in the Rapid Amortization Period,
the excess of (x) the Maximum Principal Payment over (y) the Step-Down Amount,
if any, with respect to such Payment Date.
"Second Mortgage Loan": A Mortgage Loan which constitutes a second priority
mortgage lien with respect to the related Mortgaged Property.
"Securities Act": The Securities Act of 1933, as amended.
"Servicing Advance": As defined in the Sale and Servicing Agreement.
"Servicing Fee": With respect to any Payment Date, the product of (i)
one-twelfth of the Servicing Fee Rate and (ii) the aggregate Principal Balance
of the Mortgage Loans on the first day of the Remittance Period preceding such
Payment Date (or at the Cut-Off Date with respect to the first Payment Date).
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"Servicing Fee Rate": 0.50% per annum.
"Specified Overcollateralization Amount": As defined in the Insurance
Agreement.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware Corporation.
"Standard & Poor's": Standard & Poor's, a division of The McGraw-Hill
Companies.
"Step-Down Amount": As of any Payment Date, the lesser of (x) the Maximum
Step-Down Amount for such Payment Date and (y) the Maximum Principal Payment or
the Net Principal Collections as applicable to such Payment Date; provided, that
for any Payment Date on which the Specified Overcollateralization Amount exceeds
the Overcollateralization Amount, the Step-Down Amount shall be reduced (but not
below zero) by the amount of any such excess.
"Subsequent Cut-Off Date": With respect to any Subsequent Mortgage Loan,
the opening of business on the first day of the calendar month in which the
related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loans" As defined in the Sale and Servicing Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement dated
as of a Subsequent Transfer Date executed by the Indenture Trustee and the
Sponsor substantially in the form of Exhibit L of the Sale and Servicing
Agreement, by which Subsequent Mortgage Loans are assigned to the Trust.
"Subsequent Transfer Date": The date specified in each Subsequent Transfer
Agreement, which must, with respect to any Payment Date, be a date occurring
during the calendar month in which such Payment Date occurs, at least five
Business Days prior to the Remittance Date occurring in such month.
"Substitution Amount": In connection with the delivery of any Qualified
Replacement Mortgage, if the outstanding principal amount of such Qualified
Replacement Mortgage as of the applicable Replacement Cut-Off Date is less than
the Principal Balance of the Mortgage Loan being replaced as of such Replacement
Cut-Off Date, an amount equal to such difference together with accrued and
unpaid interest on such amount calculated at the Loan Rate net of the Servicing
Fee, if any, of the Mortgage Loan being replaced.
"Telerate Screen Page 3750": The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks).
"Termination Date" means the latest of (i) the termination of the Policy
and the return of the Policy to the Insurer for cancellation, (ii) the date on
which the Insurer shall have received payment and performance of all Insurer
Issuer Secured Obligations and (iii) the date on
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which the Indenture Trustee shall have received payment and performance of all
Indenture Trustee Issuer Secured Obligations.
"Trust": Advanta Revolving Home Equity Loan Trust 1998-A.
"Trust Agreement": The Trust Agreement dated as of June 1, 1998 between the
Issuer and the Sponsor.
"Trust Collateral Value": As of any Payment Date, the sum of (i) the Pool
Balance at the end of the prior calendar month, (ii) the aggregate Principal
Balances as of the related Cut-Off Dates of all Subsequent Mortgage Loans
previously assigned to the Trust during the calendar month in which such Payment
Date occurs and (iii) the amounts, if any, on deposit in the Pre-Funding Account
at the close of business on such Payment Date.
"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 Class A
Noteholders and the Insurer, including all proceeds thereof including, without
limitation, (i) the Initial Mortgage Loans, Qualified Replacement Mortgages and
Subsequent Mortgage Loans, (ii) such amounts, including Eligible Investments, as
from time to time may be held in all Accounts (except as otherwise provided
herein), (iii) any Mortgaged Property, the Class A Noteholdership of which has
been effected on behalf of the Trust as a result of foreclosure or acceptance by
the Master Servicer or any Sub-Servicer of a deed in lieu of foreclosure and
that has not been withdrawn from the Trust, (iv) any Insurance Policies relating
to the Mortgage Loans and any rights of the Trust and the Originator under any
Insurance Policies, (v) Net Liquidation Proceeds with respect to any Liquidated
Mortgage Loan, (vi) the Policy, (vii) such amounts held in the Capitalized
Interest Account, and (viii) such amounts held in the Pre-Funding Account, the
Principal and Interest Account and the Note Account.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended and as in force on the date hereof, unless otherwise specifically
provided.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
"Underwriter": J.P. Morgan Securities Inc.
"Unpaid Class A Note Interest Shortfall": As of any Payment Date, the
amount, if any, by which (x) the Class A Interest Distribution Amount for the
prior Payment Date, plus the Unpaid Class A Note Interest Shortfall, if any,
with respect to such prior Payment Date, exceeded (y) the amount actually
distributed to the Noteholders pursuant to Section 8.6(b)(iii) on such prior
Payment Date.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Sale and Servicing Agreement or the Trust
Agreement.
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SECTION 1.2. Incorporation by Reference of the Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by the TIA, or
defined by Commission rule have the meaning assigned to them by such
definitions.
SECTION 1.3. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means "including without limitation"; and
(v) words in the singular include the plural and words in the
plural include the singular.
SECTION 1.4. Action by or Consent of Noteholders. Whenever any provision of
this Agreement refers to action to be taken, or consented to, by Noteholders,
such provision shall be deemed to refer to the Noteholder of record as of the
Record Date immediately preceding the date on which such action is to be taken,
or consent given, by Noteholders. Solely for the purposes of any action to be
taken, or consented to, by Noteholders, any Note registered in the name of
Headlands Mortgage Company or any Affiliate thereof shall be deemed not to be
outstanding; provided, however, that, solely for the purpose of determining
whether the Indenture Trustee or the Owner Trustee is entitled to rely upon any
such action or consent, only Notes which the Owner Trustee or the Indenture
Trustee, respectively, knows to be so owned shall be so disregarded.
SECTION 1.5. Conflict with TIA. If any provision hereof limits, qualifies
or conflicts with a provision of the TIA that is required under the TIA to be
part of and govern this
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Indenture, the latter provision shall control and all provisions required by the
TIA are hereby incorporated by reference. If any provision of this Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the latter provisions shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.
ARTICLE II.
The Notes
SECTION 2.1. Form. The Class A Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The terms of the
Note set forth in Exhibit A are part of the terms of this Indenture.
SECTION 2.2. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be original or
facsimile.
Notes bearing the original or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee, upon receipt of a written Issuer Order, shall
authenticate and deliver Class A Notes for original issue in an aggregate
principal amount of $80,000,000. The Class A Notes outstanding at any time may
not exceed such amounts except as provided in Section 2.6.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears attached to such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate attached to any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
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authenticated and delivered hereunder. Subject to Section 2.11, the Notes shall
be Book-Entry Notes.
SECTION 2.3. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof. The Indenture Trustee shall have the right to rely upon a certificate
executed on behalf of the Note Registrar by an Authorized Officer thereof as to
the names and addresses of the Holders of the Notes and the principal amounts
and number of such Notes.
Upon surrender for registration or transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, and if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute or
cause the Indenture Trustee to authenticate one or more new Notes, in any
authorized denominations, of the same class and a like aggregate principal
amount. A Noteholder may also obtain from the Indenture Trustee, in the name of
the designated transferee or transferees one or more new Notes, in any
authorized denominations, of the same class and a like aggregate principal
amount. Such requirements shall not be deemed to create a duty in the Indenture
Trustee to monitor the compliance by the Issuer with Section 8-401 of the UCC.
At the option of the Holder, Notes may be exchanged for other Notes in any
authorized denominations, of the same class and a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, and if the requirements of
Section 8-401(1) of the UCC are met, the Issuer shall execute and upon its
request the Indenture Trustee shall authenticate the Notes which the Noteholder
making the exchange is entitled to receive. Such requirements shall not be
deemed to create a duty in the Indenture Trustee to monitor the compliance by
the Issuer with Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in the form attached to Exhibit A, duly executed by the
Holder thereof or such Holder's attorney duly
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authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar all in accordance
with the Exchange Act, and (ii) accompanied by such other documents as the Note
Registrar may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar 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 Notes, other than
exchanges pursuant to Section 2.4 or 9.6 not involving any transfer.
Any Noteholder using the assets of (i) an employee benefit plan (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity to purchase the Notes, or to whom
the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Note Registrar, or the Note Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee and the Insurer such
security or indemnity as may be required by it to hold the Issuer, the Indenture
Trustee and the Insurer harmless, then, in the absence of notice to the Issuer,
the Note Registrar or the Indenture Trustee that such Note has been acquired by
a bona fide purchaser, and provided that the requirements of Section 8-405 of
the UCC are met, the Issuer shall execute and upon its request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note (such requirement
shall not be deemed to create a duty in the Indenture Trustee to monitor the
compliance by the Issuer with Section 8-405); provided, however, that if any
such destroyed, lost or stolen Note, but not a mutilated Note, shall have become
or within seven days shall be due and payable, or shall have been called for
redemption, the Issuer may, instead of issuing a replacement Note, direct the
Indenture Trustee, in writing, to pay such destroyed, lost or stolen Note when
so due or payable or upon the Redemption Date without surrender thereof. If,
after the delivery of such replacement Note or payment of a destroyed, lost or
stolen Note pursuant to the proviso to the preceding sentence, a bona fide
purchaser of the original Note in lieu of which such replacement Note was issued
presents for payment such original Note, the Issuer, the Indenture Trustee and
the Insurer shall be entitled to recover such replacement Note (or such payment)
from the Person to whom it was delivered or any Person taking such replacement
Note from such Person to whom such replacement Note was delivered or any
assignee of such Person, except a bona fide purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other
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governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Indenture Trustee)
connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
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 Notes.
SECTION 2.5. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and the
Insurer and any agent of the Issuer, the Indenture Trustee and the Insurer may
treat the Person in whose name any Note is registered (as of the related Record
Date) as the owner of such Note for the purpose of receiving payments of
principal of and interest, if any on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Insurer, the Indenture Trustee nor any agent of the Issuer, the Insurer or the
Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.6. Payment of Principal and Interest; Defaulted Interest. (a) The
Notes shall accrue interest as provided herein, and such amount shall be due and
payable on each Payment Date as specified herein. Any installment of interest or
principal, if any, payable on any Note which is punctually paid or duly provided
for by the Issuer on the applicable Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
Record Date, by check mailed first-class, postage prepaid, to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.11, with respect
to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made
by wire transfer in immediately available funds to the account designated by
such nominee and except for the final installment of principal payable with
respect to such Note on a Payment Date or on the Final Scheduled Payment Date
(and except for the Redemption Price for any Note called for redemption pursuant
to Section 10.1(a)) which shall be payable as provided below. The funds
represented by any such checks returned undelivered shall be held in accordance
with Section 3.3.
(b) Upon written notice from the Issuer, the Indenture Trustee shall notify
the Person in whose name a Note is registered at the close of business on the
Record Date preceding the Payment Date on which the Issuer expects that the
final installment of principal of and interest on such Note will be paid. Such
notice shall be mailed or transmitted by facsimile prior to such final Payment
Date and shall specify that such final installment will be payable only upon
presentation and surrender of such Note and shall specify the place where such
Note may
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be presented and surrendered for payment of such installment. Notices in
connection with redemptions of Notes shall be mailed to Noteholders as provided
in Section 10.2.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate to the extent lawful. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to each Noteholder and the Indenture
Trustee a notice that states the special record date, the payment date and the
amount of defaulted interest to be paid.
(d) Promptly following the date on which all principal of and interest on
the Notes has been paid in full and the Notes have been surrendered to the
Indenture Trustee, the Indenture Trustee shall, upon written notice from the
Master Servicer of the amounts, if any, that the Insurer has paid in respect of
the Notes under the Policy or otherwise which has not been reimbursed to it,
deliver such surrendered Notes to the Insurer to the extent not previously
cancelled or destroyed.
SECTION 2.7. Cancellation. Subject to Section 2.6(d), all Notes surrendered
for payment, registration of transfer, exchange or redemption shall, if
surrendered to any Person other than the Indenture Trustee, be delivered to the
Indenture Trustee and shall be promptly canceled by the Indenture Trustee.
Subject to Section 2.6(d), the Issuer may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section, except as expressly permitted by this Indenture.
Subject to Section 2.6(d), all canceled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it; provided that such Issuer Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.8. Release of Collateral. The Indenture Trustee shall, on or
after the Termination Date, release any remaining portion of the Trust Estate
from the lien created by this Indenture and deposit in the Note Account any
funds then on deposit in any other Account. The Indenture Trustee shall release
property from the lien created by this Indenture pursuant to this Section 2.8
only upon receipt by it of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.
SECTION 2.9. Book-Entry Notes. The Notes, upon original issuance, will be
issued in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company or its custodian, the initial Clearing
Agency, by, or on behalf of,
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the Issuer. Such Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no Note
Owner will receive a Definitive Note representing such Note Owner's interest in
such Note, except as provided in Section 2.11. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole Holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants. Unless and until Definitive Notes
are issued pursuant to Section 2.11, the initial Clearing Agency will
make book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest on the
Notes to such Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Notes and has delivered such instructions
to the Indenture Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Indenture Trustee at the Corporate Trust
Office.
SECTION 2.10. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.11, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Holders of the Notes to the Clearing Agency, and
shall have no obligation to the Note Owners.
SECTION 2.11. Definitive Notes. If (i) the Master Servicer advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly
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discharge its responsibilities with respect to the Notes, and the Master
Servicer is unable to locate a qualified successor, (ii) the Master Servicer at
its option advises the Indenture Trustee in writing that it elects to terminate
the book-entry system through the Clearing Agency or (iii) after the occurrence
of a Rapid Amortization Event, Note Owners representing beneficial interests
aggregating at least a majority of the Outstanding Amount of the Notes advise
the Indenture Trustee through the Clearing Agency in writing that the
continuation of a book entry system through the Clearing Agency is no longer in
the best interests of the Note Owners, then the Clearing Agency shall notify all
Note Owners and the Indenture Trustee of the occurrence of any such event and of
the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Note or Notes representing
the Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
ARTICLE III.
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest on the Notes in accordance with the
terms of the Notes and this Indenture. Without limiting the foregoing, the
Issuer will cause to be distributed all amounts on deposit in the Note Account
on a Payment Date deposited therein pursuant to the Sale and Servicing Agreement
for the benefit of the Class A Notes, to Class A Noteholders. Amounts properly
withheld under the Code or any applicable state tax laws by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer will maintain in
Irvine, California, an office or agency where Notes may be surrendered for
registration, transfer or exchange of the Notes, and where notices and demands
to or upon the Issuer in respect of the Notes and this Indenture may be served.
The Issuer hereby initially appoints the Indenture Trustee to serve as its agent
for the foregoing purposes. The Issuer will give prompt written notice to the
Indenture Trustee of the location, and of any change in the location, of any
such office or agency. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Indenture Trustee with the address
thereof, such surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.
SECTION 3.3. Money for Payments to be Held in Trust. The Issuer will cause
each Note Paying Agent other than the Indenture Trustee to execute and deliver
to the Indenture Trustee and the Insurer an instrument in which such Note Paying
Agent shall agree with the
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Indenture Trustee (and if the Indenture Trustee acts as Note Paying Agent, it
hereby so agrees), subject to the provisions of this Section, that such Note
Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee written notice of any default by
the Issuer (or any other obligor upon the Notes) of which it has
actual knowledge in the making of any payment required to be made with
respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to
the Indenture Trustee all sums so held in trust by such Note Paying
Agent;
(iv) immediately resign as a Note Paying Agent and forthwith pay
to the Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards required to be
met by a Note Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code and any applicable
state tax laws with respect to the withholding from any payments made
by it on any Notes of any applicable withholding taxes imposed thereon
and with respect to any applicable reporting requirements in
connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Note Paying Agent to pay to the Indenture Trustee all sums held in trust by
such Note Paying Agent, such sums to be held by the Indenture Trustee upon the
same trusts as those upon which the sums were held by such Note Paying Agent;
and upon such a payment by any Note Paying Agent to the Indenture Trustee, such
Note Paying Agent shall be released from all further liability with respect to
such money.
Subject to applicable laws with respect to the escheat of funds, any money
held by the Indenture Trustee or any Note Paying Agent in trust for the payment
of any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request, and shall be deposited by the
Indenture Trustee in the Note Account; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Note Paying Agent with
respect to such trust money shall thereupon cease.
SECTION 3.4. Existence. Except as otherwise permitted by the provisions of
Section 3.10, the Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Issuer
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hereunder is or becomes, organized under the laws of any other state or of the
United States of America, in which case the Issuer will keep in full effect its
existence, rights and franchises under the laws of such other jurisdiction) and
will obtain and preserve its qualification to do business in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Trust Estate, the Notes, and each other
instrument or agreement included in the Trust Estate.
SECTION 3.5. Protection of Trust Estate. The Issuer intends the security
interest granted pursuant to this Indenture in favor of the Issuer Secured
Parties to be prior to all other liens in respect of the Trust Estate, and the
Issuer shall take all actions necessary to obtain and maintain, in favor of the
Indenture Trustee, for the benefit of the Issuer Secured Parties, a first lien
on and a first priority, perfected security interest in the Trust Estate. The
Issuer will from time to time prepare (or shall cause to be prepared), execute
and deliver all such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance and other
instruments, and will take such other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust
Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Indenture Trustee for the benefit of
the Issuer Secured Parties created by this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee in such Trust Estate against the claims of
all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee pursuant to this Section;
provided that, such designation shall not be deemed to create a duty in the
Indenture Trustee or the Indenture Trustee to monitor the compliance of the
Issuer with respect to its duties under this Section 3.5 or the adequacy of any
financing statement, continuation statement or other instrument prepared by the
Issuer.
SECTION 3.6. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Insurer an Opinion of
Counsel stating that, in the opinion of such counsel, such actions have been
taken with respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements,
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as are necessary to perfect and make effective the first priority lien and
security interest in favor of the Indenture Trustee, for the benefit of the
Issuer Secured Parties, created by this Indenture.
(b) Within 90 days after the beginning of each calendar year, beginning
with the first calendar year beginning more than six months after the Closing
Date, the Issuer shall furnish to the Indenture Trustee and the Insurer, an
Opinion of Counsel either stating that, in the opinion of such counsel, such
actions have been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as are necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action or stating that in the opinion of such counsel, no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture.
SECTION 3.7. Performance of Obligations; Servicing of Mortgage Loans. (a)
The Issuer will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Operative Documents or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the Insurer to
assist it in performing its duties under this Indenture, and any performance of
such duties by a Person identified to the Indenture Trustee and the Insurer in
an Officer's Certificate of the Issuer shall be deemed to be action taken by the
Issuer. Initially, the Issuer has contracted with the Master Servicer to assist
the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Operative Documents and in the
instruments and agreements included in the Trust Estate, including, but not
limited to, preparing (or causing to be prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Operative Document or any provision
thereof without the consent of the Indenture Trustee, the Insurer or the Holders
of at least a majority of the Outstanding Amount of the Notes.
(d) If an Authorized Officer of the Owner Trustee shall have actual
knowledge of the occurrence of an Event of Servicing Termination under the Sale
and Servicing
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Agreement, the Issuer shall promptly notify the Indenture Trustee, the Insurer
and the Rating Agencies thereof in accordance with Section 11.4, and shall
specify in such notice the action, if any, the Issuer is taking in respect of
such default. If an Event of Servicing Termination shall arise from the failure
of the Master Servicer to perform any of its duties or obligations under the
Sale and Servicing Agreement with respect to the Mortgage Loans, the Issuer
shall take all reasonable steps available to it to remedy such failure.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Master Servicer or the Sponsor of their respective duties
under the Operative Documents (x) without the prior consent of the Insurer or
(y) if the effect thereof would adversely affect the Holders of the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Operative Documents, sell, transfer, exchange or otherwise dispose of
any of the properties or assets of the Issuer, including those
included in the Trust Estate, without the consent of the Insurer
(which consent may not be unreasonably withheld; provided, that if an
Insurer Default has occurred and is continuing, the Noteholders
representing 66-2/3% of the Noteholders may direct the Indenture
Trustee to sell or dispose of the Trust Estate if the Indenture
Trustee receives the Liquidation Price, as described in Section 12.1.
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien in favor of the Indenture Trustee
created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest, mortgage or other
encumbrance (other than the lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Trust Estate or any
part thereof or any interest therein or the proceeds thereof (other
than tax liens, mechanics' liens and other liens that arise by
operation of law, in each case on a Mortgaged Property and arising
solely as a result of an action or omission of the related Mortgagor),
(C) permit the lien of this Indenture not to constitute a valid first
priority (other than with respect to any such tax, mechanics' or other
lien) security interest in the Trust Estate or (D) amend, modify or
fail to comply with the provisions of the Operative Documents without
the prior written consent of the Insurer, which consent may not be
unreasonably withheld.
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SECTION 3.9. Annual Statement as to Compliance. The Issuer will deliver to
the Indenture Trustee and the Insurer, within 90 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year ended December 31,
1998), and otherwise in compliance with the requirements of TIA Section
314(a)(4) an Officer's Certificate stating, as to the Authorized Officer signing
such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. Issuer May Not Consolidate or Transfer Assets. (a) The Issuer
may not consolidate or merge with or into any other Person.
(b) Except as otherwise provided in the Sale and Servicing Agreement, the
Issuer shall not convey or transfer all or substantially all of its properties
or assets, including those included in the Trust Estate, to any Person.
SECTION 3.11. No Other Business. The Issuer shall not engage in any
business other than purchasing, owning, selling and managing the Mortgage Loans
and other assets in the manner contemplated by this Indenture and the Operative
Documents and activities incidental thereto.
SECTION 3.12. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Insurer under the Insurance Agreement and (iii) any other Indebtedness
permitted by or arising under the Operative Documents. The proceeds of the Notes
shall be used exclusively to fund the Issuer's purchase of the Mortgage Loans
and the other assets specified in the Sale and Servicing Agreement, to fund the
Pre-Funding Account and the Capitalized Interest Account and to pay the Issuer's
organizational, transactional and start-up expenses.
SECTION 3.13. Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become continently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
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SECTION 3.14. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.15. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Operative Document.
SECTION 3.16. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Master Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Master Servicer, the Owner Trustee, the Indenture Trustee and the
Certificateholders as permitted by, and to the extent funds are available for
such purpose under, the Sale and Servicing Agreement, this Indenture, or Trust
Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Note Account except in accordance with this Indenture and
the Operative Documents.
SECTION 3.17. Notice of Rapid Amortization Events and Events of Servicing
Termination. Upon a Responsible Officer of the Owner Trustee having actual
knowledge thereof, the Issuer agrees to give the Indenture Trustee, the Insurer
and the Rating Agencies prompt written notice of each Rapid Amortization Event
hereunder or Event of Servicing Termination under the Sale and Servicing
Agreement.
SECTION 3.18. Further Instruments and Acts. Upon request of the Indenture
Trustee or the Insurer, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
SECTION 3.19. Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 9.01 of the
Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate
the requirements thereunder that the Indenture Trustee, the Insurer or the
Holders of the Notes consent to amendments thereto as provided therein.
SECTION 3.20. Income Tax Characterization. For purposes of federal income,
state and local income and franchise and any other income taxes, the Issuer will
treat the Notes as indebtedness of the Sponsor and hereby instructs the
Indenture Trustee to treat the Notes as indebtedness of the Sponsor for federal
and state tax reporting purposes.
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ARTICLE IV.
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. Upon payment in full
of the Notes, this Indenture shall cease to be of further effect with respect to
the Notes except as to (i) rights of registration of transfer and exchange, (ii)
substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of
Noteholders to receive payments of principal thereof and interest thereon, (iv)
Sections 3.3, 3.4, 3.5, 3.8, 3.10, 3.12, 3.13 and 3.20, (v) the rights,
obligations and immunities of the Indenture Trustee hereunder (including the
rights of the Indenture Trustee under Section 6.7 and the obligations of the
Indenture Trustee under Section 4.2) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them, and the Indenture Trustee, on
written demand in the form of an Issuer Order and at the expense of the Issuer,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.4 and (ii) Notes for which
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3) have been
delivered to the Indenture Trustee for cancellation and the Policy has
terminated and been returned to the Insurer for cancellation and all
amounts owing to the Insurer have been paid in full; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
(i) have become due and payable,
(ii) will become due and payable at their respective Final
Scheduled Payment Dates within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and in the case of (i), (ii) or (iii) above
(A) the Issuer, has irrevocably deposited or caused to be irrevocably
deposited with the Indenture Trustee cash or direct obligations of or
obligations guaranteed by the United States of America (which will mature prior
to the date such amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for cancellation when due on the
Final
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Scheduled Payment Date or Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.1(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all Insurer Issuer Secured
Obligations and all Indenture Trustee Issuer Secured Obligations; and
(C) the Issuer has delivered to the Indenture Trustee and the Insurer an
Officer's Certificate, an Opinion of Counsel and if required by the TIA, the
Indenture Trustee or the Insurer an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.1(a) and each stating that all conditions precedent herein provided
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.2. Application of Trust Money. All monies deposited with the
Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Note Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest.
SECTION 4.3. Repayment of Monies Held by Note Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all monies then held by any Note Paying Agent other than the Indenture Trustee
under the provisions of this Indenture with respect to such Notes shall, upon
demand of the Issuer, be paid to the Indenture Trustee to be held and applied
according to Section 3.3 and thereupon such Note Paying Agent shall be released
from all further liability with respect to such monies.
ARTICLE V.
Remedies
SECTION 5.1. Rights Upon a Rapid Amortization Event. If a Rapid
Amortization Event as described in Article XII shall have occurred and be
continuing, the Rapid Amortization Period shall immediately commence and the
Class A Noteholders shall be entitled on each Payment Date to an amount equal to
the Maximum Principal Payment. The rights contained in this Article V are in
addition to any rights which the Noteholders possess pursuant to Article XII.
SECTION 5.2. Limitation of Suits. No Holder of any Note shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Rapid Amortization Event;
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(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
proceeding in respect of such Rapid Amortization Event in its own name as
Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
proceedings;
(v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.3. Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.4. Restoration of Rights and Remedies. If the Controlling Party
or any Noteholder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such proceeding had been instituted.
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SECTION 5.5. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders 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. 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 5.6. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee, Controlling Party or any Holder of any Note to exercise any
right or remedy accruing upon any Default or Rapid Amortization Event shall
impair any such right or remedy or constitute a waiver of any such Default or
Rapid Amortization Event or an acquiescence therein. Every right and remedy
given by this Article V or by law to the Indenture Trustee or to the Noteholders
may be exercised from time to time, and as often as may be deemed expedient, by
the Indenture Trustee or by the Noteholders, as the case may be.
SECTION 5.7. Control by Noteholders. If the Indenture Trustee is the
Controlling Party, the Holders of a majority of the Outstanding Amount of the
Notes, with the consent of the Insurer, shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee pursuant to Section 12.1 with respect to the Notes or
exercising any trust or power conferred on the Indenture Trustee; provided that
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.8. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on
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any Note on or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
SECTION 5.9. Waiver of Stay or Extension Laws. The Issuer covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.10. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer.
SECTION 5.11. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Master Servicer's expense, the Issuer agrees to take all such lawful action as
the Indenture Trustee may request to compel or secure the performance and
observance by the Sponsor and the Master Servicer, as applicable, of each of
their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement in accordance with the terms thereof, and to exercise any
and all rights, remedies, powers and privileges lawfully available to the Issuer
under or in connection with the Sale and Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee, including the transmission of
notices of default on the part of the Sponsor or the Master Servicer thereunder
and the institution of legal or administrative actions or proceedings to compel
or secure performance by the Sponsor or the Master Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If the Indenture Trustee is a Controlling Party and if a Rapid
Amortization Event has occurred and is continuing, the Indenture Trustee may,
and, at the written direction of the Holders of 66-2/3% of the Outstanding
Amount of the Notes shall, exercise all rights, remedies, powers, privileges and
claims of the Issuer against the Sponsor or the Master Servicer under or in
connection with the Sale and Servicing Agreement, including the right or power
to take any action to compel or secure performance or observance by the Sponsor
or the Master Servicer of each of their obligations to the Issuer thereunder and
to give any consent, request, notice, direction, approval, extension or waiver
under the Sale and Servicing Agreement, and any right of the Issuer to take such
action shall be suspended.
SECTION 5.12. Subrogation. The Indenture Trustee shall receive as
attorney-in-fact of each Noteholder any Policy Claim Amount from the Insurer.
Any and all Policy Claim
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Amounts disbursed by the Indenture Trustee from claims made under the Policy
shall not be considered payment by the Trust, and shall not discharge the
obligations of the Trust with respect thereto. The Insurer shall, to the extent
it makes any payment with respect to the Notes, become subrogated to the rights
of the recipient of such payments to the extent of such payments. Subject to and
conditioned upon any payment with respect to the Notes by or on behalf of the
Insurer, the Indenture Trustee shall assign to the Insurer all rights to the
payment of interest or principal with respect to the Notes which are then due
for payment to the extent of all payments made by the Insurer, and the Insurer
may exercise any option, vote, right, power or the like with respect to the
Notes to the extent that it has made payment pursuant to the Policy.
SECTION 5.13. Preference Claims. (a) In the event that the Indenture
Trustee has received a certified copy of an order of the appropriate court that
any payment on a Note has been avoided in whole or in part as a preference
payment under applicable bankruptcy law, the Indenture Trustee shall so notify
the Insurer, shall comply with the provisions of the Policy to obtain payment by
the Insurer of such avoided payment, and shall, at the time it provides notice
to the Insurer, notify Holders of the Notes by mail that, in the event that any
Noteholder's payment is so recoverable, such Noteholder will be entitled to
payment pursuant to the terms of the Policy. The Indenture Trustee shall furnish
to the Insurer at its written request, the requested records it holds in its
possession evidencing the payments of principal of and interest on Notes, if
any, which have been made by the Indenture Trustee and subsequently recovered
from Noteholders, and the dates on which such payments were made. Pursuant to
the terms of the Policy, the Insurer will make such payment on behalf of the
Noteholder to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Final Order (as defined in the Policy) and not to the
Indenture Trustee or any Noteholder directly.
(b) The Indenture Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which the Indenture Trustee has
actual knowledge) seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership, rehabilitation or similar law
(a "Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Indenture Trustee hereby agree that so
long as an Insurer Default shall not have occurred and be continuing, the
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedes or performance
bond pending any such appeal at the expense of the Insurer, but subject to
reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 5.12, the Insurer shall be
subrogated to, and each Noteholder and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the Indenture
Trustee and each Noteholder in the conduct of any proceeding with respect to a
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Preference Claim.
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ARTICLE VI.
The Indenture Trustee
SECTION 6.1. Duties of Indenture Trustee. (a) If a Rapid Amortization Event
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and the Operative Documents and use
the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs; provided, however, that if the Indenture Trustee is acting as Master
Servicer, it shall use the same degree of care and skill as is required of the
Master Servicer under the Sale and Servicing Agreement.
(b) Except during the continuance of a Rapid Amortization Event:
(i) The Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform on their face to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts;
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11; and
(iv) the Indenture Trustee shall not be charged with knowledge of any
failure by the Master Servicer to comply with the obligations of the Master
Servicer referred to in clauses (i) and (ii) of Section 5.1 of the Sale and
Servicing Agreement unless a Responsible Officer of the Indenture Trustee
at the Corporate Trust Office obtains actual knowledge of such failure or
occurrence or the Indenture Trustee receives written notice of such failure
or occurrence from the Master Servicer, the Insurer or the Holders of Notes
evidencing Voting Rights aggregating not less than 51%.
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(d) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing
with the Issuer.
(e) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur 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 to believe that
repayment of such funds or indemnity reasonably satisfactory to it against
such risk or liability is not reasonably assured to it.
(f) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
(g) The Indenture Trustee shall, upon two Business Days' prior written
notice to the Indenture Trustee, permit any representative of the Insurer,
during the Indenture Trustee's normal business hours, to examine all books
of account, records, reports and other papers of the Indenture Trustee
relating to the Notes, to make copies and extracts therefrom and to discuss
the Indenture Trustee's affairs and actions, as such affairs and actions
relate to the Indenture Trustee's duties with respect to the Notes, with
the Indenture Trustee's officers and employees responsible for carrying out
the Indenture Trustee's duties with respect to the Notes.
(h) The Indenture Trustee shall, and hereby agrees that it will,
perform all of the obligations and duties required of it under the Sale and
Servicing Agreement.
(i) The Indenture Trustee shall, and hereby agrees that it will, hold
the Policy in trust, and will hold any proceeds of any claim on the Policy
in trust solely for the use and benefit of the Noteholders.
(j) In no event shall Bankers Trust Company of California, N.A., in
any of its capacities hereunder, be deemed to have assumed any duties of
the Owner Trustee under the Delaware Business Trust Statute, common law, or
the Trust Agreement.
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SECTION 6.2. Rights of Indenture Trustee. (a) The Indenture Trustee may
rely on any document reasonably believed by it to be genuine and to have been
signed or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on the Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes or
the Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Indenture
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; provided, however, that the
Indenture Trustee shall, upon the occurrence of a Rapid Amortization Event or
Event of Servicing Termination as defined in the Sale and Servicing Agreement
(that has not been cured or waived), exercise the rights and powers vested in it
by this Indenture or the Sale and Servicing Agreement with reasonable care and
skill.
(g) The Indenture 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, consent, order, approval, bond or
other paper or document, unless requested in writing to do so by the Insurer or
by the Holders of Notes evidencing not less than 25% of the Outstanding Amount
thereof; provided, however, that if the payment within a reasonable time to the
Indenture Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the Indenture
Trustee, not reasonably assured to the Indenture Trustee by the security
afforded to it by the terms of this Indenture or the Sale and Servicing
Agreement, the Indenture Trustee may require indemnity reasonably satisfactory
to it
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against such cost, expense or liability as a condition to so proceeding; the
reasonable expense of every such examination shall be paid by the Person making
such request, or, if paid by the Indenture Trustee shall be reimbursed by the
Person making such request upon demand.
(h) The Indenture Trustee shall not be accountable, shall have no liability
and makes no representation as to any acts or omissions hereunder of the Master
Servicer until such time as, and only to the extent that, the Indenture Trustee
may be required to act as Master Servicer.
SECTION 6.3. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Note Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Trust Estate or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
SECTION 6.5. Notice of Defaults. If a Rapid Amortization Event, an Event of
Servicing Termination or any other Default occurs and is continuing and if it is
either known by, or written notice of the existence thereof has been delivered
to, a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
mail to each Noteholder and to the Insurer of such event within 10 days after
such knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 6.6. Reports by Indenture Trustee to Holders. Upon written request,
the Note Paying Agent or the Master Servicer shall on behalf of the Issuer
deliver to each Noteholder such information as may be reasonably required to
enable such Holder to prepare its Federal and state income tax returns required
by law.
SECTION 6.7. Compensation and Indemnity. (a) Pursuant to Section 8.6 and
subject to Section 6.18 herein, the Issuer shall, or shall cause the Master
Servicer to, pay to the Indenture Trustee from time to time compensation for its
services. The Indenture Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Issuer shall or shall
cause the Master Servicer to reimburse the Indenture Trustee for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Indenture Trustee's agents,
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counsel, accountants and experts. The Issuer shall or shall cause the Master
Servicer to indemnify the Indenture Trustee and its respective officers,
directors, employees and agents against any and all loss, liability or expense
(including attorneys' fees and expenses) incurred by each of them in connection
with the acceptance or the administration of this trust and the performance of
its duties hereunder. The Indenture Trustee shall notify the Issuer and the
Master Servicer promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Issuer and the Master Servicer shall
not relieve the Issuer of its obligations hereunder or the Master Servicer of
its obligations under Article VIII of the Sale and Servicing Agreement. The
Issuer shall or shall cause the Master Servicer to defend the claim, the
Indenture Trustee may have separate counsel and the Issuer shall or shall cause
the Master Servicer to pay the fees and expenses of such counsel. Neither the
Issuer nor the Master Servicer need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith. The
indemnification provided in this Section 6.7(a) shall survive the discharge or
termination of this Indenture and the resignation or removal of the Indenture
Trustee.
(b) The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. Notwithstanding
anything else set forth in this Indenture or the Operative Documents, the
Indenture Trustee agrees that the obligations of the Issuer (but not the Master
Servicer) to the Indenture Trustee hereunder and under the Operative Documents
shall be recourse to the Trust Estate only and specifically shall not be
recourse to the assets of the Issuer or any Securityholder. In addition, the
Indenture Trustee agrees that its recourse to the Issuer, the Trust Estate, the
Sponsor and amounts held in the Note Account, the Capitalized Interest Account,
and the Pre-Funding Account shall be limited to the right to receive the
distributions referred to herein.
SECTION 6.8. Replacement of Indenture Trustee. The Indenture Trustee may
resign at any time by so notifying the Issuer and the Insurer by written notice.
Upon receiving such notice of resignation, the Issuer shall promptly appoint a
successor Indenture Trustee (approved in writing by the Insurer, so long as such
approval is not unreasonably withheld) by written instrument, in duplicate, one
copy of such instrument shall be delivered to the resigning Indenture Trustee
(who shall deliver a copy to the Master Servicer) and one copy to the successor
Trustee; provided, however, that any such successor Indenture Trustee shall be
subject to the prior written approval of the Master Servicer, which approval
shall not be unreasonably withheld. The Issuer may and, at the request of the
Insurer shall, remove the Indenture Trustee, if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of the
Indenture Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar
law, shall have entered a decree or order granting relief or appointing a
receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or similar official) for the Indenture Trustee or for any
substantial part of the Indenture
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Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law is commenced with respect to the
Indenture Trustee and such case is not dismissed within 60 days;
(iv) the Indenture Trustee commences a voluntary case under any
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or other similar official) for the Indenture
Trustee or for any substantial part of the Indenture Trustee's property, or
makes any assignment for the benefit of creditors or fails generally to pay
its debts as such debts become due or takes any corporate action in
furtherance of any of the foregoing; or
(v) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee acceptable to the Insurer.
If the Issuer fails to appoint such a successor Indenture Trustee, the Insurer
may appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, to the Insurer and to the Issuer.
Thereupon the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the retiring Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all property
held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 30 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the
Notes may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee acceptable to the Insurer.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee
acceptable to the Insurer.
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to Section 6.8 and payment of all fees and expenses
owed to the outgoing Indenture Trustee.
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Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's and the Master Servicer's indemnity obligations under
Section 6.7 shall continue for the benefit of the retiring Indenture Trustee and
the Master Servicer shall pay any amounts owing to the Indenture Trustee.
SECTION 6.9. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust may at the time be located, the Indenture Trustee
with the consent of the Insurer shall have the power and may execute and deliver
all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Trust (including, for purposes of this Section 6.10, all or any part of the
Trust Estate), and to vest in such Person or Persons, in such capacity and for
the benefit of the Noteholders, such title to the Trust, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture 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 Indenture
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
the Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such
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rights, powers, duties and obligations (including the holding of title to
the Trust 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 Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder, including acts or omissions
of predecessor or successor trustees; and
(iii) the Indenture Trustee and the Master Servicer acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee except that following the occurrence of an Event of Servicing
Termination, the Indenture Trustee acting alone may accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
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 Article VI. 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 Indenture Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the
conduct of, affecting the liability of, or affording protection to, the
Indenture Trustee. Every such instrument shall be filed with the Indenture
Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture 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, dissolve, become insolvent,
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 Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
(e) The Master Servicer shall be responsible for the fees of any
co-trustee or separate trustee appointed hereunder.
SECTION 6.11. Eligibility: Disqualification. The Indenture Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. The Indenture Trustee
shall provide copies of such reports to the Insurer upon request. The Indenture
Trustee shall comply with TIA Section 310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b)(9); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
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SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 6.13. Appointment and Powers. Subject to the terms and conditions
hereof, each of the Issuer Secured Parties hereby appoints Bankers Trust Company
of California, N.A. as the Indenture Trustee with respect to the Collateral, and
Bankers Trust Company of California, N.A. hereby accepts such appointment and
agrees to act as Indenture Trustee with respect to the Trust Estate for the
Issuer Secured Parties, to maintain custody and possession of such Trust Estate
(except as otherwise provided hereunder) and to perform the other duties of the
Indenture Trustee in accordance with the provisions of this Indenture and the
other Operative Documents. Each Issuer Secured Party hereby authorizes the
Indenture Trustee to take such action on its behalf, and to exercise such
rights, remedies, powers and privileges hereunder, as the Controlling Party may
direct and as are specifically authorized to be exercised by the Indenture
Trustee by the terms hereof, together with such actions, rights, remedies,
powers and privileges as are reasonably incidental thereto. The Indenture
Trustee shall act upon and in compliance with the written instructions of the
Controlling Party delivered pursuant to this Indenture promptly following
receipt of such written instructions; provided that the Indenture Trustee shall
not act in accordance with any instructions (i) which are not authorized by, or
in violation of the provisions of, this Indenture or (ii) for which the
Indenture Trustee has not received reasonable indemnity. Receipt of such
instructions shall not be a condition to the exercise by the Indenture Trustee
of its express duties hereunder, except where this Indenture provides that the
Indenture Trustee is permitted to act only following and in accordance with such
instructions.
SECTION 6.14. Performance of Duties. The Indenture Trustee shall have no
duties or responsibilities except those expressly set forth in this Indenture
and the other Operative Documents to which the Indenture Trustee is a party or
as directed by the Controlling Party in accordance with this Indenture. The
Indenture Trustee shall not be required to take any discretionary actions
hereunder except at the written direction and with the indemnification of the
Controlling Party. The Indenture Trustee shall, and hereby agrees that it will,
perform all of the duties and obligations required of it under the Sale and
Servicing Agreement.
SECTION 6.15. Limitation on Liability. Neither the Indenture Trustee nor
any of its directors, officers, employees and agents shall be liable for any
action taken or omitted to be taken by it or them hereunder, or in connection
herewith, except that the Indenture Trustee shall be liable for its negligence,
bad faith or willful misconduct; nor shall the Indenture Trustee be responsible
for the validity, effectiveness, value, sufficiency or enforceability against
the Issuer of this Indenture or any of the Trust Estate (or any part thereof).
SECTION 6.16. Reliance Upon Documents. In the absence of negligence, bad
faith or willful misconduct on its part, the Indenture Trustee shall be entitled
to rely on any communication, instrument, paper or other document reasonably
believed by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons and shall have no
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liability in acting, or omitting to act, where such action or omission to act is
in reasonable reliance upon any statement or opinion contained in any such
document or instrument.
SECTION 6.17. Representations and Warranties of the Indenture Trustee. The
Indenture Trustee represents and warrants to the Issuer and to each Issuer
Secured Party as follows:
(a) Due Organization. The Indenture Trustee is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States and is duly authorized and licensed under applicable
law to conduct its business as presently conducted.
(b) Corporate Power. The Indenture Trustee has all requisite right, power
and authority to execute and deliver this Indenture and to perform all of its
duties as the Indenture Trustee hereunder.
(c) Due Authorization. The execution and delivery by the Indenture Trustee
of this Indenture and the other Operative Documents to which it is a party, and
the performance by the Indenture Trustee of its duties hereunder and thereunder,
have been duly authorized by all necessary corporate proceedings, are required
for the valid execution and delivery by the Indenture Trustee, or the
performance by the Indenture Trustee, of this Indenture and such other Operative
Documents.
(d) Valid and Binding Indenture. The Indenture Trustee has duly executed
and delivered this Indenture and each other Operative Document to which it is a
party, and each of this Indenture and each such other Operative Document
constitutes the legal, valid and binding obligation of the Indenture Trustee,
enforceable against the Indenture Trustee in accordance with its terms, except
as (i) such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
SECTION 6.18. Waiver of Setoffs. The Indenture Trustee hereby expressly
waives any and all rights of setoff that the Indenture Trustee may otherwise at
any time have under applicable law with respect to any Account and agrees that
amounts in the Accounts shall at all times be held and applied solely in
accordance with the provisions hereof.
SECTION 6.19. Control by the Controlling Party. The Indenture Trustee shall
comply with notices and instructions given by the Issuer only if accompanied by
the written consent of the Controlling Party.
SECTION 6.20. Trustee May Enforce Claims Without Possession of Notes. All
rights of action and claims under this Agreement or the Notes may be prosecuted
and enforced by the Indenture Trustee without the possession of any of the Notes
or the production thereof in any proceeding relating thereto, and such
proceeding instituted by the Indenture Trustee shall be brought in its own name
or in its capacity as Indenture Trustee. Any recovery of judgment shall,
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after provision for the payment of the reasonable compensation, expenses,
disbursement and advances of the Indenture Trustee, its agents and counsel, be
for the ratable benefit of the Noteholders in respect of which such judgment has
been recovered.
SECTION 6.21. Suits for Enforcement. In case an Event of Servicing
Termination or other default by the Master Servicer or the Sponsor hereunder
shall occur and be continuing, the Indenture Trustee, if the Controlling Party
(and if not the Controlling Party, with the consent of the Insurer), may proceed
to protect and enforce its rights and the rights of the Noteholders under this
Agreement by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or other remedy, as the
Indenture Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Indenture Trustee and the
Noteholders.
SECTION 6.22. Mortgagor Claims. In connection with any offset defenses, or
affirmative claim for recovery, asserted in legal actions brought by Mortgagors
under one or more Mortgage Loans based upon provisions therein or upon other
rights or remedies arising from any requirements of law applicable to the
Mortgage Loans:
(a) The Indenture Trustee is the holder of the Mortgage Loans only as
trustee on behalf of the holders of the Notes, and not as a principal or in any
individual or personal capacity.
(b) The Indenture Trustee shall not be personally liable for, or obligated
to pay Mortgagors, any affirmative claims asserted thereby, or responsible to
holders of the Notes for any offset defense amounts applied against Mortgage
Loan payments, pursuant to such legal actions.
(c) The Indenture Trustee will pay, solely from available Trust money,
affirmative claims for recovery by Mortgagors only pursuant to final judicial
orders or judgments, or judicially-approved settlement agreements, resulting
from such legal actions.
(d) The Indenture Trustee will comply with judicial orders and judgments
which require its actions or cooperation in connection with Mortgagors' legal
actions to recover affirmative claims against holders of the Notes.
(e) The Indenture Trustee will cooperate with and assist the Master
Servicer, the Sponsor, or holders of the Notes in their defense of legal actions
by Mortgagors to recover affirmative claims if such cooperation and assistance
is not contrary to the interests of the Indenture Trustee as a party to such
legal actions and if the Indenture Trustee is satisfactorily indemnified for all
liability, costs and expenses arising therefrom.
(f) The Issuer hereby agrees to cause the Master Servicer to indemnify,
hold harmless and defend the Indenture Trustee from and against any and all
liability, loss, costs and
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expenses of the Indenture Trustee resulting from any affirmative claims for
recovery asserted or collected by Mortgagors under the Mortgage Loans.
ARTICLE VII.
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish To Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders as of such Record Date, (b) at such other times as the Indenture Trustee
may request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished. The Indenture Trustee or, if the Indenture Trustee is not the Note
Registrar, the Issuer shall furnish to the Insurer or the Issuer in writing upon
their written request and at such other times as the Insurer or the Issuer may
request a copy of the list.
SECTION 7.2. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders contained in the most recent
list furnished to the Indenture Trustee as provided in Section 7.1 and the names
and addresses of Holders received by the Indenture Trustee in its capacity as
Note Registrar. The Indenture Trustee may destroy any list furnished to it as
provided in such Section 7.1 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
SECTION 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer
is required to file the same with the Commission, copies of the annual
reports and copies of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may be
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the
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conditions and covenants of this Indenture as may be required from time to
time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA Section 313(c)) such
summaries of any information, documents and reports required to be filed by
the Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may
be required by rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.4. Reports by Indenture Trustee. If required by TIA Section
313(a), within 60 days after each August 31, beginning with August 31, 1998, the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII.
