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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 10, 1998
Advanta Mortgage Loan Trust 1998-3
(Exact name of registrant as specified in its charter)
New York 333-52351-01 Application Pending
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
c/o Advanta Mortgage Conduit 92127
Services, Inc. (Zip Code)
Attention: Structured Finance
16875 West Bernardo Drive
San Diego, California
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (619) 674-1800
No change
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Advanta Mortgage Conduit Services, Inc. registered an issuance
of $1,000,000,000 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. 333-52351) (the "Registration Statement"). Pursuant to the Registration
Statement, Advanta Mortgage Loan Trust 1998-3 (the "Registrant" or the "Trust")
issued approximately $1,000,000,000 in aggregate principal amount of its
Mortgage Loan Asset-Backed Certificates, Series 1998-3 (the "Certificates"), on
September 23, 1998 (the "Closing Date"). This Current Report on Form 8-K is
being filed to satisfy an undertaking to file copies of certain agreements
executed in connection with the issuance of the Certificates, the forms of which
were filed as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") attached hereto as
Exhibit 4.1, dated as of September 1, 1998, among Advanta Mortgage Conduit
Services, Inc. (the "Company"), Advanta Mortgage Corp. USA, in its capacity as
Master Servicer (the "Master Servicer") and Bankers Trust Company of California,
N.A., in its capacity as Trustee (the "Trustee"). The Certificates consist of
four classes, the Class A-1 Group I Floating Rate Certificates (the "Class A-1
Certificates), the Class A-2 Group II Floating Rate Certificates (the "Class A-2
Certificates, and together with the Class A-1 Certificates, the "Class A
Certificates"), and the Class R Certificates (Residual Interest) (the "Class R
Certificates"). The Class A Certificates are the "Offered Certificates". The
Offered Certificates and the Class R Certificates are together referred to
herein as the "Certificates". The Certificates initially evidence, in the
aggregate, 100% of the undivided beneficial ownership interests in the Trust.
The assets of the Trust initially will include two investment
pools (each, a "Mortgage Loan Group" or "Group") of closed-end mortgage loans
(the "Mortgage Loans") secured by mortgages or deeds of trust (the "Mortgages")
on one-to-four family residential properties. The Class A-1 Certificates
represent undivided ownership interests in a pool of adjustable rate Mortgage
Loans secured by Mortgages which may be either in a first or in a junior lien
position as well as the proceeds of certain amounts on deposit with the Trustee.
The Class A-2 Certificates represent undivided ownership interests in a pool of
fixed rate Mortgage Loans secured by Mortgages which may be either in a first or
in a junior lien position.
Interest distributions on the Offered Certificates are based
on the Certificate Principal Balance thereof and the then applicable
Pass-Through Rate thereof.
The Class A-1 Certificates have an aggregate principal amount
of $500,000,000. The Class A-2 Certificates have an aggregate principal amount
of $500,000,000.
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As of the Closing Date, the Mortgage Loans had the
characteristics described in the Prospectus dated September 15, 1998 and the
Prospectus Supplement dated September 10, 1998 filed pursuant to Rule 424(b)(5)
of the Act with the Commission
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Group I Underwriting Agreement, dated September 10, 1998,
among Advanta Mortgage Conduit Services, Inc. and Salomon Smith Barney, Inc., as
Representative of the Underwriters (the "Representative").
1.2 Group II Underwriting Agreement, dated September 17, 1998,
among Advanta Mortgage Conduit Services, Inc. and Salomon Smith Barney, Inc.
4.1 Pooling and Servicing Agreement, dated as of September 1,
1998, among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, and Bankers Trust Company of California,
N.A., as Trustee.
4.2 Master Loan Transfer Agreement, dated June 15, 1997, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta National Bank,
Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic II,
Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey, Advanta
Mortgage Corp. Northeast, Advanta Finance Corp. and Advanta Mortgage Corp. USA
(collectively, the "Affiliated Originators"), Advanta Conduit Receivables Inc.
and Bankers Trust Company of California, N.A., as Trustee.
4.3 Conveyance Agreement, dated September 23, 1998, among
Advanta Mortgage Conduit Services, Inc., the Affiliated Originators, Advanta
Conduit Receivables, Inc. and Bankers Trust Company of California, N.A..
4.4 Certificate Guaranty Insurance Policy delivered by MBIA
Insurance Corporation.
4.5 Advanta Mortgage Holding Company Guaranty.
10.1 Indemnification Agreement, dated September 10, 1998,
among MBIA Insurance Corporation, Advanta Mortgage Conduit Services, Inc. and
the Representative.
23.1 Consent of Coopers & Lybrand, L.L.P. regarding financial
statements of MBIA Insurance Corporation and their report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANTA MORTGAGE LOAN
TRUST 1998-3
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By:/s/ Mark T. Dunsheath
------------------------
Name: Mark T. Dunsheath
Title: Vice President
Dated: October 9, 1998
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EXHIBIT INDEX
Exhibit No. Description
1.1 Group I Underwriting Agreement, dated September 10, 1998,
among Advanta Mortgage Conduit Services, Inc. and Salomon
Smith Barney, Inc., as Representative of the Underwriters (the
"Representative").
1.2 Group II Underwriting Agreement, dated September 17, 1998,
among Advanta Mortgage Conduit Services, Inc. and Salomon
Smith Barney, Inc.
4.1 Pooling and Servicing Agreement, dated as of September 1,
1998, among Advanta Mortgage Conduit Services, Inc., as
Sponsor, Advanta Mortgage Corp. USA, as Master Servicer, and
Bankers Trust Company of California, N.A., as Trustee.
4.2 Master Loan Transfer Agreement, dated June 15, 1997, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
National Bank, Advanta Mortgage Corp. Midatlantic, Advanta
Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest,
Advanta Mortgage Corp. of New Jersey, Advanta Mortgage Corp.
Northeast, Advanta Finance Corp. and Advanta Mortgage Corp.
USA (collectively, the "Affiliated Originators"), Advanta
Conduit Receivables Inc. and Bankers Trust Company of
California, N.A., as Trustee.
4.3 Conveyance Agreement, dated September 23, 1998, among Advanta
Mortgage Conduit Services, Inc., the Affiliated Originators,
Advanta Conduit Receivables, Inc. and Bankers Trust Company of
California, N.A..
4.4 Certificate Guaranty Insurance Policy delivered by MBIA
Insurance Corporation.
4.5 Advanta Mortgage Holding Company Guaranty.
10.1 Indemnification Agreement, dated September 10, 1998, among
MBIA Insurance Corporation, Advanta Mortgage Conduit Services
Inc. and the Representative.
23.1 Consent of PricewaterhouseCoopers LLP regarding financial
statements of MBIA Insurance Corporation and their report.
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EXHIBIT 1.1
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Mortgage Loan Asset-Backed Certificates,
Series 1998-3
UNDERWRITING AGREEMENT
September 10, 1998
SALOMON SMITH BARNEY INC.
As Representative of the Underwriters
named in Schedule I
7 World Trade Center
New York, NY 10048
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. (the "Company") has
authorized the issuance and sale of Mortgage Loan Asset-Backed Certificates,
Series 1998-3, (the "Certificates") consisting of (i) the Class A-1 Group I
Floating Rate Certificates (the "Class A-1 Certificates"), (ii) the Class A-2
Group II Floating Rate Certificates (the "Class A-2 Certificates" together with
the Class A-1 Certificates, the "Offered Certificates") and (iii) the residual
class with respect to each REMIC held by the Trust (the "Class R Certificates").
Only the Class A-1 Certificates are offered by the Underwriters.
The Offered Certificates will be issued by the Advanta
Mortgage Loan Trust 1998-3 (the "Trust"), and will evidence in the aggregate the
beneficial interest in a sub-trust of a trust estate (the "Trust Estate")
consisting primarily of a pool (the "Group I Mortgage Pool") of closed-end
mortgage loans having variable rates of interest (the "Group I Mortgage Loans"),
amounts on deposit with Bankers Trust Company of California, N.A., as trustee of
the Trust (the "Trustee") in an account to be used to acquire additional
mortgage loans following the Closing Date (as hereinafter defined) for the Trust
(the "Pre-Funding Account") and certain related property. The Mortgage Loans
shall have, as of September 23, 1998 (the "Closing Date"), an aggregate
principal balance of approximately $400,000,000 and the Pre-Funding Account
shall have approximately $108,562,000. The Offered Certificates are to be issued
under a pooling and servicing agreement, to be dated as of September 1, 1998
(the "Pooling and Servicing Agreement"), among the Company, as sponsor, Advanta
Mortgage Corp. USA, as master servicer, and the Trustee.
On or prior to the date of issuance of the Certificates, the
Company will obtain a guaranty insurance policy (the "Policy") issued by MBIA
Insurance Corporation (the "Insurer") which will unconditionally and irrevocably
guarantee to the Trustee for the benefit of the holders of Class A-1
Certificates the amount by which the Group I
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Insured Distribution Amount (as defined in the Pooling and Servicing Agreement)
for the Class A-1 Certificates exceeds the Group I Total Available Funds (as
defined in the Pooling and Servicing Agreement) amount for each such group.
The Offered Certificates are more fully described in a
Registration Statement which the Company has furnished to the Underwriters.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
Simultaneously with the execution of the Pooling and Servicing
Agreement, the Company will enter into a conveyance agreement pursuant to the
Master Loan Transfer Agreement dated as of September 23, 1998 among the Trustee,
Advanta Mortgage Conduit Services, Inc. and the Affiliated Originators named
thereon (together, the "Purchase Agreement"), pursuant to which the Affiliated
Originators will transfer to the Company all of their right, title and interest
in and to the Mortgage Loans as of the Closing Date.
The Company will also enter into an Indemnification Agreement
(the "Indemnification Agreement") dated as of September 10, 1998 among the
Underwriters, the Company and the Insurer, governing the liability of the
several parties with respect to the losses resulting from material misstatements
or omissions contained in the Prospectus Supplement.
Section I. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with the Underwriters that:
A. Registration Statements on Form S-3, as amended by
Post-Effective Amendments thereto, have (i) been prepared by
the Company in conformity with the requirements of the
Securities Act of 1933 (the "Securities Act") and the rules
and regulations (the "Rules and Regulations") of the United
States Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities
Act. Copies of such Registration Statements have been
delivered by the Company to the Underwriters. As used in this
Agreement, "Effective Time" means the date and the time as of
which such Registration Statements, or the most recent
post-effective amendment thereto, if any, was declared
effective by the Commission; "Effective Date" means the date
of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such Registration Statements, or
amendments thereof, including a preliminary prospectus
supplement which, as completed, is proposed to be used in
connection with the sale of the Offered Certificates and any
prospectus filed with the Commission by the Company with the
consent of the Underwriters pursuant to Rule 424(a) of the
Rules and Regulations; "Registration Statement" means such
registration statements, as amended by all Post-Effective
Amendments thereto heretofore filed with the Commission, at
the Effective Time,
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including any documents incorporated by reference therein at
such time; and "Prospectus" means such final prospectus, as
first supplemented by a prospectus supplement (the "Prospectus
Supplement") relating to the Offered Certificates, as first
filed with the Commission pursuant to paragraph (1) or (4) of
Rule 424(b) of the Rules and Regulations. Reference made
herein to any Preliminary Prospectus or to the Prospectus
shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form
S-3 under the Securities Act, as of the date of such
Preliminary Prospectus or the Prospectus, as the case may be,
and any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any document filed under the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of
such Preliminary Prospectus or the Prospectus, as the case may
be, and incorporated by reference in such Preliminary
Prospectus or the Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall
be deemed to include any report of the Company filed with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act after the Effective Time that is incorporated by reference
in the Registration Statement. The Commission has not issued
any order preventing or suspending the use of any Preliminary
Prospectus. There are no contracts or documents of the Company
which are required to be filed as exhibits to the Registration
Statement pursuant to the Securities Act or the Rules and
Regulations which have not been so filed or incorporated by
reference therein on or prior to the Effective Date of the
Registration Statements. The conditions for use of Form S-3,
as set forth in the General Instructions thereto, have been
satisfied.
To the extent that any Underwriter (i) has provided
to the Company Collateral term sheets (as hereinafter defined)
that such Underwriter has provided to a prospective investor,
the Company has filed such Collateral term sheets as an
exhibit to a report on Form 8-K within two business days of
its receipt thereof, or (ii) has provided to the Company
Structural term sheets or Computational Materials (each as
defined below) that such Underwriter has provided to a
prospective investor, the Company will file or cause to be
filed with the Commission a report on Form 8-K containing such
Structural term sheet and Computational Materials, as soon as
reasonably practicable after the date of this Agreement, but
in any event, not later than the date on which the Prospectus
is filed with the Commission pursuant to Rule 424 of the Rules
and Regulations.
B. The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will, when they
become effective or are filed with the Commission, as the case
may be, conform in all respects to the requirements of the
Securities Act and the Rules and Regulations. The
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Registration Statement, as of the Effective Date thereof and
of any amendment thereto, did not contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading. The Prospectus as of its date, and as
amended or supplemented as of the Closing Date does not and
will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; provided that no
representation or warranty is made as to information contained
in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written
information furnished to the Company in writing by the
Underwriters expressly for use therein.
C. The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
any further documents so filed and incorporated by reference
in the Prospectus, when such documents become effective or are
filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading.
D. Since the respective dates as of which information is
given in the Prospectus, there has not been any material
adverse change in the general affairs, management, financial
condition, or results of operations of the Company, otherwise
than as set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
E. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, is duly qualified to do
business and is in good standing as a foreign corporation in
each jurisdiction in which its ownership or lease of property
or the conduct of its business requires such qualification,
and has all power and authority necessary to own or hold its
properties, to conduct the business in which it is engaged and
to enter into and perform its obligations under this
Agreement, the Pooling and Servicing Agreement, the
Indemnification Agreement, the Insurance Agreement and the
Purchase Agreement, and to cause the Class A-1 Certificates to
be issued.
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F. There are no actions, proceedings or investigations
pending before or threatened by any court, administrative
agency or other tribunal to which the Company is a party or of
which any of its properties is the subject (a) which if
determined adversely to the Company would have a material
adverse effect on the business or financial condition of the
Company, (b) which asserts the invalidity of this Agreement,
the Pooling and Servicing Agreement, the Insurance Agreement,
the Indemnification Agreement, the Purchase Agreement, or the
Certificates, (c) which seeks to prevent the issuance of the
Certificates or the consummation by the Company of any of the
transactions contemplated by the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification
Agreement, the Purchase Agreement or this Agreement, as the
case may be, or (d) which might materially and adversely
affect the performance by the Company of its obligations
under, or the validity or enforceability of, the Pooling and
Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement, this
Agreement or the Certificates.
G. This Agreement has been, and the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification
Agreement and the Purchase Agreement when executed and
delivered as contemplated hereby and thereby will have been,
duly authorized, executed and delivered by the Company, and
this Agreement constitutes, and the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification
Agreement and the Purchase Agreement when executed and
delivered as contemplated herein, will constitute, legal,
valid and binding instruments enforceable against the Company
in accordance with their respective terms, subject as to
enforceability to (x) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting
creditors' rights generally, (y) general principles of equity
(regardless of whether enforcement is sought in a proceeding
in equity or at law), and (z) with respect to rights of
indemnity under this Agreement, the Indemnification Agreement
and limitations of public policy under applicable securities
laws.
H. The execution, delivery and performance of this
Agreement, the Pooling and Servicing Agreement, the Insurance
Agreement, the Indemnification Agreement and the Purchase
Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby, and the issuance
and delivery of the Certificates do not and will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party, by which the
Company is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will
such actions result in any violation of the provisions of the
articles of incorporation or by-laws of the Company or any
statute or any order,
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rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its properties
or assets.
I. Arthur Andersen LLP are independent public accountants
with respect to the Company as required by the Securities Act
and the Rules and Regulations.
J. The direction by the Company to the Trustee to
execute, authenticate, issue and deliver the Class A-1
Certificates has been duly authorized by the Company, and
assuming the Trustee has been duly authorized to do so, when
executed, authenticated, issued and delivered by the Trustee
in accordance with the Pooling and Servicing Agreement, the
Class A-1 Certificates will be validly issued and outstanding
and will be entitled to the benefits provided by the Pooling
and Servicing Agreement.
K. No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body of the United States is required
for the issuance of the Class A-1 Certificates and the sale of
the Class A-1 Certificates to the Underwriters, or the
consummation by the Company of the other transactions
contemplated by this Agreement, the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification
Agreement and the Purchase Agreement, except such consents,
approvals, authorizations, registrations or qualifications as
may be required under State securities or Blue Sky laws in
connection with the purchase and distribution of the Class A-1
Certificates by the Underwriters or as have been obtained.
L. The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate
State, Federal or foreign regulatory agencies or bodies
necessary to conduct the business now conducted by it and as
described in the Prospectus, and the Company has not received
notice of any proceedings relating to the revocation or
modification of any such license, certificate, authority or
permit which if decided adversely to the Company would, singly
or in the aggregate, materially and adversely affect the
conduct of its business, operations or financial condition.
M. At the time of execution and delivery of the Pooling
and Servicing Agreement, the Company will: (i) have good title
to the interest in the Mortgage Loans conveyed by the
Affiliated Originators, free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security
interest (collectively, "Liens"); (ii) not have assigned to
any person any of its right, title or interest in the Mortgage
Loans, in the Purchase Agreement, in the Pooling and Servicing
Agreement or in the Class A-1 Certificates being issued
pursuant thereto; and (iii) have the power and authority to
sell its interest in the Mortgage Loans to the Trustee and to
sell the Class A-1 Certificates to the Underwriters. Upon
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execution and delivery of the Pooling and Servicing Agreement
by the Trustee, the Trustee will have acquired beneficial
ownership of all of the Company's right, title and interest in
and to the Mortgage Loans. Upon delivery to the Underwriters
of the Class A-1 Certificates, the Underwriters will have good
title to the Class A-1 Certificates, free of any Liens.
N. As of the opening of business on September 1, 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. Neither the Company nor the Trust created by the
Pooling and Servicing Agreement is an "investment company"
within the meaning of such term under the Investment Company
Act of 1940 (the "1940 Act") and the rules and regulations of
the Commission thereunder.
P. At the Closing Date, the Class A-1 Certificates and
the Pooling and Servicing Agreement will conform in all
material respects to the descriptions thereof contained in the
Prospectus.
Q. At the Closing Date, the Class A-1 Certificates shall
have been rated in the highest rating category by at least two
nationally recognized rating agencies.
R. Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of this
Agreement, the Pooling and Servicing Agreement, the Insurance
Agreement, the Indemnification Agreement, the Purchase
Agreement and the Class A-1 Certificates have been paid or
will be paid at or prior to the Closing Date.
S. At the Closing Date, each of the representations and
warranties of the Company set forth in the Pooling and
Servicing Agreement will be true and correct in all material
respects.
Any certificate signed by an officer of the Company and
delivered to the Representative or counsel for the Underwriters in connection
with an offering of the Class A-1 Certificates shall be deemed, and shall state
that it is, a representation and warranty as to the matters covered thereby to
each person to whom the representations and warranties in this Section I are
made.
Section II. Purchase and Sale. The commitment of the
Underwriters to purchase the Class A-1 Certificates pursuant to this Agreement
shall be deemed to have been made on the basis of the representations and
warranties herein contained and shall be subject to the terms and conditions
herein set forth. The Company agrees to instruct the Trustee to issue and agrees
to sell to the Underwriters, and the Underwriters agree (except as provided in
Sections X and XI hereof) to purchase from the Company the
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aggregate initial principal amounts of Class A-1 Certificates set forth on
Schedule A, at the purchase price or prices set forth in Schedule A.
The obligations of the Underwriters hereunder to purchase the Class A-1
Certificates of each Class shall be several and not joint. Each Underwriter's
obligation shall be to purchase the aggregate principal amount of Class A-1
Certificates as is indicated with respect to each Underwriter under the caption
"Underwriting" in the Prospectus. The rights of the Company and a non-defaulting
Underwriter shall be as set forth in Section XIII hereof.
Section III. Delivery and Payment. Delivery of and payment for the
Class A-1 Certificates to be purchased by the Underwriters shall be made at the
offices of Dewey Ballantine LLP, 1301 Sixth Avenue, New York, New York 10019, or
at such other place as shall be agreed upon by the Representative and the
Company at 10:00 A.M. New York City time on September 23, 1998 or at such other
time or date as shall be agreed upon in writing by the Representative and the
Company. Payment shall be made to the Company by wire transfer of same day funds
payable to the account of the Company. Delivery of the Class A-1 Certificates
shall be made to the Representative for the accounts of the Underwriters against
payment of the purchase price thereof. The Class A-1 Certificates shall be in
such denominations and registered in such names as the Representative may
request in writing at least two business days prior to the Closing Date. The
Class A-1 Certificates will be made available for examination by the
Representative no later than 2:00 p.m. New York City time on the first business
day prior to the Closing Date.
Section IV. Offering by the Underwriters. It is understood that,
subject to the terms and conditions hereof, the Underwriters propose to offer
the Class A-1 Certificates for sale to the public as set forth in the
Prospectus.
Section V. Covenants of the Company. The Company agrees as follows:
A. To prepare the Prospectus in a form approved by the
Representative and to file such Prospectus pursuant to Rule
424(b) under the Securities Act not later than the
Commission's close of business on the second business day
following the execution and delivery of this Agreement; to
make no further amendment or any supplement to the
Registration Statement or to the Prospectus prior to the
Closing Date except as permitted herein; to advise the
Representative, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has
been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to
furnish the Representative with copies thereof; to file
promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and,
for so long as the delivery of a prospectus is required in
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connection with the offering or sale of the Class A-1
Certificates, to promptly advise the Representative of its
receipt of notice of the issuance by the Commission of any
stop order or of: (i) any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus; (ii) the
suspension of the qualification of the Class A-1 Certificates
for offering or sale in any jurisdiction; (iii) the initiation
of or threat of any proceeding for any such purpose; (iv) any
request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information. In the event of the issuance of any stop order or
of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any
such qualification, the Company promptly shall use its best
efforts to obtain the withdrawal of such order or suspension.
B. To furnish promptly to the Representative and to
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed with the Commission, and of each
amendment thereto filed with the Commission, including all
consents and exhibits filed therewith.
C. To deliver promptly to the Representative such number
of the following documents as the Representative shall
reasonably request: (i) conformed copies of the Registration
Statement as originally filed with the Commission and each
amendment thereto (in each case including exhibits); (ii) each
Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus; and (iii) any document incorporated
by reference in the Prospectus (including exhibits thereto).
If the delivery of a prospectus is required at any time prior
to the expiration of nine months after the Effective Time in
connection with the offering or sale of the Class A-1
Certificates, and if at such time any events shall have
occurred as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or
supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in
order to comply with the Securities Act or the Exchange Act,
the Company shall notify the Representative and, upon the
Representative's request, shall file such document and prepare
and furnish without charge to the Underwriters and to any
dealer in securities as many copies as the Representative may
from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case
any of the Underwriters are required to deliver a Prospectus
in connection with sales of any of the Class A-1 Certificates
at any time nine months or more after the Effective Time, upon
the request of the Representative but at the expense of such
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Underwriter, the Company shall prepare and deliver to such
Underwriter as many copies as such Underwriter may reasonably
request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Securities Act.
D. To file promptly with the Commission any amendment to
the Registration Statement or the Prospectus or any supplement
to the Prospectus that may, in the judgment of the Company or
the Representative, be required by the Securities Act or
requested by the Commission.
E. Prior to filing with the Commission any (i)
Preliminary Prospectus, (ii) amendment to the Registration
Statement or supplement to the Prospectus, or document
incorporated by reference in the Prospectus, or (iii)
Prospectus pursuant to Rule 424 of the Rules and Regulations,
to furnish a copy thereof to the Representative and counsel
for the Underwriters and obtain the consent of the
Representative to the filing.
F. To make generally available to holders of the Class
A-1 Certificates as soon as practicable, but in any event not
later than 90 days after the close of the period covered
thereby, a statement of earnings of the Trust (which need not
be audited) complying with Section 11(a) of the Securities Act
and the Rules and Regulations (including, at the option of the
Company, Rule 158) and covering a period of at least twelve
consecutive months beginning not later than the first day of
the first fiscal quarter following the Closing Date.
G. To use its best efforts, in cooperation with the
Representative, to qualify the Class A-1 Certificates for
offering and sale under the applicable securities laws of such
states and other jurisdictions of the United States as the
Representative may designate, and maintain or cause to be
maintained such qualifications in effect for as long as may be
required for the distribution of the Class A-1 Certificates.
The Company will file or cause the filing of such statements
and reports as may be required by the laws of each
jurisdiction in which the Class A-1 Certificates have been so
qualified.
H. Not, without the Representative's prior written
consent, to publicly offer or sell or contract to sell any
mortgage pass-through securities, collateralized mortgage
obligations or other similar securities representing interests
in or secured by other mortgage-related assets originated or
owned by the Company for a period of 5 business days following
the commencement of the offering of the Class A-1 Certificates
to the public.
I. So long as the Class A-1 Certificates shall be
outstanding, to deliver to the Representative as soon as such
statements are furnished to
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the Trustee: (i) the annual statement as to compliance
delivered to the Trustee pursuant to Section 8.16 of the
Pooling and Servicing Agreement; (ii) the annual statement of
a firm of independent public accountants furnished to the
Trustee pursuant to Section 8.17 of the Pooling and Servicing
Agreement; and (iii) the Monthly Statement furnished to the
Certificateholders pursuant to Section 7.8 of the Pooling and
Servicing Agreement.
J. To apply the net proceeds from the sale of the Offered
Certificates in the manner set forth in the Prospectus.
Section VI. Conditions to the Underwriters' Obligations.
The obligations of the Underwriters to purchase the Class A-1
Certificates pursuant to this Agreement are subject to: (i) the accuracy on and
as of the Closing Date of the representations and warranties on the part of the
Company herein contained; (ii) the performance by the Company of all of their
respective obligations hereunder; and (iii) the following conditions as of the
Closing Date:
A. The Representative shall have received confirmation of
the effectiveness of the Registration Statement. No stop order
suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the
Commission. Any request of the Commission for inclusion of
additional information in the Registration Statement or the
Prospectus shall have been complied with.
B. None of the Underwriters shall have discovered and
disclosed to the Company on or prior to the Closing Date that
the Registration Statement or the Prospectus or any amendment
or supplement thereto contains an untrue statement of a fact
or omits to state a fact which, in the opinion of Dewey
Ballantine LLP, counsel for the Underwriters, is material and
is required to be stated therein or is necessary to make the
statements therein not misleading.
C. All corporate proceedings and other legal matters
relating to the authorization, form and validity of this
Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement, the Insurance Agreement, the Indemnification
Agreement, the Class A-1 Certificates, the Registration
Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all respects to counsel for
the Underwriters, and the Company shall have furnished to such
counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
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D. The Representative shall have received the favorable
opinion of Dewey Ballantine LLP, special counsel to the
Company with respect to the following items, dated the Closing
Date, to the effect that:
1. The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of
the State of Delaware, and is qualified to do business in each
state necessary to enable it to perform its obligations as
Sponsor under the Pooling and Servicing Agreement. The Company
has the requisite power and authority to execute and deliver,
engage in the transactions contemplated by, and perform and
observe the conditions of, this Agreement, the Insurance
Agreement, the Pooling and Servicing Agreement, the Insurance
Agreement, the Indemnification Agreement and the Purchase
Agreement.
2. This Agreement, the Certificates, the Pooling and
Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement and the Purchase Agreement have been
duly and validly authorized, executed and delivered by the
Company, all requisite corporate action having been taken with
respect thereto, and each (other than the Certificates)
constitutes the valid, legal and binding agreement of the
Company.
3. Neither the transfer of the Mortgage Loans to the
Trust, the issuance or sale of the Certificates nor the
execution, delivery or performance by the Company of the
Pooling and Servicing Agreement, this Agreement, the Insurance
Agreement, the Indemnification Agreement or the Purchase
Agreement (A) conflicts or will conflict with or results or
will result in a breach of, or constitutes or will constitute
a default under, (i) any term or provision of the certificate
of incorporation or bylaws of the Company; (ii) any term or
provision of any material agreement, contract, instrument or
indenture, to which the Company is a party or is bound and
known to such counsel; or (iii) any order, judgment, writ,
injunction or decree of any court or governmental agency or
body or other tribunal having jurisdiction over the Company
and known to such counsel; or (B) results in, or will result
in the creation or imposition of any lien, charge or
encumbrance upon the Trust Estate or upon the Class A-1
Certificates, except as otherwise contemplated by the Pooling
and Servicing Agreement.
4. The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment with
respect to each Mortgage is sufficient to fully transfer to
the Trustee for the benefit of the Owners all right, title and
interest of the Company in the Note and Mortgage, as
noteholder and mortgagee or assignee thereof, subject to any
exceptions set forth in such opinion, and will be sufficient
to permit the Trustee to avail itself of all protection
available under applicable law against the claims of any
present or future creditors of the Company and to
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prevent any other sale, transfer, assignment, pledge or other
encumbrance of the Mortgage Loans by the Company from being
enforceable.
5. No consent, approval, authorization or order of,
registration or filing with, or notice to, courts,
governmental agency or body or other tribunal is required
under the laws of the State of New York, for the execution,
delivery and performance of the Pooling and Servicing
Agreement, this Agreement, the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement or the
offer, issuance, sale or delivery of the Class A-1
Certificates or the consummation of any other transaction
contemplated thereby by the Company, except such which have
been obtained.
6. There are no actions, proceedings or investigations,
to such counsel's knowledge, pending or threatened against the
Company before any court, governmental agency or body or other
tribunal (i) asserting the invalidity of the Pooling and
Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, this Agreement, the Purchase
Agreement or the Class A-1 Certificates, (ii) seeking to
prevent the issuance of the Class A-1 Certificates or the
consummation of any of the transactions contemplated by the
Pooling and Servicing Agreement, the Indemnification
Agreement, or this Agreement, (iii) which would materially and
adversely affect the performance by the Company of obligations
under, or the validity or enforceability of, the Pooling and
Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, the Class A-1 Certificates, the
Purchase Agreement or this Agreement or (iv) that would
adversely affect the status of the Trust Estate as a "real
estate mortgage investment conduit" ("REMIC") as such term is
defined in the Internal Revenue Code of 1986, as amended.
7. To the best of the knowledge of such counsel, the
Commission has not issued any stop order suspending the
effectiveness of the Registration Statement or any order
directed to any prospectus relating to the Class A-1
Certificates (including the Prospectus), and has not initiated
or threatened any proceeding for that purpose.
8. The Registration Statement and the Prospectus (other
than the financial and statistical data included therein, as
to which such counsel need express no opinion), including the
Incorporated Documents, as of the date on which the
Registration Statement was declared effective and as of the
date hereof, comply as to form in all material respects with
the requirements of the 1933 Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations
thereunder, and such counsel does not know of any amendment to
the Registration Statement required to be filed, or of any
contracts, indentures or other documents of a character
required to be filed as an exhibit to the Registration
Statement
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or required to be described in the Registration Statement
which has not been filed or described as required.
9. Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the
registration of the Trust created by such Pooling and
Servicing Agreement under the Investment Company Act of 1940
is presently required.
10. The statements in the Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES," "THE POOLING AND
SERVICING AGREEMENT" and the statements in the Prospectus
Supplement set forth under the caption "DESCRIPTION OF THE
CERTIFICATES," to the extent such statements purport to
summarize certain provisions of the Class A-1 Certificates or
of the Pooling and Servicing Agreement, are fair and accurate
in all material respects.
11. The statements in the Prospectus and Prospectus
Supplement set forth under the captions "ERISA
CONSIDERATIONS," "CERTAIN FEDERAL INCOME TAX CONSEQUENCES,"
and the statements in the Prospectus set forth under the
caption "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND
RELATED MATTERS," to the extent that they constitute matters
of federal, New York or California law, or federal, New York
or California legal conclusions provide a fair and accurate
summary of such law or conclusions.
12. Assuming that (a) the Trustee causes the Trust
created under the Pooling and Servicing Agreement to elect, as
the Trustee has covenanted to do in the Pooling and Servicing
Agreement, to be treated as a REMIC and (b) the parties to the
Pooling and Servicing Agreement comply with the terms thereof,
the Trust will be treated as a REMIC, the Class A-1
Certificates issued pursuant to the Pooling and Servicing
Agreement will be treated as the "regular interests" in the
REMIC and the Class R Certificates issued pursuant to the
Pooling and Servicing Agreement will be treated as the sole
"residual interest" in the REMIC. The Trust will not be
subject to tax upon its income or assets by any taxing
authority of the State of New York or New York City or of the
State of California (except that no opinion need be expressed
with respect to any minimum tax).
13. Such opinion shall also relate to comparable matters
with respect to the Affiliated Originators and Advanta
Mortgage Holding Company.
14. No information has come to such counsel's attention
which causes them to believe that the Prospectus (other than
the financial statement and other financial and statistical
data contained therein, as to which such counsel need express
no opinion), as of the date thereof,
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<PAGE> 15
contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
15. Such other matters as the Representative may
reasonably request.
In rendering its opinions, the counsel described above may
rely, as to matters of fact, on certificates of responsible officers of the
Company, the Trustee and public officials. Such opinions may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Company.
E. The Representative shall have received letters,
including bring-down letters, from Arthur Andersen LLP, dated
on or before the Closing Date, in form and substance
satisfactory to the Representative and counsel for the
Underwriters, to the effect that they have performed certain
specified procedures requested by the Representative with
respect to the information set forth in the Prospectus and
certain matters relating to the Company.
F. The Class A-1 Certificates shall have received the
ratings listed on Schedule A hereto, and such ratings shall
not have been rescinded or downgraded. The Representative and
counsel for the Underwriters shall have received copies of any
opinions of counsel supplied to the rating organizations
relating to any matters with respect to the Class A-1
Certificates. Any such opinions shall be dated the Closing
Date and addressed to the Underwriters or accompanied by
reliance letters to the Underwriters or shall state that the
Underwriters may rely upon them.
G. The Representative shall have received from the
Company a certificate, signed by the president, a senior vice
president or a vice president of the Company, dated the
Closing Date, to the effect that the signer of such
certificate has carefully examined the Registration Statement,
the Pooling and Servicing Agreement and this Agreement and
that, to the best of his or her knowledge based upon
reasonable investigation:
1. the representations and warranties of the Company in
this Agreement, as of the Closing Date, and in the Pooling and
Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement and in all
related agreements, as of the date specified in such
agreements, are true and correct, and the Company has complied
with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the
Closing Date;
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2. there are no actions, suits or proceedings pending, or
to the best of such officer's knowledge, threatened against or
affecting the Company which if adversely determined,
individually or in the aggregate, would be reasonably likely
to adversely affect the Company's obligations under the
Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, this Agreement or the Purchase
Agreement in any material way; and no merger, liquidation,
dissolution or bankruptcy of the Company is pending or
contemplated;
3. the information contained in the Registration
Statement and the Prospectus relating to the Company, the
Mortgage Loans or the servicing procedures of it or its
affiliates or subservicer is true and accurate in all material
respects and nothing has come to his or her attention that
would lead such officer to believe that the Registration
Statement or Prospectus includes any untrue statement of a
material fact or omits to state a material fact necessary to
make the statements therein not misleading;
4. the information set forth in the Schedule of Mortgage
Loans required to be furnished pursuant to the Pooling and
Servicing Agreement is true and correct in all material
respects;
5. there has been no amendment or other document filed
affecting the articles of incorporation or bylaws of the
Company since June 30, 1998, and no such amendment has been
authorized. No event has occurred since June 30, 1998, which
has affected the good standing of the Company under the laws
of the State of Delaware;
6. there has not occurred any material adverse change, or
any development involving a prospective material adverse
change, in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from June 30, 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 Company or in any rating
accorded any securities of the Company, if any, by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of the 1933 Act; and
8. each person who, as an officer or representative of
the Company, signed or signs the Registration Statement, the
Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, this Agreement, or any other
document delivered pursuant hereto, on the date of such
execution, or on the Closing Date, as the case may be, in
connection with the transactions described in the Pooling and
Servicing Agreement, the Insurance Agreement, the
Indemnification
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Agreement, the Purchase Agreement and this Agreement was, at
the respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such
officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
The Company shall attach to such certificate a true and
correct copy of its certificate or articles of incorporation, as appropriate,
and bylaws which are in full force and effect on the date of such certificate
and a certified true copy of the resolutions of its Board of Directors with
respect to the transactions contemplated herein.
H. The Representative shall have received a favorable
opinion of counsel to the Trustee, dated the Closing Date and
in form and substance satisfactory to the Representative, to
the effect that:
1. the Trustee is a national banking association duly
organized, validly existing and in good standing under the
laws of the United States and has the power and authority to
enter into and to take all actions required of it under the
Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the
Pooling and Servicing Agreement constitutes the legal, valid
and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except as enforceability
thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement
of creditors' rights generally, as such laws would apply in
the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Trustee, and (B) general
principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by
any governmental agency or body or other tribunal is required
on the part of the Trustee in connection with its execution
and delivery of the Pooling and Servicing Agreement or the
performance of its obligations thereunder;
4. the Class A-1 Certificates have been duly executed,
authenticated and delivered by the Trustee; and
5. the execution and delivery of, and performance by the
Trustee of its obligations under, the Pooling and Servicing
Agreement do not conflict with or result in a violation of any
statute or regulation applicable to the Trustee, or the
charter or bylaws of the Trustee, or to the best knowledge of
such counsel, any governmental authority having jurisdiction
over the Trustee or the terms of any indenture or other
agreement or instrument to which the Trustee is a party or by
which it is bound.
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In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Trustee.
I. The Representative shall have received from the
Trustee a certificate, signed by the President, a senior vice
president or a vice president of the Trustee, dated the
Closing Date, to the effect that each person who, as an
officer or representative of the Trustee, signed or signs the
Class A-1 Certificates, the Pooling and Servicing Agreement or
any other document delivered pursuant hereto, on the date
hereof or on the Closing Date, in connection with the
transactions described in the Pooling and Servicing Agreement
was, at the respective times of such signing and delivery, and
is now, duly elected or appointed, qualified and acting as
such officer or representative, and the signatures of such
persons appearing on such documents are their genuine
signatures.
J. The Policy relating to the Class A-1 Certificates
shall have been duly executed and issued at or prior to the
Closing Date and shall conform in all material respects to the
description thereof in the Prospectus.
K. The Representative shall have received a favorable
opinion of in-house counsel to the Insurer, dated the Closing
Date and in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
1. The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State
of New York. 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
Indemnification Agreement, the Insurance Agreement and such
agreement has been duly executed and delivered and constitute
the legal, valid and binding obligations of the Insurer
enforceable in accordance with its terms except that the
enforcement of the Insurance Agreement and the Indemnification
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<PAGE> 19
Agreement may be limited by laws relating to bankruptcy,
insolvency, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by
general principles of equity and by public policy
considerations relating to indemnification for securities law
violations.
4. No consent, approval, authorization or order of any
state or federal court or governmental agency or body is
required on the part of the Insurer, the lack of which would
adversely affect the validity or enforceability of the Policy;
to the extent required by applicable legal requirements that
would adversely affect validity or enforceability of the
Policy, the form of the Policy has been filed with, and
approved by, all governmental authorities having jurisdiction
over the Insurer in connection with the Policy.
5. The Policy is not required to be registered under the
Securities Act.
6. The information set forth under the caption "THE
CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" in
the Prospectus forming a part of the Registration Statement,
insofar as such statements constitute a description of the
Policy, accurately summarizes the Policy.
In rendering this opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee, the Insurer and public officials. Such opinion may assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Insurer.
L. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended
or potential downgrading or (B) any review or possible changes
in rating the direction of which has not been indicated, in
the rating, if any, accorded the Insurer's claims paying
ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the
1933 Act.
M. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended
or potential downgrading or (B) any review or possible changes
in rating the direction of which has not been indicated, in
the rating, if any, accorded the Company or in any rating
accorded any securities of the Company, if any, by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of the 1933 Act.
N. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or
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in the earnings, business or operations, since December 31,
1997, of (A) the Company and its subsidiaries or (B) the
Insurer, that is in the Representative's judgment material and
adverse and that makes it in the Representative's judgment
impracticable to market the Offered Certificates on the terms
and in the manner contemplated in the Prospectus.
O. The Representative shall have received from the
Insurer a certificate, signed by the president, a senior vice
president or a vice president of the Insurer, dated the
Closing Date, to the effect that the signer of such
certificate has carefully examined the Policy, the Insurance
Agreement, the Indemnification Agreement and the related
documents and that, to the best of his or her knowledge based
on reasonable investigation:
1. There are no actions, suits or proceedings pending or
threatened against or affecting the Insurer which, if
adversely determined, individually or in the aggregate, would
adversely affect the Insurer's performance under the Policy,
the Insurance Agreement, or the Indemnification Agreement;
2. Each person who as an officer or representative of the
Insurer, signed or signs the Policy, the Insurance Agreement,
the Indemnification Agreement or any other document delivered
pursuant hereto, on the date thereof, or on the Closing Date,
in connection with the transactions described in this
Agreement was, at the respective times of such signing and
delivery, and is now, duly elected or appointed, qualified and
acting as such officer or representative, and the signatures
of such persons appearing on such documents are their genuine
signatures;
3. The information contained in the Prospectus under the
captions "THE CERTIFICATE INSURANCE POLICY" and "THE
CERTIFICATE INSURER" is true and correct in all material
respects and does not omit to state a material fact with
respect to the description of the Policy or the ability of the
Insurer to meet its payment obligations under the Policy;
4. The tables regarding the Insurer's capitalization set
forth under the heading "THE CERTIFICATE INSURER" present
fairly the capitalization of the Insurer as of June 30, 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;
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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 June 30, 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 June 30,
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 bylaws, all of which are in full force and effect on the date of such
certificate.
P. The Representative shall have received from Dewey
Ballantine LLP, special counsel to the Company, a survey in
form and substance satisfactory to the Representative,
indicating the requirements of applicable local law which must
be complied with in order to transfer and service the Mortgage
Loans pursuant to the Pooling and Servicing Agreement and the
Company shall have complied with all such requirements.
Q. The Representative shall have received from Dewey
Ballantine LLP, special counsel to the Underwriters, such
opinion or opinions, dated the Closing Date, with respect to
the issuance and sale of the Certificates, the Prospectus and
such other related matters as the Representative shall
reasonably require.
R. The Representative and counsel for the Underwriters
shall have received copies of any opinions of counsel to the
Company supplied to the Trustee relating to matters with
respect to the Certificates. Any such opinions shall be dated
the Closing Date and addressed to the
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<PAGE> 22
Underwriters or accompanied by reliance letters to the
Underwriters or shall state the Underwriters may rely thereon.
S. The Representative shall have received such further
information, certificates and documents as the Representative
may reasonably have requested not fewer than three (3) full
business days prior to the Closing Date.
T. There shall have been executed and delivered by
Advanta Mortgage Holding Company, the corporate parent of the
Company ("AMHC"), a letter agreement with the Trustee and the
Insurer, pursuant to which AMHC agrees to become jointly and
severally liable with the Company and Advanta Mortgage Corp.
USA for the payment of the Joint and Several Obligations (as
defined in such letter agreement).
U. There shall have been executed and delivered by AMHC,
the corporate parent of the Company, a letter agreement with
the Underwriters substantially in the form of Exhibit A
hereto.
V. Prior to the Closing Date, counsel for the
Underwriters shall have been furnished with such documents and
opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the
Offered Certificates as herein contemplated and related
proceedings or in order to evidence the accuracy and
completeness of any of the representations and warranties, or
the fulfillment of any of the conditions, herein contained,
and all proceedings taken by the Company in connection with
the issuance and sale of the Class A-1 Certificates as herein
contemplated shall be satisfactory in form and substance to
the Representative and counsel for the Underwriters.
W. Subsequent to the execution and delivery of this
Agreement none of the following shall have occurred: (i)
trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the over-the-counter
market shall have been suspended or minimum prices shall have
been established on either of such exchanges or such market by
the Commission, by such exchange or by any other regulatory
body or governmental authority having jurisdiction; (ii) a
banking moratorium shall have been declared by Federal or
state authorities; (iii) the United States shall have become
engaged in hostilities, there shall have been an escalation of
hostilities involving the United States or there shall have
been a declaration of a national emergency or war by the
United States; or (iv) there shall have occurred such a
material adverse change in general economic, political or
financial conditions (or the effect of international
conditions on the financial markets of the United States shall
be such) as to make it, in the judgment of the Representative,
impractical or inadvisable to proceed with the public offering
or delivery
22
<PAGE> 23
of the Class A-1 Certificates on the terms and in the manner
contemplated in the Prospectus.
X. The Class A-1 Certificates shall have received the ratings
set forth on Schedule A hereto.
If any condition specified in this Section VI shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representative by notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
Section VII. Payment of Expenses. The Company agrees to pay: (a) the
costs incident to the authorization, issuance, sale and delivery of the Class
A-1 Certificates and any taxes payable in connection therewith; (b) the costs
incident to the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), the Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus or any document incorporated by reference therein,
all as provided in this Agreement; (d) the costs of reproducing and distributing
this Agreement; (e) the fees and expenses of qualifying the Class A-1
Certificates under the securities laws of the several jurisdictions as provided
in Section V(G) hereof and of preparing, printing and distributing a Blue Sky
Memorandum and a Legal Investment Survey (including related fees and expenses of
counsel to the Underwriters); (f) any fees charged by securities rating services
for rating the Class A-1 Certificates; and (g) all other costs and expenses
incident to the performance of the obligations of the Company; provided that,
except as provided in this Section VII, the Underwriters shall pay their own
costs and expenses, including the costs and expenses of Dewey Ballantine LLP,
any transfer taxes on the Class A-1 Certificates which they may sell and the
expenses of advertising any offering of the Class A-1 Certificates made by the
Underwriters.
If this Agreement is terminated by the Representative, in accordance
with the provisions of Section VI or Section X, the Company shall reimburse the
Underwriters for their respective reasonable out-of-pocket expenses, including
fees and disbursements of Dewey Ballantine LLP, counsel for the Underwriters.
Section VIII. Indemnification and Contribution.
A. The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter
23
<PAGE> 24
within the meaning of Section 15 of the Securities Act from and against
any and all loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of
the Class A-1 Certificates), to which such Underwriter or any such
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus
or (iv) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading and shall reimburse such Underwriter and each such
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Prospectus or the Registration
Statement in reliance upon and in conformity with written information
(including any Derived Information) furnished to the Company through
the Representative specifically for inclusion therein; and provided,
further, that as to any Preliminary Prospectus this indemnity shall not
inure to the benefit of any Underwriter or any controlling person on
account of any loss, claim, damage, liability or action arising from
the sale of the Class A-1 Certificates to any person by such
Underwriter if such Underwriter failed to send or give a copy of the
Prospectus, as amended or supplemented, to that person within the time
required by the Securities Act, and the untrue statement or alleged
untrue statement of a material fact or the omission or alleged omission
to state a material fact in the Preliminary Prospectus was corrected in
the Prospectus, unless such failure resulted from non-compliance by the
Company with Section V(C). For purposes of the last proviso to the
immediately preceding sentence, the term "Prospectus" shall not be
deemed to include the documents incorporated therein by reference, and
none of the Underwriters shall be obligated to send or give any
supplement or amendment to any document incorporated therein by
reference to any person other than a person to whom such Underwriter
had delivered such incorporated document or documents in response to a
written request therefor. The foregoing indemnity agreement is in
24
<PAGE> 25
addition to any liability which the Company may otherwise have to any
Underwriters or any controlling person of such Underwriter.
B. Each Underwriter agrees severally, and not jointly to
indemnify and hold harmless the Company, each of its directors, each of
its officers who signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act against any and all loss, claim, damage or liability, or
any action in respect thereof, to which the Company or any such
director, officer or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) any
untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or (iv) the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each
case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by or
on behalf of such Underwriter specifically for inclusion therein, and
shall reimburse the Company and any such director, officer or
controlling person for any legal or other expenses reasonably incurred
by the Company or any director, officer or controlling person in
connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition
to any liability which any Underwriter may otherwise have to the
Company or any such director, officer or controlling person.
C. Promptly after receipt by any indemnified party under this
Section VIII of notice of any claim or the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section VIII, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section VIII except to the extent it has been materially
prejudiced by such failure, and provided, further, that the failure to
notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this
Section VIII.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly
25
<PAGE> 26
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section VIII for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriters, if the indemnified
parties under this Section VIII consist of the Underwriters or any of their
controlling persons, or by the Company, if the indemnified parties under this
Section VIII consist of the Company or any of the Company's directors, officers
or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section VIII(A) and (B), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
26
<PAGE> 27
D. Each Underwriter agrees to deliver to the Company no later
than the date on which the Prospectus Supplement is required to be
filed pursuant to Rule 424 with a copy of its Derived Information
(defined below) for filing with the Commission on Form 8-K.
E. Each Underwriter agrees, assuming all Company-Provided
Information (defined below) is accurate and complete in all material
respects, to severally and not jointly indemnify and hold harmless the
Company, each of the Company's officers and directors and each person
who controls the Company within the meaning of Section 15 of the
Securities Act against any and all losses, claims, damages or
liabilities, joint or several, to which they may become subject under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of a material fact contained in the
Derived Information provided by such Underwriter, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred
by him, her or it in connection with investigating or defending or
preparing to defend any such loss, claim, damage, liability or action
as such expenses are incurred. The obligations of each of the
Underwriters under this Section VIII(E) shall be in addition to any
liability which such Underwriter may otherwise have.
The procedures set forth in Section VIII(C) shall be equally applicable
to this Section VIII(E).
F. For purposes of this Section VIII, the term "Derived
Information" means such portion, if any, of the information delivered
to the Company pursuant to Section VIII(D) for filing with the
Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into account
information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
(iii) is of the type of information defined as Collateral term
sheets, Structural term sheets or Computational Materials (as
such terms are interpreted in the No-Action Letters).
"Company-Provided Information" means any computer tape furnished to the
Underwriters by the Company concerning the Mortgage Loans comprising the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA
27
<PAGE> 28
Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the SEC staff's response thereto, were
publicly available February 17, 1995). The term "Collateral term sheet" as used
herein includes any subsequent Collateral term sheet that reflects a substantive
change in the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder letter" and
together with the PSA Letter, the "No-Action Letters") of Brown & Wood on behalf
of Kidder, Peabody & Co., Inc. (which letter, and the SEC staff's response
thereto, were publicly available May 20, 1994).
G. If the indemnification provided for in this Section VIII
shall for any reason be unavailable to or insufficient to hold harmless
an indemnified party under Section VIII(A) or (B) in respect of any
loss, claim, damage or liability, or any action in respect thereof,
referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the
other from the offering of the Class A-1 Certificates or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law or if the indemnified party failed to give the notice required
under Section VIII(C), in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Underwriters
on the other with respect to the statements or omissions which resulted
in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations.
The relative benefits of the Underwriters and the Company shall be
deemed to be in such proportion so that the Underwriters are responsible for
that portion represented by the percentage that the underwriting discount
appearing on the cover page of the Prospectus bears to the public offering price
appearing on the cover page of the Prospectus.
The relative fault of the Underwriters and the Company shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by one of the Underwriters, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission and other equitable
considerations.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section VIII(G) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section VIII(G) shall be deemed to include, for purposes
28
<PAGE> 29
of this Section VIII(G), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
In no case shall any Underwriter be responsible for any amount in
excess of the underwriting discount applicable to the Class A-1 Certificates
purchased by such Underwriter hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
H. The Underwriters severally confirm that the information set
forth (i) in the Prospectus Supplement relating to market making and
(ii) in the fourth paragraph under the caption "Underwriting" in the
Prospectus Supplement, together with the Derived Information, is
correct and constitutes the only information furnished in writing to
the Company by or on behalf of the Underwriters specifically for
inclusion in the Registration Statement and the Prospectus.
Section IX. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Underwriters or controlling
persons thereof, or by or on behalf of the Company and shall survive delivery of
any Class A-1 Certificates to the Underwriters.
Section X. Termination of Agreement. The Representative may terminate
this Agreement immediately upon notice to the Company, at any time at or prior
to the Closing Date if any of the events or conditions described in Section
VI(W) of this Agreement shall occur and be continuing. In the event of any such
termination, the covenant set forth in Section V(G), the provisions of Section
VII, the indemnity agreement set forth in Section VIII, and the provisions of
Sections IX and XIII shall remain in effect.
Section XI. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A. if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Salomon Smith Barney Inc., as
Representative of the Underwriters, 7 World Trade Center, New York, New
York, 10048, Attention: General Counsel (fax: ( 212 ) 783-1446);
B. if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to Advanta Mortgage Conduit Services,
Inc. 16875 West Bernardo Drive, San Diego, California 92127 Attention:
General Counsel (Fax: 619-674-3592).
Section XII. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriters and
the Company, and their respective successors. This Agreement and the terms and
provisions
29
<PAGE> 30
hereof are for the sole benefit of only those persons, except that the
representations, warranties, indemnities and agreements contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control the Underwriters within the meaning of Section 15 of the
Securities Act, and for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section XII, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
Section XIII. Default by One of the Underwriters. If one of the
Underwriters shall fail on the Closing Date to purchase the Offered Certificates
which it is obligated to purchase hereunder (the "Defaulted Certificates"), the
remaining Underwriters (the "Non-Defaulting Underwriter"), shall have the right,
but not the obligation within one (1) Business Day thereafter, to make
arrangements to purchase all, but not less than all, of the Defaulted
Certificates upon the terms herein set forth; if, however, the Non-Defaulting
Underwriter shall not have completed such arrangements within such one (1)
Business Day period, then this Agreement shall terminate without liability on
the part of the Non-Defaulting Underwriter.
No action taken pursuant to this Section XIII shall relieve the
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Non-Defaulting Underwriter or the Company shall
have the right to postpone the Closing Date for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
Section XIV. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement, or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Certificates and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
Section XV. Definition of the Term "Business Day". For purposes of this
Agreement, "Business Day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
Section XVI. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND SHALL BE
CONSTRUED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
30
<PAGE> 31
Section XVII. Counterparts. This Agreement may be executed in
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
Section XVIII. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
Section XIX. Representations of Underwriters. The Representative will
act for the several Underwriters in connection with the transactions
contemplated by this Agreement, and any action under this Agreement taken by the
Representative will be binding upon all of the Underwriters.
31
<PAGE> 32
If the foregoing correctly sets forth the agreement between the Company
and the Underwriters, please indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By: ________________________________
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
SALOMON SMITH BARNEY INC.
as Representative of the Underwriters
By: ________________________________
Name:
Title:
[Underwriting Agreement]
32
<PAGE> 33
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
SCHEDULE A
- ----------------------------------------------------------------------------------
INITIAL PRINCIPAL PURCHASE PRICE TO
AMOUNT OF OFFERED UNDERWRITERS
REQUIRED RATINGS CERTIFICATES PURCHASED DISREGARDING
CLASS S&P/MOODY'S BY UNDERWRITERS COUPON ACCRUED INTEREST
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 AAA /Aaa $500,000,000 Floating 99.8%
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 1.2
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Mortgage Loan Asset-Backed Certificates,
Series 1998-3
UNDERWRITING AGREEMENT
September 17, 1998
SALOMON SMITH BARNEY INC.
7 World Trade Center
New York, NY 10048
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. (the "Company") has authorized
the issuance and sale of Mortgage Loan Asset-Backed Certificates, Series 1998-3
(the "Certificates"), consisting of (i) the Class A-1 Group I Certificates (the
"Class A-1 Certificates") , (ii) the Class A-2 Group II Certificates (the "Class
A-2 Certificates" together with the Class A-1 Certificates, the "Offered
Certificates") and (iii) the residual class with respect to each REMIC held by
the Trust (the "Class R Certificates"). Only the Class A-2 Certificates are
offered by Salomon Smith Barney Inc. (the "Underwriter") pursuant to this
agreement.
The Offered Certificates will be issued by the Advanta Mortgage Loan
Trust 1998-3 (the "Trust"), and will evidence in the aggregate the beneficial
interest in a sub-trust of a trust estate (the "Trust Estate") consisting
primarily of a pool (the "Group II Mortgage Pool") of closed-end mortgage loans
having fixed rates of interest (the "Group II Mortgage Loans") and certain
related property. The Group II Mortgage Loans shall have, as of September 23,
1998 (the "Closing Date"), an aggregate principal balance of approximately
$500,000,000. The Offered Certificates are to be issued under a pooling and
servicing agreement, to be dated as of September 1, 1998 (the "Pooling and
Servicing Agreement"), among the Company, as sponsor, Advanta Mortgage Corp.
USA, as master servicer, and Bankers Trust Company of California, N.A., as
trustee (the "Trustee").
On or prior to the date of issuance of the Certificates, the Company
will obtain a guaranty insurance policy (the "Policy") issued by MBIA Insurance
Corporation (the "Insurer") which will unconditionally and irrevocably guarantee
to the Trustee for the benefit of the holders of Class A-2 Certificates the
amount by which the Group II Insured Distribution Amount (as defined in the
Pooling and Servicing Agreement) for the
<PAGE> 2
Class A-2 Certificates exceeds the Group II Total Available Funds (as defined in
the Pooling and Servicing Agreement) amount for each such group.
The Offered Certificates are more fully described in a Registration
Statement which the Company has furnished to the Underwriter. Capitalized terms
used but not defined herein shall have the meanings given to them in the Pooling
and Servicing Agreement.
Simultaneously with the execution of the Pooling and Servicing
Agreement, the Company will enter into a conveyance agreement pursuant to the
Master Loan Transfer Agreement dated as of September 23, 1998 among the Trustee,
the Affiliate and the Affiliated Originators named thereon (together, the
"Purchase Agreement"), pursuant to which the Affiliated Originators will
transfer to the Company all of their right, title and interest in and to the
Mortgage Loans as of the Closing Date.
The Company will also enter into an Indemnification Agreement (the
"Indemnification Agreement") dated as of September 10, 1998 among the
Underwriter, the Company and the Insurer, governing the liability of the several
parties with respect to the losses resulting from material misstatements or
omissions contained in the Prospectus Supplement.
Section I. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the Underwriter that:
A. Registration Statements on Form S-3, as amended by
Post-Effective Amendments thereto, have (i) been prepared by the
Company in conformity with the requirements of the Securities Act of
1933 (the "Securities Act") and the rules and regulations (the "Rules
and Regulations") of the United States Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become effective under
the Securities Act. Copies of such Registration Statements have been
delivered by the Company to the Underwriter. As used in this Agreement,
"Effective Time" means the date and the time as of which such
Registration Statements, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Preliminary Prospectus"
means each prospectus included in such Registration Statements, or
amendments thereof, including a preliminary prospectus supplement
which, as completed, is proposed to be used in connection with the sale
of the Offered Certificates and any prospectus filed with the
Commission by the Company with the consent of the Underwriters pursuant
to Rule 424(a) of the Rules and Regulations; "Registration Statement"
means such registration statements, as amended by all Post-Effective
Amendments thereto heretofore filed with the Commission, at the
Effective Time, including any documents incorporated by reference
therein at such time; and "Prospectus" means such final prospectus, as
first supplemented by a
2
<PAGE> 3
prospectus supplement (the "Prospectus Supplement") relating to the
Offered Certificates, as first filed with the Commission pursuant to
paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations.
Reference made herein to any Preliminary Prospectus or to the
Prospectus shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Securities Act, as of the date of such Preliminary Prospectus or
the Prospectus, as the case may be, and any reference to any amendment
or supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any document filed under the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of such
Preliminary Prospectus or the Prospectus, as the case may be, and
incorporated by reference in such Preliminary Prospectus or the
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to include any report of the
Company filed with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act after the Effective Time that is incorporated by
reference in the Registration Statement. The Commission has not issued
any order preventing or suspending the use of any Preliminary
Prospectus. There are no contracts or documents of the Company which
are required to be filed as exhibits to the Registration Statement
pursuant to the Securities Act or the Rules and Regulations which have
not been so filed or incorporated by reference therein on or prior to
the Effective Date of the Registration Statements. The conditions for
use of Form S-3, as set forth in the General Instructions thereto, have
been satisfied.
To the extent that the Underwriter (i) has provided to the
Company Collateral term sheets (as hereinafter defined) that the
Underwriter has provided to a prospective investor, the Company has
filed such Collateral term sheets as an exhibit to a report on Form 8-K
within two business days of its receipt thereof, or (ii) has provided
to the Company Structural term sheets or Computational Materials (each
as defined below) that the Underwriter has provided to a prospective
investor, the Company will file or cause to be filed with the
Commission a report on Form 8-K containing such Structural term sheet
and Computational Materials, as soon as reasonably practicable after
the date of this Agreement, but in any event, not later than the date
on which the Prospectus is filed with the Commission pursuant to Rule
424 of the Rules and Regulations.
B. The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Securities Act and the Rules and Regulations. The
Registration Statement, as of the Effective Date thereof and of any
amendment thereto, did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to
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<PAGE> 4
make the statements therein not misleading. The Prospectus as of its
date, and as amended or supplemented as of the Closing Date does not
and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that no representation or warranty is made as
to information contained in or omitted from the Registration Statement
or the Prospectus in reliance upon and in conformity with written
information furnished to the Company in writing by the Underwriter
expressly for use therein.
C. The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Prospectus, when such
documents become effective or are filed with the Commission, as the
case may be, will conform in all material respects to the requirements
of the Securities Act or the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
D. Since the respective dates as of which information is given
in the Prospectus, there has not been any material adverse change in
the general affairs, management, financial condition, or results of
operations of the Company, otherwise than as set forth or contemplated
in the Prospectus as supplemented or amended as of the Closing Date.
E. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which
its ownership or lease of property or the conduct of its business
requires such qualification, and has all power and authority necessary
to own or hold its properties, to conduct the business in which it is
engaged and to enter into and perform its obligations under this
Agreement, the Pooling and Servicing Agreement, the Indemnification
Agreement, the Insurance Agreement, and the Purchase Agreement, and to
cause the Class A-2 Certificates to be issued.
F. There are no actions, proceedings or investigations pending
before or threatened by any court, administrative agency or other
tribunal to which the Company is a party or of which any of its
properties is the
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<PAGE> 5
subject (a) which if determined adversely to the Company would have a
material adverse effect on the business or financial condition of the
Company, (b) which asserts the invalidity of this Agreement, the
Insurance Agreement, the Pooling and Servicing Agreement, the
Indemnification Agreement, the Purchase Agreement, or the Certificates,
(c) which seeks to prevent the issuance of the Certificates or the
consummation by the Company of any of the transactions contemplated by
the Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement or this Agreement, as
the case may be, or (d) which might materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, the Pooling and Servicing Agreement, the Insurance
Agreement, the Indemnification Agreement, the Purchase Agreement, this
Agreement or the Certificates.
G. This Agreement has been, and the Pooling and Servicing
Agreement, the Indemnification Agreement, the Insurance Agreement, and
the Purchase Agreement when executed and delivered as contemplated
hereby and thereby will have been, duly authorized, executed and
delivered by the Company, and this Agreement constitutes, and the
Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement and the Purchase Agreement when executed and
delivered as contemplated herein, will constitute, legal, valid and
binding instruments enforceable against the Company in accordance with
their respective terms, subject as to enforceability to (x) applicable
bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditors' rights generally, (y) general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law), and (z) with respect to rights of indemnity under
this Agreement, the Indemnification Agreement and limitations of public
policy under applicable securities laws.
H. The execution, delivery and performance of this Agreement,
the Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement and the Purchase Agreement by the Company and
the consummation of the transactions contemplated hereby and thereby,
and the issuance and delivery of the Certificates do not and will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
the Company is a party, by which the Company is bound or to which any
of the property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or by-laws of the Company
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its properties or assets.
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<PAGE> 6
I. Arthur Andersen LLP are independent public accountants with
respect to the Company as required by the Securities Act and the Rules
and Regulations.
J. The direction by the Company to the Trustee to execute,
authenticate, issue and deliver the Class A-2 Certificates has been
duly authorized by the Company, and assuming the Trustee has been duly
authorized to do so, when executed, authenticated, issued and delivered
by the Trustee in accordance with the Pooling and Servicing Agreement,
the Class A-2 Certificates will be validly issued and outstanding and
will be entitled to the benefits provided by the Pooling and Servicing
Agreement.
K. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of
the United States is required for the issuance of the Class A-2
Certificates and the sale of the Class A-2 Certificates to the
Underwriter, or the consummation by the Company of the other
transactions contemplated by this Agreement, the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification Agreement and
the Purchase Agreement, except such consents, approvals,
authorizations, registrations or qualifications as may be required
under State securities or Blue Sky laws in connection with the purchase
and distribution of the Class A-2 Certificates by the Underwriters or
as have been obtained.
L. The Company possesses all material licenses, certificates,
authorities or permits issued by the appropriate State, Federal or
foreign regulatory agencies or bodies necessary to conduct the business
now conducted by it and as described in the Prospectus, and the Company
has not received notice of any proceedings relating to the revocation
or modification of any such license, certificate, authority or permit
which if decided adversely to the Company would, singly or in the
aggregate, materially and adversely affect the conduct of its business,
operations or financial condition.
M. At the time of execution and delivery of the Pooling and
Servicing Agreement, the Company will: (i) have good title to the
interest in the Mortgage Loans conveyed by the Affiliated Originators,
free and clear of any lien, mortgage, pledge, charge, encumbrance,
adverse claim or other security interest (collectively, "Liens"); (ii)
not have assigned to any person any of its right, title or interest in
the Mortgage Loans, in the Purchase Agreement, in the Pooling and
Servicing Agreement or in the Class A-2 Certificates being issued
pursuant thereto; and (iii) have the power and authority to sell its
interest in the Mortgage Loans to the Trustee and to sell the Class A-2
Certificates to the Underwriters. Upon execution and delivery of the
Pooling and Servicing Agreement by the Trustee, the Trustee will have
acquired beneficial ownership of all of the Company's right, title and
interest in and to the Mortgage Loans. Upon
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<PAGE> 7
delivery to the Underwriter of the Class A-2 Certificates, the
Underwriter will have good title to the Class A-2 Certificates, free of
any Liens.
N. As of the opening of business on September 1, 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. Neither the Company nor the Trust created by the Pooling
and Servicing Agreement is an "investment company" within the meaning
of such term under the Investment Company Act of 1940 (the "1940 Act")
and the rules and regulations of the Commission thereunder.
P. At the Closing Date, the Class A-2 Certificates and the
Pooling and Servicing Agreement will conform in all material respects
to the descriptions thereof contained in the Prospectus.
Q. At the Closing Date, the Class A-2 Certificates shall have
been rated in the highest rating category by at least two nationally
recognized rating agencies.
R. Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of this Agreement,
the Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement and the Class A-2
Certificates have been paid or will be paid at or prior to the Closing
Date.
S. At the Closing Date, each of the representations and
warranties of the Company set forth in the Pooling and Servicing
Agreement will be true and correct in all material respects.
Any certificate signed by an officer of the Company and delivered to
the Underwriter or counsel for the Underwriter in connection with an offering of
the Class A-2 Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section I are made.
Section II. Purchase and Sale. The commitment of the Underwriter to
purchase the Class A-2 Certificates pursuant to this Agreement shall be deemed
to have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth. The
Company agrees to instruct the Trustee to issue and agrees to sell to the
Underwriter, and the Underwriter agrees (except as provided in Sections X and XI
hereof) to purchase from the Company the aggregate initial principal amount of
Class A-2 Certificates set forth on Schedule A, at the purchase price set forth
in Schedule A.
Section III. Delivery and Payment. Delivery of and payment for the
Class A-2 Certificates to be purchased by the Underwriter shall be made at the
offices of
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Dewey Ballantine LLP, 1301 Sixth Avenue, New York, New York 10019, or at such
other place as shall be agreed upon by the Underwriter and the Company at 10:00
A.M. New York City time on September 23, 1998 or at such other time or date as
shall be agreed upon in writing by the Underwriter and the Company. Payment
shall be made to the Company by wire transfer of same day funds payable to the
account of the Company. Delivery of the Offered Certificates shall be made to
the account of the Underwriter against payment of the purchase price thereof.
The Class A-2 Certificates shall be in such denominations and registered in such
names as the Underwriter may request in writing at least two business days prior
to the Closing Date. The Class A-2 Certificates will be made available for
examination by the Underwriter no later than 2:00 p.m. New York City time on
business day prior to the Closing Date.
Section IV. Offering by the Underwriter. It is understood that, subject
to the terms and conditions hereof, the Underwriter proposes to offer the Class
A-2 Certificates for sale to the public as set forth in the Prospectus.
Section V. Covenants of the Company. The Company agrees as follows:
A. To prepare the Prospectus in a form approved by the
Underwriter and to file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than the Commission's close of business on
the second business day following the execution and delivery of this
Agreement; to make no further amendment or any supplement to the
Registration Statement or to the Prospectus prior to the Closing Date
except as permitted herein; to advise the sentative, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish the Underwriter with copies thereof; to file promptly
all reports and any definitive proxy or information statements required
to be filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
the Prospectus and, for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Class A-2
Certificates, to promptly advise the Underwriter of its receipt of
notice of the issuance by the Commission of any stop order or of: (i)
any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus; (ii) the suspension of the qualification
of the Class A-2 Certificates for offering or sale in any jurisdiction;
(iii) the initiation of or threat of any proceeding for any such
purpose; (iv) any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information. In the event of the issuance of any stop order
or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification, the
Company promptly shall use its best efforts to obtain the withdrawal of
such order or suspension.
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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 Class A-2 Certificates, and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such same
period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus
in order to comply with the Securities Act or the Exchange Act, the
Company shall notify the Underwriter and, upon the Underwriter's
request, shall file such document and prepare and furnish without
charge to the Underwriters 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 Class A-2 Certificates at any time nine months or
more after the Effective Time, upon the request of the Underwriter but
at the expense of the Underwriter, the Company shall prepare and
deliver to the Underwriter as many copies as the Underwriter may
reasonably request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Securities Act.
D. To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Underwriter,
be required by the Securities Act or requested by the Commission.
E. Prior to filing with the Commission any (i) Preliminary
Prospectus, (ii) amendment to the Registration Statement or supplement
to the Prospectus, or document incorporated by reference in the
Prospectus, or (iii) Prospectus pursuant to Rule 424 of the Rules and
Regulations, to
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<PAGE> 10
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 Class A-2
Certificates as soon as practicable, but in any event not later than 90
days after the close of the period covered thereby, a statement of
earnings of the Trust (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158) and covering a
period of at least twelve consecutive months beginning not later than
the first day of the first fiscal quarter following the Closing Date.
G. To use its best efforts, in cooperation with the
Underwriter, to qualify the Class A-2 Certificates for offering and
sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Underwriter may designate,
and maintain or cause to be maintained such qualifications in effect
for as long as may be required for the distribution of the Class A-2
Certificates. The Company will file or cause the filing of such
statements and reports as may be required by the laws of each
jurisdiction in which the Class A-2 Certificates have been so
qualified.
H. Not, without the Underwriter's prior written consent, to
publicly offer or sell or contract to sell any mortgage pass-through
securities, collateralized mortgage obligations or other similar
securities representing interests in or secured by other
mortgage-related assets originated or owned by the Company for a period
of 5 business days following the commencement of the offering of the
Class A-2 Certificates to the public.
I. So long as the Class A-2 Certificates shall be outstanding,
to deliver to the Underwriter as soon as such statements are furnished
to the Trustee: (i) the annual statement as to compliance delivered to
the Trustee pursuant to Section 8.16 of the Pooling and Servicing
Agreement; (ii) the annual statement of a firm of independent public
accountants furnished to the Trustee pursuant to Section 8.17 of the
Pooling and Servicing Agreement; and (iii) the Monthly Statement
furnished to the Certificateholders pursuant to Section 7.8 of the
Pooling and Servicing Agreement.
J. To apply the net proceeds from the sale of the Class A-2
Certificates in the manner set forth in the Prospectus.
Section VI. Conditions to the Underwriter's Obligations. The
obligations of the Underwriter to purchase the Class A-2 Certificates pursuant
to this Agreement are subject to: (i) the accuracy on and as of the Closing Date
of the representations and warranties on the part of the Company herein
contained; (ii) the
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performance by the Company of all of their respective obligations hereunder; and
(iii) the following conditions as of the Closing Date:
A. The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission. Any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus shall have been complied with.
B. The Underwriter shall not have discovered and disclosed to
the Company on or prior to the Closing Date that the Registration
Statement or the Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact or omits to state a fact which,
in the opinion of Dewey Ballantine 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 this Agreement, the Pooling
and Servicing Agreement, the Purchase Agreement, the Insurance
Agreement, the Indemnification Agreement, the Class A-2 Certificates,
the Registration Statement and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all respects to counsel for the
Underwriter, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.
D. The Underwriter shall have received the favorable opinion
of Dewey Ballantine LLP, special counsel to the Company with respect to
the following items, dated the Closing Date, to the effect that:
1. The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, and is qualified to do business in each state necessary to
enable it to perform its obligations as Sponsor under the Pooling and
Servicing Agreement. The Company has the requisite power and authority
to execute and deliver, engage in the transactions contemplated by, and
perform and observe the conditions of, this Agreement, the Insurance
Agreement, the Pooling and Servicing Agreement, the Indemnification
Agreement and the Purchase Agreement.
2. This Agreement, the Certificates, the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification Agreement and
the Purchase Agreement have been duly and validly authorized, executed
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and delivered by the Company, all requisite corporate action having
been taken with respect thereto, and each (other than the Certificates)
constitutes the valid, legal and binding agreement of the Company.
3. Neither the transfer of the Mortgage Loans to the Trust,
the issuance or sale of the Certificates nor the execution, delivery or
performance by the Company of the Pooling and Servicing Agreement, this
Agreement, the Insurance Agreement, the Indemnification Agreement or
the Purchase Agreement (A) conflicts or will conflict with or results
or will result in a breach of, or constitutes or will constitute a
default under, (i) any term or provision of the certificate of
incorporation or bylaws of the Company; (ii) any term or provision of
any material agreement, contract, instrument or indenture, to which the
Company is a party or is bound and known to such counsel; or (iii) any
order, judgment, writ, injunction or decree of any court or
governmental agency or body or other tribunal having jurisdiction over
the Company and known to such counsel; or (B) results in, or will
result in the creation or imposition of any lien, charge or encumbrance
upon the Trust Estate or upon the Class A-2 Certificates, except as
otherwise contemplated by the Pooling and Servicing Agreement.
4. The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment with respect to
each Mortgage is sufficient to fully transfer to the Trustee for the
benefit of the Owners all right, title and interest of the Company in
the Note and Mortgage, as noteholder and mortgagee or assignee thereof,
subject to any exceptions set forth in such opinion, and will be
sufficient to permit the Trustee to avail itself of all protection
available under applicable law against the claims of any present or
future creditors of the Company and to prevent any other sale,
transfer, assignment, pledge or other encumbrance of the Mortgage Loans
by the Company from being enforceable.
5. No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental agency
or body or other tribunal is required under the laws of the State of
New York, for the execution, delivery and performance of the Pooling
and Servicing Agreement, this Agreement, the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement or the offer,
issuance, sale or delivery of the Class A-2 Certificates or the
consummation of any other transaction contemplated thereby by the
Company, except such which have been obtained.
6. There are no actions, proceedings or investigations, to
such counsel's knowledge, pending or threatened against the Company
before any court, governmental agency or body or other tribunal (i)
asserting the invalidity of the Pooling and Servicing Agreement, the
Insurance Agreement, the Indemnification Agreement, this Agreement, the
Purchase
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Agreement or the Class A-2 Certificates, (ii) seeking to prevent the
issuance of the Certificates or the consummation of any of the
transactions contemplated by the Pooling and Servicing Agreement, the
Insurance Agreement, the Indemnification Agreement, or this Agreement,
(iii) which would materially and adversely affect the performance by
the Company of obligations under, or the validity or enforceability of,
the Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, the Class A-2 Certificates, the Purchase
Agreement or this Agreement or (iv) that would adversely affect the
status of the Trust Estate as a "real estate mortgage investment
conduit" ("REMIC") as such term is defined in the Internal Revenue Code
of 1986, as amended.
7. To the best of the knowledge of such counsel, the
Commission has not issued any stop order suspending the effectiveness
of the Registration Statement or any order directed to any prospectus
relating to the Class A-2 Certificates (including the Prospectus), and
has not initiated or threatened any proceeding for that purpose.
8. The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which such
counsel need express no opinion), including the Incorporated Documents,
as of the date on which the Registration Statement was declared
effective and as of the date hereof, comply as to form in all material
respects with the requirements of the 1933 Act and the rules and
regulations thereunder and the Exchange Act and the rules and
regulations thereunder, and such counsel does not know of any amendment
to the Registration Statement required to be filed, or of any
contracts, indentures or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement which has not been filed or
described as required.
9. Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the registration of
the Trust created by such Pooling and Servicing Agreement under the
Investment Company Act of 1940 is presently required.
10. The statements in the Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES," "THE POOLING AND SERVICING
AGREEMENT" and the statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE CERTIFICATES," to the extent such
statements purport to summarize certain provisions of the Class A-2
Certificates or of the Pooling and Servicing Agreement, are fair and
accurate in all material respects.
11. The statements in the Prospectus and Prospectus Supplement
set forth under the captions "ERISA CONSIDERATIONS," "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," and the statements in the
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Prospectus set forth under the caption "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS AND RELATED MATTERS," to the extent that they constitute
matters of federal, New York or California law, or federal, New York or
California legal conclusions provide a fair and accurate summary of
such law or conclusions.
12. Assuming that (a) the Trustee causes the Trust created
under the Pooling and Servicing Agreement to elect, as the Trustee has
covenanted to do in the Pooling and Servicing Agreement, to be treated
as a REMIC and (b) the parties to the Pooling and Servicing Agreement
comply with the terms thereof, the Trust will be treated as a REMIC,
the Class A-2 Certificates issued pursuant to the Pooling and Servicing
Agreement will be treated as the "regular interests" in the REMIC and
the Class R Certificates issued pursuant to the Pooling and Servicing
Agreement will be treated as the sole "residual interest" in the REMIC.
The Trust will not be subject to tax upon its income or assets by any
taxing authority of the State of New York or New York City or of the
State of California (except that no opinion need be expressed with
respect to any minimum tax).
13. Such opinion shall also relate to comparable matters with
respect to the Affiliated Originators and Advanta Mortgage Holding
Company.
14. No information has come to such counsel's attention which
causes them to believe that the Prospectus (other than the financial
statement and other financial and statistical data contained therein,
as to which such counsel need express no opinion), as of the date
thereof, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
15. Such other matters as the Underwriter may reasonably
request.
In rendering its opinions, the counsel described above may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinions may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Company.
E. The 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 Company.
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F. The Class A-2 Certificates shall have received the ratings
listed on Schedule A hereto, 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 Class A-2 Certificates. 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 Company a
certificate, signed by the president, a senior vice president or a vice
president of the Company, dated the Closing Date, to the effect that
the signer of such certificate has carefully examined the Registration
Statement, the Pooling and Servicing Agreement and this Agreement and
that, to the best of his or her knowledge based upon reasonable
investigation:
1. the representations and warranties of the Company in this
Agreement, as of the Closing Date, and in the Pooling and Servicing
Agreement, the Insurance Agreement, the Indemnification Agreement, the
Purchase Agreement and in all related agreements, as of the date
specified in such agreements, are true and correct, and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date;
2. there are no actions, suits or proceedings pending, or to
the best of such officer's knowledge, threatened against or affecting
the Company which if adversely determined, individually or in the
aggregate, would be reasonably likely to adversely affect the Company's
obligations under the Pooling and Servicing Agreement, the Insurance
Agreement, the Indemnification Agreement, this Agreement or the
Purchase Agreement in any material way; and no merger, liquidation,
dissolution or bankruptcy of the Company is pending or contemplated;
3. the information contained in the Registration Statement and
the Prospectus relating to the Company, the Mortgage Loans or the
servicing procedures of it or its affiliates or subservicer is true and
accurate in all material respects and nothing has come to his or her
attention that would lead such officer to believe that the Registration
Statement or Prospectus includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein not misleading;
4. the information set forth in the Schedule of Mortgage Loans
required to be furnished pursuant to the Pooling and Servicing
Agreement is true and correct in all material respects;
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5. there has been no amendment or other document filed
affecting the articles of incorporation or bylaws of the Company since
June 30, 1998, and no such amendment has been authorized. No event has
occurred since June 30, 1998, which has affected the good standing of
the Company under the laws of the State of Delaware;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
June 30, 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 Company or in any rating accorded any securities of the
Company, if any, by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the 1933 Act;
and
8. each person who, as an officer or representative of the
Company, signed or signs the Registration Statement, the Pooling and
Servicing Agreement, the Insurance Agreement, the Indemnification
Agreement, this Agreement, or any other document delivered pursuant
hereto, on the date of such execution, or on the Closing Date, as the
case may be, in connection with the transactions described in the
Pooling and Servicing Agreement, the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement and this Agreement
was, at the respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
The Company shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and bylaws which
are in full force and effect on the date of such certificate and a certified
true copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
H. The Underwriter shall have received a favorable opinion of
counsel to the Trustee, dated the Closing Date and in form and
substance satisfactory to the Underwriter, to the effect that:
1. the Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States and has the power and authority to enter into and to take
all actions required of it under the Pooling and Servicing Agreement;
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<PAGE> 17
2. the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the Pooling and
Servicing Agreement constitutes the legal, valid and binding obligation
of the Trustee, enforceable against the Trustee in accordance with its
terms, except as enforceability thereof may be limited by (A)
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally, as such laws would
apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Trustee, and (B) general principles of
equity regardless of whether such enforcement is sought in a proceeding
at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part
of the Trustee in connection with its execution and delivery of the
Pooling and Servicing Agreement or the performance of its obligations
thereunder;
4. the Class A-2 Certificates have been duly executed,
authenticated and delivered by the Trustee; and
5. the execution and delivery of, and performance by the
Trustee of its obligations under, the Pooling and Servicing Agreement
do not conflict with or result in a violation of any statute or
regulation applicable to the Trustee, or the charter or bylaws of the
Trustee, or to the best knowledge of such counsel, any governmental
authority having jurisdiction over the Trustee or the terms of any
indenture or other agreement or instrument to which the Trustee is a
party or by which it is bound.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Company, the Trustee and
public officials. Such opinion may also assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Trustee.
I. The Underwriter shall have received from the Trustee a
certificate, signed by the President, a senior vice president or a vice
president of the Trustee, dated the Closing Date, to the effect that
each person who, as an officer or representative of the Trustee, signed
or signs the Class A-2 Certificates, the Pooling and Servicing
Agreement or any other document delivered pursuant hereto, on the date
hereof or on the Closing Date, in connection with the transactions
described in the Pooling and Servicing Agreement was, at the respective
times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and
the signatures of such persons appearing on such documents are their
genuine signatures.
J. The Policy relating to the Class A-2 Certificates shall
have been duly executed and issued at or prior to the Closing Date and
shall
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conform in all material respects to the description thereof in the
Prospectus.
K. The Underwriter shall have received a favorable opinion of
in-house counsel to the Insurer, dated the Closing Date and in form and
substance satisfactory to counsel for the Underwriter, to the effect
that:
1. The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New
York. The Insurer is validly licensed 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, the Indemnification Agreement, and such agreement has been
duly executed and delivered and constitute the legal, valid and binding
obligations of the Insurer enforceable in accordance with its terms
except that the enforcement of the Insurance Agreement, the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity and by public policy considerations relating to
indemnification for securities law violations.
4. No consent, approval, authorization or order of any state
or federal court or governmental agency or body is required on the part
of the Insurer, the lack of which would adversely affect the validity
or enforceability of the Policy; to the extent required by applicable
legal requirements that would adversely affect validity or
enforceability of the Policy, the form of the Policy has been filed
with, and approved by, all governmental authorities having jurisdiction
over the Insurer in connection with the Policy.
5. The Policy is not required to be registered under the
Securities Act.
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<PAGE> 19
6. The information set forth under the caption "THE
CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" in the
Prospectus forming a part of the Registration Statement, insofar as
such statements constitute a description of the Policy, accurately
summarizes the Policy.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Company, the Trustee, the
Insurer and public officials. Such opinion may assume the due authorization,
execution and delivery of the instruments and documents referred to therein by
the parties thereto other than the Insurer.
L. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating, if any,
accorded the Insurer's claims paying ability by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of the 1933 Act.
M. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating, if any,
accorded the Company or in any rating accorded any securities of the
Company, if any, by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the 1933 Act.
N. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since December
31, 1997, of (A) the Company and its subsidiaries or (B) the Insurer,
that is in the Underwriter's judgment material and adverse and that
makes it in the Underwriter's judgment impracticable to market the
Offered Certificates 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 Insurance Agreement, or
the Indemnification Agreement;
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<PAGE> 20
2. Each person who as an officer or representative of the
Insurer, signed or signs the Policy, the Insurance Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection with
the transactions described in this Agreement was, at the respective
times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and
the signatures of such persons appearing on such documents are their
genuine signatures;
3. The information contained in the Prospectus under the
captions "THE CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE
INSURER" is true and correct in all material respects and does not omit
to state a material fact with respect to the description of the Policy
or the ability of the Insurer to meet its payment obligations under the
Policy;
4. The tables regarding the Insurer's capitalization set forth
under the heading "THE CERTIFICATE INSURER" present fairly the
capitalization of the Insurer as of June 30, 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 June 30, 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.
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<PAGE> 21
7. to the best knowledge of such officer, since June 30, 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 bylaws,
all of which are in full force and effect on the date of such certificate.
P. The Underwriter shall have received from Dewey Ballantine
LLP, special counsel to the Company, a survey in form and substance
satisfactory to the Underwriter, indicating the requirements of
applicable local law which must be complied with in order to transfer
and service the Mortgage Loans pursuant to the Pooling and Servicing
Agreement and the Company 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
Certificates, the Prospectus and such other related matters as the
Underwriter shall reasonably require.
R. The Underwriter and counsel for the Underwriter shall have
received copies of any opinions of counsel to the Company supplied to
the Trustee relating to matters with respect to the Certificates. Any
such opinions shall be dated the Closing Date and addressed to the
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, certificates and documents as the Underwriter may
reasonably have requested not fewer than three (3) full business days
prior to the Closing Date.
T. There shall have been executed and delivered by Advanta
Mortgage Holding Company, the corporate parent of the Company ("AMHC"),
a letter agreement with the Trustee and the Insurer, pursuant to which
AMHC agrees to become jointly and severally liable with the Company and
Advanta Mortgage Corp. USA for the payment of the Joint and Several
Obligations (as defined in such letter agreement).
U. There shall have been executed and delivered by AMHC, the
corporate parent of the Company, a letter agreement with the
Underwriter substantially in the form of Exhibit A hereto.
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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 Offered Certificates as herein contemplated
and related proceedings or in order to evidence the accuracy and
completeness of any of the representations and warranties, or the
fulfillment of any of the conditions, herein contained, and all
proceedings taken by the Company in connection with the issuance and
sale of the Class A-2 Certificates as herein contemplated shall be
satisfactory in form and substance to the Underwriter and counsel for
the Underwriter.
W. Subsequent to the execution and delivery of this Agreement
none of the following shall have occurred: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange
or the over-the-counter market shall have been suspended or minimum
prices shall have been established on either of such exchanges or such
market by the Commission, by such exchange or by any other regulatory
body or governmental authority having jurisdiction; (ii) a banking
moratorium shall have been declared by Federal or state authorities;
(iii) the United States shall have become engaged in hostilities, there
shall have been an escalation of hostilities involving the United
States or there shall have been a declaration of a national emergency
or war by the United States; or (iv) there shall have occurred such a
material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets of the United States shall be such) as to make it, in the
judgment of the Underwriter, impractical or inadvisable to proceed with
the public offering or delivery of the Class A-2 Certificates on the
terms and in the manner contemplated in the Prospectus.
X. The Class A-2 Certificates shall have received the ratings
set forth on Schedule A hereto.
If any condition specified in this Section VI shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriter by notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriter.
Section VII. Payment of Expenses. The Company agrees to pay: (a) the
costs incident to the authorization, issuance, sale and delivery of the Class
A-2 Certificates and any taxes payable in connection therewith; (b) the costs
incident to the
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<PAGE> 23
preparation, printing and filing under the Securities Act of the Registration
Statement and any amendments and exhibits thereto; (c) the costs of distributing
the Registration Statement as originally filed and each amendment thereto and
any post-effective amendments thereof (including, in each case, exhibits), the
Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus or any document incorporated by reference therein, all as provided in
this Agreement; (d) the costs of reproducing and distributing this Agreement;
(e) the fees and expenses of qualifying the Class A-2 Certificates under the
securities laws of the several jurisdictions as provided in Section V(G) hereof
and of preparing, printing and distributing a Blue Sky Memorandum and a Legal
Investment Survey (including related fees and expenses of counsel to the
Underwriter); (f) any fees charged by securities rating services for rating the
Class A-2 Certificates; and (g) all other costs and expenses incident to the
performance of the obligations of the Company; provided that, except as provided
in this Section VII, the Underwriter shall pay its own costs and expenses,
including the costs and expenses of Dewey Ballantine LLP, any transfer taxes on
the Class A-2 Certificates which it may sell and the expenses of advertising any
offering of the Class A-2 Certificates made by the Underwriter.
If this Agreement is terminated by the Underwriter, in accordance with
the provisions of Section VI or Section X, the Company shall reimburse the
Underwriter for its reasonable out-of-pocket expenses, including fees and
disbursements of Dewey Ballantine LLP, counsel for the Underwriter.
Section VIII. Indemnification and Contribution.
A. The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Securities Act from and against
any and all loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of
the Class A-2 Certificates), to which the Underwriter or any such
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus
or (iv) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading and shall reimburse the Underwriter and each such
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Underwriter or such controlling person in
connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that
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the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Prospectus, the
Prospectus or the Registration Statement in reliance upon and in
conformity with written information (including any Derived Information)
furnished to the Company through the 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 Class A-2
Certificates to any person by the Underwriter if the Underwriter failed
to send or give a copy of the Prospectus, as amended or supplemented,
to that person within the time required by the Securities Act, and the
untrue statement or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact in the
Preliminary Prospectus was corrected in the Prospectus, unless such
failure resulted from non-compliance by the Company with Section V(C).
For purposes of the last proviso to the immediately preceding sentence,
the term "Prospectus" shall not be deemed to include the documents
incorporated therein by reference, and the Underwriter shall not be
obligated to send or give any supplement or amendment to any document
incorporated therein by reference to any person other than a person to
whom the Underwriter had delivered such incorporated document or
documents in response to a written request therefor. The foregoing
indemnity agreement is in addition to any liability which the Company
may otherwise have to the Underwriter or any controlling person of the
Underwriter.
B. The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act against
any and all loss, claim, damage or liability, or any action in respect
thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus
or (iv) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
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<PAGE> 25
furnished to the Company by or on behalf of the Underwriter
specifically for inclusion therein, and shall reimburse the Company and
any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Company or any director, officer or
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity agreement
is in addition to any liability which the Underwriter may otherwise
have to the Company or any such director, officer or controlling
person.
C. Promptly after receipt by any indemnified party under this
Section VIII of notice of any claim or the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section VIII, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section VIII except to the extent it has been materially
prejudiced by such failure; and provided, further, that the failure to
notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this
Section VIII.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section VIII for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same
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<PAGE> 26
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 VIII consist of the Underwriter or any of its controlling persons, or by
the Company, if the indemnified parties under this Section VIII consist of the
Company or any of the Company's directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section VIII(A) and (B), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
D. The Underwriter agrees to deliver to the Company no later
than the date on which the Prospectus Supplement is required to be
filed pursuant to Rule 424 with a copy of its Derived Information
(defined below) for filing with the Commission on Form 8-K.
E. The Underwriter agrees, assuming all Company-Provided
Information (defined below) is accurate and complete in all material
respects, to indemnify and hold harmless the Company, each of the
Company's officers and directors and each person who controls the
Company within the meaning of Section 15 of the Securities Act against
any and all losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of
a material fact contained in the Derived Information provided by 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
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<PAGE> 27
are incurred. The obligations of the Underwriter under this Section
VIII(E) shall be in addition to any liability which the Underwriter may
otherwise have.
The procedures set forth in Section VIII(C) shall be equally applicable
to this Section VIII(E).
F. For purposes of this Section VIII, the term "Derived
Information" means such portion, if any, of the information delivered
to the Company pursuant to Section VIII(D) for filing with the
Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into account
information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
(iii) is of the type of information defined as Collateral term
sheets, Structural term sheets or Computational Materials (as
such terms are interpreted in the No-Action Letters).
"Company-Provided Information" means any computer tape furnished to the
Underwriter by the Company concerning the Mortgage Loans comprising the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the SEC staff's response thereto, were
publicly available February 17, 1995). The term "Collateral term sheet" as used
herein includes any subsequent Collateral term sheet that reflects a substantive
change in the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder letter" and
together with the PSA Letter, the "No-Action Letters") of Brown & Wood on behalf
of Kidder, Peabody & Co., Inc. (which letter, and the SEC staff's response
thereto, were publicly available May 20, 1994).
G. If the indemnification provided for in this Section VIII
shall for any reason be unavailable to or insufficient to hold harmless
an indemnified party under Section VIII(A) or (B) in respect of any
loss, claim, damage or liability, or any action in respect thereof,
referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriter on the
other from the offering of the Class A-2 Certificates or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law or if the indemnified party failed to give the notice required
under Section VIII(C), in such proportion as is appropriate
27
<PAGE> 28
to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and
the Underwriter on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations.
The relative benefits of the Underwriter and the Company 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 Company shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by the Underwriter, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission and other equitable
considerations.
The Company and the Underwriter agree that it would not be just and
equitable if contributions pursuant to this Section VIII(G) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section VIII(G) shall be deemed to include, for purposes of this Section
VIII(G), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
In no case shall the Underwriter be responsible for any amount in
excess of the underwriting discount applicable to the Class A-2 Certificates
purchased by the Underwriter hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
H. The Underwriter confirms that the information set forth (i)
in the Prospectus Supplement relating to market making and (ii) in the
fourth paragraph under the caption "Underwriting" in the Prospectus
Supplement, together with the Derived Information, is correct and
constitutes the only information furnished in writing to the Company by
or on behalf of the Underwriter specifically for inclusion in the
Registration Statement and the Prospectus.
Section IX. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or
28
<PAGE> 29
on behalf of the Underwriter or controlling persons thereof, or by or on behalf
of the Company and shall survive delivery of any Class A-2 Certificates to the
Underwriter.
Section X. Termination of Agreement. The Underwriter may terminate this
Agreement immediately upon notice to the Company, at any time at or prior to the
Closing Date if any of the events or conditions described in Section VI(W) of
this Agreement shall occur and be continuing. In the event of any such
termination, the covenant set forth in Section V(G), the provisions of Section
VII, the indemnity agreement set forth in Section VIII, and the provisions of
Sections IX and XIII shall remain in effect.
Section XI. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A. if to the Underwriter, shall be delivered or sent by mail,
telex or facsimile transmission to Salomon Smith Barney Inc., 7 World
Trade Center, New York, New York, 10048, Attention: General Counsel
(fax: (212) 783-1446);
B. if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to Advanta Mortgage Conduit Services,
Inc. 16875 West Bernardo Drive, San Diego, California 92127 Attention:
General Counsel (Fax: 619-674-3592).
Section XII. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriter and
the Company, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the representations, warranties, indemnities and agreements contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control the Underwriter within the meaning of Section 15 of the
Securities Act, and for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section XII, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
Section XIII. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriter contained in this
Agreement, or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Certificates and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
Section XIV. Definition of the Term "Business Day". For purposes of
this Agreement, "Business Day" means any day on which the New York Stock
Exchange, Inc. is open for trading.
29
<PAGE> 30
Section XV. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND SHALL BE
CONSTRUED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section XVI. Counterparts. This Agreement may be executed in
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
Section XVII. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
30
<PAGE> 31
If the foregoing correctly sets forth the agreement between the Company
and the Underwriter, please indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By:
--------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
SALOMON SMITH BARNEY INC.