Payments and Statements to Noteholders and Certificateholders;
Accounts, Disbursements and Releases
SECTION 8.1. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture and the Sale and
Servicing Agreement. The Indenture Trustee shall apply all such money received
by it as provided in this Indenture and the Sale and Servicing Agreement. Except
as otherwise expressly provided in this Indenture or in the Sale and Servicing
Agreement, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Trust Estate, the
Indenture Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings.
SECTION 8.2. Release of Trust Estate. (a) Subject to Section 8.11 and the
payment of its fees and expenses pursuant to Section 6.7, the Indenture Trustee
may, and when required by the Issuer and the provisions of this Indenture shall,
execute instruments to release property from the lien of this Indenture, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture or the Sale and Servicing Agreement. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
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shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
monies.
(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding and all sums due the Indenture Trustee pursuant to Section 6.7 and
to the Insurer pursuant to the Insurance Agreement have been paid, release any
remaining portion of the Trust Estate that secured the Notes from the lien of
this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Accounts. The Indenture Trustee shall release
property from the lien of this Indenture pursuant to this Section 8.2(b) only
upon receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.1.
SECTION 8.3. Establishment of Accounts. The Sponsor shall cause to be
established, and the Indenture Trustee shall maintain, at the corporate trust
office of the Indenture Trustee, a Note Account, a Pre-Funding Account and a
Capitalized Interest Account, each to be held by the Indenture Trustee in the
name of the Trust for the benefit of the Class A Noteholders and the Insurer, as
their interests may appear.
SECTION 8.4. The Policy. On each Determination Date the Indenture Trustee
shall determine with respect to the immediately following Payment Date, the
amount (the "Available Funds") to be on deposit in the Note Account on such
Payment Date, as described in Section 8.6(a) hereof (excluding the amounts of
any payments made pursuant to the Policy, the Indenture Trustee's Fee, the Owner
Trustee's Fee, the Servicing Fee and the Premium Amount, but including amounts
transferred from the Capitalized Interest Account and the Pre-Funding Account).
(a) If (i) the Available Funds for such Payment Date are not sufficient to
pay the Class A Interest Distribution Amount and/or (ii) following the
application of all Available Funds, an Overcollateralization Deficit would exist
(either such event being an "Available Funds Shortfall"), the Indenture Trustee
shall complete a Notice in the form of Exhibit A to the Policy and submit such
notice to the Insurer no later than 12:00 noon New York City time on the second
Business Day preceding such Payment Date as a claim for a payment in an amount
equal to the aggregate Available Funds Shortfall.
(b) Upon receipt of payments made pursuant to the Policy from the Insurer
on behalf of Class A Noteholders, the Indenture Trustee shall deposit such
payments in the Note Account and shall distribute such payments, or the proceeds
thereof, in accordance with Section 8.6 hereof to the Class A Noteholders.
(c) The Indenture Trustee shall (i) receive payments made pursuant to the
Policy as attorney-in-fact of each Class A Noteholder receiving any Insured
Payment from the Insurer and (ii) disburse such Insured Payment to the Class A
Noteholders as set forth in Section 8.6 hereof. The Insurer shall be entitled to
receive the related Reimbursement Amount pursuant to Section 8.6(b)(vii) hereof
with respect to each Insured Payment made by the Insurer. The
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Indenture Trustee hereby agrees on behalf of each Class A Noteholder and the
Trust for the benefit of the Insurer that it recognizes that to the extent the
Insurer makes payments made pursuant to the Policy, either directly or
indirectly (as by paying through the Indenture Trustee), to the Class A
Noteholders, the Insurer will be entitled to receive such related Reimbursement
Amount.
SECTION 8.5. Pre-Funding Account and Capitalized Interest Account. (a) On
the Closing Date, the Indenture Trustee will deposit from the proceeds of the
sale of the Class A Notes, on behalf of the Class A Noteholders and the Insurer,
in the Pre-Funding Account, the Original Pre-Funded Amount and in the
Capitalized Interest Account, the Capitalized Interest Account Deposit.
(b) On each Pre-Funding Transfer Date, the Sponsor shall instruct the
Indenture Trustee to withdraw from the Pre-Funding Account and release to the
Originator an amount equal to 100% of the Principal Balance of the Pre-Funded
Mortgage Loans transferred to the Trust on such Pre-Funding Transfer Date upon
satisfaction of the conditions set forth in Section 2.4 of the Sale and
Servicing Agreement with respect to such transfer.
(c) On the Payment Date occurring in July, 1998, the Indenture Trustee
shall transfer from the Pre-Funding Account to the Note Account the Pre-Funding
Earnings, if any, applicable to such Payment Date.
(d) On each Payment Date occurring during the Pre-Funding Period, the
Indenture Trustee shall transfer from the Capitalized Interest Account to the
Note Account the Capitalized Interest Requirement, if any, for such Payment
Dates.
On the Payment Date which immediately follows the end of the Pre-Funding
Period, and following any withdrawals from the Capitalized Interest Account on
such Payment Date, the Capitalized Interest Account shall be closed and any
remaining amount on deposit therein shall be paid to the Originator.
SECTION 8.6. Flow of Funds. (a) The Indenture Trustee shall deposit to the
Note Account, without duplication, upon receipt, (i) any payments made pursuant
to the Policy, (ii) the proceeds of any liquidation of the assets of the Trust,
the Monthly Remittance Amount remitted by the Master Servicer or any
Sub-Servicer, together with any Substitution Amounts, and any Loan Purchase
Price amounts received by the Indenture Trustee, (iii) on the Payment Dates
occurring in July, 1998, the Pre-Funding Earnings transferred by the Indenture
Trustee pursuant to Section 8.5(c) hereof, (iv) the Capitalized Interest
Requirement to be transferred on such Payment Dates from the Capitalized
Interest Account, pursuant to Section 8.5(d) hereof and (v) the portion of the
amount, if any, to be transferred on such Payment Date from the Pre-Funding
Account, pursuant to Section 8.6(b)(v) hereof.
(b) With respect to the Note Account, on each Payment Date, the Indenture
Trustee shall make the following allocations, disbursements and transfers in the
following order of priority, and each such allocation, transfer and disbursement
shall be treated as having occurred only after all preceding allocations,
transfers and disbursements have occurred:
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(i) first, to the Indenture Trustee, the Indenture Trustee's Fee then
due and to the Owner Trustee, the Owner Trustee's Fee then due;
(ii) second, from amounts then on deposit in the Account, the Premium
Amount to the Insurer for such Payment Date.
(iii) third, to the Class A Noteholders, the Class A Interest
Distribution Amount and the Unpaid Class A Note Interest Shortfall, if any,
for such Payment Date;
(iv) fourth, to the Class A Noteholders, as a distribution of
principal, the Overcollateralization Deficit for such Payment Date;
(v) fifth, if such Payment Date is the first Payment Date following
the end of the Pre-Funding Period, to the Class A Noteholders as a
distribution of principal any amount remaining in the Pre-Funding Account
(after taking into account all transfers of Subsequent Mortgage Loans on or
prior to such Payment Date);
(vi) sixth, to the Class A Noteholders as a distribution of principal,
the Scheduled Principal Distribution Amount for such Payment Date;
(vii) seventh, to the Insurer, the Reimbursement Amount, if any, then
due to it;
(viii) eighth, to the Class A Noteholders as a distribution of
principal up to an amount equal to the Overcollateralization Deficiency
Amount (the "Accelerated Principal Payment");
(ix) ninth, to the Master Servicer, reimbursement for Servicing
Advances to the extent not previously reimbursed and reimbursement for
Servicing Advances which have been deemed Nonrecoverable Advances;
(x) tenth, to the Class A Noteholders, the amount of any Net Funds Cap
Carry-Forward Amount then due; and
(xi) eleventh, to the Certificateholders, which shall initially be the
Originator, any amount remaining on deposit in the Note Account.
SECTION 8.7. Investment of Accounts. (a) So long as no event described in
Section 5.1(a) of the Sale and Servicing Agreement shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of the Accounts held by the Indenture Trustee shall be invested and reinvested
by the Indenture Trustee in the name of the Indenture Trustee for the benefit of
the Class A Noteholders and the Insurer, as directed in writing by the Master
Servicer, in one or more Eligible Investments bearing interest or sold at a
discount. During the continuance of an event described in Section 5.1(a) of the
Sale and Servicing Agreement and following any removal of the Master Servicer,
the Insurer shall direct such investments. No investment in any Account shall
mature later than the Business Day immediately preceding the next Payment Date.
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(b) If any amounts are needed for disbursement from any Account held by the
Indenture Trustee and sufficient uninvested funds are not available to make such
disbursement, the Indenture 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) The Indenture Trustee shall not in any way be held liable by reason of
any insufficiency in any Account held by the Indenture Trustee resulting from
any loss on any Eligible Investment included therein.
(d) The Indenture Trustee shall hold funds in the Accounts held by the
Indenture Trustee uninvested upon the occurrence of either of the following
events:
(i) the Master Servicer or the Insurer, as the case may be, shall have
failed to give investment directions to the Indenture Trustee; or
(ii) the Master Servicer or the Insurer, as the case may be, shall
have failed to give investment directions to the Indenture Trustee by 11:15
a.m. New York time (or such other time as may be agreed by the Master
Servicer or the Insurer, as the case may be, and the Indenture Trustee) on
any Business Day (any such investment by the Indenture Trustee pursuant to
this clause (ii) to mature on the next Business Day after the date of such
investment).
SECTION 8.8. Eligible Investments. The following are Eligible Investments:
(a) Direct general obligations of the United States or the obligations of
any agency or instrumentality of the United States fully and unconditionally
guaranteed, the timely payment or the guarantee of which constitutes a full
faith and credit obligation of the United States.
(b) Federal Housing Administration debentures.
(c) FHLMC participation certificates and senior debt obligations.
(d) Federal Home Loan Banks' consolidated senior debt obligations.
(e) FNMA mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid principal)
and senior debt obligations.
(f) Federal funds, certificates of deposit, time and demand deposits, and
bankers' acceptances (having original maturities of not more than 365 days) of
any domestic bank, the short-term debt obligations of which have been rated A-1
or better by S&P and P-1 by Moody's.
(g) Investment agreements approved by the Insurer provided:
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1. The agreement is with a bank or insurance company which has an
unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by S&P, or is
the lead bank of a parent bank holding company with an uninsured,
unsecured and unguaranteed obligation meeting such rating
requirements, and
2. Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice
(provided such notice may be amended or canceled at any time prior to
the withdrawal date), and
3. The agreement is not subordinated to any other obligations of
such insurance company or bank, and
4. The same guaranteed interest rate will be paid on any future
deposits made pursuant to such agreement, and
5. The Indenture Trustee and the Insurer receive an opinion of
counsel that such agreement is an enforceable obligation of such
insurance company or bank.
(h) Commercial paper (having original maturities of not more than 365
days) rated A-1 or better by S&P and P-1 or better by Moody's.
(i) Investments in money market funds rated AAAm or AAAm-G by S&P and
AAA or P-1 by Moody's.
(j) Investments approved in writing by the Insurer and acceptable to
Moody's and S&P.
Provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
SECTION 8.9. Reports by Indenture Trustee. (a) On each Payment Date, to the
extent that the related report described in Section 4.8(d)(ii) of the Sale and
Servicing Agreement has been received by the Indenture Trustee, the Indenture
Trustee shall provide to each Class A Noteholder, to the Master Servicer, to the
Insurer, to each Underwriter, to the Sponsor, to S&P and to Moody's a written
report in substantially the form set forth as Exhibit B hereto, as such form may
be revised by the Indenture Trustee, the Master Servicer, Moody's and S&P from
time to time, but in every case setting forth the information requested on
Exhibit B hereto and the following information:
(i) the Class A Note Distribution Amount;
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(ii) the amount of such distributions allocable to principal;
(iii) the amount of such distributions allocable to interest and the
related Class A Note;
(iv) the amount of any Unpaid Class A Note Interest Shortfall in such
distribution;
(v) the amount of any Insured Payment included in the amounts
distributed to the Notes on such Payment Date;
(vi) information furnished by the Sponsor pursuant to Section
6049(d)(7)(C) of the Code and the regulations promulgated thereunder to
assist the Class A Noteholders in computing their market discount;
(vii) the total of any Substitution Amounts and any Loan Purchase
Price amounts included in such distribution;
(viii) for Payment Dates during the Pre-Funding Period, the remaining
Pre-Funded Amount;
(ix) for the final Subsequent Transfer Date, the amount of any
remaining Pre-Funded Amount that has not been used to fund the purchase of
Subsequent Mortgage Loans and that will be distributed to the Class A
Noteholders as principal, if any, on the immediately following Payment
Date;
(x) the amounts, if any, of any Realized Losses for the related
Remittance Period; and
(xi) the amount, if any, of principal in such distribution, separately
stating the components thereof;
(xii) the Servicing Fee for such Payment Date;
(xiii) the Class A Principal Balance and the Pool Factor, each after
giving effect to such distribution;
(xiv) the Pool Balance as of the end of the preceding Remittance
Period and the Pool Balance at the close of business on the last day of the
related Remittance Period;
(xv) the number and aggregate Principal Balances of Mortgage Loans as
to which the Minimum Monthly Payment is Delinquent for 30-59 days, 60-89
days and 90 or more days, respectively, as of the end of the preceding
Remittance Period;
(xvi) the book value (within the meaning of 12 C.F.R. Section 571.13
or comparable provision) of any REO Property;
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(xvii) the Class A Interest Rate applicable to the distribution on the
following Payment Date;
(xviii) the number and principal balances of any Mortgage Loans
retransferred to the Sponsor pursuant to (a) Section 2.2 and (b) Section
2.5 of the Sale and Servicing Agreement;
(xix) the Overcollateralization Deficit;
(xx) the aggregate Principal Balance of the Subsequent Mortgage Loans
delivered during the related Remittance Period;
(xxi) the amount of the Accelerated Principal Payment, if any, for the
related Payment Date;
(xxii) the amount of any Net Funds Cap Carry-Forward Amount;
(xxiii) the amount of any Step-Down Amount;
(xxiv) the amount of the Originator's Interest; and
(xxv) the current level of the Overcollateralization Amount.
Items (i) through (iii) above shall, with respect to each Note, be
presented on the basis of a Note having a $1,000 denomination. In addition, by
January 31 of each calendar year following any year during which the Notes are
outstanding, the Indenture Trustee shall furnish a report to each holder 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 Notes for such
calendar year.
(b) In addition, on each Payment Date the Indenture Trustee will distribute
to each Holder, to the Insurer, to the Underwriter, to the Master Servicer, to
the Sponsors, to S&P and to Moody's, together with the information described in
Subsection (a) preceding, the following information as of the close of business
on the last Business Day of the prior calendar month, which is hereby required
to be prepared by the Master Servicer and furnished to the Indenture Trustee for
such purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans and the Principal Balances
thereof, together with the number, aggregate Principal Balances of such
Mortgage Loans and the percentage (based on the aggregate Principal Balance
of the Mortgage Loans) of the aggregate Principal Balance of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans (a) 30-59
days Delinquent, (b) 60-89 days Delinquent and (c) 90 or more days
Delinquent;
(ii) the number, aggregate Principal Balances of all Mortgage Loans
and percentage (based on the aggregate Principal Balance of the Mortgage
Loans) of the aggregate Principal Balance of such Mortgage Loans to the
aggregate Principal Balance
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of all Mortgage Loans in foreclosure proceedings (and whether any such
Mortgage Loans are also included in any of the statistics described in the
foregoing clause (i));
(iii) the number, aggregate Principal Balances of all Mortgage Loans
and percentage (based on the aggregate Principal Balance of the Mortgage
Loans) of the aggregate Principal Balance of such Mortgage Loans to the
aggregate Principal Balance of all Mortgage Loans relating to Mortgagors in
bankruptcy proceedings (and whether any such Mortgage Loans are also
included in any of the statistics described in the foregoing clause (i));
(iv) the number, aggregate Principal Balances of all Mortgage Loans
and percentage (based on the aggregate Principal Balance of the Mortgage
Loans) of the aggregate Principal Balance of such Mortgage Loans to the
aggregate Principal Balance of all Mortgage Loans relating to REO
Properties (and whether any such Mortgage Loans are also included in any of
the statistics described in the foregoing clause (i));
(v) the book value of any REO Property;
(vi) the number and dollar amount of Mortgage Loans repurchased
pursuant to Section 4.10; and
(vii) the aggregate dollar amount of Mortgage Loans modified as to
Combined Loan-to-Value Ratio in excess of the original values and the
aggregate dollar amount of Mortgage Loans modified as to margins below the
Cut-Off Date margins.
(c) The foregoing reports shall be sent be to an Class A Noteholder only
insofar as such holder owns a Note.
SECTION 8.10. Additional Reports by Indenture Trustee. (a) The Indenture
Trustee shall report to the Sponsor, the Master Servicer and the Insurer with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Indenture Trustee and the identity
of the investments included therein, as the Sponsor, the Master Servicer or the
Insurer may from time to time request. Without limiting the generality of the
foregoing, the Indenture Trustee shall, at the request of the Sponsor, the
Master Servicer or the Insurer, transmit promptly to the Sponsor, the Master
Servicer and the Insurer copies of all accounting of aggregate receipts in
respect of the Mortgage Loans furnished to it by the Master Servicer pursuant to
Section 4.8(d)(ii) of the Sale and Servicing Agreement and shall notify the
Sponsor, the Master Servicer and the Insurer if any such receipts have not been
received by the Indenture Trustee.
(b) From time to time, at the request of the Insurer, the Indenture Trustee
shall report to the Insurer with respect to its actual knowledge, without
independent investigation, of any breach of any of the representations or
warranties relating to individual Mortgage Loans set forth in Section 3.3(a) of
the Sale and Servicing Agreement. On the date that is eighteen months after the
Closing Date, the Indenture Trustee shall provide the Insurer with a written
report of all of such inaccuracies to such date of which it has actual
knowledge, without independent
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investigation, and of the action taken by the Sponsors under Section 3.4(b) of
the Sale and Servicing Agreement with respect thereto.
SECTION 8.11. Opinion of Counsel. The Indenture Trustee shall receive at
least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.2(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require as a condition to such action, an
Opinion of Counsel, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders or the Insurer in contravention of the provisions of
this Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Trust Estate. Counsel
rendering any such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument delivered to the
Indenture Trustee in connection with any such action.
ARTICLE IX.
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with the consent of the
Insurer, as evidenced to the Indenture Trustee, the Issuer and the Indenture
Trustee, when authorized by an Issuer Order, at any time and from time to time,
may enter into one or more indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or
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in any supplemental indenture or to make any other provisions with respect
to matters or questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
the prior written consent of the Insurer and with prior notice to the Rating
Agencies by the Issuer, as evidenced to the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that such action shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Noteholder.
SECTION 9.2. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies, with the consent of the Insurer and
with the consent of the Holders of not less than a majority of the Outstanding
Notes, by Act of such Holders delivered to the Issuer and the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that, subject to
the express rights of the Insurer under the Operative Documents, no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Price with respect thereto, change the
provision of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Trust Estate to payment of principal of
or interest on the Notes, or change any place of payment where, or the coin
or currency in which, any Note or the interest thereon is payable;
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(ii) impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such amount due
on the Notes on or after the respective due dates thereof (or, in the case
of redemption, on or after the Redemption Date);
(iii) reduce the percentage of the Outstanding Notes, the consent of
the Holders of which is required for any such supplemental indenture, or
the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(v) reduce the percentage of the Outstanding Notes required to direct
the Indenture Trustee to direct the Issuer to sell or liquidate the Trust
Estate pursuant to Section 12.1;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Operative Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vii) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Payment Date (including the calculation of
any of the individual components of such calculation); or
(viii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein or in any
of the Operative Documents, terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Note of
the security provided by the lien of this Indenture.
The Indenture Trustee may determine whether or not any Notes would be
adversely affected by any supplemental indenture upon receipt of an Opinion of
Counsel to that effect and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in
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general terms the substance of such supplemental indenture. Any failure of
the Indenture Trustee to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such
supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel (and, if requested, an Officer's Certificate) stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5. Conformity With Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.6. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X.
Redemption of Notes
SECTION 10.1. Redemption. (a) The Notes are subject to redemption following
the later of (A) the Payment Date following payment in full of all amounts owing
to the Insurer and (B) the earliest of (i) the transfer, under the conditions
specified in Section
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10.1(b), to the Master Servicer of the Noteholders' security interest in each
Mortgage Loan and all property acquired in respect of any Mortgage Loan
remaining in the Trust for an amount equal to the sum of (x) the Class A
Principal Balance, (y) the sum of accrued and unpaid Class A Interest
Distribution Amount through the day preceding the final Payment Date, (ii) the
day following the Payment Date on which the distribution made to Class A
Noteholders has reduced the Class A Principal Balance to zero and no other
amounts are owed to the Class A Noteholders, (iii) the final payment or other
liquidation of the last Mortgage Loan remaining in the Trust (including, without
limitation, the disposition of the Mortgage Loan pursuant to Section 12.1
hereof) or the disposition of all property acquired upon foreclosure or deed in
lieu of foreclosure of any Mortgage Loan and (iv) the Payment Date in February
2024; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the date of death of the last
surviving descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, living on the date hereof. Upon termination in
accordance with clause (B)(i) of this Section 10.1(a), the Indenture Trustee
shall execute such documents and instruments of transfer presented by the
Sponsor, in each case without recourse, representation or warranty, and take
such other actions as the Sponsor may reasonably request to effect the transfer
of the Mortgage Loan to the Sponsor.
(b) The Class A Notes shall be subject to optional transfer to the Sponsor
on any Payment Date after the Class A Principal Balance has been reduced to an
amount less than or equal to $8,000,000 (10% of the Original Class A Principal
Balance) and all amounts due and owing to the Insurer as a Reimbursement Amount
have been paid. Such transfer shall only be permitted if the Sponsor delivers to
the Indenture Trustee an amount equal to the sum of the outstanding Class A
Principal Balance and accrued and unpaid interest thereon at the Class A
Interest Rate through the day preceding the final Payment Date plus all
Reimbursement Amounts (such amount, the "Redemption Price"). In connection with
such purchase, the Master Servicer shall remit to the Indenture Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Note Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(c) Promptly following any such purchase, the Indenture Trustee will
release the Mortgage Files to the Master Servicer, or otherwise upon their
order, in a manner similar to that described in Section 4.14 of the Sale and
Servicing Agreement.
(d) Advanta National Bank may not participate in any purchase described in
this Section 10.1(b), or fund any portion of the purchase price, unless the
then-outstanding Principal Balances of the Mortgage Loans in the Trust Estate is
less than or equal to five percent of the sum of the aggregate Loan Balances of
all Mortgage Loans in the Trust Estate as of the Initial Cut-Off Date and the
Original Pre-Funded Amount.
(e) If the Notes are to be redeemed pursuant to this Section 10.1(a), the
Master Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 45 days prior to the Redemption Date and the
Issuer shall deposit with the Indenture Trustee in the Note Account the
Redemption Price of the Notes not less than five Business Days
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prior to the Redemption Date whereupon all such Notes shall be due and payable
on the Redemption Date upon the furnishing of a notice complying with Section
10.2.
SECTION 10.2. Surrender of Notes. (a) Notice of any termination, specifying
the Payment Date (which shall be a date that would otherwise be a Payment Date)
upon which the Noteholders may surrender their Notes to the Indenture Trustee
for payment of the final distribution and cancellation, shall be given promptly
by the Indenture Trustee (upon receipt of written directions from the Sponsor,
if the Sponsor is exercising its right to transfer of the Mortgage Loans, given
not later than the first day of the month preceding the month of such final
distribution) to the Insurer and to the Master Servicer and by letter to
Noteholders mailed not earlier than the 15th day and not later than the 25th day
of the month next preceding the month of such final distribution specifying (i)
the Payment Date upon which final distribution of the Notes will be made upon
presentation and surrender of Notes at the office or agency of the Indenture
Trustee therein designated, (ii) the amount of any such final distribution and
(iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, distributions being made only upon presentation and surrender of the
Notes at the office or agency of the Indenture Trustee therein specified.
(b) Any money held by the Indenture Trustee in trust for the payment of any
amount due with respect to any Class A Note and remaining unclaimed by the
related Class A Noteholder 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 Insurer on account of any
Reimbursement Amounts, and second, to the Certificateholders of the Originator's
Interest; and such Class A Noteholder shall thereafter, as an unsecured general
creditor, look only to the Insurer or the Certificateholders of the Originator's
Interest for payment thereof (but only to the extent of the amounts so paid to
the Insurer or the Certificateholders of the Originator's Interest), and all
liability of the Indenture Trustee with respect to such trust money shall
thereupon cease; provided, however, that the Indenture Trustee, before being
required to make any such payment, shall at the expense of the Trust cause to be
published once, in the eastern edition of The Wall Street Journal, notice that
such money remains unclaimed and that, after a date specified therein, which
shall be not fewer than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be paid to the Insurer or the
Certificateholders of the Originator's Interest. The Indenture Trustee shall, at
the direction of the Sponsor, also adopt and employ, at the expense of the
Trust, any other reasonable means of notification of such payment (including,
but not limited to, mailing notice of such payment to Class A Noteholders whose
right to or interest in monies due and payable but not claimed is determinable
from the Note Register at the last address of record for each such Class A
Noteholder).
SECTION 10.3. Form of Redemption Notice. Notice of redemption supplied to
the Indenture Trustee by the Master Servicer under Section 10.1(a) shall be
given by the Indenture Trustee by facsimile or by first-class mail, postage
prepaid, transmitted or mailed prior to the applicable Redemption Date to each
Holder of Notes of record, as of the close of business on the date which is not
less than 5 days prior to the applicable Redemption Date, at such Holder's
address appearing in the Note Register.
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All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such Redemption Date is
not applicable and that payments shall be made only upon presentation and
surrender of such Notes at the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.2); and
(iv) that interest on the Notes shall cease to accrue on the Redemption
Date.
Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
SECTION 10.4. Notes Payable on Redemption Date. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.2, on the
Redemption Date become due and payable at the Redemption Price and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
ARTICLE XI.
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and to the Insurer if the application or request is made to the
Indenture Trustee (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
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(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) 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;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory
such condition or covenant has been complied with.
SECTION 11.2. Form of Documents Delivered to Indenture 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 or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Master Servicer, the Sponsor or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Master Servicer, the
Sponsor or the Issuer, 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.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of
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the Issuer to have such application granted or to the sufficiency of such
certificate or report. The foregoing shall not, however, be construed to affect
the Indenture Trustee's right to conclusively rely upon the truth and accuracy
of any statement or opinion contained in any such document as provided in
Article VI.
SECTION 11.3. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents 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 Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders 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 Indenture and (subject to Section 6.1)
conclusive in favor of the Indenture Trustee and the Issuer, 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 in any customary manner of the Indenture Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.4. Notices, etc. to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed first-class and shall be deemed to have been duly
given upon receipt to the Indenture Trustee at its Corporate Trust Office and
any notice delivered by facsimile shall be addressed to the Corporate Trust
Office, telecopy number (949) 253-7577.
(b) The Issuer by the Indenture Trustee or by any Noteholder shall be in
writing and shall be sufficient for every purpose hereunder if personally
delivered, delivered by facsimile or overnight courier or mailed first class,
and shall deemed to have been duly given upon receipt to the Issuer addressed
to: Advanta Home Equity Loan Trust 1998-A, in care of Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at any other address
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previously furnished in writing to the Indenture Trustee by Issuer. The Issuer
shall promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
(c) The Insurer by the Issuer or the Indenture Trustee shall be sufficient
for any purpose hereunder if in writing and mailed by first-class mail,
personally delivered, or telecopied to the recipient as follows:
To the Insurer: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Howard Pfeffer
Structured Finance Department
Telecopy: (212) 363-1459
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered, delivered by overnight courier or first class or via facsimile to (i)
in the case of Moody's, at the following address: Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10004, Fax No: (212) 533-0355, and
(ii) in the case of S&P, at the following address: Standard & Poor's Ratings
Group, 26 Broadway (15th Floor), New York, New York 10004, Attention: Asset
Backed Surveillance Department, Fax No: (212) 412-0224; or as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
SECTION 11.5. Notices to Noteholders; Waiver. Where this Indenture provides
for notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class, postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Noteholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice that is mailed in the manner herein provided shall
conclusively be presumed to have been duly given.
Where this Indenture 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 Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
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Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder.
SECTION 11.6. Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Note Paying Agent to such
Holder, that is different from the methods provided for in this Indenture for
such payments or notices, provided that such methods are reasonable and
consented to by the Indenture Trustee (which consent shall not be unreasonably
withheld). The Issuer will furnish to the Indenture Trustee a copy of each such
agreement and the Indenture Trustee will cause payments to be made and notices
to be given in accordance with such agreements.
SECTION 11.7. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.8. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors.
SECTION 11.10. Separability. In case any provision in this Indenture or in
the Notes 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 11.11. Benefits of Indenture. The Insurer and its successors and
assigns shall be a third-party beneficiary to the provisions of this Indenture,
and shall be entitled to rely upon and directly to enforce such provisions of
this Indenture. Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the Insurer and the Noteholders, and any other party secured
hereunder, and any other person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture. The Insurer may disclaim any of its rights and powers under this
Indenture (in which case the Indenture Trustee may exercise such right or power
hereunder), but not its duties and obligations under the Policy, upon delivery
of a written notice to the Indenture Trustee.
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SECTION 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment 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 on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trust or any other counsel reasonably acceptable to
the Indenture Trustee and the Insurer) to the effect that such recording is
necessary either for the protection of the Noteholders or any other person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Sponsor, the
Originator, the Master Servicer, the Owner Trustee or the Indenture Trustee on
the Notes or under this Indenture or any certificate or other writing delivered
in connection herewith or therewith, against (i) the Sponsor, the Originator,
the Master Servicer, the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Sponsor, the Originator, the Master Servicer, the Indenture Trustee
or the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Sponsor, the Originator, the Master Servicer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Sponsor, the Originator, the Master Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will
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not at any time institute against the Sponsor, or the Issuer, or join in any
institution against the Sponsor, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Operative Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee or of the
Insurer, during the Issuer's normal business hours, to examine all the books of
account, records, reports, and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall and shall cause its representatives to
hold in confidence all such information except to the extent disclosure may be
required by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its Obligations hereunder.
SECTION 11.19. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as Owner
Trustee of the Issuer under the Trust Agreement, in the exercise of the powers
and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability, if
any, being expressly waived by the parties to this Agreement and by any person
claiming by, through or under them and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaking by the
Issuer under this Agreement or any related documents.
ARTICLE XII.
Rapid Amortization Events
SECTION 12.1. Rapid Amortization Events. The following shall constitute
Rapid Amortization Events:
(a) failure on the part of Sponsor (i) to make a payment or deposit
required under the Sale and Servicing Agreement within four Business Days after
the date such payment or deposit is required to be made or (ii) to observe or
perform in any material respect any other covenants or agreements of the Sponsor
set forth in the Sale and Servicing Agreement, which failure continues
unremedied for a period of 60 days after written notice;
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(b) any representation or warranty made by the Sponsor in the Sale and
Servicing Agreement proves to have been incorrect in any material respect when
made and continues to be incorrect in any material respect for a period of 60
days after written notice and as a result of which the interests of the Holders
or the Insurer are materially and adversely affected: provided, however, that a
Rapid Amortization Event shall not be deemed to occur if the Sponsor has
purchased or made a substitution for the related Mortgage Loan or Mortgage Loans
if applicable during such period (or within an additional 60 days with the
consent of the Indenture Trustee and the Insurer) in accordance with the
provisions of the Sale and Servicing Agreement;
(c) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the Originator;
(d) the Trust becomes subject to regulation by the Securities and Exchange
Commission as an investment company within the meaning of the Investment Company
Act of 1940, as amended;
(e) the occurrence of an event permitting the removal of the Master
Servicer;
(f) default in the payment of any interest, principal or any installment of
principal on any Note when the same becomes due and payable, and such default
continues for a period of five days; and
(g) the aggregate of all draws under the Policy exceeds 1% of the Cut-Off
Date Pool Balance.
In the case of any event described in clause (a), (b), (e) or (g), a Rapid
Amortization Event will be deemed to have occurred only if, after the applicable
grace period, if any, described herein or in the Indenture or Sale and Servicing
Agreement either (i) the Indenture Trustee or Holders holding Class A Notes
evidencing more than 51% of the aggregate principal amount of the Class A Notes
with the consent of the Insurer (so long as there is no continuing default by
the Insurer in the performance of its obligations under the Policy) or the
Insurer (so long as there is no continuing default by the Insurer in the
performance of its obligations under the Policy), by written notice to the
Insurer, the Sponsor, the Originator, the Rating Agencies, and the Master
Servicer (and to the Indenture Trustee, if given by the Holders or the Insurer)
declare that a Rapid Amortization Event has occurred as of the date of such
notice. In the case of any event described in clause (c), (d) or (f), a Rapid
Amortization Event will be deemed to have occurred without any notice or other
action on the part of the Indenture Trustee, the Holders or the Insurer
immediately upon the occurrence of such event.
In addition to the consequences of a Rapid Amortization Event discussed
above, if (i) a default in the payment of the Class A Interest Distribution
Amount occurs on any Payment Date and continues for a period of five days or
(ii) the Originator voluntarily files a bankruptcy petition or goes into
liquidation or any person is appointed a receiver or bankruptcy trustee of the
Originator, on the day of any such filing or appointment no further Additional
Balances will be transferred to the Trust, and the Originator will promptly give
notice to the Indenture Trustee and
78
<PAGE> 85
the Insurer of any such filing or appointment. Within 15 days, the Indenture
Trustee will publish a notice of the occurrence of such event. Unless otherwise
instructed within 60 days by either the Insurer or, with the consent of the
Insurer (so long as no Insurer Default shall have occurred and be continuing),
the Holders representing undivided interests aggregating more than 51% of the
aggregate principal amount of the Class A Notes, the Indenture Trustee will
sell, dispose of or otherwise liquidate the Trust Estate in a commercially
reasonable manner and on commercially reasonable terms. Any such sale, disposal
or liquidation and such sale, disposal or liquidation will be "servicing
retained" by the Master Servicer. The net proceeds of such sale will first be
paid to the Insurer to the extent of unreimbursed draws under the Policy and
other amounts owing to the Insurer (but only if an Insurer Default shall not
have occurred and be continuing). The remainder of such net proceeds will then
be distributed to the Holders of the Class A Notes insofar as may be necessary
to required to reduce the Class A Principal Balance, together with all accrued
and unpaid interest due thereon, to zero. The Policy will cover any amount by
which such remaining net proceeds are insufficient to pay the Class A Principal
Balance in full.
[Signature Page Follows]
79
<PAGE> 86
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, hereunto duly
authorized, all as of the day and year first above written.
ADVANTA REVOLVING HOME EQUITY LOAN
TRUST 1998-A,
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee,
By: /s/ DEBRA EBERLY
-------------------------------------
Name: Debra Eberly
Title: Administrative Account Manager
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as Indenture
Trustee
By: /s/ STEPHEN HESSLER
-----------------------------------------
Name: Stephen Hessler
Title: Assistant Vice President
[Signature Page of Indenture]
<PAGE> 87
EXHIBIT A
[Form of Note]
REGISTERED $80,000,000
No. A-__
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ___________
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1998-A
CLASS A ASSET BACKED NOTES
Advanta Revolving Home Equity Loan Trust 1998-A, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of EIGHTY MILLION DOLLARS ($80,000,000),
such amount payable on each Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $80,000,000 and
the denominator of which is $80,000,000 by (ii) the aggregate amount, if any,
payable from the Note Account in respect of principal on the Class A Notes
pursuant to Section 8.6 of the Indenture; provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the August 25,
2023 Payment Date (the "Final Scheduled Payment Date"). The Issuer will pay
interest on this Note at the rate per annum provided in the Indenture on each
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Payment Date (after giving effect to all payments of principal made on the
preceding Payment Date). Interest on this Note will accrue for each Payment Date
from the most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid, from June 24,
1998.
A-1
<PAGE> 88
Interest will be computed on the basis of the actual number of days elapsed in a
360-day year. Such principal of and interest on this Note shall be paid in the
manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Policy") issued by Ambac Assurance Corporation (the "Insurer"),
pursuant to which the Insurer has unconditionally guaranteed payments of the
Insured Payments on each Payment Date, all as more fully set forth in the
Indenture.
For purposes of federal income, state and local income and franchise and
any other income taxes, the Issuer will treat the Notes as indebtedness of the
Issuer and hereby instructs the Indenture Trustee to treat the Notes as
indebtedness of the Issuer for federal state tax reporting purposes.
Each Noteholder or Note Owner, by acceptance of this Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Sponsor, the Originator, the Master Servicer, the
Indenture Trustee, or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any owner, beneficiary,
agent, officer, director or employee of the Sponsor, the Originator, the Master
Servicer, the Indenture Trustee, or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Sponsor, the
Originator, the Master Servicer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Sponsor, the Originator, the Master Servicer,
the Indenture Trustee, or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
A-2
<PAGE> 89
Any Noteholder using the assets of (i) an employee benefit plan (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity to purchase the Notes, or to whom
the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
A-3
<PAGE> 90
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: June 24, 1998 ADVANTA REVOLVING HOME EQUITY LOAN
TRUST 1998-A
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but solely as Owner
Trustee under the Trust Agreement
By:
--------------------------------------
Name:
Title:
A-4
<PAGE> 91
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: June 24, 1998 BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as Indenture
Trustee,
By:
----------------------------------------
Name:
Title:
A-5
<PAGE> 92
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A Asset Backed Notes (herein called the "Class A
Notes"), all issued under an Indenture dated as of June 1, 1998 (such indenture,
as supplemented or amended, is herein called the "Indenture"), between the
Issuer and Bankers Trust Company of California, N.A., as trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be secured by the collateral pledged as
security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the twenty-fifth day
of each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing July 27, 1998. The term "Payment Date" shall be deemed
to include the Final Scheduled Payment Date.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Scheduled Payment Date and the
Redemption Date, if any, pursuant to Section 10.1(a) of the Indenture.
Notwithstanding the foregoing, if (i) a default in the payment of the Class A
Interest Distribution Amount occurs on any Payment Date and continues for a
period of five days or (ii) the Originator voluntarily files a bankruptcy
petition or goes into liquidation or any person is appointed a receiver or
bankruptcy trustee of the Originator, then (x) the Indenture Trustee will
publish a notice of the occurrence of such event and (y) unless otherwise
instructed within 60 days by either the Insurer or, with the consent of the
Insurer (so long as no Insurer Default shall have occurred and be continuing),
the Holders of the Notes representing at least 51% of the Outstanding Amount of
the Notes, the Indenture Trustee shall sell or liquidate the Trust Estate and
(after payment of certain amounts, if any, owing to the Insurer) shall
distribute the net proceeds therefrom to the Class A Noteholders as provided in
Section 12.1 of the Indenture. All principal payments on the Class A Notes shall
be made pro rata to the Class A Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) on the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears
A-6
<PAGE> 93
on the Note Register as of the applicable Record Date without requiring that
this Note be submitted for notation of payment. Any reduction in the principal
amount of this Note (or any one or more Predecessor Notes) effected by any
payments made on any Payment Date shall be binding upon all future Holders of
this Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Holder hereof as of the Record Date preceding such
Payment Date by notice mailed prior to such Payment Date and the amount then due
and payable shall be payable only upon presentation and surrender of this Note
at the Indenture Trustee's principal Corporate Trust Office or at the office of
the Indenture Trustee's agent appointed for such purposes located in The City of
New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A Note Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1(b) of the Indenture, in whole, but not in part, at the option of the
Sponsor, on any Payment Date on or after the date on which the Class A Note
Principal Balance is less than or equal to 10% of the Original Class A Note
Principal Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar which requirements
include membership or participation in Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Sponsor, the Originator, the Master Servicer, the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any owner, beneficiary,
agent, officer, director or
A-7
<PAGE> 94
employee of the Sponsor, the Originator, the Master Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Sponsor, the Originator, the Master
Servicer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Sponsor, the Originator, the Master Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture Trustee
and the Owner Trustee have no such obligations in their individual capacity) and
except that any such owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Sponsor, or the Issuer or join in any institution
against the Sponsor, or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings, under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the Operative Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and the Insurer and any agent of the Issuer, the
Indenture Trustee or the Insurer may treat the Person in whose name this Note
(as of the day of determination or as of such other date as may be specified in
the Indenture) is registered as the owner hereof for all purposes, whether or
not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. Any such consent or waiver by the Holder of this Note (or any one
of more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder but with the consent of the Insurer.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights
A-8
<PAGE> 95
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Operative Documents, neither Wilmington Trust
Company in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Issuer for the sole purposes of binding the interests of the Issuer in
the assets of the Issuer. The Holder of this Note by the acceptance hereof
agrees that except as expressly provided in the Indenture or the Operative
Documents, in the case of an Rapid Amortization Event under the Indenture, the
Holder shall have no claim against any of the foregoing for any deficiency, loss
or claim therefrom; provided, however, that nothing contained herein shall be
taken to prevent recourse to, and enforcement against, the assets of the Issuer
for any and all liabilities, obligations and undertakings contained in the
Indenture or in this Note.
A-9
<PAGE> 96
ASSIGNMENT
Social Security or Taxpayer I.D. or other identifying number of assignee: ______
_______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints __________________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: ________________ ___________________________________*
Signature Guaranteed:
Dated: ________________ ___________________________________
________________________
A-10
<PAGE> 97
*NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever.
A-11
<PAGE> 1
EXHIBIT 4.2
<PAGE> 2
EXECUTION COPY
--------------
TRUST AGREEMENT
between
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Sponsor
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of June 1, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. Definitions.........................................................................................1
SECTION 1.1 Capitalized Terms.................................................................1
SECTION 1.2 Other Definitional Provisions.....................................................3
SECTION 1.3 Action by or Consent of Noteholders and Certificateholders........................3
ARTICLE II. Organization.......................................................................................4
SECTION 2.1 Names.............................................................................4
SECTION 2.2 Office............................................................................4
SECTION 2.3 Purposes and Powers...............................................................4
SECTION 2.4 Appointment of Owner Trustee......................................................5
SECTION 2.5 Initial Capital Contribution of Trust Estate......................................5
SECTION 2.6 Declaration of Trust..............................................................5
SECTION 2.7 Liability.........................................................................5
SECTION 2.8 Title to Trust Property...........................................................5
SECTION 2.9 Situs of Trust....................................................................5
SECTION 2.10 Representations and Warranties of the Sponsor.....................................6
SECTION 2.11 Federal Income Tax Allocations....................................................7
SECTION 2.12 Covenants of the Sponsor..........................................................7
SECTION 2.13 Covenants of the Certificateholders...............................................8
ARTICLE III. Certificates and Transfer of Interests............................................................8
SECTION 3.1 Initial Ownership.................................................................8
SECTION 3.2 The Certificates..................................................................9
SECTION 3.3 Authentication of Certificates....................................................9
SECTION 3.4 Registration of Transfer and Exchange of Certificates.............................9
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates.................................9
SECTION 3.6 Persons Deemed Certificateholders................................................10
SECTION 3.7 Access to List of Certificateholders' Names and Addresses........................10
SECTION 3.8 Maintenance of Office or Agency..................................................10
SECTION 3.9 ERISA............................................................................10
SECTION 3.10 Restrictions on Transfer of Certificates.........................................11
SECTION 3.11 Acceptance of Obligations........................................................12
SECTION 3.12 Payments on Certificates.........................................................12
ARTICLE IV. Voting Rights and Other Actions...................................................................12
SECTION 4.1 Prior Notice to Holders with Respect to Certain Matters..........................12
SECTION 4.2 Action by Certificateholders with Respect to Certain Matters.....................13
SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy..........................13
SECTION 4.4 Restrictions on Certificateholders' Power........................................13
SECTION 4.5 Majority Control.................................................................14
SECTION 4.6 Rights of Insurer................................................................14
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE V. Certain Duties.....................................................................................14
SECTION 5.1 Accounting and Records to the Noteholders, Certificateholders, the
Internal Revenue Service and Others..............................................14
SECTION 5.2 Signature on Returns; Tax Matters Partner........................................15
ARTICLE VI. Authority and Duties of Owner Trustee.............................................................15
SECTION 6.1 General Authority................................................................15
SECTION 6.2 General Duties...................................................................15
SECTION 6.3 Action upon Instruction..........................................................15
SECTION 6.4 No Duties Except as Specified in this Agreement or in Instructions...............16
SECTION 6.5 No Action Except under Specified Documents or Instructions.......................16
SECTION 6.6 Restrictions.....................................................................17
ARTICLE VII. Concerning the Owner Trustee.....................................................................17
SECTION 7.1 Acceptance of Trust and Duties...................................................17
SECTION 7.2 Furnishing of Documents..........................................................18
SECTION 7.3 Representations and Warranties...................................................18
SECTION 7.4 Reliance; Advice of Counsel......................................................18
SECTION 7.5 Not Acting in Individual Capacity................................................19
SECTION 7.6 Owner Trustee Not Liable for Certificates or Mortgage Loans......................19
SECTION 7.7 Owner Trustee May Own Certificates and Notes.....................................19
SECTION 7.8 Payments from Owner Trust Estate.................................................19
SECTION 7.9 Doing Business in Other Jurisdictions............................................20
ARTICLE VIII. Compensation of Owner Trustee...................................................................20
SECTION 8.1 Owner Trustee's Fees and Expenses................................................20
SECTION 8.2 Indemnification..................................................................20
SECTION 8.3 Payments to the Owner Trustee....................................................20
SECTION 8.4 Non-recourse Obligations.........................................................21
ARTICLE IX. Termination of Trust Agreement....................................................................21
SECTION 9.1 Termination of Trust Agreement...................................................21
ARTICLE X. Successor Owner Trustees and Additional Owner Trustees.............................................22
SECTION 10.1 Eligibility Requirements for Owner Trustee.......................................22
SECTION 10.2 Resignation or Removal of Owner Trustee..........................................22
SECTION 10.3 Successor Owner Trustee..........................................................23
SECTION 10.4 Merger or Consolidation of Owner Trustee.........................................23
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee........................24
ARTICLE XI. Miscellaneous.....................................................................................25
SECTION 11.1 Supplements and Amendments.......................................................25
SECTION 11.2 No Legal Title to Owner Trust Estate in Certificateholders.......................26
SECTION 11.3 Limitations on Rights of Others..................................................26
SECTION 11.4 Notices..........................................................................26
SECTION 11.5 Severability.....................................................................26
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 11.6 Separate Counterparts............................................................26
SECTION 11.7 Assignments; Insurer.............................................................26
SECTION 11.8 No Petition......................................................................27
SECTION 11.9 No Recourse......................................................................27
SECTION 11.10 Headings.........................................................................27
SECTION 11.11 Governing Law....................................................................27
SECTION 11.12 Master Servicer..................................................................27
</TABLE>
EXHIBITS
Exhibit A.........Form of Certificate
Exhibit B.........Form of Certificate of Trust
iii
<PAGE> 6
TRUST AGREEMENT dated as of June 1, 1998 between ADVANTA
MORTGAGE CONDUIT SERVICES, INC., a Delaware corporation (the "Sponsor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation as Owner Trustee.
ARTICLE I.
Definitions
SECTION 1.1 Capitalized Terms. For the purposes of this
Agreement, the following terms shall have the meanings set forth below. All
other capitalized terms used herein but not defined shall have the meanings set
forth in the Sale and Servicing Agreement.
"Affiliate" shall mean with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, or owns, directly or
indirectly, 50% or more of, the Person specified.
"Agreement" shall mean this Trust Agreement, as the same may
be amended and supplemented from time to time.
"Benefit Plan" shall have the meaning assigned to such term in
Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of
the Delaware Code, 12 Del. Code Sections 3801 et. seq. as the same may be
amended from time to time.
"Certificate" means a trust certificate evidencing the
beneficial ownership interest of a Certificateholder in the Trust, substantially
in the form of Exhibit A attached hereto.
"Certificate Account" shall mean the account designated as
such as established and maintained pursuant to the Indenture.
"Certificate of Trust" shall mean the Certificate of Trust in
the form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of
the Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean
the register maintained and the registrar appointed pursuant to Section 3.4.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at such other address as the Owner
Trustee may designate by notice to the Certificateholders and the Sponsor, or
the principal corporate trust office of any successor Owner Trustee (the address
of which the successor owner trustee will notify the Certificateholders and the
Sponsor).
"Definitive Certificates" shall mean Certificates issued in
certificated, fully registered form.
"ERISA" shall have the meaning assigned to such term in
Section 3.9.
"Expenses" shall have the meaning assigned to such term in
Section 8.2.
<PAGE> 7
"Holder" or "Certificateholder" shall mean the Person in whose
name a Certificate is registered on the Certificate Register.
"Indemnification Agreement" shall mean the Indemnification
Agreement dated as of June 24, 1998 among the Insurer, the Sponsor and J.P.
Morgan & Co.
"Indemnified Parties" shall have the meaning assigned to such
term in Section 8.2.
"Indenture" shall mean the Indenture dated as of June 1, 1998,
between the Issuer and Bankers Trust Company of California, N.A., as Indenture
Trustee, as the same may be amended and supplemented from time to time.
"Indenture Trustee" shall mean, initially Bankers Trust
Company of California, N.A., in its capacity as indenture trustee, including its
successors in interest, until and unless a successor Person shall have become
the Indenture Trustee pursuant to the Sale and Servicing Agreement and
thereafter "Indenture Trustee" shall mean such successor Person.
"Instructing Party" shall have the meaning assigned to such
term in Section 6.3.
"Insurance Agreement" shall mean the Insurance Agreement dated
as of June 24, 1998 among the Insurer, the Sponsor, the Master Servicer and the
Indenture Trustee.
"Insurer" shall mean Ambac Assurance Corporation, or its
successor in interest.
"Issuer" shall mean Advanta Revolving Home Equity Loan Trust
1998-A.
"Master Servicer" shall mean Advanta Mortgage Corp. USA.
"Operative Documents" shall mean this Agreement, the
Certificate of Trust, the Sale and Servicing Agreement, the Indemnification
Agreement, the Insurance Agreement, the Indenture and the other documents and
certificates delivered in connection therewith.
"Originator" shall mean Advanta National Bank.
"Owner Trust Estate" shall mean all right, title and interest
of the Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Account and all other property
of the Trust from time to time, including any rights of the Owner Trustee and
the Trust pursuant to the Sale and Servicing Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor Owner Trustee hereunder.
"Record Date" shall mean with respect to any Payment Date, the
close of business on the last Business Day immediately preceding such Payment
Date.
"Sale and Servicing Agreement" shall mean the Sale and
Servicing Agreement among the Trust, Advanta Mortgage Conduit Services, Inc., as
Sponsor, Advanta Mortgage Corp. USA, as Master Servicer, and the Indenture
Trustee, dated as of June 1, 1998, as the same may be amended and supplemented
from time to time.
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"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Security Majority" means a majority by principal amount of
the Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Sponsor" shall mean Advanta Mortgage Conduit Services, Inc.
in its capacity as Sponsor hereunder.
"Treasury Regulations" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein
to specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Accounts" shall have the meaning ascribed thereto in
the Sale and Servicing Agreement.
SECTION 1.2 Other Definitional Provisions.. (a) Legal title
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to them in the Sale and Servicing Agreement or, if not defined therein,
in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles as in effect on the
date of this Agreement or any such certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document shall
control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
SECTION 1.3 Action by or Consent of Noteholders and
Certificateholders. Whenever any provision of this Agreement refers to action to
be taken, or consented to, by Noteholders or Certificateholders, such provision
shall be deemed to refer to the Certificateholder or Noteholder, as the case may
be, of record as of the Record Date immediately preceding the date on which such
action is to be taken, or consent given, by Noteholders or Certificateholders.
Solely for the purposes of any action to be taken, or consented to, by
Noteholders or Certificateholders, any Note or Certificate registered in the
name of the Sponsor or any Affiliate thereof shall be deemed not to be
outstanding;
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provided, however that, solely for the purpose of determining whether the
Indenture Trustee is entitled to rely upon any such action or consent, only
Notes or Certificates which the Owner Trustee, or the Indenture Trustee,
respectively, knows to be so owned shall be so disregarded.
ARTICLE II.
Organization
SECTION 2.1 Names. There is hereby formed a trust to be known
as "Advanta Revolving Home Equity Loan Trust 1998-A," in which name the Owner
Trustee may conduct the business of the Trust, make and execute contracts and
other instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care
of the Owner Trustee at the Corporate Trust Office or at such other address as
the Owner Trustee may designate by written notice to the Certificateholders and
the Sponsor.
SECTION 2.3 Purposes and Powers. The purpose of the Trust is,
and the Trust shall have the power and authority, to engage in the following
activities:
(i) to issue the Notes pursuant to the Indenture
and the Certificates pursuant to this Agreement, and to sell
the Notes;
(ii) with the proceeds of the sale of the Notes, to
fund the Pre-Funding Account and to pay the organizational,
start-up and transactional expenses of the Trust and to pay
the balance to the Sponsor pursuant to the Sale and Servicing
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage
and convey the Owner Trust Estate to the Indenture Trustee on
behalf of the Noteholders and for the benefit of the Insurer
and to hold, manage and distribute to the Certificateholders
pursuant to the terms of the Sale and Servicing Agreement any
portion of the Owner Trust Estate released from the Lien of,
and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations
under the Operative Documents to which it is a party;
(v) to engage in those activities, including
entering into agreements, that are necessary, suitable or
convenient to accomplish the foregoing or are incidental
thereto or connected therewith; and
(vi) subject to compliance with the Operative
Documents, to engage in such other activities as may be
required in connection with conservation of the Owner Trust
Estate and the making of distributions to the
Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the
Operative Documents.
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SECTION 2.4 Appointment of Owner Trustee. The Sponsor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein and in the
Business Trust Statute.
SECTION 2.5 Initial Capital Contribution of Trust Estate. The
Sponsor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Sponsor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Account. On or prior to the Closing
Date, the Owner Trustee will also, upon receipt thereof, acknowledge on behalf
of the Trust receipt of the Mortgage Loans pursuant to the Sale and Servicing
Agreement. The Sponsor shall pay organizational expenses of the Trust as they
may arise.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject to
the conditions set forth herein for the use and benefit of the
Certificateholders, subject to the obligations of the Trust under the Operative
Documents. It is the intention of the parties hereto that the Trust constitute a
business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. It is the intention
of the parties hereto that, solely for income tax purposes, the Trust shall be
treated as a branch; provided, however, that in the event Certificates are owned
by more than one Certificateholder, it is the intention of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall then be
treated as a partnership and that, unless otherwise required by appropriate tax
authorities, only after such time the Trust will file or cause to be filed
annual or other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes. Effective
as of the date hereof, the Owner Trustee shall have all rights, powers and
duties set forth herein and to the extent not inconsistent herewith, in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
The Owner Trustee shall file the Certificate of Trust with the Secretary of
State.
SECTION 2.7 Liability. No Holder shall have any personal
liability for any liability or obligation of the Trust.
SECTION 2.8 Title to Trust Property. (a) Legal title to all
of the Owner Trust Estate shall be vested at all times in the Trust as a
separate legal entity except where applicable law in any jurisdiction requires
title to any part of the Owner Trust Estate to be vested in a trustee or
trustees, in which case title shall be deemed to be vested in the Owner Trustee,
a co-trustee and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the
Trust Property. The Holders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Article IX. No transfer, by operation of law or otherwise, of any right, title
or interest by any Certificateholder of its ownership interest in the Owner
Trust Estate shall operate to terminate this Agreement or the trusts hereunder
or entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Trust Property.
SECTION 2.9 Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. Payments will be received by the Trust only in Delaware or
New York and payments will be made by the Trust only from Delaware or New York.
The Trust shall not have any employees in any state other than Delaware;
provided, however, that nothing herein shall restrict or prohibit the Owner
Trustee, the Master Servicer or any agent of the Trust
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from having employees within or without the State of Delaware. The only office
of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Sponsor.
The Sponsor makes the following representations and warranties on which the
Owner Trustee relies in accepting the Owner Trust Estate in trust and issuing
the Certificates and upon which the Insurer relies in issuing the Policy.
(a) The Sponsor is duly organized and validly existing as a
Delaware corporation with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted and is proposed to be conducted pursuant to this Agreement
and the Operative Documents;
(b) It is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of its property,
the conduct of its business and the performance of its obligations under this
Agreement and the Operative Documents requires such qualification;
(c) The Sponsor has the corporate power and authority to
execute and deliver this Agreement and to carry out its terms; the Sponsor has
full power and authority to sell and assign the property to be sold and assigned
to and deposited with the Trust and the Sponsor has duly authorized such sale
and assignment and deposit to the Trust by all necessary corporate action; and
the execution, delivery and performance of this Agreement has been duly
authorized by the Sponsor by all necessary corporate action. The Sponsor has
duly executed this Agreement and this Agreement constitutes a legal, valid and
binding obligation of the Sponsor enforceable against the Sponsor, in accordance
with its terms.
(d) To the best knowledge of the Sponsor, no consent, license,
approval or authorization or registration or declaration with, any Person or
with any governmental authority, bureau or agency is required in connection with
the execution, delivery or performance of this Agreement and the Operative
Documents, except for such as have been obtained, effected or made;
(e) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the certificate of
incorporation or by-laws of the Sponsor, or any material indenture, agreement or
other instrument to which the Sponsor is a party or by which it is bound; nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Operative Documents); nor violate any law or, to the
best of the Sponsor's knowledge, any order, rule or regulation applicable to the
Sponsor of any court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Sponsor or its properties; and
(f) There are no proceedings or investigations pending or, to
its knowledge threatened against it before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over it or its properties (A) asserting the invalidity of this
Agreement or any of the Operative Documents, (B) seeking to prevent the issuance
of the Certificates or the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Documents, (C) seeking
any determination or ruling that might materially and adversely affect its
performance of its obligations under, or the validity or enforceability
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of, this Agreement or any of the Operative Documents, or (D) seeking to
adversely affect the federal income tax or other federal, state or local tax
attributes of the Notes or the Certificates.
SECTION 2.11 Federal Income Tax Allocations. In the event
that the Trust is treated as a partnership for Federal income tax purposes, net
income of the Trust for any month as determined for Federal income tax purposes
(and each item of income, gain, loss, credit and deduction entering into the
computation thereof) shall be allocated to the extent of available net income,
among the Certificateholders as of the first Record Date following the end of
such month, in proportion to their ownership percentage of principal amount of
Certificates on such date.
Net losses of the Trust, if any, for any month as determined
for Federal income tax purposes (and each item of income, gain, loss, credit and
deduction entering into the computation thereof) shall be allocated among the
Certificateholders as of the Record Date in proportion to their ownership
percentage of principal amount of Certificates on such Record Date until the
principal balance of the Certificates is reduced to zero. The Sponsor, as agent
on behalf of the Originator, is authorized to modify the allocations in this
paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the
Certificateholders, or as otherwise required by the Code.
SECTION 2.12 Covenants of the Sponsor. The Sponsor agrees and
covenants for the benefit of each Certificateholder, the Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
(a) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as permitted by
its certificate of incorporation and the Operative Documents;
(b) it shall not, for any reason, institute proceedings for
the Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of the property of the
Trust or cause or permit the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Operative
Document to which it or the Trust is a party and each other agreement entered
into on or after the date hereof to which it or the Trust is a party, an
agreement by each such counterparty that prior to the occurrence of the event
specified in Section 9.1(e) such counterparty shall not institute against, or
join any other Person in instituting against, it or the Trust, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States; and
(d) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against it, or file a petition seeking or consenting
to reorganization or relief under any applicable federal or state law relating
to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of it or a
substantial part of its property, or make any assignment for the benefit of
creditors, or admit in writing
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its inability to pay its debts generally as they become due, or declare or
effect a moratorium on its debt or take any action in furtherance of any such
action.
SECTION 2.13 Covenants of the Certificateholders. Each
Certificateholder agrees:
(a) to be bound by the terms and conditions of the
Certificates and of this Agreement, including any supplements or amendments
hereto and to perform the obligations of a Certificateholder as set forth
therein or herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee, the Insurer
and all other Certificateholders present and future;
(b) to hereby appoint the Sponsor as such Certificateholder's
agent and attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust, if any, and agree that, if requested by the Trust,
it will sign such federal income tax information return in its capacity as
holder of an interest in the Trust. Each Certificateholder also hereby agrees
that in its tax returns it will not take any position inconsistent with those
taken in any tax returns that may be filed by the Trust;
(c) if such Certificateholder is other than an individual or
other entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of a
Certificate in a taxable sale or exchange, within 30 days of the date of the
transfer; and
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or the
Sponsor to be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Sponsor or the Trust or a substantial part of its property, or
cause or permit the Sponsor or the Trust to make any assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts generally
as they become due, or declare or effect a moratorium on its debt or take any
action in furtherance of any such action.
Except as provided in Section 2.13, and notwithstanding any
other provision to the contrary in this Agreement, no Certificateholder shall be
deemed to have adopted, be bound by, or succeed in any way to any representation
by, or duty of indemnification by or any other duty of, the Sponsor, including
those contained in Sections 2.10, 2.12, 3.6, 8.2 or elsewhere herein.
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1 Initial Ownership. Upon the formation of the Trust
by the contribution by the Sponsor pursuant to Section 2.5, the Owner Trustee,
contemporaneously therewith, having full power, authority, and authorization to
do so, has executed, authenticated, dated, issued, and delivered, in the name
and on behalf of the Trust, to the Originator, one or more Certificates
representing in the aggregate a 100% interest in the Trust, and has registered
such Certificate(s) on the Certificate Register in the name of the Originator.
The Originator shall be the sole beneficiary of the Trust. Such Certificate(s)
are duly authorized, validly issued, and entitled to the benefits of this
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Agreement. For so long as the Originator shall own such 100% interest in the
Trust, the Originator shall be the sole beneficial owner of the Trust.
SECTION 3.2 The Certificates. The Certificates shall be issued
in denominations of $1,000 and integral multiples of $1000 in excess thereof.
The Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of authentication and delivery of such
Certificates. A transferee of a Certificate shall become a Certificateholder,
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder, upon due registration of such Certificate in such
transferee's name pursuant to Section 3.4.
SECTION 3.3 Authentication of Certificates. Concurrently with
the initial sale of the Mortgage Loans to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause each Certificate to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Sponsor, signed by its chairman of the board, its president
or any vice president, its treasurer or any assistant treasurer without further
corporate action by the Sponsor, in authorized denominations. No Certificate
shall entitle its holder to any benefit under this Agreement, or shall be valid
for any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee, by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
SECTION 3.4 Registration of Transfer and Exchange of
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Owner Trustee shall be the
initial Certificate Registrar.
In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Certificate, specifically acknowledges
that it has no right to or interest in any monies at any time held in the
Pre-Funding Account or the Funding Account or prior to the release of such
monies pursuant to Section 8.6(b)(xi) of the Indenture, such monies being held
in trust for the benefit of the Noteholders and the Insurer. Notwithstanding the
foregoing, in the event that it is ever determined that the monies held in the
Pre-Funding Account constitute a pledge of collateral, then the provisions of
the Sale and Servicing Agreement shall be considered to constitute a security
agreement and the Sponsor and the Certificateholders hereby grant to the
Indenture Trustee and the Insurer a first priority perfected security interest
in such amounts. In addition, each Certificateholder, by acceptance of its
Certificate, hereby appoints the Sponsor as its agent to pledge a first priority
perfected security interest in the Pre-Funding Account and the Funding Account,
and any amounts held therein from time to time to the Indenture Trustee and the
Insurer and agrees to execute and deliver such instruments of conveyance,
assignment, grant, confirmation, etc., as well as any financing statements, in
each case as the Insurer shall consider reasonably necessary in order to perfect
the Indenture Trustee's security interest in the Mortgage Loans.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
shall
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be delivered to the Certificate Registrar, the Owner Trustee and the Insurer
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Certificate shall have been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee shall 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 denomination. In connection with the
issuance of any new Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
SECTION 3.6 Persons Deemed Certificateholders. Every Person by
virtue of becoming a Certificateholder in accordance with this Agreement and the
rules and regulations of the Certificate Registrar shall be deemed to be bound
by the terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee, the Certificate Registrar and the
Insurer and any agent of the Owner Trustee, the Certificate Registrar and the
Insurer, may treat the Person in whose name any Certificate shall be registered
in the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to the Sale and Servicing Agreement and the
Indenture and for all other purposes whatsoever, and none of the Owner Trustee,
the Certificate Registrar or the Insurer nor any agent of the Owner Trustee, the
Certificate Registrar or the Insurer shall be bound by any notice to the
contrary.
SECTION 3.7 Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Master Servicer, the Sponsor or the Insurer, within 15 days after receipt by the
Owner Trustee of a request therefor from such Person in writing, a list, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Holders of Certificates or one or more Holders of Certificates
evidencing not less than 25% by Percentage Interest apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application is accompanied by
a copy of the communication that such applicants propose to transmit, then the
Owner Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Sponsor, the
Master Servicer, the Owner Trustee or the Insurer or any agent thereof
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner
Trustee shall maintain in Wilmington, Delaware an office or offices or agency or
agencies where Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee in respect
of the Certificates and the Operative Documents may be served. The Owner Trustee
initially designates its Corporate Trust Office for such purposes. The Owner
Trustee shall give prompt written notice to the Sponsor, the Certificateholders
and the Insurer of any change in the location of the Certificate Register or any
such office or agency.
SECTION 3.9 ERISA. The Certificates may not be acquired by or
for the account of (i) an employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is subject to the provisions of Title I of ERISA, (ii) a plan described in
Section 4975(e)(1) of the Code, or (iii) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity (each, a
"Benefit Plan"). By accepting and holding
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its beneficial ownership interest in its Certificate, the Holder thereof shall
be deemed to have represented and warranted that it is not a Benefit Plan.
SECTION 3.10 Restrictions on Transfer of Certificates. (a) The
Certificates shall be assigned, transferred, exchanged, pledged, financed,
hypothecated or otherwise conveyed (collectively, for purposes of this Section
3.10 and any other Section referring to the Certificates, "transferred" or a
"transfer") only in accordance with this Section 3.10.
(b) No transfer of a 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. Except for the initial issuance of the
Certificate to the Originator, the Owner Trustee shall require (i) the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Owner Trustee and the Insurer certifying to the
Owner Trustee and the Insurer the facts surrounding such transfer, which
investment letter shall not be an expense of the Owner Trustee or the Insurer,
or (ii) if the investment letter is not delivered, a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Owner Trustee, the
Insurer and the Sponsor that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor from said Act or is
being made pursuant to said Act, which Opinion of Counsel shall not be an
expense of the Owner Trustee, the Insurer or the Sponsor. The Holder of a
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Sponsor, the Owner Trustee and the Insurer against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
(c) The Certificates and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Certificate shall (A) be organized and existing under
the laws of the United States of America or any state thereof or the District of
Columbia; (B) expressly assume, by an agreement supplemental hereto, executed
and delivered to the Owner Trustee, the performance of every covenant and
obligation of the Sponsor hereunder except for the covenants and obligations
contained in Sections 2.1, 2.2, 2.3, 2.4, 3.3 and 3.4 of the Sale and Servicing
Agreement, Section 7.1 of the Indenture and under the Credit Line Agreements;
(ii) the person that acquires a Certificate shall deliver to the Owner Trustee
and the Insurer an Officer's Certificate stating that such transfer and such
supplemental agreement comply with this Section 3.10 and that all conditions
precedent provided by this subsection 3.10 have been complied with and an
Opinion of Counsel stating that such transfer and such supplemental agreement
comply with this Section 3.10 and that all conditions precedent provided by this
Section 3.10 have been complied with, and the Owner Trustee may conclusively
rely on such Officer's Certificate, shall have no duty to make inquiries with
regard to the matters set forth therein and shall incur no liability in so
relying; (iii) the person that acquires a Certificate shall deliver to the Owner
Trustee and the Insurer a letter from each Rating Agency confirming that its
rating of the Class A Notes, after giving effect to such transfer, will not be
reduced or withdrawn without regard to the Policy; (iv) the person that acquires
a Certificate shall deliver to the Owner Trustee and the Insurer an Opinion of
Counsel to the effect that (a) such transfer will not adversely affect the
treatment of the Class A Notes after such transfer as debt for federal and
applicable state income tax purposes, (b) such transfer will not result in the
Trust being subject to tax at the entity level for federal or applicable state
tax purposes, (c) such transfer will not have any material adverse impact on the
federal or applicable state income taxation of a Class A Noteholder and (d) such
transfer will not result in the arrangement created by this Agreement or any
"portion" of the Trust, being treated as a taxable mortgage pool as defined in
Section 7701(i) of the Code; (v) all filings and other actions necessary to
continue the perfection of the interest of the Trust in the Mortgage Loans and
the other property conveyed hereunder shall have been taken or made.
Notwithstanding the foregoing, the requirement set forth in subclause (i)(A) of
this Section 3.10 shall not apply in the event the Owner Trustee and the Insurer
shall have received a letter from each Rating
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Agency confirming that its rating of the Class A Notes, after giving effect to a
proposed transfer to a Person that does not meet the requirement set forth in
subclause (i)(A), shall not be reduced or withdrawn without regard to the
Policy. Notwithstanding the foregoing, the requirements set forth in this
paragraph ( c) shall not apply to the initial issuance of the Certificate to the
Originator.
(d) Except for the initial issuance of the Certificate to the
Originator, no transfer of a Certificate shall be made unless the Owner Trustee
shall have received a representation letter from the transferee of such
Certificate, acceptable to and in form and substance satisfactory to the Owner
Trustee, to the effect that such transferee is not a Benefit Plan, which
representation letter shall not be an expense of the Owner Trustee.
(e) No transfer or pledge of the Certificates shall result in
more than 98 other holders of Certificates.
SECTION 3.11 Acceptance of Obligations. The Sponsor agrees to
be bound by and to perform all the duties of the Sponsor set forth in this
Agreement.
SECTION 3.12 Payments on Certificates. The Holders of the
Certificates will be entitled to distributions on each Payment Date, as provided
in the Indenture.
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1 Prior Notice to Holders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute or unless such amendment would not materially and
adversely affect the interests of the Holders);
(b) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Certificateholders;
or
(d) except pursuant to Section 7.14 of the Sale and Servicing
Agreement, the amendment, change or modification of the Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or supplement any
provision in a manner that would not materially adversely affect the interests
of the Certificateholders.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, or Certificate Registrar within five
Business Days thereof.
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SECTION 4.2 Action by Certificateholders with Respect to
Certain Matters. (a) The Owner Trustee shall not have the power, except upon
the direction of the Insurer or in the event that an Insurer Default shall have
occurred and is continuing, the Security Majority in accordance with the
Operative Documents, to (i) remove the Master Servicer under the Sale and
Servicing Agreement or (ii) except as expressly provided in the Operative
Documents, sell the Mortgage Loans after the termination of the Indenture. The
Owner Trustee shall take the actions referred to in the preceding sentence only
upon written instructions signed by the Insurer or the Securityholders, as the
case may be, and the furnishing of indemnification satisfactory to the Owner
Trustee by the Certificateholders.
(b) Upon the written request of any Certificateholder (a
"Proposer"), the Owner Trustee shall distribute promptly to all
Certificateholders any request for action or consent of Certificateholders
submitted by such Proposer. The Owner Trustee shall provide a reasonable method
for collecting responses to such request and shall tabulate and report the
results thereof to the Certificateholders and the Sponsor. The Owner Trustee
shall have no responsibility or duty to determine if any such proposed action or
consent is permitted under the terms of this Agreement or applicable law.
SECTION 4.3 Action by Certificateholders with Respect to
Bankruptcy. Until one year and one day following the day on which the Notes have
been paid in full, the Owner Trustee shall not have the power to, and shall not
commence any proceeding or other actions contemplated by Section 2.12(b)
relating to the Trust without the prior written consent of the Insurer (unless
an Insurer Default shall have occurred and is continuing) or the Security
Majority upon an Insurer Default. Until one year and one day following the day
on which the Notes have been paid in full, all amounts due to the Insurer under
the Insurance Agreement have been paid in full, the Policy has terminated and
the Indenture Trustee has surrendered the Policy to the Insurer, the Owner
Trustee shall not have the power to, and shall not, commence any proceeding or
other actions contemplated by Section 2.12(b) relating to the Trust without the
prior written consent of all of the Certificateholders and the delivery to the
Owner Trustee by each such Certificateholder of a certificate certifying that
such Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.4 Restrictions on Certificateholders' Power. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Operative
Documents or would be contrary to Section 2.3 or otherwise contrary to law nor
shall the Owner Trustee be obligated to follow any such direction, if given.
(b) No Certificateholder (other than the Originator) shall
have any right by virtue or by availing itself of any provisions of this
Agreement to institute any suit, action, or proceeding in equity or at law upon
or under or with respect to this Agreement or any Operative Document, unless the
Certificateholders are the Instructing Party pursuant to Section 6.3 and unless
a Certificateholder previously shall have given to the Owner Trustee a written
notice of default and of the continuance thereof, as provided in this Agreement,
and also unless Certificateholders evidencing not less than 25% by Percentage
Interest shall have made written request upon the Owner Trustee to institute
such action, suit or proceeding in its own name as Owner Trustee under this
Agreement and shall have offered to the Owner Trustee such reasonable indemnity
as it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Owner Trustee, for 30 days after its receipt of such
notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit, or proceeding, and during such 30-day period no
request or waiver inconsistent with such written request has been given to the
Owner Trustee pursuant to and in compliance with this Section or Section 6.3; it
being understood and intended, and being expressly covenanted by each
Certificateholder with every
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other Certificateholder and the Owner Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner provided in this Agreement and for the equal, ratable, and common benefit
of all Certificateholders. For the protection and enforcement of the provisions
of this Section 4.4, each and every Certificateholder and the Owner Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 4.5 Majority Control. No Certificateholder shall have
any right to vote or in any manner otherwise control the operation and
management of the Trust except as expressly provided in this Agreement. Except
as expressly provided herein, any action that may be taken by the
Certificateholders under this Agreement may be taken by the Holders of
Certificates evidencing not less than a majority interest in the Trust. Except
as expressly provided herein, any written notice of the Certificateholders
delivered pursuant to this Agreement shall be effective if signed by
Certificateholders evidencing not less than a majority interest in the Trust at
the time of the delivery of such notice.
SECTION 4.6 Rights of Insurer. Notwithstanding anything to
the contrary in the Operative Documents, without the prior written consent of
the Insurer (or if an Insurer Default shall have occurred and is continuing, the
Security Majority) the Owner Trustee shall not (i) remove the Master Servicer,
(ii) initiate any claim, suit or proceeding by the Trust or compromise any
claim, suit or proceeding brought by or against the Trust, other than with
respect to the enforcement of any Mortgage Loan or any rights of the Trust
thereunder, (iii) authorize the merger or consolidation of the Trust with or
into any other business trust or other entity (other than in accordance with
Section 3.10 of the Indenture), (iv) amend the Certificate of Trust or (v) amend
this Agreement in accordance with Section 11.1 of this Agreement.
ARTICLE V.
Certain Duties
SECTION 5.1 Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to Sections
5.1(b)(iii) and 5.1(c) of the Sale and Servicing Agreement, the Sponsor shall
(a) maintain (or cause to be maintained) the books of the Trust on a calendar
year basis on the accrual method of accounting, including, without limitation,
the allocations of net income under Section 2.11 hereof, (b) deliver (or cause
to be delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1, if applicable) to enable each Certificateholder to prepare its
Federal and state income tax returns, (c) file or cause to be filed, if
necessary, such tax returns relating to the Trust (including a partnership
information return, Form 1065), and direct the Owner Trustee or the Master
Servicer, as the case may be, to make such elections as may from time to time be
required or appropriate under any applicable state or Federal statute or rule or
regulation thereunder so as to maintain the Trust's characterization as a
branch, or if applicable, as a partnership, for Federal income tax purposes and
(d) collect or cause to be collected any withholding tax as described in and in
accordance with Section 5.1(b)(ii) of the Sale and Servicing Agreement with
respect to income or distributions to Certificateholders and the appropriate
forms relating thereto. The Owner Trustee or the Master Servicer, as the case
may be, shall make all elections pursuant to this Section as directed in writing
by the Sponsor. The Owner Trustee shall sign all tax information returns
presented to it in final execution form, if any, filed pursuant to this Section
5.1 and any other returns as may be required by law, and in doing so shall rely
entirely upon, and shall have no liability for information
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provided by, or calculations provided by, the Sponsor or the Master Servicer.
The Owner Trustee shall elect under Section 1278 of the Code to include in
income currently any market discount that accrues with respect to the Mortgage
Loans. The Owner Trustee shall not make the election provided under Section 754
of the Code.
SECTION 5.2 Signature on Returns; Tax Matters Partner. (a)
Notwithstanding the provisions of Section 5.1 and in the event that the Trust is
characterized as a partnership, the Owner Trustee shall sign on behalf of the
Trust the tax returns of the Trust presented to it in final execution form,
unless applicable law requires a Certificateholder to sign such documents, in
which case such documents shall be signed by the Sponsor, as agent, on behalf of
the Certificateholders.
(b) In the event that the Trust is characterized as a
partnership, the Originator shall be the "tax matters partner" of the Trust
pursuant to the Code.
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1 General Authority. The Owner Trustee is authorized
and directed to execute and deliver the Operative Documents to which the Trust
is named as a party and each certificate or other document attached as an
exhibit to or contemplated by the Operative Documents to which the Trust is
named as a party and any amendment thereto, in each case, in such form as the
Sponsor shall approve as evidenced conclusively by the Owner Trustee's execution
thereof, and on behalf of the Trust, to direct the Indenture Trustee to
authenticate and deliver Class A Notes in the aggregate principal amount of
$80,000,000. In addition to the foregoing, the Owner Trustee is authorized, but
shall not be obligated, to take all actions required of the Trust pursuant to
the Operative Documents. The Owner Trustee is further authorized from time to
time to take such action as the Instructing Party recommends with respect to the
Operative Documents so long as such activities are consistent with the terms of
the Operative Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and to administer the Trust in the
interest of the Holders, subject to the Operative Documents and in accordance
with the provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Operative Documents to the extent the Master Servicer
has agreed in the Sale and Servicing Agreement to perform any act or to
discharge any duty of the Trust or the Owner Trustee hereunder or under any
Operative Document, and the Owner Trustee shall not be liable for the default or
failure of the Master Servicer to carry out its obligations under the Sale and
Servicing Agreement.
SECTION 6.3 Action upon Instruction. (a) Subject to Article
IV, the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) or the Certificateholders (if an Insurer Default shall have occurred
and be continuing) (the "Instructing Party") shall have the exclusive right to
direct the actions of the Owner Trustee in the management of the Trust, so long
as such instructions are not inconsistent with the express terms set forth
herein or in any Operative Document. The Instructing Party shall not instruct
the Owner Trustee in a manner inconsistent with this Agreement or the Operative
Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Operative Document if the Owner Trustee shall have
reasonably determined, or shall have been
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advised by counsel, that such action is likely to result in liability on the
part of the Owner Trustee or is contrary to the terms hereof or of any Operative
Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Operative Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Instructing Party received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten days of
such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Operative Documents, as it shall deem to
be in the best interests of the Certificateholders, and shall have no liability
to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Operative Document or any
such provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Instructing
Party requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Operative
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement or
in Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Operative Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Operative Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any Liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee (solely in its
individual capacity) and that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.5 No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Operative
Documents and
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(iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation or a publicly traded
partnership for Federal income tax purposes. The Certificateholders shall not
direct the Owner Trustee to take action that would violate the provisions of
this Section.
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1 Acceptance of Trust and Duties. The Owner Trustee
accepts the trust hereby created and agrees to perform its duties hereunder with
respect to such trust but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it constituting
part of the Owner Trust Estate upon the terms of the Operative Documents and
this Agreement. The Owner Trustee shall not be answerable or accountable
hereunder or under any Operative Document under any circumstances, except (i)
for its own willful misconduct, bad faith or gross negligence, (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 7.3
expressly made by the Owner Trustee in its individual capacity, (iii) for
liabilities arising from the failure of the Owner Trustee to perform obligations
expressly undertaken by it in the last sentence of Section 6.4 hereof, (iv) for
any investments issued by the Owner Trustee or any branch or affiliate thereof
in its commercial capacity or (v) for taxes, fees or other charges on, based on
or measured by, any fees, commissions or compensation received by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment, not constituting gross negligence, made by a Responsible Officer of
the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it if such action or omission is in
accordance with the instructions of the Instructing Party, the Sponsor, the
Master Servicer or any Certificateholder pursuant to the terms hereof;
(c) no provision of this Agreement or any Operative Document
shall require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Operative Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Operative Documents,
including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Sponsor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Operative Documents, other than
the certificate of authentication on the Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty or obligation to
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the Sponsor, the Insurer, Indenture Trustee, any Certificateholder, other than
as expressly provided for herein and in the Operative Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Sponsor, the Insurer, the Indenture Trustee, or the Master
Servicer under any of the Operative Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations under this
Agreement or the Operative Documents that are required to be performed by the
Sponsor under this Agreement, by the Indenture Trustee under the Indenture or
the Master Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Operative Document, at the request, order or
direction of the Instructing Party or any of the Certificateholders, unless such
Instructing Party or Certificateholders have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Operative Document shall not be construed as a duty, and the
Owner Trustee shall not be answerable for other than its negligence, bad faith
or willful misconduct in the performance of any such act.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall
furnish to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Operative Documents.
SECTION 7.3 Representations and Warranties. The Owner Trustee
hereby represents and warrants, in its individual capacity, to the Sponsor and
the Holders (which shall have relied on such representations and warranties in
issuing the Policy), that:
(a) It is a Delaware banking corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware state law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order binding on
it, or constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel. (a) The Owner Trustee
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of the determination of which is not specifically
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prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer,
secretary or other authorized officers of the relevant party, as to such fact or
matter, and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
Operative Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
(ii) may consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it. The Owner Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or other
such persons and according to such opinion not contrary to this Agreement or any
Operative Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as
provided in this Article VII, in accepting the trusts hereby created Wilmington
Trust Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Operative Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Sponsor and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Operative Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) or the Notes (other
than the signature of the Owner Trustee on the Notes), or of any Mortgage Loan
or related documents. The Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority of any security interest
created by any Mortgage Loan or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to Certificateholders
under this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Mortgage Loan; the
existence and enforceability of any insurance thereon; the existence and
contents of any Mortgage Loan on any computer or other record thereof; the
validity of the assignment of any Mortgage Loan to the Trust or of any
intervening assignment; the completeness of any Mortgage Loan; the performance
or enforcement of any Mortgage Loan; the compliance by the Sponsor, the Master
Servicer or any other Person with any warranty or representation made under any
Operative Document or in any related document or the accuracy of any such
warranty or representation or any action of the Indenture Trustee or the Master
Servicer or any SubMaster Servicer taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates or Notes and may deal with the Sponsor, the Indenture
Trustee and the Master Servicer in banking transactions with the same rights as
it would have if it were not Owner Trustee.
SECTION 7.8 Payments from Owner Trust Estate. All payments to
be made by the Owner Trustee under this Agreement or any of the Operative
Documents to which the Trust or the Owner Trustee is a party shall be made only
from the income and proceeds of the Owner Trust Estate and only to the extent
that the Owner Trust shall have received income or proceeds from the Owner Trust
Estate to make such payments in accordance with the terms hereof. Wilmington
Trust Company,
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or any successor thereto, in its individual capacity, shall not be liable for
any amounts payable under this Agreement or any of the Operative Documents to
which the Trust or the Owner Trustee is a party.
SECTION 7.9 Doing Business in Other Jurisdictions.
Notwithstanding anything contained to the contrary, neither Wilmington Trust
Company or any successor thereto, nor the Owner Trustee shall be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 10.5 hereof, (i) require the consent
or approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the State
of Delaware ; (ii) result in any fee, tax or other governmental charge under the
laws of the State of Delaware becoming payable by Wilmington Trust Company (or
any successor thereto); or (iii) subject Wilmington Trust Company (or any
successor thereto) to personal jurisdiction in any jurisdiction other than the
State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company (or any successor
thereto) or the Owner Trustee, as the case may be, contemplated hereby.
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner
Trustee shall receive as compensation for its services hereunder such fees as
have been separately agreed upon before the date hereof between the Sponsor and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Sponsor for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder and under the Operative Documents.
SECTION 8.2 Indemnification. The Sponsor shall be liable as
primary obligor for, and shall indemnify the Owner Trustee (in its individual
and trust capacities) and its officers, directors, successors, assigns, agents
and servants (collectively, the "Indemnified Parties") from and against, any and
all liabilities, obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may (in its trust or individual capacities) at
any time be imposed on, incurred by, or asserted against the Owner Trustee or
any Indemnified Party in any way relating to or arising out of this Agreement,
the Operative Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee hereunder, except
only that the Sponsor shall not be liable for or required to indemnify the Owner
Trustee from and against Expenses arising or resulting from any of the matters
described in the third sentence of Section 7.1. The indemnities contained in
this Section and the rights under Section 8.1 shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Sponsor which approval shall not be unreasonably
withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to
the Owner Trustee pursuant to this Article VIII shall be deemed not to be a part
of the Owner Trust Estate immediately after such payment.
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SECTION 8.4 Non-recourse Obligations. Notwithstanding anything
in this Agreement or any Operative Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that all
obligations of the Trust to the Owner Trustee individually or as Owner Trustee
for the Trust shall be recourse to the Owner Trust Estate only and specifically
shall not be recourse to the assets of any Certificateholder.
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1 Termination of Trust Agreement. (a) This Agreement
and the Trust shall terminate and be of no further force or effect upon the
later of (i) the maturity or other liquidation of the last Mortgage Loan
(including the redemption by the Sponsor at its option of the corpus of the
Trust as described in Section 10.1(b) of the Indenture) and the subsequent
distribution of amounts in respect of such Mortgage Loans as provided in the
Operative Documents or (ii) the payment to Certificateholders of all amounts
required to be paid to them pursuant to this Agreement and the payment to the
Insurer of all amounts payable or reimbursable to it pursuant to the Sale and
Servicing Agreement and the Insurance Agreement; provided, however, that the
rights to indemnification under Section 8.2 and the rights under Section 8.1
shall survive the termination of the Trust. The Master Servicer shall promptly
notify the Owner Trustee and the Insurer of any prospective termination pursuant
to this Section 9.1. The bankruptcy, liquidation, dissolution, death or
incapacity of any Certificateholder shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or Owner Trust Estate nor (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Sponsor nor
any other Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which the Certificateholders shall surrender their
Certificates to the Indenture Trustee for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders mailed within five Business Days of receipt of notice of such
redemption from the Master Servicer given pursuant to Section 10.1 of the Sale
and Servicing Agreement, stating (i) the Payment Date upon or with respect to
which final payment of the Certificates shall be made upon presentation and
surrender of the Certificates at the office of the Indenture Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Payment Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Indenture Trustee therein specified. The Owner Trustee shall give such
notice to the Certificate Registrar (if other than the Owner Trustee) and the
Indenture Trustee at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Indenture Trustee shall
cause to be distributed to Certificateholders amounts distributable on such
Payment Date pursuant to Section 8.6(b)(xi) of the Indenture.
In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the
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remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed, subject to applicable escheat laws, by the
Owner Trustee to the Sponsor and Holders shall look solely to the Sponsor for
payment.
(d) Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution shall be
distributed by the Owner Trustee to the Sponsor.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1 Eligibility Requirements for Owner Trustee. The
Owner Trustee shall at all times be a corporation (i) satisfying the provisions
of Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; (iv) having (or having a parent which has) a rating of at least
Baa3 by Moody's or A-1 by Standard & Poors or being otherwise acceptable to the
Rating Agencies; and (v) acceptable to the Insurer in its sole discretion. If
such corporation shall publish reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The
Owner Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Sponsor, the Insurer and the
Master Servicer. Upon receiving such notice of resignation, the Sponsor shall
promptly appoint a successor Owner Trustee, meeting the qualifications set forth
in Section 10.1 herein, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee, provided that the Sponsor shall have received written
confirmation from each of the Rating Agencies that the proposed appointment will
not result in an increased capital charge to the Insurer by either of the Rating
Agencies. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee or the Insurer may petition any court
of competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Sponsor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then a majority of the Certificateholders with the consent of the
Insurer (so long as no Insurer Default shall have occurred and is continuing)
may remove the Owner Trustee. If a majority of the Certificateholders shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Sponsor shall promptly appoint a successor Owner Trustee,
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meeting the qualifications set forth in Section 10.1 herein, by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed, one copy to the Insurer and one copy to the
successor Owner Trustee and the Sponsor shall pay all fees owed to the outgoing
Owner Trustee, if not previously paid by the Trust.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 10.3 and payment of all reasonable
fees and expenses owed to the outgoing Owner Trustee.
Notwithstanding any other provision of this Agreement, and in
addition to any other method of removal of the Owner Trustee contained herein,
upon a proposal made pursuant to Section 4.2(b) and the subsequent consent of
Certificateholders representing no less than a 66-2/3% interest in the Trust,
the Owner Trustee may be removed as Owner Trustee , subject to the consent of
the Insurer (so long as no Insurer Default shall have occurred and is
continuing), which consent is not to be unreasonably withheld. In the event the
Owner Trustee is removed pursuant to this paragraph, the provisions of this
Agreement, including Article X herein, shall apply as if the Owner Trustee had
resigned hereunder.
SECTION 10.3 Successor Owner Trustee. Any successor Owner
Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and
deliver to the Sponsor, the Master Servicer, the Insurer and to its predecessor
Owner Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee. The predecessor Owner Trustee shall upon
payment of its fees and expenses deliver to the successor Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
Sponsor and the predecessor Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Owner Trustee all such rights,
powers, duties and obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Master Servicer shall mail notice of the successor
of such Owner Trustee to all Certificateholders, the Indenture Trustee and the
Noteholders. If the Master Servicer shall fail to mail such notice within 10
days after acceptance of appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Master Servicer.
The successor Owner Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State reflecting the name and
principal place of business of such successor Owner Trustee in the State of
Delaware.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee 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 Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act
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on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided further that the Owner Trustee shall mail notice of
such merger or consolidation to the Rating Agencies.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner
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 Owner Trust Estate or any Mortgaged Property may at the time be
located, the Master Servicer and the Owner Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Owner Trustee and the Insurer to act as co-trustee,
jointly with the Owner Trustee, or separate trustee or separate trustees, of all
or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Owner 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, the Owner Trustee
subject to the approval of the Insurer (which approval shall not be unreasonably
withheld) shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 10.1 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.3.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner 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 Owner 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,
the Owner 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 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
Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Master Servicer and the Owner 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 Owner
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 Article. 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 Owner
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 Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Master Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the
Owner Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful
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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 Owner Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
ARTICLE XI.
Miscellaneous
SECTION 11.1 Supplements and Amendments. (a) This Agreement
may be amended by the Sponsor and the Owner Trustee, with the prior written
consent of the Insurer (so long as no Insurer Default shall have occurred and is
continuing), without the consent of any of the Noteholders (i) to cure any
ambiguity or defect or (ii) to correct, supplement or modify any provisions in
this Agreement; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel which may be based upon a certificate of the Master
Servicer, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time, with
the prior written consent of the Insurer (so long as no Insurer Default shall
have occurred and is continuing) by the Sponsor and the Owner Trustee, with
prior written notice to the Rating Agencies, and, to the extent such amendment
materially and adversely affects the interests of the Noteholders, with the
consent of the Noteholders evidencing not less than a majority of the
Outstanding Amount of the Notes and, the consent of the Certificateholders
evidencing not less than a majority interest in the Trust (which consent of any
Holder of a Certificate or Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate or Note and of any
Certificate or Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the
Certificate or Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that, subject to the express rights of the Insurer under the
Operative Documents, no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Mortgage Loans or distributions that shall be required to be made
for the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the
Certificates, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes and
Holders of all outstanding Certificates.
Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder and the Indenture Trustee.
It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Operative Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe. Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
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Prior to the execution of any amendment to this Agreement or
the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their ownership interest therein only in
accordance with Article IX. No transfer, by operation of law or otherwise, of
any right, title or interest of the Certificateholders to and in their ownership
interest in the Owner Trust Estate shall operate to terminate this Agreement or
the trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of legal title to any part of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. Except for
Section 11.7, the provisions of this Agreement are solely for the benefit of the
Owner Trustee, the Sponsor, the Certificateholders, the Master Servicer and, to
the extent expressly provided herein, the Insurer, the Indenture Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified
or permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed first class mail or certified mail, in each case return receipt
requested, and shall be deemed to have been duly given upon receipt, if to the
Owner Trustee, addressed to the Corporate Trust Office; if to the Sponsor,
addressed to Advanta Mortgage Conduit Services, Inc., 500 Office Center Drive,
Suite 400, Fort Washington, Pennsylvania 19034; if to the Insurer, addressed to
Insurer, AMBAC Assurance Corporation, One State Street Plaza, New York, New York
10004, Attention: Howard Pfeffer, Structured Finance Department, Telecopy No.:
(212) 363-1459; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
SECTION 11.5 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdictional shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.7 Assignments; Insurer. (a) This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
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This Agreement shall also inure to the benefit of the Insurer for so long as an
Insurer Default shall not have occurred and be continuing. Without limiting the
generality of the foregoing, all covenants and agreements in this Agreement
which confer rights upon the Insurer shall be for the benefit of and run
directly to the Insurer, and the Insurer shall be entitled to rely on and
enforce such covenants, subject, however, to the limitations on such rights
provided in this Agreement and the Operative Documents. The Insurer may disclaim
any of its rights and powers under this Agreement (but not its duties and
obligations under the Policy) upon delivery of a written notice to the Owner
Trustee.
SECTION 11.8 No Petition. The Owner Trustee (not in its
individual capacity but solely as Owner Trustee), by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenants and agrees that they will not at any time institute against the
Sponsor, or join in any institution against the Sponsor of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates, the Notes, this
Agreement or any of the Operative Documents.
SECTION 11.9 No Recourse. Each Certificateholder by accepting
a Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Master Servicer, the Sponsor, the Owner Trustee, the
Indenture Trustee, the Insurer or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Certificates or the Operative Documents.