By:
---------------------------------
Name:
Title:
[Underwriting Agreement]
31
<PAGE> 32
SCHEDULE A
<TABLE>
<CAPTION>
CLASS REQUIRED RATINGS INITIAL PRINCIPAL COUPON PURCHASE PRICE TO
S&P/MOODY'S AMOUNT OF OFFERED UNDERWRITER
CERTIFICATES PURCHASED DISREGARDING
BY UNDERWRITER ACCRUED INTEREST
<S> <C> <C> <C> <C>
Class A-2 AAA /Aaa $500,000,000 Floating 99.80%
</TABLE>
<PAGE> 1
EXHIBIT 4.1
8
<PAGE> 2
EXECUTION COPY
POOLING AND SERVICING AGREEMENT
Relating to
ADVANTA MORTGAGE LOAN TRUST
1998-3
Among
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
Dated as of September 1, 1998
1
<PAGE> 3
TABLE OF CONTENTS
(Not a Part of this Agreement)
Page
i
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Parties..................................................................................................1
Recitals.................................................................................................1
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION.............................................................2
Section 1.1. Definitions...........................................................................2
Section 1.2. Use of Words and Phrases.............................................................31
Section 1.3. Captions; Table of Contents..........................................................31
Section 1.4. Opinions.............................................................................31
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST..................................................31
Section 2.1. Establishment of the Trust...........................................................31
Section 2.2. Office...............................................................................31
Section 2.3. Purposes and Powers..................................................................31
Section 2.4. Appointment of the Trustee; Declaration of Trust.....................................31
Section 2.5. Expenses of the Trust................................................................32
Section 2.6. Ownership of the Trust...............................................................32
Section 2.7. Situs of the Trust...................................................................32
Section 2.8. Miscellaneous REMIC Provisions.......................................................32
ARTICLE III.............................................................................................36
Section 3.1. Representations and Warranties of the Sponsor........................................36
Section 3.2. Representations and Warranties of the Master Servicer...............................38
Section 3.3. Representations and Warranties of the Sponsor with Respect to the Mortgage
Loans..............................................................................40
Section 3.4. Covenants of Sponsor to Take Certain Actions with Respect to the Mortgage
Loans In Certain Situations........................................................42
Section 3.5. Conveyance of the Mortgage Loans.....................................................43
Section 3.6. Acceptance by Trustee; Certain Substitutions of Mortgage Loans;
Certification by Trustee...........................................................46
Section 3.7. Cooperation Procedures...............................................................47
Section 3.8. Conveyance of the Subsequent Mortgage Loans..........................................47
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES............................................................50
Section 4.1. Issuance of Certificates.............................................................50
Section 4.2. Sale of Certificates.................................................................50
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS........................................................50
Section 5.1. Terms................................................................................50
Section 5.2. Forms................................................................................51
Section 5.3. Execution, Authentication and Delivery...............................................51
Section 5.4. Registration and Transfer of Certificates............................................51
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates....................................53
Section 5.6. Persons Deemed Owners................................................................54
Section 5.7. Cancellation.........................................................................54
Section 5.8. Limitation on Transfer of Ownership Rights...........................................54
Section 5.9. Assignment of Rights.................................................................55
ARTICLE VI COVENANTS....................................................................................55
Section 6.1. Distributions........................................................................55
Section 6.2. Money for Distributions to be Held in Trust; Withholding.............................55
Section 6.3. Protection of Trust Estate...........................................................56
ii
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
Section 6.4. Performance of Obligations...........................................................56
Section 6.5. Negative Covenants...................................................................57
Section 6.6. No Other Powers......................................................................57
Section 6.7. Limitation of Suits..................................................................57
Section 6.8. Unconditional Rights of Owners to Receive Distributions..............................58
Section 6.9. Rights and Remedies Cumulative.......................................................58
Section 6.10. Delay or Omission Not Waiver........................................................58
Section 6.11. Control by Owners...................................................................59
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES........................................................60
Section 7.1. Collection of Money..................................................................60
Section 7.2. Establishment of Accounts............................................................60
Section 7.3. The Certificate Insurance Policy.....................................................60
Section 7.4. Reserved.............................................................................62
Section 7.5. Flow of Funds........................................................................62
Section 7.6. Investment of Accounts...............................................................64
Section 7.7. Eligible Investments.................................................................65
Section 7.8. Reports by Trustee...................................................................66
Section 7.9. Additional Reports by Trustee........................................................69
Section 7.10. Supplemental Interest Payment Account, Supplement Interest Payments and
Class RS Distribution Account......................................................70
ARTICLE VIII SERVICING AND ADMINISTRATION OF MORTGAGE LOANS.............................................71
Section 8.1. Master Servicer and Sub-Servicers....................................................71
Section 8.2. Collection of Certain Mortgage Loan Payments.........................................73
Section 8.3. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers...................73
Section 8.4. Successor Sub-Servicers..............................................................74
Section 8.5. Liability of Master Servicer.........................................................74
Section 8.6. No Contractual Relationship Between Sub-Servicer and Trustee or the Owners...........74
Section 8.7. Assumption or Termination of Sub-Servicing Agreement by Trustee......................74
Section 8.8. Principal and Interest Account.......................................................75
Section 8.9. Delinquency Advances, Compensating Interest and Servicing Advances...................76
Section 8.10. Purchase of Mortgage Loans..........................................................77
Section 8.11. Maintenance of Insurance............................................................77
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements.........................78
Section 8.13. Realization Upon Defaulted Mortgage Loans...........................................79
Section 8.14. Trustee to Cooperate; Release of Files..............................................80
Section 8.15. Servicing Compensation..............................................................82
Section 8.16. Annual Statement as to Compliance...................................................82
Section 8.17. Annual Independent Certified Public Accountants' Reports............................82
Section 8.18. Access to Certain Documentation and Information Regarding the Mortgage
Loans..............................................................................82
Section 8.19. Assignment of Agreement.............................................................82
Section 8.20. Removal of Master Servicer; Resignation of Master Servicer..........................83
Section 8.21. Inspections by the Certificate Insurer and the Trustee; Errors and
Omissions Insurance................................................................86
Section 8.22. Merger, Conversion, Consolidation or Succession to Business of Master
Servicer...........................................................................87
Section 8.23. Notices of Material Events..........................................................87
ARTICLE IX TERMINATION OF TRUST.........................................................................88
Section 9.1. Termination of Trust.................................................................88
Section 9.2. Termination Upon Option of Master Servicer...........................................88
Section 9.3. Termination Upon Loss of REMIC Status................................................89
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
Section 9.4. Disposition of Proceeds..............................................................90
Section 9.5. Netting of Amounts...................................................................90
ARTICLE X THE TRUSTEE...................................................................................90
Section 10.1. Certain Duties and Responsibilities.................................................90
Section 10.2. Removal of Trustee for Cause........................................................92
Section 10.3. Certain Rights of the Trustee.......................................................93
Section 10.4. Not Responsible for Recitals or Issuance of Certificates............................93
Section 10.5. May Hold Certificates...............................................................94
Section 10.6. Money Held in Trust.................................................................94
Section 10.7. No Lien for Fees....................................................................94
Section 10.8. Corporate Trustee Required; Eligibility.............................................94
Section 10.9. Resignation and Removal; Appointment of Successor...................................94
Section 10.10. Acceptance of Appointment by Successor Trustee.....................................96
Section 10.11. Merger, Conversion, Consolidation or Succession to Business of the
Trustee............................................................................96
Section 10.12. Reporting; Withholding.............................................................96
Section 10.13. Liability of the Trustee...........................................................96
Section 10.14. Appointment of Co-Trustee or Separate Trustee......................................97
ARTICLE XI MISCELLANEOUS................................................................................98
Section 11.1. Compliance Certificates and Opinions................................................98
Section 11.2. Form of Documents Delivered to the Trustee..........................................99
Section 11.3. Acts of Owners......................................................................99
Section 11.4. Notices, etc., to Trustee..........................................................100
Section 11.5. Notices and Reports to Owners; Waiver of Notices...................................100
Section 11.6. Rules by Trustee and Sponsor.......................................................101
Section 11.7. Successors and Assigns.............................................................101
Section 11.8. Severability.......................................................................101
Section 11.9. Benefits of Agreement..............................................................101
Section 11.10. Legal Holidays....................................................................101
Section 11.11. Governing Law.....................................................................101
Section 11.12. Counterparts......................................................................101
Section 11.13. Usury.............................................................................101
Section 11.14. Amendment.........................................................................102
Section 11.15. REMIC Status; Taxes...............................................................103
Section 11.16. Additional Limitation on Action and Imposition of Tax.............................104
Section 11.17. Appointment of Tax Matters Person.................................................104
Section 11.18. The Certificate Insurer...........................................................104
Section 11.19. Maintenance of Records............................................................105
Section 11.20. Notices...........................................................................105
</TABLE>
SCHEDULE I -- SCHEDULES OF MORTGAGE LOANS
EXHIBIT A -- FORM OF CERTIFICATES
EXHIBIT B -- CONTENTS OF MORTGAGE LOAN FILE
EXHIBIT C -- FORM OF CERTIFICATE RE: MORTGAGE LOANS PREPAID IN FULL
AFTER THE CUT-OFF DATE
EXHIBIT D -- FORM OF TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
EXHIBIT E -- FORM OF CERTIFICATION
EXHIBIT F -- FORM OF DELIVERY ORDER
EXHIBIT G -- FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
EXHIBIT H -- POWER OF ATTORNEY
EXHIBIT I -- FORM OF MONTHLY REPORT
iv
<PAGE> 7
EXHIBIT J -- FORM OF MASTER SERVICER'S TRUST RECEIPT
EXHIBIT K -- FORM OF SUBSEQUENT TRANSFER AGREEMENT
v
<PAGE> 8
POOLING AND SERVICING AGREEMENT, relating to ADVANTA MORTGAGE
LOAN TRUST 1998-3, dated as of September 1, 1998, by and among ADVANTA MORTGAGE
CONDUIT SERVICES, INC., a Delaware corporation, in its capacity as Sponsor of
the Trust (the "Sponsor"), ADVANTA MORTGAGE CORP. USA, a Delaware corporation,
in its capacity as master servicer (the "Master Servicer"), and BANKERS TRUST
COMPANY OF CALIFORNIA, N.A., a national banking association, in its capacity as
trustee (the "Trustee").
WHEREAS, the Sponsor wishes to establish a trust, and to
provide for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Master Servicer has agreed to service the
Mortgage Loans, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done;
WHEREAS, Bankers Trust Company of California, N.A. is willing
to serve in the capacity of Trustee hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Sponsor, the Master Servicer and the
Trustee hereby agree as follows:
1
<PAGE> 9
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.1. DEFINITIONS. For all purposes of this Agreement,
the following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Accepted Servicing Practices": The Master Servicer's normal
servicing practices in servicing and administering mortgage loans for its own
account, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Properties are located and will give due consideration to the
Certificateholders' reliance on the Master Servicer.
"Account": Any account established in accordance with Sections
7.2, 7.10 or 8.8 hereof each of which shall be established at a Designated
Depository Institution.
"Accrual Period": With respect to any Payment Date, the period
commencing on the immediately preceding Payment Date (or the Startup Day in the
case of the first Payment Date) to and including the day prior to the current
Payment Date. All calculations of interest on the Class A Certificates will be
made on the basis of the actual number of days elapsed in the related Accrual
Period in a year of 360 days.
"Addition Notice": With respect to the transfer of Subsequent
Mortgage Loans to the Trust pursuant to Section 3.8(b) of this Agreement,
notice, which shall be given not later than five Business Days prior to the
related Subsequent Transfer Date, of the Sponsor's designation of Subsequent
Mortgage Loans to be sold to the Trust and the aggregate Loan Balance and the
weighted average Coupon Rate of such Subsequent Mortgage Loans. Such Addition
Notice shall include an electronic data file in a form agreeable to the Trustee,
the Certificate Insurer and the Master Servicer.
"Advanta Mortgage Files": For any Mortgage Loan identified on
the related Schedule of Mortgage Loans with an "A" code, the items listed as
(a), (b), (c), (d) and (f) on Exhibit B hereto.
"Advanta Servicing Fee": With respect to any Mortgage Loan
that is not an Unaffiliated Originator Loan, an amount retained by the Master
Servicer or by any successor thereto as compensation for servicing and
administration duties relating to such Mortgage Loan pursuant to Section 8.15
hereof and equal to 0.50% per annum of the then outstanding Loan Balance of such
Mortgage Loan as of the opening of business on the first day of each calendar
month payable on a monthly basis.
"Affiliated Originators": Advanta Mortgage Corp. USA, a
Delaware corporation, Advanta Mortgage Corp. Midatlantic, a Pennsylvania
corporation, Advanta Mortgage Corp. Midatlantic II, a Pennsylvania corporation,
Advanta Mortgage Corp. Midwest, a Pennsylvania corporation, Advanta Mortgage
Corp. of New Jersey, a New Jersey corporation, Advanta Mortgage Corp. Northeast,
a New York corporation, Advanta National Bank, a national banking association,
Advanta Finance Corp., a Nevada corporation.
"Aggregate Certificate Principal Balance": As of any date of
determination thereof, the sum of the then outstanding Certificate Principal
Balance of the Class A Certificates.
2
<PAGE> 10
"Agreement": This Pooling and Servicing Agreement, as it may
be amended from time to time, and including the Exhibits hereto.
"AMHC": Advanta Mortgage Holding Company, a Delaware
corporation and the corporate parent of Advanta Mortgage Corp. USA, and the
indirect corporate parent of Advanta Mortgage Conduit Services, Inc.
"Appraised Value": The appraised value of any Property based
upon the appraisal or other valuation made at the time of the origination of the
related Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase
money mortgage, the sales price of the Property at such time of origination, if
such sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person
who is authorized to act for such Person in matters relating to this Agreement,
and whose action is binding upon such Person and, with respect to the Trustee,
the Sponsor and the Master Servicer, initially including those individuals whose
names appear on the lists of Authorized Officers delivered on the Startup Day.
"Balance Ratio": The ratio of the sum of the Loan Balances of
the Mortgage Loans in Group I to the sum of the Loan Balances of the Mortgage
Loans in Group II.
"Balloon Loan": Any Mortgage Loan which has an amortization
schedule which extends beyond its maturity date, resulting in a relatively large
unamortized principal balance due in a single payment at maturity.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York, the
State of California or in the city in which the principal corporate trust office
of the Trustee is located, are authorized or obligated by law or executive order
to be closed.
"Capitalized Interest Account": The Capitalized Interest
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Certificate": Any one of the Class A Certificates or Class R
Certificates, each representing the interests and the rights described in this
Agreement.
"Certificate Account": The Certificate Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Certificate Insurance Policy": The certificate guaranty
insurance policy dated September 23, 1998 issued by the Certificate Insurer to
the Trustee for the benefit of the Owners of the Class A Certificates.
"Certificate Insurer": MBIA Insurance Corporation.
"Certificate Insurer Default": Any one of the following events
shall have occurred and be continuing:
(a) The Certificate Insurer shall have failed to make a
payment required under the Certificate Insurance Policy;
3
<PAGE> 11
(b) The Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code or any other similar Federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar Federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) A court of competent jurisdiction, the New York Department
of Insurance, or other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Certificate Insurer or for all or any material portion
of its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Certificate Insurer (or the taking of
possession of all or any material portion of the property of the Certificate
Insurer).
"Certificate Principal Balance": As of the Startup Day as to
each of the following Classes of Certificates, the Certificate Principal
Balances thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Class A-1 Certificates = $500,000,000
Class A-2 Certificates = $500,000,000
</TABLE>
As of any Payment Date with respect to the Class A-1 Certificates and the Class
A-2 Certificates, the Class A-1 Certificate Principal Balance and the Class A-2
Certificate Principal Balance, respectively, as of such Payment Date. The Class
R Certificates do not have a Certificate Principal Balance.
"Civil Relief Act": The Soldiers and Sailors' Civil Relief Act
of 1940, as amended from time to time.
"Civil Relief Act Shortfalls": Interest shortfalls resulting
from the application of the Civil Relief Act.
"Class": Any Class of the Class A Certificates or the Class R
Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates
or the Class A-2 Certificates.
"Class A Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A Certificates less any amounts actually distributed on such Class A
Certificates with respect to the Class A Principal Distribution Amount pursuant
to Section 7.5(d) hereof with respect to principal thereon on all prior Payment
Dates.
"Class A Distribution Amount": The sum of the Class A-1
Distribution Amount and the Class A-2 Distribution Amount.
"Class A Interest Carry Forward Amount": With respect to any
Payment Date, the Class A-1 Interest Carry Forward Amount and the Class A-2
Interest Carry Forward Amount.
"Class": All of the Class A-1 Certificates, all of the Class
A-2 Certificates or all of the Class R Certificates.
4
<PAGE> 12
"Class A-1 Available Funds Cap Rate": As of any Payment Date,
an amount, expressed as a per annum rate, equal to (a)(i) the aggregate amount
of interest due and collected (or advanced) on all of the Mortgage Loans in
Group I for the related Remittance Period minus (ii) the aggregate of the
Servicing Fee and the Trustee's Fee and the premiums due to the Certificate
Insurer, in each case relating to Group I, on such Payment Date and minus (iii)
commencing on the seventh Payment Date following the Closing Date, an amount
equal to 0.75% per annum times the aggregate Principal Balance of the Mortgage
Loans in Group I as of the beginning of such related Remittance Period, divided
by (b) the aggregate Principal Balance of the Mortgage Loans in Group I
immediately prior to such Payment Date calculated on the basis of a 360 day year
and the actual number of days elapsed.
"Class A-1 Certificate": Any Certificate designated as a
"Class A-1 Certificate" on the face thereof, in the form of Exhibit A-1 hereto.
The Class A-1 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance thereof.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-1 Certificates less any amounts actually distributed with respect to the
Class A-1 Certificates pursuant to Section 7.5(e) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-1 Current Interest": With respect to any Payment
Date, an amount equal to the amount of interest accrued on the Class A-1
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-1 Pass-Through Rate provided, that such
amount will be reduced by the Class A-1 Certificates' pro rata share of any
Civil Relief Act Shortfalls relating to Group I during the related Remittance
Period.
"Class A-1 Distribution Account": The Class A-1 Distribution
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Class A-1 Distribution Amount": With respect to the Class A-1
Certificates for any Payment Date, the amount actually distributed to the Owners
of the Class A-1 Certificates on such Payment Date, which amount shall be the
lesser of (x) the Class A-1 Formula Distribution Amount for such Payment Date
and (y) the amount (including any applicable portion of any Group I Insured
Payment) available for distribution on account of the Class A-1 Certificates for
such Payment Date.
"Class A-1 Formula Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date, the sum of (x) the Class A-1
Interest Distribution Amount for such Payment Date and (y) the Class A-1
Principal Distribution Amount for such Payment Date.
"Class A-1 Formula Interest Shortfall": As defined in Section
7.10(b) hereof.
"Class A-1 Formula Pass-Through Rate": As of any Payment Date,
the rate described in clause (i) of the definition of "Class A-1 Pass-Through
Rate".
"Class A-1 Full Distribution Amount": With respect to any
Payment Date, the sum of (x) the Class A-1 Full Interest Distribution Amount for
such Payment Date and (y) the Class A-1 Principal Distribution Amount for such
Payment Date.
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"Class A-1 Full Interest Distribution Amount": With respect to
any Payment Date, the Class A-1 Interest Distribution Amount for such Payment
Date calculated using the lesser of (i) the Group I Maximum Rate for such
Payment Date and (ii) the Class A-1 Formula Pass-Through Rate for such Payment
Date, rather than the Class A-1 Pass-Through Rate for such Payment Date plus, if
the full amount of the Class A-1 Formula Interest Shortfall, if any, was not
funded on any prior Payment Date and remains unpaid on such Payment Date, such
amount, together with interest thereon (from the Payment Date on which such
Class A-1 Formula Interest Shortfall was calculated) at the lesser of (i) the
Class A-1 Formula Pass-Through Rate or (ii) the Group I Maximum Rate for such
Payment Date.
"Class A-1 Interest Carry-Forward Amount": With respect to any
Payment Date, the amount, if any, by which (x) the Class A-1 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class A-1
Certificates on such immediately preceding Payment Date on account of the Class
A-1 Interest Distribution Amount.
"Class A-1 Interest Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date the sum of:
(i) the Class A-1 Current Interest; and
(ii) the Class A-1 Interest Carry-Forward Amount.
"Class A-1 Pass-Through Rate": The Class A-1 Pass-Through Rate
will be equal to the lesser of (i)(a) with respect to any Payment Date which
occurs on or prior to the Step-Up Payment Date, the London interbank offering
rate for one-month United States dollar deposits ("LIBOR") plus 0.23% per annum
or (b) with respect to any Payment Date thereafter, LIBOR plus 0.46% per annum
and (ii) the Class A-1 Available Funds Cap Rate for such Payment Date.
"Class A-1 Principal Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date, an amount equal to the lesser of
(x) the Group I Principal Distribution Amount as of such Payment Date and (y)
the Class A-1 Certificate Principal Balance as of such Payment Date.
"Class A-1 Supplemental Interest Amount": With respect to any
Payment Date the excess, if any, of (x) the Class A-1 Full Interest Distribution
Amount over (y) the Class A-1 Pass Through Rate.
"Class A-1 Unfunded Interest Advance": As defined in Section
7.10(b) hereof.
"Class A-2 Available Funds Cap Rate": As of any Payment Date,
amount, expressed as a per annum rate, equal to (a)(i) the aggregate amount of
interest due and collected (or advanced) on all of the Mortgage Loans in Group
II for the related Remittance Period minus (ii) the aggregate of the Servicing
Fee and the Trustee's Fee and the premiums due to the Certificate Insurer, in
each case relating to Group II, on such Payment Date and minus (iii) commencing
on the seventh Payment Date following the Closing Date, an amount equal to 0.75%
per annum times the aggregate Principal Balance of the Mortgage Loans in Group
II as of the beginning of such related Remittance Period, divided by (b) the
aggregate Principal Balance of the Mortgage Loans in Group II immediately prior
to such Payment Date calculated on the basis of a 360 day year and the actual
number of days elapsed.
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"Class A-2 Certificate": Any Certificate designated as a
"Class A-2 Certificate" on the face thereof, in the form of Exhibit A-2 hereto.
The Class A-2 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance thereof.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-2 Certificates less any amounts actually distributed with respect to the
Class A-2 Certificates pursuant to Section 7.5(f) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-2 Current Interest": With respect to any Payment
Date, an amount equal to the sum of (i) the amount of interest accrued on the
Class A-2 Certificate Principal Balance immediately prior to such Payment Date
during the related Accrual Period at the Class A-2 Pass-Through Rate provided,
that such amount will be reduced by the Class A-2 Certificates' pro rata share
of any Civil Relief Act Shortfalls relating to Group II during the related
Remittance Period.
"Class A-2 Distribution Account": The Class A-2 Distribution
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Class A-2 Distribution Amount": With respect to the Class A-2
Certificates for any Payment Date, the amount actually distributed to the Owners
of the Class A-2 Certificates on such Payment Date, which amount shall be the
lesser of (x) the Class A-2 Formula Distribution Amount for such Payment Date
and (y) the amount (including any applicable portion of any Group II Insured
Payment) available for distribution on account of the Class A-2 Certificates for
such Payment Date.
"Class A-2 Formula Interest Shortfall": As defined in Section
7.10(b) hereof.
"Class A-2 Formula Pass-Through Rate": As of any Payment Date,
the rate described in clause (i) of the definition of "Class A-2 Pass-Through
Rate".
"Class A-2 Full Distribution Amount": With respect to any
Payment Date, the sum of (x) the Class A-2 Full Interest Distribution Amount for
such Payment Date and (y) the Class A-2 Principal Distribution Amount for such
Payment Date.
"Class A-2 Full Interest Distribution Amount": With respect to
any Payment Date, the Class A-2 Interest Distribution Amount for such Payment
Date calculated using the Class A-2 Formula Pass-Through Rate for such Payment
Date rather than the Class A-2 Pass-Through Rate for such Payment Date but not
including any Class A-2 Formula Interest Shortfalls which were not funded on any
prior Payment Date.
"Class A-2 Interest Carry Forward Amount": With respect to
any Payment Date, the amount, if any, by which (x) the Class A-2 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class A-2
Certificates on such immediately preceding Payment Date on account of the Class
A-2 Interest Distribution Amount.
"Class A-2 Interest Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date the sum of:
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<PAGE> 15
(i) Class A-2 Current Interest
(ii) the Class A-2 Interest Carry-Forward Amount.
"Class A-2 Pass-Through Rate": The Class A-2 Pass-Through Rate
will be equal to the lesser of (i)(a) with respect to any Payment Date which
occurs on or prior to the Step-Up Payment Date, LIBOR plus 0.30% per annum or
(b) with respect to any Payment Date thereafter, LIBOR plus 0.60% per annum and
(ii) the Class A-2 Available Funds Cap Rate for such Payment Date.
"Class A-2 Principal Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, an amount equal to the lesser of
(x) the Group II Principal Distribution Amount as of such Payment Date and (y)
the Class A-2 Certificate Principal Balance as of such Payment Date.
"Class A-2 Supplemental Interest Amount": With respect to any
Payment Date the excess, if any, of (x) the Class A-2 Full Interest Distribution
Amount over (y) the Class A-2 Pass Through Rate.
"Class A-2 Unfunded Interest Advance": As defined in Section
7.10(b) hereof.
"Class R Certificate": Any one of the Certificates designated
on the face thereof as a Class R Certificate, substantially in the form annexed
hereto as Exhibit A-3, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein, and evidencing an interest
designated as the "residual interest" in the Upper-Tier REMIC for the purposes
of the REMIC Provisions.
"Class RS Supplemental Interest Payment Account": As defined
in Section 7.10(a) hereof.
"Clean-Up Call Date": The first Remittance Date following the
date on which the aggregate Loan Balances of all Mortgage Loans has declined to
10% or less of the aggregate principal balance of the Mortgage Loans as of the
Startup Day.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Combined Loan-to-Value Ratio": With respect to any First
Mortgage Loan, the percentage equal to the Original Principal Amount of the
related Note divided by the Appraised Value of the related Property and with
respect to any Second Mortgage Loan or Third Mortgage Loan, the percentage equal
to (a) the sum of (i) the remaining principal balance, as of origination of the
Second Mortgage Loan or Third Mortgage Loan, as appropriate, of the Senior Lien
note(s) relating to such Second Mortgage Loan or Third Mortgage Loan, as
appropriate, and (ii) the Original Principal Amount of the Note relating to such
Second Mortgage Loan or Third Mortgage Loan, as appropriate, divided by (b) the
Appraised Value.
"Commitment": The Commitment to Issue a Certificate Guaranty
Insurance Policy dated September 22, 1998 and issued by the Certificate Insurer.
"Compensating Interest": As defined in Section 8.9(b) hereof.
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<PAGE> 16
"Conduit Acquisition Trust": The trust described in the
Pooling and Servicing Agreement dated as of May 1, 1997 among the Sponsor,
Bankers Trust Company of California, N.A., as trustee, Advanta Mortgage Corp.
USA, as the master servicer, and the "Borrowers" named therein.
"Conduit Mortgage Files": For any Mortgage Loan identified on
the related Schedule of Mortgage Loans with a "B" code, the items listed on
Exhibit B hereto.
"Control Party": Until the last sentence of Section 11.18
hereof is applicable and so long as no Certificate Insurer Default has occurred
and is continuing, the Certificate Insurer, and thereafter, the Trustee.
"Coupon Rate": The rate of interest borne by each Note.
"Cut-Off Date": The date as of which Initial Mortgage Loans
are transferred and assigned to the Trust, the opening of business, September 1,
1998.
"Date-of-Payment Loan": Any Mortgage Loan as to which,
pursuant to the Note relating thereto, interest is computed and charged to the
Mortgagor at the Coupon Rate on the outstanding principal balance of such Note
based on the number of days elapsed between receipt of the Mortgagor's last
payment through receipt of the Mortgagor's most current payment.
"Definitive Certificates": Certificates issued in definitive
form without coupons.
"Delinquency Advance": As defined in Section 8.9(a) hereof.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as
Exhibit F hereto and delivered by the Sponsor to the Trustee on the Startup Day
pursuant to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to each
Account, an institution whose deposits are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund of the FDIC, the long-term deposits of
which shall be rated A2 or better by Moody's or A or better by Standard & Poor's
and in the highest short-term rating category for Moody's, and Standard & Poor's
unless otherwise approved in writing by the Trustee. The Certificate Insurer,
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
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<PAGE> 17
company, or (v) approved in writing by the Trustee, the Certificate Insurer,
Moody's and Standard & Poor's and, in each case acting or designated by the
Master Servicer as the depository institution for the Principal and Interest
Account; provided, however, that any such institution or association shall have
combined capital, surplus and undivided profits of at least $100,000,000.
Notwithstanding the foregoing, an Account may be held by an institution
otherwise meeting the preceding requirements except that the only applicable
rating requirement shall be that the unsecured and uncollateralized debt
obligations thereof shall be rated Baa3 or better by Moody's or BBB or better by
Standard & Poor's if such institution has trust powers and the Principal and
Interest Account is held by such institution in its corporate trust department.
"Designated Residual Owner": Advanta Conduit Receivables, Inc.
"Determination Date": As to each Payment Date, the third
Business Day preceding such Payment Date or such earlier day as shall be agreed
to by the Certificate Insurer and the Trustee.
"Direct Participant" or "DTC Participant" means any
broker-dealer, bank or other financial institution for which the Depository
holds Class A Certificates from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall
have the meaning set forth from time to time in the definition thereof at
Section 860E(e)(5) of the Code (or any successor statute thereto) and applicable
to the Trust.
"Document Delivery Requirements": The Sponsor's obligations to
deliver certain legal documents, to prepare and record certain Mortgage
assignments or to deliver certain opinions relating to Mortgage assignments, in
each case with respect to the Mortgage Loans and as set forth in Section 3.5(c)
hereof.
"Eligible Investments": Those investments so designated
pursuant to Section 7.7 hereof.
"Event of Default": Any event described in clauses (a) or (b)
of Section 8.20 hereof.
"Fannie Mae": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"File": The documents delivered to the Trustee pursuant to
Section 3.5 hereof pertaining to a particular Mortgage Loan and any additional
documents required to be added to the Advanta Mortgage File or Conduit Mortgage
File, as appropriate, pursuant to this Agreement.
"Final Determination": As defined in Section 9.3(a) hereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Property.
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<PAGE> 18
"Freddie Mac": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
"Full Interest Distribution Amount": The sum of (i) the Class
A-1 Full Interest Distribution Amount and (ii) the Class A-2 Full Interest
Distribution Amount.
"Funding Period": The period commencing on the Startup Day and
ending on the earliest to occur of (i) the date on which the Group I Pre-Funded
Amount (exclusive of any investment earnings) is less than $100,000, (ii) the
date on which any Event of Default occurs and (iii) November 25, 1998.
"Gross Margin": With respect to each Mortgage Loan with an
adjustable rate, the fixed percentage amount set forth in the related Mortgage
Note which amount is added to the Index in accordance with the terms of the
related Mortgage Note to determine, on each Interest Rate Adjustment Date, the
Coupon Rate for such Mortgage Loan, subject to any maximum.
"Group": Group I or Group II.
"Group I": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group I, including
any Qualified Replacement Mortgages delivered in replacement thereof.
"Group I Amortized Subordinated Requirement": As defined in
the Insurance Agreement.
"Group I Available Funds": As defined in Section 7.3(a)
hereof.
"Group I Capitalized Interest Requirement": $271,405.
"Group I Certificates": The Class A-1 Certificates.
"Group I Deficiency Amount": As defined in Section 7.3(b)(i)
hereof.
"Group I Formula Distribution Amount": With respect to the
Group I Certificates for any Payment Date, the Class A-1 Formula Distribution
Amount for such Payment Date.
"Group I Initial Specified Subordinated Amount": As defined in
the Insurance Agreement.
"Group I Insured Distribution Amount": As to the Class A-1
Certificates and any Payment Date, the sum of (x) the Group I Interest
Distribution Amount for such Payment Date, (y) the Group I Subordination
Deficit, if any, as of such Payment Date and (z) the Group I Preference Amount.
"Group I Insured Payment": With respect to any Payment Date,
an amount equal to the sum of (i) the Group I Deficiency Amount and (ii) any
Group I Preference Amount.
"Group I Interest Distribution Amount": As of any Payment Date
the Class A-1 Interest Distribution Amount for such Payment Date.
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"Group I Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all interest collected by the Master
Servicer during the related Remittance Period with respect to the Mortgage Loans
in Group I, (ii) all Delinquency Advances made by the Master Servicer on such
Remittance Date with respect to Group I, (iii) all Compensating Interest paid by
the Master Servicer on such Remittance Date with respect to Group I, net of
amounts allowed to be retained pursuant to Section 8.8(c) , (iv) the portion of
the Loan Purchase Price and the Substitution Amounts relating to interest on the
Mortgage Loans in Group I, (v) the portion of any Net Liquidation Proceeds
relating to interest with respect to Group I, and (vi) the proceeds of any
liquidation of the Trust Estate related to Group I (to the extent such proceeds
relate to interest on Group I).
"Group I Maximum Rate": With respect to any Payment Date, an
amount, expressed as a per annum rate, equal to (a)(i) the aggregate amount of
interest due and collected (or advanced) on all of the Mortgage Loans in Group I
for the related Remittance Period (using such Mortgage Loans' maximum life
coupon rate) minus (ii) the aggregate of the Servicing Fee, the Premium Amount
and the Trustees' Fee, in each case relating to Group I, divided by (b) the
aggregate Loan Balance of the Mortgage Loans in Group I as of the beginning of
such Remittance Period, calculated on the basis of a 360 day year and the actual
numbers of days elapsed.
"Group I Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group I Interest Remittance Amount for such Remittance
Date and (ii) the Group I Principal Remittance Amount for such Remittance Date.
"Group I Net Weighted Average Coupon Rate": With respect to
any Payment Date, the weighted average of the Coupon Rates of the Mortgage Loans
in Group I (weighted by the Loan Balances of the Mortgage Loans in Group I),
less the sum of (A) 0.50% per annum and (B) the Trustee's Fees related to Group
I.
"Group I Original Pool Balance": The sum of (x) the aggregate
principal balances of the Initial Mortgage Loans in Group I as of the related
Cut-Off-Date and (y) the Group I Original Pre-Funded Amount, which sum is
$108,562,000.
"Group I Original Pre-Funded Amount": The amount deposited in
the Pre-Funding Account on the Startup Day, from the proceeds of the sale of the
Group I Certificates, which amount is $108,562,000.
"Group I Preference Amount": Any amount previously distributed
to an Owner on the Group I Certificates that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy pursuant to the
United States Bankruptcy Code (11 U.S.C.), as amended from time to time, in
accordance with a final nonappealable order of a court having competent
jurisdiction.
"Group I Pre-Funded Amount": With respect to any
Determination Date, the amount on deposit in the Pre-Funding Account and
available for the purchase of the Subsequent Mortgage Loans.
"Group I Pre-Funding Earnings": With respect to the November
25, 1998 Payment Date, the actual investment earnings related to Group I earned
during the period September 23, 1998 through November 25, 1998 (inclusive) on
the Pre-Funding Account during such period as calculated by the Trustee
pursuant to Section 3.8(e) hereof.
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"Group I Premium Amount": As to any Payment Date, the product
of (x) one-twelfth of the Premium Percentage and (y) the Class A-1 Certificate
Principal Balance on such Payment Date (after taking into account any
distributions of the Group I Principal Distribution Amount to be made on such
Payment Date).
"Group I Principal Distribution Amount": With respect to the
Group I Certificates for any Payment Date, the lesser of:
(i) the excess of (a) the sum, as of such Payment Date, of (x)
the Group I Total Available Funds and (y) any Group I Insured Payment
over (b) the Group I Interest Distribution Amount; and
(ii) the sum, without duplication, of:
(a) the principal actually collected by the Master Servicer
with respect to the Mortgage Loans in Group I during the related Remittance
Period,
(b) the Loan Balance of each Mortgage Loan in Group I that
either was repurchased by an Originator or by the Sponsor or purchased by the
Master Servicer or any Sub-Servicer on the related Remittance Date, to the
extent such Loan Balance is actually received by the Trustee,
(c) any Substitution Amounts delivered by the Sponsor or an
Originator on the related Remittance Date in connection with a substitution of a
Mortgage Loan in Group I, to the extent such Substitution Amounts are actually
received by the Trustee,
(d) all Net Liquidation Proceeds actually collected by the
Master Servicer with respect to the Mortgage Loans in Group I during the related
Remittance Period (to the extent such Net Liquidation Proceeds relate to
principal),
(e) the amount of any Group I Subordination Deficit for such
Payment Date,
(f) the proceeds received by the Trustee of any termination of
Group I (to the extent such proceeds relate to principal),
(g) the amount of any Subordination Increase Amount with
respect to Group I for such Payment Date, to the extent of any Net Monthly
Excess Cashflow available for such purpose;
minus
(h) the amount of any Subordination Reduction Amount with
respect to Group I for such Payment Date.
"Group I Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Master Servicer with respect to Mortgage Loans in Group I during the related
Remittance Period, (ii) the Loan Balance of each such Mortgage Loan in Group I
that either was repurchased by an Originator or by the Sponsor or purchased by
the Master Servicer on such Remittance Date, to the extent such Loan Balance was
actually deposited in the Principal and Interest Account, (iii) any Substitution
Amounts delivered by the Sponsor in connection with a substitution of a Mortgage
Loan in Group I, to the extent
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<PAGE> 21
such Substitution Amounts were actually deposited in the Principal and Interest
Account on such Remittance Date, and (iv) all Net Liquidation Proceeds actually
collected by the Master Servicer with respect to such Mortgage Loans in Group I
during the related Remittance Period (to the extent such Liquidation Proceeds
related to principal) net of amounts allowed to be retained pursuant to Section
8.8(c) and (v) the proceeds of any liquidation of the Trust Estate related to
Group I (to the extent such proceeds relate to principal).
"Group I Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group I Insured Payments previously received by the Trustee
and all Group I Preference Amounts previously paid by the Certificate Insurer
and in each case not previously repaid to the Certificate Insurer pursuant to
Section 7.5(c)(iv)(C) or Section 7.5(c)(iv)(D) hereof plus (ii) interest accrued
on each such Group I Insured Payment not previously repaid calculated at the
Late Payment Rate from the date the Trustee received the related Group I Insured
Payment and (y)(i) any amounts then due and owing to the Certificate Insurer
relating to Class A-1 Certificates under the Insurance Agreement plus (ii)
interest on such amounts at the Late Payment Rate. The Certificate Insurer shall
notify the Trustee and the Sponsor of the amount of any Group I Reimbursement
Amount.
"Group I Specified Subordinated Amount": As defined in the
Insurance Agreement.
"Group I Subordinated Amount": As of any Payment Date, the
excess, if any, of (x) the aggregate Loan Balances of the Mortgage Loans in
Group I as of the close of business on the last day of the related Remittance
Period over (y) the Class A-1 Certificate Principal Balance as of such Payment
Date (after taking into account the payment of the Group I Principal
Distribution Amount on such Payment Date except for any portion thereof related
to a Group I Insured Payment).
"Group I Subordination Deficit": With respect to Group I as of
any Payment Date, the amount, if any, by which (x) the aggregate Class A-1
Certificate Principal Balance , after taking into account the payment of the
Group I Principal Distribution Amount (calculated for this purpose only without
regard to clause (ii)(f) thereof) on such Payment Date, exceeds (y) the
aggregate Loan Balances of the Mortgage Loans in Group I as of the close of
business on the last day of the prior Remittance Period and including any
amounts held by the Trustee in the Pre-Funding Account.
"Group I Supplemental Interest Payment Account": As defined in
Section 7.10(a) hereof.
"Group I Total Available Funds": As defined in Section 7.3(a)
hereof.
"Group I Total Monthly Excess Spread": With respect to Group I
as of any Payment Date, the excess of (i) the interest which is collected on the
Mortgage Loans in Group I during the prior Remittance Period, minus the related
Servicing Fees, minus the Trustee's Fees, plus any Delinquency Advances and
Compensating Interest paid by the Master Servicer with respect to Group I with
respect to such Remittance Period over (ii) the sum of (x) the interest due on
the Group I Certificates on such Payment Date and (y) the Group I Premium Amount
for such Payment Date.
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"Group II": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group II,
including any Qualified Replacement Mortgages delivered in replacement thereof.
"Group II Amortized Subordinated Amount Requirement": As
defined in the Insurance Agreement.
"Group II Available Funds": As defined in Section 7.3(a)(ii)
hereof.
"Group II Certificates": The Class A-2 Certificates.
"Group II Deficiency Amount": As defined in Section
7.3(b)(ii).
"Group II Formula Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, the sum of (x) the Class A-2
Interest Distribution Amount for such Payment Date and (y) the Class A-2
Principal Distribution Amount for such Payment Date.
"Group II Initial Specified Subordinated Amount": As defined
in the Insurance Agreement.
"Group II Insured Distribution Amount": As to the Class A-2
Certificates for any Payment Date, the sum of (x) the Class A-2 Interest
Distribution Amount for such Payment Date, (y) the Group II Subordination
Deficit as of such Payment Date and (z) the Group II Preference Amount.
"Group II Insured Payment": With respect to any Payment Date,
an amount equal to the sum of (i) the Group II Deficiency Amount and (ii) any
Class A-2 Preference Amount.
"Group II Interest Distribution Amount": As of any Payment
Date, the Class A-2 Interest Distribution Amount for such Payment Date.
"Group II Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all interest collected by the Master
Servicer during the related Remittance Period with respect to the Mortgage Loans
in Group II, (ii) all Delinquency Advances made by the Master Servicer on such
Remittance Date with respect to Group II, (iii) all Compensating Interest paid
by the Master Servicer on such Remittance Date with respect to Group II net of
amounts allowed to be retained in Section 8.8(c), (iv) the portion of the Loan
Purchase Price and the Substitution Amounts relating to the Mortgage Loans in
Group II and, (v) the portion of any Net Liquidation Proceeds relating to
interest with respect to Group II, and (vi) the proceeds of any liquidation of
the Trust Estate related to Group II (to the extent such proceeds relate to
interest on Group II).
"Group II Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group II Interest Remittance Amount for such Remittance
Date and (ii) the Group II Principal Remittance Amount for such Remittance Date.
"Group II Net Weighted Average Coupon Rate": With respect to
any Payment Date, the weighted average of the Coupon Rates of the Mortgage Loans
in Group II (weighted by the Loan Balances of the Mortgage Loans in Group II),
less the sum of (A) 0.50% per annum and (B) the Trustee's Fee related to Group
II.
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"Group II Preference Amount": Any amount previously
distributed to an Owner on the Group II Certificates that is recoverable and
sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code (11 U.S.C.), as amended from time
to time, in accordance with a final nonappealable order of a court having
competent jurisdiction.
"Group II Premium Amount": As to any Payment Date, the product
of (x) one-twelfth of the Premium Percentage and (y) the Class A-2 Certificate
Principal Balance on such Payment Date (after taking into account any
distributions of the Group II Principal Distribution Amount on such Payment
Date).
"Group II Principal Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, the lesser of:
(i) the excess of (a) the sum, as of such Payment Date, of (x)
the Group II Total Available Funds and (y) any Group II Insured Payment
over (b) the Group II Interest Distribution Amount; and
(ii) the sum, without duplication, of:
(a) the principal actually collected by the Master Servicer
with respect to the Mortgage Loans in Group II during the related Remittance
Period,
(b) the Loan Balance of each Mortgage Loan in Group II that
either was repurchased by an Originator or by the Sponsor or purchased by the
Master Servicer or any Sub-Servicer on the related Remittance Date, to the
extent such Loan Balance is actually received by the Trustee,
(c) any Substitution Amounts delivered by the Sponsor on the
related Remittance Date in connection with a substitution of a Mortgage Loan in
Group II, to the extent such Substitution Amounts are actually received by the
Trustee,
(d) all Net Liquidation Proceeds actually collected by the
Master Servicer with respect to the Mortgage Loans in Group II during the
related Remittance Period (to the extent such Net Liquidation Proceeds relate to
principal),
(e) the amount of any Group II Subordination Deficit for such
Payment Date,
(f) the proceeds received by the Trustee of any termination of
Group II (to the extent such proceeds relate to principal),
(g) the amount of any Subordination Increase Amount with
respect to Group II for such Payment Date, to the extent of any Net Monthly
Excess Cashflow available for such purpose;
minus
(h) the amount of any Subordination Reduction Amount with
respect to Group II for such Payment Date.
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"Group II Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Master Servicer with respect to Mortgage Loans in Group II during the
related Remittance Period, (ii) the Loan Balance of each such Mortgage Loan in
Group II that either was repurchased by an Originator or by the Sponsor or
purchased by the Master Servicer on such Remittance Date, to the extent such
Loan Balance was actually deposited in the Principal and Interest Account, (iii)
any Substitution Amounts delivered by the Sponsor in connection with a
substitution of a Mortgage Loan in Group II, to the extent such Substitution
Amounts were actually deposited in the Principal and Interest Account on such
Remittance Date, (iv) all Net Liquidation Proceeds actually collected by the
Master Servicer with respect to such Mortgage Loans in Group II during the
related Remittance Period (to the extent such Liquidation Proceeds related to
principal) net of amounts allowed to be retained pursuant to Section 8.8(c) and
(v) the proceeds of any liquidation of the Trust Estate related to Group II (to
the extent such proceeds relate to principal).
"Group II Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group II Insured Payments previously received by the Trustee
not previously repaid to the Certificate Insurer pursuant to Sections
7.5(c)(iv)(C) and 7.5(c)(iv)(D) hereof plus (ii) interest accrued on each such
Group II Insured Payment not previously repaid calculated from the date the
Trustee received the related Group II Insured Payment at the Late Payment Rate
applicable to such date and (y)(i) any amounts then due and owing to the
Certificate Insurer relating to the Class A-2 Certificates under the Insurance
Agreement plus (ii) interest on such amounts at the Late Payment Rate. The
Certificate Insurer shall notify the Trustee and the Sponsor of the amount of
any Group II Reimbursement Amount.
"Group II Specified Subordinated Amount": As defined in the
Insurance Agreement.
"Group II Subordinated Amount": As of any Payment Date, the
excess, if any, of (x) the aggregate Loan Balances of the Mortgage Loans in
Group II as of the close of business on the last day of the related Remittance
Period over (y) the Group II Certificate Principal Balance as of such Payment
Date (after taking into account the payment of the Group II Principal
Distribution Amount on such Payment Date except for any portion thereof related
to a Group II Insured Payment).
"Group II Subordination Deficit": With respect to Group II as
of any Payment Date, the amount, if any, by which (x) the Class A-2 Certificate
Principal Balance, after taking into account the payment of the Group II
Principal Distribution Amount (calculated for this purpose only without regard
to clause (ii)(f) thereof) on such Payment Date, exceeds (y) the aggregate Loan
Balances of the Mortgage Loans in Group II as of the close of business on the
last day of the prior Remittance Period.
"Group II Supplemental Interest Payment Account": As defined
in Section 7.10(a) hereof.
"Group II Total Available Funds": As defined in Section
7.3(a)(ii) hereof.
"Group II Total Monthly Excess Spread": With respect to Group
II as of any Payment Date, the difference between (i) the interest which is
collected on the Mortgage Loans in Mortgage Loan Group II during the prior
Remittance Period, minus the related Servicing Fees, minus the Trustee's Fees,
plus any Delinquency Advances and Compensating Interest paid by the Master
Servicer with respect to Group II as of such Remittance Period and (ii) the sum
of (x) the
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interest due on the Class A-2 Certificates at the Class A-2 Pass-Through Rate on
such Payment Date, and (y) the Group II Premium Amount for such Payment Date.
"Group I Underwriters": Salomon Smith Barney Inc., Lehman
Brothers Inc., J.P. Morgan Securities, Inc. and Prudential Securities
Incorporated.
"Group II Underwriter": Salomon Smith Barney Inc.
"Indemnification Agreement": The Indemnification Agreement
dated as of September 10, 1998 among the Certificate Insurer, The Sponsor and
the Underwriters as may be amended from time to time.
"Index": With respect to any adjustable rate Mortgage Note,
the applicable index set forth therein.
"Indirect Participant" shall mean any financial institution
for whom any Direct Participant holds an interest in a Class A Certificate.
"Initial Mortgage Loans" shall mean Mortgage Loans delivered
by the Sponsor on the Startup Day.
"Insurance Agreement": The Insurance and Indemnity Agreement
dated as of September 23, 1998 between the Sponsor, AMHC, the Trustee, the
Master Servicer, and the Certificate Insurer, as it may be amended from time to
time.
"Insurance Policy": Any hazard, title or primary mortgage
insurance policy relating to a Mortgage Loan.
"Insured Payment": The Group I Insured Payment and the Group
II Insured Payment.
"Interest Advance": As defined in Section 7.10(b) hereof.
"Interest Determination Date": With respect to any Accrual
Period for the Class A Certificates, the second London Business Day preceding
the first day of such Accrual Period.
"Interest Rate Adjustment Date": The date on which an
adjustment to the Coupon Rate on a Mortgage Note becomes effective.
"Late Payment Rate": For any Payment Date, means the lesser of
(a) the greater of (x) the per annum rate of interest publicly announced from
time to time by Citibank, N.A. as its prime or base lending rate (any change in
such rate of interest to be effective on the date such change is announced by
Citibank, N.A.), plus 2% per annum and (y) the then applicable highest rate of
interest on the Certificates and (b) the maximum rate permissible under
applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days.
"LIBOR": With respect to any Accrual Period for the Class A
Certificates, the rate determined by the Trustee on the related Interest
Determination Date on the basis of the offered rates of the Reference Banks for
one-month U.S. dollar deposits, as such rates appear on Reuters Screen LIBO Page
(or any successor service thereto), as of 11:00 a.m. (London time) on
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such Interest Determination Date. On each Interest Determination Date, LIBOR for
the related Accrual Period will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of 1/16%.
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the higher of (x) LIBOR as determined on the
previous Interest Determination Date and (y) the Reserve Interest Rate.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A
Mortgage Loan which is purchased from the Trust pursuant to Section 3.3, 3.4,
3.6(b) or 8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the
Master Servicer or any Sub-servicer in connection with the liquidation of any
defaulted Mortgage Loan, such expenses, including, without limitation, legal
fees and expenses, and any unreimbursed Servicing Advances expended by the
Master Servicer or any Sub-servicer pursuant to Section 8.9 with respect to the
related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan,
any amounts (including the proceeds of any Insurance Policy) recovered by the
Master Servicer in connection with such Liquidated Loan, whether through
trustee's sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, the
outstanding principal balance thereof as of the Cut-Off Date or Subsequent
Cut-Off-Date, as the case may be, less any related Principal Remittance Amounts
relating to such Mortgage Loan included in previous related Monthly Remittance
Amounts that were transferred by the Master Servicer or any Sub-servicer to the
Trustee for deposit in the related Certificate Account; provided, however, (x)
that the Loan Balance for any Mortgage Loan which has become a Liquidated Loan
shall be zero as of the first day of the Remittance Period following the
Remittance Period in which such Mortgage Loan becomes a Liquidated Loan, and at
all times thereafter and (y) the Loan Balance "as of the Cut-Off Date" for any
Mortgage Loan originated during the period from the Cut-Off Date to the Startup
Day shall be the original Loan Balance thereof.