SECTION 11.10 Headings. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 11.11 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12 Master Servicer. The Master Servicer is
authorized to prepare, or cause to be prepared, execute and deliver on behalf of
the Trust all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Trust or Owner Trustee to prepare, file
or deliver pursuant to the Operative Documents. Upon written request, the Owner
Trustee shall execute and deliver to the Master Servicer a limited power of
attorney appointing the Master Servicer the Trust's agent and attorney-in-fact
to prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
WILMINGTON TRUST COMPANY, as
Owner Trustee
By: /s/ DEBRA EBERLY
--------------------------------
Name: Debra Eberly
Title: Administrative Account Manager
ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Sponsor
By: /s/ JAMES L. SHREERO
--------------------------------
Name: James L. Shreero
Title: Senior Vice President
[Signature Page of Trust Agreement]
<PAGE> 34
Exhibit A
---------
CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE REPRESENTS CERTAIN RESIDUAL RIGHTS TO PAYMENT TO THE
EXTENT DESCRIBED HEREIN AND IN THE TRUST AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED
STATES PERSON.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A
TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION
AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3.10 OF THE TRUST
AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS THE TRANSFEREE
PROVIDES A REPRESENTATION LETTER FROM THE TRANSFEREE OF SUCH
CERTIFICATE, ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO
THE OWNER TRUSTEE AND THE INSURER, TO THE EFFECT THAT SUCH TRANSFEREE
IS NOT (i) AN EMPLOYEE BENEFIT PLAN SUBJECT TO SECTION 406 OF ERISA,
(ii) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE
CODE, NOR (iii) A PERSON ACTING ON BEHALF OF OR USING THE ASSETS OF ANY
SUCH PLAN, WHICH REPRESENTATION LETTER SHALL NOT BE AN EXPENSE OF THE
INDENTURE TRUSTEE OR THE INSURER.
NO TRANSFER OF A 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. EXCEPT FOR THE INITIAL ISSUANCE
OF THE CERTIFICATE TO THE ORIGINATOR, THE OWNER TRUSTEE SHALL REQUIRE
(i) THE TRANSFEREE TO EXECUTE AN INVESTMENT LETTER ACCEPTABLE TO AND IN
FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND THE INSURER
CERTIFYING TO THE OWNER TRUSTEE AND THE INSURER THE FACTS SURROUNDING
SUCH TRANSFER, WHICH INVESTMENT LETTER SHALL NOT BE AN EXPENSE OF THE
OWNER TRUSTEE OR THE INSURER OR (ii) IF THE INVESTMENT LETTER IS NOT
DELIVERED, A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO AND IN FORM AND
SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE, THE INSURER AND THE
SPONSOR THAT SUCH TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION,
DESCRIBING THE APPLICABLE EXEMPTION AND THE BASIS THEREFOR, FROM SAID
ACT OR IS BEING MADE PURSUANT TO SAID ACT, WHICH OPINION OF COUNSEL
SHALL NOT BE AN EXPENSE OF THE OWNER TRUSTEE, THE INSURER OR THE
SPONSOR. THE HOLDER OF A CERTIFICATE DESIRING TO EFFECT SUCH TRANSFER
SHALL, AND DOES HEREBY AGREE TO, INDEMNIFY THE SPONSOR AND THE INSURER
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.
<PAGE> 35
THE CERTIFICATES AND ANY INTEREST THEREIN SHALL NOT BE TRANSFERRED
EXCEPT UPON SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT: (I) THE
PERSON THAT ACQUIRES A CERTIFICATE SHALL (A) BE ORGANIZED AND EXISTING
UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE OR THE
DISTRICT OF COLUMBIA THEREOF, (B) EXPRESSLY ASSUME, BY AN AGREEMENT
SUPPLEMENTAL HERETO, EXECUTED AND DELIVERED TO THE OWNER TRUSTEE, THE
PERFORMANCE OF EVERY COVENANT AND OBLIGATION OF THE SPONSOR UNDER THE
TRUST AGREEMENT, EXCEPT FOR THE COVENANTS AND OBLIGATIONS CONTAINED IN
SECTIONS 2.1, 2.2, 2.3, 2.4, 3.3 AND 3.4 OF THE SALE AND SERVICING
AGREEMENT, SECTION 7.1 OF THE INDENTURE AND UNDER THE CREDIT LINE
AGREEMENTS; (II) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER
TO THE OWNER TRUSTEE AND THE INSURER AN OFFICER'S CERTIFICATE STATING
THAT SUCH TRANSFER AND SUCH SUPPLEMENTAL AGREEMENT COMPLY WITH SECTION
3.10 OF THE TRUST AGREEMENT AND THAT ALL CONDITIONS PRECEDENT PROVIDED
BY SECTION 3.10 OF THE TRUST AGREEMENT HAVE BEEN COMPLIED WITH AND AN
OPINION OF COUNSEL STATING THAT SUCH TRANSFER AND SUCH SUPPLEMENTAL
AGREEMENT COMPLY WITH SECTION 3.10 AND THAT ALL CONDITIONS PRECEDENT
PROVIDED BY SECTION 3.10 HAVE BEEN COMPLIED WITH, AND THE OWNER TRUSTEE
MAY CONCLUSIVELY RELY ON SUCH OFFICER'S CERTIFICATE, SHALL HAVE NO DUTY
TO MAKE INQUIRIES WITH REGARD TO THE MATTERS SET FORTH THEREIN AND
SHALL INCUR NO LIABILITY IN SO RELYING; (III) THE PERSON THAT ACQUIRES
A CERTIFICATE SHALL DELIVER TO THE OWNER TRUSTEE AND THE INSURER A
LETTER FROM EACH RATING AGENCY CONFIRMING THAT ITS RATING OF THE CLASS
A NOTES, AFTER GIVING EFFECT TO SUCH TRANSFER, WILL NOT BE REDUCED OR
WITHDRAWN WITHOUT REGARD TO THE POLICY; (IV) THE PERSON THAT ACQUIRES A
CERTIFICATE SHALL DELIVER TO THE OWNER TRUSTEE AND THE INSURER AN
OPINION OF COUNSEL TO THE EFFECT THAT (A) SUCH TRANSFER WILL NOT
ADVERSELY AFFECT THE TREATMENT OF THE CLASS A NOTES AFTER SUCH TRANSFER
AS DEBT FOR FEDERAL AND APPLICABLE STATE INCOME TAX PURPOSES, (B) SUCH
TRANSFER WILL NOT RESULT IN THE TRUST BEING SUBJECT TO TAX AT THE
ENTITY LEVEL FOR FEDERAL OR APPLICABLE STATE TAX PURPOSES, (C) SUCH
TRANSFER WILL NOT HAVE ANY MATERIAL ADVERSE IMPACT ON THE FEDERAL OR
APPLICABLE STATE INCOME TAXATION OF A NOTEHOLDER AND (D) SUCH TRANSFER
WILL NOT RESULT IN THE ARRANGEMENT CREATED BY THE TRUST AGREEMENT OR
ANY "PORTION" OF THE TRUST, BEING TREATED AS A TAXABLE MORTGAGE POOL AS
DEFINED IN SECTION 7701(i) OF THE CODE; (V) ALL FILINGS AND OTHER
ACTIONS NECESSARY TO CONTINUE THE PERFECTION OF THE INTEREST OF THE
TRUST IN THE MORTGAGE LOANS AND THE OTHER PROPERTY CONVEYED UNDER THE
TRUST AGREEMENT SHALL HAVE BEEN TAKEN OR MADE.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
<PAGE> 36
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1998-A
ASSET BACKED CERTIFICATE
Percentage Interest: ____%
Date of Cut-Off Date:
June 5, 1998
First Payment Date: Issue Date: June 24, 1998
July 27, 1998
No. ___
---------------------------------
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY
not in its individual capacity but
solely as Owner Trustee
By:_____________________________
Authenticating Agent
The Trust was created pursuant to a Trust Agreement dated as
of June 1, 1998 (the "Trust Agreement"), between the Sponsor and Wilmington
Trust Company, as owner trustee (the "Owner Trustee"), a summary of certain of
the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as Advanta Home Equity Loan "Asset Backed Certificates" (herein
called the "Certificates"). Also issued under the Indenture dated as of June 1,
1998 (the "Indenture") between the Trust and Bankers Trust Company of
California, N.A., as indenture trustee (the "Indenture Trustee") are Class A
Notes (the "Class A Notes"). These Certificates are issued under and are subject
to the terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust includes a
pool of adjustable-rate home equity revolving credit line loans secured by first
or second deeds of trust or Mortgages on primarily one-to-four family
residential properties.
Under the Trust Agreement, there will be distributed on the
25th day of each month or, if such 25th day is not a Business Day, the next
Business Day (the "Payment Date"), commencing on
<PAGE> 37
July 27, 1998, to the Person in whose name this Certificate is registered at the
close of business on the Business Day preceding such Payment Date (the "Record
Date") such Certificateholder's Percentage Interest in the amount to be
distributed to Certificateholders on such Payment Date.
The holder of this Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.
The holder of this Certificate, by acceptance of this
Certificate, specifically acknowledges that it has no right to or interest in
any monies at any time held pursuant to the Pre-Funding Account or prior to the
release of such monies pursuant to Section 8.6(v) of the Indenture, such monies
being held in trust for the benefit of the Noteholders and the Insurer.
Notwithstanding the foregoing, in the event that it is ever determined that the
monies held in the Pre-Funding Account constitute a pledge of collateral, then
the provisions of the Sale and Servicing Agreement shall be considered to
constitute a security agreement and the holder of this Certificate hereby grants
to the Indenture Trustee and the Insurer a first priority perfected security
interest in such amounts. In addition, each Certificateholder, by acceptance of
its Certificate, hereby appoints the Sponsor as its agent to pledge a first
priority perfected security interest in the Pre-Funding Account and agrees to
execute and deliver such instruments of conveyance, assignment, grant,
confirmation, etc., as well as any financing statements, in each case as the
Insurer shall consider reasonably necessary in order to perfect the Indenture
Trustee's security interest in the Trust Property.
It is the intent of the Sponsor, the Master Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a branch. In the event that the Certificates are held by more than
one Holder, it is the intent of the Sponsor, the Master Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a partnership and the Certificateholders will be treated as partners
in that partnership. The Sponsor and any other Certificateholders, by acceptance
of a Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates for such tax purposes as partnership interests in
the Trust. Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Trust or the Sponsor, or join in any institution against the Trust or the
Sponsor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, the Trust Agreement or any of the Operative
Documents.
Distributions on this Certificate will be made as provided in
the Sale and Servicing Agreement and the Indenture by the Indenture Trustee by
wire transfer or check mailed to the Certificateholder of record in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
<PAGE> 38
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
Date: ____________ ADVANTA REVOLVING HOME EQUITY LOAN
TRUST 1998-A
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as Owner Trustee
By: _______________________________________
Name:
Title:
<PAGE> 39
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an
interest in, the Originator, the Sponsor, the Master Servicer, the Insurer, the
Owner Trustee or any Affiliates of any of them and no recourse may be had
against such parties or their assets, except as may be expressly set forth or
contemplated herein or in the Trust Agreement, the Indenture or the Operative
Documents. In addition, this Certificate is not guaranteed by any governmental
agency or instrumentality and is limited in right of payment to certain
collections with respect to the Mortgage Loans, as more specifically set forth
herein, in the Sale and Servicing Agreement and in the Indenture. A copy of each
of the Sale and Servicing Agreement and the Trust Agreement may be examined
during normal business hours at the principal office of the Sponsor, and at such
other places, if any, designated by the Sponsor, by any Certificateholder upon
written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Sponsor and the rights of the Certificateholders under the
Trust Agreement at any time by the Sponsor and the Owner Trustee with the prior
written consent of the Insurer and with the consent of the holders of the Notes
and the Certificates evidencing not less than a majority of the outstanding
Notes and the Certificates. Any such consent by the holder of this Certificate
shall be conclusive and binding on such holder and on all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the holders of
any of the Certificates (other than the Sponsor or the Insurer).
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Corporate Trust Office, accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate Registrar
appointed under the Trust Agreement is Wilmington Trust Company.
Except for Certificates issued to the Sponsor, the
Certificates are issuable only as registered Certificates without coupons in
denominations of $1,000 or integral multiples of $1,000 in excess thereof. As
provided in the Trust Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates in authorized
denominations evidencing the same aggregate denomination, as requested by the
holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and
any agent of the Owner Trustee, the Certificate Registrar, the Insurer or the
Insurer may treat the person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Owner Trustee, the Certificate
Registrar, the Insurer nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement, the Indenture and the Sale and Servicing Agreement and the
disposition of all property held as part of the Trust. The Sponsor may at its
option redeem the corpus of the Trust at a price specified in the Sale and
Servicing Agreement, and such purchase of the
<PAGE> 40
Mortgage Loans and other property of the Trust will effect a transfer of the
Certificates; however, such right of purchase is exercisable, subject to certain
restrictions, only on any Payment Date on or after the Payment Date immediately
prior to which the Class A Note Principal Balance is less than 10% of the
Original Class A Note Principal Balance and all amounts due and owing to the
Insurer for unpaid premiums and unreimbursed draws on the Policy and all other
amounts due and owing to the Insurer pursuant to the Insurance Agreement,
together with interest thereon as provided under the Insurance Agreement, have
been paid.
The recitals contained herein shall be taken as the statements
of the Sponsor or the Master Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Certificate or of
any Mortgage Loan or related document.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual or
facsimile signature, this Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
<PAGE> 41
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________ Attorney to transfer said
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated:
__________________________*
Signature Guaranteed:
__________________________*
__________________________
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
<PAGE> 42
EXHIBIT B
CERTIFICATE OF TRUST OF
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1998-A
This Certificate of Trust of Advanta Revolving Home Equity
Loan Trust 1998-A (the "Trust") is being duly executed and filed by the
undersigned, as trustee, to form a business trust under the Delaware Business
Trust Act (12 Del. Code Sections 3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is
Advanta Revolving Home Equity Loan Trust 1998-A.
2. Delaware Trust. The name and business address of the Owner
Trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attn: Corporate Trust Administration.
3. This Certificate of Trust will be effective June ___, 1998.
IN WITNESS WHEREOF, the undersigned, in accordance with
Section 3811(a) of the Act, has duly executed this Certificate of Trust.
WILMINGTON TRUST COMPANY
not in its individual capacity but solely
as Owner Trustee of the Trust
By:_________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
<PAGE> 2
SALE AND SERVICING AGREEMENT
Among
ADVANTA REVOLVING HOME EQUITY LOAN TRUST
1998-A
as Issuer,
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Indenture Trustee
Dated as of June 1, 1998
<PAGE> 3
TABLE OF CONTENTS
(Not a Part of this Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties..................................................................................................1
Recitals.................................................................................................1
Article I DEFINITIONS; RULES OF CONSTRUCTION.............................................................1
Section 1.1. Definitions.....................................................................1
"Accepted Servicing Practices".....................................................................1
"Account"..........................................................................................2
"Addition Notice"..................................................................................2
"Additional Balance"...............................................................................2
"AMHC".............................................................................................2
"Appraised Value"..................................................................................2
"Assignment of Mortgage"...........................................................................2
"Authorized Officer"...............................................................................2
"Business Day".....................................................................................2
"Capitalized Interest Account".....................................................................2
"Certificate"......................................................................................2
"Civil Relief Act".................................................................................3
"Class A Note".....................................................................................3
"Class A Principal Balance"........................................................................3
"Closing Date".....................................................................................3
"Code".............................................................................................3
"Combined Loan-to-Value Ratio".....................................................................3
"Credit Limit".....................................................................................3
"Credit Limit Utilization Rate"....................................................................3
"Credit Line Agreement"............................................................................3
"Cut-Off Date".....................................................................................3
"Cut-Off Date Pool Balance"........................................................................4
"Cut-Off Date Principal Balance"...................................................................4
"Date-of-Payment Loans"............................................................................4
"Debt Service Reduction"...........................................................................4
"Defective Mortgage Loan"..........................................................................4
"Deficient Valuation"..............................................................................4
"Delinquent".......................................................................................4
"Depository".......................................................................................4
"Designated Depository Institution"................................................................4
"Determination Date"...............................................................................5
"Direct Participant" or "DTC Participant"..........................................................5
"Document Delivery Requirements"...................................................................5
"Draw".............................................................................................5
"Draw Period"......................................................................................5
"Event of Servicing Termination"...................................................................5
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
"FDIC".............................................................................................5
"FHLMC"............................................................................................5
"First Mortgage Loan"..............................................................................5
"Foreclosure Profit"...............................................................................5
"FNMA".............................................................................................6
"Highest Lawful Rate"..............................................................................6
"Holder" or "Noteholder"...........................................................................6
"Indemnification Agreement"........................................................................6
"Indenture":.......................................................................................6
"Indenture Trustee"................................................................................6
"Indenture Trustee's Fee"..........................................................................6
"Indirect Participant":............................................................................6
"Initial Cut-Off Date".............................................................................6
"Initial Mortgage Loans"...........................................................................6
"Initial Premium"..................................................................................6
"Insurance Agreement"..............................................................................6
"Insurance Policy".................................................................................6
"Insurance Proceeds"...............................................................................7
"Insurer"..........................................................................................7
"Interest Collections".............................................................................7
"Interest Remittance Amount".......................................................................7
"Issuer" or "Trust"...............................................................................7
"Late Payment Rate"................................................................................7
"Lifetime Rate Cap"................................................................................7
"Liquidated Mortgage Loan".........................................................................7
"Liquidation Expenses".............................................................................7
"Liquidation Proceeds".............................................................................8
"Liquidation Report"...............................................................................8
"Loan Purchase Price"..............................................................................8
"Loan Rate"........................................................................................8
"Loan Rate Cap"....................................................................................8
"Margin"...........................................................................................8
"Master Servicer"..................................................................................8
"Master Servicer Affiliate"........................................................................8
"Master Servicer's Trust Receipt"..................................................................8
"Minimum Monthly Payment"..........................................................................8
"Minimum Originator's Interest"....................................................................9
"Moody's"..........................................................................................9
"Mortgage".........................................................................................9
"Mortgage Files"...................................................................................9
"Mortgage Loan Schedule"...........................................................................9
"Mortgage Loans"...................................................................................9
"Mortgaged Property"...............................................................................9
"Mortgagor"........................................................................................9
"Net Liquidation Proceeds".........................................................................9
"Nonrecoverable Advance"...........................................................................9
"Note Account"....................................................................................10
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
"Officer's Certificate"...........................................................................10
"Operative Documents".............................................................................10
"Original Class A Principal Balance"..............................................................10
"Original Principal Amount".......................................................................10
"Original Principal Balance"......................................................................10
"Originator"......................................................................................10
"Originator's Interest"...........................................................................10
"Outstanding".....................................................................................10
"Owner Trustee"...................................................................................11
"Payment Date"....................................................................................11
"Percentage Interest".............................................................................11
"Person"..........................................................................................11
"Policy"..........................................................................................11
"Pool Balance"....................................................................................11
"Pool Certification"..............................................................................11
"Pool Factor".....................................................................................11
"Pre-Funded Mortgage Loans".......................................................................11
"Pre-Funding Period"..............................................................................11
"Pre-Funding Transfer Date".......................................................................11
"Prepaid Installment".............................................................................11
"Preference Amount"...............................................................................12
"Prepayment"......................................................................................12
"Preservation Expenses"...........................................................................12
"Prime"...........................................................................................12
"Principal and Interest Account"..................................................................12
"Principal Balance"...............................................................................12
"Principal Collections"...........................................................................12
"Principal Remittance Amount".....................................................................12
"Prospectus"......................................................................................13
"Prospectus Supplement"...........................................................................13
"Qualified Replacement Mortgage"..................................................................13
"Realized Loss"...................................................................................13
"Record Date".....................................................................................13
"Register"........................................................................................14
"Registrar".......................................................................................14
"Registration Statement"..........................................................................14
"Reimbursement Amount"............................................................................14
"REO Property"....................................................................................14
"Remittance Date".................................................................................14
"Remittance Period"...............................................................................14
"Replacement Cut-Off Date"........................................................................14
"Representation Letter"...........................................................................14
"Standard & Poor's"...............................................................................14
"Schedule of Mortgage Loans"......................................................................15
"Second Mortgage Loan"............................................................................15
"Securities Act"..................................................................................15
"Senior Lien".....................................................................................15
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
"Servicing Advance"...............................................................................15
"Servicing Fee"...................................................................................15
"Servicing Fee Rate"..............................................................................15
"Sponsor".........................................................................................15
"Subsequent Cut-Off Date".........................................................................15
"Subsequent Mortgage Loans".......................................................................15
"Subsequent Transfer Agreement"...................................................................15
"Subsequent Transfer Date"........................................................................15
"Substitution Amount".............................................................................15
"Sub-Servicer"....................................................................................16
"Sub-Servicing Agreement".........................................................................16
"Telerate Screen Page 3750".......................................................................16
"Termination Fees"................................................................................16
"Transfer Date"...................................................................................16
"Transfer Notice Date"............................................................................16
"Trust Agreement".................................................................................16
"Trust Collateral Value"..........................................................................16
"Trust Estate"....................................................................................16
"Underwriter".....................................................................................17
Section 1.2. Use of Words and Phrases.......................................................17
Section 1.3. Captions; Table of Contents....................................................17
Section 1.4. Opinions.......................................................................17
Article II CONVEYANCE OF MORTGAGE LOANS.................................................................17
Section 2.1. Conveyance of the Initial Mortgage Loans.......................................17
Section 2.2. Acceptance by Indenture Trustee; Certain Substitutions of
Mortgage Loans; Certification by Indenture Trustee...........................20
Section 2.3. Cooperation Procedures.........................................................24
Section 2.4. Conveyance of the Subsequent Mortgage Loans....................................24
Section 2.5. Retransfers of Mortgage Loans at Election of Sponsor...........................26
Article III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR AND THE MASTER SERVICER............27
Section 3.1. Representations and Warranties of the Sponsor..................................27
Section 3.2. Representations and Warranties of the Master Servicer..........................29
Section 3.3. Representations and Warranties of the Sponsor with Respect to
the Mortgage Loans; Retransfer of Certain Mortgage Loans.....................31
Section 3.4. Covenants of Sponsor to Take Certain Actions with Respect to the
Mortgage Loans In Certain Situations.........................................38
Article IV SERVICING AND ADMINISTRATION OF MORTGAGE LOANS...............................................39
Section 4.1. Master Servicer and Sub-Servicers..............................................39
Section 4.2. Collection of Certain Mortgage Loan Payments...................................42
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.3. Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers................................................................43
Section 4.4. Successor Sub-Servicers........................................................43
Section 4.5. Liability of Master Servicer...................................................43
Section 4.6. No Contractual Relationship Between Sub-Servicer and Indenture
Trustee or the Class A Noteholders...........................................43
Section 4.7. Assumption or Termination of Sub-Servicing Agreement by
Indenture Trustee............................................................44
Section 4.8. Principal and Interest Account.................................................44
Section 4.9. Servicing Advances.............................................................46
Section 4.10. Purchase of Mortgage Loans.....................................................46
Section 4.11. Maintenance of Insurance.......................................................46
Section 4.12. Due-on-Sale Clauses; Assumption and Substitution Agreements....................47
Section 4.13. Realization Upon Defaulted Mortgage Loans......................................48
Section 4.14. Indenture Trustee to Cooperate; Release of Mortgage Files......................49
Section 4.15. Servicing Compensation.........................................................51
Section 4.16. Annual Statement as to Compliance..............................................52
Section 4.17. Annual Independent Certified Public Accountants' Reports.......................52
Section 4.18. Access to Certain Documentation and Information Regarding the
Mortgage Loans...............................................................52
Section 4.19. Assignment of Agreement........................................................52
Article V SERVICING TERMINATION.........................................................................53
Section 5.1. Events of Servicing Termination................................................53
Section 5.2. Inspections by Insurer; Errors and Omissions Insurance.........................57
Section 5.3. Merger, Conversion, Consolidation or Succession to Business of
Master Servicer..............................................................57
Section 5.4. Notification to Noteholders....................................................57
Article VI ADMINISTRATIVE DUTIES OF THE MASTER SERVICER.................................................57
Section 6.1. Administrative Duties with Respect to the Indenture............................57
Section 6.2. Records........................................................................59
Section 6.3. Additional Information to be Furnished to the Issuer...........................59
Article VII MISCELLANEOUS...............................................................................59
Section 7.1. Compliance Certificates and Opinions...........................................59
Section 7.2. Form of Documents Delivered to the Indenture Trustee...........................60
Section 7.3. Acts of Class A Noteholders....................................................61
Section 7.4. Notices, etc. to Indenture Trustee.............................................61
Section 7.5. Notices and Reports to Class A Noteholders; Waiver of Notices..................61
Section 7.6. Rules by Indenture Trustee.....................................................62
</TABLE>
v
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.7. Successors and Assigns.........................................................62
Section 7.8. Severability...................................................................62
Section 7.9. Benefits of Agreement..........................................................62
Section 7.10. Legal Holidays.................................................................62
Section 7.11. Governing Law..................................................................63
Section 7.12. Counterparts...................................................................63
Section 7.13. Usury..........................................................................63
Section 7.14. Amendment......................................................................63
Section 7.15. The Insurer....................................................................64
Section 7.16. Notices........................................................................64
Section 7.17. Limitation of Liability........................................................66
SCHEDULE I -- Schedule of Mortgage Loans
EXHIBIT A -- Form of Contents of Mortgage Loan File
EXHIBIT B -- Form of Credit Line Agreement
EXHIBIT C -- Form of Certificate Regarding Prepaid Loans
EXHIBIT D -- Form of Trustee's Acknowledgement of Receipt
EXHIBIT E -- Form of Certification
EXHIBIT F -- Form of Master Servicer's Trust Receipt
EXHIBIT G -- Subsequent Transfer Agreement
EXHIBIT H -- Form of Addition Notice
</TABLE>
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SALE AND SERVICING AGREEMENT, dated as of June 1, 1998, by and
among ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1998-A (the "Trust" or the
"Issuer"), 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 Indenture Trustee (the "Indenture Trustee").
WHEREAS, the Issuer desires to purchase a portfolio of
Mortgage Loans arising in connection with Credit Line Agreements originated by
Advanta National Bank (the "Originator");
WHEREAS the Sponsor has purchased such Mortgage Loans from the
Originator and is willing to sell such Mortgage Loans to the Issuer;
WHEREAS, the Issuer desires to purchase Subsequent Mortgage
Loans arising in connection with Credit Line Agreements to be originated by the
Originator.
WHEREAS, the Sponsor has an agreement to purchase such
Subsequent Mortgage Loans from the Originator and is willing to sell such
Subsequent Mortgage Loans to the Issuer; and
WHEREAS, the Master Servicer has agreed to service the
Mortgage Loans, which constitute the principal assets of the Trust Estate;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Sponsor, the Master Servicer, the Issuer
and the Indenture 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. In addition, capitalized terms used herein and not
defined herein shall have their respective meanings as set forth in the
Indenture.
"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 Mortgaged Properties are located and will give due
consideration to the Insurer's and the Noteholders' reliance on the Master
Servicer.
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"Account": Any account established in accordance with Section
4.8 hereof and Section 8.3 of the Indenture.
"Addition Notice": With respect to the transfer of Subsequent
Mortgage Loans to the Trust pursuant to Section 2.4(b) of this Agreement, a
notice in the form of Exhibit H hereto, which shall be given not later than five
Business Days prior to the related Subsequent Transfer Date, of the Sponsor's
designation of Subsequent Mortgage Loans to be sold to the Trust and the
aggregate Principal Balance of such Subsequent Mortgage Loans.
"Additional Balance": As to any Mortgage Loan and day, the
aggregate amount of all Draws conveyed to the Trust pursuant to Section 2.1.
"Agreement": This Sale 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": As to any Mortgaged Property, the value
established by a drive-by inspection or a full appraisal of such Mortgaged
Property in order to establish compliance with the underwriting criteria then in
effect in connection with the application for the Mortgage Loan secured by such
Mortgaged Property.
"Assignment of Mortgage": With respect to each Mortgage Loan,
an assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect the recordation of the pledge
of the Mortgage Loans to the Indenture Trustee for the benefit of the Class A
Noteholders.
"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 Indenture
Trustee, the Master Servicer and the Sponsor, initially including those
individuals whose names appear on the lists of Authorized Officers delivered on
the Closing Date.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York or
the State of California or in the city in which the principal corporate trust
office of the Indenture Trustee is located, are authorized or obligated by law
or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest
Account established in accordance with Section 8.3 of the Indenture and
maintained by the Indenture Trustee.
"Certificate": As defined in the Trust Agreement.
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"Civil Relief Act": The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
"Class A Note": Any Note designated as a "Class A Note" on the
face thereof, in the form of Exhibit A to the Indenture. The Class A Notes shall
be issued with an initial aggregate Class A Principal Balance equal to the
Original Class A Principal Balance therefor.
"Class A Principal Balance": As of any time of determination,
the Original Class A Principal Balance of the Class A Notes less any amounts
actually distributed theretofore as principal thereon to the Class A Notes of
the Class A Notes on all prior Payment Dates.
"Closing Date": June 24, 1998.
"Code": The Internal Revenue Code of 1986, as amended, and
any successor statute.
"Combined Loan-to-Value Ratio": With respect to any Mortgage
Loan as of any date, the percentage equivalent of a fraction, the numerator of
which is the sum of (i) the Credit Limit and (ii) the outstanding principal
balance as of the date of execution of the related Credit Line Agreement (or as
of any subsequent date, if any, as of which such outstanding principal balance
may be determined in connection with an increase in the Credit Limit for such
Mortgage Loan) of any mortgage loan or mortgage loans that are senior in
priority to the Mortgage Loan and which is secured by the same Mortgaged
Property and the denominator of which is the lesser of (i) the Appraised Value
of the related Mortgaged Property as set forth in the Mortgage File on such date
of execution or on such subsequent date, if any, or (ii) in the case of a
Mortgaged Property purchased within one year of such date of execution, the
purchase price thereof.
"Credit Limit": As to any Mortgage Loan, the maximum principal
balance permitted under the terms of the related Credit Line Agreement.
"Credit Limit Utilization Rate": As to any Mortgage Loan, the
percentage equivalent of a fraction, the numerator of which is the Principal
Balance for such Mortgage Loan and the denominator of which is the related
Credit Limit.
"Credit Line Agreement": With respect to any Mortgage Loan,
the related home equity line of credit agreement, security instrument and
promissory note executed by the related Mortgagor and any amendment or
modification thereof.
"Cut-Off Date": With respect to each Initial Mortgage Loan,
the Initial Cut-Off Date. With respect to any Subsequent Mortgage Loan, the
Subsequent Cut-Off Date related to such Subsequent Mortgage Loan. With respect
to each Qualified Replacement Mortgage, the Replacement Cut-off Date related to
such Qualified Replacement Mortgage.
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"Cut-Off Date Pool Balance": The aggregate Principal Balances
of all the Mortgage Loans as of the related Cut-Off Date; as of the Initial
Cut-Off Date, $75,130,216.06.
"Cut-Off Date Principal Balance": With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the related Cut-Off Date.
"Date-of-Payment Loans": Any Mortgage Loan as to which,
pursuant to the Credit Line Agreement relating thereto, interest is computed and
charged to the Mortgagor at the rate on the outstanding principal balance of
such Credit Line Agreement based on the number of days elapsed between receipt
of the Mortgagor's last payment through receipt of the Mortgagor's most current
payment.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Minimum Monthly Payment
due on such Mortgage Loan.
"Defective Mortgage Loan": A Mortgage Loan determined not to
satisfy the criteria set forth in this Agreement.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding Principal Balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the United
States Bankruptcy Code.
"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.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the
Principal and Interest Account, an institution whose deposits are insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
long-term deposits of which shall be rated (x) A or better by Standard & Poor's
and (y) A2 or better by Moody's and in one of the two highest short-term rating
categories, unless otherwise approved in writing by the Insurer and each of
Moody's and Standard & Poor's, and which is any of the following: (i) a federal
savings and loan association duly organized, validly existing and in good
standing under the federal banking laws, (ii) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (iii) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, (iv) a principal subsidiary of
a bank holding company, or
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(v) approved in writing by the Insurer, Moody's and Standard & Poor's and, in
each case acting or designated by the Master Servicer as the depository
institution for the Principal and Interest Account; provided, however, that any
such institution or association shall have combined capital, surplus and
undivided profits of at least $100,000,000. Notwithstanding the foregoing, the
Principal and Interest Account may be held by an institution otherwise meeting
the preceding requirements except that the only applicable rating requirement
shall be that the unsecured and uncollateralized debt obligations thereof shall
be rated Baa3 or better by Moody's if such institution has trust powers and the
Principal and Interest Account is held by such institution in its trust capacity
and not in its commercial capacity.
"Determination Date": As to each Payment Date, the third
Business Day next preceding such Payment Date or such earlier day as shall be
agreed to by the Insurer and Indenture Trustee.
"Direct Participant" or "DTC Participant": Any broker-dealer,
bank or other financial institution for which the Depository holds the Class A
Notes from time to time as a securities depository.
"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 upon certain conditions as set
forth in Section 2.1 hereof.
"Draw": With respect to any Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the related Cut-Off Date in accordance
with the related Credit Line Agreement.
"Draw Period": With respect to any Mortgage Loan, the period
of time whereby a Mortgagor may make a Draw under the related Credit Line
Agreement; such period not exceed ten years, unless extended at the option of
the Originator and/or the Master Servicer.
"Event of Servicing Termination": As defined in Section 5.1
hereof.
"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.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Mortgaged Property.
"Foreclosure Profit": With respect to a Liquidated Mortgage
Loan, the amount, if any, by which (i) the aggregate of its Net Liquidation
Proceeds exceeds (ii) the related Principal Balance (plus accrued and unpaid
interest thereon at the applicable Loan
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Rate from the date interest was last paid through the date of receipt of the
final Liquidation Proceeds) of such Liquidated Mortgage Loan immediately prior
to the final recovery of its Liquidation Proceeds.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"Highest Lawful Rate": As defined in Section 7.13.
"Holder" or "Noteholder": means the Person in whose name a
Note is registered on the Note Register.
"Indemnification Agreement": The Indemnification Agreement
dated as of June 24, 1998 among the Sponsor, the Insurer and the Underwriter.
"Indenture": The Indenture dated as of June 1, 1998 between
the Issuer and the Indenture Trustee, as the same may be amended and
supplemented from time to time.
"Indenture Trustee": Bankers Trust Company of California,
N.A., located on the date of execution of this Agreement at 3 Park Plaza, 16th
Floor, Irvine, California 92614, not in its individual capacity but solely as
Indenture Trustee under this Agreement, and any successor hereunder.
"Indenture Trustee's Fee": With respect to any Payment Date,
the product of (x) one-twelfth of .015% and (y) the Pool Balance as of the end
of the immediately preceding Remittance Period.
"Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in the Class A Notes.
"Initial Cut-Off Date": With respect to the Initial Mortgage
Loans, the close of business on June 5, 1998.
"Initial Mortgage Loans": Mortgage Loans delivered by the
Sponsor to the Trust on the Closing Date.
"Initial Premium": The initial premium payable by the Sponsor
on behalf of the Trust to the Insurer in consideration of the delivery to the
Indenture Trustee of the Policy.
"Insurance Agreement": The Insurance Agreement dated as of
June 24, 1998 among the Sponsor, the Master Servicer, the Indenture Trustee and
the 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.
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"Insurance Proceeds": Proceeds paid by any insurer (other
than the Insurer) pursuant to any Insurance Policy covering a Mortgage Loan, or
amounts required to be paid by the Master Servicer pursuant to the last sentence
of the first paragraph of Section 4.11(b), or the penultimate sentence of
Section 4.11(c), net of any component thereof (i) covering any expenses incurred
by or on behalf of the Master Servicer in connection with obtaining such
proceeds, (ii) that is applied to the restoration or repair of the related
Mortgaged Property, (iii) released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures, or (iv) required to be paid to
any holder of a mortgage senior to such Mortgage Loan.
"Insurer": Ambac Assurance Corporation or any successor
thereto, as issuer of the Policy.
"Interest Collections": For any Payment Date, amounts
collected during the related Remittance Period, including the portion of Net
Liquidation Proceeds allocated to interest pursuant to the terms of the Credit
Line Agreements, less the Servicing Fee for the related Remittance Period.
"Interest Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) all interest collected by the Master Servicer
during the related Remittance Period with respect to the Mortgage Loans (less
the Servicing Fee), except that with respect to Prepaid Installments, interest
shall be remitted in the related Remittance Period and (ii) all Net Liquidation
Proceeds actually collected by the Master Servicer with respect to the Mortgage
Loan during the related Remittance Period (to the extent such Net Liquidation
Proceeds relate to interest).
"Issuer" or "Trust": Advanta Revolving Home Equity Loan Trust
1998-A created by the Trust Agreement.
"Late Payment Rate": For any Payment Date, the rate of
interest, as it is publicly announced by Citibank, N.A. or its successor at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date such change is announced by
Citibank, N.A. or its successor) plus 2%. The Late Payment Rate shall be
computed on the basis of a year of 365 days calculating the actual number of
days elapsed. In no event shall the Late Payment Rate exceed the maximum rate
permissible under any applicable law limiting interest rates.
"Lifetime Rate Cap": With respect to each Mortgage Loan with
respect to which the related Credit Line Agreement provides for a lifetime rate
cap, the maximum Loan Rate permitted over the life of such Mortgage Loan under
the terms of the related Credit Line Agreement, a form of which is set forth in
Exhibit B hereto.
"Liquidated Mortgage Loan": As defined in Section 4.13(b)
hereof. A Mortgage Loan which is purchased from the Trust pursuant to Section
3.3, 3.4, 3.6(b) or 4.10 hereof is not a "Liquidated Mortgage Loan."
"Liquidation Expenses": Expenses which are incurred by the
Master Servicer or any Sub-Servicer in connection with the liquidation of any
defaulted
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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 4.9 with respect to the related
Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated
Mortgage Loan, any amounts (including the proceeds of any Insurance Policy but
excluding any amounts drawn on the Policy) recovered by the Master Servicer in
connection with such Liquidated Mortgage Loan, whether through Indenture
Trustee's sale, foreclosure sale or otherwise.
"Liquidation Report": As defined in Section 4.13(b).
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Section 2.2(b), 3.3,
3.4, or 4.10 hereof, an amount equal to the Principal Balance of such Mortgage
Loan as of the date of purchase, plus one month's interest on the outstanding
Principal Balance thereof as of the beginning of the preceding Remittance Period
computed at the Loan Rate, if any, together with, without duplication, the
aggregate amount of (i) all delinquent interest, all Servicing Advances
theretofore made with respect to such Mortgage Loan and not subsequently
recovered from the related Mortgage Loan and (ii) any Reimbursement Amount
relating to such Mortgage Loan.
"Loan Rate": With respect to any Mortgage Loan and as of any
day, the per annum rate of interest applicable under the related Credit Line
Agreement to the calculation of interest for such day on the Principal Balance
of such Mortgage Loan.
"Loan Rate Cap": With respect to each Mortgage Loan, the
lesser of (i) the Lifetime Rate Cap, if any, or (ii) the applicable state usury
ceiling, if any.
"Margin": With respect to each Mortgage Loan with an
adjustable rate, the fixed percentage amount set forth in the related Credit
Line Agreement which amount is added to Prime in accordance with the terms of
the related Credit Line Agreement to determine the Loan Rate for such Mortgage
Loan, subject to any maximum.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Master Servicer Affiliate": A Person (i) controlling,
controlled by or under common control with the Master Servicer and (ii) which is
qualified to service residential mortgage loans.
"Master Servicer's Trust Receipt": The Master Servicer's
trust receipt in the form set forth as Exhibit F hereto.
"Minimum Monthly Payment": With respect to any Mortgage Loan
and any month, the minimum amount required to be paid by the related Mortgagor
in that month.
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"Minimum Originator's Interest": With respect to any date, an
amount equal to 2% of the Trust Collateral Value.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing a Credit Line Agreement.
"Mortgage Files": For each Mortgage Loan, the items listed on
Exhibit A hereto.
"Mortgage Loan Schedule": A schedule of Mortgage Loans
transferred to the Trust, attached hereto as Schedule I, as it may be further
supplemented in connection with subsequent transfers of Subsequent Mortgage
Loans.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 2.1(a) and 2.4 hereof, together with
any Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedule of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan" and
"Second Mortgage Loan." The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Mortgaged Property which is REO Property prior to such Mortgaged Property's
disposition by the Trust. Any mortgage loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred and assigned
to the Trust by the Sponsor, in fact was not transferred and assigned to the
Trust for any reason whatsoever shall nevertheless be considered a "Mortgage
Loan" for all purposes of this Agreement. The term "Mortgage Loan" includes the
terms "Initial Mortgage Loan" and "Subsequent Mortgage Loan."
"Mortgaged Property": The underlying property securing a
Mortgage Loan.
"Mortgagor": The obligor on a Credit Line Agreement.
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances and accrued and unpaid Servicing Fees through
the date of liquidation relating to such Liquidated Mortgage Loan. In no event
shall Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan be
less than zero.
"Nonrecoverable Advance" shall mean, with respect to any
Mortgage Loan, any Servicing Advance previously made and not reimbursed pursuant
to Section 4.9 which, in the good faith business judgment of the Master
Servicer, as evidenced by an Officer's Certificate delivered to the Insurer and
the Indenture Trustee on or prior to the related Remittance Date, would not be
ultimately recoverable.
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"Note Account": The Note Account established in accordance
with Section 8.3 of the Indenture and maintained by the Indenture Trustee.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Indenture Trustee.
"Operative Documents": Collectively, this Agreement, the
Indenture, the Trust Agreement, the Subsequent Transfer Agreements, the Policy,
the Class A Notes, the Indemnification Agreement and the Insurance Agreement.
"Original Class A Principal Balance": $80,000,000.
"Original Principal Amount": With respect to any particular
Class A Note, an amount equal to the product of (i) the Percentage Interest of
such Class A Note and (ii) the Original Class A Principal Balance.
"Original Principal Balance": With respect to each Credit
Line Agreement, the principal amount of such Credit Line Agreement or the
mortgage note relating to a Senior Lien, as the case may be, on the date of
origination thereof.
"Originator": As defined in the Recitals.
"Originator's Interest": As of any Payment Date, is the
excess, if any, of (x) the Trust Collateral Value as of such Payment Date over
(y) the Class A Principal Balance as of such Payment Date (after taking into
account reductions therein on such Payment Date).
"Outstanding": With respect to Class A Notes, as of any date
of determination, all such Class A Notes theretofore executed and delivered
hereunder except:
(i) Class A Notes theretofore cancelled by the
Indenture Trustee or delivered to the Indenture Trustee for
cancellation;
(ii) Class A Notes or portions thereof for which
full and final payment money in the necessary amount has been
theretofore deposited with the Indenture Trustee in trust for the
Class A Noteholders;
(iii) Class A Notes in exchange for or in lieu of
which other Class A Notes have been executed and delivered pursuant
to this Agreement, unless proof satisfactory to the Indenture Trustee
is presented that any such Class A Notes are held by a bona fide
purchaser; and
(iv) Class A Notes alleged to have been mutilated,
destroyed, lost or stolen for which replacement Class A Notes have
been issued as provided for in Section 2.4 of the Indenture.
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"Owner Trustee" : Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Payment Date": Any date on which the Indenture Trustee is
required to make distributions to the Class A Noteholders, which shall be the
25th day of each month, commencing in the month following the Closing Date or,
if such day is not a Business Day, then on the next succeeding Business Day.
"Percentage Interest": As to any Class A Note that amount,
expressed as a percentage, equal to a fraction, the numerator of which is the
Class A Principal Balance of such Class A Note as of the related Cut-Off Date
and the denominator of which is the Original Class A Principal Balance of all
Class A Notes of the same Class; and as to any Certificate, the Percentage
Interest set forth on such Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy": The financial guaranty insurance policy dated June
24, 1998, issued by the Insurer to the Indenture Trustee for the benefit of the
Noteholders.
"Pool Balance": With respect to any date, the Principal
Balances of the Mortgage Loans as of such date.
"Pool Certification": As defined in Exhibit F attached
hereto.
"Pool Factor": A seven-digit decimal which the Indenture
Trustee shall compute monthly expressing the Class A Principal Balance as of
each Payment Date (after giving effect to any distribution of principal on such
Payment Date) as a proportion of the Original Class A Principal Balance. On the
Closing Date, the Pool Factor will be 1.0000000. Thereafter, the Pool Factor
shall decline to reflect reductions in the related Class A Principal Balance
resulting from distributions of principal to the Class A Notes.
"Pre-Funded Mortgage Loans": Subsequent Mortgage Loans
assigned to the Trust in consideration of amounts released to the Originator
from the Pre-Funding Account.
"Pre-Funding Period": The period commencing on the Closing
Date and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which a Rapid Amortization Event occurs and
(iii) July 20, 1998.
"Pre-Funding Transfer Date": Any Subsequent Transfer Date on
which Pre-Funded Mortgage Loans are assigned to the Trust.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due
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date for such installment, intended by the Mortgagor as an early payment thereof
and not as a Prepayment with respect to such Mortgage Loan.
"Preference Amount": As defined in the Policy.
"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.
"Prime": The "prime" rate of interest charged from time to
time as set forth in the related Credit Line Agreement.
"Principal and Interest Account": Collectively, each
principal and interest account created by the Master Servicer or any
Sub-Servicer pursuant to Section 4.8(a) hereof, or pursuant to any Sub-Servicing
Agreement.
"Principal Balance": As to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any date, the related Cut-Off Date Principal
Balance, plus (i) any Additional Balance in respect of such Mortgage Loan, minus
(ii) all collections credited as principal against the Principal Balance of any
such Mortgage Loan in accordance with the related Credit Line Agreement prior to
such day. For purposes of this definition, a Liquidated Mortgage Loan shall be
deemed to have a Principal Balance of zero as of the first day of the Remittance
Period following the Remittance Period in which such Mortgage Loan becomes a
Liquidated Mortgage Loan and at all times thereafter.
"Principal Collections": As to any Payment Date, the sum of
all payments by or on behalf of Mortgagors and any other amounts constituting
principal (including, but not limited to, and Substitution Amounts any portion
of Insurance Proceeds or Net Liquidation Proceeds allocable to principal of the
applicable Mortgage Loan, but excluding Foreclosure Profits) collected by the
Master Servicer under the Mortgage Loans during the related Remittance Period.
The terms of the related Credit Line Agreement shall determine the portion of
each payment in respect of a Mortgage Loan that constitutes principal or
interest.
"Principal Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) the principal actually collected by the Master
Servicer with respect to Mortgage Loans during the related Remittance Period,
(ii) the Principal Balance of each such Mortgage Loan that either was
repurchased by the Sponsor or purchased by the Master Servicer, to the extent
such Principal Balance was actually
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deposited in the Principal and Interest Account on such Remittance Date, (iii)
any Substitution Amounts delivered by the Sponsor in connection with a
substitution of a Mortgage Loan, to the extent such Substitution Amounts were
actually deposited in the Principal and Interest Account on such Remittance
Date, and (iv) all Net Liquidation Proceeds actually collected by the Master
Servicer with respect to such Mortgage Loans during the related Remittance
Period (to the extent such Liquidation Proceeds related to principal).
"Prospectus": That certain Prospectus dated October 30, 1997
naming Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage Corp. USA as
registrants and describing certain mortgage loan asset-backed securities to be
issued from time to time as described in related Prospectus Supplements.
"Prospectus Supplement": That certain Prospectus Supplement
dated June 19, 1998, describing the Class A Notes issued by the Trust.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 2.2(b), 3.3 or 3.4 hereof, which (i) bears a
variable rate of interest, (ii) has a Loan Rate at least equal to the Loan Rate
of the Mortgage Loan being replaced, (which shall mean a Mortgage Loan having
the same interest rate index, a margin over such index and a maximum interest
rate at least equal to those applicable to the Mortgage Loan being replaced),
(iii) is of the same or better property type and the same or better occupancy
status as the replaced Mortgage Loan, (iv) shall be of the same or better credit
quality classification (determined in accordance with the respective
Originator's credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than the Payment Date occurring in August,
2023, (vi) has a Combined Loan-to-Value Ratio as of the Initial Cut-Off Date or
Subsequent Cut-Off Date, as applicable, no higher than the Combined
Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (vii) has a
Principal Balance as of the related Replacement Cut-Off Date equal to or less
than the Principal Balance of the replaced Mortgage Loan as of such Replacement
Cut-Off Date, (viii) is in the same lien position or better. Except with respect
to clause (vi) above, in the event that one or more mortgage loans are proposed
to be substituted for one or more mortgage loans, the Insurer may allow the
foregoing tests to be met on a weighted average basis or other aggregate basis
acceptable to the Insurer, as evidenced by a written approval delivered to the
Indenture Trustee by the Insurer.
"Realized Loss": As to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance thereof as of the date of
liquidation is in excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last
day of the calendar month immediately preceding the calendar month in which such
Payment Date occurs.
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"Register": The register maintained by the Indenture Trustee
in accordance with Section 2.3 of the Indenture, in which the names of the Class
A Noteholders are set forth.
"Registrar": The Indenture Trustee, acting in its capacity as
Indenture Trustee appointed pursuant to Section 2.3 of the Indenture, or any
duly appointed and eligible successor thereto.
"Registration Statement": The Registration Statement filed by
the Sponsor with the Securities and Exchange Commission, including all
amendments thereto and including the Prospectus and the Prospectus Supplement
relating to the Class A Notes constituting a part thereof.
"Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all payments made pursuant to the Policy previously received by the
Indenture Trustee and all Preference Amounts previously paid to the Indenture
Trustee by the Insurer and in each case not previously repaid to the Insurer
pursuant to Section 8.6(b)(vii) of the Indenture plus (ii) interest accrued on
each such payment made pursuant to the Policy not previously repaid calculated
at the Late Payment Rate from the date the Indenture Trustee received the
related payment made pursuant to the Policy and (y)(i) any amounts then due and
owing to the Insurer under the Insurance Agreement plus (ii) interest on such
amounts at the Late Payment Rate. The Insurer shall notify the Indenture Trustee
and the Sponsor of the amount of any Reimbursement Amount.
"REO Property": A Mortgaged Property acquired by the Master
Servicer or any Sub-Servicer on behalf of the Trust through foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
"Remittance Date": Any date on which the Master Servicer is
required to remit monies on deposit in the Principal and Interest Account to the
Indenture Trustee, which shall be the 18th day or, if such day is not a Business
Day, the next preceding Business Day, of each month, commencing in the month
following the month in which the Closing Date occurs.
"Remittance Period": As to any Payment Date, the calendar
month preceding the month of such Payment Date.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or agreements
with, the Depository to effectuate a book entry system with respect to the Class
A Notes registered in the Register under the nominee name of the Depository.
"Standard & Poor's": Standard & Poor's, a division of The
McGraw-Hill Companies.
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"Schedule of Mortgage Loans": The Schedule of Mortgage Loans,
attached hereto as Schedule I, as it may be further supplemented in connection
with Subsequent Transfers.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Mortgaged 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 Mortgaged Property having a first
priority lien.
"Servicing Advance": As defined in Section 4.9 and Section
4.13 hereof.
"Servicing Fee": With respect to any Payment Date, the
product of (i) one-twelfth of the Servicing Fee Rate and (ii) the aggregate
Principal Balance of the Mortgage Loans as of the opening of business on the
first day of the Remittance Period preceding such Payment Date (or as of the
Initial Cut-Off Date with respect to the first Payment Date).
"Servicing Fee Rate": 0.50% per annum.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a
Delaware Corporation.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loan, the opening of business on the first day of the calendar month in
which the related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loans": The Mortgage Loans assigned to
the Trust pursuant to Section 2.4 of this Agreement, which shall be listed on
the Schedule of Mortgage Loans attached to the Subsequent Transfer Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Indenture
Trustee and the Sponsor substantially in the form of Exhibit G hereto, by which
Subsequent Mortgage Loans are assigned to the Trust.
"Subsequent Transfer Date": The date specified in each
Subsequent Transfer Agreement, which must, with respect to any Payment Date, be
a date occurring during the calendar month in which such Payment Date occurs,
and on or prior to the Remittance Date occurring in such month.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Principal Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on
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such amount calculated at the Loan Rate net of the Servicing Fee, if any, of the
Mortgage Loan being replaced.
"Sub-Servicer": Any Person with whom the Master Servicer has
entered into a Sub-Servicing Agreement and who satisfies any requirements set
forth in Section 4.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and any Sub-Servicer relating to the servicing and/or
administration of certain Mortgage Loans as permitted by Section 4.3.
"Telerate Screen Page 3750": The display designated as page
3750 on the Telerate Service (or such other page as may replace page 3750 on
that service for the purpose of displaying London interbank offered rates of
major banks).
"Termination Fees": With respect to Mortgage Loans which
prepay in full or in part and are secured by Mortgaged Properties in certain
jurisdictions, an account termination fee generally not exceeding $500 may be
charged by the Master Servicer and retained as additional servicing compensation
pursuant to Section 4.15. Such Termination Fees may not be applicable to
accounts terminated subsequent to a date designated in the related Credit Line
Agreement which depending on the jurisdiction may be during the Draw Period.
"Transfer Date": As defined in Section 2.5 herein.
"Transfer Notice Date": As defined in Section 2.5 herein.
"Trust Agreement": The Trust Agreement dated as of June 1,
1998 between the Owner Trustee and the Sponsor.
"Trust Collateral Value": As of any Payment Date, the sum of
(i) the Pool Balance at the end of the prior calendar month, (ii) the aggregate
Principal Balances as of the related Cut-Off Dates of all Subsequent Mortgage
Loans previously assigned to the Trust during the calendar month in which such
Payment Date occurs and (iii) the amounts, if any, on deposit in the Pre-Funding
Account at the close of business on such Payment Date.
"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, for the benefit of the Class A
Noteholders and the Insurer (including all proceeds thereof), including the
following: (i) the Initial Mortgage Loans, Qualified Replacement Mortgages and
Subsequent Mortgage Loans; (ii) such amounts, including Eligible Investments, as
from time to time may be held in all Accounts (except as otherwise provided
herein); (iii) any Mortgaged Property, the Class A Noteholder of which has been
effected on behalf of the Trust as a result of foreclosure or acceptance by the
Master Servicer or any Sub-Servicer of a deed in lieu of foreclosure and that
has not been withdrawn from the Trust; (iv) any Insurance Policies relating to
the Mortgage Loans and any rights of the Trust and the Sponsor under any
Insurance Policies; (v) Net Liquidation
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Proceeds with respect to any Liquidated Mortgage Loan; (vi) the Policy; (vii)
such amounts held in the Capitalized Interest Account; and (viii) such amounts
held in the Pre-Funding Account, the Principal and Interest Account and the Note
Account.
"Underwriter": J.P. Morgan Securities Inc.
Section 1.2. Use of Words and Phrases. "Herein," "hereby,"
"hereunder," "hereof," "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders. As used herein, any form of the word "include" shall
be deemed to be followed by the words "without limitation."
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 Notes 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
CONVEYANCE OF MORTGAGE LOANS
Section 2.1. Conveyance of the Initial Mortgage Loans. (a) The
Sponsor, concurrently with the execution and delivery hereof, hereby transfers,
assigns, sets over and otherwise conveys without recourse to the Indenture
Trustee, all right, title and interest of the Sponsor in and to: (i) each
Initial Mortgage Loan listed on the Schedule of Mortgage Loans, including its
Principal Balance (including all Additional Balances) and all collections in
respect thereof received on or after the Initial Cut-Off Date (excluding
payments in respect of accrued interest due prior to the Initial Cut-Off Date);
(ii) property that secured a Mortgage Loan that is acquired by foreclosure or
deed in lieu of foreclosure; (iii) the Sponsor's rights under the hazard
insurance policies; and (iv) all other assets included or to be included in the
Trust for the benefit of Class A Noteholders and the Insurer; provided, however,
neither the Indenture Trustee nor the Trust assumes the obligation under any
Credit Line Agreement that provides for the
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funding of future advances to the Mortgagor thereunder, and neither the Trust
nor the Indenture Trustee shall be obligated or permitted to fund any such
future advances. Additional Balances shall be part of the related Principal
Balance and are hereby transferred to the Trust for application to the
Originator's Interest only on the Closing Date pursuant to this Section 2.1, and
therefor part of the Trust estate. In addition, on or prior to the Closing Date,
the Sponsor shall cause the Insurer to deliver the Policy to the Indenture
Trustee for the benefit of the Class A Noteholders of the Class A Notes. The
foregoing transfer, assignment, set-over and conveyance to the Trust shall be
made to the Indenture Trustee, on behalf of the Trust, and each reference in
this Agreement to such transfer, assignment, set-over and conveyance shall be
construed accordingly.
The 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 Closing
Date) describing the Mortgage Loans and naming the Sponsor as debtor and the
Indenture Trustee as secured party and any amendments to UCC-1 financing
statements required to reflect a change in the name or corporate structure of
the Sponsor or the filing of any additional UCC-1 financing statements due to
the change in the principal office of the Sponsor (within 90 days of any event
necessitating such filing)) as are necessary to perfect and protect the Class A
Noteholders' and the Insurer's interests in each Mortgage Loan and the proceeds
thereof.
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Sponsor agrees to:
(i) cause to be delivered, without recourse to the
Indenture Trustee, on the Closing Date with respect to the Initial
Mortgage Loans or, on the Subsequent Transfer Date with respect to
Subsequent Mortgage Loans, or, on the Transfer Date with respect to the
Qualified Replacement Mortgage listed on the Schedule of Mortgage
Loans, the items listed as items (a) through (f) in Exhibit A hereto;
and
(ii) cause, within 75 Business Days following the Closing
Date, 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
Sponsor to the Indenture Trustee; provided, however, that Assignments
of Mortgage shall not be required to be submitted for recording with
respect to any Mortgage Loan as to which the recordholder is the
Originator (under, with respect to Advanta National Bank, either its
current name, "Advanta National Bank" or its prior name, "Advanta
National Bank USA"), unless the related Mortgaged Property is not
located in a jurisdiction in which, as evidenced by an Opinion of
Counsel acceptable to the Rating Agencies delivered to the Indenture
Trustee within 30 Business Days following the Closing Date, recordation
of such Assignment of Mortgage is not necessary to perfect the lien of
the Indenture Trustee in the related Mortgage Loan.
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All recording, if required pursuant to this Section 2.1, shall
be accomplished at the expense of the Sponsor. Notwithstanding anything to the
contrary contained in this Section 2.1, 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 Indenture Trustee of a copy of such Mortgage, such assignment or
assignments of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
Copies of all Mortgage assignments and any Assignment of
Mortgage in recordable form received by the Indenture Trustee shall be kept in
the related Mortgage File.
(c) In the case of Initial Mortgage Loans which have been
prepaid in full on or after the Initial Cut-Off Date and prior to the Closing
Date, or with respect to Subsequent Mortgage Loans which have been prepaid in
full on or after the Subsequent Cut-Off Date and prior to the Subsequent
Transfer Date, the Sponsor, in lieu of the foregoing, will deliver within 15
Business Days after the Closing Date, or Subsequent Transfer Date, as
applicable, to the Indenture Trustee a certification of an Authorized Officer in
the form set forth in Exhibit C hereto.
(d) The Sponsor shall transfer, assign, set over and otherwise
convey without recourse, to the Indenture Trustee all right, title and interest
of the Sponsor in and to any Qualified Replacement Mortgage delivered to the
Indenture Trustee on behalf of the Trust by the Sponsor pursuant to Section 2.2,
Section 3.3 or Section 3.4 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 shall reserve and retain all right, title and interest in and to
payments of principal and interest due on such Qualified Replacement Mortgage
prior to the applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage therefor, the
Indenture Trustee will transfer, assign, set over and otherwise convey without
recourse, on the Sponsor order, all of its right, title and interest in and to
such released Mortgage Loan and all the Trust's right, title and interest to
principal collected and interest accruing on such released Mortgage Loan on and
after the applicable Replacement Cut-Off Date; provided, however, that the Trust
shall reserve and retain all right, title and interest in and to payments of
principal collected and interest accruing on such released Mortgage Loan prior
to the applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Indenture Trustee on behalf of the Trust,
the Sponsor agrees to cause to be delivered to the Indenture Trustee the items
described in Section 2.1(b) on the date of such transfer and assignment or, if a
later delivery time is permitted by Section 2.1(b), then no later than such
later delivery time.
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(g) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the Indenture
Trustee shall deliver on the date of conveyance of such Qualified Replacement
Mortgage and on the order of the Sponsor (i) the original Credit Line Agreement,
or the certified copy, relating thereto, endorsed without recourse, to the
Sponsor and (ii) such other documents as constituted the Mortgage File with
respect thereto.
(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Sponsor shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
(i) The Sponsor shall reflect on its records that the Mortgage
Loans have been sold to the Trust.
(j) If the Master Servicer's shareholders' equity (on a
consolidated basis with AMHC) calculated pursuant to generally accepted
accounting principles, as evidenced by the Financial Statements (as defined in
the Insurance Agreement, and which the Master Servicer hereby agrees to provide
to the Insurer on a quarterly basis promptly after the same are available),
falls below $5,000,000, then the Sponsor shall promptly prepare and deliver to
the Indenture Trustee the Mortgage assignments. Upon the direction of the
Insurer, the Indenture Trustee shall submit such assignments for recording in
the appropriate jurisdictions. The Master Servicer shall pay the anticipated
recording costs to the Indenture Trustee on the date of delivery of the
assignments to the Indenture Trustee, and if the Master Servicer fails to do so
or the actual recording costs exceed the anticipated recording costs then the
Indenture Trustee shall pay such costs and shall be entitled to reimbursement
therefor from amounts otherwise distributable to the Class A Noteholders.
(k) To the extent that the ratings, if any, then assigned to
the unsecured debt of the Advanta National Bank or of its ultimate corporate
parent are satisfactory to the Insurer, Moody's and Standard & Poor's, then any
of the Document Delivery Requirements described above may be waived by an
instrument signed by the Insurer, Standard & Poor's and Moody's (or any
documents theretofore delivered to the Indenture Trustee returned to Advanta
National Bank) on such terms and subject to such conditions as the Insurer,
Moody's and Standard & Poor's may permit.
Section 2.2. Acceptance by Indenture Trustee; Certain
Substitutions of Mortgage Loans; Certification by Indenture Trustee. (a) The
Indenture Trustee hereby acknowledges its receipt of the Policy and agrees to
execute and deliver on the Closing Date and on each Subsequent Transfer Date and
each Transfer Date an acknowledgment of receipt of the Credit Line Agreements
delivered by the Sponsor in the form attached as Exhibit D hereto, and declares
that it will hold such documents and any amendments, replacement or supplements
thereto, as well as any other assets included in the definition of Trust Estate
and delivered to the Indenture Trustee, as Indenture Trustee in trust upon and
subject to the conditions set forth herein for the benefit of the Class A
Noteholders and the Insurer. The Indenture Trustee further agrees to review any
other documents
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delivered by the Sponsor within 90 days after the Closing Date (or within 90
days with respect to any Subsequent Mortgage Loan or Qualified Replacement
Mortgage after the assignment thereof) and to deliver to the Sponsor, the Master
Servicer and the Insurer a Pool Certification in the form attached hereto as
Exhibit E to the effect that, as to each Mortgage Loan listed in the Schedule of
Mortgage Loans (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such Pool Certification as not covered by such Pool
Certification), (i) all documents required to be delivered to it pursuant to
this Agreement are in its possession and (ii) such documents have been reviewed
by it and on their face appear to relate to such Mortgage Loan; provided,
however, that such Pool Certification shall not be delivered prior to 90 days
after the Closing Date with respect to the Initial Mortgage Loans and 90 days
after the Pre-Funding Period with respect to the Pre-Funded Mortgage Loans. The
Indenture Trustee shall be under no duty or obligation to inspect, review or
examine any such documents, instruments, certificates or other papers to verify
the validity, legality, enforceability, sufficiency, due authorization,
recordability or genuineness of same or to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face, nor shall the Indenture 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 Indenture Trustee during such 90-day period finds
any document constituting a part of a Mortgage File which is not properly
executed, has not been received within the specified period, or is unrelated to
the Mortgage Loans 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 Indenture Trustee shall
promptly so notify the Sponsor and the Insurer. In performing any such review,
the Indenture Trustee may conclusively rely on the Sponsor as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the Indenture Trustee's review of the items delivered by the
Sponsor pursuant to Section 2.1(b)(i) is limited solely to confirming that the
documents listed in Section 2.1(b)(i) have been executed and received, on their
face, appear to relate to the Mortgage Files identified in the Schedules of
Mortgage Loans and conform materially to the description thereof in the Schedule
of Mortgage Loans. The Sponsor agrees to use reasonable efforts to remedy a
material defect in a document constituting part of a Mortgage File of which it
is so notified by the Indenture Trustee. If, however, within 60 days after the
Indenture 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 Class A
Noteholders or of the Insurer, the Sponsor will then on the next succeeding
Business Day (i) substitute in lieu of such Mortgage Loan a Qualified
Replacement Mortgage and, deliver the Substitution Amount applicable thereto to
the Master Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Mortgage Loan at a purchase price equal to the Loan Purchase Price
thereof, which purchase price shall be delivered to the Master Servicer for
deposit in the Principal and Interest Account. Upon receipt of any Qualified
Replacement Mortgage or of written notification signed by a Servicing Officer to
the effect that the Loan Purchase Price in respect of a Defective Mortgage Loan
has been deposited into the Principal and Interest Account, then as promptly as
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practicable, the Indenture Trustee shall execute such documents and instruments
of transfer presented by the Sponsor, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Sponsor to effect such transfer by the Trust of such Defective
Mortgage Loan pursuant to this Section. It is understood and agreed that the
obligation of the Sponsor to accept a transfer of a Defective Mortgage Loan and
to either convey a Qualified Replacement Mortgage or to make a deposit of any
related Loan Purchase Price into the Principal and Interest Account shall
constitute the sole remedy respecting such defect available to Class A
Noteholders, the Indenture Trustee and the Insurer against the Sponsor.
The Sponsor, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall deliver an
amended Mortgage Loan Schedule to the Indenture Trustee and the Insurer and
shall make appropriate entries in its general account records to reflect such
transfer. The Sponsor shall, following such retransfer, appropriately mark its
records to indicate that it is no longer servicing such Mortgage Loan on behalf
of the Trust. The Sponsor, promptly following such transfer, shall appropriately
mark its electronic ledger and make appropriate entries in its general account
records to reflect such transfer.
(c) As to any Qualified Replacement Mortgage, the Sponsor
shall, if required to deliver any such Qualified Replacement Mortgage, deliver
to the Indenture Trustee with respect to such Qualified Replacement Mortgage
such documents and agreements as are required to be held by the Indenture
Trustee in accordance with Section 2.2. For any Remittance Period during which
the Sponsor substitutes one or more Qualified Replacement Mortgages, the Master
Servicer shall determine the Substitution Amount which amount shall be deposited
by the Sponsor in the Principal and Interest Account at the time of
substitution. All amounts received in respect of the Qualified Replacement
Mortgage during the Remittance Period in which the circumstances giving rise to
such substitution occur shall not be a part of the Trust Estate and shall not be
deposited by the Master Servicer in the Principal and Interest Account. All
amounts received by the Master Servicer during the Remittance Period in which
the circumstances giving rise to such substitution occur in respect of any
Defective Mortgage Loan so removed by the Trust Estate shall be deposited by the
Master Servicer in the Principal and Interest Account. Upon such substitution,
the Qualified Replacement Mortgage shall be subject to the terms of this
Agreement in all respects, and the Sponsor shall be deemed (i) to have made with
respect to such Qualified Replacement Mortgage or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in Section
3.3 and (ii) to have certified that such Mortgage Loan(s) is/are Qualified
Replacement Loan(s). The procedures applied by the Sponsor in selecting each
Qualified Replacement Mortgage shall not be materially adverse to the interests
of the Indenture Trustee, the Class A Noteholders or the Insurer.
(d) The Master Servicer or the Originator may consent to the
placing of a lien senior to that of any Mortgage on the related Mortgaged
Property, provided that
(i) such Mortgage succeeded to a first lien position after the
related Mortgage Loan was conveyed to the Trust and, immediately
following the
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placement of such senior lien, such Mortgage is in a second lien
position and the outstanding principal amount of the mortgage loan
secured by such subsequent senior lien is no greater than the
outstanding principal amount of the senior mortgage loan secured by the
Mortgaged Property as of the date the related Mortgage Loan was
originated; or
(ii) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the related Cut-Off Date and the new senior
lien secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount and interest rate of the
replacement first mortgage loan immediately following such refinancing
is not greater than the outstanding principal amount and interest rate
of such existing first mortgage loan at the date of origination of such
Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Master Servicer or
the Originator can consent to the placing of liens senior to that of a Mortgage
on the related Mortgaged Property only if the Combined Loan-to-Value Ratio and
second mortgage ratio is less than or equal to the original Combined
Loan-to-Value Ratio and second mortgage ratio; provided, however, the Master
Servicer or the Originator may consent to the placing of a senior lien on up to
5% of the Mortgage Loans if the Combined Loan-to-Value Ratios of any such
Mortgage Loan will not increase to greater than 100%; provided, further, that
the Master Servicer or the Originator may only approve modifications if the
related Mortgagor has used the Credit Line Agreement in the past twelve months
and has made timely payments, the current characteristics of the related
Mortgagor meet the Originator's underwriting guidelines used at the time of
origination and the Originator receives verbal verification of employment of the
related Mortgagor.
The Master Servicer or the Originator may also, without prior
approval from the Rating Agencies or the Insurer, increase the Credit Limits on
Mortgage Loans provided that (i) new appraisals are obtained and the Combined
Loan-to-Value Ratios of the Mortgage Loans after giving effect to such increase
are less than or equal to the Combined Loan-to-Value Ratios of the Mortgage
Loans as of the related Cut-Off Date, (ii) such increases are consistent with
the Originator's underwriting policies, (iii) the related Mortgagor has used the
Credit Line Agreement in the past twelve months and has made timely payments and
(iv) the Master Servicer receives verbal verification of employment of the
related Mortgagor. In addition, the Master Servicer may increase the Credit
Limits on Mortgage Loans having aggregate balances of up to 5% of the Pool
Balance, without obtaining new appraisals provided that (i) the increase in the
Credit Limit does not cause the Combined Loan-to-Value Ratios of the Mortgage
Loans to exceed 80%, (ii) the increase is consistent with the Originator's
underwriting policies, (iii) the related Mortgagor has used the Credit Line
Agreement in the past twelve months and has made timely payments and (iv) the
Master Servicer receives verbal verification of employment of the related
Mortgagor.
Furthermore, the Master Servicer or the Originator may,
without prior approval from the Rating Agencies and the Insurer, solicit
Mortgagors for a reduction in
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Loan Rates of no more than .50%; provided that the Originator can only reduce
such Loan Rates on up to 5% of the Mortgage Loans by Pool Balance. Any such
solicitations shall not result in a reduction in the weighted average Margin of
the Mortgage Loans in the pool by more than 2.5 basis points taking into account
any such prior reductions.
Subject to the above limitations, the Originator or the Master
Servicer, may agree to changes in the terms of a Mortgage Loan at the request of
the Mortgagor; provided, that such changes (i) do not materially and adversely
affect the interests of Holders or the Insurer and (ii) are consistent with
Accepted Servicing Practices.
Notwithstanding anything to the contrary, neither the
Originator nor the Master Servicer shall agree to any changes or modifications
in the terms of any Mortgage Loan that, after giving effect to such change or
modifications, would cause any criteria set forth in Section 2.4 to be violated.
Section 2.3. Cooperation Procedures. (a) The Sponsor shall,
in connection with the delivery of each Qualified Replacement Mortgage to the
Indenture Trustee, provide the Indenture Trustee with the information set forth
in the Schedules of Mortgage Loans with respect to such Qualified Replacement
Mortgage.
(b) The Sponsor, the Master Servicer and the Indenture Trustee
covenant to provide each other with all data and information required to be
provided by them hereunder at the times required hereunder, and additionally
covenant reasonably to cooperate with each other in providing any additional
information required by any of them in connection with their respective duties
hereunder.
Section 2.4. Conveyance of the Subsequent Mortgage Loans. (a)
The Sponsor may, on Subsequent Transfer Dates, deliver to the Indenture Trustee
loans eligible to become Subsequent Mortgage Loans on the next following Payment
Date, in exchange, on such Payment Date, for monies released to the Originator
pursuant to Section 8.5(b) of the Indenture, or a corresponding increase in the
Originator's Interest.
Upon assignment of any Pre-Funded Mortgage Loan, the Indenture
Trustee shall release to the Sponsor an amount equal to the Principal Balance
thereof as of the related Subsequent Cut-Off Date from amounts then on deposit
in the Pre-Funding Account.
(b) The Sponsor shall transfer to the Indenture Trustee the
Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) the Sponsor shall have provided the Indenture Trustee,
each Rating Agency and the Insurer with a timely Addition Notice and
shall have provided any information reasonably requested by any of the
foregoing with respect to the Subsequent Mortgage Loans;
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(ii) the Sponsor shall have delivered to the Indenture
Trustee a duly executed written assignment (including an acceptance by
the Indenture Trustee) in substantially the form of Exhibit G (the
"Subsequent Transfer Agreement"), which shall include Schedules of
Mortgage Loans, listing the Subsequent Mortgage Loans and any other
exhibits listed thereon;
(iii) the Master Servicer shall have deposited in the
Principal and Interest Account all collections in respect of the
Subsequent Mortgage Loans received on or after the related Subsequent
Cut-Off Date;
(iv) as of each Subsequent Transfer Date, neither the
Master Servicer nor the Sponsor was insolvent nor will any of them have
been made insolvent by such transfer nor is any of them aware of any
pending insolvency;
(v) such addition will not result in a material adverse
tax consequence to the Trust or the Class A Noteholders;
(vi) with respect to Subsequent Mortgage Loans which are
Pre-Funded Mortgage Loans, the Pre-Funding Period shall not have
terminated; and
(vii) the Sponsor shall have delivered to the Indenture
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b) and paragraphs (c)
and (d) below and in the related Subsequent Transfer Agreement.
(c) The obligation of the Trust to accept the assignment of a
Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the
following requirement: such Subsequent Mortgage Loan may not be more than 30
days contractually delinquent as of the related Subsequent Cut-Off Date.
(d) The obligation of the Trust to accept the assignment of a
Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the
following additional requirements, any of which may be waived or modified in any
respect by the Insurer by a written instrument executed by the Insurer:
(i) No such Subsequent Mortgage Loan may (A) have a Combined
Loan-to-Value Ratio greater than 125%; (B) have a Principal Balance in
excess of $285,000; (C) have a remaining term to stated maturity in
excess of 300 months; (D) have a Loan Rate (as of the related Subsequent
Cut-Off Date) below 8.25%; (E) have a Margin below 0.00%; or (F) be more
than 30 days Delinquent (as of the related Subsequent Cut-off Date).
(ii) After giving effect to the assignment to the Trust of any
such Subsequent Mortgage Loan (A) the weighted average net Loan Rate of
all Mortgage Loans shall be no less than 12.00%; (B) the Mortgage Loans
shall have weighted average Combined Loan-to-Value Ratio no greater than
88.00%; (C) the weighted average margin shall not be less than 3.50%;
(D) the weighted remaining term to stated maturity shall not exceed 275
months; (E) no more the
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1.00% of the Pool Balance as of such Subsequent Transfer Date shall
relate to Mortgaged Properties in any one zip code; and (F) no more
than 10% of the Mortgage Loans have a Combined Loan-to-Value greater
than 100%.
(e) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Sponsor agrees to satisfy the conditions set
forth in Sections 2.1(b)-(j), 2.2 and 2.3.
(f) In connection with the transfer of any Subsequent Mortgage
Loans to the Trust the Sponsor, the Master Servicer and the Indenture Trustee
may, with the prior written consent of the Insurer, amend the definition of
"Specified Overcollateralization Amount" for the purpose of changing the related
Specified Overcollateralization Amount; provided, however, that any such
amendment must comply with the provisions of Sections 7.14(b) and 7.14(d)
hereof.
Section 2.5. Retransfers of Mortgage Loans at Election of
Sponsor . Subject to the conditions set forth below, the Sponsor may, but shall
not be obligated to (except the Sponsor shall be obligated upon a breach of a
representation or warranty), accept the reassignment of Mortgage Loans from the
Trust as of the close of business on a Payment Date (the "Transfer Date"). On
the fifth Business Day (the "Transfer Notice Date") prior to the Transfer Date
designated in such notice, the Sponsor shall give the Indenture Trustee, the
Insurer and the Master Servicer a notice of the proposed reassignment that
contains a list of the Mortgage Loans to be reassigned. Such reassignment of
Mortgage Loans shall be permitted upon satisfaction of the following conditions:
(i) No Rapid Amortization Event has occurred or will occur
as a result of such removal;
(ii) On the Transfer Notice Date the Originator's Interest
(after giving effect to the removal from the Trust of the Mortgage Loans
proposed to be retransferred) is at least equal to the Minimum
Originator's Interest;
(iii) The Overcollateralization Amount as of such Payment
Date (after giving effect to the removal as described in Section 2.5(ii)
above) equals or exceeds the then Specified Overcollateralization
Amount;
(iv) The transfer of any Mortgage Loans on any Transfer
Date during the Managed Amortization Period shall not, in the reasonable
belief of the Sponsor cause a Rapid Amortization Event to occur or an
event which with notice or lapse of time or both would constitute a
Rapid Amortization Event;
(v) On or before the Transfer Date, the Sponsor shall have
delivered to the Indenture Trustee, the Insurer and the Rating Agencies
a revised Mortgage Loan Schedule, reflecting the proposed transfer and
the Transfer Date, and the Master Servicer shall have marked its
servicing records to show that the Mortgage Loans reassigned to the
holder of the Sponsor are no longer owned by the Trust;
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(vi) The Sponsor shall represent and warrant that random
selection procedures were used in selecting the Mortgage Loans and no
other selection procedures were used which are adverse to the interests
of the Sponsor of the Class A Noteholders or the Insurer were utilized
in selecting the Mortgage Loans to be removed from the Trust; and
(vii) The Sponsor shall have delivered to the Indenture
Trustee and the Insurer an Officer's Certificate certifying that the
items set forth in subparagraphs (i) through (vi), inclusive, have been
performed or are true and correct, as the case may be. The Indenture
Trustee may conclusively rely on such Officer's Certificate, shall have
no duty to make inquiries with regard to the matters set forth therein
and shall incur no liability in so relying.
Upon receiving the requisite information from the Sponsor, the Master Servicer
shall perform in a timely manner those acts required of it, as specified above.
Upon satisfaction of the above conditions, on the Transfer Date the Indenture
Trustee shall deliver, or cause to be delivered, to the Sponsor the Mortgage
File for each Mortgage Loan being so reassigned, and the Indenture Trustee shall
execute and deliver to the Sponsor such other documents prepared by the Sponsor
as shall be reasonably necessary to reassign such Mortgage Loans to the Sponsor.
Any such transfer of the Trust's right, title and interest in and to Mortgage
Loans shall be without recourse, representation or warranty by or of the
Indenture Trustee or the Trust to the Sponsor.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER
Section 3.1. Representations and Warranties of the Sponsor.
The Sponsor hereby represents, warrants and covenants to the Indenture Trustee,
the Master Servicer, the Insurer and to the Class A Noteholders as of the
Closing Date that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is in good standing as a foreign corporation in each jurisdiction in
which the nature of its respective 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
respective properties, to carry out its respective business as presently
conducted and as proposed to be conducted and to enter into and
discharge its respective obligations under this Agreement and the other
Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the
other Operative Documents to which the Sponsor is a party by the Sponsor
and its respective performance and compliance with the terms of this
Agreement and of the other Operative Documents to which it is a party
have been duly authorized by
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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 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
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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 make no such representation or warranty), that are
necessary or advisable in connection with the purchase and sale of the
Notes 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 respective
obligations under this Agreement and such of the other Operative
Documents to which it is a party.
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 Indenture Trustee.
Section 3.2. Representations and Warranties of the Master
Servicer. The Master Servicer hereby represents, warrants and covenants to the
Indenture Trustee, the Sponsor, the Insurer and to the Class A Noteholders as of
the Closing Date that:
(a) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, is, in compliance with the laws of each state in which any
Mortgaged Property is located to the extent necessary to enable it to
perform its obligations hereunder and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business, or
the properties owned or leased by it make such qualification necessary.
The Master Servicer has all requisite corporate power and authority to
own and operate its properties, to carry out its business as presently
conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative
Documents to which it is a party. The Master Servicer has, on a
consolidated basis with its parent, AMHC, equity of at least $5,000,000,
as determined in accordance with generally accepted accounting
principles.
(b) The execution and delivery of this Agreement by the
Master Servicer and its performance and compliance with the terms of
this
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Agreement and the other Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of
the Master Servicer and will not violate the Master Servicer's Articles
of Incorporation or Bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or
other instrument to which the Master Servicer is a party or by which the
Master Servicer is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Master Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to
which the Master Servicer is a party, assuming due authorization,
execution and delivery by the other parties hereto and thereto, each
constitutes a valid, legal and binding obligation of the Master
Servicer, enforceable against it in accordance with the terms hereof,
except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at
law).
(d) The Master Servicer is not in default with respect to
any order or decree of any court or any order, regulation or demand of
any federal, state, municipal or governmental agency, which might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Master Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other Operative
Documents to which the Master Servicer is a party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
litigation might have consequences that would prohibit its entering into
this Agreement or any other Operative Document to which it is a party or
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Master Servicer or its properties or
might have consequences that would materially and adversely affect its
performance hereunder and under the other Operative Documents to which
the Master Servicer is a party.
(f) 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
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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.
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 Indenture Trustee.
Upon discovery by the Master Servicer, the Sponsor, the
Insurer or the Indenture 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 Class A Noteholders or of the Insurer, the party
discovering such breach shall give prompt written notice to the other parties.
Within 60 days of its discovery or its receipt of notice of breach, the Master
Servicer shall cure such breach in all material respects; provided, however,
that if the Master Servicer can demonstrate to the reasonable satisfaction of
the Insurer that it is diligently pursuing remedial action, then the cure period
may be extended with the written approval of the Insurer.
Section 3.3. Representations and Warranties of the Sponsor
with Respect to the Mortgage Loans; Retransfer of Certain Mortgage Loans.
(a) The Sponsor makes the following representations and
warranties as to the Mortgage Loans on which the Issuer relies in accepting the
Mortgage Loans and on which the Insurer relies in issuing the Policy. Such
representations and warranties speak as of the Closing Date with respect to the
Initial Mortgage Loans, and as of the related Subsequent Transfer Date with
respect to any Subsequent Mortgage Loan (unless otherwise specified below), but
shall in each case survive the sale, transfer, and assignment of the Mortgage
Loans to the Issuer and the pledge thereof to the Indenture Trustee pursuant to
the Indenture:
(i) All of the original or certified documentation set
forth in Section 2.1 (including all material documents related thereto)
with respect to each Initial Mortgage Loan has been or will be delivered
to the Indenture Trustee on the Closing Date or, with respect to any
Subsequent Mortgage Loans, on the related Subsequent Transfer Date, or
as otherwise provided in Section 3.2. All such documentation is true and
accurate in all material respects. 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;
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(ii) Each Mortgage Loan is being serviced by the Master
Servicer or a Person controlling, controlled by or under common control
with the Master Servicer and qualified to service mortgage loans;
(iii) As of the Closing Date with respect to the Initial
Mortgage Loans and the related Subsequent Transfer Date with respect to
any Subsequent Mortgage Loan (unless otherwise specified), and the
applicable Transfer Date with respect to any Qualified Replacement
Mortgage, this Agreement constitutes a valid transfer and assignment to
the Trust of all right, title and interest of the Sponsor in and to the
related Cut-Off Date Principal Balances with respect to the applicable
Mortgage Loans, all monies due or to become due with respect thereto
(excluding payments in respect of accrued interest due prior to the
related Cut-Off Date), and all proceeds of such related Cut-Off Date
Principal Balances with respect to the Mortgage Loans and such funds as
are from time to time deposited in the Principal and Interest Account
(excluding any investment earnings thereon) and all other property
specified in the definition of "Mortgage Loan" as being part of the
corpus of the Trust conveyed to the Trust by the Sponsor, and upon
payment for the Additional Balances, will constitute a valid transfer
and assignment to the Indenture Trustee of all right, title and interest
of the Sponsor in and to the Additional Balances, all monies due or to
become due with respect thereto, and all proceeds of such Additional
Balances and all other property specified in the definition of "Mortgage
Loan" relating to the Additional Balances. However, if this Agreement is
not deemed to be a valid transfer and assignment to the Indenture
Trustee of such right, title and interest, this Agreement shall in any
event constitute a grant of a security interest (as defined in the UCC
as in effect in New York) in such property to the Indenture Trustee on
behalf of the Trust. If this Agreement constitutes the grant of a
security interest to the Trust in such property, and if the Indenture
Trustee maintains possession of the Mortgage File for each Mortgage
Loan, the Trust shall have a first priority perfected security interest
in such property, subject to the effect of Section 9-306 of the UCC with
respect to collections on the Mortgage Loans that are deposited in the
Principal and Interest Account;
(iv) As of the Closing Date with respect to the Initial
Mortgage Loans, the related Subsequent Transfer Date with respect to any
Subsequent Mortgage Loan (unless otherwise specified) and the applicable
Transfer Date with respect to any Qualified Replacement Mortgage and as
of the date any Additional Balance is created, the information set forth
in the Mortgage Loan Schedule for such Mortgage Loans is true and
correct in all material respects;
(v) As of the Closing Date and any Subsequent Transfer
Date, no more than 1.00% of the related Cut-Off Date Pool Balance of the
Mortgage Loans is secured by Mortgaged Properties located within any
single zip code area;
(vi) The Mortgages and Credit Line Agreements have not
been assigned or pledged, and the Sponsor is the sole owner and holder
of the Mortgages and Credit Line Agreements free and clear of any and
all liens, claims,
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encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the Class A Noteholder of the applicable Mortgage Loan, to sell, assign
or transfer the same;
(vii) As of the Closing Date with respect to the Initial
Mortgage Loans, the Subsequent Transfer Date with respect to the
Subsequent Mortgage Loans and the applicable Transfer Date with respect
to any Qualified Replacement Mortgage, there is no valid offset, defense
or counterclaim of any obligor under any Credit Line Agreement or
Mortgage. Neither the operation of any of the terms of each Credit Line
Agreement and each Mortgage nor the exercise of any right thereunder
will render either the Credit Line Agreement or the Mortgage
unenforceable, in whole or in part, nor subject to any right of
rescission, set-off, claim, counterclaim or defense, including, without
limitation, the defense of usury and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
(viii) No Minimum Monthly Payment is more than 59 days
delinquent (measured on a contractual basis); and with respect to the
Initial Mortgage Loans no more than 0.23% (by Initial Cut-Off Date Pool
Balance) were 30-59 days delinquent (measured on a contractual basis).
No Subsequent Mortgage Loan will be more than 30 days delinquent;
(ix) As of the related Cut-Off Date with respect to the
Mortgage Loans and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage, each Credit Line Agreement and each
Mortgage Loan is an enforceable obligation of the related Mortgagor,
except as the enforceability thereof may be limited by the bankruptcy,
insolvency or similar laws affecting creditors' rights generally;
(x) The weighted average remaining term to maturity of the
Initial Mortgage Loans on a contractual basis as of the Initial Cut-Off
Date for the Mortgage Loans is approximately 273 months. On each date
that the Loan Rates have been adjusted, interest rate adjustments on the
Mortgage Loans were made in compliance with the related Mortgage and
Credit Line Agreement and applicable law. Over the term of each Initial
Mortgage Loan, the Loan Rate may not exceed the related Loan Rate Cap,
if any. The Loan Rate Caps for the Initial Mortgage Loans range between
16.25% and 24.25%. The Initial Mortgage Loans' margins range between
0.00% and 7.75% and the weighted average margin is approximately 3.59%
as of the related Cut-Off Date for the Initial Mortgage Loans. The Loan
Rates on such Initial Mortgage Loans range between 8.50% and 16.25% and
the weighted average Loan Rate is approximately 12.09%; and
(xi) The Credit Limits on the Initial Mortgage Loans range
between $10,000 and $384,000 with an average of 32,903.27. As of the
Initial Cut-Off Date for the Initial Mortgage Loans, no Initial Mortgage
Loan had a
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principal balance in excess of approximately $284,000 and the average
principal balance of the Initial Mortgage Loans is equal to
approximately $31,641.56
(xii) Each Mortgage Loan being transferred to the Trust is
a Mortgage;
(xiii) Each Subsequent Mortgage Loan complies with the
requirements in Section 2.4 of this Agreement, including without
limitation the conditions described in subsections (c) and (d) of such
Section 2.4;
(xiv) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include
manufactured homes, condominiums and townhouses but shall not include
cooperatives or other property which constitutes other than real
property under applicable state law;
(xv) No Mortgage Loan had a Combined Loan-to-Value Ratio
in excess of 125%;
(xvi) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to any
Subsequent Mortgage Loans, each Mortgage is either a valid and
subsisting first or second lien of record on the Mortgaged Property
(subject in the case of any Second Mortgage Loan only to a Senior Lien
on such Mortgaged Property) and subject in all cases to the exceptions
to title set forth in the title insurance policy, with respect to the
related Mortgage Loan, which exceptions are generally acceptable to
banking institutions in connection with their regular mortgage lending
activities, and except for liens for (i) real estate taxes and special
assessments not yet delinquent, (ii) income taxes, (iii) any covenants,
conditions and restrictions, rights of way, easements, and other matters
of public record and such other exceptions to which similar properties
are commonly subject and which do not individually, or in the aggregate,
materially and adversely affect the benefits of the security intended to
be provided by such Mortgage;
(xvii) Immediately prior to the transfer and assignment
herein contemplated, the Sponsor held good and indefeasible title to,
and was the sole owner of, each Mortgage Loan conveyed by the Sponsor
(including its Cut-Off Date Pool Balance), all monies due or to become
due with respect thereto, and all proceeds of such Cut-Off Date Pool
Balances with respect to the Mortgage Loans is subject to no liens,
charges, mortgages, encumbrances or rights of others except liens which
will be released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated, the
Indenture 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;
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(xviii) There is no delinquent tax or assessment lien or
mechanic's lien on any Mortgaged Property, and each Mortgaged Property
is free of substantial damage and is in good repair;
(xix) 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;
(xx) With respect to each First Mortgage Loan, and, to the
best of the Sponsor's knowledge, with respect to each Second 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 Mortgaged Property is situated, was issued on the date of
origination of the Mortgage Loan and as of the Cut-Off Date and each
applicable Transfer Date with respect to the Subsequent Mortgage Loan,
each such policy is valid and remains in full force and effect, or a
title search or guaranty of title customary in the relevant jurisdiction
was obtained with respect to a Mortgage Loan as to which no title
insurance policy or binder was issued.
(xxi) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Subsequent
Mortgage Loan, each Credit Line Agreement is the legal, valid, binding
and enforceable obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights 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;
(xxii) The terms of each Credit Line Agreement and each
Mortgage have not been impaired, altered or modified in any respect,
except by a written instrument which (if such instrument is secured by
real property) has been recorded, if necessary, to protect the interest
of the Class A Noteholders and which has been delivered to the Indenture
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;
(xxiii) Except as otherwise required by law, pursuant to
the statute under which the related Mortgage Loan was made, the related
Credit Line Agreement is not and has not been secured by any collateral,
pledged account or other security except the lien of the corresponding
Mortgage;
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(xxiv) Each Mortgaged Property is located in the state
identified in the Schedule of Mortgage Loans and consists of one or more
parcels of real property with a residential dwelling erected thereon;
(xxv) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is undamaged
by waste, fire, earthquake or earth movement, flood, tornado or other
casualty, so as to affect adversely the value of the Mortgaged Property
as security for the Mortgage Loan or the use for which the premises were
intended;
(xxvi) With respect to each Second Mortgage Loan, either
(A) no consent for such Mortgage Loan was required by the holder of the
related Senior Lien prior to the making of such Mortgage Loan or (B)
such consent has been obtained and is contained in the related Mortgage
File;
(xxvii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by Indenture Trustee's sale and (B)
otherwise by judicial foreclosure. There is no homestead or other
exemption available which materially interferes with the right to sell
the related Mortgaged Property at a Indenture Trustee's sale or the
right to foreclose the related Mortgage;
(xxviii) As of the Closing Date with respect to the
Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans, there is no default, breach, violation or
event of acceleration existing under any Mortgage or the related Credit
Line Agreement and no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration; and the Sponsor
has not waived any default, breach, violation or event of acceleration;
(xxix) To the best knowledge of the Sponsor, all parties
to the Credit Line Agreement and the Mortgage had legal capacity to
execute the Credit Line Agreement and the Mortgage and each Credit Line
Agreement and Mortgage have been duly and properly executed by such
parties;
(xxx) No selection procedures reasonably believed by the
Sponsor to be adverse to the interests of the Class A Noteholders or the
Insurer was utilized in selecting the Mortgage Loans;
(xxxi) No Mortgagor has been released, in whole or in
part, except in connection with an assumption agreement which has been
approved by the applicable title insurer (to the extent required by such
title insurer) and which is part of the Mortgage File delivered to the
Indenture Trustee;
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(xxxii) With respect to each Mortgage Loan that is not a
first mortgage loan, the related prior lien requires equal monthly
payments. At the time of origination of each Mortgage Loan that is not a
first mortgage loan, the related prior lien was not more than 30 days
delinquent;
(xxxiii) All required inspections, licenses and
certificates with respect to the use and occupancy of all occupied
portions of all property securing the Mortgages have been made, obtained
or issued, as applicable;
(xxxiv) No more than 78% of the Initial Mortgage Loans are
second mortgage loans;
(xxxv) With respect to each Mortgage Loan that is not a
first mortgage loan, the related prior lien does not provide for
negative amortization;
(xxxvi) With respect to each Mortgage Loan that is not a
first mortgage loan, the maturity date of the Mortgage Loan is prior to
the maturity date of the related prior lien if such prior lien provides
for a balloon payment;
(xxxvii) Each Mortgage Loan is secured by a property
having an appraised value of less than $1,500,000.
(b) Upon the discovery by the Master Servicer, the Sponsor,
the Insurer or the Indenture Trustee of a breach of any of the representations
and warranties made in respect of any Mortgage Loan which materially and
adversely affects the interests of the Class A Noteholders or of the 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
Sponsor of such breach and request that the Sponsor cure such breach or take the
actions described in Section 3.4(b) hereof within the time periods required
thereby, and the Sponsor shall cure such breach or take such actions; provided,
however, that the cure for any breach of a representation and warranty relating
to the characteristics of the Mortgage Loans in the aggregate shall be a
reassignment of, or substitution for, only those Mortgage Loans necessary to
cause such characteristics to be in compliance with the related representation
and warranty. Upon accepting such transfer and making any required deposit into
the Principal and Interest Account or substitution of a Qualified Replacement
Mortgage, as the case may be, the Sponsor shall be entitled to receive an
instrument of assignment or transfer from the Indenture Trustee to the same
extent as set forth in Section 2.2 with respect to the transfer of Mortgage
Loans under that Section.
It is understood and agreed that the obligation of the Sponsor
to accept a transfer of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit in the Principal and Interest
Account or to substitute an Qualified Replacement Mortgage, as the case may be,
shall constitute the sole remedy against the Sponsor respecting such breach
available to Class A Noteholders of the Class A Notes, the Indenture Trustee on
behalf of the Class A Noteholders of the Class A Notes and the Insurer.