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Section 3.3, 3.4,
3.6(b) or 8.10 hereof, an amount equal to the Loan Balance of such Mortgage Loan
as of the date of purchase, plus one month's interest on the outstanding Loan
Balance thereof as of the beginning of the preceding Remittance Period computed
at the Coupon Rate less the Servicing Fee (expressed as an annual percentage
rate), if any, together with, without duplication, the aggregate amount of (i)
all delinquent interest, all Delinquency Advances and Servicing Advances
theretofore made with respect to such Mortgage Loan and not subsequently
recovered from the related Mortgage Loan, (ii) all Delinquency Advances which
the Master Servicer or any Sub-servicer has theretofore failed to remit with
respect to such Mortgage Loan and (iii) any Group I Reimbursement Amount or
Group II Reimbursement Amount relating to the applicable Mortgage Loan Group.
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"London Business Day": A day on which banks are open for
dealing in foreign currency, and exchange in London and New York City.
"Lower-Tier Balance": As to each Class of Lower-Tier Interests
and any Payment Date, the Initial Lower-Tier Balance as set forth in Section
2.8(a) minus all amounts distributed as principal of such Class on previous
Payment Dates pursuant to Section 7.5(d) or (e).
"Lower-Tier Interest 1": The interest of that name established
pursuant to Section 2.8(a) hereof.
"Lower-Tier Interest 2": The interest of that name established
pursuant to Section 2.8(a) hereof.
"Lower-Tier Interest 3": The interest of that name established
pursuant to Section 2.8(a) hereof.
"Lower-Tier Interest 4": The interest of that name established
pursuant to Section 2.8(a) hereof.
"Lower-Tier Interest 5": The interest of that name established
pursuant to Section 2.8(a) hereof.
"Lower-Tier Interest 1 Monthly Interest": With respect to any
Payment Date, the amount of interest accrued on the Lower-Tier Balance of the
Lower-Tier Interest 1 immediately prior to such Payment Date during the related
Accrual Period at the Lower-Tier Interest 1 Pass-Through Rate.
"Lower-Tier Interest 1 Pass-Through Rate": For any Payment
Date, the Group I Net Weighted Average Coupon Rate.
"Lower-Tier Interest 1 Termination Date": The Payment Date on
which the Lower-Tier Balance of Lower-Tier Interest 1 is reduced to zero through
the distribution made in respect of Lower-Tier Interest 1 on such Payment Date.
"Lower-Tier Interest 2 Monthly Interest": With respect to any
Payment Date, the amount of interest accrued on the Lower-Tier Balance of the
Lower-Tier Interest 2 immediately prior to such Payment Date during the related
Accrual Period at the Lower-Tier Interest 2 Pass-Through Rate.
"Lower-Tier Interest 2 Pass-Through Rate": For any Payment
Date, the Group I Net Weighted Average Coupon Rate.
"Lower-Tier Interest 2 Termination Date": The Payment Date on
which the Lower-Tier Balance of Lower-Tier Interest 2 is reduced to zero through
the distribution made in respect of Lower-Tier Interest 2 on such Payment Date.
"Lower-Tier Interest 3 Monthly Interest": With respect to any
Payment Date, the amount of interest accrued on the Lower-Tier Balance of the
Lower-Tier Interest 3 immediately prior to such Payment Date during the related
Accrual Period at the Lower-Tier Interest 3 Pass-Through Rate.
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"Lower-Tier Interest 3 Pass-Through Rate": For any Payment
Date, the Group II Net Weighted Average Coupon Rate.
"Lower-Tier Interest 3 Termination Date": The Payment Date on
which the Lower-Tier Balance of Lower-Tier Interest 3 is reduced to zero through
the distribution made in respect of Lower-Tier Interest 3 on such Payment Date.
"Lower-Tier Interest 4 Monthly Interest": With respect to any
Payment Date, the amount of interest accrued on the Lower-Tier Balance of the
Lower-Tier Interest 4 immediately prior to such Payment Date during the related
Accrual Period at the Lower-Tier Interest 4 Pass-Through Rate.
"Lower-Tier Interest 4 Pass-Through Rate": For any Payment
Date, the Group II Net Weighted Average Coupon Rate.
"Lower-Tier Interest 4 Termination Date": The Payment Date on
which the Lower-Tier Balance of Lower-Tier Interest 4 is reduced to zero through
the distribution made in respect of Lower-Tier Interest 4 on such Payment Date.
"Lower-Tier Interest 5 Monthly Interest": With respect to any
Payment Date, the amount of interest accrued on the Lower-Tier Balance of the
Lower-Tier Interest 5 immediately prior to such Payment Date during the related
Accrual Period at the Lower-Tier Interest 5 Pass-Through Rate.
"Lower-Tier Interest 5 Pass-Through Rate": For any Payment
Date, the weighted average of the Group I Net Weighted Average Coupon Rate and
the Group II Net Weighted Average Coupon Rate.
"Lower-Tier Interest 5 Termination Date": The Payment Date on
which the Lower-Tier Balance of Lower-Tier Interest 5 is reduced to zero through
the distribution made in respect of Lower-Tier Interest 5 on such Payment Date.
"Lower-Tier Pass-Through Rate": As to each of the respective
Lower-Tier Interests, the applicable "Lower-Tier Pass-Through Rate" set forth in
Section 2.8 hereof.
"Lower-Tier REMIC": The segregated pool of assets referred to
as the Trust Estate, other than the Upper-Tier Group I Distribution Account and
the Upper-Tier Group II Distribution Account which are assets of the Upper- Tier
REMIC.
"Lower-Tier REMIC Certificates": The Lower-Tier REMIC Regular
Interests and the Lower-Tier REMIC Residual Class.
"Lower-Tier REMIC Regular Interests": As defined in Section
2.8 (b) hereof.
"Lower-Tier REMIC Residual Class": With respect to the
Lower-Tier REMIC, the interest therein designated as the "residual interest"
therein for purposes of the REMIC Provisions. The Lower-Tier REMIC Residual
Class shall be uncertificated, and shall be issuable only in Percentage Interest
of 100% to Advanta Conduit Receivables, Inc. as Tax Matters Person. Such
interests shall be non-transferable, except that Advanta Conduit Receivables,
Inc. may assign such interest to another person who accepts such assignment and
the designation as Tax Matters Person pursuant to Section 11.18 hereof. The
Lower-Tier REMIC Residual Class is
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entitled only to any amounts at any time held in the Certificate Account and not
required to be paid to the Upper-Tier REMIC, which is expected to be zero at all
times during the term of this Agreement.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Master Servicer's Trust Receipt": The Master Servicer's
trust receipt in the form set forth as Exhibit J hereto.
"Master Servicing Fee": As to any Payment Date the product of
(x) one-twelfth of 0.50% and (y) the aggregate Loan Balances of the Unaffiliated
Originator Loans as of the opening of business on the first day of the calendar
month preceding such Payment Date.
"Master Transfer Agreement": Any one of the Master Loan
Transfer Agreements among the Sponsor and/or the Conduit Acquisition Trust, the
Trustee and one or more Originators. For purposes of this Agreement the Master
Loan Transfer Agreements are (x) the Master Loan Transfer Agreement dated as of
June 15, 1997 among the Sponsor, the Trustee and the Affiliated Originators
named therein and (y) any similar agreement with an Unaffiliated Originator
designated as a "Master Transfer Agreement" together, in either case, with any
related Conveyance Agreements (as defined therein).
"Monthly Remittance Amount": With respect to Group I, the
Group I Monthly Remittance Amount, and with respect to Group II, the Group II
Monthly Remittance Amount.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second or third lien on an estate in fee simple interest in
real property securing a Note.
"Mortgage Loan Group": Either Group I or Group II. References
herein to the related Class of Class A Certificates, when used with respect to a
Mortgage Loan Group, shall mean (A) in the case of Group I, the Group I
Certificates, and (B) in the case of Group II, the Group II Certificates.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 3.5(a) hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedule of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan",
"Second Mortgage Loan" and "Third Mortgage Loan". The term "Mortgage Loan"
includes any Mortgage Loan which is Delinquent, which relates to a foreclosure
or which relates to a Property which is REO Property prior to such Property's
disposition by the Trust. Any mortgage loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred and assigned
to the Trust by the Sponsor, in fact was not transferred and assigned to the
Trust for any reason whatsoever shall nevertheless be considered a "Mortgage
Loan" for all purposes of this Agreement. The term "Mortgage Loan" includes the
terms "Initial Mortgage Loan" and "Subsequent Mortgage Loan".
"Mortgagor": The obligor on a Note.
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"Net Liquidation Proceeds": As to any Liquidated Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances, unreimbursed Delinquency Advances and accrued
and unpaid Servicing Fees through the date of liquidation relating to such
Liquidated Loan. In no event shall Net Liquidation Proceeds with respect to any
Liquidated Loan be less than zero.
"Nonrecoverable Advances": With respect to any Mortgage Loan,
(a) any Delinquency Advance or Servicing Advance previously made and not
reimbursed pursuant to Sections 7.5 or 8.9, (b) a Delinquency Advance or
Servicing Advance proposed to be made in respect of a Mortgage Loan or REO
Property either of which, in the good faith business judgment of the Master
Servicer, as evidenced by an Officer's Certificate delivered no later than 1
Business Day prior to the related Determination Date to the Certificate Insurer
and the Trustee would not be ultimately recoverable pursuant to Sections 7.5 or
8.9 or (c) any other advance identified as a Nonrecoverable Advance in
subsection 8.9(d) or (e).
"Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Trustee.
"Operative Documents": Collectively, this Agreement, the
Master Transfer Agreements, the Subsequent Transfer Agreements, the Certificate
Insurance Policy, the Insurance Agreement, the Indemnification Agreement and
Certificates.
"Original Principal Amount": With respect to each Note, the
principal amount of such Note or the mortgage note relating to a Senior Lien, as
the case may be, on the date of origination thereof.
"Originator": Any entity from which the Sponsor has purchased
(or, in the case of Subsequent Mortgage Loans, will purchase) Mortgage Loans, or
Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta Mortgage
Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of
New Jersey, Advanta Mortgage Corp. Northeast, Advanta National Bank and Advanta
Finance Corp.
"Outstanding": With respect to all Certificates of a Class, as
of any date of determination, all such Certificates theretofore executed and
delivered hereunder except:
(i) Certificates theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment money in the necessary amount has been theretofore deposited
with the Trustee in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this
Agreement, unless proof satisfactory to the Trustee is presented that
any such Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 5.5 hereof.
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"Owner": The Person in whose name a Certificate is registered
in the Register, to the extent described in Section 5.6.
"Pass-Through Rate": As to each Class of Certificates, the
related Pass-Through Rate.
"Payment Date": Any date on which the Trustee is required to
make distributions to the Owners, which shall be the 25th day of each month,
commencing in the month following the Startup Day or if the 25th day is not a
Business Day, then the next succeeding Business Day.
"Percentage Interest": As to any Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Certificate
Principal Balance of such Certificate as of the Cut-Off Date and the denominator
of which is the Certificate Principal Balance of all Certificates of the same
Class; and as to any Class R Certificate, that Percentage Interest set forth on
such Class R Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Cumulative Realized Losses": With respect to any period,
the sum of all Realized Losses with respect to the Mortgage Loans in the related
Group experienced during such period.
"Pool Delinquency Rate": With respect to any Remittance
Period, the fraction, expressed as a percentage, equal to (x) the aggregate
principal balances of all Mortgage Loans 90 or more days Delinquent (including
all foreclosures and REO Properties) as of the close of business on the last day
of such Remittance Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Remittance Period.
"Pool Principal Balance": The aggregate principal balances of
all Mortgage Loans.
"Pool Rolling Six Month Delinquency Rate": As of any Payment
Date commencing with the seventh Payment Date, the fraction, expressed as a
percentage, equal to the average of the Pool Delinquency Rates for each of the
six immediately preceding Remittance Periods with respect to the Mortgage Loans.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Premium Amount": As to any Payment Date, the product of (x)
one-twelfth of the Premium Percentage and (y) the sum of the Class A-1
Certificate Principal Balance and the Class A-2 Certificate Principal Balance on
such Payment Date (after taking into account any distributions of the Group I
Principal Distribution Amount and Group II Principal Distribution Amount,
respectively on such Payment Date).
"Premium Percentage": As defined in the Commitment.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such
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installment, intended by the Mortgagor as an early payment thereof and not as a
Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan
which is received by the Master Servicer in advance of the scheduled due date
for the payment of such principal (other than the principal portion of any
Prepaid Installment), and the proceeds of any Insurance Policy which are to be
applied as a payment of principal on the related Mortgage Loan shall be deemed
to be Prepayments for all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Master
Servicer or any Sub-servicer in connection with a foreclosed Mortgage Loan prior
to the liquidation thereof, including, without limitation, expenditures for real
estate property taxes, hazard insurance premiums, property restoration or
preservation.
"Principal and Interest Account": Collectively, each principal
and interest account created by the Master Servicer or any Sub-servicer pursuant
to Section 8.8(a) hereof, or pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": As applicable, the Group I
Principal Remittance Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": "Prohibited transaction" shall have
the meaning set forth from time to time in the definition thereof at Section
860F(a)(2) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Property": The underlying property securing a Mortgage Loan.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": "Qualified liquidation" shall have
the meaning set forth from time to time in the definition thereof at Section
860F(a)(4) of the Code (or any successor statute thereto) and applicable to the
Trust and the Tax Estates.
"Qualified Mortgage": "Qualified mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto) and applicable to the
Trust and the Mortgage Loan Groups.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 3.3, 3.4 or 3.6(b) hereof, which (i) bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
I or bears a fixed rate of interest if the Mortgage Loan to be substituted for
is in Group II, (ii) has a Coupon Rate at least equal to the Coupon Rate of the
Mortgage Loan being replaced, (which, in the case of a Mortgage Loan in Group I,
shall mean a Mortgage Loan having the same interest rate index, a margin over
such index and a maximum interest rate at least equal to those applicable to the
Mortgage Loan being replaced), (iii) is of the same or better property type and
the same or better occupancy status as the replaced Mortgage Loan, (iv) shall be
of the same or better credit quality classification (determined in accordance
with the Originators' credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than September 25, 2028, (vi) has a Combined
Loan-to-Value Ratio as of the Cut-Off Date or Subsequent Cut-Off Date no higher
than the Combined Loan-to-Value Ratio of the replaced Mortgage Loan at such
time, (vii) has a Loan Balance as of the related Replacement Cut-Off Date equal
to or less than the Loan Balance of the replaced
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Mortgage Loan as of such Replacement Cut-Off Date, (viii) satisfies all of the
representations and warranties set forth in Section 3.3 and the criteria set
forth from time to time in the definition thereof at Section 860G(a)(4) of the
Code (or any successor statute thereto) and applicable to the Trust, all as
evidenced by an Officer's Certificate of the Sponsor delivered to the
Certificate Insurer and the Trustee prior to any such substitution and (ix) is a
valid First Mortgage Loan if the Mortgage Loan to be substituted for is a valid
First Mortgage Loan or, Second Mortgage Loan if the Mortgage Loan to be
substituted for is a Second Mortgage Loan, or Third Mortgage Loan if the
Mortgage Loan to be substituted for is a Third Mortgage Loan. In the event that
one or more mortgage loans are proposed to be substituted for one or more
mortgage loans, the Certificate Insurer may allow the foregoing tests to be met
on a weighted average basis with respect to the Mortgage Loans in Group II only
or other aggregate basis acceptable to the Certificate Insurer, as evidenced by
a written consent delivered to the Trustee by the Certificate Insurer, except
that the requirement of clauses (vi) and (viii) hereof must be satisfied as to
each Qualified Replacement Mortgage.
"Realized Loss": As to any Liquidated Loan, the amount, if
any, by which the Loan Balance thereof as of the date of liquidation is in
excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the business
day immediately preceding the Payment Date occurs, provided, that, if the Class
A Certificates revert to Definitive Certificates, the Record Date with respect
to each Payment Date thereafter shall be the last Business Day of the calendar
month immediately preceding the calendar month in which such payment date
occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Trustee which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Sponsor or any affiliate thereof, (iii) whose quotations
appear on the Reuters Screen LIBO Page on the relevant Interest Determination
Date and (iv) which have been designated as such by the Trustee.
"Register": The register maintained by the Trustee in
accordance with Section 5.4 hereof, in which the names of the Owners are set
forth.
"Registrar": The Trustee, acting in its capacity as Trustee
appointed pursuant to Section 5.4 hereof, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by
the Sponsor with the Securities and Exchange Commission, including all
amendments thereto and including the Prospectus and Prospectus Supplement
relating to the Class A Certificates constituting a part thereof.
"Reimbursement Amount": The sum of Group I Reimbursement
Amount and a Group II Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
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"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time.
"REMIC Trust": The segregated pool of assets consisting of the
Trust Estate, including both the Lower-Tier REMIC and the Upper-Tier REMIC,
except for the Supplemental Interest Trust, the Supplemental Interest Payment
Account, the Capitalized Interest Account and the Pre-Funding Account.
"Remittance Date": Any date on which the Master Servicer is
required to remit monies on deposit in the Principal and Interest Account to the
Trustee, which shall be no later than the 18th day of each month, or, if such
day is not a Business Day, the immediately preceding Business Day, commencing in
the month following the month in which the Startup Day occurs.
"Remittance Period": The period (inclusive) beginning on the
first day of the calendar month immediately preceding the month in which a
Remittance Date occurs and ending on the last day of such immediately preceding
calendar month.
"REO Property": A Property acquired by the Master Servicer or
any Sub-servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter" The letters to, or agreements with,
the Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Representative": Salomon Smith Barney Inc., as representative
of the Group I Underwriters.
The "Reserve Interest Rate": shall be the rate per annum that
the Trustee determines to be either (i) the arithmetic mean (rounded upwards if
necessary to the nearest whole multiple of 1/16%) of the one-month U.S. dollar
lending rates which New York City banks selected by the Trustee are quoting on
the relevant Interest Determination Date to the principal London offices of
leading banks in the London interbank market or, in the event that the Trustee
can determine no such arithmetic mean, (ii) the lowest one-month U.S. dollar
lending rate which New York City banks selected by the Trustee are quoting on
such Interest Determination Date to leading European banks.
"Reuters Screen LIBO Page": The display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as may
replace the LIBO Page on that service for the purpose of displaying London
interbank offered rated of major banks)
"Schedules of Mortgage Loans": The Schedules of Mortgage
Loans, attached hereto as Schedule I as they may be further supplemented in
connection with Subsequent Transfers. Such Schedules shall also contain one of
the following codes for each Mortgage Loan or Subsequent Mortgage Loan: "C" if
such Mortgage Loan is an Unaffiliated Originator Loan or
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"A" for all other Mortgage Loans. The information contained on each Mortgage
Loan Schedule shall be delivered to the Trustee on a computer readable magnetic
tape or disk.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Property having a first priority
lien; and with respect to any Third Mortgage Loan, the mortgage loans relating
to the corresponding Property having first and second priority liens.
"Servicer Affiliate": A Person (i) controlling, controlled by
or under common control with the Master Servicer and (ii) which is qualified to
service residential mortgage loans.
"Servicing Advance": As defined in Section 8.9(c) and Section
8.13 hereof.
"Servicing Fee": With respect to any Mortgage Loan which is an
Unaffiliated Originator Loan, the sum of any servicing fee relating to such
Unaffiliated Originator Loan and the Master Servicing Fee. With respect to any
Mortgage Loan other than an Unaffiliated Originator Loan, the Advanta Servicing
Fee. The Sponsor shall inform the Trustee as to the level of any servicing fee
relating to an Unaffiliated Originator Loan, which shall not be in excess of
0.50% per month, unless otherwise approved by the Control Party in writing.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware
corporation.
"Standard & Poor's": Standard & Poor's Ratings Group, a
division of The McGraw Hill Companies.
"Startup Day": September 23, 1998.
"Step-Up Payment Date": The Payment Date following the
Calendar month in which the Clean-Up Call Date occurs.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loans, the first day of the month in which such Subsequent Mortgage
Loans are transferred and assigned to the Trust.
"Subsequent Mortgage Loans": The Mortgage Loans sold to the
Trust pursuant to Section 3.8 hereof, 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 Trustee and the
Sponsor substantially in the form of Exhibit M hereto, by which Subsequent
Mortgage Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": The date specified in each
Subsequent Transfer Agreement.
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"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Loan Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Coupon Rate net of
the Servicing Fee of the Mortgage Loan being replaced.
"Sub-Servicer": Any Person with whom the Master Servicer has
entered into a Sub-Servicing Agreement and who satisfies any requirements set
forth in Section 8.3 hereof in respect of the qualification of a Sub- Servicer .
"Sub-Servicing Agreement": The written contract between the
Master Servicer and any Sub-Servicer relating to servicing and/or administration
of certain Mortgage Loans as permitted by Section 8.3.
"Supplemental Interest Payment Account": The Group I
Supplemental Interest Payment Account, and Group II Supplemental Interest
Payment Account established in accordance with Section 7.10(a) hereof and
maintained by the Trustee.
"Supplemental Interest Payment Amount Available": As defined
in Section 7.10(b) hereof.
"Supplemental Interest Trust": The Advanta Supplemental
Interest Trust 1998-3 created pursuant to Section 7.10(a) hereof.
"Tax Matters Person": The Tax Matters Person appointed
pursuant to Section 11.17 hereof.
"Tax Matters Person Residual Interest": The 100% interest in
the Class R Certificates and the Lower-Tier REMIC Residual Class, each of which
shall be issued to and held by Advanta Conduit Receivables, Inc. throughout the
term hereof unless another Person shall accept an assignment of such interest
and the designation of Tax Matters Person pursuant to Section 11.17 hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Third Mortgage Loan": A Mortgage Loan which constitutes a
third priority mortgage lien with respect to the related Property.
"Total Monthly Excess Cashflow": As defined in Section
7.5(c)(iv) hereof.
"Total Monthly Excess Spread": Either the Group I Total
Monthly Excess Spread or the Group II Total Monthly Excess Spread, as
appropriate.
"Transaction Documents": Collectively this Agreement, the
Insurance Agreement, the Underwriting Agreements relating to the Class A
Certificates, the Master Transfer Agreements, any Sub-Servicing Agreement, any
Subsequent Transfer Agreement, the Indemnification Agreement.
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"Trust": Advanta Mortgage Loan Trust 1998-3, the trust created
under this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts (except as otherwise provided herein), (iii)
any Property, the ownership of which has been effected on behalf of the Trust as
a result of foreclosure or acceptance by the Master Servicer of a deed in lieu
of foreclosure and that has not been withdrawn from the Trust, (iv) any
Insurance Policies relating to the Mortgage Loans and any rights of the Sponsor
under any Insurance Policies, (v) Net Liquidation Proceeds with respect to any
Liquidated Loan, (vi) the rights of the Trustee under the Certificate Insurance
Policy, and (vii) the rights of the Sponsor against any Originator pursuant to
the related Master Transfer Agreement.
"Trustee": Bankers Trust Company of California, N.A., located
on the date of execution of this Agreement at Bankers Trust Company, 3 Park
Plaza, Irvine, California 92614, a national banking association, not in its
individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"Trustee's Fees": With respect to any Payment Date and
Mortgage Loan Group, the product of (x) one-twelfth of 0.007% and (y) the
aggregate Loan Balance of the Mortgage Loan in the related Mortgage Loan Group
as of the beginning of the related Remittance Period.
"Unaffiliated Originator Loan": Any Mortgage Loan purchased by
the Sponsor from an Unaffiliated Originator and sold to the Trust by the
Sponsor.
"Unaffiliated Originators": Any Originator who is not
affiliated with the Sponsor.
"Underwriters": The Group I Underwriters and the Group II
Underwriters.
"Upper-Tier Group I Distribution Account": The Upper-Tier
Group I Distribution Account established pursuant to Section 7.2 hereof.
"Upper-Tier Group II Distribution Account": The Upper-Tier
Group II Distribution Account established pursuant to Section 7.2 hereof.
"Upper-Tier REMIC": The REMIC established pursuant to Section
2.8 hereof with respect to the Class A Certificates. The assets of the
Upper-Tier REMIC shall include the Upper-Tier Group I Distribution Account, the
Upper-Tier Group II Distribution Account and the right to receive the
distributions deposited therein with respect to each Lower-Tier Interest.
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SECTION 1.2. USE OF WORDS AND PHRASES. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
SECTION 1.3. CAPTIONS; TABLE OF CONTENTS. The captions or
headings in this Agreement and the Table of Contents are for convenience only
and in no way define, limit or describe the scope and intent of any provisions
of this Agreement.
SECTION 1.4. OPINIONS. Each opinion with respect to the
validity, binding nature and enforceability of documents or Certificates may be
qualified to the extent that the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law) and may state
that no opinion is expressed on the availability of the remedy of specific
enforcement, injunctive relief or any other equitable remedy. Any opinion
required to be furnished by any Person hereunder must be delivered by counsel
upon whose opinion the addressee of such opinion may reasonably rely, and such
opinion may state that it is given in reasonable reliance upon an opinion of
another, a copy of which must be attached, concerning the laws of a foreign
jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
SECTION 2.1. ESTABLISHMENT OF THE TRUST. The parties hereto do
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "Advanta
Mortgage Loan Trust 1998-3". Each Mortgage Loan Group shall constitute a
sub-trust of the Trust.
SECTION 2.2. OFFICE. The office of the Trust shall be in care
of the Trustee, addressed to Bankers Trust Company of California, N.A., Three
Park Plaza, Irvine, California 92614, or at such other address as the Trustee
may designate by notice to the Sponsor, the Master Servicer, the Owners and the
Certificate Insurer.
SECTION 2.3. PURPOSES AND POWERS. The purpose of the Trust is
to engage in the following activities, and only such activities: (i) the
issuance of the Certificates and the acquiring, owning and holding of Mortgage
Loans and the Trust Estate in connection therewith; (ii) activities that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith, including the investment of monies in accordance
with this Agreement; and (iii) such other activities as may be required in
connection with conservation of the Trust Estate and distributions to the
Owners; provided, however, that nothing contained herein shall permit the
Trustee to take any action which would result in the loss of REMIC status for
the REMIC Trust.
SECTION 2.4. APPOINTMENT OF THE TRUSTEE; DECLARATION OF TRUST.
The Sponsor hereby appoints the Trustee as trustee of the Trust effective as of
the Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon
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and subject to the conditions set forth herein for the benefit of the Owners and
the Certificate Insurer, as their interests may appear.
SECTION 2.5. EXPENSES OF THE TRUST. Any expenses of the Trust
that have been reviewed and approved by the Sponsor (which approval shall not be
unreasonably withheld), including the reasonable expenses of the Trustee shall
be paid by the Sponsor to the Trustee or to such other Person to whom such
amounts may be due. Failure by the Sponsor to pay any such fees or other
expenses shall not relieve the Trustee of its obligations hereunder. The Trustee
hereby covenants with the Owners that every material contract or other material
agreement entered into by the Trustee on behalf of the Trust shall expressly
state therein that no Owner shall be personally liable in connection with such
contract or agreement.
SECTION 2.6. OWNERSHIP OF THE TRUST. On the Startup Day the
ownership interests in the Trust and the subtrusts shall be transferred as set
forth in Section 4.2 hereof, such transfer to be evidenced by sale of the
Certificates as described therein. Thereafter, transfer of any ownership
interest shall be governed by Sections 5.4 and 5.8 hereof.
SECTION 2.7. SITUS OF THE TRUST. It is the intention of the
parties hereto that the Trust constitute a trust under the laws of the State of
New York. The Trust will be created in, and all Accounts maintained by the
Trustee on behalf of the Trust will be located in, the State of New York. The
Trust will not have any employees and will not have any real or personal
property (other than property acquired pursuant to Section 8.13 hereof) located
in any state other than in the State of New York and payments will be received
by the Trust only in the State of New York and payments from the Trust will be
made only from the State of New York. The Trust's only office will be at the
office of the Trustee as set forth in Section 2.2 hereof.
SECTION 2.8. MISCELLANEOUS REMIC PROVISIONS. (a) The Trustee
shall elect that each of the Lower-Tier REMIC and the Upper-Tier REMIC shall be
treated as a REMIC under Section 860D of the Code. Any inconsistencies or
ambiguities in this Agreement or in the administration of this Agreement shall
be resolved in a manner that preserves the validity of such REMIC elections. The
assets of the Lower-Tier REMIC shall include the Mortgage Loans, the Accounts,
any REO Property, and any proceeds of the foregoing. The Lower-Tier REMIC
Regular Interests (as defined below) shall constitute the assets of the
Upper-Tier REMIC.
(b) The Lower-Tier REMIC will be evidenced by (x) Lower-Tier
Interest 1, Lower-Tier Interest 2, Lower-Tier Interest 3, Lower-tier Interest 4,
and Lower-Tier Interest 5 (the "Lower-Tier REMIC Regular Interests"), which will
be uncertificated and non-transferable and are hereby designated as the "regular
interests" in the Lower-Tier REMIC and (y) the Lower-Tier REMIC Residual Class,
which is hereby designated as the single "residual interest" in the Lower-Tier
REMIC (the Lower-Tier REMIC Regular Interests, together with the Lower-Tier
REMIC Residual Class, the "Lower-Tier REMIC Certificates"). The Lower-Tier
REMIC Regular Interests shall be recorded on the records of the Lower-Tier REMIC
as being issued to and held by the Trustee on behalf of the Upper-Tier REMIC.
Lower-Tier Interest 1 shall have an initial principal balance equal to
one percent of the initial principal balance of the Class A-1 Certificates (that
is, $5,000,000). Lower-Tier Interest 2 shall have an initial principal balance
equal to one percent of the Group I Original Pool Balance (that is, $5,000,000).
Lower-Tier Interest 3 shall have an initial principal balance equal to one
percent of the initial principal balance of the Class A-2 Certificates (that is,
$5,000,000) Lower-Tier Interest 4 shall have an initial principal balance equal
to one percent of the Group II Original Pool Balance (that is, $5,000,000).
Lower-Tier Interest 5 shall have an initial principal
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balance equal to the excess of (i) the sum of the Group I Original Pool Balance
and the Group II Original Pool Balance over (ii) the sum of the initial
principal balances of Lower-Tier Interest 1, Lower-Tier Interest 2, Lower-Tier
Interest 3, and Lower-Tier Interest 4 (that is, $980,000,000).
On each Payment Date, principal payments on the Mortgage Loans shall
be allocated 99% to Lower-Tier Interest 2, Lower-Tier Interest 4 and Lower-Tier
Interest 5, and 1% to Lower-Tier Interest 1 and Lower-Tier Interest 3 until paid
in full. The aggregate amount of principal allocated to the Lower-Tier Interest
1 and Lower-Tier Interest 3 shall be apportioned between such Interests in the
same manner in which principal on the Mortgage Loans is payable with respect to
the Class A-1 and Class A-2 Certificates, respectively. The aggregate amount of
principal allocated to Lower-Tier Interest 2, Lower-Tier Interest 4 and
Lower-Tier Interest 5 shall be allocated and apportioned among such Interests
first, to Lower-Tier Interest 2 and Lower-Tier Interest 4 the least amount of
principal necessary which when applied to such Interests can be applied so that
the ratio of the principal balance of Lower-Tier Interest 2 to the principal
balance of Lower-Tier Interest 4 equals the ratio of the sum of Loan Balances of
the Mortgage Loans in Group I to the sum of the Loan Balances of the Mortgage
Loans in Group II (the "Balance Ratio") and second, to Lower-Tier Interest 5.
Any Subordination Increase Amount will not be paid as interest to the
Lower-Tier REMIC Regular Interests, but instead to the extent available, a
portion of the interest payable with respect to Lower-Tier Interest 5 which
equals 1% of the Subordination Increase Amount (and, to the extent 1% of the
Subordination Increase Amount exceeds the interest payable on Lower-Tier
Interest 5, a pro rata portion of the interest payable on the Lower-Tier
Interest 2 and Lower-Tier Interest 4 equal to such excess) will be payable as a
reduction of the principal balances of Lower-Tier Interest 1 and Lower-Tier
Interest 3 in the same manner in which the Subordination Increase Amount is
allocated among the Class A-1 and Class A-2 Certificates, respectively (and will
be accrued and added to principal on Lower-Tier Interest 2 and Lower-Tier
Interest 4 in the same proportion as interest payable on such Interests is used
to reduce principal on other Interests as just described).
Notwithstanding the above, principal payments on the Mortgage Loans
that are attributable to the Overcollateralization Release Amount shall be
allocated to Lower-Tier Interest 2, Lower-Tier Interest 4 and Lower-Tier
Interest 5 (allocated first to Lower-Tier Interest 5 until such certificates are
paid in full, and second to Lower-Tier Interest 2 and Lower-Tier Interest 4 and
apportioned between Lower-Tier Interest 2 and Lower-Tier Interest 4 in such a
manner that the Balance Ratio is maintained until paid in full).
Realized Losses shall be applied such that after all distributions
have been made on such Payment Date the principal balances Lower-Tier Interest 1
and Lower-Tier Interest 3 are each 1% of the principal balances of the Class A-1
and Class A-2 Certificates, respectively, and the aggregate principal balance of
Lower-Tier Interest 2, Lower-Tier Interest 4 and Lower-Tier Interest 5 is equal
to the sum of the Loan Balances of the Mortgage Loans less an amount equal to
the sum of the principal balances of Lower-Tier Interest 1 and Lower-Tier
Interest 3 and is allocated and apportioned first, to Lower-Tier Interest 2 and
Lower-Tier Interest 4 the least amount of Realized Losses necessary which when
applied to such Interests can be applied in such a manner that the Balance Ratio
is maintained, and second, to Lower-Tier Interest 5.
Lower-Tier Interest 1 and Lower-Tier Interest 2 shall each have
Pass-Through Rates equal to the Group I Net Weighted Average Coupon Rate (the
sum expressed as a per annum rate on the sum of the Loan Balances for Mortgage
Loans in Group I). Lower-Tier Interest 3 and Lower-Tier Interest 4 shall each
have a Pass-Through Rate equal to the Group II Net
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Weighted Average Coupon Rate (the sum expressed as a per annum rate on the sum
of the Loan Balances for the Mortgage Loans in Group II). Lower-Tier Interest 5
shall have a Pass-Through Rate equal to the weighted average of the Group I Net
Coupon Rate and the Group II Net Coupon Rate (the sum expressed as a per annum
rate on the sum of Loan Balances of the Mortgage Loans). The Lower-Tier REMIC
Residual Class shall have no principal balance and no Pass-Through Rate and
shall be entitled to only those distributable assets, if any, remaining in the
Lower-Tier REMIC on each Payment Date after all amounts required to be
distributed to Lower-Tier Interest 1, Lower-Tier Interest 2, Lower-Tier Interest
3, Lower-tier Interest 4, and Lower-Tier Interest 5 and applicable Trust
expenses have been paid.
The Lower-Tier REMIC Certificates will have the following designations
and Pass-Through Rates, and distributions of principal and interest thereon
shall be allocated to the Certificates in the following manner:
<TABLE>
<CAPTION>
Pass- Allocation Allocation
Lower-Tier REMIC Initial Through of of
Certificates Balance Rate Principal Interest
------------ ------- ---- --------- --------
<S> <C> <C> <C> <C>
1 $5,000,000 (1) (4) (5)
2 $5,000,000 (1) (4) (5)
3 $5,000,000 (2) (4) (5)
4 $5,000,000 (2) (4) (5)
5 $980,000,000 (3) (4) (5)
Lower-Tier (6) (6) (6)
Residual
</TABLE>
- -----------------
(1) The Pass-Through Rate on these Lower-Tier REMIC Regular Interests shall
at any time of determination equal the Group I Net Weighted Average
Coupon Rate.
(2) The Pass-Through Rate on these Lower-Tier REMIC Regular Interest shall
at any time of determination equal the Group II Net Weighted Average
Coupon Rate.
(3) The Pass-Through Rate on this REMIC II Regular Interest shall at any
time of determination equal the weighted average of the Group I Net
Weighted Average Coupon Rate and the Group II Net Weighted Average
Coupon Rate.
(4) Principal will be allocated to and apportioned among the Class A-1 and
Class A-2 in the same proportion as principal from the Mortgage Loans
is payable with respect to such Certificates, except that a portion of
such principal in an amount equal to the Overcollateralization Release
Amount shall first be allocated as a payment of interest to the Class B
Certificates, and all principal will be allocated as a payment of
interest to the Class B Certificates after the principal balances of
the Class A Certificates have been reduced to zero.
(5) Except as provided in the next sentence, interest will be allocated
among the Class A-1 and Class A-2 in the same proportion as interest is
payable on such Certificates.
Any interest with respect to each Lower-Tier Regular Interest in excess
of the product of (i) 100 times the weighted average coupon of the
Lower-Tier Interest 1, Lower-Tier Interest 2, Lower-Tier Interest 3,
Lower-Tier Interest 4 and Lower-Tier Interest 5, where Lower-Tier
Interest 1 and Lower-Tier Interest 3 is first subject to a cap and
floor equal to the Class A-1 and Class A-2 Pass-Through Rates,
respectively, and Lower-Tier Interest 2, Lower-Tier Interest 4 and
Lower-Tier Interest 5 are each subject to a cap equal to 0%, and (ii)
the principal balance of each such Lower-Tier Interest, shall not be
allocated to the Class A Certificates but will be allocated to the
Class B
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Certificates. However, the Class B Certificates shall be subordinated
to the extent provided in Section 7.03.
(6) On each Distribution Date, available funds, if any, remaining in the
Lower-Tier REMIC after payments of interest and principal, as
designated above, will be distributed to the Lower-Tier Residual
Certificate. It is expected that there shall not be any distributions
on the Lower-Tier Residual Certificates.
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(c) The Class A-1, Class A-2 and Class B Certificates are
hereby designated as "regular interests" with respect to the Upper-Tier REMIC
(the "Upper-Tier REMIC Regular Interests") and the Class R Certificate is hereby
designated as the single "residual interest" with respect to the Upper-Tier
REMIC. On each Payment Date, available funds, if any, remaining in the
Upper-Tier REMIC after payments of interest and principal as designated herein
shall be distributed to the Class R Certificates.
(d) For federal income tax purposes, the "latest possible
maturity date" for each of the Lower-Tier REMIC Regular Interests, and
Upper-Tier REMIC Regular Interests is hereby set to be the Payment Date of
September 25, 2028.
(e) The Startup Day is hereby designated for each of the
Lower-Tier REMIC and Upper-Tier REMIC as the "startup day" within the meaning of
Section 860G(a)(9) of the Code.
(f) The Trustee shall provide to the Internal Revenue Service
and to the persons described in Section 860E(e)(3) and (6) of the Code, the
information described in Treasury regulations Section 1.860D-1(b)(5)(ii), or any
successor regulation thereto, with respect to each of the Lower-Tier REMIC and
the Upper-Tier REMIC. Such information will be provided in the manner described
in Treasury regulations Section 1.860E-2(a)(5), or any successor regulation
thereto.
(g) The Owner of the Tax Matters Person Residual Interests in
the Upper-Tier REMIC and the Lower-Tier REMIC is hereby designated as "tax
matters person" as defined in the REMIC Provisions with respect to each such
REMIC.
(h) The Trust and each REMIC shall, for federal income tax
purposes, maintain books on a calendar year basis and report income on an
accrual basis.
ARTICLE III
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR.
The Sponsor hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of its business, or the properties owned or leased by it make such qualification
necessary. The Sponsor has all requisite corporate power and authority to own
and operate its properties, to carry out its business as presently conducted and
as proposed to be conducted and to enter into and discharge its obligations
under this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Sponsor is a party by the Sponsor and its
performance and compliance with the terms of this Agreement and of the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Sponsor and will not violate the
Sponsor's Articles of Incorporation or Bylaws or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or other
instrument to which the Sponsor is a party or by which the Sponsor is bound, or
violate any statute or any order, rule or regulation of any court,
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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 and belief, the Registration Statement does not contain any untrue
statement of a material fact required to be stated therein or omit to state any
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Sponsor makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Sponsor of the Operative Documents to which it is a party, have been duly taken,
given or obtained, as the case may be, are in full force and effect on the date
hereof, are not subject to any pending proceedings or appeals (administrative,
judicial or otherwise) and either the time within which any appeal therefrom may
be taken or review thereof
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may be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of the Sponsor and the performance by the Sponsor of its obligations
under this Agreement and such of the other Operative Documents to which it is a
party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Sponsor.
(j) The Sponsor received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the Mortgage Loans
evidenced by the Certificates.
(k) The Sponsor did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any intent to hinder, delay or defraud any of
its respective creditors.
(l) The Sponsor is solvent and the Sponsor will not be
rendered insolvent as a result of the sale of the Mortgage Loans to the Trust or
the sale of the Certificates.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the Mortgage
Loans to the Trustee.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE MASTER
SERVICER. The Master Servicer hereby represents, warrants and covenants to the
Trustee, the Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is, and each Sub-Servicer is, in compliance with the laws of each state in which
any Property is located to the extent necessary to enable it to perform its
obligations hereunder and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business, or the properties owned or
leased by it make such qualification necessary. The Master Servicer and each
Sub-servicer has all requisite corporate power and authority to own and operate
its properties, to carry out its business as presently conducted and as proposed
to be conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party. The Master
Servicer has, on a consolidated basis with its parent, AMHC, equity of at least
$5,000,000, as determined in accordance with generally accepted accounting
principles.
(b) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this Agreement and
the other Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Master Servicer and will
not violate the Master Servicer's Articles of Incorporation or Bylaws or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument to which the Master Servicer is a party
or by which the Master Servicer is bound or violate any statute or any order,
rule or regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Master Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Master Servicer is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a valid,
legal and binding obligation of the Master Servicer,
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enforceable against it in accordance with the terms hereof, except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity (whether considered in a
proceeding or action in equity or at law).
(d) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Master Servicer or its properties or might have consequences
that would materially and adversely affect its performance hereunder and under
the other Operative Documents to which the Master Servicer is a party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which litigation
might have consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or that would materially and
adversely affect the condition (financial or otherwise) or operations of the
Master Servicer or its properties or might have consequences that would
materially and adversely affect its performance hereunder and under the other
Operative Documents to which the Master Servicer is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Master Servicer
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement
which describe the Master Servicer or matters or activities for which the Master
Servicer is responsible in accordance with the Operative Documents or which are
attributed to the Master Servicer therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue statement
of a material fact with respect to the Master Servicer or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein with respect to the Master Servicer not misleading. To the
best of the Master Servicer's knowledge and belief, the Registration Statement
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(h) [Reserved.]
(i) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Master Servicer makes no
such representation or warranty), that are necessary or advisable in connection
with the execution and delivery by the Master Servicer of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of the Master Servicer and the performance by the Master Servicer of
its
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obligations under this Agreement and such of the other Operative Documents to
which it is a party.
(j) The collection practices used by the Master Servicer with
respect to the Mortgage Loans directly serviced by it have been, in all material
respects, legal, proper, prudent and customary in the mortgage loan servicing
business.
(k) The transactions contemplated by this Agreement are in the
ordinary course of business of the Master Servicer.
(l) The terms of each existing Sub-Servicing Agreement and
each designated Sub-servicer are acceptable to the Master Servicer and any new
Sub-Servicing Agreements or Sub-servicers will comply with the provisions of
Section 8.3.
It is understood and agreed that the representations and
warranties set forth in this Section 3.2 shall survive delivery of the Mortgage
Loans to the Trustee.
Upon discovery by any of the Originators, the Master Servicer,
the Sponsor, any Sub-Servicer, the Certificate Insurer or the Trustee of a
breach of any of the representations and warranties set forth in this Section
3.2 which materially and adversely affects the interests of the Owners or of the
Certificate Insurer, the party discovering such breach shall give prompt written
notice to the other parties. Within 30 days of its discovery or its receipt of
notice of breach, the Master Servicer shall cure such breach in all material
respects and, upon the Master Servicer's continued failure to cure such breach,
may thereafter be removed by the Trustee or the Certificate Insurer pursuant to
Section 8.20 hereof; provided, however, that if the Master Servicer can
demonstrate to the reasonable satisfaction of the Certificate Insurer and the
Trustee that it is diligently pursuing remedial action, then the cure period may
be extended with the written approval of the Certificate Insurer and the
Trustee.
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR
WITH RESPECT TO THE MORTGAGE LOANS. (a) The Sponsor makes the following
representations and warranties as to the Mortgage Loans on which the Certificate
Insurer relies and the Trustee relies in accepting the Mortgage Loans in trust
and executing and authenticating the Certificates. Such representations and
warranties speak as of the Startup Day with respect to the Initial Mortgage
Loans, as of the related Subsequent Transfer Date with respect to any Subsequent
Mortgage Loan, or as of the date upon which any Qualified Replacement Mortgage
is added to the Trust, but shall survive the sale, transfer, and assignment of
the Mortgage Loans to the Trustee:
(i) The information with respect to each Mortgage Loan set
forth in the Schedules of Mortgage Loans is true and correct as of the
Cut-Off Date or the Subsequent Cut-Off Date, as the case may be;
(ii) All of the original or certified documentation set forth
in Section 3.5 (including all material documents related thereto) with
respect to each Mortgage Loan has been or will be delivered to the
Trustee on the Startup Day or the related Subsequent Transfer Date, as
the case may be, or as otherwise provided in Section 3.5;
(iii) Except for any Unaffiliated Originator Loans being
serviced by a servicer other than the Master Servicer, each Mortgage
Loan is being serviced by the Master Servicer or a Person controlling,
controlled by or under common control with the Master Servicer and
qualified to service mortgage loans;
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(iv) The Note related to each Mortgage Loan in Group II bears
a Coupon Rate of at least 6.33% per annum;
(v) As of the Cut-Off Date, no more than 0.81% of the
aggregate principal balances of the Initial Mortgage Loans are 30-59
days Delinquent and no Initial Mortgage Loan is 60 or more days'
Delinquent; as of the related Subsequent Cut-Off Date, no Subsequent
Mortgage Loan with respect to Group I or Group II shall be 60 or more
days Delinquent;
(vi) As of the Startup Day and any Subsequent Transfer Date,
no more than 1.00% of the aggregate principal balances of the Initial
Mortgage Loans or the Subsequent Mortgage Loans, as applicable, is
secured by Properties located within any single zip code area;
(vii) Each Mortgage Loan conforms, and all such Mortgage Loans
in the aggregate conform, in all material respects to the description
thereof set forth in the Registration Statement; and
(viii) The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the description
thereof set forth in the Prospectus.
(b) The Sponsor hereby assigns to the Trustee for the benefit
of the Owners of the Certificates and the Certificate Insurer (so long as a
Certificate Insurer Default has not occurred and is continuing) all of its
right, title and interest in respect of each Master Transfer Agreement
applicable to the related Mortgage Loan. Insofar as such Master Transfer
Agreement provides for representations and warranties made by the related
Originator in respect of a Mortgage Loan and any remedies provided thereunder
for any breach of such representations and warranties, such right, title and
interest may be enforced by the Master Servicer or by the Trustee on behalf of
the Owners and the Certificate Insurer. Upon the discovery by the Sponsor, the
Master Servicer, the Certificate Insurer or the Trustee of a breach of any of
the representations and warranties made in a Master Transfer Agreement in
respect of any Mortgage Loan which materially and adversely affects the
interests of the Owners or of the Certificate Insurer in such Mortgage Loan, the
party discovering such breach shall give prompt written notice to the other
parties. The Master Servicer shall promptly notify the related Originator of
such breach and request that such Originator cure such breach or take the
actions described in Section 3.4(b) hereof within the time periods required
thereby, and if such Originator does not cure such breach in all material
respects, the Sponsor shall cure such breach or take such actions. The
obligations of the Sponsor or Master Servicer, as the case may be, set forth
herein with respect to any Mortgage Loan as to which such a breach has occurred
and is continuing shall constitute the sole obligations of the Master Servicer
and of the Sponsor in respect of such breach.
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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
any Originator, the Sponsor, the Master Servicer, the Certificate Insurer, any
Sub-Servicer or the Trustee that the representations and warranties set forth in
Section 3.3 of this Agreement or in the Master Transfer Agreement were untrue in
any material respect as of the Startup Day (or the Subsequent Transfer Date, as
the case may be) and such breaches of the representations and warranties
materially and adversely affect the interests of the Owners or of the
Certificate Insurer, the party discovering such breach shall give prompt written
notice to the other parties.
The Sponsor acknowledges that a breach of any representation or
warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan, (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Property or (z) set forth in
clause (viii) of Section 3.3 above constitutes breach of a representation or
warranty which materially and adversely affects the interests of the Owners or
of the Certificate Insurer in such Mortgage Loan.
(b) Upon the earliest to occur of the Sponsor's discovery, its
receipt of notice of breach from any one of the other parties hereto or from the
Certificate Insurer or such time as a breach of any representation and warranty
materially and adversely affects the interests of the Owners or of the
Certificate Insurer as set forth above, the Sponsor hereby covenants and
warrants that it shall promptly cure such breach in all material respects or it
shall (or shall cause an affiliate of the Sponsor to or an Originator to),
subject to the further requirements of this paragraph, on the second Remittance
Date next succeeding such discovery, receipt of notice or such other time (i)
substitute in lieu of each Mortgage Loan in the related Mortgage Loan Group
which has given rise to the requirement for action by the Sponsor a Qualified
Replacement Mortgage and deliver the Substitution Amount applicable thereto,
together with the aggregate amount of all Delinquency Advances and Servicing
Advances theretofore made with respect to such Mortgage Loan, to the Master
Servicer for deposit in the Principal and Interest Account or (ii) purchase such
Mortgage Loan from the REMIC Trust at a purchase price equal to the Loan
Purchase Price thereof, which purchase price shall be delivered to the Master
Servicer for deposit in the Principal and Interest Account. In connection with
any such proposed purchase or substitution, the Sponsor at its expense, shall
cause to be delivered to the Trustee and the Certificate Insurer an opinion of
counsel experienced in federal income tax matters stating whether or not such a
proposed purchase or substitution would constitute a Prohibited Transaction for
the REMIC Trust or would jeopardize the status of the REMIC Trust as a REMIC,
and the Sponsor shall only be required to take either such action to the extent
such action would not constitute a Prohibited Transaction for the REMIC Trust or
would not jeopardize the status of the REMIC Trust as a REMIC. Any required
purchase or substitution, if delayed by the absence of such opinion shall
nonetheless occur upon the earlier of (i) the occurrence of a default or
imminent default with respect to the Mortgage Loan, (ii) the delivery of such
opinion or (iii) at the direction of the Control Party. It is understood and
agreed that the obligation of the Sponsor to cure the defect, or substitute for,
or purchase any Mortgage Loan as to which a representation or warranty is untrue
in any material respect and has not been remedied shall constitute the sole
remedy available to the Owners, the Trustee and the Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by an Originator or by the Sponsor (or by an affiliate of the Sponsor,
as the case may be) to the Trust pursuant to Section 3.3, Section 3.4 or Section
3.6 hereof, the related Originator and the Sponsor shall be obligated to take
the actions described in Section 3.4(b) with respect to such Qualified
Replacement Mortgage upon the discovery by any of the Owners, the Sponsor, the
Master
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Servicer, the Certificate Insurer, any Sub-Servicer or the Trustee that the
representations and warranties set forth in the related Master Transfer
Agreement or in Section 3.3 above are untrue in any material respect on the date
such Qualified Replacement Mortgage is conveyed to the Trust such that the
interests of the Owners or the Certificate Insurer in the related Qualified
Replacement Mortgage are materially and adversely affected; provided, however,
that for the purposes of this subsection (c) the representations and warranties
in the related Master Transfer Agreement or as set forth in Section 3.3 above
referring to items "as of the Cut-Off Date" or "as of the Subsequent Cut-Off
Date" or "as of the Startup Day" 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 delivery of the respective Mortgage Loans
(including Qualified Replacement Mortgage Loans) to the Trustee.
SECTION 3.5. CONVEYANCE OF THE MORTGAGE LOANS. (a) The Sponsor,
concurrently with the execution and delivery hereof, and on behalf of the
Conduit Acquisition Trust, hereby transfers, sells, assigns, sets over and
otherwise conveys without recourse, to the Trustee, all right, title and
interest of the Sponsor and the Conduit Acquisition Trust in and to each Initial
Mortgage Loan listed on the Schedule of Mortgage Loans delivered by the Sponsor
on the Startup Day. Each of the Sponsors and the Conduit Acquisition Trust will
convey all right, title and interest in and to principal collected and interest
accruing on each such Initial Mortgage Loan on and after the Cut-Off Date and
all of its right, title and interest in and to all Insurance Policies and any
other assets included or to be included in the Trust for the benefit of Owners
and the Certificate Insurer. The transfer by the Sponsor and the Conduit
Acquisition Trust of the Initial Mortgage Loans set forth on the Schedule of
Initial Mortgage Loans to the Trustee is absolute and is intended by the Owners
and all parties hereto to be treated as a sale by the Sponsor and the Conduit
Acquisition Trust.
(b) The Sponsor agrees to take or cause to be taken such actions
and execute such documents (including, without limitation, the filing of all
necessary continuation statements for the UCC-1 financing statements filed in
the State of New York (which shall have been filed within 90 days of the Startup
Day or the Subsequent Transfer Date, as the case may be) describing the Mortgage
Loans and naming the Sponsor and the Conduit Acquisition Trust, as applicable,
as debtor and the Trustee as the secured party and any amendments to UCC-1
financing statements required to reflect a change in the name or corporate
structure of the debtor or the filing of any additional UCC-1 financing
statements due to a change in the principal officer of the debtor (within 90
days of any event necessitating such filing) as are necessary to perfect and
protect the Certificateholders' and the Certificate Insurer's interests in each
Mortgage Loan and the proceeds thereof.
(c) In connection with the transfer and assignment of the Mortgage
Loans, the Sponsor agrees to:
(i) cause to be delivered, on the Startup Day, or any Subsequent
Transfer Date, as applicable, without recourse, to the Trustee the
items listed in the definitions of "Advanta Mortgage Files" and
"Conduit Mortgage Files," as appropriate; provided that the assignments
of mortgage listed in clause (e) of Exhibit B hereto shall be delivered
to the Trustee with respect to the Designated Advanta Mortgage Files
within 75 Business Days of the Startup Day, or any Subsequent Transfer
Date, as applicable. Notwithstanding the foregoing, with respect to the
Initial Mortgage Loans, to the extent
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that the above-described items required to be delivered have not been
delivered, to the Trustee by the Startup Date, the Sponsor agrees to
deposit an amount equal to the Loan Balance of each such Mortgage Loan
(each, an "Escrow Loan") into the Escrow Pre-Funding Account (the
"Escrow Amount"), and the Trustee shall hold such amount in trust until
such items have been received by the Trustee. Upon receipt of such
items, with respect to such Escrow Loan, the Trustee shall release the
related Escrow Amount to the Sponsor. It is understood by all parties
that the deposit of the Escrow Amount into the Pre-Funding Account is a
matter of convenience and (i) such monies shall not be construed to be
part of the Original Pre-Funded Amounts and (ii) the release of such
funds and delivery of the above-described items shall not be subject to
the conditions relating to the transfer of Subsequent Mortgage Loans.
If, by the end of the Funding Period, the missing items have not been
delivered by the Sponsor to the Trustee, (i) the aggregate remaining
Escrow Amount shall, on the January Payment Date, be transferred to the
Certificate Account and distributed to the Group I or Group II
Certificateholders, as applicable, as a prepayment of principal in
accordance with the payment priorities described in Section 7.5 and
(ii) the Master Servicer shall, on the January Remittance Date, make a
Nonrecoverable Advance pursuant to Subsection 8.9(e).
(ii) cause, within 75 Business Days following the Startup Day, or
any Subsequent Transfer Date, as applicable, the assignments of
Mortgage to be submitted for recording in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof as
against creditors of or purchasers from the related Originator to the
Trustee; provided, however, that, for administrative convenience and
facilitation of servicing and to reduce closing costs, assignments of
mortgage shall not be required to be submitted for recording with
respect to any Mortgage Loan which relates to an Advanta Mortgage File
only if the Trustee, the Certificate Insurer and each Rating Agency has
received an Opinion of Counsel, satisfactory in form and substance to
the Certificate Insurer and to each Rating Agency, to the effect that
the recordation of such assignments in any specific jurisdiction is not
necessary to protect the Trustee's interest in the related Mortgage.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Originators or of the Sponsor.
Notwithstanding anything to the contrary contained in this Section 3.5, in those
instances where the public recording office retains the original Mortgage, the
assignment of a Mortgage or the intervening assignments of the Mortgage after it
has been recorded, the Sponsor shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Trustee shall
be kept in the related file.
Such assignments of mortgage shall, in addition to the
requirements specified in Exhibit B, be in recordable form. On or before the
Startup Day, the Sponsor shall deliver to the Trustee original executed powers
of attorney, from the current recordholders of the related Mortgage
substantially in the form of Exhibit H, authorizing the Master Servicer on
behalf of the Trustee to record the assignments of mortgage as provided in
clause (ii) above. Pursuant to such power of attorney, the Trustee also may
execute a new assignment of mortgage for any Mortgage Loan if the original
assignment of mortgage delivered by the Sponsor to the Trustee is not in
recordable form at such time as the assignment of mortgage is to be recorded by
the Trustee.
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(d) In the case of Mortgage Loans which have been prepaid in full
on or after the Cut-Off Date and prior to the Startup Day, or on or after any
Subsequent Cut-Off Date and prior to the related Subsequent Transfer Date, as
the case may be, the Sponsor, in lieu of the foregoing, will deliver within 15
Business Days after the Startup Day, to the Trustee a certification of an
Authorized Officer in the form set forth in Exhibit C.
(e) The Sponsor (or the Conduit Acquisition Trust or an affiliate
of the Sponsor) shall transfer, sell, assign, set over and otherwise convey
without recourse, to the Trustee all right, title and interest of the Sponsor
(or the Conduit Acquisition Trust or of such affiliate) in and to any Qualified
Replacement Mortgage delivered to the Trustee pursuant to Section 3.3, Section
3.4 or Section 3.6 hereof and all its right, title and interest to principal
collected and interest accruing on such Qualified Replacement Mortgage on and
after the applicable Replacement Cut-Off Date; provided, however, that the
Sponsor (or the Conduit Acquisition or such affiliate) shall reserve and retain
all right, title and interest in and to payments of principal and interest due
on such Qualified Replacement Mortgage prior to the applicable Replacement
Cut-Off Date.
(f) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage therefor, the Trustee
will transfer, sell, assign, set over and otherwise convey without recourse, on
the Sponsor's order, all of its right, title and interest in and to such
released Mortgage Loan and all the Trust's right, title and interest to
principal collected and interest accruing on such released Mortgage Loan on and
after the applicable Replacement Cut-Off Date; provided, however, that the Trust
shall reserve and retain all right, title and interest in and to payments of
principal collected and interest accruing on such released Mortgage Loan prior
to the applicable Replacement Cut-Off Date.
(g) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Sponsor agrees
to cause to be delivered to the Trustee the items described in Section 3.5(b) on
the date of such transfer and assignment or, if a later delivery time is
permitted by Section 3.5(b), then no later than such later delivery time.
(h) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage the Trustee shall
deliver on the date of conveyance of such Qualified Replacement Mortgage and on
the order of the Sponsor (i) the original Note, or the certified copy, relating
thereto, endorsed without recourse, to the Sponsor and (ii) such other documents
as constituted the File with respect thereto.
(i) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Sponsor shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
(j) The Sponsor shall cause to be reflected on the records of the
Conduit Acquisition Trust that the Mortgage Loans have been sold to the Trust.
(k) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Sponsor or of the Sponsor's ultimate corporate parent are
satisfactory to the Control Party, Standard & Poor's and Moody's, then any of
the Document Delivery Requirements described above may be waived by an
instrument signed by the Control Party, Standard & Poor's, and Moody's (or any
documents theretofore delivered to the Trustee returned to the Sponsor) on such
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terms and subject to such conditions as the Control Party, Moody's and Standard
& Poor's may permit.
SECTION 3.6. ACCEPTANCE BY TRUSTEE; CERTAIN SUBSTITUTIONS OF
MORTGAGE LOANS; CERTIFICATION BY TRUSTEE. (a) The Trustee agrees to execute and
deliver on the Startup Day and on any Subsequent Transfer Dates an
acknowledgment of receipt in the form attached as Exhibit D hereto of the Files
delivered by the Sponsor, and declares that it will hold such documents and any
amendments, replacement or supplements thereto, as well as any other assets
included in the definition of Trust Estate and delivered to the Trustee, as
Trustee in trust upon and subject to the conditions set forth herein for the
benefit of the Owners and the Certificate Insurer. On or before the tenth
Business Day after the Start-Up Day, the Trustee shall execute and deliver to
the Certificate Insurer and the Master Servicer an acknowledgment of receipt of
the original Notes for each Mortgage Loan. The Trustee further agrees to review
any documents delivered by the Sponsor within 90 days after the Startup Day (or
within 90 days with respect to any Subsequent Mortgage Loan or Qualified
Replacement Mortgage after the assignment thereof) and to deliver to the
Sponsor, the Certificate Insurer and the Master Servicer a Certification in the
form attached as Exhibit E hereto. The Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face, nor shall the Trustee be under any duty to
determine independently whether there are any intervening assignments or
assumption or modification agreements with respect to any Mortgage Loan.
(b) If the Trustee during such 90-day period finds any document
constituting a part of a File which is not properly executed, has not been
received within the specified period, or is unrelated to the Mortgage Loans
identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does
not conform in a material respect to the description thereof as set forth in the
Schedules of Mortgage Loans, the Trustee shall promptly so notify the Sponsor
and the Certificate Insurer. In performing any such review, the Trustee may
conclusively rely on the Sponsor as to the purported genuineness of any such
document and any signature thereon. The Sponsor agrees to use reasonable efforts
to remedy a material defect in a document constituting part of a File of which
it is so notified by the Trustee. If, however, within 60 days after the
Trustee's notice to it respecting such defect the Sponsor has not remedied or
caused to be remedied the defect and the defect materially and adversely affects
the interest in the related Mortgage Loan of the Owners or of the Certificate
Insurer, the Sponsor will (or will cause the related Originator or an affiliate
of the Sponsor to) on the next succeeding Remittance Date (i) substitute in lieu
of such Mortgage Loan a Qualified Replacement Mortgage and, deliver the
Substitution Amount applicable thereto to the Master Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Mortgage Loan at a purchase
price equal to the Loan Purchase Price thereof, which purchase price shall be
delivered to the Master Servicer for deposit in the Principal and Interest
Account. In connection with any such proposed purchase or substitution the
Sponsor shall cause at the Sponsor's expense to be delivered to the Trustee and
the Certificate Insurer an opinion of counsel experienced in federal income tax
matters stating whether or not such a proposed purchase or substitution would
constitute a Prohibited Transaction for the REMIC Trust or would jeopardize the
status of the REMIC Trust as a REMIC, and the Sponsor shall only be required to
take either such action to the extent such action would not constitute a
Prohibited Transaction for the REMIC Trust or would not jeopardize the status of
the REMIC Trust as a REMIC. Any required purchase or substitution, if delayed by
the absence of such opinion shall nonetheless occur upon the earlier of (i) the
occurrence of a default or imminent default with respect to the Mortgage Loan or
(ii) the delivery of such opinion or (iii) at the direction of the Control
Party.
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SECTION 3.7. COOPERATION PROCEDURES. (a) The Sponsor shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Trustee, provide the Trustee with the information set forth in the Schedules of
Mortgage Loans with respect to such Qualified Replacement Mortgage.
(b) The Sponsor, the Master Servicer and the Trustee covenant to
provide each other and to the Certificate Insurer with all data and information
required to be provided by them hereunder at the times required hereunder, and
additionally covenant reasonably to cooperate with each other in providing any
additional information required by any of them in connection with their
respective duties hereunder.
SECTION 3.8. CONVEYANCE OF THE SUBSEQUENT MORTGAGE LOANS. (a)
Subject to the conditions set forth in paragraph (b) below in consideration of
the Trustee's delivery on the related Subsequent Transfer Dates to or upon the
order of the Sponsor of all or a portion of the balance of funds in the
Pre-Funding Account, the Sponsor shall on any Subsequent Transfer Date cause the
Conduit Acquisition Trust to sell, transfer, assign, set over and otherwise
convey without recourse, to the Trust for assignment to Group I, all right,
title and interest of the Conduit Acquisition Trust and the Sponsor in and to
each Subsequent Mortgage Loan listed on the Schedule of Mortgage Loans delivered
by the Sponsor to the Trustee on such Subsequent Transfer Date, all of the
Sponsor's and the Conduit Acquisition Trust's right, title and interest in and
to principal collected and interest accruing on each such Subsequent Mortgage
Loan on and after the related Subsequent Cut-Off Date and all its right, title
and interest in and to all Insurance Policies; provided, however, that the
Conduit Acquisition Trust reserves and retains all its right, title and interest
in and to principal collected and interest accruing on each such Subsequent
Mortgage Loan prior to the related Subsequent Cut-Off Date. The transfer to the
Trust by the Conduit Acquisition Trust of the Subsequent Mortgage Loans set
forth on the Schedule of Mortgage Loans shall be absolute and shall be intended
by the Sponsor and the Owners and all parties hereto to be treated as a sale by
the Conduit Acquisition Trust.
The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Loan Balances of the Subsequent
Mortgage Loans so transferred.
(b) The Sponsor shall transfer to the Trust 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 Trustee, the
Certificate Insurer, Moody's and Standard & Poor's with a timely
Addition Notice and shall have provided any information in an
electronic data file form as reasonably requested by any of the
foregoing with respect to the Subsequent Mortgage Loans;
(ii) the Sponsor shall have delivered to the Trustee a duly
executed written assignment (including an acceptance by the
Trustee) in substantially the form of Exhibit K (the "Subsequent
Transfer Agreement"), which shall include Schedules of Mortgage
Loans, listing the Subsequent Mortgage Loans and any other
exhibits listed thereon;
(iii) the Sponsor 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;
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(iv) as of each Subsequent Transfer Date, none of the related
Originator, the Master Servicer or the Sponsor was insolvent nor will
any of them have been made insolvent by such transfer nor is any of
them aware of any pending insolvency;
(v) such addition will not result in a material adverse tax
consequent to the Trust or the Owners of the Certificates;
(vi) the Funding Period shall not have terminated;
(vii) the Sponsor shall have delivered to the 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;
(viii) the Sponsor shall have delivered to the Rating Agencies,
the Certificate Insurer, and the Trustee, Opinions of Counsel with
respect to the transfer of the Subsequent Mortgage Loans substantially
in the form of the Opinions of Counsel delivered to the Trustee on the
Startup Day (bankruptcy, corporate and tax opinions);
(ix) an independent accountant retained by the Sponsor provides
the Sponsor with a letter (with copies provided to the Rating Agencies,
the Certificate Insurer, the Underwriters and the Trustee) stating
whether or not the characteristics of the Subsequent Mortgage Loans
conform to the characteristics described in the Pooling and Servicing
Agreement. In preparing such letter, the independent accountant must
use the same type of procedures as were applicable to the Initial
Mortgage Loans which were transferred to the Trust as of the Startup
Date;
(x) The Rating Agencies shall have provided confirmation that the
rating of the Certificates will not be adversely affected by such
transfer of Subsequent Mortgage Loans; and
(xi) the Certificate Insurer shall have approved the transfer.
(c) The obligation of the Trust to purchase a Subsequent Mortgage Loan
for assignment to Group I on any Subsequent Transfer Date is subject to the
following requirements: (i) such Subsequent Mortgage Loan may not be 30 or more
days contractually delinquent as of the related Subsequent Cut-Off Date; (ii)
the remaining term to maturity of such Subsequent Mortgage Loan may not exceed
30 years; (iii) such Subsequent Mortgage Loan has a Coupon Rate of at least
7.25%; (iv) such Subsequent Mortgage Loan may not have a combined loan-to-value
ratio ("CLTV") in excess of 100%; (v) such Subsequent Mortgage Loan may not have
a Loan Balance in excess of $650,000; (vi) no Subsequent Mortgage Loan shall be
a Second Mortgage Loan; (vii) no Subsequent Mortgage Loan shall be a Balloon
Loan; (viii) following the purchase of Subsequent Mortgage Loans for Group I by
the Trust, the Mortgage Loans in Group I (including the Subsequent Mortgage
Loans) (a) will have a weighted average Coupon Rate of at least 10.00%; (b) will
have an average principal balance of $150,000; (c) will have not more than 4.5%,
by aggregate principal balance, Mortgage Loans that are non-owner occupied; (d)
will have a weighted average CLTV of not more than 80.80%; (e) will have not
less than 81.50%, by aggregate principal balance, Mortgage Loans that are
considered "fully documented" loans; (f) will have not less than 87.00%, by
aggregate principal balance, Mortgage Loans that are related to single family
residences; (g) will have a weighted average margin of at least 6.00%; (h) will
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have not more than 1%, by aggregate principal balance, Mortgage Loans
concentrated in any single zip code; (i) will have not more than 16.00%, by
aggregate principal balance, Mortgage Loans in any single state; (j) will have
not less than 25%, by aggregate principal balance, Mortgage Loans that are "A"
classified; (k) will have not less than 16.00%, by aggregate principal balance,
Mortgage Loans that are "A-" classified; (l) will have not more than 23.00%, by
aggregate principal balance, Mortgage Loans that are "B" classified; (m) will
have not more than 14.00%, by aggregate principal balance, Mortgage Loans that
are "C" classified; and (n) will have not more than 4.00%, by aggregate
principal balance, Mortgage Loans that are "D" classified.
(d) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Sponsor agrees to satisfy the conditions set
forth in Sections 3.5(b)-(j), 3.6, 3.7 and 3.8(b)-(d).
(e) In connection with each Subsequent Transfer Date and on the
Payment Date occurring in October of 1998, and November of 1998 the Sponsor and
the Trustee shall co-operate in determining (i) the amount and correct
dispositions of Group I Capitalized Interest Requirement, the Group I
Pre-Funding Earnings and the amount then on deposit in the Pre-Funding Account,
and (ii) any other necessary matters in connection with the administration of
the Pre-Funding Account and of the Capitalized Interest Account. In the event
that any amounts are incorrectly released to the Owners of the Class R
Certificates from either of the Pre-Funding Account or the Capitalized Interest
Account, such Owners or the Sponsor shall immediately repay such amounts to the
Trustee.
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ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
SECTION 4.1. ISSUANCE OF CERTIFICATES. On the Startup Day, upon
the Trustee's receipt from the Sponsor of an executed Delivery Order in the form
set forth as Exhibit F hereto, the Trustee shall execute, authenticate and
deliver the Certificates on behalf of the Trust in accordance with the
directions set forth in such Delivery Order.
SECTION 4.2. SALE OF CERTIFICATES. At 11 a.m. New York City time
on the Startup Date, at the offices of Dewey Ballantine LLP, 1301 Avenue of the
Americas, New York, New York, the Sponsor will sell and convey the Mortgage
Loans and the money, instruments and other property related thereto to the
Trustee, and the Trustee will (i) deliver to the Representative, the Class A-1
Certificates and to the Group II Underwriters the Class A-2 Certificates, each
with an aggregate Percentage Interest Class equal to 100% of such Class,
registered in the name of Cede & Co. or in such other names as the
Representative shall direct for the Class A-1 Certificates and the Group II
Underwriter shall direct for the Class A-2 Certificates, against payment of the
purchase price thereof by wire transfer of immediately available funds to the
Trustee and (ii) deliver to the Sponsor, the Class R Certificates, with an
aggregate Percentage Interest equal to 100%, registered as the Sponsor shall
request. Upon receipt of the proceeds of the sale of the Certificates, the
Trustee shall, from the proceeds of the sale of the Certificates, pay other fees
and expenses identified by the Sponsor, and pay to the Sponsor the balance after
deducting such amounts.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 5.1. TERMS. (a) The Certificates are pass-through
securities having the rights described therein and herein. Notwithstanding
references herein or therein with respect to the Certificates as to "principal"
and "interest" no debt of any Person is represented thereby, nor are the
Certificates or the underlying Notes guaranteed by any Person (except that the
Notes may be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the Certificate
Insurance Policy). Distributions on the Certificates are payable solely from
payments received on or with respect to the Mortgage Loans (other than the
Servicing Fees), monies in the Principal and Interest Account, the Pre-Funding
Account, the Capitalized Interest Account and the Supplemental Interest Payment
Account, except as otherwise provided herein, from earnings on monies and the
proceeds of property held as a part of the Trust Estate and, upon the occurrence
of certain events, from Insured Payments. Each Certificate entitles the Owner
thereof to receive monthly, on each Payment Date, a specified portion of such
payments with respect to the Mortgage Loans in the related Mortgage Loan Group,
any Insured Payments to be made to the related Mortgage Loan Group pro rata in
accordance with such Owner's Percentage Interest and certain amounts payable
from the Supplemental Interest Payment Account.
(b) Each Owner is required, and hereby agrees, to return to the
Trustee any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
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SECTION 5.2. FORMS. The Certificates shall be in substantially the
forms set forth in Exhibit A hereof with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Agreement or as may in the Sponsor's judgment be necessary, appropriate or
convenient to comply, or facilitate compliance, with applicable laws, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
applicable securities laws or as may, consistently herewith, be determined by
the Authorized Officer of the Sponsor executing such Delivery Order, as
evidenced by his execution thereof.
SECTION 5.3. EXECUTION, AUTHENTICATION AND DELIVERY. Each
Certificate shall be executed on behalf of the Trust, by the manual signature of
one of the Trustee's Authorized Officers and shall be authenticated by the
manual signature of one of the Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who were
at any time the proper officers of the Trustee shall, upon proper authentication
by the Trustee, bind the Trust, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificates or did not hold such offices at the date of authentication of
such Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated as
set forth above.
SECTION 5.4. REGISTRATION AND TRANSFER OF CERTIFICATES. (a) The
Trustee, as registrar, shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby appointed registrar for the
purpose of registering Certificates and transfers of Certificates as herein
provided. The Owners and the Certificate Insurer shall have the right to inspect
the Register at all reasonable times and to obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon
surrender for registration of transfer of any Certificate at the office
designated as the location of the Register, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the aggregate
principal amount of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by
such Owner may be exchanged for other Certificates authorized of like Class,
tenor and a like aggregate original principal amount and bearing numbers not
contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever any
Certificate is so surrendered for exchange, the Trustee shall execute,
authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(d) Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
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(e) Any Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered so
as to participate in a global book-entry system with the Depository, as set
forth herein. Each Class of Class A Certificates shall, except as otherwise
provided in the next paragraph, be initially issued in the form of a single
fully registered Class A Certificate with a denomination equal to the Aggregate
Certificate Principal Balance. Upon initial issuance, the ownership of each such
Class A Certificate shall be registered in the Register in the name of Cede &
Co., or any successor thereto, as nominee for the Depository.
The Sponsor and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the Register in
the name of Cede & Co., as nominee of the Depository, the Sponsor, the Master
Servicer, the Certificate Insurer and the Trustee shall have no responsibility
or obligation to Direct or Indirect Participants or beneficial owners for which
the Depository holds Class A Certificates from time to time as a Depository.
Without limiting the immediately preceding sentence, the Sponsor, the Master
Servicer, the Certificate Insurer and the Trustee shall have no responsibility
or obligation with respect to (i) the accuracy of the records of the Depository,
Cede & Co., or any Direct or Indirect Participant with respect to the ownership
interest in the Class A Certificates, (ii) the delivery to any Direct or
Indirect Participant or any other Person, other than a registered Owner of a
Class A Certificate as shown in the Register, of any notice with respect to the
Class A Certificates or (iii) the payment to any Direct or Indirect Participant
or any other Person, other than a registered Owner of a Class A Certificate as
shown in the Register, of any amount with respect to any distribution of
principal or interest on the Class A Certificates. No Person other than a
registered Owner of a Class A Certificate as shown in the Register shall receive
a certificate evidencing such Class A Certificate.
Upon delivery by the Depository to the Trustee of written notice
to the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the registered Owners
of Class A Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the close of business on a Record Date, the name
"Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(h) the event that (i) the Depository or the Sponsor advises the
Trustee and the Certificate Insurer in writing that the Depository is no longer
willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Class A Certificates and the Sponsor or the
Trustee is unable to locate a qualified successor or (ii) the Sponsor at its
sole option elects to terminate the book-entry system through the Depository,
the Class A Certificates shall no longer be restricted to being registered in
the Register in the name of Cede & Co. (or a
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successor nominee) as nominee of the Depository. At that time, the Sponsor may
determine that the Class A Certificates shall be registered in the name of and
deposited with a successor depository operating a global book-entry system, as
may be acceptable to the Sponsor, or such depository's agent or designee but, if
the Sponsor does not select such alternative global book-entry system, then the
Class A Certificates may be registered in whatever name or names registered
Owners of Class A Certificates transferring Class A Certificates shall
designate, in accordance with the provisions hereof; provided, that the cost of
any such re-registration shall be paid by the Sponsor.
(i) notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates, as the case may be, and all notices with respect to
such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(j) neither the Sponsor, the Master Servicer, the Certificate
Insurer, nor the Trustee will have any liability for any actions taken by DTC or
its nominee, Euroclear or CEDEL, including, without limitation, actions for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Class A Certificates held by Euroclear, CEDEL or Cede
& Co., as nominee for DTC, or for maintaining supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 5.5. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(i) any mutilated Certificate is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) in the case of any mutilated Certificate, such mutilated
Certificate shall first be surrendered to the Trustee, and in the case of any
destroyed, lost or stolen Certificate, there shall be first delivered to the
Trustee such security or indemnity as may be reasonably required by it to hold
the Trustee harmless (provided, that with respect to an Owner which is an
insurance company, a letter of indemnity furnished by it shall be sufficient for
this purpose; provided, that such insurance company possesses at least an
investment grade rating from any of Standard & Poor's, or Moody's), then, in the
absence of notice to the Trustee that such Certificate has been acquired by a
bona fide purchaser, the Trustee shall execute, authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Class, tenor and aggregate principal
amount, bearing a number not contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto; any other expenses
in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in exchange
for or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Certificates.
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SECTION 5.6. PERSONS DEEMED OWNERS. The Trustee and any agent of
the Trustee may treat the Person in whose name any Certificate is registered as
the Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
SECTION 5.7. CANCELLATION. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate cancelled as provided in this Section, except as expressly permitted
by this Agreement. All cancelled Certificates may be held by the Trustee in
accordance with its standard retention policy.
SECTION 5.8. LIMITATION ON TRANSFER OF OWNERSHIP RIGHTS. (a) No
sale or other transfer of any Class A Certificate shall be made to the Sponsor,
any Originator or any of their respective affiliates.
(b) No sale or other transfer of record or beneficial ownership of
a Class R Certificate or assignment of an interest in the Lower-Tier REMIC
Residual Class (whether pursuant to a purchase, a transfer resulting from a
default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or an agent of a Disqualified Organization. The
transfer, sale or other disposition of a Class R Certificate or assignment of an
interest in the Lower-Tier REMIC Residual Class (whether pursuant to a purchase,
a transfer resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Class R Certificate or Lower-Tier REMIC Residual Class.
Furthermore, in no event shall the Trustee accept surrender for transfer,
registration of transfer, or register the transfer, of any Class R Certificate
nor authenticate and make available any new Class R Certificate unless the
Trustee has received an affidavit from the proposed transferee in the form
attached hereto as Exhibit I. Each holder of a Class R Certificate by his
acceptance thereof, shall be deemed for all purposes to have consented to the
provisions of this Section 5.08(b). The Lower-Tier REMIC Residual Class is not
transferable except that the Owner of the Tax Matters Person Residual Interest
in the Lower-Tier REMIC may assign its interest to another Person who accepts
such assignment and the designation as Tax Matters Person pursuant to Section
11.17 hereof.
(c) No other sale or other transfer of record or beneficial
ownership of a Class R Certificate shall be made unless such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made in accordance with said Act
and laws. In the event such a transfer is to be made within three years from the
Startup Day, (i) the Trustee or the Sponsor shall require a written opinion of
counsel acceptable to and in form and substance satisfactory to the Sponsor that
such transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which opinion of counsel shall not be an expense
of the Trustee or the Sponsor, and (ii) the Trustee shall require the Transferee
to execute an investment letter acceptable to and in form and substance
satisfactory to the Sponsor certifying to the Trustee and the Sponsor the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or the Sponsor. The Owner of a Class R Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
the Sponsor against any liability that may result if the transfer is not so
exempt or is not made
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in accordance with such federal and state laws. No Class R Certificate shall be
acquired by or transferred to (i) an employee benefit plan (as defined in
section 3(3) of the Employee Retirement Security Act of 1974, as amended
("ERISA")) subject to the provisions of Title I of ERISA, (ii) a plan (as
defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the Code,
or (iii) an entity whose underlying assets are deemed to be assets of a plan
described in (i) or (ii) above by reason of such plan's investment in the entity
(each, a "Benefit Plan Entity"). Any transferee of a Class R Certificate shall
(x) certify that it is not any of the above and (y) deliver an opinion of
counsel to that effect.
SECTION 5.9. ASSIGNMENT OF RIGHTS. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute a transfer of an ownership interest sufficient to render the
transferee an Owner of the Trust without compliance with the provisions of
Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
SECTION 6.1. DISTRIBUTIONS. The Trustee will duly and punctually
pay distributions with respect to the Certificates in accordance with the terms
of the Certificates and this Agreement. Such distributions shall be made (i) by
check mailed on each Payment Date or (ii) if requested by any Owner, to such
Owner by wire transfer to an account within the United States designated no
later than five Business Days prior to the related Record Date, made on each
Payment Date, in each case to each Owner of record on the immediately preceding
Record Date; provided, however, that an Owner of a Class A Certificate shall
only be entitled to payment by wire transfer if such Owner owns Class A
Certificates in the aggregate denomination of at least $5,000,000.
SECTION 6.2. MONEY FOR DISTRIBUTIONS TO BE HELD IN TRUST;
WITHHOLDING. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
and on behalf of the Trustee, and no amounts so withdrawn from the Certificate
Account for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of any
amount due with respect to any Class A Certificate and remaining unclaimed by
the Owner of such Class A Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first, to the
Certificate Insurer on account of any Reimbursement Amount due for the related
Mortgage Loan Groups, and second to the Owners of the Class R Certificates; and
the Owner of such Class A Certificate shall thereafter, as an unsecured general
creditor, look only to the Owners of the Class R Certificates or the Certificate
Insurer for payment thereof (but only to the extent of the amounts so paid to
the Certificate Insurer or the Owners of the Class R Certificates), and all
liability of the Trustee with respect to such trust money shall thereupon cease;
provided, however, that the
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Trustee, before being required to make any such payment, shall at the expense of
the Sponsor cause to be published once, in the eastern edition of The Wall
Street Journal, notice that such money remains unclaimed and that, after a date
specified therein, which shall be not fewer than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be paid to
the Certificate Insurer or the Owners of the Class R Certificates as provided
above. The Trustee shall, at the direction of the Sponsor, also adopt and
employ, at the expense of the Sponsor, any other reasonable means of
notification of such payment (including, but not limited to, mailing notice of
such payment to Owners whose right to or interest in monies due and payable but
not claimed is determinable from the Register at the last address of record for
each such Owner).
SECTION 6.3. PROTECTION OF TRUST ESTATE. (a) The Trustee will hold
the Trust Estate in trust for the benefit of the Owners and the Certificate
Insurer as their interests may appear, and, upon request of the Certificate
Insurer, or with the Consent of the Certificate Insurer, at the request and
expense of the Sponsor, will from time to time execute and deliver all such
supplements and amendments hereto pursuant to Section 11.14 hereof and all
instruments of further assurance and other instruments, and will take such other
action upon such request as it deems reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
(ii) perfect, publish notice of, or protect the validity of any
grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Trustee, and the ownership interests of the Owners represented
thereby, in such Trust Estate against the claims of all Persons and
parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Sponsor to take any action pursuant to this Section
6.3 to the other party.
(b) The Trustee shall have the power to enforce, and shall enforce
the obligations of the other parties to this Agreement and of the Certificate
Insurer by action, suit or proceeding at law or equity, and shall also have the
power to enjoin, by action or suit in equity, any acts or occurrences which may
be unlawful or in violation of the rights of the Owners; provided, however, that
nothing in this Section shall require any action by the Trustee unless the
Trustee shall first (i) have been furnished indemnity satisfactory to it and
(ii) when required by this Agreement, have been requested to take such action by
a majority of the Percentage Interests represented by the affected Class or
Classes of Class A Certificates then Outstanding or, if there are no longer any
affected Class A Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates.
(c) The Trustee shall execute any instrument required pursuant to
this Section so long as such instrument does not conflict with this Agreement or
with the Trustee's fiduciary duties.
SECTION 6.4. PERFORMANCE OF OBLIGATIONS. (a) The Trustee will not
take any action that would release the Sponsor or the Certificate Insurer from
any of their respective covenants or obligations under any instrument or
document relating to the Trust Estate or the
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Certificates or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any such instrument or document, except as expressly provided
in this Agreement or such other instrument or document.
(b) The Trustee may contract with other Persons to assist it in
performing its duties hereunder.
SECTION 6.5. NEGATIVE COVENANTS. The Trustee will not, to the
extent within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Owner by reason of the payment
of any taxes levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in part,
except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this Agreement,
or release any Person from any covenants or obligations with respect to
the Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any lien, charge,
adverse claim, security interest, mortgage or other encumbrance to or
upon the Trust Estate or any part thereof or any interest therein or
the proceeds thereof.
SECTION 6.6. NO OTHER POWERS. The Trustee will not, to the extent
within the control of the Trustee, permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.3
hereof.
SECTION 6.7. LIMITATION OF SUITS. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Certificate Insurance Policy or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(A) such Owner has previously given written notice to the
Sponsor, the Certificate Insurer, and the Trustee of such Owner's
intention to institute such proceeding;
(B) the Owners of not less than 25% of the Percentage
Interests represented by the affected Class or Classes of Certificates
then Outstanding or, if there are no affected Classes of Class A
Certificates then Outstanding, by such percentage of the Percentage
Interests represented by the Class R Certificates, shall have made
written request to the Trustee to institute such proceeding in respect
of such Event of Default;
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(C) such Owner or Owners have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(D) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such proceeding;
(E) as long as any Class A Certificate or any Reimbursement Amount
is outstanding, the Certificate Insurer consented in writing thereto;
and
(F) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Certificate
Insurer or by the Owners of a majority of the Percentage Interests
represented by the Class A Certificates or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage
Interests represented by the Class R Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent requests and
indemnity from two or more groups of Owners, each representing less than a
majority of the applicable Class of Certificates, the Trustee shall act at the
direction of the Certificate Insurer, notwithstanding any other provision of
this Agreement.
SECTION 6.8. UNCONDITIONAL RIGHTS OF OWNERS TO RECEIVE
DISTRIBUTIONS. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
SECTION 6.9. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided herein, no right or remedy herein conferred upon or reserved to the
Trustee, the Certificate Insurer or to the Owners is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
Except as otherwise provided herein, the assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.10. DELAY OR OMISSION NOT WAIVER. No delay of the
Trustee, the Certificate Insurer or any Owner of any Certificate to exercise any
right or remedy under this Agreement to any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article VI or by law
to the Trustee, the Certificate Insurer or to the Owners may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee, the
Certificate Insurer or by the Owners, as the case may be.
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SECTION 6.11. CONTROL BY OWNERS. The Certificate Insurer (so long
as a Certificate Insurer Default has not occurred and is continuing) or the
Owners of a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding, with the consent of the Control Party (which may
not be unreasonably withheld) or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding, with the consent of
the Control Party (which may not be unreasonably withheld) may direct the time,
method and place of conducting any proceeding for any remedy available to the
Control Party with respect to the Certificates or exercising any trust or power
conferred on the Control Party with respect to the Certificates or the Trust
Estate, including, but not limited to, those powers set forth in Section 6.3 and
Section 8.20 hereof; provided that:
(A) such direction shall not be in conflict with any rule of law
or with this Agreement;
(B) the Control Party shall have been provided with indemnity
satisfactory to it; and
(C) the Trustee may take any other action deemed proper by the
Trustee, which is not inconsistent with such direction; provided,
however, that the Trustee need not take any action which it determines
might involve it in liability or may be unjustly prejudicial to the
Owners not so directing; provided, further, that in the event that any
directions provided by the Trustee and the Certificate Insurer conflict
with each other, the Certificate Insurer's direction shall prevail.
So long as a Certificate Insurer Default has not occurred and is
continuing, the Certificate Insurer shall act as the Control Party until all
Reimbursement Amounts have been paid.
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ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 7.1. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement, including (a) all payments due on the Mortgage Loans in accordance
with the respective terms and conditions of such Mortgage Loans and required to
be paid over to the Trustee by the Master Servicer or by any Sub-Servicer and
(b) Insured Payments. The Trustee shall hold all such money and property
received by it, other than pursuant to or as contemplated by Section 6.2(b)
hereof, as part of the Trust Estate and shall apply it as provided in this
Agreement.
SECTION 7.2. ESTABLISHMENT OF ACCOUNTS. The Sponsor shall cause to
be established, and the Trustee shall maintain, at the corporate trust office of
the Trustee, a Certificate Account, a Pre-Funding Account, a Capitalized
Interest Account, the Upper-Tier Group I Distribution Account, the Upper Tier
Group II Distribution Account, the Class A-1 Distribution Account and the Class
A-2 Distribution Account each of which is to be held by the Trustee in the name
of the Trust for the benefit of the Owners of the Certificates and the
Certificate Insurer, as their interests may appear.
SECTION 7.3. THE CERTIFICATE INSURANCE POLICY. On each
Determination Date the Trustee shall determine with respect to the immediately
following Payment Date:
(i) the amounts to be on deposit in the Certificate Account on
such Payment Date with respect to Group I (disregarding the amounts of
any Group I Insured Payments) and equal to the sum of (x) such amounts
excluding (1) the amount of any Total Monthly Excess Cashflow amounts
included in such amounts and excluding (2) an amount equal to the Group
I Premium Amount together with any Master Servicing Fees described in
7.5(c)(i) and Trustee's Fees described in 7.5(c)(iii) for the related
Payment Date plus (y) any amounts of Total Monthly Excess Cashflow to
be applied on account of Group I on such Payment Date; the amounts
described in the preceding clause (x) with respect to each Mortgage
Loan Group and Payment Date after taking into account the portion of
the Group I Principal Distribution Amount to be actually distributed on
such Payment Date without regard to any Group I Insured Payment to be
made with respect to such Payment Date, are the "Group I Available
Funds"; the sum of the amounts described in the preceding clauses (x)
and (y) are the "Group I Total Available Funds";
(ii) the amounts to be on deposit in the Certificate Account on
such Payment Date with respect to Group II (disregarding the amounts of
any Group II Insured Payments) and equal to the sum of (x) such amounts
excluding the amount of any Total Monthly Excess Cashflow amounts
included in such amounts and excluding an amount equal to the Group II
Premium Amount together with any Master Servicing Fees described in
7.5(c)(i) and Trustee's Fees described in 7.5(c)(iii) for the related
Payment Date, plus (y) any amounts of Total Monthly Excess Cashflow to
be applied on account of Group II on such Payment Date; the amounts
described in the preceding clause (x) with respect to each Group II and
Payment Date, after taking into account the portion of the Group II
Principal Distribution Amount to be actually distributed on such
Payment Date without regard to any Group II Insured Payment to be made
with respect to such
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Payment Date, are the "Group II Available Funds"; the sum of the
amounts described in the preceding clauses (x) and (y) are the "Group
II Total Available Funds"; and
(b) (i) If the Group I Insured Distribution Amount for any Payment
Date exceeds the Group I Total Available Funds for such Payment Date
(after taking into account the portion of the Group I Principal
Distribution Amount to be actually distributed on such Payment Date
without regard to any Group I Insured Payment to be made with respect
to such Payment Date) (such amount being a "Group I Deficiency
Amount"), the Trustee shall complete a Notice in the form of Exhibit A
to the Certificate Insurance Policy and submit such notice to the
Certificate Insurer no later than 12:00 noon New York City time on the
third Business Day preceding such Payment Date as a claim for a Group I
Insured Payment in an amount equal to such Group I Deficiency Amount.
Upon receipt of any Group I Insured Payments from the Certificate
Insurer under the Certificate Insurance Policy, the Trustee shall
deposit such Group I Insured Payments in the Certificate Account.
(ii) If the Group II Insured Distribution Amount for any, Payment
Date exceeds the Group II Total Available Funds for such Payment Date
(after taking into account the portion of the Group II Principal
Distribution Amount to be actually distributed on such Payment Date
without regard to any Group II Insured Payment to be made with respect
to such Payment Date) (such amount being a "Group II Deficiency
Amount"), the Trustee shall complete a Notice in the form of Exhibit A
to the Certificate Insurance Policy and submit such notice to the
Certificate Insurer no later than 12:00 noon New York City time on the
third Business Day preceding such Payment Date as a claim for a Group
II Insured Payment in an amount equal to such Group II Deficiency
Amount. Upon receipt of any Group II Insured Payments from the
Certificate Insurer under the Certificate Insurance Policy, the Trustee
shall deposit such Group II Insured Payments in the Certificate
Account.
(c) The Trustee shall distribute all Insured Payments received, or
the proceeds thereof, in accordance with Section 7.5(c) to the Owners of the
Class A Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the related Class
receiving any Insured Payment from the Certificate Insurer and (ii) disburse
such Insured Payment to the Owners of the related Class A Certificates as set
forth in Section 7.5(c). The Certificate Insurer shall be entitled to receive
the related Reimbursement Amount pursuant to Sections 7.5(c)(iv)(C) and
7.5(c)(iv)(D) hereof with respect to each Insured Payment made by the
Certificate Insurer. The Trustee hereby agrees on behalf of each Owner of Class
A Certificates and the Trust for the benefit of the Certificate Insurer that it
recognizes that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the Owners
of such Class A Certificates, the Certificate Insurer will be entitled to
receive the related Reimbursement Amount pursuant to Sections 7.5(c)(iv)(C) and
7.5(c)(iv)(D) hereof.
(e) The Trustee shall receive, as attorney-in-fact of each Owner
of a Class A Certificate, any Insured Payment from the Certificate Insurer and
disburse the same to each Owner of a Class A Certificate in accordance with the
provisions of Section 7.3. Insured Payments disbursed by the Trustee from
proceeds of the Certificate Insurance Policy shall not be considered payment by
the Trust Fund nor shall such payments discharge the obligation of the Trust
Fund with respect to such Class A Certificates, and the Certificate Insurer
shall become the
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owner of such unpaid amounts due from the Trust Fund in respect of the Class A
Certificates. The Trustee hereby agrees on behalf of each Holder of a Class A
Certificate for the benefit of the Certificate Insurer that it recognizes that
to the extent the Certificate Insurer makes any Group I Insured Payment or Group
II Insured Payment, as applicable, either directly or indirectly (as by paying
through the Trustee), to the Class A Certificateholders, the Certificate Insurer
will be subrogated to the rights of the Class A Certificateholders with respect
to such Class A Payment, shall be deemed to the extent of payments so made to be
a registered Class A Certificateholder and shall receive all future
distributions until all such Insured Payments by the Certificate Insurer,
together with interest thereon at the interest rate borne by the Class A
Certificates, have been fully reimbursed. To evidence such subrogation, the
Trustee shall, or shall cause the Certificate Registrar to, note the Certificate
Insurer's rights as subrogee on the registration books maintained by the Trustee
or the Certificate Registrar upon receipt from the Certificate Insurer of proof
of payment of any Group I Insured Payment or Group II Insured Payment, as
applicable. The effect of the foregoing provisions is that, to the extent of
Insured Payments made by it, the Certificate Insurer shall be paid before
payment of the balance of the distributions are made to the other Owners of the
Class A Certificates.
SECTION 7.4. RESERVED.
SECTION 7.5. FLOW OF FUNDS. (a) On each Remittance Date, the
Trustee shall deposit to the Certificate Account with respect to Group I,
without duplication, upon receipt, any Insured Payments relating to Group I, the
Group I Monthly Remittance Amount remitted by the Master Servicer or any
Sub-servicer.
(b) On each Remittance Date, the Trustee shall deposit to the
Certificate Account with respect to Group II, without duplication, upon receipt,
any Insured Payments relating to Group II, the proceeds of any liquidation of
the assets of the Trust, insofar as such assets relate to Group II, the Group II
Monthly Remittance Amount remitted by the Master Servicer or any Sub-servicer.