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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 Sponsor, the Master Servicer, the Sponsor, the Insurer, any Sub-Servicer or
the Indenture Trustee that the representations and warranties set forth in
Section 3.3 of this Agreement were untrue in any material respect as of the
Closing Date (or the Subsequent Transfer Date, or the Transfer Date, as the case
may be) and such breaches of the representations and warranties materially and
adversely affect the interests of the Class A Noteholders or of the 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 Mortgaged 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 Class A Noteholders or of the 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 Insurer or such time as a breach of any representation and warranty
materially and adversely affects the interests of the Class A Noteholders or of
the 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), subject to the further requirements
of this paragraph, on the second Remittance Date next succeeding such discovery,
receipt of notice or such other time (i) substitute in lieu of each Mortgage
Loan which has given rise to the requirement for action by the Sponsor a
Qualified Replacement Mortgage and deliver the Substitution Amount applicable
thereto, together with the aggregate amount of all Servicing Advances
theretofore made with respect to such Mortgage Loan, to the Master Servicer for
deposit in the Principal and Interest Account or (ii) purchase such Mortgage
Loan from the Trust at a purchase price equal to the Loan Purchase Price
thereof, which purchase price shall be delivered to the Master Servicer for
deposit in the Principal and Interest Account. It is understood and agreed that
the obligation of the Sponsor to cure the defect, or substitute for, or purchase
any Mortgage Loan as to which a representation or warranty is untrue in any
material respect and has not been remedied shall constitute the sole remedy
available to the Class A Noteholders, the Indenture Trustee or the Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by the Sponsor to the Trust pursuant to Section 2.2, Section 3.3 or
Section 3.4 hereof, 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 Class A Noteholders, the Master Servicer, the Sponsor,
the Insurer, or the Indenture Trustee that the representations and warranties
set forth in Section 3.3 above are untrue in any material respect on the date
such Qualified Replacement Mortgage is conveyed to the Trust such that the
interests of the Class A Noteholders or the Insurer in the related Qualified
Replacement Mortgage are materially and adversely affected; provided,
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however, that for the purposes of this subsection (c) the representations and
warranties set forth in Section 3.3 above referring to items "as of the Initial
Cut-Off Date" or "as of the Subsequent Cut-Off Date" or "as of the related
Cut-Off Date" or "as of the Closing Date" or "as of the Subsequent Transfer
Date" 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 the pledge of the respective Mortgage Loans
(including Qualified Replacement Mortgage Loans) to the Indenture Trustee on
behalf of the Trust.
ARTICLE IV
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 4.1. Master Servicer and Sub-Servicers.
(a) Advanta Mortgage Corp. USA agrees to act as the Master
Servicer and to perform all servicing duties under this Agreement subject to the
terms hereof.
(b) The Master Servicer shall service and administer the
Mortgage Loans on behalf of the Indenture Trustee and the Insurer and shall have
full power and authority, acting alone or through one or more Sub-Servicers, to
do any and all things in connection with such servicing and administration which
it may deem necessary or desirable. Without limiting the generality of the
foregoing, the Master Servicer, in its own name or the name of a Sub-Servicer,
may, and is hereby authorized and empowered by the Indenture Trustee to, execute
and deliver, on behalf of itself, the Class A Noteholders, the Insurer and the
Indenture Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, the insurance
policies and accounts related thereto and the properties subject to the
Mortgages in accordance with the terms of this Agreement. Upon the execution and
delivery of this Agreement, and from time to time as may be required thereafter,
the Indenture Trustee shall furnish the Master Servicer or its Sub-Servicers
with any powers of attorney and such other documents as may be necessary or
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties hereunder.
In servicing and administering the Mortgage Loans, the Master
Servicer shall employ procedures consistent with Accepted Servicing Practices
and in a manner consistent with recovery under any insurance policy required to
be maintained by the Master Servicer pursuant to this Agreement.
Costs incurred by the Master Servicer in effectuating the
timely payment of taxes and assessments on the property securing a Credit Line
Agreement and foreclosure costs may be added by the Master Servicer to the
amount owing under such Credit Line Agreement where the terms of such Credit
Line Agreement so permit; provided, however, that the addition of any such cost
shall not be taken into account for
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purposes of calculating the principal amount of the Credit Line Agreement and
the Mortgage Loan secured by the Credit Line Agreement or distributions to be
made to Class A Noteholders. Such costs shall be recoverable by the Master
Servicer pursuant to Section 4.9 and 4.13.
(c) Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered by the
Indenture Trustee, to execute and deliver, on behalf of itself, the Class A
Noteholders, the Insurer and the Indenture Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the related Properties, including consenting to the
placement of a lien senior to that of any Mortgage on the related Mortgaged
Property; provided, that,
(i) such Mortgage succeeded to a first lien position after
the related Mortgage Loan was conveyed to the Trust and, immediately
following the placement of such senior lien, such Mortgage is in a
second lien position and the outstanding principal amount of the
mortgage loan secured by such subsequent senior lien is no greater than
the outstanding principal amount of the senior mortgage loan secured by
the Mortgaged Property as of the date the related Mortgage Loan was
originated; or
(ii) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the related Cut-Off Date and the new senior
lien secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount and interest rate of the
replacement first mortgage loan immediately following such refinancing
is not greater than the outstanding principal amount and interest rate
of such existing first mortgage loan at the date of origination of such
Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Master Servicer
can consent to the placing of liens senior to that of a Mortgage on the related
Mortgaged Property only if the Combined Loan-to-Value Ratio and second mortgage
ratio is less than or equal to the original Combined Loan-to-Value Ratio and
second mortgage ratio; provided, however, the Master Servicer may consent to the
placing of a senior lien on up to 5% of the Mortgage Loans if the Combined
Loan-to-Value Ratios of any such Mortgage Loan will not increase to greater than
100%; provided, further, that the Master Servicer may only approve modifications
if the related Mortgagor has used the Credit Line Agreement in the past twelve
months and has made timely payments, the current characteristics of the related
Mortgagor are consistent with the Accepted Servicing Practices and the Master
Servicer receives verbal verification of employment of the related Mortgagor.
At the written direction of the Originator, the Master
Servicer may also, without prior approval from the Rating Agencies or the
Insurer, increase the Credit Limits on Mortgage Loans provided that (i) new
appraisals are obtained and the Combined Loan-to-Value
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Ratios of any such Mortgage Loan of the Mortgage Loans after giving effect to
such increase are less than or equal to the Combined Loan-to-Value Ratios of the
Mortgage Loans as of the related Cut-Off Date, (ii) such increases are
consistent with the Accepted Servicing Practices, (iii) the related Mortgagor
has used the Credit Line Agreement in the past twelve months and has made timely
payments and (iv) the Master Servicer receives verbal verification of employment
of the related Mortgagor. In addition, the Master Servicer, at the written
direction of the Originator, may increase the Credit Limits on Mortgage Loans
having aggregate balances of up to 5% of the Pool Balance, without obtaining new
appraisals provided that (i) the increase in the Credit Limit does not cause the
Combined Loan-to-Value Ratios of the Mortgage Loans to exceed 100%, (ii) the
increase is consistent with Accepted Servicing Practices, (iii) the related
Mortgagor has used the Credit Line Agreement in the past twelve months and has
made timely payments and (iv) the Master Servicer receives verbal verification
of employment of the related Mortgagor.
Furthermore, the Master Servicer may, without prior approval
from the Rating Agencies and the Insurer solicit Mortgagors for a reduction in
Loan Rates of no more than .50%; provided that the Master Servicer can only
reduce such Loan Rates on up to 5% of the Mortgage Loans by Pool Balance. Any
such solicitations shall not result in a reduction in the weighted average
Margin of the Mortgage Loans in the pool by more than 2.5 basis points taking
into account any such prior reductions.
Subject to the above limitations, the Master Servicer may
agree to changes in the terms of a Mortgage Loan at the request of the
Mortgagor; provided, that such changes (i) do not materially and adversely
affect the interests of Class A Noteholders or the Insurer and (ii) are
consistent with Accepted Servicing Practices.
Notwithstanding anything to the contrary, the Master Servicer
shall not agree to any changes or modifications in the terms of any Mortgage
Loan that, after giving effect to such change or modification, would cause any
criteria set forth in Section 2.4 to be violated.
(d) The relationship of the Master Servicer (and of any
successor to the Master Servicer as servicer under this Agreement) to the
Indenture Trustee under this Agreement is intended by the parties to be that of
an independent contractor and not that of a joint venturer, partner or agent.
In the event that the rights, duties and obligations of the
Master Servicer are terminated hereunder, any successor to the Master Servicer
in its sole discretion may, to the extent permitted by applicable law, terminate
the existing subservicer arrangements with any subservicer or assume the
terminated Master Servicer's rights under such subservicing arrangements which
termination or assumption will not violate the terms of such arrangements.
(e) The Master Servicer may, and is hereby authorized to,
perform any of its servicing responsibilities with respect to all or certain of
the Mortgage Loans through a Sub-Servicer as it may from time to time designate,
but no such designation of a Sub-Servicer shall serve to release the Master
Servicer from any of its obligations under
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this Agreement. Such Sub-Servicer shall have all the rights and powers of the
Master Servicer with respect to such Mortgage Loans under this Agreement.
(f) Without limiting the generality of the foregoing, but
subject to Sections 4.13 and 4.14, the Master Servicer in its own name or in the
name of a Sub-Servicer may be authorized and empowered pursuant to a power of
attorney executed and delivered by the Indenture Trustee to execute and deliver,
and may be authorized and empowered by the Indenture Trustee, to execute and
deliver, on behalf of itself, the Class A Noteholders and the Indenture 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 Class A Noteholdership of any Mortgaged Property on behalf of the
Indenture Trustee, and (iii) to hold title to any Mortgaged Property upon such
foreclosure or deed in lieu of foreclosure on behalf of the Indenture Trustee;
provided, however, that Section 4.14(a) shall constitute a power of attorney
from the Indenture Trustee to the Master Servicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Mortgage Loan paid in full (or with respect to which payment in full has been
escrowed). Subject to Sections 4.13 and 4.14, the Indenture Trustee shall
furnish the Master Servicer and any Sub-Servicer with any powers of attorney and
other documents as the Master Servicer or such Sub-Servicer shall reasonably
request to enable the Master Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
(g) The Master Servicer shall give prompt notice to the
Indenture Trustee of any action, of which the Master Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
(h) Servicing Advances incurred by the Master Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Mortgaged Property shall be recoverable by the Master
Servicer or such Sub-Servicer to the extent described in Section 4.9 and in
Section 8.6(b)(ix) of the Indenture.
Section 4.2. Collection of Certain Mortgage Loan Payments. (a)
In accordance with Accepted Servicing Practices and subject to the limitations
set forth in Section 4.1, the Master Servicer may in its discretion (i) waive
any assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or about to be in default because of a Mortgagor's
financial condition, arrange with the Mortgagor a schedule for the payment of
delinquent payments due on the related Mortgage Loan; provided, however, the
Master Servicer shall not reschedule the payment of delinquent payments more
than one time in any twelve consecutive months with respect to any Mortgagor nor
extend the maturity of any Mortgage Loan beyond the Payment Date in August,
2023; (iii) modify payments of monthly principal and interest on any Mortgage
Loan becoming subject to the terms of the Civil Relief Act, as amended, in
accordance with the Master Servicer's general
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policies of the comparable mortgage loans subject to such Act; or (iv) extend
the maturity date of any Mortgage Loan in connection with the extension of the
related Draw Period (provided, however, that in no event may any such maturity
date be extended to a date which is more than 12 months after the original
maturity date without the Insurer's approval or to a date which is later than
the Payment Date occurring in August, 2023).
(b) The Master Servicer shall hold in escrow on behalf of the
related Mortgagor all Prepaid Installments received by it, and shall apply such
Prepaid Installments as directed by such Mortgagor and as set forth in the
related Credit Line Agreement.
Section 4.3. Sub-Servicing Agreements Between Master Servicer
and Sub-Servicers. The Master Servicer may enter into Sub-Servicing Agreements
for any servicing and administration of Mortgage Loans with any institution
which is acceptable to the Insurer in compliance with the laws of each state
necessary to enable it to perform its obligations under such Sub-Servicing
Agreement. The Master Servicer shall give notice to the Insurer of the
appointment of any Sub-Servicer and shall furnish to the Insurer a copy of the
Subservicing Agreement. For purposes of this Agreement, the Master Servicer
shall be deemed to have received payments on Mortgage Loans when any
Sub-Servicer has received such payments. Any such Sub-Servicing Agreement shall
be consistent with and not violate the provisions of this Agreement.
Section 4.4. Successor Sub-Servicers. The Master Servicer may
terminate any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement and to either directly service the
related Mortgage Loans itself or enter into a Sub-Servicing Agreement with a
successor Sub-Servicer that qualifies under Section 4.3.
Section 4.5. Liability of Master Servicer. The Master
Servicer shall not be relieved of its obligations under this Agreement
notwithstanding any Sub-Servicing Agreement or any of the provisions of this
Agreement relating to agreements or arrangements between the Master Servicer and
a Sub-Servicer or otherwise, and the Master Servicer shall be obligated to the
same extent and under the same terms and conditions as if it alone were
servicing and administering the Mortgage Loans. The Master Servicer shall be
entitled to enter into any agreement with a Sub-Servicer for indemnification of
the Master Servicer by such Sub-Servicer and nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement. The
Trust shall not indemnify the Master Servicer for any losses due to the Master
Servicer's or any Sub-Servicer's negligence.
Section 4.6. No Contractual Relationship Between Sub-Servicer
and Indenture Trustee or the Class A Noteholders. 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 Insurer, the Indenture Trustee and the Class A
Noteholders 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 4.7.
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Section 4.7. Assumption or Termination of Sub-Servicing
Agreement by Indenture 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 Indenture Trustee pursuant to the Sale
and Servicing Agreement, 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
Indenture Trustee at its option.
The Master Servicer shall, upon request of the Indenture
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.
Section 4.8. 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
Class A Noteholders and the Insurer and maintain at one or more Designated
Depository Institutions the Principal and Interest Account.
Subject to Subsections (c) and (e) below, the Master Servicer
and any Sub-Servicer shall deposit all receipts related to the Mortgage Loans to
the Principal and Interest Account on a daily basis (but no later than the
second Business Day after receipt).
Within one Business Day of the Closing Date, and on each
Subsequent Transfer Date and each Transfer Date, the Sponsor shall cause the
Master Servicer to deposit to the Principal and Interest Account all receipts
related to the related Mortgage Loans received after the Initial Cut-Off Date or
related Replacement Cut-Off Date or related Subsequent Cut-Off Date, as the case
may be.
(b) All funds in the Principal and Interest Account may only
be held (i) uninvested, up to the limits insured by the FDIC, or (ii) invested
in Eligible Investments. The Principal and Interest Account shall be held in
trust in the name of the Trust and for the benefit of the Class A Noteholders
and the Insurer. Any investment earnings on funds held in the Principal and
Interest Account shall be for the account of the Master Servicer and may only be
withdrawn from the Principal and Interest Account by the Master Servicer
immediately following the remittance of the Monthly Remittance Amounts by the
Master Servicer. Any references herein to amounts on deposit in the Principal
and Interest Account shall refer to amounts net of such investment earnings. The
Master Servicer shall deposit the amount of any investment losses immediately
into the Principal and Interest Account as realized.
(c) Subject to Subsection (e) below, the Master Servicer shall
deposit to the Principal and Interest Account all principal and interest
collections on the Mortgage Loans received on or after the Initial Cut-Off Date
or related Subsequent Cut-Off Date,
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as the case may be, including any Prepayments and Net Liquidation Proceeds, all
Loan Purchase Prices and Substitution Amounts received or paid by the Master
Servicer with respect to the Mortgage Loans and other recoveries or amounts
related to the Mortgage Loans received by the Master Servicer, together with any
amounts which are reimbursable from the Principal and Interest Account, but net
of (i) the Servicing Fee with respect to each Mortgage Loan and other servicing
compensation to the Master Servicer as permitted by Section 4.15 hereof, (ii)
principal (including Prepayments) collected on the related Mortgage Loans prior
to the Initial Cut-Off Date or related Subsequent Cut-Off Date, as the case may
be, (iii) interest accruing on the related Mortgage Loans prior to the Initial
Cut-Off Date or related Subsequent Cut-Off Date, as the case may be and (iv) Net
Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed the
Principal Balance of the related Mortgage Loan.
(d) (i) The Master Servicer may make withdrawals from the
Principal and Interest Account only for the following purposes:
(A) to effect the timely remittance to the Indenture Trustee
of the Monthly Remittance Amounts due on the Remittance
Date;
(B) to pay to itself from any funds in the Principal and
Interest Account any accrued and unpaid Servicing Fees
and reimburse itself pursuant to Section 4.9(a) hereof
for unreimbursed Servicing Advances and Servicing
Advances which have been deemed Nonrecoverable Advances;
(C) to withdraw investment earnings on amounts on deposit in
the Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and InterestAccount
following the termination of the Trust Estate pursuant
to Article X or XII of the Indenture.
(ii) On the tenth day of each month, the Master Servicer
shall send to the Indenture Trustee a report, in the form of a computer tape,
detailing the aggregate payments on the total Mortgage Loans during the prior
Remittance Period. Such tape shall be in the form and have the specifications as
may be agreed to between the Master Servicer and the Indenture Trustee from time
to time.
(iii) On each Remittance Date the Master Servicer shall remit
to the Indenture Trustee by wire transfer, or otherwise make funds available in
immediately available funds, the Interest Remittance Amount and the Principal
Remittance Amount.
(e) To the extent that the ratings, if any, then assigned to
the unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are
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satisfactory to the Insurer, Moody's and Standard & Poor's, then the requirement
to maintain the Principal and Interest Account may be waived by an instrument
signed by the Insurer, Standard & Poor's and Moody's, and the Master Servicer
may be allowed to co-mingle with its general funds the amounts otherwise
required to be deposited to the Principal and Interest Account, on such terms
and subject to such conditions as the Insurer, Moody's and Standard & Poor's may
permit.
Section 4.9. Servicing Advances . The Master Servicer will pay
all "out-of-pocket" costs and expenses incurred in the performance of its
servicing obligations, including, but not limited to, the cost of (i)
Preservation Expenses, (ii) any enforcement or judicial proceedings, including
foreclosures, and (iii) the management and liquidation of REO Property, but is
only required to pay such costs and expenses to the extent the Master Servicer
reasonably believes such costs and expenses will increase Net Liquidation
Proceeds on the related Mortgage Loan. Each such amount so paid will constitute
a "Servicing Advance." The Master Servicer may recover Servicing Advances (x)
from the Mortgagors to the extent permitted by the Mortgage Loans, from
Liquidation Proceeds realized upon the liquidation of the related Mortgage Loan,
from Insurance Proceeds, and (y) as provided in Section 8.6(b)(ix) of the
Indenture.
Section 4.10. Purchase of Mortgage Loans . The Master Servicer
may, but is not obligated to, purchase for its own account any Mortgage Loan
which becomes Delinquent, in whole or in part, as to 90 days or more or any
Mortgage Loan as to which enforcement proceedings have been brought by the
Master Servicer or by any Sub-Servicer pursuant to Section 4.13. Any such Loan
so purchased shall be purchased by the Master Servicer on a Remittance Date at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Principal and Interest Account.
Section 4.11. Maintenance of Insurance . (a) The Master
Servicer shall cause to be maintained with respect to each Mortgage Loan a
hazard insurance policy with a generally acceptable carrier that provides for
fire and extended coverage, and which provides for a recovery by the Master
Servicer on behalf of the Trust of insurance proceeds relating to such Mortgage
Loan in an amount not less than the least of (i) the outstanding principal
balance of the Mortgage Loan or (ii) the maximum insurable value of the
Mortgaged Property.
(b) If any Mortgage Loan at the time of origination relates to
a Mortgaged Property in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, the Master
Servicer will cause to be maintained with respect thereto a flood insurance
policy in a form meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable carrier in an
amount representing coverage, and which provides for a recovery by the Master
Servicer on behalf of the Trust of Insurance Proceeds relating to such Mortgage
Loan of not less than the least of (i) the outstanding Principal Balance of the
Mortgage Loan or (ii) the maximum amount of insurance that is available under
the Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify
the Trust and the Insurer out of the Master Servicer's own funds
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for any loss to the Trust and the Insurer resulting from the Master Servicer's
failure to maintain the insurance required by this Section.
It is understood and agreed that such insurance shall be with
insurers approved by the Master Servicer and that no earthquake or other
additional insurance is to be required of any Mortgagor or to be maintained on
property acquired in respect of a defaulted loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. Any cost incurred by the Master Servicer in
maintaining any such insurance shall be added to the amount owing under the
Mortgage Loan where the terms of the Mortgage Loan so permit; provided, however,
that the addition of any such cost shall not be taken into account for purposes
of calculating the principal amount of the Credit Line Agreement or the
distributions to be made to the Class A Noteholders. Such costs shall be
recoverable by the Servicer pursuant to Section 4.9.
(c) In the event that the Master Servicer shall obtain and
maintain a blanket policy insuring against fire, flood and hazards of extended
coverage on all of the Mortgage Loans, then, to the extent such policy names the
Master Servicer as loss payee and provides coverage in an amount equal to the
aggregate unpaid principal balance on the Mortgage Loans without co-insurance,
and otherwise complies with the requirements of this Section 4.11, the Master
Servicer shall be deemed conclusively to have satisfied its obligations with
respect to fire and hazard insurance coverage under this Section 4.11, it being
understood and agreed that such blanket policy may contain a deductible clause,
in which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property a policy complying with the
preceding paragraphs of this Section 4.11, 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 4.11 and the amount paid under such
blanket policy. Upon the request of the Indenture Trustee or the Insurer, the
Master Servicer shall cause to be delivered to the Indenture Trustee or the
Insurer, a certified true copy of such policy.
Section 4.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Credit Line Agreement; provided, however, that the
Master Servicer shall not exercise any such right if (i) the "due-on-sale"
clause, in the reasonable belief of the Master Servicer, is not enforceable
under applicable law or (ii) the Master Servicer reasonably believes that to
permit an assumption of the Mortgage Loan would not materially and adversely
affect the interest of the Class A Noteholders or of the Insurer. In such event,
the Master Servicer shall enter into an assumption and modification agreement
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Credit Line Agreement
and, unless prohibited by applicable law or any of the agreements, guaranties or
assignments relating to the
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Mortgage Loans contained in the Mortgage Files, the Mortgagor remains liable
thereon. If the foregoing is not permitted under applicable law, the Master
Servicer is authorized to enter into a substitution of liability agreement with
such person, pursuant to which the original Mortgagor is released from liability
and such person is substituted as Mortgagor and becomes liable under the Credit
Line Agreement; provided, however, that to the extent any such substitution of
liability agreement would be delivered by the Master Servicer outside of its
usual procedures for mortgage loans held in its own portfolio the Master
Servicer shall, prior to executing and delivering such agreement, obtain the
prior written consent of the Insurer. The Mortgage Loan, as assumed, shall
conform in all respects to the requirements, representations and warranties of
this Agreement. The Master Servicer shall notify the Indenture Trustee that any
such assumption or substitution agreement has been completed by forwarding to
the Indenture Trustee the original copy of such assumption or substitution
agreement, which copy shall be added by the Indenture Trustee to the related
Mortgage File and which shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. The Master Servicer shall be responsible for
recording any such assumption or substitution agreements. In connection with any
such assumption or substitution agreement, the required monthly payment on the
related Mortgage Loan shall not be changed but shall remain as in effect
immediately prior to the assumption or substitution, the stated maturity or
outstanding principal amount of such Mortgage Loan shall not be changed nor
shall any required monthly payments of principal or interest be deferred or
forgiven. Any fee collected by the Master Servicer or the Sub-Servicer for
consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or 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 4.13. Realization Upon Defaulted Mortgage Loans . (a)
The Master Servicer shall foreclose upon or otherwise comparably effect the
ownership on behalf of the Mortgaged Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Master Servicer has not purchased pursuant to
Section 4.10. 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 4.9 hereof.
Notwithstanding the generality of the foregoing provisions,
the Master Servicer shall manage, conserve, protect and operate each REO
Property for the Class A
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Noteholders solely for the purpose of its prompt disposition and sale. Pursuant
to its efforts to sell such REO Property, the Master Servicer shall either
itself or through an agent selected by the Master Servicer protect and conserve
such REO Property in the same manner and to such extent as is customary in the
locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Class A Noteholders, rent
the same, or any part thereof, as the Master Servicer deems to be in the best
interest of the Class A Noteholders for the period prior to the sale of such REO
Property. The Master Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation, on a Mortgaged Property in determining
whether to foreclose upon or otherwise comparably convert the Class A
Noteholdership of such Mortgaged Property.
(b) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through Indenture
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 Mortgage Loan" and shall promptly deliver to the
Insurer its customary liquidation report (each, a "Liquidation Report") with
respect to such Mortgage Loan.
Section 4.14. Indenture Trustee to Cooperate; Release of
Mortgage Files. (a) Upon the payment in full of the Principal Balance of any
Mortgage Loan (including the repurchase of any Mortgage Loan or any liquidation
of such Mortgage Loan through foreclosure or otherwise), or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer shall deliver to the
Indenture Trustee a Master Servicer's Trust Receipt. Upon receipt of such Master
Servicer's Trust Receipt, the Indenture Trustee shall promptly release the
related Mortgage File, in trust to (i) the Master Servicer, (ii) an escrow agent
or (iii) any employee, agent or attorney of the Indenture Trustee, in each case
pending its release by the Master Servicer, such escrow agent or such employee,
agent or attorney of the Indenture Trustee, as the case may be. Upon any such
payment in full, or the receipt of such notification that such funds have been
placed in escrow, the Master Servicer is authorized to give, as attorney-in-fact
for the Indenture Trustee and the mortgagee under the Mortgage which secured the
Credit Line Agreement, an instrument of satisfaction (or assignment of Mortgage
without recourse) regarding the Mortgaged Property relating to such Mortgage,
which instrument of satisfaction or assignment, as the case may be, shall be
delivered to the Person or Persons entitled thereto against receipt therefor of
payment in full, it being understood and agreed that no expense incurred in
connection with such instrument of satisfaction or assignment, as the case may
be, shall be chargeable to the Principal and Interest Account. In lieu of
executing any such satisfaction or assignment, as the case may be, the Master
Servicer may prepare and submit to the Indenture Trustee, a satisfaction (or
assignment without recourse, if requested by the Person or Persons entitled
thereto) in form for execution by the Indenture Trustee with all requisite
information completed by the Master Servicer; in such event, the Indenture
Trustee shall execute and acknowledge such satisfaction or assignment, as the
case may be, and deliver the same with the related Mortgage File, as aforesaid.
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(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 Indenture Trustee shall (except in the case of the payment
or liquidation pursuant to which the related Mortgage File is released to an
escrow agent or an employee, agent or attorney of the Indenture Trustee), upon
request of the Master Servicer and delivery to the Indenture Trustee of a Master
Servicer's Trust Receipt in the form of Exhibit F hereto, release the related
Mortgage File to the Master Servicer and shall execute such documents as shall
be necessary to the prosecution of any such proceedings, including, without
limitation, an assignment without recourse of the related Mortgage to the Master
Servicer; provided, that there shall not be released and unreturned at any one
time more than 300 Mortgage Files. The Indenture Trustee shall complete in the
name of the Indenture Trustee any endorsement in blank on any Credit Line
Agreement prior to releasing such Credit Line Agreement to the Master Servicer.
Such receipt shall obligate the Master Servicer to return the Mortgage File to
the Indenture Trustee when the need therefor by the Master Servicer no longer
exists unless the Mortgage Loan shall be liquidated, in which case, upon receipt
of the liquidation information, in physical or electronic form, a copy of the
Master Servicer's Trust Receipt shall be released by the Indenture Trustee to
the Master Servicer.
(c) The Master Servicer shall have the right to approve
applications of Mortgagors for consent to (i) partial releases of Mortgages,
(ii) alterations to Mortgaged Properties and (iii) removal, demolition or
division of Mortgaged Properties. No application for approval shall be
considered by the Master Servicer unless: (x) the provisions of the related
Credit Line Agreement and Mortgage have been complied with; (y) the Combined
Loan-to-Value Ratio (which may, for this purpose, be determined at the time of
any such action in a manner reasonably acceptable to the Insurer) and the
Mortgagor's debt-to-income ratio after any release does not exceed the maximum
Combined Loan-to-Value Ratio and debt-to-income ratio specified as the
then-current maximum levels under the Originator's underwriting guidelines for a
similar credit grade borrower and (z) the lien priority of the related Mortgage
is not adversely affected. The Master Servicer shall also have the right (such
right to be exercised in an manner consistent with the Master Servicer's normal
servicing practices and consistent with such guidelines as may be approved by
the Rating Agencies and the Insurer) to permit a borrower who is selling his
principal residence and purchasing a new residence to substitute the new
Mortgaged Property as collateral for the related Mortgage Loan so long as the
Combined Loan-to-Value Ratio is no greater and the occupancy and property type
remain the same. In any such event, however, the Master Servicer will generally
require the borrower to make a partial pre-payment in reduction of the principal
amount of the Loan to the extent that the borrower receives proceeds from the
sale of the prior residence that will not be applied to the purchase of the new
residence. Upon receipt by the Indenture Trustee and the Insurer of an Officer's
Certificate executed on behalf of the Master Servicer setting forth the action
proposed to be taken in respect of a particular Mortgage Loan and certifying
that the criteria set forth in the immediately preceding sentence have been
satisfied, the Indenture Trustee shall execute and deliver to the Master
Servicer the consent or partial release so requested by the Master Servicer. A
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proposed form of consent or partial release, as the case may be, shall accompany
any Officer's Certificate delivered by the Master Servicer pursuant to this
paragraph.
(d) No costs associated with the procedures described in this
Section 4.14 shall be an expense of the Trust.
(e) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given by
the Insurer, Moody's and Standard & Poor's pursuant to Section 2.1(k) hereof.
(f) Each Master Servicer's Trust Receipt may be delivered to
the Indenture 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 Indenture Trustee shall mutually agree.
The Indenture Trustee shall promptly release the related Mortgage File(s) within
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 Indenture Trustee.
Receipt of a Master Servicer's Trust Receipt pursuant to clauses (i), (ii) or
(iii) above shall be authorization to the Indenture Trustee to release such
Mortgage Files, provided the Indenture Trustee has determined that such Master
Servicer's Trust Receipt has been executed, with respect to clauses (i) or (ii)
above, or approved, with respect to clause (iii) above, by an Authorized Officer
of the Master Servicer or any Sub-servicer, and so long as the Indenture Trustee
complies with its duties and obligations under this Agreement. If the Indenture
Trustee is unable to release the Mortgage Files within the time frames
previously specified, the Indenture 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 seven 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 Indenture Trustee's negligent failure to
release the related Mortgage File or the Indenture Trustee's negligent failure
to execute and release documents in a timely manner, the Indenture Trustee shall
be liable for such penalties or damages.
(g) On each day that the Master Servicer remits to the
Indenture 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
Indenture 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 4.15. Servicing Compensation. As compensation for its
activities hereunder, the Master Servicer shall be entitled to retain the amount
of the Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, Termination Fees, release fees,
bad check charges, assumption fees, late payment charges, or any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Principal and Interest Account pursuant to Section 4.8(c) and similar items
may, to the extent collected from Mortgagors, be retained by the Master
Servicer.
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Section 4.16. Annual Statement as to Compliance. The Master
Servicer, at its own expense, will deliver to the Indenture Trustee, Insurer,
Standard & Poor's and Moody's, on or before the fifteenth of April of each year,
commencing in 1999, 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 4.17. Annual Independent Certified Public Accountants'
Reports. On or before the fifteenth of April of each year, commencing in 1999,
the Master Servicer, at its own expense, shall cause to be delivered to the
Indenture Trustee, the Insurer, Standard & Poor's and Moody's a letter or
letters of a firm of independent, nationally recognized certified public
accountants reasonably acceptable to the Insurer stating that such firm has,
with respect to the Master Servicer's overall servicing operations (i) performed
applicable tests in accordance substantially in compliance with the testing
procedures as set forth in Appendix 3 of the Audit Guide for Audits of HUD
Approved Nonsupervised Mortgagees or (ii) examined such operations substantially
in compliance with the requirements of the Uniform Single Attestation Program
for Mortgage Bankers, and in either case stating such firm's conclusions
relating thereto.
Section 4.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans. The Master Servicer shall provide to the
Indenture Trustee, the Insurer, the FDIC and the supervisory agents and
examiners of each of the foregoing access to the documentation regarding the
Mortgage Loans required by applicable state and federal regulations, such access
being afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Master Servicer designated by it.
Upon any change in the format of the computer tape maintained
by the Master Servicer in respect of the Mortgage Loans, the Master Servicer
shall deliver a copy of such computer tape to the Indenture Trustee and in
addition shall provide a copy of such computer tape to the Indenture Trustee and
the Insurer at such other times as the Indenture Trustee or the Insurer may
reasonably request.
Section 4.19. 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 Indenture Trustee and
Insurer, which such consent shall not be unreasonably withheld; provided,
however, that any assignee must meet the eligibility requirements set forth in
Section 5.1(g) hereof for a successor servicer. Notice of any such assignment
shall be given by the Master Servicer to the Indenture Trustee, the Insurer and
Moody's.
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ARTICLE V
SERVICING TERMINATION
Section 5.1. Events of Servicing Termination. (a) If any one
of the following events ("Event of Servicing Termination") shall occur and be
continuing:
(i) The Master Servicer shall fail to deliver to the
Indenture 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 Indenture Trustee
or from Class A Noteholders evidencing Percentage Interest aggregating
not less than 25%.
(ii) The Master Servicer shall (I) apply for or consent to
the appointment of a receiver, Indenture 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 Indenture 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 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 Class A
Noteholders or Insurer for a period of sixty (60) days after the Master
Servicer's discovery or receipt of notice thereof from the Indenture
Trustee, the Insurer, or Class A Noteholders evidencing Percentage
Interests aggregating not less than 25%; provided, however, that if the
Master Servicer can demonstrate to the reasonable satisfaction of the
Insurer that
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it is diligently pursuing remedial action, then the cure period may be
extended with the written consent of the Insurer.
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Master Servicer, either the
Indenture Trustee, the Insurer or the Class A Noteholders evidencing Percentage
Interests aggregating not less than 51% in each case with the consent of the
Insurer, or the Insurer, by notice then given in writing to the Master Servicer
(and to the Indenture Trustee if given by the Insurer of the Class A
Noteholders) may terminate all of the rights and obligations of the Master
Servicer as servicer under this Agreement. Any such notice to the Master
Servicer shall also be given to each Rating Agency and the Insurer. On and after
the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer under this Agreement, whether with respect to the
Notes or the Mortgage Loans or otherwise, shall pass to and be vested in the
Indenture Trustee pursuant to and under this Section 5.1 and, without
limitation, the Indenture Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of each Mortgage
Loan and related documents, or otherwise. The Master Servicer agrees to
cooperate with the Indenture Trustee in effecting the termination of the
responsibilities and rights of the Master Servicer hereunder, including, without
limitation, the transfer to the Indenture Trustee for the administration by it
of all cash amounts that shall at the time be held by the Master Servicer and to
be deposited by it in the Note Account, or that have been deposited by the
Master Servicer in the Note Account or thereafter received by the Master
Servicer with respect to the Mortgage Loans. All reasonable costs and expenses
(including attorneys' fees) incurred in connection with amending this Agreement
to reflect such succession as Master Servicer pursuant to this Section 5.1 shall
be paid by the predecessor Master Servicer (or if the predecessor Master
Servicer is the Indenture Trustee, the initial Master Servicer) upon
presentation of reasonable documentation of such costs and expenses.
Notwithstanding the foregoing, a delay in or failure of
performance under Section 5.1(i) for a period of two Business Days or under
Section 5.1(iv) for a period of 60 days, shall not constitute an Event of
Servicing Termination if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Master Servicer and such delay or
failure was caused by an act of God or the public enemy, acts of declared or
undeclared war, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods or similar causes. The
preceding sentence shall not relieve the Master Servicer from using its best
efforts to perform its respective obligations in a timely manner in accordance
with the terms of this Agreement and the Master Servicer shall provide the
Indenture Trustee, the Sponsor, the Insurer and the Noteholders with an
Officer's Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations. The
Master Servicer shall immediately notify the Indenture Trustee and the Insurer
in writing of any Events of Servicing Termination.
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(b) In addition to the foregoing, the Insurer may remove the
Master Servicer upon the occurrence of an "Event of Servicing Termination" under
the Insurance Agreement.
(c) The Master Servicer shall not resign from the obligations
and duties hereby imposed on it except by mutual written consent of the Sponsor,
the Master Servicer, the Insurer and the Indenture Trustee or upon determination
that its duties hereunder are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
carried on by it, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer at the
date of this Agreement. Any such determination permitting the resignation of the
Master Servicer shall be evidenced by an opinion of counsel to such effect which
shall be delivered to the Indenture Trustee and the Insurer.
(d) No removal or resignation of the Master Servicer shall
become effective until the Indenture Trustee or a successor servicer shall have
assumed the Master Servicer's responsibilities and obligations in accordance
with this Section.
(e) Upon removal or resignation of the Master Servicer, the
Master Servicer also shall promptly deliver or cause to be delivered to a
successor servicer or the Indenture 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 Indenture Trustee and
remitted directly and immediately to the Indenture Trustee or the successor
Master Servicer.
(g) Upon removal or resignation of the Master Servicer, the
Indenture 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 Indenture
Trustee shall, if it is unable to obtain a qualifying bid and is prevented by
law from acting as Master Servicer, appoint, or petition a court of competent
jurisdiction to appoint, any housing and home finance institution, bank or
mortgage servicing institution which has shareholders' equity of not less than
$5,000,000, as determined in accordance with generally accepted accounting
principles, and acceptable to the 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 Indenture 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 4.8 and 4.15; provided, however, that if the
Indenture Trustee acts as successor Master Servicer then the Sponsor agrees to
pay to the Indenture Trustee at such time that the Indenture Trustee becomes
such successor Master Servicer a fee of twenty-five dollars ($25.00) for each
Mortgage Loan then included in the Trust Estate. The Indenture Trustee shall be
obligated to serve as
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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 Originator.
(h) In the event the Indenture Trustee solicits bids as
provided above, the Indenture 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 4.8 and 4.15. Within
thirty days after any such public announcement, the Indenture 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 Indenture Trustee shall deduct from any sum received by
the Indenture 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 Indenture Trustee to the Master Servicer at the time of
such sale, transfer and assignment to the Master Servicer's successor.
(i) The Indenture 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 Indenture
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 Indenture 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 Indenture 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 Indenture
Trustee nor any other successor Master Servicer shall be held liable by reason
of any failure to make, or any delay in making, any distribution hereunder or
any portion thereof caused by (i) the failure of the Master Servicer to deliver,
or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Master Servicer.
(j) The Master Servicer which is being removed or is resigning
shall give notice to the Mortgagors and to Moody's and Standard & Poor's of the
transfer of the servicing to the successor.
(k) The Indenture Trustee shall give notice to the Insurer,
Moody's and Standard & Poor's and to the Class A Noteholders of the occurrence
of any event specified in Section 5.1(a) of which the Indenture Trustee has
actual knowledge.
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Section 5.2. Inspections by Insurer; Errors and Omissions
Insurance. (a) At any reasonable time and from time to time upon reasonable
notice, the Insurer, the Indenture 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.
(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 5.3. 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 5.1(f).
Section 5.4. Notification to Noteholders (a). Upon any
termination or appointment of a successor to the Master Servicer pursuant to
this Article V, the Indenture Trustee shall give prompt written notice thereof
to the Noteholders at their respective addresses appearing in the Note Register,
the Insurer and each Rating Agency.
ARTICLE VI
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
Section 6.1. Administrative Duties with Respect to the
Indenture. The Master Servicer shall perform all its duties and the duties of
the Issuer under the Indenture. In addition, the Master Servicer shall consult
with the Owner Trustee as the Master Servicer deems appropriate regarding the
duties of the Issuer under the Indenture. The Master Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture. The Master
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Master Servicer shall take all necessary action that is the
duty of the Issuer to take pursuant to the Indenture.
(a) Duties with Respect to the Issuer.
(i) In addition to the duties of the Master Servicer set
forth in this Agreement or any of the Documents, the Master Servicer
shall perform such calculations and shall prepare for execution by
the Issuer or the Owner Trustee or
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shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions
as it shall be the duty of the Issuer or the Owner Trustee to
prepare, file or deliver pursuant to this Agreement or any of the
Operative Documents or under state and federal tax and securities
laws, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer to take
pursuant to this Agreement or any of the Operative Documents. In
accordance with the directions of the Issuer or the Owner Trustee,
the Master Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Mortgage
Loans (including the Operative Documents) as are not covered by any
of the foregoing provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within the capability
of the Master Servicer.
(ii) Notwithstanding anything in this Agreement or any of
the Operative Documents to the contrary, the Master Servicer shall
be responsible for promptly notifying the Owner Trustee and the
Indenture Trustee in the event that any withholding tax is imposed
on the Issuer's payments (or allocations of income) with respect to
the Originator's Interest as contemplated by this Agreement. Any
such notice shall be in writing and specify the amount of any
withholding tax required to be withheld by the Owner Trustee or the
Indenture Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the
Operative Documents to the contrary, the Master Servicer shall be
responsible for performance of the duties of the Issuer or the
Sponsor set forth in Section 5.1(a), (b), (c) and (d) of the Trust
Agreement with respect to, among other things, accounting and
reports with respect to the Originator's Interest.
(iv) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the Master Servicer may
enter into transactions with or otherwise deal with any of its
Affiliates; provided, however, that the terms of any such
transactions or dealings shall be in accordance with any directions
received from the Issuer and shall be, in the Master Servicer's
opinion, no less favorable to the Issuer in any material respect.
(b) Non-Ministerial Matters. With respect to matters that
in the reasonable judgment of the Master Servicer are non-ministerial, the
Master Servicer shall not take any action pursuant to this Article VI unless
within a reasonable time before the taking of such action, the Master Servicer
shall have notified the Owner Trustee and the Insurer of the proposed action and
the Owner Trustee and the Insurer shall not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:
(i) the amendment of or any supplement to the Indenture;
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(ii) the initiation of any claim or lawsuit by the Issuer
and the compromise of any action, claim or lawsuit brought by or
against the Issuer (other than in connection with the collection of
the Mortgage Loans);
(iii) the amendment, change or modification of this
Agreement or any of the Operative Documents;
(iv) the appointment of successor Note Registrars,
successor Paying Agents and successor Indenture Trustees pursuant to
the Indenture or the appointment of Successor Servicers or the
consent to the assignment by the Note Registrar, Paying Agent or
Indenture Trustee of its obligations under the Indenture; and
(v) the removal of the Indenture Trustee.
(c) Exceptions. Notwithstanding anything to the contrary
in this Agreement, except as expressly provided herein or in the other Operative
Documents, the Master Servicer, in its capacity hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Noteholders to the
Originator under the Operative Documents, (2) sell the Trust Property pursuant
to Section 12.1 of the Indenture, (3) take any other action that the Issuer
directs the Servicer not to take on its behalf or (4) in connection with its
duties hereunder assume any indemnification obligation of any other Person.
(d) Responsibility. The Indenture Trustee or any
successor Servicer shall not be responsible for any obligations or duties of the
Master Servicer under Section 6.1.
Section 6.2. Records. The Master Servicer shall maintain
appropriate books of account and records relating to services performed under
this Agreement, which books of account and records shall be accessible for
inspection by the Issuer and the Indenture Trustee at any time during normal
business hours.
Section 6.3. Additional Information to be Furnished to the
Issuer. The Master Servicer shall furnish to the Issuer and the Indenture
Trustee from time to time such additional information regarding the Mortgage
Loans as the Issuer and the Indenture Trustee shall reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Compliance Certificates and Opinions. Upon any
application or request by the Sponsor, the Insurer or the Class A Noteholders to
the Indenture Trustee to take any action under any provision of this Agreement,
the Sponsor, the Insurer or the Class A Noteholders, as the case may be, shall
furnish to the Indenture 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 7.2. Form of Documents Delivered to the Indenture
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 Indenture
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 Indenture 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 Indenture Trustee, stating that
the information with respect to such matters is in the possession of the
Indenture 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
Indenture Trustee may reasonably rely upon the opinion of such other counsel.
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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 7.3. Acts of Class A Noteholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by the Class A Noteholders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Class A Noteholders 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
Indenture Trustee, and, where it is hereby expressly required, to the Sponsor.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Class A
Noteholders 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 Indenture
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 the Class A Notes shall be proved by the
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by any Class A Noteholder shall bind the Holder
of every Class A Note 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 Indenture Trustee or the Trust in reliance thereon,
whether or not notation of such action is made upon such Class A Notes.
Section 7.4. Notices, etc. to Indenture Trustee. Any request,
demand, authorization, direction, notice, consent, waiver or act of the Class A
Noteholders or other documents provided or permitted by this Agreement to be
made upon, given or furnished to, or filed with the Indenture Trustee by any
Owner, the 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 Indenture Trustee at its Corporate Trust Office as set forth in the
Indenture.
Section 7.5. Notices and Reports to Class A Noteholders;
Waiver of Notices. Where this Agreement provides for notice to Class A
Noteholders of any event
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or the mailing of any report to Class A Noteholders, 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 Class A Noteholders 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 Class A
Noteholders, 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 Class A Noteholders shall be filed with the
Indenture Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Class A Noteholders 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 Indenture 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 Class A Notes, failure to give such notice shall not affect any
other rights or obligations created hereunder.
Section 7.6. Rules by Indenture Trustee. The Indenture Trustee
may make reasonable rules for any meeting of Class A Noteholders.
Section 7.7. 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 7.8. Severability. In case any provision in this
Agreement or in the Class A Notes 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 7.9. Benefits of Agreement. Nothing in this Agreement
or in the Class A Notes, expressed or implied, shall give to any Person, other
than the Class A Noteholders, the Insurer and the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
Section 7.10. Legal Holidays. In any case where the date of
any Payment Date, any other date on which any distribution to any Holder is
proposed to be paid, or
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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 Class A Notes 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 7.11. Governing Law. In view of the fact that Class A
Noteholders 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 Class A Note 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 7.12. Counterparts. This instrument may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 7.13. Usury. The amount of interest payable or paid on
any Class A Note 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 Class A Note exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Class A Note
inadvertently in error by the Indenture 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 Indenture 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 Class A Note, if any, remaining
unpaid in any event, the Indenture Trustee shall not be responsible for any
repayment of such excess payments. In addition, all sums paid or agreed to be
paid to the Indenture Trustee for the benefit of Class A Noteholders of Class A
Notes 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 Class A Notes.
Section 7.14. Amendment. (a) The Indenture Trustee, the
Sponsor and the Master Servicer, may at any time and from time to time, with the
prior approval of the Insurer but without the giving of notice to or the receipt
of the consent of the Class A Noteholders, amend this Agreement, and the
Indenture 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
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add provisions hereto which are not inconsistent with the provisions hereof, or
(ii) complying with the requirements of the Code and the regulations proposed or
promulgated thereunder; provided, however, that any such action shall not, as
evidenced by an opinion of counsel delivered to the Indenture Trustee,
materially and adversely affect the interests of any Owner (without its written
consent).
(b) The Indenture Trustee, the Sponsor and the Master Servicer
may, at any time and from time to time, with the prior approval of the Insurer
but without the giving of notice to or the receipt of the consent of the Class A
Noteholders, amend this Agreement, and the Indenture Trustee shall consent to
such amendment, for the purpose of changing the definition of "Specified
Overcollateralization Amount"; provided, however, that no such change shall
affect the weighted average life of the Class A Notes (assuming an appropriate
prepayment speed as determined by the Underwriter as evidenced in writing) by
more than five percent, as determined by the Underwriter.