(c) Subject to any superseding provisions of clause (d) below,
during the continuance of a Certificate Insurer Default, on each Payment Date
the Trustee shall make the following allocations, disbursements and transfers of
amounts then on deposit in the Certificate Account for each Mortgage Loan Group
in the following order of priority, and each such allocation, transfer and
disbursement shall be treated as having occurred only after all preceding
allocations, transfers and disbursements have occurred:
(i) first, from amounts then on deposit in the Certificate
Account to the Trustee, an amount equal to the Trustee's Fees then due
to it;
(ii) second, (x) from amounts then on deposit therein with
respect to Group I, the Group I Premium Amount for such Payment Date
and (y) from amounts then on deposit therein with respect to Group II,
the Group II Premium Amount for such Payment Date;
(iii) third, from amounts then on deposit in the Certificate
Account to the Master Servicer, an amount equal to any Master Servicing
Fees then due to it on account of the Unaffiliated Originator Loans not
theretofore received by the Master Servicer pursuant to Section
8.8(c)(i) hereof, as reported by the Master Servicer to the Trustee;
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(iv) fourth, on each Payment Date, the Trustee shall allocate an
amount equal to the excess of (a) the sum of (x) the Total Monthly
Excess Spread with respect to such Mortgage Loan Group and Payment Date
plus (y) any Subordination Reduction Amount with respect to such
Mortgage Loan Group and Payment Date (such sum being the "Total Monthly
Excess Cashflow" with respect to such Mortgage Loan Group and Payment
Date) with respect to each Mortgage Loan Group in the following order
of priority:
(A) first, such Total Monthly Excess Cashflow shall be
allocated on such Payment Date with respect to the related
Mortgage Loan Group in an amount equal to the excess, if any, of
(x) the related Group Insured Distribution Amount for such Payment
Date over (y) the Available Funds with respect to such Mortgage
Loan Group for such Payment Date (the amount of such difference
being the "Available Funds Shortfall" with respect to the related
Mortgage Loan Group);
(B) second, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group remaining after
the application described in clause (A) above shall be allocated
against any Available Funds Shortfall with respect to the other
Mortgage Loan Group;
(C) third, any portion of the Total Monthly Excess Cashflow
with respect to such Mortgage Loan Group remaining after the
allocations described in clauses (A) and (B) above shall be paid
to the Certificate Insurer in respect of amounts owed on account
of any Reimbursement Amount with respect to the related Mortgage
Loan Group;
(D) fourth, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group remaining after
the allocations described in clauses (A), (B) and (C) above shall
be paid to the Certificate Insurer in respect of any Reimbursement
Amount with respect to the other Mortgage Loan Group;
(v) fifth, the amount, if any, of the Total Monthly Excess
Cashflow with respect to a Mortgage Loan Group on a Payment Date
remaining after the allocations described in clause (iv) above is the
"Net Monthly Excess Cashflow" with respect to such Mortgage Loan Group
for such Payment Date; such amount is required to be applied in the
following order of priority:
(A) first, such Net Monthly Excess Cashflow shall be used
to reduce to zero, through the payment of a Subordination Increase
Amount, any Subordination Deficiency Amount with respect to the
related Mortgage Loan Group as of such Payment Date;
(B) second, any portion of the Net Monthly Excess Cashflow
remaining after the application described in clause (A) above
shall be used to reduce to zero, through the payment of a
Subordination Increase Amount, any Subordination Deficiency
Amounts with respect to the other Mortgage Loan Group; and
(C) third, any remaining Net Monthly Excess Cashflow
remaining after the applications described in clauses (A) and (B)
above shall be paid to the Master
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Servicer to the extent of any unreimbursed Delinquency Advances,
unreimbursed Servicing Advances and accrued and unpaid Servicing
Fees, in each case as certified to the Trustee by the Master
Servicer to be owing to it as of such Payment Date.
(vi) sixth, following the making by the Trustee of all
allocations, transfers and disbursements described above under Sections
7.3 and 7.10 hereof and the prior clauses of this Section 7.5, from
amounts (including any related Insured Payment) then on deposit in the
Certificate Account, the Trustee shall transfer (i) to the Class A-1
Distribution Account the Class A-1 Distribution Amount for such Payment
Date; (ii) to the Class A-2 Distribution Account, the Class A-2
Distribution Amount for such Payment Date; and (iii) to the Class R
Distribution Account, the Residual Net Monthly Excess Cashflow, if any,
for such Payment Date.
(vii) seventh, on each Payment Date, the Trustee shall transfer
all monies then on deposit in the Class R Distribution Account to the
Supplemental Interest Payment Account; such transfer shall be deemed to
be a distribution on the Class R Certificates.
(d) On any Payment Date during the continuance of any Certificate
Insurer Default described in clause (b) or (c) of the definition thereof;
No Premium Amount shall be paid to the Certificate Insurer (unless
the Certificate Insurer or its custodian, trustee, agent, receiver, custodian,
or similar official continues to make payments required under the Certificate
Insurance Policy) and any amounts otherwise payable to the Certificate Insurer
as Premium Amounts shall be retained in the Certificate Account as Group I Total
Available Funds or Group II Total Available Funds, as appropriate. On any
Payment Date wherein such Certificate Insurer Default has been cured, the
Premium Amounts shall be paid to the Certificate Insurer.
(e) Trustee shall distribute on each Payment Date to the Owners of
the Class A-1 Certificates, from the amount then on deposit in the Class A-1
Distribution Account, the lesser of (x) such amount on deposit in such Account
and (y) the Class A-1 Formula Distribution Amount on such Payment Date. Any
application of such amount Shall be first made to interest and then to
principal.
(f) The Trustee shall distribute on each Payment Date to the
Owners of the Class A-2 Certificates, from the amount then on deposit in the
Class A-2 Distribution Account, the lesser of (x) such amount on deposit in such
Account and (y) the Class A-2 Formula Distribution Amount on such Payment Date.
Any application of such amount Shall be first made to interest and then to
principal.
(g) Notwithstanding any of the foregoing provisions, the aggregate
amount distributed to the Owners of any Class A Certificates on account of
principal shall not exceed the original Certificate Principal Balance for the
related Class.
SECTION 7.6. INVESTMENT OF ACCOUNTS. (a) So long as no event
described in Sections 8.20(a) or (b) hereof shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of the Accounts held by the Trustee shall be invested and reinvested by the
Trustee in the name of the Trustee for the benefit of the Owners and the
Certificate Insurer, as their interests may appear, as directed in writing by
the Master Servicer, in one or more Eligible Investments bearing interest or
sold at a discount other than the Capitalized
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Interest Account which funds shall be invested and reinvested by the Trustee on
behalf of the Master Servicer. During the continuance of an event described in
Sections 8.20(a) or (b) hereof and following any removal of the Master Servicer,
the Certificate Insurer shall direct such investments. No investment in any
Account shall mature later than the Business Day immediately preceding the next
Payment Date.
(b) If any amounts are needed for disbursement from any Account
held by the Trustee and sufficient uninvested funds are not available to make
such disbursement, the Trustee shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in such Account. No investments will
be liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in any
way be held liable by reason of any insufficiency in any Account held by the
Trustee resulting from any loss on any Eligible Investment included therein
(except to the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held by the
Trustee uninvested upon the occurrence of either of the following events:
(i) the Master Servicer or the Certificate Insurer, as the case
may be, shall have failed to give investment directions to the Trustee
within ten days after receipt of a written request for such directions
from the Trustee; or
(ii) the Master Servicer or the Certificate Insurer, as the case
may be, shall have failed to give investment directions to the Trustee
during the ten-day period described in clause (i) preceding, by 11:15
a.m. New York time (or such other time as may be agreed by the Master
Servicer or the Certificate Insurer, as the case may be, and the
Trustee) on any Business Day (any such investment by the Trustee
pursuant to this clause (ii) to mature on the next Business Day after
the date of such investment).
(e) For purposes of investment, the Trustee shall aggregate all
amounts on deposit in the Accounts. All income or other gain from investments in
the Accounts shall be deposited, pro rata, in the Accounts immediately on
receipt, and any loss resulting from such investments shall be charged, pro
rata, to the Accounts.
SECTION 7.7. ELIGIBLE INVESTMENTS. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(b) Federal Housing Administration debentures and rated Aa2 or
higher by Moody's and AA or better by Standard & Poor's, if applicable.
(c) Freddie Mac senior debt obligations and rated Aa2 or higher by
Moody's and AA or better by Standard & Poor's, if applicable.
(d) Federal Home Loan Banks' consolidated senior debt obligations
and rated Aa2 or higher by Moody's and AA or better by Standard & Poor's if
applicable.
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(e) FNMA senior debt obligations and rated Aa2 or higher by
Moody's and AA or better by Standard & Poor's, if applicable.
(f) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated A-1 or better by Standard & Poor's and P-1 by Moody's.
(g) Investment agreements approved by the Certificate Insurer
provided:
1. The agreement is with a bank or insurance company which has an
unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by Standard &
Poor's and
2. Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice
(provided such notice may be amended or canceled at any time prior to
the withdrawal date), and
3. The agreement is not subordinated to any other obligations of
such insurance company or bank, and
4. The same guaranteed interest rate will be paid on any future
deposits made pursuant to such agreement, and
5. The Trustee and the Certificate Insurer receive an opinion of
counsel that such agreement is an enforceable obligation of such
insurance company or bank.
(h) Commercial paper (having original maturities of not more than
365 days) rated A-1 or better by Standard & Poor's and P-1 or better by Moody's.
(i) Investments in money market funds rated AAAm or AAAm-G by
Standard & Poor's and Aaa or P-1 by Moody's.
(j) Investments approved in writing by the Certificate Insurer and
acceptable to Moody's and Standard & Poor's;
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
SECTION 7.8. REPORTS BY TRUSTEE. (a) On each Payment Date the
Trustee shall provide to each Owner, to the Master Servicer, to the Certificate
Insurer, to each Underwriter, to the Sponsor, to Standard & Poor's and to
Moody's a written report in substantially the form set forth as Exhibit I hereto
with respect to each Mortgage Loan Group, as such form may be revised by the
Trustee, the Master Servicer, Moody's and Standard & Poor's from time to time,
but in
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every case setting forth the information requested on Exhibit F hereto and the
following information:
(i) the amount of the distribution with respect to the related
Class of Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein;
(iii) the amount of such distributions allocable to interest;
(iv) the Interest Carry Forward for each Class,
(v) the Certificate Principal Balance for each Class of Class A
Certificates as of such Payment Date, together with the principal
amount of such Class of Class A Certificates (based on a Certificate in
an original principal amount of $1,000) then outstanding, in each case
after giving effect to any payment of principal on such Payment Date;
(vi) with respect to the Group I Certificates, the amount of any
Group I Insured Payment included in the amounts distributed in respect
of the Group I Certificates; with respect to the Group II Certificates,
the amount of any Group II Insured Payment included in the amounts
distributed in respect of the Group II Certificates.
(vii) the aggregate Loan Balance of all Mortgage Loans after
giving effect to any payment of principal on such Payment Date both in
the aggregate and in each of the Mortgage Loan Groups;
(viii) information furnished by the Sponsor pursuant to Section
6049(d)(7)(C) of the Code and the regulations promulgated thereunder to
assist the Owners in computing their market discount;
(ix) the total of any Substitution Amounts and any Loan Purchase
Price amounts included in such distribution;
(x) the amount of any Supplemental Interest Payment, Class RS
Certificate distribution and any Interest Advance on such Distribution
Date, together with the amount of any unreimbursed Interest Advance
then owed to the Trustee;
(xi) the amount of any Subordination Reduction Amount with respect
to each Mortgage Loan Group;
(xii) the amounts, if any, of any Realized Losses in each Mortgage
Loan Group for the related Remittance Period;
(xiii) the Pool Rolling Three-Month Delinquency Rate and the Pool
Cumulative Realized Losses (x) as a percentage of the average Pool
Principal Balance as of the close of business on the last day of each
of the twelve preceding Remittance Periods and (y) as a percentage of
the Original Aggregate Loan Balance; and
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(xiv) a number with respect to each Class (the "Pool Factor" for
such Class) computed by dividing the Certificate Loan Balance for such
Class (after giving effect to any distribution of principal to be made
on such Payment Date) by the Original Certificate Principal Balance for
such Class on the Closing Day.
(xv) the Certificate Principal Balance for each Class of Class A
Certificates in each case after giving effect to any payment of
principal on such Payment Date;
(xvi) the weighted average Coupon Rate of the Mortgage Loans with
respect to each Group;
(xvii) the Group I Subordinated Amount, the Group II Subordinated
Amount after giving effect to any payment of principal on such Payment
Date;
(xviii) whether a Servicer Termination Loss Trigger has occurred,
as such terms are defined in the Insurance Agreement.
Items (i) through (iii) above shall, with respect to each Class of
Class A Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to
the Certificates for such calendar year.
(b) In addition, on each Payment Date the Trustee will distribute
to each Owner, to the Certificate Insurer, to each Underwriter, to the Master
Servicer, to the Sponsor, to Standard & Poor's and to Moody's, together with the
information described in Subsection (a) preceding, the following information
with respect to each Mortgage Loan Group as of the close of business on the last
Business Day of the prior calendar month, which is hereby required to be
prepared by the Master Servicer and furnished to the Trustee for such purpose on
or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each Mortgage Loan
Group and the aggregate Loan Balances thereof, together with the
number, aggregate principal balances of such Mortgage Loans in such
Mortgage Loan Group and the percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group (a)
30-59 days Delinquent, (b) 60-89 days Delinquent and (c) 90 or more
days Delinquent;
(ii) the number, aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group in
foreclosure proceedings (and whether any such Mortgage Loans are also
included in any of the statistics described in the foregoing clause
(i));
(iii) the number, aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related
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Mortgage Loan Group relating to Mortgagors in bankruptcy proceedings
(and whether any such Mortgage Loans are also included in any of the
statistics described in the foregoing clause (i));
(iv) the number, aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group
relating to REO Properties (and whether any such Mortgage Loans are
also included in any of the statistics described in the foregoing
clause (i)); and
(v) the loan number of the related Mortgage Loan and the book
value of any REO Property in each Mortgage Loan Group.
(c) The foregoing reports shall be sent be to an Owner only
insofar as such Owner owns a Certificate with respect to the related Mortgage
Loan Group.
(d) The Sponsor and the Master Servicer, on behalf of
Certificateholders and the Trust (the "Trust Parties") hereby authorize the
Trustee to include the loan level information with respect to the Mortgage
Loans, excluding any information relating to the fees or amounts due to the
Certificate Insurer, contained in reports provided to the Certificate Insurer or
the Trustee by the Servicer hereunder and, if so directed by an Authorized
Officer of the Sponsor in writing to the Trustee, the monthly report to the
Owners prepared by the Trustee (the "Information") on The Bloomberg, an on-line
computer based on-line information network maintained by Bloomberg L.P.
("Bloomberg") or on any other on-line computer based on-line information network
or service ("Information Network"), or in other electronic or print information
services deemed acceptable by the Sponsor or the Master Servicer as designated
in writing to the Trustee by an Authorized Officer of the Master Servicer. The
Trust Parties agree not to commence any actions or proceedings, or otherwise
assert any claims, against the Trustee or its affiliates or any of the Trustee's
or its affiliates' respective agents, representatives, directors, officers or
employees (collectively, the "Designated Parties"), arising out of, or related
to or in connection with the dissemination and/or use of any Information by the
Trustee, including, but not limited to, claims based on allegations of
inaccurate or incomplete information by the Trustee to Bloomberg or to any
Information Network or otherwise (other than in connection with the Trustee's
negligence or willful misconduct). The Trust Parties waive their rights to
assert any such claims against the Designated Parties and fully and finally
release the Designated Parties from any and all such claims, demands,
obligations, actions and liabilities (other than in connection with such
Designated Parties' negligence or willful misconduct). The Trustee makes no
representations or warranties, expressed or implied, of any kind whatsoever with
respect to the accuracy, adequacy, timeliness, completeness, merchantability or
fitness for any particular purpose of any Information in any form or manner. The
authorizations, covenants and obligations of the Trust Parties under this
section shall be irrevocable and shall survive the termination of this
Agreement.
SECTION 7.9. ADDITIONAL REPORTS BY TRUSTEE. (a) The Trustee shall
report to the Sponsor, the Master Servicer and the Certificate Insurer with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Trustee and the identity of the
investments included therein, as the Sponsor, the Master Servicer or the
Certificate Insurer may from time to time request. Without limiting the
generality of the foregoing, the Trustee shall, at the request of the Sponsor,
the Master Servicer or the Certificate Insurer, transmit promptly to the
Sponsor, the Master Servicer and the Certificate Insurer copies of all
accounting of receipts in respect of the Mortgage Loans furnished to it by the
Master
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Servicer and shall notify the Sponsor, the Master Servicer and the Certificate
Insurer if any such receipts have not been received by the Trustee.
(b) The Trustee shall immediately report to the Certificate
Insurer, Sponsor and Master Servicer with respect to its actual knowledge,
without independent investigation, of any breach of any of the representations
or warranties relating to individual Mortgage Loans set forth in any Master
Transfer Agreement or in Section 3.3(a) hereof. On the date that is eighteen
months after the Closing Day, the Trustee shall provide the Certificate Insurer
with a written report of all of such inaccuracies to such date of which it has
actual knowledge, without independent investigation, and of the action taken by
the Originators and/or the Sponsor under the related Master Transfer Agreement
or under Section 3.4(b) hereof with respect thereto.
SECTION 7.10. SUPPLEMENTAL INTEREST PAYMENT ACCOUNT, SUPPLEMENT
INTEREST PAYMENTS AND CLASS RS DISTRIBUTION ACCOUNT.
(a) The parties hereto do hereby create and establish a trust, the
"Advanta Supplemental Interest Trust 1998-3" (the "Supplemental Interest
Trust"). The Supplemental Interest Trust shall hold three trust accounts, the
"Group I Supplemental Interest Payment Account", the "Group II Supplemental
Interest Payment Account" and a "Class RS Distribution Account" to be held by
the Trustee in its name on behalf of the Supplemental Interest Trust. None of
the assets of the Supplemental Interest Trust shall be considered assets of the
REMIC, and any amounts transferred from the REMIC to the Supplemental Interest
Trust shall be treated as distributions with respect to the Class RS
Certificates.
(b) The amount, if any, on deposit in the Group I Supplemental
Interest Payment Account on any Payment Date is the "Group I Supplemental
Interest Payment Amount Available" on such Payment Date.
If, on any Determination Date, the Trustee determines that the
Group I Supplemental Interest Payment Amount Available to be available on the
next Payment Date is less than the excess of (x) the excess of (i) the Class A-1
Full Interest Distribution Amount over (ii) the Class A-1 Interest Distribution
Amount over (y) the Group I Supplemental Interest Payment Amount Available as of
such Payment Date (the "Class A-1 Formula Interest Shortfall"), the Trustee
shall demand that the Designated Residual Owner fund the Class A-1 Formula
Interest Shortfall on the related Payment Date. The Designated Residual Owner
shall fund such amounts from the amounts available in the Class RS Distribution
Account. If the funds from the Class RS Distribution Account are insufficient to
pay in full the Class A-1 Formula Interest Shortfall (the "Class A-1 Unfunded
Interest Advance"), the Class A-1 Unfunded Interest Advance will be carried
forward to the next Payment Date.
(c) The amount, if any, on deposit in the Group II Supplemental
Payment Account on any Payment Date is the "Group II Supplemental Interest
Payment Amount Available" on such Payment Date.
If, on any Determination Date, the Trustee determines that the
Group II Supplemental Interest Payment Amount Available to be available on the
next Payment Date is less than the excess of (x) the excess of (i) the Class A-2
Full Interest Distribution Amount over (ii) the Class A-2 Interest Distribution
Amount over (y) the Group II Supplemental Interest Payment Amount Available as
of such Payment Date (the "Class A-2 Formula Interest Shortfall"), the Trustee
shall demand that the Designated Residual Owner fund the Class A-2 Formula
Interest Shortfall on the related Payment Date. The Designated Residual Owner
shall
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fund such amounts from the amounts available in the Class RS Distribution
Account. If the funds from the Class RS Distribution Account are insufficient to
pay in full the Class A-2 Formula Interest Shortfall (the "Class A-2 Unfunded
Interest Advance"), the Class A-2 Unfunded Interest Advance will not be paid and
will not be carried forward to the next Payment Date.
The amount so funded under Section 7.10(b) or 7.10(c) by the
Designated Residual Owner on any such Payment Date is the "Interest Advance" for
such Payment Date.
On each Payment Date, the Trustee shall withdraw from the Group I
Supplemental Interest Payment Account and deposit in the Class A-1 Distribution
Account the lesser of (x) the amount by which the Class A-1 Full Interest
Distribution Amount exceeds the Class A-1 Interest Distribution Amount and (y)
the Group I Supplemental Interest Payment Amount Available.
On each Payment Date, the Trustee shall withdraw from the Group II
Supplemental Interest Payment Account and deposit in the Class A-2 Distribution
Account the lesser of (x) the amount by which the Class A-2 Full Interest
Distribution Amount exceeds the Class A-2 Interest Distribution Amount and (y)
the Group II Supplemental Interest Payment Amount Available.
(d) Any portion of either the Group I Supplemental Interest
Payment Available Amount or the Group II Supplemental Interest Payment Amount
Available after application of clause (b) or (c) above shall be applied in the
following order of priority:
(i) first, to the Designated Residual Owner, as reimbursement for
unpaid Interest Advances, together with interest thereon, with the
earliest Interest Advances being deemed to be paid first;
(ii) second, to the Class RS Distribution Account, the remainder.
(e) the Trustee shall on each Payment Date and after making all
other transfers and distributions distribute the amount on deposit in the Class
RS Distribution Account to the Owners of the Class RS Certificates, pro rata in
accordance with their Percentage Interests.
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
SECTION 8.1. MASTER SERVICER AND SUB-SERVICERS. (a) Acting
directly or through one or more Sub-Servicers as provided in Section 8.3, the
Master Servicer, as master servicer, shall service and administer the Mortgage
Loans in accordance with this Agreement and on behalf of the Trustee and the
Certificate Insurer and with reasonable care, and using that degree of skill and
attention that the Master Servicer exercises with respect to comparable mortgage
loans that it services for itself or others, and shall have full power and
authority, acting alone, to do or cause to be done any and all things in
connection with such servicing and administration which it may deem necessary or
desirable.
(b) The duties of the Master Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for
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collections and furnishing monthly and annual statements to the Trustee and the
Certificate Insurer, as applicable, with respect to distributions, paying
Compensating Interest and making Delinquency Advances and Servicing Advances
pursuant hereto. The Master Servicer shall follow its customary standards,
policies and procedures in performing its duties as Master Servicer. The Master
Servicer shall cooperate with the Trustee and furnish to the Trustee with
reasonable promptness information in its possession as may be necessary or
appropriate to enable the Trustee to perform its tax reporting duties hereunder.
The Trustee shall furnish the Master Servicer or any Sub-servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer or any Sub-servicer to carry out its servicing and
administrative duties hereunder.
(c) Without limiting the generality of the foregoing, the Master
Servicer (i) shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Owners, the
Certificate Insurer and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the related Properties; (ii) may consent to any modification of the terms of any
Note not expressly prohibited hereby if the effect of any such modification (x)
will not be to affect materially and adversely the security afforded by the
related Property, the timing of receipt of any payments required hereby or the
interests of the Certificate Insurer and (y) will not cause the REMIC Trust to
fail to qualify as a REMIC.
(d) The Master Servicer shall have the right using that degree of
skill and attention that the Master Servicer exercises with respect to
comparable mortgage loans that it services for itself or others, to approve
applications of Mortgagors for consent to (i) partial releases of Mortgages,
(ii) alterations to Properties and (iii) removal, demolition or division of
Properties. No application for approval shall be considered by the Master
Servicer unless: (x) the provisions of the related Note and Mortgage have been
complied with; (y) the Combined Loan-to-Value Ratio (which may, for this
purpose, be determined at the time of any such action in a manner reasonably
acceptable to the Trustee) and the Mortgagor's debt-to-income ratio after any
release does not exceed the Combined Loan-to-Value Ratio and debt-to-income
ratio applicable to such Mortgage Loan at origination and (z) the lien priority
of the related Mortgage is not adversely affected; provided, however, that the
foregoing requirements (x), (y) and (z) shall not apply to any such situation
described in this paragraph if such situation results from any condemnation or
easement activity by a governmental entity.
(e) The parties intend that the REMIC Trust shall constitute, and
that the affairs of REMIC Trust shall be conducted so as to qualify it as a
REMIC. In furtherance of such intention, the Master Servicer covenants and
agrees that it shall act as agent (and the Master Servicer is hereby appointed
to act as agent) on behalf of the REMIC Trust and that in such capacity it
shall: (i) use its best efforts to conduct the affairs of the REMIC Trust at all
times that any Class of Certificates are outstanding so as to maintain the
status of the REMIC Trust as a REMIC under the REMIC Provisions; (ii) not
knowingly or intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of REMIC Trust or that would subject
the Trust to tax and (iii) exercise reasonable care not to allow the REMIC Trust
to receive income from the performance of services or from assets not permitted
under the REMIC Provisions to be held by a REMIC.
(f) The Master Servicer may, and is hereby authorized to, perform
any of its servicing responsibilities with respect to all or certain of the
Mortgage Loans through a Sub-Servicer as it may from time to time designate, but
no such designation of a Sub-Servicer shall
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serve to release the Master Servicer from any of its obligations under this
Agreement. Such Sub-Servicer shall have all the rights and powers of the Master
Servicer with respect to such Mortgage Loans under this Agreement.
(g) Without limiting the generality of the foregoing, but subject
to Sections 8.13 and 8.14, the Master Servicer in its own name or in the name of
a Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Trustee to execute and deliver, and may be
authorized and empowered by the Trustee, to execute and deliver, on behalf of
itself, the Owners, the Certificate Insurer and the Trustee or any of them, (i)
any and all instruments of satisfaction or cancellation or of partial or full
release or discharge and all other comparable instruments with respect to the
Mortgage Loans and with respect to the Properties, (ii) and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Property on behalf of the Trustee, and (iii) to hold title to
any Property upon such foreclosure or deed in lieu of foreclosure on behalf of
the Trustee; provided, however, that Section 8.14(a) shall constitute a power of
attorney from the Trustee to the Master Servicer or any Sub-servicer to execute
an instrument of satisfaction (or assignment of mortgage without recourse) with
respect to any Mortgage Loan paid in full (or with respect to which payment in
full has been escrowed). Subject to Sections 8.13 and 8.14, the Trustee shall
furnish the Master Servicer and any Sub-servicer with any powers of attorney and
other documents as the Master Servicer or such Sub-Servicer shall reasonably
request to enable the Master Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
(h) The Master Servicer shall give prompt notice to the Trustee of
any action, of which the Master Servicer has actual knowledge, to (i) assert a
claim against the Trust or (ii) assert jurisdiction over the Trust.
(i) Servicing Advances incurred by the Master Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Property shall be recoverable by the Master Servicer or
such Sub-Servicer to the extent described in Section 8.9(c) and in Section
7.5c(v)(C) hereof.
SECTION 8.2. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS. (a) The
Master Servicer shall, to the extent such procedures shall be consistent with
this Agreement and the terms and provisions of any applicable Insurance
Policies, follow Accepted Servicing Practices. Consistent with the foregoing,
the Master Servicer may in its discretion (i) waive any assumption fees, late
payment charges, charges for checks returned for insufficient funds, prepayment
fees, if any, or other fees which may be collected in the ordinary course of
servicing the Mortgage Loans, (ii) if a Mortgagor is in default or about to be
in default because of a Mortgagor's financial condition, arrange with the
Mortgagor a schedule for the payment of delinquent payments due on the related
Mortgage Loan; provided, however, the Master Servicer shall not reschedule the
payment of delinquent payments more than one time in any twelve consecutive
months with respect to any Mortgagor.
(b) The Master Servicer shall hold in escrow on behalf of the
related Mortgagor all Prepaid Installments received by it, and shall apply such
Prepaid Installments as directed by such Mortgagor and as set forth in the
related Note.
SECTION 8.3. SUB-SERVICING AGREEMENTS BETWEEN MASTER SERVICER AND
SUB-SERVICERS. The Master Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution which is
in compliance with the laws of
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each state necessary to enable it to perform its obligations under such
Sub-Servicing Agreement. The Master Servicer shall give notice to the
Certificate Insurer and the Trustee of the appointment of any Sub-Servicer and
shall furnish to the Certificate Insurer and the Trustee a copy of the
Subservicing Agreement. For purposes of this Agreement, the Master shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments. Any such Sub-Servicing Agreement shall be consistent
with and not violate the provisions of this Agreement.
SECTION 8.4. SUCCESSOR SUB-SERVICERS. The Master Servicer may
terminate any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement and to either itself directly service
the related Mortgage Loans itself or enter into a Sub-Servicing Agreement with a
successor Sub-Servicers that qualifies under Section 8.3.
SECTION 8.5. LIABILITY OF MASTER SERVICER. The Master Servicer
shall not be relieved of its obligations under this Agreement notwithstanding
any Sub-Servicing Agreement or any of the provisions of this Agreement relating
to agreements or arrangements between the Master Servicer and a Sub-Servicer or
otherwise, and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master by such
Sub-Servicer and nothing contained in such Sub-Servicing Agreement shall be
deemed to limit or modify this Agreement. The Trust shall not indemnify the
Master Servicer for any losses due to the Master Servicer's negligence.
SECTION 8.6. NO CONTRACTUAL RELATIONSHIP BETWEEN SUB-SERVICER AND
TRUSTEE OR THE OWNERS. Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Master Servicer alone and the Certificate
Insurer, the Trustee and the Owners shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
any Sub-Servicer except as set forth in Section 8.7.
SECTION 8.7. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENT
BY TRUSTEE. In connection with the assumption of the responsibilities, duties
and liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Master Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Master Servicer and a Sub-Servicer may be
assumed or terminated by the Trustee at its option. Any termination fee due
under any such Sub-servicing agreement shall be paid by the preceding Master
Servicer but in no event shall the Trustee be liable for any such fee.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party, without the payment of any fee by the Trustee, notwithstanding
any contrary provision in any Sub-Servicing Agreement.
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SECTION 8.8. PRINCIPAL AND INTEREST ACCOUNT. (a) The Master
Servicer and/or each Sub-servicer, as applicable, shall establish in the name of
the Trust for the benefit of the Owners of the Certificates and the Certificate
Insurer, as their interests may appear, and maintain at one or more Designated
Depository Institutions the Principal and Interest Account.
Subject to Subsections (c) and (e) below, the Master Servicer and
any Sub-servicer shall deposit all receipts related to the Mortgage Loans to the
Principal and Interest Account on a daily basis (but no later than the first
Business Day after receipt).
On the Startup Day, on each Subsequent Transfer Date and each day
thereafter, as applicable, the Sponsor and/or the Master Servicer shall deposit
to the Principal and Interest Account all receipts related to the Mortgage Loans
which relate to or are received on or after the Cut-Off Date or the Subsequent
Cut-Off Date, as the case may be.
(b) All funds in the Principal and Interest Account may only be
held (i) uninvested, up to the limits insured by the FDIC or (ii) invested in
Eligible Investments. The Principal and Interest Account shall be held in trust
in the name of the Trust and for the benefit of the Owners of the Certificates
and the Certificate Insurer. Any investment earnings on funds held in the
Principal and Interest Account shall be for the account of the Master Servicer
and may only be withdrawn from the Principal and Interest Account by the Master
Servicer immediately following the remittance of the Monthly Remittance Amounts
by the Master Servicer. Any references herein to amounts on deposit in the
Principal and Interest Account shall refer to amounts net of such investment
earnings. Any investment losses are at the expense of the Master Servicer and
shall be replaced on or prior to the Remittance Date.
(c) Subject to Subsection (e) below, the Master Servicer shall
deposit to the Principal and Interest Account all principal and interest
collections on the Mortgage Loans received on or after the Cut-Off Date or
related Subsequent Cut-Off Date including any Prepaid Installments, Prepayments
and Net Liquidation Proceeds, all Loan Purchase Prices and Substitution Amounts
received or paid by the Master Servicer with respect to the Mortgage Loans,
other recoveries or amounts related to the Mortgage Loans received by the Master
Servicer, Compensating Interest and Delinquency Advances together with any
amounts which are reimbursable from the Principal and Interest Account, but net
of (i) the Servicing Fee with respect to each Mortgage Loan and other servicing
compensation to the Master Servicer as permitted by Section 8.15 hereof, (ii)
principal (including Prepayments) collected on the related Mortgage Loans prior
to the Cut-Off Date or related Subsequent Cut-Off Date, (iii) interest accruing
on the related Mortgage Loans prior to the Cut-Off Date or related Subsequent
Cut-Off Date and (iv) Net Liquidation Proceeds to the extent such Net
Liquidation Proceeds exceed the Loan Balance of the related Mortgage Loan.
(d) (i) The Master Servicer may make withdrawals from the
Principal and Interest Account only for the following purposes:
(1) to effect the timely remittance to the Trustee of the
Monthly Remittance Amounts due on the Remittance Date;
(2) to reimburse itself pursuant to Section 8.9(a) hereof for
unreimbursed Delinquency Advances and Servicing Advances and
Nonrecoverable Advances;
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(3) to withdraw investment earnings on amounts on deposit in
the Principal and Interest Account;
(4) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(5) to clear and terminate the Principal and Interest Account
following the termination of the Trust Estate pursuant to Article
X.
(ii) On the tenth day of each month, the Master Servicer shall
send to the Trustee a report, in the form of a computer tape, detailing
the payments on the Mortgage Loans during the prior Remittance Period.
Such tape shall be in the form and have the specifications as may be
agreed to between the Master Servicer and the Trustee from time to
time. The Certificate Insurer shall have the right to request this
computer tape upon providing 3 Business Days written notice to the
Master Servicer.
(iii) On each Remittance Date the Master Servicer shall remit to
the Trustee by wire transfer, or otherwise make funds available in
immediately available funds for deposit in the Certificate Account
pursuant to Section 7.5 of this Agreement, (x) for Group I, the Group I
Interest Remittance Amount and the Group I Principal Remittance Amount
and (y) for Group II, the Group II Interest Remittance Amount and the
Group II Principal Remittance Amount.
(e) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are satisfactory to the Certificate Insurer, the Trustee,
Moody's and Standard & Poor's, then the requirement to maintain the Principal
and Interest Account may be waived by an instrument signed by the Certificate
Insurer, Standard & Poor's, Trustee, and Moody's, and the Master Servicer may be
allowed to co-mingle with its general funds the amounts otherwise required to be
deposited to the Principal and Interest Account, on such terms and subject to
such conditions as the Certificate Insurer, the Trustee, Moody's and Standard &
Poor's may permit.
SECTION 8.9. DELINQUENCY ADVANCES, COMPENSATING INTEREST AND
SERVICING ADVANCES. (a) The Master Servicer is required, not later than each
Remittance Date, to deposit into the Principal and Interest Account an amount
equal to the sum of the interest portions (net of the Servicing Fees) due, but
not collected, with respect to Delinquent Mortgage Loans during the prior
Remittance Period, but only if, in its good faith business judgment, the Master
Servicer reasonably believes that such amount will ultimately be recovered from
the related Mortgage Loan. Such amounts are "Delinquency Advances".
The Master Servicer shall be permitted to fund its payment of
Delinquency Advances on any Remittance Date and to reimburse itself for any
Delinquency Advances paid from the Master Servicer's own funds, from collections
on the related Mortgage Loan. The Master Servicer may use funds deposited to the
Principal and Interest Account subsequent to the related Remittance Period and
shall deposit into the Principal and Interest Account with respect thereto (i)
late collections from the Mortgagor whose Delinquency gave rise to the shortfall
which resulted in such Delinquency Advance and (ii) Net Liquidation Proceeds
recovered on account of the related Mortgage Loan to the extent of the amount of
aggregate Delinquency Advances related thereto or (iii) from its own funds. If
not therefore recovered from the related Mortgagor or the related Net
Liquidation Proceeds, Delinquency Advances constituting Nonrecoverable Advances
shall be recoverable pursuant to Section 7.5(h)(1) hereof.
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(b) On or prior to each Remittance Date, the Master Servicer shall
deposit in the Principal and Interest Account with respect to any full
Prepayment received on a Mortgage Loan during the related Remittance Period out
of its own funds without any right of reimbursement therefor, an amount equal to
the difference between (x) 30 days' interest at the Mortgage Loan's Coupon Rate
(less the Servicing Fee) on the Loan Balance of such Mortgage Loan as of the
first day of the related Remittance Period and (y) to the extent not previously
advanced, the interest (less the Servicing Fee) paid by the Mortgagor with
respect to the Mortgage Loan during such Remittance Period (any such amount paid
by the Master Servicer, "Compensating Interest"). The Master Servicer shall in
no event be required to pay Compensating Interest with respect to any Remittance
Period in an amount in excess of the aggregate Servicing Fee received by the
Master Servicer with respect to all Mortgage Loans for such Remittance Period.
(c) The Master Servicer will pay all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations, including,
but not limited to, the cost of (i) Preservation Expenses, (ii) any enforcement
or judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Master Servicer reasonably believes such costs and expenses
will increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
amount so paid will constitute a "Servicing Advance". The Master Servicer may
recover Servicing Advances (x) from the Mortgagors to the extent permitted by
the Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of
the related Mortgage Loan and (y) as provided in Section 7.5(h)(1) hereof. In no
case may the Master Servicer recover Servicing Advances from principal and
interest payments on any Mortgage Loan or from any amounts relating to any other
Mortgage Loan except as provided pursuant to Section 7.5(h)(1) hereof.
SECTION 8.10. PURCHASE OF MORTGAGE LOANS. The Master Servicer may,
but is not obligated to, purchase for its own account any Mortgage Loan which
becomes Delinquent, in whole or in part, as to four consecutive monthly
installments or any Mortgage Loan as to which enforcement proceedings have been
brought by the Master Servicer or by any Sub-Servicer pursuant to Section 8.13.
Any such Mortgage Loan so purchased shall be purchased by the Master Servicer on
a Remittance Date at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be deposited in the Principal and Interest Account.
Notwithstanding the foregoing, the Master Servicer may not purchase any such
Mortgage Loan unless the Master Servicer has delivered to the Trustee an opinion
of counsel experienced in federal income tax matters acceptable to the Trustee
to the effect that such a purchase would not constitute a Prohibited Transaction
for the Trust or otherwise subject the Trust to tax and would not jeopardize the
status of either the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC.
SECTION 8.11. MAINTENANCE OF INSURANCE. (a) The Master Servicer
shall cause to be maintained with respect to each Mortgage Loan a hazard
insurance policy with a generally acceptable carrier that provides for fire and
extended coverage, and which provides for a recovery by the Master Servicer on
behalf of the Trust of insurance proceeds relating to such Mortgage Loan in an
amount not less than the least of (i) the outstanding principal balance of the
Mortgage Loan, (ii) the minimum amount required to compensate for damage or loss
on a replacement cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to a
Property in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Master Servicer will
cause to be maintained with respect thereto a flood insurance policy in a form
meeting the requirements of the current guidelines of the Federal
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Insurance Administration with a generally acceptable carrier in an amount
representing coverage, and which provides for a recovery by the Master Servicer
on behalf of the Trust of insurance proceeds relating to such Mortgage Loan of
not less than the least of (i) the outstanding principal balance of the Mortgage
Loan, (ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973. The Master Servicer
shall indemnify the Trust and the Certificate Insurer out of the Master
Servicer's own funds for any loss to the Trust and the Certificate Insurer
resulting from the Master Servicer's failure to maintain the insurance required
by this Section.
(c) In the event that the Master Servicer shall obtain and
maintain a blanket policy insuring against fire, flood and hazards of extended
coverage on all of the Mortgage Loans, then, to the extent such policy names the
Master Servicer as loss payee and provides coverage in an amount equal to the
aggregate unpaid principal balance on the Mortgage Loans without co-insurance,
and otherwise complies with the requirements of this Section 8.11, the Master
Servicer shall be deemed conclusively to have satisfied its obligations with
respect to fire and hazard insurance coverage under this Section 8.11, it being
understood and agreed that such blanket policy may contain a deductible clause,
in which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Property a policy complying with the preceding
paragraphs of this Section 8.11, and there shall have been a loss which would
have been covered by such policy, deposit in the Principal and Interest Account
from the Master Servicer's own funds the difference, if any, between the amount
that would have been payable under a policy complying with the preceding
paragraphs of this Section 8.11 and the amount paid under such blanket policy.
Upon the request of the Trustee or the Certificate Insurer, the Master Servicer
shall cause to be delivered to the Trustee and the Certificate Insurer, a
certified true copy of such policy.
SECTION 8.12. DUE-ON-SALE CLAUSES; ASSUMPTION AND SUBSTITUTION
AGREEMENTS. When a Property has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Note; provided, however, that the Master Servicer
shall not exercise any such right if (i) the "due-on-sale" clause, in the
reasonable belief of the Master Servicer, is not enforceable under applicable
law or (ii) the Master Servicer reasonably believes that to permit an assumption
of the Mortgage Loan would not materially and adversely affect the interest of
the Owners or of the Certificate Insurer. In such event, the Master Servicer
shall enter into an assumption and modification agreement with the person to
whom such property has been or is about to be conveyed, pursuant to which such
person becomes liable under the Note and, unless prohibited by applicable law or
the Mortgage Documents, the Mortgagor remains liable thereon. If the foregoing
is not permitted under applicable law, the Master Servicer is authorized to
enter into a substitution of liability agreement with such person, pursuant to
which the original Mortgagor is released from liability and such person is
substituted as Mortgagor and becomes liable under the Note; provided, however,
that to the extent any such substitution of liability agreement would be
delivered by the Master Servicer outside of its usual procedures for mortgage
loans held in its own portfolio the Master Servicer shall, prior to executing
and delivering such agreement, obtain the prior written consent of the Control
Party. The Mortgage Loan, as assumed, shall conform in all respects to the
requirements, representations and warranties of this Agreement. The Master
Servicer shall notify the Trustee that any such assumption or substitution
agreement has been completed by forwarding to the Trustee the original copy of
such assumption or substitution agreement, which copy shall be added by the
Trustee to the related File and which shall, for all purposes, be considered a
part of
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such File to the same extent as all other documents and instruments constituting
a part thereof. The Master Servicer shall be responsible for recording or
causing the recordation any such assumption or substitution agreements. In
connection with any such assumption or substitution agreement, the required
monthly payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the
stated maturity or outstanding principal amount of such Mortgage Loan shall not
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Master Servicer or the
Sub-Servicer for consenting to any such conveyance or entering into an
assumption or substitution agreement shall be retained by or paid to the Master
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or any assumption which the Master
Servicer may be restricted by law from preventing, for any reason whatsoever.
SECTION 8.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The
Master Servicer shall foreclose upon or otherwise comparably effect the
ownership on behalf of the Trust of Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Master Servicer has not purchased pursuant to
Section 8.10. In connection with such foreclosure or other conversion, the
Master Servicer shall exercise such of the rights and powers vested in it
hereunder, and use the same degree of care and skill in their exercise or use,
as prudent mortgage lenders would exercise or use under the circumstances in the
conduct of their own affairs, including, but not limited to, advancing funds for
the payment of taxes, amounts due with respect to Senior Liens, and insurance
premiums. Any amounts so advanced shall constitute "Servicing Advances" within
the meaning of Section 8.9(c) hereof. The Master Servicer shall sell any REO
Property within 23 months of its acquisition by the Trust, unless the Master
Servicer obtains for the Trustee an opinion of counsel experienced in federal
income tax matters, addressed to the Trustee, the Certificate Insurer and the
Master Servicer, to the effect that the holding by the Trust of such REO
Property for any greater period will not result in the imposition of taxes on
"Prohibited Transactions" of the Trust or any REMIC therein as defined in
Section 860F of the Code or cause either the Lower-Tier REMIC or the Upper-Tier
REMIC to fail to qualify as a REMIC under the REMIC Provisions at any time that
any Certificates are outstanding. Notwithstanding the generality of the
foregoing provisions, the Master Servicer shall manage, conserve, protect and
operate each REO Property for the Owners and the Certificate Insurer solely for
the purpose of its prompt disposition and sale in a manner which does not cause
such REO Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code or result in the receipt by the
Lower-Tier REMIC or the Upper Tier REMIC of any "income from non-permitted
assets" within the meaning of Section 860F(a)(2)(B) of the Code or any "net
income from foreclosure property" which is subject to taxation under the REMIC
Provisions. Pursuant to its efforts to sell such REO Property, the Master
Servicer shall either itself or through an agent selected by the Master Servicer
protect and conserve such REO Property in the same manner and to such extent as
is customary in the locality where such REO Property is located and may,
incident to its conservation and protection of the interests of the Owners, rent
the same, or any part thereof, as the Master Servicer deems to be in the best
interest of the Owners for the period prior to the sale of such REO Property.
The Master Servicer shall take into account the existence of any hazardous
substances, hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act of 1976, or other federal, state or local
environmental legislation,
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on a REO Property in determining whether to foreclose upon or otherwise
comparably convert the ownership of such REO Property. With respect to any
Mortgage Loan secured by a mixed use REO Property, the Master Servicer shall,
prior to foreclosing upon or otherwise comparably effecting the ownership in the
name of the Master Servicer on behalf of the Trust, either (x) perform a "phase
one environmental study" of such REO Property or (y) repurchase such REO
Property at the Loan Purchase Price.
Notwithstanding the generality of the foregoing provisions, the
Master Servicer shall manage, conserve, protect and operate each REO Property
for the Owners solely for the purpose of its prompt disposition and sale in a
manner which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the Trust of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from foreclosure
property" which is subject to taxation under the REMIC Provisions. Pursuant to
its efforts to sell such REO Property, the Master Servicer shall either itself
or through an agent selected by the Master Servicer protect and conserve such
REO Property in the same manner and to such extent as is customary in the
locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Owners, rent the same, or
any part thereof, as the Master Servicer deems to be in the best interest of the
Owners for the period prior to the sale of such REO Property. The Master
Servicer shall take into account the existence of any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation, on a Property in determining whether to foreclose upon or otherwise
comparably convert the ownership of such Property.
(b) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan" and shall promptly deliver to the Certificate Insurer
a related liquidation report with respect to such Liquidated Loan.
SECTION 8.14. TRUSTEE TO COOPERATE; RELEASE OF FILES. (a) Upon the
payment in full of any Mortgage Loan (including the repurchase of any Mortgage
Loan or any liquidation of such Mortgage Loan through foreclosure or otherwise),
or the receipt by the Master Servicer or any Sub-servicer of a notification that
payment in full will be escrowed in a manner customary for such purposes, the
Master Servicer or any Sub-servicer shall deliver to the Trustee a Master
Servicer's Trust Receipt. Upon receipt of such Master Servicer's Trust Receipt,
the Trustee shall promptly release the related File, in trust to the applicable
party as directed in writing by the Master Servicer on the Master Servicer's
Trust Receipt, in each case pending its release by the such party. Upon any such
payment in full, or the receipt of such notification that such funds have been
placed in escrow, the Master Servicer or any Sub-servicer is authorized to give,
as attorney-in-fact for the Trustee and the mortgagee under the Mortgage which
secured the Note, an instrument of satisfaction (or assignment of Mortgage
without recourse) regarding the Property relating to such Mortgage, which
instrument of satisfaction or assignment, as the case may be, shall be delivered
to the Person or Persons entitled thereto against receipt therefor of payment in
full, it being understood and agreed that no expense incurred in connection with
such instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Principal and Interest Account. In lieu of executing any such
satisfaction or assignment, as the case may be, the Master Servicer or any
Sub-servicer may prepare and submit to the Trustee, a satisfaction (or
assignment without recourse, if requested by the Person or Persons entitled
thereto) in form for execution by
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the Trustee with all requisite information completed by the Master Servicer or
any Sub-servicer; in such event, the Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Trustee shall (except in the case of the payment or liquidation
pursuant to which the related File is released to an escrow agent or an
employee, agent or attorney of the Trustee), upon request of the Master Servicer
or any Sub-servicer and delivery to the Trustee of a Master Servicer's Trust
Receipt, release the related File to the Master Servicer and shall execute such
documents as shall be necessary to the prosecution of any such proceedings,
including, without limitation, an assignment without recourse of the related
Mortgage to the Master Servicer; provided that the Master Servicer shall not
have received and not returned at any one time more than 10% of the entire
number of Files. The Trustee shall complete in the name of the Trustee any
endorsement in blank on any Note prior to releasing such Note to the Master
Servicer or any Sub-servicer. Such receipt shall obligate the Master Servicer or
any Sub-servicer to return the File to the Trustee when the need therefor by the
Master Servicer or any Sub-servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of the liquidation information,
in physical or electronic form, the Master Servicer's Trust Receipt shall be
released by the Trustee to the Master Servicer or any Sub-servicer.
(c) No costs associated with the procedures described in this
Section 8.14 shall be an expense of the Trust.
(d) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given by
the Certificate Insurer, Moody's and Standard & Poor's pursuant to Section
3.5(j) hereof.
(e) Each Master Servicer's Trust Receipt may be delivered to the
Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such other
means, including, without limitation, electronic or computer readable medium, as
the Master Servicer and the Trustee shall mutually agree. The Trustee shall
promptly release the related File(s) within five (5) to seven (7) business days
of receipt of a properly completed Master Servicer's Trust Receipt pursuant to
clauses (i), (ii) or (iii) above or such shorter period as may be agreed upon by
the Master Servicer and the Trustee. Receipt of a Master Servicer's Trust
Receipt pursuant to clauses (i), (ii) or (iii) above shall be authorization to
the Trustee to release such Files, provided the Trustee has determined that such
Master Servicer's Trust Receipt has been executed, with respect to clauses (i)
or (ii) above, or approved, with respect to clause (iii) above, by an Authorized
Officer of the Master Servicer or any Sub-servicer, and so long as the Trustee
complies with its duties and obligations under this Agreement. If the Trustee is
unable to release the Files within the time frames previously specified, the
Trustee shall immediately notify the Master Servicer or any Sub-servicer
indicating the reason for such delay, but in no event shall such notification be
later than five business days after receipt of a Master Servicer's Trust
Receipt. If the Master Servicer is required to pay penalties or damages due
solely to the Trustee's negligent failure to release the related File or the
Trustee's negligent failure to execute and release documents in a timely manner,
the Trustee shall be liable for such penalties or damages.