(c) This Agreement may also be amended by the Indenture
Trustee, the Sponsor, and the Master Servicer at any time and from time to time,
with the prior written approval of the Insurer and not less than a majority of
the Percentage Interest represented by the Class A Notes 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 Class A Noteholders 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 Class A Notes or (b) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such amendments,
without the consent of all Class A Noteholders then Outstanding.
(d) The Insurer, the Class A Noteholders, Moody's and Standard
& Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
Section 7.15. The Insurer. The Insurer is a third-party
beneficiary of this Agreement. Any right conferred to the Insurer shall be
suspended during any period in which the Insurer is in default in its payment
obligations under the Policy except with respect to amendments to this Agreement
pursuant to Section 11.14. During any period of suspension the Insurer's rights
hereunder shall vest in the Class A Noteholders of the Class A Notes and shall
be exercisable by the Class A Noteholders of at least a majority in Percentage
Interest of the Class A Notes then Outstanding. At such time as the Class A
Notes are no longer Outstanding hereunder and the Insurer has been reimbursed
for all payments made pursuant to the Policy to which it is entitled hereunder,
the Insurer's rights hereunder shall terminate.
Section 7.16. Notices. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
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The Indenture Trustee: Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92614
Attention: ADVANTA REVOLVING HOME
EQUITY LOAN TRUST 1998-A
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: ADVANTA Mortgage Conduit
Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Senior Vice President,
Loan Service
Tel: (619) 674-3356
Fax: (619) 674-3666
with a copy addressed to the attention of
the General Counsel at the same address.
The Master Servicer: Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Senior Vice President,
Loan Service
Tel: (619) 674-3356
Fax: (619) 674-3666
The Insurer: Ambac Assurance Corporation
One State Street Plaza
17th Floor
New York, New York 10004
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring Department
Standard & Poor's: Standard & Poor's Ratings Group
25 Broadway, 12th Floor
New York, New York 10004
Attention: Surveillance Dept.
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The Trust: Advanta Revolving Home Equity Loan
Trust 1998-A
c/o Wilmington Trust Company, as Owner
Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Section 7.17. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaking by the
Issuer under this Agreement or any related documents.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Sponsor, the Issuer, the Master
Servicer and the Indenture 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: /s/ JAMES L. SHREERO
--------------------------------
Name: James L. Shreero
Title: Senior Vice President
ADVANTA MORTGAGE CORP. USA, as Master
Servicer
By: /s/ JAMES L. SHREERO
--------------------------------
Name: James L. Shreero
Title: Senior Vice President
ADVANTA REVOLVING HOME EQUITY
LOAN TRUST 1998-A, as Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By: /s/ DEBRA EBERLY
----------------------------
Name: Debra Eberly
Title: Administrative Account
Manager
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., not in its individual
capacity, but solely as Indenture Trustee
By: /s/ STEPHEN HESSLER
--------------------------------
Name: Stephen Hessler
Title: Assistant Vice President
[Signature Page of Sale and Servicing Agreement]
<PAGE> 76
SCHEDULE I
SCHEDULE OF MORTGAGE LOANS
S-1
<PAGE> 77
EXHIBIT A
FORM OF CONTENTS OF MORTGAGE LOAN FILE
--------------------------------------
(a) The original Credit Line Agreement, or a certified copy
thereof, bearing all intervening endorsements, endorsed either (i) "Pay to the
order of Bankers Trust Company of California, N.A., as custodian or trustee
under the applicable custody or trust agreement, without recourse" or (ii) "Pay
to the order of Bankers Trust Company of California, N.A., as custodian or
trustee under the applicable custody or trust agreement, without recourse,
Advanta as Master Servicer," or (iii) "Pay to the order of Bankers Trust Company
of California, N.A., as custodian or trustee" by [Seller, signature, name,
title] and signed in the name of the previous owner by an authorized offer (in
the event that the Mortgage Loan was acquired by the previous owner in a merger
the signature must be in the following form: "[the previous owner], successor by
merger to [name of predecessor]", in the event that the Mortgage Loan was
acquired or originated while doing business under another name, the signature
must be in the following form: "[the previous owner], formerly known as
[previous name]" or (iv) "Pay to the order of Bankers Trust Company, without
recourse". The original Credit Line Agreement should be accompanied by any rider
made in connection with the origination of the related Mortgage Loan.
(b) The original of any guaranty executed in connection with
the Credit Line Agreement (if any).
(c) The original Mortgage with evidence of recording thereon
or copies certified by the related recording office or if the original Mortgage
has not yet been returned from the recording office, a certified copy of the
Mortgage.
(d) The originals of any assumption, modification,
consolidation or extension agreements.
(e) If required, the original Assignment of Mortgage of each
Mortgage Loan to "Bankers Trust Company of California, N.A., as custodian or
trustee", "Bankers Trust Company of California, N.A. as trustee or custodian on
behalf of the Advanta Conduit" or "Bankers Trust Company, as trustee". In the
event that the Mortgage Loan was acquired by the previous owner in a merger, the
Assignment of Mortgage must be the "(previous owner), successor by merger to
(names of predecessor)"; and in the event that the Mortgage Loan was acquired or
originated by the previous owner while doing business under another name, the
Assignment of Mortgage must be by the "(previous owner), formerly known as
(previous name)."
(f) The originals of all intervening Assignments of Mortgage,
showing a complete chain of assignment from origination to the related Seller,
including warehousing assignments, with evidence of recording thereon (or, if an
original
A-1
<PAGE> 78
intervening assignment has not been returned from the recording office,
a certified copy thereof.
A-2
<PAGE> 79
EXHIBIT B
FORM OF CREDIT LINE AGREEMENTS
------------------------------
[Attached]
B-1
<PAGE> 80
EXHIBIT C
FORM OF CERTIFICATE REGARDING PREPAID LOANS
-------------------------------------------
I, James L. Shreero, Senior Vice-President of Advanta Mortgage
Conduit Services, Inc., a Delaware corporation, as sponsor (the "Sponsor"),
hereby certify that between the "Cut-Off Date" (as defined in the Sale and
Servicing Agreement, dated as of June 1, 1998, among the Sponsor, Advanta
Mortgage Corp. USA, a Delaware corporation, as Master Servicer, Advanta
Revolving Home Equity Loan Trust 1998-A, as Issuer, and Bankers Trust Company of
California, N.A., a national banking association, as Indenture Trustee), and the
date hereof, the following schedule of "Mortgage Loans" (each as defined in the
Sale and Servicing Agreement) has been prepaid in full.
Dated: _________________
----------------------------------------
James L. Shreero, Senior Vice-President
C-1
<PAGE> 81
EXHIBIT D
FORM OF TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
-------------------------------------------
Bankers Trust Company of California, N.A., a national banking
association, in its capacity as indenture trustee (the "Indenture Trustee")
under that certain Sale and Servicing Agreement, dated as of June 1, 1998 (the
"Sale and Servicing Agreement"), by and among Advanta Mortgage Conduit Services,
Inc., a Delaware corporation, as Sponsor (the "Sponsor"), Advanta Mortgage Corp.
USA, a Delaware corporation, as Master Servicer, Advanta Revolving Home Equity
Loan Trust 1998-A, as Issuer, and the Indenture Trustee, hereby acknowledges
receipt of the items delivered to it by the Sponsor with respect to the Initial
Mortgage Loans.
The Schedule of Initial Mortgage Loans is attached to this
Receipt.
The Indenture Trustee hereby additionally acknowledges that it
shall review such items as required by Section 2.2(a) of the Sale and Servicing
Agreement and shall otherwise comply with Section 2.2(b) of the Sale and
Servicing Agreement as required thereby.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Indenture Trustee
By:
-------------------------------------
Name:
Title:
Dated: June ___, 1998
D-1
<PAGE> 82
EXHIBIT E
FORM OF CERTIFICATION
---------------------
WHEREAS, the undersigned is an Authorized Officer of Bankers
Trust Company of California, N.A., a national banking association, acting in its
capacity as indenture trustee (the "Indenture Trustee") of a certain pool of
mortgage loans (the "Pool") heretofore conveyed in trust to the Indenture
Trustee, pursuant to that certain Sale and Servicing Agreement, dated as of June
1, 1998 (the "Sale and Servicing Agreement"), by and among Advanta Mortgage
Conduit Services, Inc., a Delaware corporation, as Sponsor (the "Sponsor"),
Advanta Mortgage Corp. USA, a Delaware corporation, as Master Servicer, Advanta
Revolving Home Equity Loan Trust 1998-A, as Issuer, and the Indenture Trustee;
and
WHEREAS, the Indenture Trustee is required, pursuant to
Section 2.2(a) of the Sale and Servicing Agreement, to review the Files relating
to the Pool within a specified period following the Closing Day and Subsequent
Transfer Date and to notify the Sponsor promptly of any defects with respect to
the Pool, and the Sponsor is required to remedy such defects or take certain
other action, all as set forth in Section 2.2(b) of the Sale and Servicing
Agreement; and
WHEREAS, Section 2.2(a) of the Sale and Servicing Agreement
requires the Indenture Trustee to deliver this Certification upon the
satisfaction of certain conditions set forth therein;
NOW, THEREFORE, the Indenture Trustee has determined that as
to each Mortgage Loan listed in the Schedule of Mortgage Loans (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
Pool Certification as not covered by such Pool Certification), (i) all documents
required to be delivered to it pursuant to this Agreement are in its possession
and (ii) such documents have been reviewed by it and on their face appear to
relate to such Mortgage Loan. The Indenture Trustee makes no certification
hereby, however, with respect to any intervening assignments or assumption and
modification agreements.
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.
By:
-----------------------------------
Name:
Title:
Date:_______________
E-1
<PAGE> 83
EXHIBIT F
FORM OF MASTER SERVICER'S TRUST RECEIPT
---------------------------------------
To: Bankers Trust Company of California, N.A.
Three Park Plaza, 16th Floor
Irvine, California 92714
Attn: Corporate Trust
Date: _________________
In connection with the administration of the mortgage loans
held by you as Indenture Trustee under that certain Sale and Servicing Agreement
dated as of June 1, 1998 by and among Advanta Mortgage Conduit Services, Inc., a
Delaware corporation, as Sponsor, Advanta Mortgage Corp. USA, a Delaware
corporation, as Master Servicer, Advanta Revolving Home Equity Loan Trust
1998-A, as Issuer, and you (the "Agreement"), the Master Servicer hereby
requests a release of the File held by you as Indenture Trustee with respect to
the following described Mortgage Loan for the reason indicated below:
Mortgagor's Name:
Loan No.:
Reason for requesting file:
_______ 1. Mortgage Loan paid in full.
(The Master Servicer hereby certifies that all amounts
received in connection with the loan have been or will
be credited to the Certificate Account (whichever is
applicable) pursuant to the Agreement.)
_______ 2. Mortgage Loan purchased pursuant to Section 3.3, 3.4, 2.2(b)
or 4.10(b) of the Agreement.
(The Master Servicer hereby certifies that the Loan
Purchase Price has been or will be paid to the
Certificate Account pursuant to the Agreement.)
F-1
<PAGE> 84
_______ 3. Mortgage Loan substituted.
(The Master Servicer hereby certifies that a Qualified
Replacement Mortgage has been or will be assigned and
delivered to you along with the related File pursuant
to the Agreement.)
_______ 4. The Mortgage Loan is being foreclosed.
_______ 5. Other. (Describe)
The undersigned acknowledges that the above File will be held
by the undersigned in accordance with the provisions of the Agreement and will
be returned to you, except if the Mortgage Loan has been paid in full, or
purchased or substituted for by a Qualified Replacement Mortgage (in which case
the File will be retained by us permanently) and except if the Mortgage Loan is
being foreclosed (in which case the File will be returned when no longer
required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed
to them in the Agreement.
ADVANTA MORTGAGE CORP. USA
By:______________________________
Name:
Title:
F-2
<PAGE> 85
EXHIBIT G
SUBSEQUENT TRANSFER AGREEMENT
-----------------------------
Advanta Mortgage Conduit Services, Inc., as seller (the
"Seller"), and Advanta Revolving Home Equity Loan Trust 1998-A, as purchaser
(the "Purchaser"), pursuant to that certain Sale and Servicing Agreement dated
as of June 1, 1998 by and among Advanta Mortgage Conduit Services, Inc., a
Delaware corporation, as Sponsor, Advanta Mortgage Corp. USA, a Delaware
corporation, as Master Servicer, Advanta Revolving Home Equity Loan Trust
1998-A, a Delaware business trust, and Bankers Trust Company of California,
N.A., as Trustee (the "Sale and Servicing Agreement"), hereby confirm their
understanding with respect to the sale by the Seller and the purchase by the
Purchaser of those Mortgage Loans listed on the attached Schedule of Mortgage
Loans (the "Subsequent Mortgage Loans").
Conveyance of Subsequent Mortgage Loans. The Seller does
hereby irrevocably transfer, assign, set over and otherwise convey to the
Purchaser, without recourse (except as otherwise explicitly provided for herein)
all of its right, title and interest in and to the Subsequent Mortgage Loans,
including specifically, without limitation, the Mortgages, the Files and all
other documents, materials and properties appurtenant thereto and the Credit
Line Agreements, including all interest accruing and principal collected by the
Seller on or with respect to the Subsequent Mortgage Loans on or after the
Subsequent Cut-Off Date, together with all of its right, title and interest in
and to the proceeds received on or after the Subsequent Cut-Off Date of any
related insurance policies on behalf of the Purchaser. The Seller shall deliver
the original Mortgage or mortgage assignment with evidence of recording thereon
(except as otherwise provided by the Sale and Servicing Agreement) and other
required documentation in accordance with the terms set forth in Section 2.4 of
the Sale and Servicing Agreement.
The costs relating to the delivery of the documents specified
in this Subsequent Transfer Agreement and the Sale and Servicing Agreement shall
be borne by the Seller.
Additional terms of the sale are attached hereto as Attachment
A.
The Seller hereby affirms the representations and warranties
set forth in the Sale and Servicing Agreement that relate to the Subsequent
Mortgage Loans as of the date hereof. The Seller hereby delivers notice and
confirms that each of the conditions set forth in Section 2.4(b) to the Sale and
Servicing Agreement are satisfied as of the date hereof.
All terms and conditions of the Sale and Servicing Agreement
are hereby ratified, confirmed and incorporated herein, provided that in the
event of any conflict the
G-1
<PAGE> 86
provisions of this Subsequent Transfer Agreement shall control over the
conflicting provisions of the Sale and Servicing Agreement.
Terms capitalized herein and not defined herein shall have
their respective meanings as set forth in the Sale and Servicing Agreement.
ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Seller
By:_____________________________
Name:
Title:
ADVANTA REVOLVING HOME
EQUITY LOAN TRUST 1998-A, as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By:_____________________________
Name:
Title:
Dated: _______________
Attachments
A. Additional Terms of the Sale.
B. Schedule of Mortgage Loans.
C. Opinion of Seller's Counsel.
D. Seller's Officer's Certificate.
E. Opinion of Seller's Bankruptcy Counsel.
F. Opinion of Seller's Tax Counsel.
G. Trustee's Certificate.
H. Wire Transfer Instructions
I. Conveyance Agreement
G-2
<PAGE> 87
- ---------------------------------------
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
SUBSEQUENT TRANSFER AGREEMENT
ADVANTA MORTGAGE POOL: 1998-A
_______________ 1998
- ---------------------------------------
1. CUTOFF DATE 5 JUNE 1998 (DD MONTH YEAR)
1A. PRICING DATE 19 JUNE 1998 (DD MONTH YEAR)
2. CLOSING DATE 24 JUNE 1998 (DD MONTH YEAR)
2A. DAYS - CUTOFF TO CLOSING
3. POOL PRINCIPAL BALANCE
AS OF THE CUTOFF DATE
4. NET PURCHASE PRICE 100.00%
EQUALS:
PLUS:
5. ACCRUED INTEREST $
EQUALS:
6. NET PROCEEDS $
7. PASSTHROUGH RATE %
SEE FORMULA BELOW
8. FIRST DISTRIBUTION DATE
9. MAXIMUM CLTV
10. REQUIRED MINIMUM COUPON
11. MAXIMUM BALLOON PERCENTAGE
12. MAXIMUM CONCENTRATION PCT
13. MAXIMUM VACATION &
INVESTOR OWNED PCT
13A MAXIMUM THIRD LIENS
14. ADDITIONAL REPS & WARRANTIES:
15. OTHER MATTERS
G-3
<PAGE> 88
EXHIBIT H
FORM OF ADDITION NOTICE
-----------------------
[DATE]
Bankers Trust Company of California, N.A.
Corporate Trust Department
Three Park Plaza, 16th floor
Irvine, California 92714
Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Ambac Assurance Corporation
One State Street Plaza
New York, NY 10004
Re: Advanta Heloc 1998-A: Addition Notice
--------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.4(b) of the Sale and Servicing
Agreement, dated as of June 1, 1998 among Advanta Mortgage Conduit Services,
Inc., as Sponsor, Advanta Mortgage Corp. USA, as Master Servicer, Advanta
Revolving Home Equity Loan Trust 1998-A (the "Trust") and Bankers Trust Company
of California, N.A., as Indenture Trustee of the Trust, this Addition Notice is
delivered to you in connection with the conveyance of the Subsequent Mortgage
Loans listed on the Schedule of Subsequent Mortgage Loans attached to the
Subsequent Transfer Agreement dated ______________ between the Originator and
the Trustee.
ADVANTA MORTGAGE CONDUIT
SERVICES, INC.
By:_________________________________
Name:
Title:
H-1
<PAGE> 1
EXHIBIT 4.4
<PAGE> 2
[AMBAC Logo and Letterhead]
CERTIFICATE GUARANTY INSURANCE POLICY
Insured Obligations: $80,000,000 Policy Number: AB0178BE
Advanta Revolving Home Equity Loan Trust
1998-A, Advanta Revolving Home Equity Loan
Asset Backed Notes, Series 1998-A,
Class A Notes, Variable Pass-Through Rate
Premium: Calculated as set forth
in the Certificate Guaranty
Insurance Policy Endorsement
attached hereto and made a part
hereof
AMBAC ASSURANCE CORPORATION (AMBAC) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations, that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by
reason of Nonpayment.
Ambac will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification to Ambac of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such
payments of principal or interest shall be made only upon presentation of an
instrument of assignment in form and substance satisfactory to Ambac,
transferring to Ambac all rights under such Insured Obligations to receive the
principal of and interest on the Insured Obligation. Ambac shall be subrogated
to all the Holders' rights to payment on the Insured Obligations to the extent
of the insurance disbursements so made. Once payments of the Insured Amounts
have been made to the Trustee, Ambac shall have no further obligation hereunder
in respect of such Insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any payment
of principal or interest on an Insured Obligation which has become Due for
Payment and which is made to a Holder by or on behalf of the Trustee has been
deemed a preferential transfer and theretofore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonapplicable order of a court of competent jurisdiction, such Holder will be
entitled to payment from Ambac to the extent of such recovery if sufficient
funds are not otherwise available.
This Policy is noncancelable by Ambac for any reason, including failure to
receive payment of any premium due hereunder. The premium on this Policy is not
refundable for any reason. This Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation, other than at the sole option of Ambac, nor
against any risk other than Nonpayment, including failure of the Trustee to
make any payment due Holders of Insured Amounts.
To the fullest extent permitted by applicable law, Ambac hereby waives and
agrees not to assert any and all rights and defenses, to the extent such rights
and defenses may be available to Ambac, to avoid payment of its obligations
under this Policy in accordance with the express provisions hereof.
Any capitalized terms not defined herein shall have the meaning given such
terms in the endorsement attached hereto or in the Agreement.
In witness whereof, Ambac has caused this Policy to be affixed with its
corporate seal and to be signed by its duly authorized officers in facsimile to
become effective as their original signatures and binding upon Ambac by virtue
of the countersignature of its duly authorized representative.
/s/ P. Lassiter /s/ Stephen D. Cooke
President Secretary
[AMBAC CORPORATE SEAL]
/s/ Karl P. Molin
Effective Date: June 24, 1998 Authorized Representative
<PAGE> 3
CERTIFICATE GUARANTY INSURANCE ENDORSEMENT
Attached to and forming Effective Date of Endorsement:
part of Policy #ABO178BE June 24, 1998
issued to:
Bankers Trust Company
of California, N.A.,
as Indenture Trustee for the Holders of
Advanta Revolving Home Equity Loan Asset-Backed
Notes, Series 1998-A, Class A
For all purposes of this Policy, the following terms shall have the
following meanings:
"Agreement" shall mean the Sale and Servicing Agreement dated as of June
1, 1998 between Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, Bankers Trust Company of California,
N.A., as Indenture Trustee, and the Advanta Revolving Home Equity Loan Trust
1998-A, as Issuer, as such Agreement may be amended, modified or supplemented
from time to time as set forth in the Agreement.
"Certificate Insurance Policy" or "Policy" shall mean this Certificate
Guaranty Insurance Policy together with each and every endorsement hereto.
"Deficiency Amount" means the excess, if any, of Required Payments over
the Net Available Distribution Amount for such Payment Date.
"Due for Payment" shall mean the Business Day immediately preceding the
Payment Date on which Insured Amounts are due.
"First Payment Date" shall mean July 27, 1998.
"Holder" shall mean any person who is the registered owner or beneficial
owner of any Class A Notes.
<PAGE> 4
- 2 -
"Indenture" shall mean the Indenture between Advanta Revolving Home Equity
Loan Trust 1998-A, as Issuer and Bankers Trust Company of California, N.A. as
Indenture Trustee, dated June 1, 1998.
"Indenture Trustee" shall mean Bankers Trust Company of California, N.A.
or its successor-in-interest, in its capacity as Indenture Trustee under the
Indenture, or if any successor indenture trustee or any co-trustee shall be
appointed as provided therein, then "Indenture Trustee" shall also mean such
successor trustee or such co-trustee, as the case may be, subject to the
provisions thereof.
"Insurance Agreement" shall mean the Insurance and Indemnity Agreement,
dated as of June 24, 1998, among Advanta Mortgage Conduit Services, Inc., as
Sponsor, Advanta Mortgage Corp. USA, as Master Servicer, Bankers Trust Company
of California, N.A., as Indenture Trustee, Ambac Assurance Corporation, as
Insurer, and the Advanta Revolving Home Equity Loan Trust 1998-A, as Issuer as
such Agreement may be amended, modified or supplemented from time to time.
"Insured Amounts" shall mean, with respect to any Payment Date, the
Deficiency Amount for such Payment Date.
"Insured Payments" shall mean, with respect to any Payment Date, the
aggregate amount actually paid by the Insurer to the Trustee in respect of (i)
Insured Amounts for such Payment Date and (ii) Preference Amounts for any given
Business Day.
"Insurer" shall mean Ambac Assurance Corporation, or any successor
thereto, as issuer of the Certificate Insurance Policy.
"Late Payment Rate" shall mean for any Payment Date, the greater of (i)
the rate of interest, as it is publicly announced by Citibank, N.A. at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date such change is announced by
Citibank, N.A.) plus 2% and (ii) the then applicable highest rate of interest
on the Investor Certificates. The Late Payment Rate shall be computed on the
basis of a year of 360 days and the actual number of days elapsed. In no event
shall the Late Payment Rate exceed the maximum rate permissible under any
applicable law limiting interest rates.
"Net Available Distribution Amount" means, with respect to any Payment
Date, the amount on deposit in the Note Account on such Payment Date minus the
Owner Trustee's Fee, the Indenture Trustee's Fee and the Premium Amount.
"Nonpayment" shall mean, with respect to any Payment Date, a Deficiency
Amount, owing in respect of such Payment Date.
"Note Account" shall mean the account created and maintained with the
Trustee for the benefit of the Noteholders and the Insurer pursuant to Section
8.3 of the Indenture.
<PAGE> 5
-3-
"Notes" shall mean any one of the Class A Notes substantially in the form
set forth in Exhibit A-1 to the Indenture.
"Notice" shall mean the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A to the
Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Amount which shall be
due and owing on the applicable Payment Date.
"Payment Date" shall mean the 25th day of any month (or if such 25th day
is not a Business Day, the first Business Day immediately following) beginning
with the First Payment Date.
"Preference Amount" means any payment of principal or interest on a Class
A Note which has become Due for Payment and which is made to a Holder by or on
behalf of the Indenture Trustee which has been deemed a preferential transfer
and theretofore recovered from its Holder pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a court of
competent jurisdiction.
"Premium Percentage" shall have the meaning set forth in the Insurance
Agreement.
"Reimbursement Amount" shall mean, as to any Payment Date, the sum of (x)
(i) all Insured Payments paid by the Insurer, but for which the Insurer has not
been reimbursed prior to such Payment Date pursuant to Section 8.6(b)(vii) of
the Indenture, plus (ii) interest accrued thereon, calculated at the Late
Payment Rate from the date the Indenture Trustee received the related Insured
Payments, and (y) without duplication (i) any amounts then due and owing to the
Insurer under the Insurance Agreement plus (ii) interest on such amounts at the
Late Payment Rate.
"Required Payments" shall mean as of any Payment Date, the sum of (i) the
Class A Interest Distribution Amount (excluding any Prepayment Interest
Shortfalls and any Relief Act Shortfalls) plus any Class A Unpaid Note Interest
Shortfall and (ii) for any Payment Date, any shortfalls in amounts available in
the Note Account to pay the Overcollateralization Deficit and (c) on the Final
Scheduled Payment Date, any shortfall in amounts available in the Note Account
to pay the outstanding Class A Principal Balance.
"Trust Agreement" shall mean the Trust Agreement between Advanta Mortgage
Conduit Services, Inc., as Sponsor and Wilmington Trust Company as Owner
Trustee, dated as of June 1, 1998.
Capitalized used herein and not otherwise defined shall have the meaning
assigned to them in the Agreement or the Indenture.
As provided by the Policy, the Insurer will pay any amount payable
hereunder no later than 12:00 noon, New York City time, on the later of the
Payment Date on which the related Insured
<PAGE> 6
-4-
Amount is due or the Business Day following receipt in New York, New York on a
Business Day by the Insurer of a Notice; 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 is not
in proper form or is otherwise insufficient for the purpose of making a claim
under the Policy, it shall be deemed not to have been received for purposes of
this paragraph, and the Insurer shall promptly so advise the Indenture Trustee
and the Indenture Trustee may submit an amended Notice.
The Insurer hereby agrees that if it shall be subrogated to the rights of
Holders by virtue of any previous payment under this Policy, no recovery of
such payment will occur unless the full amount of the Holders' allocable
distributions for such Payment Date can be made. In so doing, the Insurer does
not waive its rights to seek full payment of all Reimbursement Amounts owed to
it under the Agreement.
The terms and provisions of the Agreement constitute the instrument of
assignment referred to in the second paragraph of the face of this Policy.
A premium will be payable on this Policy on each Payment Date as provided
in Section 8.6(b)(ii) of the Indenture, beginning with the First Payment Date,
in an amount equal to the Premium Amount.
Claims arising under the Policy would be excluded from coverage by the
California Insurance Guaranty Association established pursuant to the laws of
California.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy to which this Endorsement is attached and of which it forms a
part is hereby amended to provide that there shall be no acceleration payment
due under the Policy unless such acceleration is at the sole option of the
Insurer.
Nothing herein contained shall be held to vary, alter, waive or extend any
of the terms, conditions, provisions, agreements or limitations of the above
mentioned Policy other than as above stated.
This Policy is issued under and pursuant to, and shall be construed under,
the laws of the State of California.
<PAGE> 7
IN WITNESS WHEREOF, the Ambac Assurance Corporation has caused this
Endorsement to the Policy to be signed by its duly authorized officers.
/s/ Warren Tong /s/ Karl P. Molin
- -------------------------------- ----------------------------
First Vice President Assistant Secretary
<PAGE> 8
A-1
EXHIBIT A
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
Policy No. ABO178BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED AMOUNTS
Date: [ ]
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. ABO178BE
(the "Policy") issued by Ambac Assurance Corporation ("Ambac"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Indenture, as the case may be, unless the context
otherwise requires.
The Indenture Trustee hereby certifies as follows:
1. The Indenture Trustee is the Indenture Trustee under the Indenture for the
Holders.
2. The relevant Payment Date is [date].
3. Payment on the Notes in respect of the Payment Date is due to be
received on __________________________________ under the Indenture,
in an amount equal to $_____________________.
4. There is an Insured Amount of $_____________________ in respect of the
certificates, which amount is an Insured Amount pursuant to the terms
of the Indenture.
5. The sum of $___________________ is the Insured Amount that is Due For
Payment.
6. The Indenture Trustee has not heretofore made a demand for the
Insured Amount in respect of the Payment Date.
<PAGE> 9
A-2
7. The Indenture Trustee hereby requests the payment of the Insured
Amount that is Due For Payment be made by Ambac under the Policy and
directs that payment under the Policy 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 to:_______________________
Indenture Trustee's account number.
8. The Indenture Trustee hereby agrees that, following receipt of the
Insured Amount from Ambac, it shall (a) hold such amounts in trust and
apply the same directly to the distribution of payment on the Notes
when due; (b) not apply such funds for any other purpose; (c) deposit
such funds to the Note Account and not commingle such funds with other
funds held by Trustee and (d) maintain an accurate record of such
payments with respect to each certificate and the corresponding claim
on the Policy and proceeds thereof.
By:____________________________
Indenture Trustee
Title:_________________________
(Officer)
<PAGE> 1
Exhibit 8.1
<PAGE> 2
June 24, 1998
To the Addressees Listed
on Schedule I hereto
Re: Advanta Revolving Home Equity Loan Trust 1998-A
Revolving Home Equity Loan Asset-Backed Notes
Series 1998-A
------------------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the
issuance and delivery of certain mortgage loan certificates denominated Advanta
Revolving Home Equity Loan Trust 1998-A, Revolving Home Equity Loan Asset-
Backed Notes Series 1998-A, Class A (the "Class A Notes") pursuant to a Sale
and Servicing Agreement dated as of June 1, 1998 (the "Sale and Servicing
Agreement") among Advanta Mortgage Conduit Services, Inc. (the "Sponsor").
Advanta Mortgage Corp, USA, as Master Servicer (the "Master Servicer"), Advanta
Revolving Home Equity Loan Trust 1998-A (the "Trust") and Bankers Trust Company
of California N.A., as Indenture Trustee (the "Indenture Trustee").
As special tax counsel, we have examined such documents as we
deemed appropriate for the purposes of rendering the opinions set forth below,
including the following: (a) Prospectus dated October 30, 1997 and Prospectus
Supplement dated June 19, 1998 (together the "Prospectus") with respect to the
Class A Notes, and (b) an executed copy of the Sale and Servicing Agreement and
the exhibits attached thereto.
We have examined the question of whether the issuance by the
Trust of the Class A Notes will be treated as indebtedness by the Trust for
federal income tax purposes. Our analysis is based on provisions of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated
thereunder as in effect on the date hereof and on existing judicial and
administrative interpretations thereof. These authorities are subject to change
and to differing interpretations, which could apply retroactively. The opinion
of special tax counsel is not binding on the courts or the Internal Revenue
Service ("IRS").
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather
than the form of the transaction or the manner in which the instruments are
labeled. The IRS and the courts have set forth various factors to be taken into
account in determining whether or not a transaction constitutes the issuance of
indebtedness for federal income tax purposes, which we have reviewed as they
apply to this transaction.
<PAGE> 3
June 24, 1998
Page 2
Based or the foregoing, and such legal and factual investigations as we
have deemed appropriate, we are of the opinion that for federal income tax
purposes the transaction contemplated by the Sale and Servicing Agreement will
be treated as the issuance of indebtedness because (i) the characteristics of
the transaction strongly indicate that in economic substance, the transaction
is the issuance of indebtedness, and (ii) the parties have stated unambiguously
their intention to treat the transaction as the issuance of indebtedness for
tax purposes.
Terms capitalized herein and not otherwise shall have their respective
meanings as forth in the Sale and Servicing Agreement.
We express no opinion on any matter not discussed in this letter. The
opinion letter is rendered as of the Closing Date, at the request of the Master
Servicer and the Sponsor, for the sole benefit of each addressee hereof, and
no other person or entity is entitled to rely hereon without our prior written
consent. Copies of this opinion letter may not be furnished to any other person
or entry, nor may any portion of this opinion letter be quoted, circulated or
referred to in any other document, without our prior written consent.
Very truly yours,
/s/ Dewey Ballantine LLP
<PAGE> 4
SCHEDULE I
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, California 92127
Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, California 92127
Bankers Trust Company of California N.A. as Trustee
Three Park Plaza, 16th Floor
Irvine, California 92714
Standard & Poor's Ratings Group,
a division of The McGraw-Hill Companies
25 Broadway
New York, New York 10004
Advanta Revolving Home Equity Loan Trust 1998-A
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Moody's Investors Service
99 Church Street
New York, New York 10007
<PAGE> 1
EXHIBIT 10.1
<PAGE> 2
EXECUTION COPY
PURCHASE AGREEMENT
Between
ADVANTA NATIONAL BANK,
as Originator
and
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Purchaser
Dated as of June 1, 1998
<PAGE> 3
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I Definitions....................................................................................1
ARTICLE II Procedures for Purchases of Mortgage Loans; Conditions Precedent; Settlements................6
Section 2.01. Purchase and Sale...............................................................6
Section 2.02. Delivery of Documents; Purchase of Initial Mortgage Loans.......................6
Section 2.03. Delivery of Documents; Purchases of Subsequent Mortgage Loans...................7
Section 2.04. Purchase Requests...............................................................7
Section 2.05. Survival of Representations.....................................................8
Section 2.06. Proceeds of Mortgage Loans......................................................8
Section 2.07. Defective Mortgage Loans........................................................8
ARTICLE III..............................................................................................8
Section 3.01. Intent of Parties; Security Interest............................................8
ARTICLE IV Representations and Warranties................................................................9
Section 4.01. Representations and Warranties of Originator....................................9
Section 4.02. Representations and Warranties Regarding Mortgage Loans........................10
Section 4.03. Representations and Warranties of Purchaser....................................16
Section 4.04. Remedies for Breach of Representations and Warranties; Repurchase
Obligation.....................................................................17
ARTICLE V Covenants and Warranties of the Originator....................................................18
Section 5.01. Affirmative Covenants..........................................................18
Section 5.02. Negative Covenants.............................................................18
ARTICLE VI Sale of Mortgage Loans from the Purchaser to the Trust.......................................19
Section 6.01. Sale and Servicing Agreement...................................................19
ARTICLE VII Termination; Additional Remedies...........................................................20
Section 7.01. Termination of Commitment to Purchase..........................................20
Section 7.02. Additional Remedies............................................................20
ARTICLE VIII Term.......................................................................................20
ARTICLE IX Exclusive Benefit of Parties; Assignment.....................................................20
ARTICLE X Amendment; Waivers............................................................................21
ARTICLE XI Execution in Counterparts....................................................................21
ARTICLE XII Effect of Invalidity of Provisions..........................................................21
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XIII Governing Law..............................................................................21
ARTICLE XIV Notices.....................................................................................22
ARTICLE XV Entire Agreement.............................................................................22
ARTICLE XVI Indemnities.................................................................................22
ARTICLE XVII RESPA Obligations..........................................................................23
ARTICLE XVIII Survival..................................................................................24
ARTICLE XIX Consent to Service..........................................................................24
ARTICLE XX Submission to Jurisdiction; Waiver of Trial by Jury..........................................24
ARTICLE XXI Construction................................................................................24
ARTICLE XXII Further Agreements.........................................................................25
</TABLE>
ii
<PAGE> 5
PURCHASE AGREEMENT ("Agreement") dated as of June 1, 1998
between Advanta National Bank, a national banking association ("Originator"),
and Advanta Mortgage Conduit Services, Inc.
("Purchaser").
WHEREAS, Originator desires to sell from time to time to
Purchaser the Initial Mortgage Loans and Subsequent Mortgage Loans (each as
hereinafter defined), and Purchaser desires to purchase such Initial Mortgage
Loans and Subsequent Mortgage Loans, each in accordance with the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, the parties, in consideration of good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Capitalized terms not defined herein shall have the meanings
set forth in the Sale and Servicing Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Additional Balance": As to any Mortgage Loan and day, the
aggregate amount of all Draws conveyed to the Trust pursuant to Section 2.1 of
the Sale and Servicing Agreement.
"Assignment of Mortgage": With respect to each Mortgage Loan,
an assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect the recordation of the pledge
of the Mortgage Loans to the Indenture Trustee for the benefit of the Class A
Noteholders.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York or
in the city in which the principal corporate trust office of the Indenture
Trustee is located, are authorized or obligated by law or executive order to be
closed.
"Class A Note": Any note executed and authenticated by the
Indenture Trustee substantially in the form set forth in Exhibit A to the
Indenture.
"Class A Noteholder": The holder of a Class A Note.
"Closing Date": June 24, 1998.
"Collateral": As defined in Article III hereof.
"Credit Line Agreement": With respect to any Mortgage Loan,
the related home equity line of credit agreement, security instrument and
promissory note executed by the related Mortgagor and any amendment or
modification thereof.
<PAGE> 6
"Cut-Off Date": With respect to each Initial Mortgage Loan,
the Initial Cut-Off Date. With respect to any Subsequent Mortgage Loan, the
Subsequent Cut-Off Date related to such Subsequent Mortgage Loan. With respect
to each Qualified Replacement Mortgage, the Replacement Cut-off Date related to
such Qualified Replacement Mortgage.
"Cut-Off Date Principal Balance": With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the related Cut-Off Date.
"Draw": With respect to any Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the Cut-Off Date in accordance with the
related Credit Line Agreement.
"Event of Termination": As defined in Article IX hereof.
"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.
"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.
"Indenture": The Indenture dated as of June 1, 1998 between
the Trust and the Indenture Trustee.
"Indenture Trustee": Bankers Trust Company of California, N.A.
or any successor Indenture Trustee appointed in accordance with the Indenture
that has accepted such appointment in accordance with the Indenture.
"Initial Cut-Off Date": With respect to the Initial Mortgage
Loans, the close of business on June 5, 1998.
"Initial Mortgage Loans": Mortgage Loans transferred and
assigned to the Indenture Trustee on the Closing Date.
"Issuer": Advanta Home Equity Loan Trust 1998-A.
"Liquidated Mortgage Loan": As defined in Section 4.13(b) of
the Sale and Servicing Agreement. A Mortgage Loan which is purchased from the
Trust pursuant to Section 3.3, 3.4, 3.6(b) or 4.10 of the Sale and Servicing
Agreement is not a "Liquidated Mortgage Loan".
"Loan Rate": As defined in the Sale and Servicing Agreement.
"Losses": Any and all out-of-pocket losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and disbursements)
directly incurred by any person specified in this Agreement, resulting from
transactions entered into under
2
<PAGE> 7
this Agreement (other than liability for taxes). Losses must be accounted for
and presented for reimbursement documented in reasonable detail and within a
reasonable time.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing a Credit Line Agreement.
"Mortgage Files": For each Mortgage Loan, the items listed on
Exhibit B of the Sale and Servicing Agreement.
"Mortgage Loan Schedule": A schedule of Mortgage Loans
transferred to the Trust, attached hereto as Schedule I, as it may be further
supplemented in connection with subsequent transfers of Subsequent Mortgage
Loans.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 2.1(a) of the Sale and Servicing
Agreement, together with any Qualified Replacement Mortgages substituted
therefor in accordance with this Agreement, as from time to time are held as a
part of the Trust Estate, the Mortgage Loans originally so held being identified
in the Schedule of Mortgage Loans. The term "Mortgage Loan" includes the terms
"First Mortgage Loan" and "Second Mortgage Loan". The term "Mortgage Loan"
includes any Mortgage Loan which is Delinquent, which relates to a foreclosure
or which relates to a Mortgaged Property which is REO Property prior to such
Mortgaged Property's disposition by the Trust. Any mortgage loan which, although
intended by the parties hereto to have been, and which purportedly was,
transferred and assigned to the Trust by the Sponsor, in fact was not
transferred and assigned to the Trust for any reason whatsoever shall
nevertheless be considered a "Mortgage Loan" for all purposes of this Agreement.
The term "Mortgage Loan" includes the terms "Initial Mortgage Loan," and
"Subsequent Mortgage Loan".
"Mortgaged Property": The underlying property securing a
Mortgage Loan.
"Mortgagor": The obligor on a Credit Line Agreement.
"Note Account": The note account established in accordance
with Section 8.3 of the Indenture and maintained by the Indenture Trustee.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Indenture Trustee.
"Payment Date": Any date on which the Indenture Trustee is
required to make distributions to the Class A Noteholders, which shall be the
25th day of each month, commencing in the month following the Closing Day or, if
such day is not a Business Day, then on the succeeding Business Day.
3
<PAGE> 8
"Policy": The financial guaranty insurance policy, dated as of
the Closing Date, issued by Ambac Assurance Corporation to the Indenture Trustee
for the benefit of the Class A Noteholders.
"Principal Balance": As to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any date, the related Cut-Off Date Principal
Balance, plus (i) any Additional Balance in respect of such Mortgage Loan, minus
(ii) all collections credited as principal against the Principal Balance of any
such Mortgage Loan in accordance with the related Credit Line Agreement prior to
such day. For purposes of this definition, a Liquidated Mortgage Loan shall be
deemed to have a Principal Balance of zero as of the first day of the Remittance
Period following the Remittance Period in which such Mortgage Loan becomes a
Liquidated Mortgage Loan and at all times thereafter.
"Purchase": Any purchase of Subsequent Mortgage Loans by
Purchaser from Originator pursuant to the terms hereof and of the applicable
Purchase Request.
"Purchase Date": With respect to the Subsequent Mortgage
Loans, the Subsequent Transfer Date.
"Purchase Price": With respect to the Principal Balance of the
Initial Mortgage Loans as of the Cut-Off Date 98%; with respect to the Principal
Balances of all Additional Balances and all Subsequent Mortgage Loans 98%.
"Purchase Request": A request for the purchase of Subsequent
Mortgage Loans in the form of Exhibit A hereto.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 2.2(b), 3.3 or 3.4 of the Sale and Servicing
Agreement, which (i) bears a variable rate of interest, (ii) has a Loan Rate at
least equal to the Loan Rate of the Mortgage Loan being replaced, (which shall
mean a Mortgage Loan having the same interest rate index, a margin over such
index and a maximum interest rate at least equal to those applicable to the
Mortgage Loan being replaced), (iii) is of the same or better property type and
the same or better occupancy status as the replaced Mortgage Loan, (iv) shall be
of the same or better credit quality classification (determined in accordance
with Originator's credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than the Payment Date occurring in August,
2023, (vi) has a Combined Loan-to-Value Ratio as of the Initial Cut-Off Date or
Subsequent Cut-Off Date, as applicable, no higher than the Combined
Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (vii) has a
Principal Balance as of the related Replacement Cut-Off Date equal to or less
than the Principal Balance of the replaced Mortgage Loan as of such Replacement
Cut-Off Date, (viii) is in the same lien position or better.
"Reference Bank": As defined in the Indenture.
"Reference Bank Rate": As defined in the Indenture.
4
<PAGE> 9
"Remittance Period": As to any Payment Date, the calendar
month preceding the month of such Payment Date.
"REO Property": A Mortgaged Property acquired by the Master
Servicer or any Sub-Servicer on behalf of the Trust through foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
"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.
"Repurchase Price": The sum of (a) product of (i) the
outstanding principal balance of the related Mortgage Loan as of such date of
repurchase and (ii) the related Purchase Price, plus (b) any accrued interest as
of such date.
"Sale and Servicing Agreement": The Sale and Servicing
Agreement dated as of June 1, 1998 among the Originator, the Purchaser, the
Issuer and the Indenture Trustee.
"SEC": The Securities and Exchange Commission and any
successor thereto.
"Shareholder's Equity": The aggregate "assets" of Originator
less the aggregate "liabilities" of Originator, with the term "asset" having the
meaning ascribed to such term by GAAP and the term "liabilities" being those
obligations or liabilities of the Originator which, in accordance with GAAP,
would be included on the liability side of the Originator's balance sheet.
"Sponsor": Advanta Mortgage Conduit Services, Inc.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loan, the opening of business on the first day of the calendar month in
which the related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loans": Mortgage Loans sold by Originator
to Purchaser on any Subsequent Transfer Date.
"Subsequent Transfer Date": Any date on which Originator
transfers to Purchaser Subsequent Mortgage Loans in accordance with the Sale and
Servicing Agreement.
"Termination Date": The date of termination of the Trust in
accordance with the Trust Agreement.
"Trust": The trust created by the Trust Agreement, the corpus
of which consists of the Mortgage Loans, such other assets as shall from time to
time be identified as deposited in a Certificate Account in accordance with the
Sale and Servicing Agreement, property that secured a Mortgage Loan and that has
become REO, the rights
5
<PAGE> 10
of the Sponsor in certain hazard insurance policies maintained by the Mortgagors
or the Master Servicer in respect of the Mortgage Loans, the Policy, an
assignment of certain rights of the Sponsor under this Agreement, such assets as
may be deposited from time to time in a pre-funding account, rights to certain
amounts in a spread account and all proceeds of each of the foregoing (exclusive
of payments of accrued interest on the Mortgage Loans which are due on or prior
to the Cut-Off Date).
"Trust Agreement": The Trust Agreement dated as of June 1,
1998 between the Sponsor and Wilmington Trust Company, as Owner Trustee.
ARTICLE II
Procedures for Purchases of Mortgage Loans;
Conditions Precedent; Settlements
Section 2.01. Purchase and Sale. (a) On the Closing Date in
consideration for the Purchase Price, Originator hereby sells, transfers,
assigns, sets over and otherwise conveys to Purchaser, without recourse, all of
its right, title and interest in and to (i) each Initial Mortgage Loan,
including its Principal Balances and all collections in respect thereof received
on or after the Cut-Off Date (excluding payments in respect of accrued interest
due prior to the Cut-Off Date); (ii) property that secured an Initial Mortgage
Loan that is acquired by foreclosure or deed in lieu of foreclosure; (iii)
Originator's rights under the hazard insurance policies; and (iv) all proceeds
with respect to the foregoing. From time to time, with respect to any Subsequent
Mortgage Loan, pursuant to the terms of this Agreement, Originator shall, on the
related Subsequent Transfer Date transfer, assign, set over and otherwise convey
to Purchaser without recourse all of its right, title and interest in and to the
Principal Balances of the Subsequent Mortgage Loans and all collections in
respect thereof received after the Cut-Off Date for the Subsequent Mortgage
Loans or, with respect to any Additional Balances with respect thereto, on or
after the date of transfer to the Trust.
(b) Each such purchase with respect to the Subsequent Mortgage
Loans shall be initiated by Originator pursuant to the delivery to Purchaser of
a Purchase Request in the manner set forth in Section 2.04.
Section 2.02. Delivery of Documents; Purchase of Initial
Mortgage Loans. Prior to the purchase of Initial Mortgage Loans:
(a) Originator shall have delivered to Purchaser or any agent
appointed by Purchaser the Mortgage File for each of the Mortgage
Loans.
(b) Purchaser shall have received a Mortgage Loan Schedule
pertaining to the related Mortgage Loans.
(c) Purchaser shall have received copies of the resolutions of
the Board of Directors of Originator, certified by its Secretary,
approving this Agreement.
6
<PAGE> 11
(d) Purchaser shall have received the Articles of
Incorporation or Charter of Originator.