On each day that the Master Servicer remits to the Trustee Master
Servicer's Trust Receipts pursuant to clauses (ii) or (iii) above, the Master
Servicer or any Sub-servicer shall also submit to the Trustee a summary of the
total amount of such Master Servicer's Trust
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Receipts requested on such day by the same method as described in such clauses
(ii) or (iii) above.
SECTION 8.15. SERVICING COMPENSATION. As compensation for its
activities hereunder, the Master Servicer shall be entitled to retain the amount
of the Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad check charges,
assumption fees, late payment charges, or any other servicing-related fees, Net
Liquidation Proceeds not required to be deposited in the Principal and Interest
Account pursuant to Section 8.8(c)(v) and similar items may, to the extent
collected from Mortgagors, be retained by the Master Servicer.
SECTION 8.16. ANNUAL STATEMENT AS TO COMPLIANCE. The Master
Servicer, at its own expense, will deliver to the Trustee, the Certificate
Insurer, Standard & Poor's, and Moody's, on or before the last day of March 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 8.17. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'
REPORTS. On or before the last day of March of each year, commencing in 1999,
the Master Servicer, at its own expense, shall cause to be delivered to the
Trustee, the Certificate Insurer, Standard & Poor's and Moody's a letter or
letters of a firm of independent, nationally recognized certified public
accountants reasonably acceptable to the Control Party stating that such firm
has, with respect to the Master Servicer's overall servicing operations (i)
performed applicable tests in accordance with the compliance testing procedures
as set forth in Appendix 3 of the Audit Guide for Audits of HUD Approved
Nonsupervised Mortgagees or (ii) examined such operations in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers, and in
either case stating such firm's conclusions relating thereto.
SECTION 8.18. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE MORTGAGE LOANS. The Master Servicer shall provide to the Trustee,
the Certificate Insurer, the FDIC and the supervisory agents and examiners of
each of the foregoing access to the documentation regarding the Mortgage Loans
required by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Master Servicer designated by it.
Upon any change in the format of the computer tape maintained by
the Master Servicer in respect of the Mortgage Loans, the Master Servicer shall
deliver a copy of such computer tape to the Trustee and in addition shall
provide a copy of such computer tape to the Trustee at such other times as the
Trustee may reasonably request. The Certificate Insurer may request a copy of
this computer tape upon three Business Days prior written notice to the Master
Servicer.
SECTION 8.19. ASSIGNMENT OF AGREEMENT. The Master Servicer may not
assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Trustee and the Certificate
Insurer, which such consent shall not be unreasonably withheld; provided,
however, that any assignee must meet the eligibility
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requirements set forth in Section 8.20(g) hereof for a successor servicer.
Notice of any such assignment shall be given by the Master Servicer to the
Trustee, the Certificate Insurer and Moody's.
SECTION 8.20. REMOVAL OF MASTER SERVICER; RESIGNATION OF MASTER
SERVICER. (a) The Trustee, with the consent of the Certificate Insurer (or the
Owners pursuant to Section 6.11 hereof) may remove the Master Servicer upon the
occurrence of any of the following events:
(i) The Master Servicer shall fail to deliver to the Trustee any
proceeds or required payment, which failure continues unremedied for
five Business Days following written notice to an Authorized Officer of
the Master Servicer from the Trustee or from any Owner.
(ii) The Master Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing
its inability to pay its debts generally as they become due, (III) make
a general assignment for the benefit of creditors, (IV) be adjudicated
a bankrupt or insolvent, (V) commence a voluntary case under the
federal bankruptcy laws of the United States of America or file a
voluntary petition or answer seeking reorganization, an arrangement
with creditors or an order for relief or seeking to take advantage of
any insolvency law or file an answer admitting the material allegations
of a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding or (VI) take corporate action for the purpose of
effecting any of the foregoing;
(iii) If without the application, approval or consent of the
Master Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of
the Master Servicer an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or similar
entity with respect to the Master Servicer or of all or any substantial
part of its assets, or other like relief in respect thereof under any
bankruptcy or insolvency law, and, if such proceeding is being
contested by the Master Servicer in good faith, the same shall (A)
result in the entry of an order for relief or any such adjudication or
appointment or (B) continue undismissed or pending and unstayed for any
period of seventy-five (75) consecutive days; or
(iv) The Master Servicer shall fail to perform any one or more of
its obligations hereunder other than the obligations contemplated by
Subsection 8.20(i) above, and shall continue in default thereof for a
period of sixty (60) days after notice by the Trustee or the
Certificate Insurer of said failure; provided, however, that if the
Master Servicer can demonstrate to the reasonable satisfaction of the
Control Party that it is diligently pursuing remedial action, then the
cure period may be extended with the written approval of the Control
Party; or
(v) The Master Servicer shall fail to cure any breach of any of
its representations and warranties set forth in Section 3.2 which
materially and adversely affects the interests of the Owners or the
Certificate Insurer for a period of thirty (30) days after the Master
Servicer's discovery or receipt of notice thereof; provided, however,
that if the Master Servicer can demonstrate to the reasonable
satisfaction of the
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Control Party that it is diligently pursuing remedial action, then the
cure period may be extended with the written approval of the Control
Party.
(b) The Control Party also may remove the Master Servicer upon the
occurrence of any of the following events:
(i) a Deficiency Amount; provided, however, that the Certificate
Insurer shall have no right to remove the Master Servicer under this
clause (i) if the Master Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that such event was due to
circumstances beyond the control of the Master Servicer; or
(ii) the failure by the Master Servicer to make any required
Servicing Advance; or
(iii) the failure by the Master Servicer to perform any one or
more of its obligations hereunder or under the Insurance Agreement,
which failure materially and adversely affects the interests of the
Certificate Insurer and the Trustee; or
(iv) the failure by the Master Servicer to make any required
Delinquency Advance or to pay any Compensating Interest; or
(v) the occurrence of a Servicer Termination Loss Trigger, as
such terms are defined in the Insurance Agreement; or
(vi) the enactment of any law by a legislative body that
declares, or any finding or ruling by a court of competent
jurisdiction, that the Insurance Agreement or this Agreement is not
valid and binding on the Sponsor or the Master Servicer;
provided, however, with respect to clause (iv), if the Master Servicer can
demonstrate to the reasonable satisfaction of the Control Party that any such
event was due to circumstances beyond the control of the Master Servicer, such
event shall not be considered an event of termination of the Master Servicer;
provided, however, that (x) prior to any removal of the Master Servicer by the
Control Party pursuant to clauses (i) or (ii) of this Section 8.20(b), the
Master Servicer shall first have been given by the Control Party and by
registered or certified mail, notice of the occurrence of one or more of the
events set forth in clauses (i), (ii) or (iii) above and the Master Servicer
shall not have remedied, or shall not have taken actions satisfactory to the
Control Party to remedy, such event or events within 30 days (60 days with
respect to clause (iii)) after the Master Servicer's receipt of such notice
(provided, however, that if the Master Servicer can demonstrate to the
reasonable satisfaction of the Control Party that it is diligently pursuing
remedial action, then the cure period in each case may be extended with the
written approval of the Control Party) and (y) in the event of the refusal or
inability of the Master Servicer to make any required Delinquency Advance or to
pay any Compensating Interest or Monthly Remittance, such removal shall be
effective (without the requirement of any action on the part of the Certificate
Insurer or of the Trustee) at 4 p.m. on the second Business Day following the
day on which the Trustee or the Certificate Insurer notifies an Authorized
Officer of the Master Servicer that a required Delinquency Advance has not been
received by the Trustee. Upon the Trustee's determination that a required
Delinquency Advance or payment of Compensating Interest has not been made by the
Master Servicer, the Trustee shall so notify in writing an Authorized Officer of
the Master Servicer and the Certificate Insurer as soon as is reasonably
practical.
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(c) The Master Servicer shall not resign from the obligations and
duties hereby imposed on it, except upon determination that its duties hereunder
are no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer at the date of this Agreement. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an opinion of counsel to such effect which shall be delivered to
the Trustee and the Certificate Insurer.
(d) No removal or resignation of the Master Servicer shall become
effective until the Trustee or a successor servicer shall have assumed the
Master Servicer's responsibilities and obligations in accordance with this
Section. If no successor servicer is available, the Trustee shall act as
successor servicer and perform all of the obligations of this Section,
including, without limitation, making Delinquency Advances and paying
Compensating Interest; provided, however, that the Trustee will not be obligated
to act as successor servicer if it is legally unable to perform its duties
hereunder.
(e) Upon removal or resignation of the Master Servicer, the Master
Servicer also shall promptly deliver or cause to be delivered to a successor
servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Master Servicer has
maintained for the Mortgage Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Master Servicer's possession.
(f) Any collections received by the Master Servicer after removal
or resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the Trustee or the successor Master Servicer.
(g) Upon removal or resignation of the Master Servicer, the
Trustee (x) may solicit bids for a successor servicer as described below, and
(y) pending the appointment of a successor Master Servicer as a result of
soliciting such bids, shall serve as Master Servicer. The Trustee shall, if it
is unable to obtain a qualifying bid and is prevented by law from acting as
Master Servicer, appoint, or petition a court of competent jurisdiction to
appoint, any housing and home finance institution, bank or mortgage servicing
institution which has shareholders' equity of not less than $10,000,000, as
determined in accordance with generally accepted accounting principles, and
acceptable to the Certificate Insurer as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. The compensation of any
successor servicer (including, without limitation, the Trustee) so appointed
shall be the aggregate Servicing Fees, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15; provided, however, that if the Trustee
acts as successor Master Servicer then the Sponsor agrees to pay to the Trustee
at such time that the Trustee becomes such successor Master Servicer a fee of
twenty-five dollars ($25.00) for each Mortgage Loan then included in the Trust
Estate. The Trustee shall be obligated to serve as successor Master Servicer
whether or not the $25.00 fee described in the preceding sentence is paid by the
Sponsor, but shall in any event be entitled to receive, and to enforce payment
of, such fee from the Sponsor.
(h) In the event the Trustee solicits bids as provided above, the
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount
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of the aggregate Servicing Fees as servicing compensation, together with the
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in Sections 8.8 and 8.15. Within thirty days
after any such public announcement, the Trustee shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest satisfactory bid. The
Trustee shall deduct from any sum received by the Trustee from the successor to
the Master Servicer in respect of such sale, transfer and assignment all costs
and expenses of any public announcement and of any sale, transfer and assignment
of the servicing rights and responsibilities hereunder. After such deductions,
the remainder of such sum shall be paid by the Trustee to the Master Servicer at
the time of such sale, transfer and assignment to the Master Servicer's
successor.
(i) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Master Servicer agrees to cooperate with the Trustee and any
successor Master Servicer in effecting the termination of the Master Servicer's
servicing responsibilities and rights hereunder and shall promptly provide the
Trustee or such successor Master Servicer, as applicable, all documents and
records reasonably requested by it to enable it to assume the Master Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor Master Servicer, as applicable, all amounts which then have been or
should have been deposited in the Principal and Interest Account by the Master
Servicer or which are thereafter received with respect to the Mortgage Loans.
Neither the Trustee nor any other successor Master Servicer shall be held liable
by reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Master
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Master Servicer or (iii) any breaches of a predecessor Master Servicer.
(j) The Trustee or any other successor Master Servicer, upon
assuming the duties of Master Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the Master Servicer
has theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Trustee is acting as successor Master Servicer, the Trustee
shall only be required to make Delinquency Advances (including the Delinquency
Advances described in this clause (j)) if, in the Trustee's reasonable good
faith judgment, such Delinquency Advances will ultimately be recoverable from
the related Mortgage Loans.
(k) The Master Servicer which is being removed or is resigning
shall give notice to the Mortgagors and to Moody's and Standard and & Poor's of
the transfer of the servicing to the successor.
(l) The Trustee shall give notice to the Certificate Insurer,
Moody's, Standard & Poor's and to the Owners of the occurrence of any event
specified in Section 8.20(a) of which the Trustee has knowledge.
(m) Notwithstanding anything herein to the contrary, upon
termination of the Master Servicer hereunder, any liabilities of the Master
Servicer which accrued prior to such termination shall survive such termination.
SECTION 8.21. INSPECTIONS BY THE CERTIFICATE INSURER AND THE
TRUSTEE; ERRORS AND OMISSIONS INSURANCE. (a) At any reasonable time and from
time to time upon reasonable notice, the Certificate Insurer, the Trustee, or
any agents or representatives thereof may inspect the Master Servicer's
servicing operations and discuss the servicing operations of the
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Master Servicer with any of its officers or directors. The costs and expenses
incurred by the Master Servicer or its agents or representatives in connection
with any such examinations or discussions shall be paid by the Master Servicer.
(b) The Master Servicer agrees to maintain errors and omissions
coverage and a fidelity bond, each at least to the extent generally maintained
by prudent mortgage loan servicers having servicing portfolios of a similar
size.
SECTION 8.22. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF MASTER SERVICER. Any corporation into which the Master Servicer may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer shall be a party, or any corporation succeeding to all or substantially
all of the business of the Master Servicer, shall be the successor of the Master
Servicer hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto provided that such corporation
meets the qualifications set forth in Section 8.20(g).
SECTION 8.23. NOTICES OF MATERIAL EVENTS. The Master Servicer
shall give prompt notice to the Certificate Insurer, the Trustee, Moody's and
Standard & Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which with
notice or the passage of time, or both, would result in the occurrence of a
default by the Sponsor, any Originator or the Master Servicer under any
Transaction Document or would constitute a material breach of a representation,
warranty or covenant under any Transaction Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Sponsor, the Master Servicer or AMHC in any federal, state or local court or
before any governmental body or agency, or before any arbitration board, or any
such proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse effect upon any the Sponsor's, the
Master Servicer's or AMHC's ability to perform its obligations under any
Transaction Document;
(c) The commencement of any proceedings by or against the Sponsor,
the Master Servicer or AMHC under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official shall have been, or may be, appointed or requested for the Sponsor, the
Master Servicer or AMHC; and
(d) The receipt of notice from any agency or governmental body
having authority over the conduct of any of the Sponsor's the Master Servicer's
or the AMHC's business that the Sponsor, the Master Servicer or AMHC is to cease
and desist, or to undertake any practice, program, procedure or policy employed
by the Sponsor, the Master Servicer or AMHC in the conduct of the business of
any of them, and such cessation or undertaking will materially adversely affect
the conduct of the Sponsor's, the Master Servicer's or AMHC's business or its
ability to perform under the Transaction Documents or materially adversely
affect the financial affairs of the Sponsor, the Master Servicer or AMHC.
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ARTICLE IX
TERMINATION OF TRUST
SECTION 9.1. TERMINATION OF TRUST. The Trust created hereunder and
all obligations created by this Agreement will terminate upon the earlier of (i)
the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policy of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, and (ii) at any time when a Qualified Liquidation
of the REMIC Trust is effected as described below or (iii) as described in
Section 9.2 or 9.3 hereof. To effect a termination of this Agreement pursuant to
clause (ii) above, the Owners of all Certificates then Outstanding shall (x)
unanimously direct the Trustee on behalf of the Lower-Tier REMIC and the
Upper-Tier REMIC to adopt a plan of complete liquidation with respect to each of
the Mortgage Loan Groups as contemplated by Section 860F(a)(4) of the Code and
(y) provide to the Trustee an opinion of counsel experienced in federal income
tax matters to the effect that such liquidation constitutes a Qualified
Liquidation, and the Trustee either shall sell the Mortgage Loans and distribute
the proceeds of the liquidation of the Trust Estate, or shall distribute
equitably in kind all of the assets of the Trust Estate to the remaining Owners
of the Certificates based on their interests in the Trust, each in accordance
with such plan, so that the liquidation or distribution of the Trust Estate, the
distribution of any proceeds of the liquidation and the termination of this
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation. In no event, however, will the Trust created by this
Agreement continue beyond the expiration of twenty-one (21) years from the death
of the last survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the United Kingdom, living on the date
hereof. The Trustee shall give written notice of termination of the Agreement to
each Owner in the manner set forth in Section 11.5.
SECTION 9.2. TERMINATION UPON OPTION OF MASTER SERVICER. (a) On
any Remittance Date on or after the Clean-Up Call Date, the Master Servicer
acting directly or through one or more affiliates may determine to purchase and
may cause the purchase from the Trust of all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired in respect of
any such Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise
then remaining in the Trust Estate at a price equal to the sum of (v) the
greater of (i) 100% of the aggregate Loan Balances of all of the related
Mortgage Loans as of the day of purchase minus (a) the amount actually remitted
by the Master Servicer representing the related Monthly Principal Remittance
Amount on such Remittance Date for the related Remittance Period and (b) any
unreimbursed Delinquency Advances, Servicing Advances and Nonrecoverable
Advances and (ii) the fair market value of such Mortgage Loans (disregarding
accrued interest), (w) the amount of any difference between the related Monthly
Interest Remittance Amount actually remitted by the Master Servicer on such
Remittance Date and the related Monthly Interest Remittance Amount due on such
Remittance Date, (x) the related Reimbursement Amount, if any, and (y) the
aggregate amount of any Delinquency Advances and Servicing Advances remaining
unreimbursed, together with any accrued and unpaid Servicing Fees, as of such
Remittance Date (such amount, the "Termination Price"). In connection with such
purchase, the Master Servicer shall remit to the Trustee all amounts then on
deposit in the Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase. Notwithstanding the foregoing, the Master Servicer or its
affiliate may not terminate the Trust pursuant to this Section 9.2
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without the consent of the Certificate Insurer, if termination would result in a
draw on the Certificate Insurance Policy.
(b) In connection with any such purchase, the Master Servicer
shall provide to the Trustee an opinion of counsel experienced in federal income
tax matters to the effect that such purchase constitutes a Qualified Liquidation
of the REMIC Trust.
(c) Promptly following any such purchase, the Trustee will release
the Files to the Master Servicer, or otherwise upon their order, in a manner
similar to that described in Section 8.14 hereof.
(d) Upon such purchase, the Certificate Insurance Policy will
terminate and be returned to the Certificate Insurer.
SECTION 9.3. TERMINATION UPON LOSS OF REMIC STATUS. (a) Following
a (x) final determination by the Internal Revenue Service, or by a court of
competent jurisdiction, in either case from which no appeal is taken within the
permitted time for such appeal, or (y) if any appeal is taken, following a final
determination of such appeal from which no further appeal can be taken, to the
effect that the REMIC Trust does not and will no longer qualify as a "REMIC"
pursuant to Section 860D of the Code (the "Final Determination") or (z)
following the delivery of an opinion of counsel ("REMIC Opinion") to the effect
that the effect of the Final Determination is to increase substantially the
probability that the REMIC Trust will no longer qualify as a "REMIC" pursuant to
Section 860D of the Code, on any Remittance Date on or after the date which is
30 calendar days following such Final Determination, the Owners of a majority in
Percentage Interest represented by the Class A Certificates then Outstanding may
direct the Trustee to adopt a plan of complete liquidation with respect to the
Trust Estate. In connection with such purchase, the Master Servicer shall remit
to the Trustee all amounts then on deposit in the Principal and Interest Account
for deposit in the Certificate Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
(b) Upon receipt of such direction from the Owners of such Class A
Certificates or such notice from the Certificate Insurer, the Trustee shall
notify the holders of the Class R Certificates of such election to liquidate or
such determination to purchase, as the case may be, (the "Termination Notice").
The Owner of a majority of the Percentage Interest of the Class R Certificates
then Outstanding may, on any Remittance Date, within 60 days from the date of
receipt of the Termination Notice (the "Purchase Option Period"), at their
option, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the Class
R Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period in
the event that the Owners of the Class A Certificates have given the Trustee the
direction described in clause (a)(i) above, the Trustee shall sell the Mortgage
Loans and distribute the proceeds of the liquidation of the Trust Estate, such
that, if so directed, the liquidation of the Trust Estate, the distribution of
the proceeds of such liquidation occur no later than the close of the 60th day,
or such later day as the Owners of the Class A Certificates shall permit or
direct in writing, after the expiration of the Purchase Option Period.
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(d) Following a Final Determination, the Owners of a majority of
the Percentage Interest of the Class R Certificates then Outstanding may, at
their option on any Remittance Date and upon delivery to the Owners of the Class
A Certificates and the Trustee of an opinion of counsel experienced in federal
income tax matters selected by the Owners of such Class R Certificates which
opinion shall be reasonably satisfactory in form and substance to a majority of
the Percentage Interests represented by the Class A Certificates then
Outstanding and the Trustee, to the effect that the effect of the Final
Determination is to increase substantially the probability that the gross income
of the REMIC Trust will be subject to federal taxation, purchase from the Trust
all (but not fewer than all) Mortgage Loans in the Trust Estate, and all
property theretofore acquired by foreclosure, deed in lieu of foreclosure, or
otherwise in respect of any Mortgage Loan then remaining in the Trust Estate at
a purchase price equal to the Termination Price. In connection with such
purchase, the Master Servicer shall remit to the Trustee all amounts then on
deposit in the Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase. The foregoing opinion shall be deemed satisfactory unless the
Owners of a majority of the Percentage Interest represented by the Class A
Certificates then Outstanding or the Trustee give the Owners of a majority of
the Percentage Interest of the Class R Certificates notice that such opinion is
not satisfactory within thirty days after receipt of such opinion.
SECTION 9.4. DISPOSITION OF PROCEEDS. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article IX to the Certificate Account; provided, however, that
any amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Master Servicer from
the Master Servicer's own funds shall be paid by the Trustee to the Master
Servicer.
SECTION 9.5. NETTING OF AMOUNTS. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
SECTION 10.1. CERTAIN DUTIES AND RESPONSIBILITIES. (a) The Trustee
(i) undertakes to perform such duties and only such duties as are specifically
set forth in this Agreement, and no implied covenants or obligations shall be
read into this Agreement against the Trustee and (ii) in the absence of bad
faith on its part, may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or opinions
furnished pursuant to and conforming to the requirements of this Agreement; but
in the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, shall be under a duty
to examine the same to determine whether or not they conform to the requirements
of this Agreement.
(b) Notwithstanding the appointment of the Master Servicer
hereunder, the Trustee is hereby empowered to perform the duties of the Master
Servicer hereunder whether following the failure of the Master Servicer to
perform, pursuant to Section 8.20 hereof or otherwise. Specifically, and not in
limitation of the foregoing, the Trustee shall have the power:
(i) to collect Mortgagor payments;
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(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into assumption
and substitution agreements as permitted by Section 8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant to Section
8.14;
(v) to make Delinquency Advances and Servicing Advances and to
pay Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect
of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by an Authorized Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Certificate Insurer or of the Owners of a majority in
Percentage Interest of the Certificates of the affected Class or
Classes and the Certificate Insurer relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement relating to such Certificates.
(d) Whether or not therein expressly so provided, every provision
of this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The permissive right of the Trustee to take actions enumerated
in this Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Agreement, or to take any
steps in the execution of the trusts hereby created or in the enforcement of any
rights and powers hereunder until it shall be indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees and other
reasonable disbursements and against all liability, except liability which is
adjudicated to have resulted from its negligence or willful misconduct, in
connection with any action so taken. The Trustee shall receive from the Sponsor
promptly upon demand therefor,
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reimbursement of expenses as are described in the fee quote letter, dated August
28, 1997 and executed by the Sponsor.
SECTION 10.2. REMOVAL OF TRUSTEE FOR CAUSE. (a) The Trustee may be
removed pursuant to paragraph (b) hereof upon the occurrence of any of the
following events (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(A) the Trustee shall fail to distribute to the Owners entitled
thereto on any Payment Date amounts available for distribution in
accordance with the terms hereof; or
(B) the Trustee shall fail in the performance of, or breach, any
covenant or agreement of the Trustee in this Agreement, or if any
representation or warranty of the Trustee made in this Agreement or in
any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material respect
as of the time when the same shall have been made, and such failure or
breach shall continue or not be cured for a period of 30 days after
there shall have been given, by registered or certified mail, to the
Trustee by the Sponsor, the Certificate Insurer or by the Owners of at
least 25% of the aggregate Percentage Interests represented by the
Class A Certificates then Outstanding, or, if there are no Class A
Certificates then Outstanding, by such Percentage Interests represented
by any Class R Certificates, a written notice specifying such failure
or breach and requiring it to be remedied; or
(C) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Trustee, and such decree or order shall have remained in
force undischarged or unstayed for a period of 75 days; or
(D) a conservator or receiver or liquidator or sequestrator or
custodian of the property of the Trustee is appointed in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Trustee or relating to all
or substantially all of its property; or
(E) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due, file or
consent to the filing of a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, voluntarily suspend payment of its
obligations, or take corporate action for the purpose of any of the
foregoing.
The Sponsor shall give to the Certificate Insurer and Moody's and
Standard & Poor's notice of the occurrence of any such event of which the
Sponsor is aware.
(b) If any event described in Paragraph (a) occurs and is
continuing, then and in every such case (i) the Certificate Insurer or (ii) with
the prior written consent (which shall not be unreasonably withheld) of the
Certificate Insurer (x) the Sponsor or (y) the Owners of a majority
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of the Percentage Interests represented by the Class A Certificates, or, if
there are no Class A Certificates then Outstanding, by such Percentage Interest
represented by any Class of Class R Certificates then Outstanding may, whether
or not the Trustee resigns pursuant to Section 10.9 hereof, immediately,
concurrently with the giving of notice to the Trustee, and without delaying the
30 days required for notice therein, appoint a successor Trustee pursuant to the
terms of Section 10.9 hereof.
SECTION 10.3. CERTAIN RIGHTS OF THE TRUSTEE. Except as otherwise
provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Sponsor, the Certificate
Insurer or the Owners of any Class of Certificates mentioned herein shall be
sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement at the request or direction
of any of the Owners pursuant to this Agreement, unless such Owners shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document, but the Trustee in its discretion may make such
further inquiry or investigation into such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed and supervised with
due care by it hereunder; and
(h) the Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication of the
Certificates.
SECTION 10.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
CERTIFICATES. The recitals contained herein and in the Certificates, except any
such recitals relating to the Trustee, shall be taken as the statements of the
Sponsor and the Trustee assumes no responsibility for their
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correctness. The Trustee makes no representation as to the validity or
sufficiency of this Agreement or of the Certificates other than as to validity
and sufficiency of its authentication of the Certificates.
SECTION 10.5. MAY HOLD CERTIFICATES. The Trustee or any agent of
the Trust, in its individual or any other capacity, may become an Owner or
pledgee of Certificates and may otherwise deal with the Trust with the same
rights it would have if it were not Trustee or such agent.
SECTION 10.6. MONEY HELD IN TRUST. Money held by the Trustee in
trust hereunder need not be segregated from other trust funds except to the
extent required herein or required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Sponsor and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
SECTION 10.7. NO LIEN FOR FEES. The Trustee shall have no lien on
the Trust Estate for the payment of any fees and expenses.
SECTION 10.8. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall
at all times be a Trustee hereunder which shall be a corporation or association
organized and doing business under the laws of the United States of America or
of any State authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000, subject to
supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Certificate Insurer or, if the last
sentence of Section 11.18 hereof is applicable, the Sponsor and having (x)
long-term, unsecured debt rated at least A-1 by Moody's (or such lower rating as
may be acceptable to Moody's) and (y) a short-term deposit rating of at least
A-1 from Standard & Poor's (or such lower rating as may be acceptable to
Standard & Poor's). If such Trustee publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation or association shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall, upon the request of
the Sponsor (with the consent of the Certificate Insurer) (which consent shall
not be unreasonably withheld) or of the Certificate Insurer, resign immediately
in the manner and with the effect hereinafter specified in this Article X.
SECTION 10.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a successor
trustee pursuant to this Article X shall become effective until the acceptance
of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed,
may resign at any time by giving written notice of resignation to the Sponsor
and by mailing notice of resignation by first-class Mail, postage prepaid, to
the Certificate Insurer and the Owners at their addresses appearing on the
Register. A copy of such notice shall be sent by the resigning Trustee to
Moody's and Standard & Poor's. Upon receiving notice of resignation, the Sponsor
shall promptly appoint a successor trustee or trustees by written instrument, in
duplicate, executed on behalf of the Trust by an Authorized Officer of the
Sponsor, one copy of which instrument shall
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be delivered to the Trustee so resigning and one copy to the successor trustee
or trustees. If no successor trustee shall have been appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Owner may, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible under
Section 10.8 hereof and shall fail to resign after written request therefor by
the Sponsor or by the Certificate Insurer, the Certificate Insurer or the
Sponsor (with the written consent of the Certificate Insurer) may remove the
Trustee and appoint a successor trustee by written instrument, in duplicate,
executed on behalf of the Trust by an Authorized Officer of the Sponsor, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests
represented by the Class A Certificates, or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by Class R Certificates then Outstanding may at any time, with the
prior written consent of the Certificate Insurer, remove the Trustee and appoint
a successor trustee by delivering to the Trustee to be removed, to the successor
trustee so appointed, to the Sponsor and to the Certificate Insurer, copies of
the record of the act taken by the Owners, as provided for in Section 11.3
hereof.
(e) If the Trustee fails to perform its duties in accordance with
the terms of this Agreement or becomes ineligible to serve as Trustee, the
Certificate Insurer or, if the last sentence of Section 11.18 hereof is
applicable, the Sponsor may remove the Trustee and appoint a successor trustee
by written instrument, in triplicate, signed by the Certificate Insurer and the
Sponsor duly authorized, one complete set of which instruments shall be
delivered to the Sponsor, one complete set to the Certificate Insurer, one
complete set to the Trustee so removed and one complete set to the successor
Trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Sponsor shall promptly appoint a successor Trustee acceptable to the
Certificate Insurer. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor Trustee shall be
appointed by act of the Owners of a majority of the Percentage Interests
represented by the Class A Certificates then Outstanding or, if there are no
Class A Certificates then Outstanding, by such majority of the Percentage
Interest of the Class R Certificates delivered to the Sponsor and the retiring
Trustee, the successor Trustee so appointed shall forthwith upon its acceptance
of such appointment become the successor Trustee and supersede the successor
Trustee appointed by the Sponsor. If no successor Trustee shall have been so
appointed by the Sponsor or the Owners and shall have accepted appointment in
the manner hereinafter provided, any Owner may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor Trustee.
(g) The Sponsor shall give notice of any removal of the Trustee by
mailing notice of such event by first-class mail, postage prepaid, to the
Certificate Insurer and to the Owners as their names and addresses appear in the
Register. Each notice shall include the name of the successor Trustee and the
address of its corporate trust office.
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SECTION 10.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Sponsor on behalf of the Trust and to its predecessor Trustee an
instrument accepting such appointment hereunder and stating its eligibility to
serve as Trustee hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts, duties and obligations of its predecessor hereunder; but, on
request of the Sponsor or the successor Trustee, such predecessor Trustee shall,
upon payment of its charges then unpaid, execute and deliver an instrument
transferring to such successor Trustee all of the rights, powers and trusts of
the Trustee so ceasing to act, and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such Trustee so ceasing to
act hereunder. Upon request of any such successor Trustee, the Sponsor on behalf
of the Trust shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
Upon acceptance of appointment by a successor Trustee as provided
in this Section, the Sponsor shall mail notice thereof by first-class mail,
postage prepaid, to the Owners at their last addresses appearing upon the
Register. The Sponsor shall send a copy of such notice to Moody's, Standard &
Poor's and the Certificate Insurer. If the Sponsor fails to mail such notice
within ten days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Trust.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor shall be qualified and eligible under
this Article X.
SECTION 10.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF THE TRUSTEE. Any corporation or association into which the Trustee
may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation or
association shall be otherwise qualified and eligible under this Article X. In
case any Certificates have been executed, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such Trustee
may adopt such execution and deliver the Certificates so executed with the same
effect as if such successor Trustee had itself executed such Certificates.
SECTION 10.12. REPORTING; WITHHOLDING. The Trustee shall timely
provide to the Owners the Internal Revenue Service's Form 1099 and any other
statement required by applicable Treasury regulations as determined by the
Sponsor, and shall withhold, as required by applicable law, federal, state or
local taxes, if any, applicable to distributions to the Owners, including, but
not limited to, backup withholding under Section 3406 of the Code and the
withholding tax on distributions to foreign investors under Sections 1441 and
1442 of the Code.
SECTION 10.13. LIABILITY OF THE TRUSTEE. The Trustee shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Sponsor, the
Master Servicer or any Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
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judgment; provided, however, that this provision shall not protect the Trustee
or any such Person against any liability which would otherwise be imposed by
reason of negligent action, negligent failure to act or bad faith in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Subject to the foregoing sentence, the Trustee shall not be
liable for losses on investments of amounts in any Account (except for any
losses on obligations on which the bank serving as Trustee is the obligor). In
addition, the Sponsor and Master Servicer covenant and agree to indemnify the
Trustee, and its officers, directors, employees and agents, including, without
limitation, when the Trustee is acting as Master Servicer, and hold it harmless
against, any and all losses, liabilities, damages, claims or expenses (including
legal fees and expenses) other than those resulting from the negligence or bad
faith of the Trustee. The indemnification provided in this Section 10.13 shall
survive the termination of this Agreement or the resignation or removal of the
Trustee hereunder. The Trustee and any director, officer, employee or agent of
the Trustee may rely and shall be protected in acting or refraining from acting
in good faith on any certificate, notice or other document of any kind prima
facie properly executed and submitted by the Authorized Officer of any Person
respecting any matters arising hereunder.
SECTION 10.14. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the Master Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
and the Certificate Insurer to act as co-Trustee or co-Trustees, jointly with
the Trustee, of all or any part of the Trust Estate or separate Trustee or
separate Trustees of any part of the Trust Estate, and to vest in such Person or
Persons, in such capacity and for the benefit of the Owners, such title to the
Trust Estate, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in the case any event indicated in
Sections 8.20(a) or 8.20(b) shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment with the consent of the
Certificate Insurer. No co-Trustee or separate Trustee hereunder shall be
required to meet the terms of eligibility as a successor Trustee under Section
10.8 and no notice to Owner of the appointment of any co-Trustee or separate
Trustee shall be required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate Trustee or
co-Trustee jointly (it being understood that such separate Trustee or
co-Trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Trustee or co-Trustee, but solely at
the direction of the Trustee;
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(ii) No co-Trustee hereunder shall be held personally liable by
reason of any act or omission of any other co-Trustee hereunder; and
(iii) The Master Servicer and the Trustee acting jointly may at
any time accept the resignation of or remove any separate Trustee or
co-Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate Trustees and co-Trustees,
as effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to this Agreement and the conditions
of this Section 10.14. Each separate Trustee and co-Trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer.
Any separate Trustee or co-Trustee may, at any time, constitute
the Trustee, its agent or attorney-in-fact, with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate Trustee or
co-Trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
The Trustee shall give to Moody's, the Sponsor and the Certificate
Insurer notice of the appointment of any Co-Trustee or separate Trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any
application or request by the Sponsor, the Certificate Insurer or the Owners to
the Trustee to take any action under any provision of this Agreement, the
Sponsor, the Certificate Insurer or the Owners, as the case may be, shall
furnish to the Trustee a certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action have been
complied with, except that in the case of any such application or request as to
which the furnishing of any documents is specifically required by any provision
of this Agreement relating to such 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
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(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 11.2. FORM OF DOCUMENTS DELIVERED TO THE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be
based, insofar as it relates to legal matters, upon an opinion of counsel,
unless such Authorized Officer knows, or in the exercise of reasonable care
should know, that the opinion is erroneous. Any such certificate of an
Authorized Officer of the Trustee or any opinion of counsel may be based,
insofar as it relates to factual matter upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Sponsor or of the
Master Servicer, stating that the information with respect to such factual
matters is in the possession of the Sponsor or of the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any opinion of counsel may also be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Trustee, stating that the
information with respect to such matters is in the possession of the Trustee,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may be based on the written opinion of
other counsel, in which event such opinion of counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee may reasonably rely
upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
SECTION 11.3. ACTS OF OWNERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Sponsor and/or the Certificate Insurer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Owners signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and the Trust, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf
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of such corporation or partnership, such certificate or affidavit shall also
constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Owner of any Certificate shall bind the
Owner of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
SECTION 11.4. NOTICES, ETC., TO TRUSTEE. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with the Trustee by any Owner, the Certificate Insurer or
by the Sponsor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
SECTION 11.5. NOTICES AND REPORTS TO OWNERS; WAIVER OF NOTICES.
Where this Agreement provides for notice to Owners of any event or the mailing
of any report to Owners, such notice or report shall be sufficiently given
(unless otherwise herein expressly provided) if mailed, first-class postage
prepaid, to each Owner affected by such event or to whom such report is required
to be mailed, at the address of such Owner as it appears on the Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice or the mailing of such report. In any case where a
notice or report to Owners is mailed in the manner provided above, neither the
failure to mail such notice or report nor any defect in any notice or report so
mailed to any particular Owner shall affect the sufficiency of such notice or
report with respect to other Owners, and any notice or report which is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given or provided.
Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Owners shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
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SECTION 11.6. RULES BY TRUSTEE AND SPONSOR. The Trustee may make
reasonable rules for any meeting of Owners. The Sponsor may make reasonable
rules and set reasonable requirements for its functions.
SECTION 11.7. SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Agreement by any party hereto shall bind its successors and assigns,
whether so expressed or not.
SECTION 11.8. SEVERABILITY. In case any provision in this
Agreement or in the Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.9. BENEFITS OF AGREEMENT. Nothing in this Agreement or
in the Certificates, expressed or implied, shall give to any Person, other than
the Owners, the Certificate Insurer and the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
SECTION 11.10. LEGAL HOLIDAYS. In any case where the date of any
Payment Date, any other date on which any distribution to any Owner is proposed
to be paid, or any date on which a notice is required to be sent to any Person
pursuant to the terms of this Agreement shall not be a Business Day, then
(notwithstanding any other provision of the Certificates or this Agreement)
payment or mailing need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made or mailed on
the nominal date of any such Payment Date, or such other date for the payment of
any distribution to any Owner or the mailing of such notice, as the case may be,
and no interest shall accrue for the period from and after any such nominal
date, provided such payment is made in full on such next succeeding Business
Day.
SECTION 11.11. GOVERNING LAW. In view of the fact that Owners are
expected to reside in many states and outside the United States and the desire
to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Certificate shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
SECTION 11.12. COUNTERPARTS. This instrument may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.13. USURY. The amount of interest payable or paid on
any Certificate under the terms of this Agreement shall be limited to an amount
which shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the State of New York or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error on the part of the Trustee acting on behalf of the Trust
and the Owner receiving such excess payment shall promptly, upon discovery of
such error or upon notice thereof from the Trustee on behalf of the Trust,
refund the amount of such excess or, at the option of such Owner, apply the
excess to the payment of principal of such Certificate, if any, remaining
unpaid. In addition, all sums paid or
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agreed to be paid to the Trustee for the benefit of Owners of Certificates for
the use, forbearance or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such Certificates.
SECTION 11.14. AMENDMENT. (a) The Trustee, the Sponsor and the
Master Servicer, may at any time and from time to time, with the prior written
consent of the Certificate Insurer but without the giving of notice to or the
receipt of the consent of the Owners, amend this Agreement, and the Trustee
shall consent to such amendment, for the purpose of (i) curing any ambiguity, or
correcting or supplementing any provision hereof which may be inconsistent with
any other provision hereof, or to add provisions hereto which are not
inconsistent with the provisions hereof, (ii) upon receipt of an opinion of
counsel experienced in federal income tax matters to the effect that no
entity-level tax will be imposed on the REMIC Trust or upon the transferor of a
Class R Certificate as a result of the ownership of any Class R Certificate by a
Disqualified Organization, removing the restriction on transfer set forth in
Section 5.8(b) hereof or (iii) complying with the requirements of the Code and
the regulations proposed or promulgated thereunder; provided, however, that any
such action shall not, as evidenced by an opinion of counsel delivered to the
Trustee, materially and adversely affect the interests of any Owner (without its
written consent).
(b) The Trustee, the Sponsor and the Master Servicer may, at any
time and from time to time, with the prior written consent of the Certificate
Insurer but without the giving of notice to or the receipt of the consent of the
Owners, amend this Agreement, and the Trustee shall consent to such amendment,
for the purpose of changing the definitions of Group I Amortized Subordinated
Amount Requirement" and "Group II Amortized Subordinated Amount Requirement"
provided, however, that no such change shall affect the weighted average life of
the related Class of Class A Certificates (assuming an appropriate prepayment
speed as determined by the Representative with respect to the Class A-1
Certificates and by the Group II Underwriter with respect to the Class A-2
Certificates) by more than five percent, as determined by the Representative.
(c) This Agreement may also be amended by the Trustee, the
Sponsor, and the Master Servicer at any time and from time to time, with the
prior written approval of the Certificate Insurer and not less than a majority
of the Percentage Interest represented by each affected Class of Certificates
then Outstanding, for the purpose of adding any provisions or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Owners hereunder; provided, however, that no such
amendment shall (a) change in any manner the amount of, or change the timing of,
payments which are required to be distributed to any Owner without the consent
of the Owner of such Certificate, (b) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such amendments or (c)
result in a down-rating or withdrawal of any ratings then assigned to the Class
A Certificates, without the consent of the Owners of all Certificates of the
Class or Classes affected then Outstanding.
(d) Each proposed amendment to this Agreement shall be accompanied
by an opinion of counsel nationally recognized in federal income tax matters
addressed to the Trustee and to the Certificate Insurer to the effect that such
amendment would not adversely affect the status of the REMIC Trust as a REMIC.
Neither such opinion of counsel nor any expense of any such proposed amendment
shall be at the Trustee's expense.
102
<PAGE> 110
(e) The Certificate Insurer, the Owners, Moody's and Standard &
Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
SECTION 11.15. REMIC STATUS; TAXES. (a) The Tax Matters Person
shall prepare and file or cause to be filed with the Internal Revenue Service
Federal tax or information returns with respect to the REMIC Trust and the
Certificates containing such information and at the times and in such manner as
may be required by the Code or applicable Treasury regulations, and shall
furnish to Owners such statements or information at the times and in such manner
as may be required thereby. For this purpose, the Tax Matters Person may, but
need not, rely on any proposed regulations of the United States Department of
the Treasury. The Tax Matters Person shall indicate the election to treat the
REMIC Trust as a REMIC (which election shall apply to the taxable period ending
December 31, 1998 and each calendar year thereafter) in such manner as the Code
or applicable Treasury regulations may prescribe. The Trustee, as Tax Matters
Person appointed pursuant to Section 11.17 hereof shall sign all tax information
returns filed pursuant to this Section 11.15. The Tax Matters Person shall
provide information necessary for the computation of tax imposed on the transfer
of a Class R Certificate to a Disqualified Organization, or an agent of a
Disqualified Organization, or a pass-through entity in which a Disqualified
Organization is the record holder of an interest. The Tax Matters Person shall
provide the Trustee with copies of any Federal tax or information returns filed,
or caused to be filed, by the Tax Matters Person with respect to the REMIC Trust
or the Certificates.
(b) The Tax Matters Person shall timely file all reports required
to be filed by the Trust with any federal, state or local governmental authority
having jurisdiction over the Trust, including other reports that must be filed
with the Owners, such as the Internal Revenue Service's Form 1066 and Schedule Q
and the form required under Section 6050K of the Code, if applicable to REMICs.
Furthermore, the Tax Matters Person shall report to Owners, if required, with
respect to the allocation of expenses pursuant to Section 212 of the Code in
accordance with the specific instructions to the Tax Matters Person by the
Sponsor with respect to such allocation of expenses. The Tax Matters Person
shall collect any forms or reports from the Owners determined by the Sponsor to
be required under applicable federal, state and local tax laws.
(c) The Tax Matters Person shall provide to the Internal Revenue
Service and to persons described in Section 860E(e)(3) and (6) of the Code the
information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Sponsor covenants and agrees that within ten Business Days
after receiving a written request from the Trustee it shall provide to the
Trustee any information necessary to enable the Trustee to meet its obligations
under subsections (b) and (c) above.
(e) The Trustee, the Sponsor and the Master Servicer each
covenants and agrees for the benefit of the Owners (i) to take no action which
would result in the termination of "REMIC" status for the REMIC Trust, (ii) not
to engage in any "prohibited transaction", as such term is defined in Section
860F(a)(2) of the Code and (iii) not to engage in any other action which may
result in the imposition on the REMIC Trust of any other taxes under the Code.
(f) The REMIC Trust shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an accrual basis.
103
<PAGE> 111
(g) Except as otherwise permitted by Section 7.6(b), no Eligible
Investment shall be sold prior to its stated maturity (unless sold pursuant to a
plan of liquidation in accordance with Article IX hereof).
(h) Neither the Sponsor nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the Trustee
or the Sponsor may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received the prior written consent of the
Certificate Insurer and an opinion of counsel experienced in federal income tax
matters to the effect that such transaction does not result in a tax imposed on
the Trustee or cause a termination of REMIC status for the REMIC Trust;
provided, however, that such transaction is otherwise permitted under this
Agreement.
SECTION 11.16. ADDITIONAL LIMITATION ON ACTION AND IMPOSITION OF
TAX. (a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained, and delivered to the Certificate
Insurer, an opinion of counsel experienced in federal income tax matters (which
opinion shall be at the expense of the Sponsor) to the effect that such
transaction does not result in a tax imposed on the Trust or cause a termination
of REMIC status for the REMIC Trust, (i) sell any assets in the Trust Estate,
(ii) accept any contribution of assets after the Startup Day or (iii) agree to
any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust as defined in Section 860F(a)(2) of the Code,
on the "net income from foreclosure property" as defined in Section 860G(c) of
the Code, on any contribution to the REMIC Trust after the Startup Day pursuant
to Section 860G(d) of the Code, or any other tax (other than any minimum tax
imposed by Sections 23151(a) or 23153(a) of the California Revenue and Taxation
Code) is imposed, such tax shall be paid by (i) the Trustee, if such tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement, (ii) the Master Servicer, if such tax arises out of or results
from a breach by the Master Servicer of any of its obligations under this
Agreement, or otherwise (iii) the Owners of the Class R Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the Owners of the Class R Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Owners of the Class R Certificates on any
Payment Date sufficient funds to reimburse the Trustee for the payment of such
tax (to the extent that the Trustee has not been previously reimbursed or
indemnified therefor).
SECTION 11.17. APPOINTMENT OF TAX MATTERS PERSON. The Owners of
the Class R Certificates hereby appoint the Trustee as their agent to act as the
Tax Matters Person for REMIC Trust for all purposes of the Code and such Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the Code.
SECTION 11.18. THE CERTIFICATE INSURER. The Certificate Insurer is
a third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policy, except with respect to amendments to this
Agreement pursuant to Section 11.14. During the continuance of a Certificate
Insurer Default,
104
<PAGE> 112
the Certificate Insurer's rights hereunder shall vest in the Trustee on behalf
of the Owners of the Class A Certificates and shall be exercisable by the Owners
of at least a majority in Percentage Interest of the Class A Certificates then
Outstanding or, if there are no Class A Certificates then Outstanding and the
Certificate Insurance Policy has expired or a Certificate Insurer Default has
occurred and is continuing, or if there are no Class A Certificates outstanding
and any and all amounts due and owing the Certificate Insurer under the
Insurance Agreement have been paid in full, and the Certificate Insurance Policy
has expired or is unavailable due to a Certificate Insurer Default, by at least
a majority of the Class R Certificates then Outstanding. At such time as the
Class A Certificates are no longer Outstanding hereunder and the Certificate
Insurer has been reimbursed for all Reimbursement Amounts to which it is
entitled hereunder and the Certificate Insurance Policy has expired, the
Certificate Insurer's rights hereunder shall terminate.
SECTION 11.19. MAINTENANCE OF RECORDS. Each Originator and Owner
of a Class R Certificate shall each continuously keep an original executed
counterpart of this Agreement in its official records.
SECTION 11.20. NOTICES. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
The Trustee: Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92614
Attention: Advanta 1998-3
Tel: (949) 253-7575
Fax: (949) 253-7577
The Sponsor: Advanta Mortgage Conduit Services Inc.
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Attention: Structured Finance
The Master Servicer: Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Fax: (619) 674-3592
The Certificate
Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio
Management
(Advanta Mortgage Loan Trust
1998-3 Mortgage Loan Backed
Certificates Series 1998-3)
105
<PAGE> 113
Telecopy No.: (914) 765-3919
Confirmation: (914) 765-3111
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Mortgage Monitoring
Department
Standard & Poor's: Standard & Poor's Ratings Group
26 Broadway, 15th Floor
New York, New York 10004
Attention: Manager, Structured Finance
Operations Group
Class A-1 Certificate
Underwriters: Salomon Smith Barney Inc.
as Representative of the Underwriters
7 World Trade Center
New York, New York 10048
Attention: General Counsel
Class A-2 Certificate
Underwriter: Salomon Smith Barney Inc.