(e) Purchaser shall have received a certificate of the
Secretary or Assistant Secretary of Originator certifying (i) the names
and signatures of the officers authorized on its behalf to execute this
Agreement, and any other documents to be delivered by it hereunder and
(ii) a copy of Originator's By-laws.
(f) Purchaser shall have received an opinion of counsel to
Originator as to the due authorization, execution and delivery by
Originator of this Agreement and as to the validity and enforceability
of the transfers contemplated hereunder and addressing such other
matters as Purchaser may reasonably request.
(g) Originator shall have instructed the applicable debtor,
trustee, paying agent, authenticating agent, transfer agent, registrar,
predecessor in interest, owner (if the Mortgage Loans are in the form
of a security agreement), or servicer, if any, in respect of the
related Mortgage Loans to reflect on their books and records the
transfer of such Mortgage Loans to Purchaser, as owner or secured party
(if the Mortgage Loans are in the form of a security agreement).
(h) Purchaser shall have received the most recent available
standard servicing or lien reports in summary form, if any, with
respect to all of the mortgages in Originator's portfolio similar to
the Mortgage Loans.
(i) Purchaser shall be permitted to perform its standard loan
review of each Mortgage Loan to be purchased.
(j) UCC-1 financing statements duly executed by Originator as
debtor shall have been filed naming the Purchaser as secured party and
the Indenture Trustee on behalf of the Trust as assignee.
Section 2.03. Delivery of Documents; Purchases of Subsequent
Mortgage Loans. Prior to any purchase of Subsequent Mortgage Loans after the
purchase of Initial Mortgage Loans, the actions, conditions and deliveries
specified in Section 2.02 shall have been taken or made, as the case may be with
respect to the Subsequent Mortgage Loans.
Section 2.04. Purchase Requests. Originator shall deliver to
Purchaser a Purchase Request at least three Business Days prior to the proposed
Purchase Date for any Purchase (unless otherwise agreed by the parties).
Purchaser shall indicate its acceptance or declination of each Purchase Request
by completing the appropriate section of the Purchase Request and returning the
copy thereof to Originator; provided, however, that Purchaser hereby agrees to
accept each Purchase Request if all of the conditions to such Purchase provided
for in this Agreement (including, without limitation, Section 2.02 hereof and
the conditions with respect to the purchase of Subsequent Mortgage Loans) have
been satisfied.
7
<PAGE> 12
With respect to all Purchase Requests, if Purchaser does not
send a copy of a completed Purchase Request to Originator within at least three
Business Days prior to the proposed Purchase Date (five Business Days, if the
related Purchase Request was received by Purchaser at least two calendar weeks
prior to the proposed Purchase Date), Purchaser shall be deemed to have accepted
such Purchase Request. Each Purchase Request accepted by Purchaser shall be
irrevocable and binding on Purchaser and the Originator. Originator shall
indemnify Purchaser and hold it harmless against any Losses incurred by
Purchaser as a result of any failure by Originator to timely deliver the
Subsequent Mortgage Loans subject to such Purchase. On the applicable Purchase
Date, the Purchaser shall pay Originator the Purchase Price for the related
Subsequent Mortgage Loans against receipt of the documents required to be
delivered by Originator pursuant to Section 2.03.
Section 2.05. Survival of Representations. The terms and
conditions of the purchase of each Mortgage Loan shall be as set forth in this
Agreement. Originator will be deemed on the Closing Date and on each Purchase
Date to have made to Purchaser the representations and warranties set forth in
Article IV hereof and such representations and warranties of Originator shall be
true and correct on and as of the Closing Date and on and as of such Purchase
Date. Each Purchase Request made by Originator shall be deemed to be a
restatement of each of the covenants of Originator made pursuant to Article V of
this Agreement. In addition, Originator shall reaffirm the representations and
warranties contained in Article IV on the date of disposition of the Mortgage
Loans by the Purchaser pursuant to the Sale and Servicing Agreement.
Section 2.06. Proceeds of Mortgage Loans. The transfer and
sale hereby of all of the Originator's right, title and interest in and to each
Mortgage Loan shall include all proceeds, products and profits derived
therefrom, including, without limitation, all scheduled payments of principal of
and interest on such Mortgage Loan and other amounts due or payable or to become
due or payable in respect thereof and proceeds thereof, including, without
limitation, all monies, goods and other tangible or intangible property received
upon the liquidation or sale thereof, except any payments in respect of accrued
interest due prior to the Cut-Off Date.
Section 2.07. Defective Mortgage Loans. If any Mortgage Loan
is re-transferred to Purchaser pursuant to Section 2.2(b) of the Sale and
Servicing Agreement, Originator shall, at Purchaser's option, either (a)
repurchase such Mortgage Loan at the Repurchase Price, or (b) provide a
Qualified Replacement Mortgage if Originator has any such loans available for
sale at the time, subject to the terms and conditions of the Sale and Servicing
Agreement.
ARTICLE III
Section 3.01. Intent of Parties; Security Interest. Purchaser
and Originator confirm that the transactions contemplated herein are intended as
purchases and sales rather than as loan transactions. In the event, for any
reason, and solely in such event, any transaction hereunder is construed by any
court or regulatory authority as a loan or other purchase and sale of the
related Mortgage Loans, Originator shall be
8
<PAGE> 13
deemed to have hereby pledged to Purchaser as security for the performance by
Originator of all of its obligations from time to time arising hereunder and
under any and all Purchases effected pursuant thereto, and shall be deemed to
have granted to Purchaser a security interest in the related Mortgage Loans and
all distributions in respect thereof, and the proceeds of any and all of the
foregoing (collectively, the "Collateral"). In furtherance of the foregoing, (i)
this Agreement shall constitute a security agreement, (ii) Purchaser shall have
all of the rights of a secured party with respect to the Collateral pursuant to
applicable law and (iii) Originator shall execute all documents, including, but
not limited to, financing statements under the Uniform Commercial Code as in
effect in any applicable jurisdictions, as Purchaser may reasonably require to
effectively perfect and evidence Purchaser's first priority security interest in
the Collateral. Originator also covenants not to pledge, assign or grant any
security interest to any other party in any Mortgage Loan sold to Purchaser.
ARTICLE IV
Representations and Warranties
Section 4.01. Representations and Warranties of Originator .
Originator represents, warrants and covenants to Purchaser as of the Closing
Date and with respect to the Subsequent Mortgage Loans as of each related
Subsequent Transfer Date that:
(i) Originator is duly organized, validly existing and in good
standing under its respective jurisdiction of incorporation and is duly
authorized and qualified to transact any and all business contemplated
by this Agreement to be conducted by Originator in any state in which a
Mortgaged Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan in accordance with the terms of
this Agreement;
(ii) Originator has the full corporate power and authority to
originate each Mortgage Loan, and to execute, deliver and perform, and
to enter into and consummate the transactions contemplated by this
Agreement and the execution, delivery and performance of this Agreement
by Originator has been duly authorized by all necessary corporate
action on the part of Originator; and this Agreement, assuming the due
authorization, execution and delivery thereof by the Purchaser,
constitutes a legal, valid and binding obligation of Originator,
enforceable against Originator in accordance with its respective terms,
except to the extent that (a) the enforceability thereof may be limited
by federal or state bankruptcy, insolvency, moratorium, receivership
and other similar laws relating to creditors' rights generally and (b)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought;
(iii) the execution and delivery of this Agreement by
Originator, the consummation by Originator of the transactions herein
contemplated, and the fulfillment by Originator of or compliance by
Originator with the terms hereof
9
<PAGE> 14
will not (A) result in a breach of any term or provision of the
charter or by-laws of Originator or (B) conflict with, result in a
breach, violation or acceleration of, or result in a default under, the
terms of any other material agreement or instrument to which Originator
is a party or by which it may be bound, or any statute, order or
regulation applicable to Originator of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
Originator, which breach, violation, default or non-compliance would
have a material adverse effect on (a) the business, operations,
financial condition, properties or assets of Originator taken as a
whole or (b) the ability of Originator to perform its obligations under
this Agreement; and Originator is not a party to, bound by, or in
breach or violation of any material indenture or other material
agreement or instrument, or subject to or in violation of any statute,
order or regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which
materially and adversely affects or, to Originator's knowledge, would
in the future reasonably be expected to materially and adversely
affect, (x) the ability of Originator to perform its obligations under
this Agreement or (y) the business, operations, financial condition,
properties or assets of Originator taken as a whole;
(iv) Originator is, and currently intends to remain, in good
standing and qualified to do business in each jurisdiction where
failure to be so qualified or licensed would have a material adverse
effect on (a) the business, operations, financial condition, properties
or assets of Originator taken as a whole or (b) the enforceability of
any Mortgage Loan in accordance with the terms of this Agreement;
(v) there is no litigation pending or, to Originator's actual
knowledge, overtly threatened against Originator that would materially
and adversely affect the execution, delivery or enforceability of this
Agreement or for Originator to perform any of its other obligations
hereunder in accordance with the terms hereof;
(vi) no consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by Originator of, or compliance by Originator with,
this Agreement or the consummation of the transactions contemplated
hereby (except for such consents, approvals, authorizations, or orders
to be obtained in connection with each Purchase Date with respect to
future transactions to be consummated hereunder), or if any such
consent, approval, authorization or order not relating to a future
transaction is required, Originator has obtained the same; and
(vii) Originator has caused to be performed any and all acts
required to preserve the rights and remedies of the Purchaser in any
insurance policies of Originator or a mortgagee applicable to the
Mortgage Loans sold by Originator.
Section 4.02. Representations and Warranties Regarding
Mortgage Loans. With respect to the Mortgage Loans, Originator represents and
warrants to
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Purchaser as of the Closing Date with respect to each Initial Mortgage Loan
conveyed by Originator and as of the related Subsequent Transfer Date with
respect to each Subsequent Mortgage Loan conveyed by Originator as follows:
(i) All of the original or certified documentation set forth
in Section 2.1 of the Sale and Servicing Agreement (including all
material documents related thereto) with respect to each Initial
Mortgage Loan has been or will be delivered to Purchaser on the Closing
Day or, with respect to any Subsequent Mortgage Loans, on the related
Subsequent Transfer Date. All such documentation is true and accurate
in all material respects. 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;
(ii) As of the Closing Day with respect to the Initial
Mortgage Loans, the related Subsequent Transfer Date with respect to
any Subsequent Mortgage Loan (unless otherwise specified) and the
applicable Transfer Date with respect to any Qualified Replacement
Mortgage and as of the date any Additional Balance is created, the
information set forth in the Mortgage Loan Schedule for such Mortgage
Loans is true and correct in all material respects;
(iii) As of the Closing Day and any Subsequent Transfer Date,
no more than 1.00% of the related Cut-Off Date Pool Balance of the
Mortgage Loans is secured by Mortgaged Properties located within any
single zip code area. None of the Mortgage Loans consists of
Date-of-Payment Loans;
(iv) The Mortgages and Credit Line Agreements have not been
assigned or pledged, and Originator is the sole owner and holder of the
Mortgages and Credit Line Agreements free and clear of any and all
liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full
right and authority, under all governmental and regulatory bodies
having jurisdiction over the Class A Noteholder of the applicable
Mortgage Loan, to sell, assign or transfer the same;
(v) As of the Closing Day with respect to the Initial Mortgage
Loans, the Subsequent Transfer Date with respect to the Subsequent
Mortgage Loans and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage, there is no valid offset, defense or
counterclaim of any obligor under any Credit Line Agreement or
Mortgage. Neither the operation of any of the terms of each Credit Line
Agreement and each Mortgage nor the exercise of any right thereunder
will render either the Credit Line Agreement or the Mortgage
unenforceable, in whole or in part, nor subject to any right of
rescission, set-off, claim, counterclaim or defense, including, without
limitation,
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the defense of usury and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;
(vi) No Minimum Monthly Payment is more than 59 days
delinquent (measured on a contractual basis); and with respect to the
Initial Mortgage Loans no more than 0.23% (by Initial Cut-Off Date Pool
Balance) were 30-59 days delinquent (measured on a contractual basis).
No Subsequent Mortgage Loan will be more than 30 days delinquent;
(vii) As of the related Cut-Off Date with respect to the
Mortgage Loans and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage, each Credit Line Agreement and each
Mortgage Loan is an enforceable obligation of the related Mortgagor,
except as the enforceability thereof may be limited by the bankruptcy,
insolvency or similar laws affecting creditors' rights generally;
(viii) The weighted average remaining term to maturity of the
Initial Mortgage Loans on a contractual basis as of the Initial Cut-Off
Date for the Mortgage Loans is approximately 273 months. On each date
that the Loan Rates have been adjusted, interest rate adjustments on
the Mortgage Loans were made in compliance with the related Mortgage
and Credit Line Agreement and applicable law. Over the term of each
Initial Mortgage Loan, the Loan Rate may not exceed the related Loan
Rate Cap, if any. The Loan Rate Caps for the Initial Mortgage Loans
range between 16.25% and 24.25%. The Initial Mortgage Loans' margins
range between 0.00% and 7.75% and the weighted average margin is
approximately 3.59% as of the related Cut-Off Date for the Initial
Mortgage Loans. The Loan Rates on such Initial Mortgage Loans range
between 8.50% and 16.25% and the weighted average Loan Rate is
approximately 12.09%;
(ix) The Credit Limits on the Initial Mortgage Loans range
between $10,000 and $384,000 with an average of 32,903.27. As of the
Initial Cut-Off Date for the Initial Mortgage Loans, no Initial
Mortgage Loan had a principal balance in excess of approximately
$284,000 and the average principal balance of the Initial Mortgage
Loans is equal to approximately $31,641.56;
(x) Each Mortgage Loan being transferred to the Trust is a
Mortgage;
(xi) Each Subsequent Mortgage Loan complies with the
requirements in Section 2.4 of the Sale and Servicing Agreement,
including without limitation the conditions described in subsections
(c) and (d) of such Section 2.4;
(xii) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include
condominiums and townhouses but shall not include cooperatives or
mobile homes attached to a foundation, or otherwise, or constitutes
other than real property under applicable state law;
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(xiii) No Mortgage Loan had a Combined Loan-to-Value Ratio in
excess of 125%;
(xiv) As of the Closing Day with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to any
Subsequent Mortgage Loans, each Mortgage is either a valid and
subsisting first or second lien of record on the Mortgaged Property
(subject in the case of any Second Mortgage Loan only to a Senior Lien
on such Mortgaged Property) and subject in all cases to the exceptions
to title set forth in the title insurance policy, with respect to the
related Mortgage Loan, which exceptions are generally acceptable to
banking institutions in connection with their regular mortgage lending
activities, and except for liens for (i) real estate taxes and special
assessments not yet delinquent, (ii) income taxes, (iii) any covenants,
conditions and restrictions, rights of way, easements, and other
matters of public record and such other exceptions to which similar
properties are commonly subject and which do not individually, or in
the aggregate, materially and adversely affect the benefits of the
security intended to be provided by such Mortgage;
(xv) Immediately prior to the transfer and assignment herein
contemplated, Originator held good and indefeasible title to, and was
the sole owner of, each Mortgage Loan conveyed by Originator
(including its Cut-Off Date Pool Balance), all monies due or to become
due with respect thereto, and all proceeds of such Cut-Off Date Pool
Balances with respect thereto, free of any 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, Purchaser will hold
good and indefeasible title to, and be the sole owner of, each Mortgage
Loan, free of any liens, charges, mortgages, encumbrances or rights of
others except liens which will be released simultaneously with such
transfer and assignment;
(xvi) There is no delinquent tax or assessment lien or
mechanic's lien on any Mortgaged Property, and each Mortgaged Property
is free of substantial damage and is in good repair;
(xvii) 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;
(xviii) With respect to each First Mortgage Loan, and, to the
best of Originator's knowledge, with respect to each Second 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 Mortgaged Property is situated, was issued on the date
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of origination of the Mortgage Loan and as of the Cut-Off Date and
each applicable Transfer Date with respect to the Subsequent
Mortgage Loan, each such policy is valid and remains in full force and
effect, or a title search or guaranty of title customary in the
relevant jurisdiction was obtained with respect to a Mortgage Loan as
to which no title insurance policy or binder was issued.
(xix) As of the Closing Day with respect to any Mortgage Loan
and the applicable Transfer Date with respect to any Subsequent
Mortgage Loan, each Credit Line Agreement is the legal, valid, binding
and enforceable obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights 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;
(xx) The terms of each Credit Line Agreement and each Mortgage
have not been impaired, altered or modified in any respect, except by a
written instrument which has been recorded, if necessary, to protect
the interest of Purchaser. 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;
(xxi) Except as otherwise required by law, pursuant to the
statute under which the related Mortgage Loan was made, the related
Credit Line Agreement is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxii) Each Mortgaged Property is located in the state
identified in the Schedule of Mortgage Loans and consists of one or
more parcels of real property with a residential dwelling erected
thereon;
(xxiii) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, flood, tornado
or other casualty, so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the
premises were intended;
(xxiv) With respect to each Second Mortgage Loan, either (A)
consent for such Mortgage Loan was not required by the holder of the
related Senior Lien prior to the making of such Mortgage Loan or (B)
such consent has been obtained and is contained in the related Mortgage
File;
(xxv) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the
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realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a
deed of trust, by Indenture Trustee's sale and (B) otherwise by
judicial foreclosure. There is no homestead or other exemption
available which materially interferes with the right to sell the
related Mortgaged Property at a Indenture Trustee's sale or the right
to foreclose the related Mortgage;
(xxvi) As of the Closing Day with respect to any Mortgage Loan
and the applicable Transfer Date with respect to any Subsequent
Mortgage Loan, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Credit Line
Agreement and no event which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration; and the Sponsor
has not waived any default, breach, violation or event of acceleration;
(xxvii) To the best knowledge of Originator, all parties to
the Credit Line Agreement and the Mortgage had legal capacity to
execute the Credit Line Agreement and the Mortgage and each Credit Line
Agreement and Mortgage have been duly and properly executed by such
parties;
(xxviii) No selection procedures reasonably believed by
Originator to be adverse to the interests of the Purchaser was utilized
in selecting the Mortgage Loans;
(xxix) No Mortgagor has been released, in whole or in part,
except in connection with an assumption agreement which has been
approved by the applicable title insurer (to the extent required by
such title insurer) and which is part of the Mortgage File delivered to
the Purchaser;
(xxx) With respect to each Mortgage Loan that is not a first
mortgage loan, the related prior lien requires equal monthly payments.
At the time of origination of each Mortgage Loan that is not a first
mortgage loan, the related prior lien was not more than 30 days
delinquent;
(xxxi) All required inspections, licenses and certificates
with respect to the use and occupancy of all occupied portions of all
property securing the Mortgages have been made, obtained or issued, as
applicable;
(xxxii) No more than 78% of the Mortgage Loans are second
mortgage loans;
(xxxiii) With respect to each Mortgage Loan that is not a
first mortgage loan, the related prior lien does not provide for
negative amortization;
(xxxiv) With respect to each Mortgage Loan that is not a first
mortgage loan, the maturity date of the Mortgage Loan is prior to the
maturity date of the related prior lien if such prior lien provides for
a balloon payment; and
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(xxxv) Each Mortgage Loan is secured by a property having an
appraised value of less than $1,500,000.
Section 4.03. Representations and Warranties of Purchaser.
Purchaser hereby makes the following representations and warranties, each of
which representations and warranties (i) is material and being relied upon by
Originator and (ii) is true in all respects as of the date of this Agreement:
(i) Purchaser has been duly organized and is validly existing
as a corporation under the laws of the State of Delaware.
(ii) Purchaser has the requisite power and authority and legal
right to execute and deliver, engage in the transactions contemplated
by, and perform and observe the terms and conditions of, this Agreement
to be performed by it.
(iii) This Agreement has been duly authorized and executed by
Purchaser, is valid, binding and enforceable against Purchaser in
accordance with its terms, and the execution, delivery and performance
by Purchaser of this Agreement does not conflict with any material term
or provision of any other agreement to which Purchaser is a party or
any term or provision of the Certificate of Incorporation or the
By-laws of the Purchaser, or any law, rule, equation, order, judgment,
writ, injunction or decree applicable to Purchaser of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over Purchaser.
(iv) No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or
court is required under applicable law in connection with the execution
and delivery by Purchaser of this Agreement.
(v) To the best knowledge of Purchaser, there is no action,
proceeding or investigation pending or threatened against Purchaser
before any court, administrative agency or other tribunal (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement,
or (iii) which is likely to materially and adversely affect the
performance by Purchaser of its obligations under, or the validity or
enforceability of, this Agreement.
(vi) Each purchase of Initial Mortgage Loans and Subsequent
Mortgage Loans hereunder shall constitute a representation by Purchaser
to Originator that Purchaser understands, and that Purchaser has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of, its investment in the
relevant Mortgage Loans.
Section 4.04. Remedies for Breach of Representations and
Warranties; Repurchase Obligation. It is understood and agreed that the
representations and warranties set forth in Section 4.01 and 4.02 shall survive
each sale of Mortgage Loans to Purchaser and shall inure to the benefit of
Purchaser and subsequent transferees
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notwithstanding any restrictive or qualified endorsement on any Mortgage Note or
Assignment of Mortgage or the examination or failure to examine any Mortgage
Loan File. With respect to the representations and warranties contained in
Sections 4.01 and 4.02 which are made to the best of Originator's knowledge or
to the actual knowledge of Originator, if it is discovered by either Originator
or Purchaser that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related Mortgage Loan or Purchaser's interest therein, then notwithstanding
Originator's lack of knowledge with respect to the inaccuracy at the time the
representation or warranty was made, Originator shall repurchase the related
Mortgage Loan in accordance with this Section 4.04 as if the applicable
representation or warranty was breached, subject to the terms and conditions of
the Sale and Servicing Agreement. Upon discovery by either Originator or
Purchaser of a breach of any of the foregoing representations and warranties
which materially and adversely affects the value of the Mortgage Loans or the
interest of Purchaser (or which materially and adversely affects the interests
of Purchaser in the related Mortgage Loan in the case of a representation and
warranty relating to a particular Mortgage Loan), the party discovering such
breach shall give prompt written notice to the others.
Within 60 days of the earlier of either discovery by or notice
to Originator of any breach of a representation or warranty which materially and
adversely affects the value of any Mortgage Loan or Purchaser's interest
therein, Originator shall use its best efforts promptly to cure such breach in
all material respects and, if such breach cannot be cured or is not cured or is
not being diligently pursued as evidenced by a notice acceptable to Purchaser,
as evidenced by Purchaser's agreement thereto, at the end of such 60-day period,
Originator shall, at Purchaser's option, either (a) repurchase such Mortgage
Loan at the Repurchase Price, or (b) provide a Qualified Replacement Mortgage,
if Originator has any such loans available for sale at the time subject to the
terms and conditions of the Sale and Servicing Agreement.
At the time of repurchase or substitution, Purchaser and
Originator shall arrange for the assignment of such Mortgage Loan to Originator
and the delivery by Purchaser to Originator of the related Mortgage Loan Files.
In addition to such cure and repurchase obligation, Originator
shall indemnify Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
the representations and warranties contained in this Article IV (notwithstanding
any limitation in such representation and warranty as to Originator's
knowledge). It is understood and agreed that the obligations of Originator set
forth in this Section 4.04 to cure or repurchase a defective Mortgage Loan and
to indemnify Purchaser as provided in this Section 4.04 constitute the sole
remedies of Purchaser respecting a breach of the foregoing representations and
warranties.
Any cause of action against Originator relating to or arising
out of the breach of any representations and warranties made in Sections 4.01 or
4.02 shall accrue
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as to any Mortgage Loan upon (i) discovery of such breach by
Purchaser or notice thereof by Originator to Purchaser, (ii) failure by
Originator to cure such breach or repurchase such Mortgage Loan as specified
above, and (iii) demand upon Originator by Purchaser for compliance with the
relevant provisions of this Agreement.
ARTICLE V
Covenants and Warranties of Originator
So long as this Agreement remains in effect or Originator
shall have any obligations hereunder, Originator hereby covenants and agrees
with Purchaser as follows:
Section 5.01. Affirmative Covenants.
(a) Originator shall do all things necessary to remain duly
incorporated, validly existing and in good standing in its jurisdiction of
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted except where failure to
maintain such authority would not have a material adverse effect on the ability
of Originator to conduct its business or to perform its obligations under this
Agreement.
(b) At all times during this Agreement, Originator shall
possess sufficient net capital and liquid assets (or ability to access the same)
to satisfy its obligations as they become due in the normal course of business.
(c) Originator shall permit Purchaser or its accountants,
attorneys or other agents access to all of the books and records relating to
Mortgage Loans purchased and retained by Purchaser for inspection and copying
during normal business hours at all places where Originator conducts business.
Section 5.02. Negative Covenants.
(a) Originator shall not assign or attempt to assign this
Agreement or any rights hereunder, without first obtaining the specific written
consent of Purchaser.
(b) Originator shall not amend its Articles of Incorporation
or By-laws, which amendment shall have or is likely to have an adverse effect
upon Purchaser or its interests under this Agreement, without the prior written
consent of Purchaser.
(c) Originator shall not (i) dissolve or terminate its
existence or (ii) transfer any assets to any affiliate except as otherwise
expressly permitted or contemplated hereby.
(d) Except with the written consent of Purchaser, Originator
shall not guarantee, endorse or otherwise in any way become or be responsible
for any obligations of any other person, entity or affiliate, including, without
limitation, whether directly or indirectly by agreement to purchase the
indebtedness of any other person or through the
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purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purposes of paying or discharging
any indebtedness or obligation of such other person or otherwise; provided,
however, that nothing contained herein shall prevent Originator from
indemnifying its officers, directors and agents pursuant to its By-laws and its
Articles of Incorporation.
(e) Originator will not commit any act in violation of
applicable laws, or regulations promulgated pursuant thereto that relate to the
Mortgage Loans or that materially and adversely affect the operations or
financial conditions of Originator.
ARTICLE VI
Sale of Mortgage Loans from the Purchaser to the Trust
Section 6.01. Sale and Servicing Agreement. It is the intent
of Originator and Purchaser that with respect to the Mortgage Loans, Purchaser
shall concurrently sell all of its right, title and interest to the Mortgage
Loans and all other property conveyed to it hereunder to the Trust pursuant to
the Sale and Servicing Agreement.
With respect to such sale, Originator agrees:
(i) to cooperate fully with Purchaser and the Trust with
respect to all reasonable requests and due diligence procedures
including participating in meetings with rating agencies, insurers and
such other parties as Purchaser shall designate and participating in
meetings with the Trust and providing information reasonably requested
by the Trust;
(ii) to execute all other necessary documents to effect the
transactions contemplated therein;
(iii) Originator shall make the representations and warranties
set forth herein regarding Originator and the Mortgage Loans as of the
date of the transfer to the Trust;
(iv) to deliver to Purchaser for inclusion in any prospectus
or other offering material such publicly available information
regarding Originator, its financial condition and the mortgage loan
delinquency, foreclosure and loss experience of its portfolio as is
customarily set forth in a prospectus supplement with respect to a
comparable mortgage pool, the underwriting of mortgage loans, the
servicer, the servicing and collection of mortgage loans, lending
activities and loan sales of the servicer, regulatory matters and
delinquency and loss experience and any additional information
reasonably requested by Purchaser, or as is otherwise reasonably
requested by Purchaser and which Originator is capable of providing
without unreasonable effort or expense, and to indemnify Purchaser and
its affiliates for material misstatements or omissions contained in
such information;
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(v) to deliver to Purchaser, and to any Person designated by
Purchaser, such legal documents and in-house opinions of counsel as are
customarily delivered by originators and reasonably determined by
Purchaser to be necessary in connection with the transactions
contemplated by the Sale and Servicing Agreement, it being understood
that the cost of any opinions of outside special counsel that may be
required shall be the responsibility of Originator; and
(vi) to cooperate fully with Purchaser and any prospective
Purchaser with respect to the preparation of Mortgage Loan documents
and other documents and with respect to servicing requirements
reasonably requested by the rating agencies and insurers.
ARTICLE VII
Termination; Additional Remedies
Section 7.01. Termination of Commitment to Purchase. The
agreement of Purchaser to purchase Mortgage Loans from Originator hereunder, and
the agreement of Originator to sell Mortgage Loans hereunder, shall terminate
automatically on the first day of the Rapid Amortization Period. All other
provisions hereof shall continue in force and effect until the Termination Date.
Section 7.02. Additional Remedies. Upon the occurrence of a
Rapid Amortization Event under the Indenture due to an act or omission of
Originator (an "Event of Termination"), Purchaser and its assignees shall have,
in addition to all other rights and remedies under this Agreement or otherwise,
all other rights and remedies provided under the UCC of each applicable
jurisdiction and other applicable laws, which rights shall be cumulative.
Without limiting the foregoing, the occurrence of an Event of Termination shall
not deny to Purchaser or its assignees any remedy in addition to termination of
its obligations to make purchases hereunder to which Purchaser or its assignee
may be otherwise appropriately entitled, whether by statute or applicable law,
at law or in equity.
ARTICLE VIII
Term
This Agreement shall terminate on the Termination Date.
ARTICLE IX
Exclusive Benefit of Parties; Assignment
This Agreement is for the exclusive benefit of the parties
hereto and their respective successors and assigns and shall not be deemed to
give any legal or equitable right to any other person except the Sponsor, the
Trust, the holders of the Class A Notes
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and the Insurer. This Agreement may not be assigned by any party hereto without
the prior written consent of the other party hereto except to the Trust.
ARTICLE X
Amendment; Waivers
This Agreement may be amended from time to time only by
written agreement of Originator and Purchaser with the prior written consent of
the Insurer, which consent shall not be unreasonably withheld. Any forbearance,
failure, or delay by a party in exercising any right, power, or remedy hereunder
shall not be deemed to be a waiver thereof, and any single or partial exercise
by a party of any right, power or remedy hereunder shall not preclude the
further exercise thereof. Every right, power and remedy of a party shall
continue in full force and effect until specifically waived by it in writing. No
right, power or remedy shall be exclusive, and each such right, power or remedy
shall be cumulative and in addition to any other right, power or remedy, whether
conferred hereby or hereafter available at law or in equity or by statute or
otherwise.
ARTICLE XI
Execution in Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which shall constitute one
and the same instrument.
ARTICLE XII
Effect of Invalidity of Provisions
In case any one or more of the provisions contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall in no way be affected, prejudiced or disturbed thereby.
ARTICLE XIII
Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its rules
regarding conflict of laws.
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ARTICLE XIV
Notices
Any notices, consents, directions, demands and other
communications given under this Agreement (unless otherwise specified herein)
shall be in writing and shall be deemed to have been duly given when personally
delivered at or telecopied to the respective addresses or facsimile numbers, as
the case may be, set forth on the signature page hereof for Originator and
Purchaser, or to such other address or facsimile number as either party shall
give notice to the other party pursuant to this Section. Notices, consents,
etc., may also be effected by first class mail, postage prepaid sent to the
foregoing addresses and will be effective upon receipt by the intended
recipient.
ARTICLE XV
Entire Agreement
This Agreement, including the Exhibits and Schedules hereto,
contains the entire agreement of the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements between
them, whether oral or written, of any nature whatsoever with respect to the
subject matter hereof.
ARTICLE XVI
Indemnities
Without limiting any other rights which Purchaser or
Originator may have hereunder or under applicable law, and in addition to any
other indemnity provided hereunder, Originator hereby agrees to indemnify
Purchaser and its respective officers, directors, agents and employees (each, an
"Indemnified Party") from and against any and all Losses incurred by any of them
relating to or resulting from:
(1) any representation or warranty made by Originator (or any
officers, employees or agents of Originator) under or in connection
with this Agreement, any periodic report required to be furnished
thereunder or any other information or document delivered by Originator
pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made;
(2) the failure by Originator to (a) comply with any
applicable law, rule or regulation with respect to any Purchase or (b)
perform or observe any material obligation or covenant hereunder; or
(3) the failure by Originator (if so requested by Purchaser)
to execute and properly file, or any delay in executing and properly
filing, financing statements or other similar instruments or documents
under the Uniform Commercial Code of any applicable jurisdiction or
other applicable laws with respect to the Mortgage Loans.
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Promptly after receipt by an Indemnified Party under this
Article XVI of notice of the commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Article XVI, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability that it may have to any Indemnified Party
otherwise than under this Article XVI. In case any such action is brought
against any Indemnified Party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may elect by written notice delivered to the
Indemnified Party promptly after receiving the aforesaid notice from such
Indemnified Party, to assume the defense thereof, with counsel satisfactory to
such Indemnified Party; provided, however, that if the defendants in any such
action include both the Indemnified Party and the indemnifying party and the
Indemnified Party or parties shall have reasonably concluded that there may be
legal defenses available to it or them and/or other Indemnified Parties that are
different from or additional to those available to the indemnifying party, the
Indemnified Party or parties shall have the right to elect separate counsel to
assert such legal defenses and to otherwise participate in the defense of such
action on behalf of such Indemnified Party or parties. Upon receipt of notice
from the indemnifying party to such Indemnified Party of its election so to
assume the defense of such action and approval by the Indemnified Party of
counsel, the indemnifying party will not be liable for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof, unless (i) the Indemnified Party shall have employed separate
counsel in connection with the assertion of legal defenses in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by Originator in the case of Article XVI,
representing the Indemnified Parties under this Article XVI, who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the Indemnified Party to represent the Indemnified Party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the Indemnified
Party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall only be in respect of the counsel
referred to in such clause (i) or (iii).
ARTICLE XVII
RESPA Obligations
Originator agrees to discharge on Purchaser's behalf all
obligations, including, without limitation, all disclosure obligations, which
Purchaser may have under the Real Estate Settlement Procedures Act of 1974, as
amended, in connection with Purchaser's purchases of Mortgage Loans hereunder.
Purchaser agrees to provide Originator with such information as is reasonably
necessary for Originator to discharge such obligations and hereby appoints
Originator as its agent in its name for the purposes of, and only for the
purposes of, performing such obligations. Originator hereby agrees to indemnify
Purchaser and its respective officers, directors, agents and employees from
23
<PAGE> 28
any losses suffered by any such party in connection with Originator's
obligations under this Article XVII.
ARTICLE XVIII
Survival
All indemnities and undertakings of Originator and Purchaser
hereunder shall survive the termination of this Agreement.
ARTICLE XIX
Consent to Service
Each party irrevocably consents to the service of process by
registered or certified mail, postage prepaid, to it at its address given
pursuant to Article XIV hereof.
ARTICLE XX
Submission to Jurisdiction; Waiver of Trial by Jury
With respect to any claim arising out of this Agreement each
party irrevocably submits to the exclusive jurisdiction of the courts of the
State of New York and the United States District Court located in the Borough of
Manhattan, City of New York, and each party irrevocably waives any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum and further
irrevocably waives the right to object, with respect to such claim, suit, action
or proceeding brought in any such court, that such court does not have
jurisdiction over such party; provided that service of process is made as set
forth in Article XIX hereof, or by any other lawful means. To the extent
permitted by applicable law, Purchaser and Originator each irrevocably waive all
right of trial by jury in any action, proceeding or counterclaim arising out of
or in connection with this Agreement or any matter arising hereunder.
ARTICLE XXI
Construction
The headings in this Agreement are for convenience only and
are not intended to influence its construction. References to Articles,
Sections, Schedules and Exhibits in this Agreement are to the Articles, Sections
of and Schedules and Exhibits to this Agreement. The Schedules and Exhibits are
hereby incorporated into and form a part of this Agreement. In this Agreement,
the singular includes the plural, the plural the singular, the words "and" and
"or" are used in the conjunctive or disjunctive as the sense
24
<PAGE> 29
and circumstances may require and the word "including" means "including, but not
limited to." Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding."
ARTICLE XXII
Further Agreements
Originator and Purchaser each agree to execute and deliver to
the other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.
[Signature Page Follows]
25
<PAGE> 30
IN WITNESS WHEREOF, Purchaser and Originator have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the date first written above.
ADVANTA MORTGAGE CONDUIT
SERVICES INC.,
as Purchaser
By: /s/ JAMES L. SHREERO
-------------------------------
Name: James L. Shreero
Title: Senior Vice President
ADVANTA NATIONAL BANK,
as Originator
By: /s/ JAMES L. SHREERO
-------------------------------
Name: James L. Shreero
Title: Senior Vice President
[Signature Page to Purchase Agreement]
<PAGE> 31
Purchase Agreement
EXHIBIT A
[Form of Purchase Request]
Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, California 92127
Fort Washington, PA 19034
Pursuant to Section 2.04 of the Purchase Agreement dated as of
June 1, 1998 between Advanta National Bank (the "Originator") and you, we hereby
offer to sell, transfer and assign to you all of Originator's right, title and
interest in and to the Subsequent Mortgage Loans identified in the attached
schedule on the following date (the "Purchase Date"): ,
including any Additional Balances thereto.
Please acknowledge your acceptance of such offer by executing
this Purchase Request in the space provided below and returning it to Advanta
Mortgage Conduit Services, Inc. at _______________________________________
by facsimile with an original acceptance to follow by first class mail.
The failure of Advanta Mortgage Conduit Services, Inc. to
return this Purchase Request, after execution by Advanta Mortgage Conduit
Services, Inc., to the Originator in the manner provided above within three
Business Days prior to the Purchase Date (five business days, if this Purchase
Request was received by you at least two calendar weeks prior to the
above-referenced Purchase Date) shall constitute an acceptance of the offer
communicated hereby.
Very truly yours,
[Originator]
By:
-------------------------------
Name:
Title:
Agreed to and acknowledged
this day of , .
---- ---------- ----
Advanta Mortgage Conduit Services, Inc.
By:
------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.2
<PAGE> 2
AMBAC ASSURANCE CORPORATION,
and
J.P. MORGAN SECURITIES INC.
INDEMNIFICATION AGREEMENT
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1998-A
Dated as of June 24, 1998
<PAGE> 3
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall not
be deemed to be part of this Indemnity Agreement. All capitalized terms used in
this Indemnity Agreement and not otherwise defined shall have the meanings set
forth in Article I of this Indemnity Agreement.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Defined Terms.............................................. 1
Section 2. Other Definitional Provisions.............................. 1
Section 3. Representations and Warranties of the Underwriter.......... 2
Section 4. Representations and Warranties of the Insurer.............. 2
Section 5. Indemnification............................................ 3
Section 6. Amendments, Etc............................................ 5
Section 7. Notices.................................................... 5
Section 8. Severability............................................... 6
Section 9. Governing Law.............................................. 6
Section 10. Counterparts.............................................. 6
Section 11. Headings.................................................. 6
</TABLE>
(i)
<PAGE> 4
INDEMNIFICATION AGREEMENT dated as of June 24, 1998 (the "Indemnity
Agreement"), by and among AMBAC ASSURANCE CORPORATION, as Insurer, and J.P.
MORGAN SECURITIES INC. (the "Underwriter").
Section 1. Defined Terms. Unless the context clearly requires otherwise,
all capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Sale and Servicing Agreement, the Insurance
Agreement or the Policy. For purposes of this Indemnity Agreement, the following
terms shall have the following meanings:
"Insurance Agreement" means the Insurance and Indemnity Agreement (as may
be amended, modified or supplemented from time to time) dated as of June 24,
1998 by and among the Advanta Mortgage Conduit Services, Inc., as Sponsor,
Advanta Mortgage Corp. USA, as Master Servicer, the Insurer and the Trust, as
Issuer.
"Insurer" means Ambac Assurance Corporation, or any successor thereto, as
issuer of the Policy.
"Insurer Information" has the meaning given such term in Section 4.
"Offering Document" means the Prospectus Supplement, dated June 19, 1998,
in respect of the Certificates, and any amendment or supplement thereto, and any
other offering document in respect of the Certificates that makes reference to
the Policy.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of June 1, 1998, relating to the Advanta Home Equity Loan Asset-Backed
Notes, Series 1998-A, by and among the Sponsor, the Master Servicer and the
Trustee (as may be amended, modified or supplemented from time to time as set
forth therein).
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Underwriter" means J.P. Morgan Securities Inc.
"Underwriter's Information" has the meaning given such term in Section 3.
Section 2. Other Definitional Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Indemnity Agreement
shall refer to this Indemnity Agreement as a whole and not to any particular
provision of this Indemnity Agreement, and Section, subsection, Schedule and
Exhibit references are to this Indemnity Agreement unless otherwise specified.
The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms. The words "include" and "including"
shall be deemed to be followed by the phrase "without limitation."
<PAGE> 5
Section 3. Representations and Warranties of the Underwriter. The
Underwriter represent and warrant as of the Closing Date as follows:
(a) Compliance With Laws. The Underwriter will comply in all
material respects with all legal requirements in connection with offers
and sales of the Notes and will make such offers and sales in the manner
to be provided in the Offering Document.
(b) Offering Document. The Underwriter will not use, or distribute
to other broker-dealers for use, any Offering Document in connection with
the offer and sale of the Notes unless such Offering Document includes
such information relating to the Insurer as has been furnished by the
Insurer for inclusion therein and has been approved by the Insurer.
(c) Underwriter' Information. All material provided by the
Underwriter for inclusion in the Offering Document (as revised from time
to time), shall be true and correct in all material respects, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the following information (collectively, the
"Underwriter's Information"): the information contained under the heading
"Underwriting" in the Offering Document.
Section 4. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Underwriter as follows:
(a) Organization and Licensing. The Insurer is a duly organized and
licensed and validly existing Wisconsin stock insurance company duly
qualified to conduct an insurance business in the State of New York.
(b) Corporate Power. The Insurer has the corporate power and
authority to issue the Policy and execute this Indemnity Agreement and to
perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. Proceedings legally required for the
issuance of the Policy and the execution, delivery and performance of this
Indemnity Agreement have been taken and all material licenses, orders,
consents or other authorizations or approvals of any governmental boards
or bodies legally required for the enforceability of the Policy have been
obtained; any proceedings not taken and any licenses, authorizations or
approvals not obtained are not material to the enforceability of the
Policy.
(d) Enforceability. The Policy, when issued, and this Indemnity
Agreement will each constitute a legal, valid and binding obligation of
the Insurer, enforceable in accordance with its terms, subject to
insolvency, reorganization, moratorium, receivership and other similar
laws affecting creditors' rights generally and by general principles of
equity and subject to principles of public policy limiting the right to
enforce the indemnification provisions contained therein and herein,
insofar as such provisions relate to indemnification for liabilities
arising under federal securities laws.
2
<PAGE> 6
(e) Financial Information. The balance sheet of the Insurer as of
December 31, 1997 and the related statements of income, stockholders'
equity and cash flows for the two fiscal years ended December 31, 1996,
and the accompanying footnotes, together with an opinion thereon dated
January 30, 1997, of KPMG Peat Marwick, independent certified public
accountants, a copy of which is incorporated by reference in the Offering
Document, fairly present in all material respects the financial condition
of the Insurer as of such dates and for the periods covered by such
statements in accordance with generally accepted accounting principles
consistently applied. The balance sheets of the Insurer as of December 31,
1996 and December 31, 1997 fairly present in all material respects the
financial condition of the Insurer as of such date in accordance with
generally accepted accounting principles consistently applied. Since March
31, 1998, there has been no material change in such financial condition of
the Insurer that would materially and adversely affect its ability to
perform its obligations under the Policy.
(f) Insurer Information. The information in the Offering Document as
of the date hereof under the caption "THE INSURER AND THE POLICY" (the
"Insurer Information") is true and correct in all material respects and
does not contain any untrue statement of a material fact.
(g) Rating. The Insurer is not aware of any facts that if disclosed
to Moody's or Standard & Poor's would be reasonably expected to result in
a downgrade of the rating of the claims paying ability of the Insurer by
either of such Rating Agencies.
(h) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would result in a Material Adverse Change or would
materially and adversely affect its ability to perform its obligations
under the Policy or this Insurance Agreement.
(i) 1933 Act Registration. The Policy is exempt from registration
under the Act.
Section 5. Indemnification.
(a) The Underwriter hereby agrees to pay, and to protect, indemnify
and save harmless, the Insurer and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls the Insurer within
the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act from and against, any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or by reason of any untrue
statement of a material fact or an omission to state a material fact
necessary in order to make the statements therein in light of the
circumstances in which they were made not misleading, contained in the
Underwriter's Information or a
3
<PAGE> 7
breach of any of the representations and warranties of the Underwriter
contained in Section 3.
(b) The Insurer agrees to pay, and to protect, indemnify and save
harmless, the Underwriter and its respective officers, directors,
shareholders, employees, agents and each Person, if any, who controls such
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act from and against, any and all
claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs
of investigations) of any nature arising out of or by reason of any untrue
statement of a material fact or an omission to state a material fact
necessary in order to make the statements therein in light of the
circumstances in which they were made not misleading, contained in the
Insurer Information or a breach of any of the representations and
warranties of the Insurer contained in Section 4.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties") in respect of which the indemnity provided in this Section 5(a)
or (b) may be sought from any Underwriter, on the one hand, or the
Insurer, on the other (each, an "Indemnifying Party") hereunder, each such
Indemnified Party shall promptly notify the Indemnifying Party in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel satisfactory to the Indemnified Party and the
payment of all expenses. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof at the expense of the Indemnified Party; provided,
however, that the fees and expenses of such separate counsel shall be at
the expense of the Indemnifying Party if (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) the Indemnifying Party shall
have failed to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to the Indemnified Party in any such
action or proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both the Indemnified
Party and the Indemnifying Party, and the Indemnified Party shall have
been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Indemnifying Party (in which case, if the 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 behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially
similar or related actions or proceedings 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
at any time for the Indemnified Parties, which firm shall be designated in
writing by the Indemnified Party). The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected
without its written consent to the extent that any such settlement shall
be prejudicial to the Indemnifying Party, but, if settled with its written
consent, or if there is a final judgment for the plaintiff in any such
action or proceeding with respect to which the Indemnifying Party shall
have
4
<PAGE> 8
received notice in accordance with this subsection (c), the Indemnifying
Party agrees to indemnify and hold the Indemnified Parties harmless from
and against any loss or liability by reason of such settlement or
judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party (other
than due to application of this Section), each Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand provided, that no Underwriter shall
be liable for any amount in excess of (i) the excess of the sales prices
of the Offered Certificates to the public over the prices paid therefor by
the Underwriter over (ii) the aggregate amount of any damages which the
Underwriter have otherwise been required to pay in respect of the same or
any substantially similar claim.
The relative fault of each Indemnifying Party, on the one
hand, and each indemnified Party, on the other, shall be determined by
reference to, among other things, whether the breach of, or alleged breach
of, any of its representations and warranties set forth within the control
of, the Indemnifying Party or the Indemnified Party, and the parties
relative intent, knowledge, access to information and opportunity to
correct or prevent such breach.
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.
Section 6. Amendments, Etc. This Indemnity Agreement may be amended,
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto.
Section 7. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - MBS
Telecopy No.: 212-363-1459
Confirmation: 212-668-0340
5
<PAGE> 9
(b) To any Underwriter:
J.P. Morgan & Co.
60 Wall Street
New York, New York 10260-0060
Attention: Jim Pomposelli
Telecopy No.: 212-648-5251
Confirmation: 212-648-6158
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 8. Severability. In the event that any provision of this Indemnity
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in
any way the ability of such party to pursue any other remedy available to it.
Section 9. Governing Law. This Indemnity Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
Section 10. Counterparts. The Indemnity Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 11. Headings. The headings of Sections and the Table of Contents
contained in this Indemnity Agreement are provided for convenience only. They
form no part of this Indemnity Agreement and shall not affect its construction
or interpretation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement, all as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION,
as Insurer
By: /s/ Warren Tong
------------------------------------
Name: Warren Tong
Title:
J.P. MORGAN SECURITIES INC.
By: /s/ James R. Pomposelli
------------------------------------
Name: James R. Pomposelli
Title: Vice President