7 World Trade Center
New York, New York 10048
Attention: General Counsel
106
<PAGE> 114
IN WITNESS WHEREOF, the Sponsor, the Master Servicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
ADVANTA MORTGAGE CONDUIT SERVICES,
INC.
as Sponsor
By: /s/ Mark T. Dunsheath
---------------------------------------
Mark T. Dunsheath
Vice President
ADVANTA MORTGAGE CORP. USA
as Master Servicer
By: /s/ Mark T. Dunsheath
---------------------------------------
Mark T. Dunsheath
Vice President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: /s/ Mark M. McNeill
---------------------------------------
Mark M. McNeill
Assistant Secretary
[POOLING AND SERVICING AGREEMENT]
<PAGE> 115
STATE OF CALIFORNIA )
: ss.:
COUNTY OF ORANGE )
On the 21st day of September, 1998, before me personally came Mark
M. McNeill to me known, who, being by me duly sworn did depose and say that
his/her office is located at Three Park Plaza, Irvine, California 92714; that
s/he is Asst. Secretary of Bankers Trust Company of California, N.A., the
national banking corporation described in and that executed the above instrument
as Trustee; and that s/he signed his/her name thereto under authority granted by
the Board of Directors of said national banking association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL] [NOTARY SEAL]
/s/ Richard A. Ward Richard A. Ward
- --------------------------------------- Commission #1165195
Richard A. Ward Notary Public Notary Public - California
Orange County
My Comm. Expires Dec 11, 2001
<PAGE> 116
SCHEDULE 1
Schedules of Mortgage Loans
On file with Trustee.
<PAGE> 117
EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATES
ADVANTA MORTGAGE LOAN TRUST 1998-3
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS A-1 GROUP I CERTIFICATES
(Class A-1 Group I Floating Rate Certificate)
Comprised of (i) a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans in Group I and (ii) the
Uncertificated Right to Receive Group I
Supplemental Interest Amounts.
The Mortgage Loans are Serviced by
ADVANTA MORTGAGE CORP. USA, as Master Servicer
Unless this certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to Issuer or its agent for registration of transfer, exchange, or payment, and
any certificate 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.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
Advanta Mortgage Conduit Services, Inc., Advanta Mortgage Corp. USA, Advanta
National Bank, Advanta Corp., an Originator or any of their subsidiaries and
affiliates. This certificate is comprised of (A) a Certificate representing (i)
a fractional ownership interest in Group I described herein, monies in certain
Accounts created pursuant to the Pooling and Servicing Agreement and certain
other rights relating thereto and is payable only from amounts received by the
Trustee relating to the Mortgage Loans in Group I held by the Trust, (ii) monies
held in such Accounts and (B) the uncertificated right to receive Group I
Supplemental Interest Amounts.)
No.: A-1 September 23, 1998 00755WGA8
-------------- ------------------ ---------
Date CUSIP
$500,000,000 September 25, 2028
- ------------ ------------------
Original Principal Amount Final Scheduled
Payment Date
CEDE & CO.
----------
Registered Owner
<PAGE> 118
The registered Owner named above is the registered Owner of a
fractional interest in (A) (i) a pool consisting of variable rate mortgage loans
(the "Mortgage Loans") assigned to a particular mortgage loan group ("Group I")
which will be formed by Advanta Mortgage Conduit Services, Inc. ("Advanta" or
the "Sponsor"), a Delaware corporation and sold by the Sponsor to Bankers Trust
Company of California, N.A., a national banking association, as trustee (the
"Trustee") on behalf of Advanta Mortgage Loan Trust 1998-3 (the "Trust")
pursuant to that certain Pooling and Servicing Agreement dated as of September
1, 1998 (the "Pooling and Servicing Agreement") by and among the Sponsor, the
Trustee and Advanta Mortgage Corp. USA, as Master Servicer (the "Master
Servicer"), (ii) such amounts, including Eligible Investments, as from time to
time may be held in the related Accounts (except as otherwise provided in the
Pooling and Servicing Agreement), each created pursuant to the Pooling and
Servicing Agreement, (iii) any Property relating to the Mortgage Loans in Group
I, the ownership of which has been effected in the name of the Master Servicer
on behalf of the Trust as a result of foreclosure or acceptance by the Master
Servicer of a deed in lieu of foreclosure and that has not been withdrawn from
the Trust Estate, (iv) Net Liquidation Proceeds relating to the Mortgage Loans
in Group I and (B) the right to receive Group I Supplemental Interest Amounts.
Such Mortgage Loans in Group I and other amounts and property enumerated above
are hereinafter referred to as "Group I."
The Original Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate original principal amount of the Class A-1 Certificates on
September 1, 1998 (the "Startup Date"), which aggregate amount was $500,000,000.
The Owner hereof is entitled to principal payments on each Payment Date, as
hereinafter described, which will fully amortize such Original Principal Amount
over the period from the date of initial delivery hereof to the final Payment
Date of the Class A-1 Certificates. Therefore, the actual outstanding principal
amount of this Certificate, on any date subsequent to October 26, 1998 (the
first Payment Date) will be less than the Original Principal Amount set forth
above.
Upon receiving the final distribution hereon, the Owner hereof
is required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
SAVINGS AND LOAN INSURANCE CORPORATION,
<PAGE> 119
THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized
Certificates designated as Advanta Mortgage Loan Trust 1998-3, Mortgage Loan
Asset-Backed Certificates, Class A-1 Group I Certificates (the "Class A-1
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Owner of this Certificate by virtue of acceptance hereof
assents and by which such Owner is bound. Also issued under the Pooling and
Servicing Agreement are Class A-2 Group II Floating Rate Certificates; Class R
Certificates; and Class RS Certificates; all such Certificates are collectively
referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Payment Date") commencing October 26, 1998, the Owners of the Class A-1
Certificates as of the close of business on the last business day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs (the "Record Date") will be entitled to receive the Class A-1
Distribution Amount relating to such Payment Date and will be entitled to
receive the Group I Supplemental Interest Payments. Distributions will be made
in immediately available funds to such Owners, by wire transfer or otherwise, to
the account of an Owner at a domestic bank or other entity having appropriate
facilities therefor, if such Owner has so notified the Trustee at least five
business days prior to the related record date, or by check mailed to the
address of the person entitled thereto as it appears on the Register.
Each Owner of record of a Class A-1 Certificate will be
entitled to receive such Owner's Percentage Interest in the amounts distributed
on such Payment Date to the Owners of the Class A-1 Certificates. The Percentage
Interest of each Class A-1 Certificate as of any date of determination will be
equal to the percentage obtained by dividing the Original Principal Amount set
forth on such Class A-1 Certificate by $500,000,000.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable to any Owner shall be considered as having been paid by
the Trustee to such Owner for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Master Servicer
pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement permits the Master Servicer to enter into Sub-Servicing Agreements
with certain institutions eligible for appointment as Sub-Servicers for the
servicing and administration of certain Mortgage Loans. No appointment of any
Sub-Servicer shall release the Master Servicer from any of its obligations under
the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, Advanta Mortgage Conduit Services, Inc., Advanta Mortgage
Corp. USA, Advanta National Bank, Advanta Corp., any Originator or any of their
subsidiaries and affiliates and are not insured or guaranteed by the
<PAGE> 120
Federal Deposit Insurance Corporation, the Government National Mortgage
Association, or any other governmental agency. This Certificate is limited in
right of payment to certain collections and recoveries relating to the Mortgage
Loans in Group I and amounts on deposit in the Accounts (except as otherwise
provided in the Pooling and Servicing Agreement) all as more specifically set
forth hereinabove and in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the Owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the
obligations created thereby will terminate upon the earlier of (i) the payment
to the Owners of all Certificates from amounts other than those available under
the Insurance Policy of all amounts held by the Trustee and required to be paid
to such Owners pursuant to the Pooling and Servicing Agreement upon the later to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last Mortgage Loan in the Trust Estate or (b) the
disposition of all property acquired in respect of any Mortgage Loan remaining
in the Trust Estate or (ii) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that
(i) the Master Servicer may at its option, purchase from the Trust all (but not
fewer than all) remaining Mortgage Loans and other property then constituting
the Trust Estate, and thereby effect early retirement of the Class A
Certificates, on any Remittance Date when the aggregate outstanding Loan
Balances of the Mortgage Loans in the Trust Estate is 10% or less of the
original aggregate Loan Balance of the Mortgage Loans in the Trust Estate as of
the Closing Date and (ii) under certain circumstances relating to the
qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC
under the Code the Mortgage Loans may be sold, thereby affecting the early
retirement of the Class A-1 Certificates.
The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each Owner in the manner set forth therein.
The Owners of a majority of the Percentage Interests
represented by the Offered Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right to exercise any
trust or power set forth in the Pooling and Servicing Agreement with respect to
the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of
<PAGE> 121
like Class, tenor and a like Percentage Interest will be issued to the
designated transferee or transferees.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-1 Certificates are issuable only as registered
Certificates in denominations of $1,000 original principal amount and integral
multiples of $1,000. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A-1 Certificates are
exchangeable for new Class A-1 Certificates of authorized denominations
evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any such agent shall be affected by notice
to the contrary.
<PAGE> 122
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
<PAGE> 123
EXHIBIT A-2
FORM OF CLASS A-2 CERTIFICATES
ADVANTA MORTGAGE LOAN TRUST 1998-3
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS A-2 GROUP II CERTIFICATES
(Class A-2 Group II Floating Rate Certificate)
Comprised of (i) a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans in Group II and (ii) the
Uncertificated Right to Receive Group II
Supplemental Interest Amounts.
The Mortgage Loans are Serviced by
ADVANTA MORTGAGE CORP. USA, as Master Servicer
Unless this certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to Issuer or its agent for registration of transfer, exchange, or payment, and
any certificate 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.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
Advanta Mortgage Conduit Services, Inc., Advanta Mortgage Corp. USA, Advanta
National Bank, Advanta Corp., an Originator or any of their subsidiaries and
affiliates. This certificate is comprised of (A) a Certificate representing (i)
a fractional ownership interest in Group II described herein, monies in certain
Accounts created pursuant to the Pooling and Servicing Agreement and certain
other rights relating thereto and is payable only from amounts received by the
Trustee relating to the Mortgage Loans in Group II held by the Trust, (ii)
monies held in such Accounts and (B) the uncertificated right to receive Group
II Supplemental Interest Amounts.)
No.: A-2 September 23, 1998 00755WGB6
-------------- ------------------ ---------
Date CUSIP
$500,000,000 September 25, 2028
----------- ------------------
Original Principal Amount Final Scheduled
Payment Date
CEDE & CO.
----------
Registered Owner
<PAGE> 124
The registered Owner named above is the registered Owner of a
fractional interest in (A) (i) a pool consisting of variable rate mortgage loans
(the "Mortgage Loans") assigned to a particular mortgage loan group ("Group II")
which will be formed by Advanta Mortgage Conduit Services, Inc. ("Advanta" or
the "Sponsor"), a Delaware corporation and sold by the Sponsor to Bankers Trust
Company of California, N.A., a national banking association, as trustee (the
"Trustee") on behalf of Advanta Mortgage Loan Trust 1998-3 (the "Trust")
pursuant to that certain Pooling and Servicing Agreement dated as of September
1, 1998 (the "Pooling and Servicing Agreement") by and among the Sponsor, the
Trustee and Advanta Mortgage Corp. USA, as Master Servicer (the "Master
Servicer"), (ii) such amounts, including Eligible Investments, as from time to
time may be held in the related Accounts (except as otherwise provided in the
Pooling and Servicing Agreement), each created pursuant to the Pooling and
Servicing Agreement, (iii) any Property relating to the Mortgage Loans in Group
II, the ownership of which has been effected in the name of the Master Servicer
on behalf of the Trust as a result of foreclosure or acceptance by the Master
Servicer of a deed in lieu of foreclosure and that has not been withdrawn from
the Trust Estate, (iv) Net Liquidation Proceeds relating to the Mortgage Loans
in Group II and (B) the right to receive Group II Supplemental Interest Amounts.
Such Mortgage Loans in Group II and other amounts and property enumerated above
are hereinafter referred to as "Group II."
The Original Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate original principal amount of the Class A-2 Certificates on
September 1, 1998 (the "Startup Date"), which aggregate amount was $500,000,000.
The Owner hereof is entitled to principal payments on each Payment Date, as
hereinafter described, which will fully amortize such Original Principal Amount
over the period from the date of initial delivery hereof to the final Payment
Date of the Class A-2 Certificates. Therefore, the actual outstanding principal
amount of this Certificate, on any date subsequent to October 26, 1998 (the
first Payment Date) will be less than the Original Principal Amount set forth
above.
Upon receiving the final distribution hereon, the Owner hereof
is required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
SAVINGS AND LOAN INSURANCE CORPORATION,
<PAGE> 125
THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized
Certificates designated as Advanta Mortgage Loan Trust 1998-3, Mortgage Loan
Asset-Backed Certificates, Class A-2 Group II Certificates (the "Class A-2
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Owner of this Certificate by virtue of acceptance hereof
assents and by which such Owner is bound. Also issued under the Pooling and
Servicing Agreement are Class A-1 Group I Floating Rate Certificates; Class R
Certificates; and Class RS Certificates; all such Certificates are collectively
referred to as the Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Payment Date") commencing October 26, 1998, the Owners of the Class A-2
Certificates as of the close of business on the last business day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs (the "Record Date") will be entitled to receive the Class A-2
Distribution Amount relating to such Payment Date and will be entitled to
receive the Group II Supplemental Interest Payments. Distributions will be made
in immediately available funds to such Owners, by wire transfer or otherwise, to
the account of an Owner at a domestic bank or other entity having appropriate
facilities therefor, if such Owner has so notified the Trustee at least five
business days prior to the related record date, or by check mailed to the
address of the person entitled thereto as it appears on the Register.
Each Owner of record of a Class A-2 Certificate will be
entitled to receive such Owner's Percentage Interest in the amounts distributed
on such Payment Date to the Owners of the Class A-2 Certificates. The Percentage
Interest of each Class A-2 Certificate as of any date of determination will be
equal to the percentage obtained by dividing the Original Principal Amount set
forth on such Class A-2 Certificate by $500,000,000.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable to any Owner shall be considered as having been paid by
the Trustee to such Owner for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Master Servicer
pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement permits the Master Servicer to enter into Sub-Servicing Agreements
with certain institutions eligible for appointment as Sub-Servicers for the
servicing and administration of certain Mortgage Loans. No appointment of any
Sub-Servicer shall release the Master Servicer from any of its obligations under
the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, Advanta Mortgage Conduit Services, Inc., Advanta Mortgage
Corp. USA, Advanta National Bank, Advanta Corp., any Originator or any of their
subsidiaries and affiliates and are not insured or guaranteed by the
<PAGE> 126
Federal Deposit Insurance Corporation, the Government National Mortgage
Association, or any other governmental agency. This Certificate is limited in
right of payment to certain collections and recoveries relating to the Mortgage
Loans in Group II and amounts on deposit in the Accounts (except as otherwise
provided in the Pooling and Servicing Agreement) all as more specifically set
forth hereinabove and in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the Owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the
obligations created thereby will terminate upon the earlier of (i) the payment
to the Owners of all Certificates from amounts other than those available under
the Insurance Policy of all amounts held by the Trustee and required to be paid
to such Owners pursuant to the Pooling and Servicing Agreement upon the later to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last Mortgage Loan in the Trust Estate or (b) the
disposition of all property acquired in respect of any Mortgage Loan remaining
in the Trust Estate or (ii) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that
(i) the Master Servicer may at its option, purchase from the Trust all (but not
fewer than all) remaining Mortgage Loans and other property then constituting
the Trust Estate, and thereby effect early retirement of the Class A
Certificates, on any Remittance Date when the aggregate outstanding Loan
Balances of the Mortgage Loans in the Trust Estate is 10% or less of the
original aggregate Loan Balance of the Mortgage Loans in the Trust Estate as of
the Closing Date and (ii) under certain circumstances relating to the
qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC
under the Code the Mortgage Loans may be sold, thereby affecting the early
retirement of the Class A-2 Certificates.
The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each Owner in the manner set forth therein.
The Owners of a majority of the Percentage Interests
represented by the Offered Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right to exercise any
trust or power set forth in the Pooling and Servicing Agreement with respect to
the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of
<PAGE> 127
like Class, tenor and a like Percentage Interest will be issued to the
designated transferee or transferees.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-2 Certificates are issuable only as registered
Certificates in denominations of $1,000 original principal amount and integral
multiples of $1,000. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A-2 Certificates are
exchangeable for new Class A-2 Certificates of authorized denominations
evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any such agent shall be affected by notice
to the contrary.
<PAGE> 128
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
<PAGE> 129
EXHIBIT R
FORM OF CLASS R CERTIFICATES
TRANSFER OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R
CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION
860(E)(5) OF THE CODE. SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR
POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN
CERTAIN TAXABLE INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING
ELECTRIC ENERGY OR PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY
ORGANIZATION (OTHER THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL
INCOME TAX UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS
INCOME. NO TRANSFER OF THIS CLASS R CERTIFICATE WILL BE REGISTERED BY THE
TRUSTEE UNLESS THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING,
AMONG OTHER THINGS, THAT THE PROPOSED TRANSFEREE IS NOT A DISQUALIFIED
ORGANIZATION AND IS NOT ACQUIRING THE CLASS R CERTIFICATE FOR THE ACCOUNT OF A
DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH
PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY
GIVE RISE TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN
AGENT ACTING FOR THE TRANSFEREE. A PASS-THROUGH EQUITY THAT HOLDS THIS CLASS R
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY BY SUCH DISQUALIFIED
ORGANIZATION AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR
PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
SAVINGS AND LOAN INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE> 130
ADVANTA MORTGAGE LOAN TRUST 1998-3
CLASS R
This Certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
Advanta Mortgage Conduit Services, Inc., Advanta Mortgage Corp. USA, Advanta
National Bank, Advanta Corp., any Originator or any of their subsidiaries and
affiliates. This Certificate represents a fractional ownership interest in
certain excess monies of the Supplemental Interest Payment Account described
herein.
No: R-1 Date: September 23, 1998
--------------- ----------------------
Percentage Interest: 100% September 25, 2028
--- ------------------
Final Scheduled
Payment Date
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee of Advanta Mortgage Loan Trust 1998-3
------------------------------------------------
Registered Owner
The registered Owner named above is the registered Owner of a
fractional interest in certain excess monies of the Supplemental Interest
Payment Account pursuant to that certain Pooling and Servicing Agreement dated
as of September 1, 1998 (the "Pooling and Servicing Agreement") by and among the
Sponsor, the Trustee and Advanta Mortgage Corp. USA, as Master Servicer (the
"Master Servicer").
<PAGE> 131
This Certificate is one of a Class of duly authorized
Certificates designated as Advanta Mortgage Loan Trust 1998-3, Class R
Certificates (the "Class R Certificates") and issued under and subject to the
terms, provisions and conditions of the Pooling and Servicing Agreement, to
which Pooling and Servicing Agreement the Owner of this Certificate by virtue of
acceptance hereof assents and by which such Owner is bound.
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Payment Date"), commencing October 26, 1998 to the persons in whose names the
Class R Certificates are registered at the close of business on the last
business day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs (the "Record Date"), the Trustee will distribute
to each Owner of the Class R Certificates such Owner's Percentage Interest
multiplied by any amounts then available to be distributed to the Owners of the
Class R Certificates. Distributions will be made in immediately available funds,
by wire transfer or otherwise, to the account of such Owner at a domestic bank
or other entity having appropriate facilities therefor, if such Owner has so
notified the Trustee at least five business days prior to the related record
date, or by check mailed to the address of the person entitled thereto as it
appears on the Register.
Upon receiving the final distribution hereon, the Owner hereof
is required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable state or local law by any Person from a distribution to
any Owner shall be considered as having been paid by the Trustee to such Owner
for all purposes of the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, the Sponsor, Advanta Mortgage Corp. USA, Advanta National
Bank, Advanta Corp. or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This
Certificate is limited in right of payment to certain collections and recoveries
relating to the Mortgage Loans, all as more specifically set forth hereinabove
and in the Pooling and Servicing Agreement.
No Owner shall have the right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the Owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such
<PAGE> 132
Certificate or to institute suit for the enforcement of any such distribution,
and such right shall not be impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the
obligations created thereby will terminate upon the earlier of (i) the payment
to the Owners of all Certificates from amounts other than those available under
the Insurance Policy of all amounts held by the Trustee and required to be paid
to such Owners pursuant to the Pooling and Servicing Agreement upon the later to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last Mortgage Loan in the Trust Estate or (b) the
disposition of all property acquired in respect of any Mortgage Loan remaining
in the Trust Estate or (ii) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC occurs pursuant to the Pooling and
Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that
(i) the Master Servicer may at its option, purchase from the Trust all (but not
fewer than all) Mortgage Loans and other property then constituting the Trust
Estate, and thereby effect early retirement of the Certificates, on any
Remittance Date when the aggregate outstanding Loan Balances of the Mortgage
Loans in the Trust Estate is 10% or less of the original aggregate Loan Balance
of the Mortgage Loans as of the Closing Date and (ii) under certain
circumstances relating to the qualification of either the Upper-Tier REMIC or
the Lower-Tier REMIC as a REMIC under the Code the Mortgage Loans in the Trust
Estate may be sold, thereby effecting the early retirement of the Class R
Certificates.
The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed by, the Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Certificates of like Class, tenor and a
like aggregate fractional undivided interest in the Trust Estate will be issued
to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class R Certificates are issuable only as registered
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class R Certificates are exchangeable for
new Class R Certificates evidencing the same Percentage Interest as the Class R
Certificates exchanged.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any such agent shall be affected by notice
to the contrary.
<PAGE> 133
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed, pursuant to the provisions of the Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
<PAGE> 134
EXHIBIT RS
FORM OF CLASS RS CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN (X) THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G and 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE AND (Y)
CERTAIN OTHER PROPERTY HELD IN THE SUPPLEMENTAL INTEREST PAYMENT ACCOUNT.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE
WITHOUT REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
TRANSFER OF THIS CLASS RS CERTIFICATE IS RESTRICTED AS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS RS
CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION
860(E)(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUCH
TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER
THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF
THIS CLASS RS CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED
TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE
PROPOSED TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE
CLASS RS CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF
THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND
AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY
GIVE RISE TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN
AGENT ACTING FOR THE TRANSFEREE. A PASS-THROUGH EQUITY THAT HOLDS THIS CLASS RS
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY
<PAGE> 135
BY SUCH DISQUALIFIED ORGANIZATION AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE
ON CORPORATIONS. FOR PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH"
ENTITY INCLUDES REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS,
COMMON TRUST FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I
OF SUBCHAPTER 1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS,
NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
SAVINGS AND LOAN INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
SUPPLEMENTAL INTEREST PAYMENT ACCOUNT
RELATING TO
ADVANTA MORTGAGE LOAN TRUST 1998-3
CLASS RS
This Certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
Advanta Mortgage Conduit Services, Inc., Advanta Mortgage Corp. USA, Advanta
National Bank, Advanta Corp., any Originator or any of their subsidiaries and
affiliates. This Certificate represents a fractional ownership interest in
certain excess monies of the Supplemental Interest Payment Account described
herein.
No: RS- Date: September 23, 1998
Percentage Interest: ------% September 25, 2028
------- ------------------
Final Scheduled
Payment Date
.
-----------------------------
Registered Owner
The registered Owner named above is the registered Owner of a
fractional interest in certain excess monies of the Supplemental Interest
Payment Account pursuant to that certain Pooling and Servicing Agreement dated
as of September 1, 1998 (the "Pooling and Servicing Agreement") by and among the
Sponsor, the Trustee and Advanta Mortgage Corp. USA, as Master Servicer (the
"Master Servicer").
This Certificate is one of a Class of duly authorized
Certificates designated as Advanta Mortgage Loan Trust 1998-3, Class RS
Certificates (the "Class RS Certificates") and issued under and subject to the
terms, provisions and conditions of the Pooling and Servicing
<PAGE> 136
Agreement, to which Pooling and Servicing Agreement the Owner of this
Certificate by virtue of acceptance hereof assents and by which such Owner is
bound.
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Payment Date"), commencing October 26, 1998 to the persons in whose names the
Class RS Certificates are registered at the close of business on the last
business day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs (the "Record Date"), the Trustee will distribute
to each Owner of the Class RS Certificates such Owner's Percentage Interest
multiplied by any amounts then available to be distributed to the Owners of the
Class RS Certificates. Distributions will be made in immediately available
funds, by wire transfer or otherwise, to the account of such Owner at a domestic
bank or other entity having appropriate facilities therefor, if such Owner has
so notified the Trustee at least five business days prior to the related record
date, or by check mailed to the address of the person entitled thereto as it
appears on the Register.
Upon receiving the final distribution hereon, the Owner hereof
is required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable state or local law by any Person from a distribution to
any Owner shall be considered as having been paid by the Trustee to such Owner
for all purposes of the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, the Sponsor, Advanta Mortgage Corp. USA, Advanta National
Bank, Advanta Corp. or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This
Certificate is limited in right of payment to certain collections and recoveries
relating to the Mortgage Loans, all as more specifically set forth hereinabove
and in the Pooling and Servicing Agreement.
No Owner shall have the right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the Owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner.
<PAGE> 137
The Pooling and Servicing Agreement provides that the
obligations created thereby will terminate upon the earlier of (i) the payment
to the Owners of all Certificates from amounts other than those available under
the Certificate Insurance Policy of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of a Trust Estate occurs pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that
(i) the Master Servicer may at its option, purchase from the Trust all (but not
fewer than all) Mortgage Loans and other property then constituting the Trust
Estate, and thereby effect early retirement of the Certificates, on any
Remittance Date when the aggregate outstanding Loan Balances of the Mortgage
Loans in the Trust Estate is 10% or less of the original aggregate Loan Balance
of the Mortgage Loans as of the Closing Date and (ii) under certain
circumstances relating to the qualification of the REMIC Trust as a REMIC under
the Code the Mortgage Loans in the Trust Estate may be sold, thereby effecting
the early retirement of the Certificates.
The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed by, the Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Certificates of like Class, tenor and a
like aggregate fractional undivided interest in the Trust Estate will be issued
to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class RS Certificates are issuable only as registered
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class RS Certificates are exchangeable
for new Class RS Certificates evidencing the same Percentage Interest as the
Class RS Certificates exchanged.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any such agent shall be affected by notice
to the contrary.
<PAGE> 138
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed, pursuant to the provisions of the Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: ______________________
Name:
Title:
<PAGE> 139
EXHIBIT B
FORM OF CONTENTS OF MORTGAGE LOAN FILE
(a) the original Note, or , if such Note is lost, a certified
copy thereof along with a lost note affidavit in the form of Exhibit K to the
Insurance Agreement, 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 Note should be accompanied by any
rider made in connection with the origination of the related Mortgage Loan;
(b) the original of any guarantee executed in connection with
the Note (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 all assumption, modification,
consolidation or extension agreements;
(e) 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)"; and
(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 intervening assignment has not been returned from the recording office,
a certified copy thereof.
<PAGE> 140
EXHIBIT C
FORM OF CERTIFICATE RE: PREPAID LOANS
I, Mark T. Dunsheath, 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 Pooling and
Servicing Agreement dated as of September 1, 1998 among the Sponsor, Advanta
Mortgage Corp. USA, as master servicer and Bankers Trust Company of California,
N.A., as trustee) and the date hereof the following schedule of "Mortgage Loans"
(each as defined in the Pooling and Servicing Agreement) has been prepaid in
full.
Dated: September 23, 1998
By: ___________________________
Name: Mark T. Dunsheath
Title: Vice President
<PAGE> 141
EXHIBIT D
FORM OF TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
Bankers Trust Company of California, N.A., a national banking
association, in its capacity as trustee (the "Trustee") under that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling 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, and the Trustee, hereby acknowledges
receipt of the items delivered to it by the Sponsor with respect to the Mortgage
Loans listed on Schedule I of the Pooling and Servicing Agreement, except as set
forth on the exception report (the "Exception Report") attached hereto.
The Trustee hereby additionally acknowledges that it shall
review such items (i) to confirm that an original Note is contained in the file
within 10 Business Days after the Startup Day and (ii) as required by Section
3.6(a) of the Pooling and Servicing Agreement, during the period specified
therein, and shall otherwise comply with Section 3.6(b) of the Pooling and
Servicing Agreement as required thereby.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By: ______________________________________
Name:
Title:
Dated: ________________
<PAGE> 142
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 trustee (the "Trustee") of a certain pool of mortgage loans (the
"Pool") heretofore conveyed in trust to the Trustee, pursuant to that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling 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, and the Trustee; and
WHEREAS, the Trustee is required, pursuant to Section 3.6(a)
of the Pooling and Servicing Agreement, to review the Files relating to the Pool
within a specified period following the Startup Day 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
3.6(b) of the Pooling and Servicing Agreement; and
WHEREAS, Section 3.6(a) of the Pooling and Servicing Agreement
requires the Trustee to deliver this Certification upon the satisfaction of
certain conditions set forth therein.
NOW, THEREFORE, it has determined that all required documents
(or certified copies of documents listed in Section 3.5 of the Pooling and
Servicing Agreement) have been executed or received, and that such documents
relate to the Initial Mortgage Loans identified in the Schedules of Mortgage
Loans pursuant to Section 3.5(a) of the Pooling and Servicing Agreement or, in
the event that such documents have not been executed and received or do not so
relate to such Mortgage Loans, any remedial action by the Sponsor pursuant to
Section 3.6(b) of the Pooling and Servicing Agreement has been completed. The
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:____________________________
<PAGE> 143
EXHIBIT F
FORM OF DELIVERY ORDER
________________________ (date)
Bankers Trust Company
of California, N.A.
Three Park Plaza
16th Floor
Irvine, California 92614
Attention: Corporate Trust Administration
Ladies and Gentlemen:
Pursuant to Article IV of the Pooling and Servicing Agreement,
dated as of September 1, 1998 (the "Pooling and Servicing Agreement") by and
among Advanta Mortgage Conduit Services, Inc., a Delaware corporation, as
sponsor (the "Sponsor"), Advanta Mortgage Corp. USA, as master servicer, and
Bankers Trust Company of California, N.A., as trustee, the Sponsor HEREBY
CERTIFIES that all conditions precedent to the issuance of Advanta Mortgage Loan
Trust 1998-3, Mortgage Loan Asset-Backed Certificates (the "Certificates"), HAVE
BEEN SATISFIED and HEREBY REQUESTS YOU TO AUTHENTICATE AND DELIVER said
Certificates, and to RELEASE said Certificates to the Owners thereof, or
otherwise upon their order.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES, INC.
By: __________________________
Name: Mark T. Dunsheath
Title: Vice President
<PAGE> 144
EXHIBIT G
FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION 860E(e)
OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which he makes this affidavit.
2. That (i) the Investor is not a "disqualified organization"
and will not be a "disqualified organization" as of [date of transfer] (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
certain taxable instrumentalities), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas, or any
organization (other than a farmers' cooperative) that is exempt from federal
income tax unless such organization is subject to the tax on unrelated business
income); (ii) it is not acquiring the Class R Certificates for the account of
disqualified organization; (iii) it consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Trustee (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Class R
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer any such Class R Certificate unless
(a) it has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same four representations and (b) as of
the time of the transfer, it does not have actual knowledge that such affidavit
is false.
IN WITNESS WHEREOF, the Investor has caused this instrument to
be executed on its behalf, pursuant to authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this __ day of __________, ____.
[NAME OF INVESTOR]
By:___________________________
[Name of Officer]
[Title of Officer]
<PAGE> 145
[Corporate Seal]
Attest:
______________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of
Officer], known or proved to be the same person who executed the foregoing
instrument and to be the [Title of Officer] of the Investor, and acknowledged to
me that he executed the same as his free act and deed and the free act and deed
of the Investor.
Subscribed and sworn before me this ____ day of _______, ____.
__________________________
NOTARY PUBLIC
COUNTY OF ________________
STATE OF _________________
My commission expires the ____ day of _______________, ____.
<PAGE> 146
EXHIBIT H
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, _____________,
______________ of ________________ (the "Sponsor"), do hereby constitute and
appoint Bankers Trust Company of California, N.A., as the true and lawful
attorney, for the Sponsor and in its name, place and stead, to record the
assignments of mortgage with respect to the Mortgage Loans transferred to the
Bankers Trust Company of California, N.A., as trustee (the "Trustee"), under
that Pooling and Servicing Agreement dated as of September 1, 1998 by and among
the Sponsor, the Trustee and Advanta Mortgage Corp. USA, as master servicer, and
to do and perform all other things and acts relating to such assignments of
mortgage as may be necessary to effectuate the transfer of such Mortgage Loans
to the Trustee, including the execution and delivery of new assignments of
mortgage where necessary to comply with applicable real estate recording laws at
the time of recordation.
This power of attorney is irrevocable and is coupled with an
interest in the Mortgage Loans, and it may at all times be relied upon by any
person, firm or corporation dealing with the attorney named herein as remaining
in full force and effect, and such person, firm or corporation shall have no
liability to the Sponsor with respect thereto.
WITNESS the following signature this ____ day of ___________
_____.
______________________
By: __________________
Name: ________________
Title: _______________
STATE OF PENNSYLVANIA
COUNTY OF MONTGOMERY
I, _____________, a Notary Public in and for the jurisdiction
aforesaid, do hereby certify that _______________, who acknowledged himself to
the _______________ of _______________, a Delaware corporation, personally
appeared before me in the jurisdiction aforesaid and that he as such
______________ executed the foregoing instrument on behalf of said corporation
for the purposes therein contained.
Witness my hand and official seal this _____ day of _________________.
_____________________(SEAL)
Notary Public
My Commission Expires:
<PAGE> 147
EXHIBIT I
FORM OF MONTHLY REPORT
Advanta Mortgage Conduit Services, Inc.
Mortgage Loan Asset-Backed Certificates
Series 1998-3
Statement to Certificateholders
<TABLE>
<CAPTION>
PRIOR CURRENT
ORIGINAL PRINCIPAL PRINCIPAL
CLASS FACE VALUE BALANCE INTEREST PRINCIPAL TOTAL BALANCE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1
A-2
R
- ------------------------------------------------------------------------------------------------
TOTALS
- ------------------------------------------------------------------------------------------------
</TABLE>
FACTOR INFORMATION PER $1000 OF ORIGINAL FACE PASS-THROUGH RATES
<TABLE>
<CAPTION>
PRIOR CURRENT
PRINCIPAL PRINCIPAL
CLASS CUSIP BALANCE INTEREST PRINCIPAL TOTAL BALANCE CURRENT NEXT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
R
</TABLE>
SPONSOR: Advanta Mortgage Conduit Services, Inc. ACCOUNT
SERVICER: Advanta Mortgage Corp. USA MANAGER: _________________
LEAD UNDERWRITER: Salomon Smith Barney, Inc..
RECORD DATE:
DISTRIBUTION DATE:
FACTOR INFORMATION:
<PAGE> 148
Advanta Mortgage Conduit Services, Inc.
Mortgage Loan Asset-Backed Certificates
Series 1998-3
Statement to Certificateholders
AS TO EACH MORTGAGE LOAN GROUP
DISTRIBUTION DATE:
DELINQUENCY ADVANCES MADE:
ACCRUED SERVICING FEE FOR THE CURRENT PERIOD:
PLUS ADDITIONAL SERVICING FEES:
LESS PERMITTED REDUCTIONS TO SERVICING FEES:
TOTAL SERVICING FEES DUE MASTER SERVICER (INCLUDING MASTER SERVICING FEE):
COLLECTED SERVICING FEES FOR CURRENT PERIOD:
<TABLE>
<CAPTION>
Total Delinquency (Excluding Foreclosure & REO, Including
delinquent bankruptcies) -------------- Loans in
----------------------- Foreclosure
(Including
30-59 60-89 90+ Total bankruptcies in
Days Days Days Delinquency F/C) --
---- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C>
UPS-$
%-$
Loans-$
%-#
</TABLE>
BOOK VALUE AND LOAN NUMBER OF REO PROPERTY:
NUMBER OF LOANS AS OF THE CURRENT DISTRIBUTION DATE:
NUMBER OF LOANS AS OF THE NEXT DISTRIBUTION DATE:
WEIGHTED AVERAGE COUPON AS OF THE CURRENT DISTRIBUTION DATE:
WEIGHTED AVERAGE COUPON AS OF THE NEXT DISTRIBUTION DATE:
<PAGE> 149
SUBSTITUTION AMOUNTS:
LOAN PURCHASE PRICES
Bankruptcy
Proceedings
-----------
Loans-# UPB-$
Status
Current
Delinquent*
Foreclosure*
Total
Modified Loans
--------------
Loans-# UPS-$
Status
Current
Delinquent*
Foreclosure*
Total
* included in delinquency and foreclosure statistics above
CURTAILMENTS INCLUDED IN CURRENT DISTRIBUTION:
PREPAYMENTS IN FULL INCLUDED IN CURRENT DISTRIBUTION:
RECOVERIES OF PRINCIPAL INCLUDED IN CURRENT DISTRIBUTION:
CARRY-FORWARD AMOUNT:
AMOUNT OF SUBORDINATION INCREASE OR DECREASE WITH
RESPECT TO A MORTGAGE LOAN GROUP:
INFORMATION PURSUANT TO
SECTION 6049(d)(7)(C):
PROJECTED EXCESS SPREAD FOR MORTGAGE LOAN GROUP:
BALANCE OF LARGEST LOAN:
<PAGE> 150
TRUST ACTIVITY
CERTIFICATE ACCOUNT DEPOSIT
AS TO EACH MORTGAGE LOAN GROUP:
PROCEEDS OF LIQUIDATION OF TRUST ESTATE:
AMOUNT OF DEPOSIT IN THE CERTIFICATE ACCOUNT:
LOAN PURCHASE PRICE AMOUNTS:
SUBSTITUTION AMOUNT:
INVESTMENT EARNINGS: ON CERT. ACCT.
MONTHLY REMITTANCE FOR EACH CLASS:
AMOUNT OF EXCESS SPREAD ALLOCABLE TO A GROUP USED TO COVER SHORTFALLS WITH
RESPECT TO ANOTHER GROUP:
AMOUNT WITHDRAWN FROM CERTIFICATE ACCOUNT
AND DEPOSITED IN THE EXPENSE ACCOUNT:
AMOUNT WITHDRAWN FROM CERTIFICATE ACCOUNT
AND DISTRIBUTED TO SUBORDINATED CERTIFICATES:
.
.
AMOUNT REMAINING IN CERTIFICATE ACCOUNT:
PREMIUM AMOUNT:
<PAGE> 151
EXHIBIT J
FORM OF MASTER SERVICER'S TRUST RECEIPT
To: Bankers Trust Company
of California, N.A.
Three Park Plaza
16th Floor
Irvine, California 92614
Attn: Corporate Trust
Date:
In connection with the administration of the mortgage loans
held by you as Trustee under a certain Pooling and Servicing Agreement dated as
of September 1, 1998 and by and among Advanta Mortgage Corp. USA, as Master
Servicer, and you, as Trustee (the "Agreement"), the Master Servicer hereby
requests a release of the File held by you as 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 repurchased pursuant to Section 3.3, 3.4, 3.6(b) or
8.10(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.)
_______ 3. Mortgage Loan substituted.
<PAGE> 152
(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
repurchased 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:_______________________
<PAGE> 153
EXHIBIT K
FORM OF SUBSEQUENT TRANSFER AGREEMENT
Advanta Mortgage Conduit Services, Inc., as Seller, and
Advanta Mortgage Loan Trust 1998-3, as Purchaser, pursuant to the Pooling and
Servicing Agreement dated as of September 1, 1998 among Advanta Mortgage Corp.
USA as Master Servicer, Advanta Mortgage Conduit Services, Inc., as Sponsor,
Bankers Trust Company of California, N.A., as Trustee (the "Pooling 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 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 Pooling
and Servicing Agreement) and other required documentation in accordance with the
terms set forth in Section 3.8(b) of the Pooling and Servicing Agreement.
The costs relating to the delivery of the documents specified
in this Subsequent Transfer Agreement and the Pooling 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 Pooling and Servicing Agreement that related 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 3.8(b) to the Pooling
and Servicing Agreement are satisfied as of the date hereof.
All terms and conditions of the Pooling and Servicing
Agreement are hereby ratified, confirmed and incorporated herein; provided that
in the event of any conflict the provisions of this Subsequent Transfer
Agreement shall control over the conflicting provisions of the Pooling and
Servicing Agreement.
<PAGE> 154
Terms and capitalized and not defined herein shall have their
respective meanings as set forth in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the parties have executed this Subsequent
Transfer Agreement as of this ____ day of ____________, ______.
ADVANTA MORTGAGE CONDUIT
SERVICES, INC.,
as Seller
By:___________________________
Mark Dunsheath
Vice President
ADVANTA MORTGAGE LOAN
TRUST 1998-3
By: Bankers Trust Company of
California, N.A.,
not in its individual capacity but
solely as 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. Trustee's Certificate.
H. Purchase Request.
I. Assignment.
<PAGE> 155
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
SUBSEQUENT TRANSFER AGREEMENT
ADVANTA MORTGAGE POOL: 1998-3
SEPTEMBER, 1998
1. CUTOFF DATE 1 SEPTEMBER 1998 (DD MONTH YEAR)
1A. PRICING DATE (DD MONTH YEAR)
2. CLOSING DATE 23 SEPTEMBER 1998 (DD MONTH YEAR)
2A. DAYS - CUTOFF TO CLOSING
3. POOL PRINCIPAL BALANCE AS
OF THE CUTOFF DATE
4. NET PURCHASE PRICE EQUALS: 100.00%
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
<PAGE> 1
EXHIBIT 4.2
9
<PAGE> 2
EXECUTION COPY
- --------------------------------------------------------------------------------
MASTER LOAN TRANSFER AGREEMENT
Dated as of June 15, 1997
by and among
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK
ADVANTA FINANCE CORP.,
as Affiliated Originators
ADVANTA CONDUIT RECEIVABLES, INC.
as an Affiliate
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
and
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor
- --------------------------------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions.................................................................1
Section 2. Interest Calculations.......................................................3
Section 3. Transfers of Mortgage Loans.................................................4
Section 4. Representations, Warranties and Covenants
Regarding the Affiliated Originators and the
Sponsor. ...................................................................4
Section 5. Representations and Warranties of the Affiliated
Originators Regarding the Mortgage Loans. ..................................8
Section 6. Authorized Representatives.................................................14
Section 7. Notices....................................................................14
Section 8. Governing Law..............................................................15
Section 9. Assignment.................................................................15
Section 10. Counterparts...............................................................15
Section 11. Amendment..................................................................15
Section 12. Severability of Provisions.................................................15
Section 13. No Agency; No Partnership or Joint Venture.................................15
Section 14. Further Assurances.........................................................15
Section 15. The Certificate Insurer....................................................15
Section 16. Maintenance of Records.....................................................16
</TABLE>
i
<PAGE> 4
THIS MASTER LOAN TRANSFER AGREEMENT, dated as of June 15, 1997,
between Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta
Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage
Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Mortgage Conduit
Services, Inc., Advanta Finance Corp. and Advanta National Bank, each a seller
(each an "Affiliated Originator" and collectively, the "Affiliated
Originators"), Advanta Conduit Receivables, Inc. (the "Affiliate"), Bankers
Trust Company of California, N.A., as trustee ("Trustee") and Advanta Mortgage
Conduit Services, Inc., as sponsor ("Sponsor");
I. BACKGROUND
A. Each Affiliated Originator is an originator or purchaser of mortgage
loans which such Affiliated Originator may, from time to time, convey to the
Conduit Acquisition Trust, or cause the Conduit Acquisition Trust to acquire;
B. The Affiliated Originators and the Sponsor expect, from time to
time, to cause that such mortgage loans to be conveyed to an Advanta Trust in
connection with a securitization transaction sponsored by the Sponsor.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
Section 1. Definitions. Whenever used in this Agreement or in any
Conveyance Agreement, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this Article; provided,
however, that any capitalized terms used herein or in any conveyance Agreement
and not defined herein shall have their respective meanings as set forth in the
related Advanta Pooling Agreement.
Advanta Pooling Agreement: Any Pooling and Servicing Agreement
entered into by Advanta Mortgage Conduit Services, Inc. as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer and a trustee, as it may be amended and
supplemented from time to time by the parties thereto.
Advanta Trust: A securitization trust created by the Sponsor into
which Mortgage Loans described in this Agreement and the Conveyance Agreements
are deposited.
Agreement: This Master Loan Transfer Agreement as it may be amended
from time to time, including the exhibits and supplements hereto.
Bulk Acquisition Loan: Any Mortgage Loan purchased by an Affiliated
Originator from another Originator (other than any other Affiliated Originator)
as part of a bulk portfolio acquisition.
<PAGE> 5
Conduit Acquisition P&S: The Pooling and Servicing Agreement dated
as of May 1, 1997 by and between the Sponsor and the Trustee relating to the
Conduit Acquisition Trust.
Conduit Acquisition Trust: The trust created pursuant to the Conduit
Acquisition P&S.
Conveyance Agreement: Any Conveyance Agreement relating to a Pool,
in substantially the form set forth as Exhibit A hereto.
Coupon Rate: The rate of interest borne by each Note.
Cut-Off Date: With respect to any Pool, as defined in the related
Conveyance Agreement.
FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
File: The documents delivered to the Trustee pursuant to the
document delivery provisions of the Conduit Acquisition P&S pertaining to a
particular Mortgage Loan, together with any additional documents required to be
added to the File pursuant to the Conduit Acquisition P&S.
First Mortgage Loan: A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Property.
FNMA: The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
Loan Balance: With respect to each Mortgage Loan, the outstanding
principal balance thereof on the related Cut Off Date, less any related
Principal Remittance Amounts relating to such Mortgage Loan included in previous
related Monthly Remittance Amounts that were transferred by the Master Servicer
or any Sub-Servicer to the Trustee for deposit in the related Certificate
Account.
Master Servicer: Advanta Mortgage Corp. USA, a Delaware corporation,
and its permitted successors and assigns.
Mortgage Loans: Each of the mortgage loans subject hereto, together
with any Qualified Replacement Mortgages substituted therefor in accordance with
the related Advanta Pooling Agreement.
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Note: The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
Offered Certificates: Any securities issued by an Advanta Trust
which are not retained by the Sponsor or any Originator.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool: Any group of Mortgage Loans transferred to the Sponsor
pursuant to a specific Conveyance Agreement.
Property: The underlying property securing a Mortgage Loan.
Qualified Mortgage: "Qualified Mortgage" shall have the meaning set
forth from time to time in the definition thereof at Section 860G(a)(3) of the
Code (or any successor statute thereto) and applicable to the related Advanta
Trust.
Schedules of Mortgage Loans: The Schedules of Mortgage Loans
required to be delivered pursuant to the related Advanta Pooling Agreement.
Second Mortgage Loan: A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Property.
Senior Lien: With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien; and
with respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
Third Mortgage Loan: A Mortgage Loan which constitutes a third
priority mortgage lien with respect to the related Property.
Trustee: Bankers Trust Company of California, N.A., located on the
date of execution of this Agreement at 3 Park Plaza, Irvine, California 92714, a
national banking association, not in its individual capacity but solely as
Trustee, and any successor hereunder.
Unaffiliated Originator Loan: Any Mortgage Loan purchased by an
Affiliated Originator from an Unaffiliated Originator.
Unaffiliated Originators: Any Originator (x) not affiliated with the
Sponsor and (y) approved in writing by the Certificate Insurer.
Section 2. Interest Calculations. Calculations of interest
hereunder, including, without limitation, calculations of interest at the Coupon
Rate, which are made in respect of the Loan Balance of a Mortgage Loan shall be
made on a daily basis using either (i) a 360-day year comprised of twelve 30-day
months or (ii) a 360-day year and
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the actual number of days elapsed in the applicable interest period, as required
by the related Note.
Section 3. Transfers of Mortgage Loans. From time to time in
connection with the establishment of Advanta Trusts the Affiliated Originators
and the Sponsor, intend to transfer Mortgage Loans from the Conduit Acquisition
Trust to the related Advanta Trust. Each such transfer will be evidenced by a
Conveyance Agreement in substantially the form of Exhibit A hereto.
Section 4. Representations, Warranties and Covenants Regarding the
Affiliated Originators and the Sponsor. (a) Each Affiliated Originator hereby
represents and warrants to the Sponsor, the Trustee and their respective
successors and assigns that, as of the date hereof;
(i) Such Affiliated Originator is a corporation (or, in
the case of Advanta National Bank USA, a national banking
association) duly organized, validly existing and in good standing
under the laws governing its creation and existence and is in good
standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it make
such qualification necessary. Such Affiliated Originator has all
requisite corporate power and authority to own and operate its
properties, to carry out its business as presently conducted and as
proposed to be conducted, to enter into and discharge its
obligations under this Agreement and the Conveyance Agreements.
(ii) The execution and delivery of this Agreement by such
Affiliated Originator and its performance and compliance with the
terms of this Agreement and the Conveyance Agreements to which it is
a party have been duly authorized by all necessary corporate action
on the part of such Affiliated Originator and will not violate such
Affiliated Originator's Articles of Incorporation, Articles of
Association or Bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in a breach of, any material contract, agreement or
other instrument to which such Affiliated Originator or its
properties is a party or by which such Affiliated Originator is
bound or violate any statute or any order, rule or regulation of any
court, governmental agency or body or other tribunal having
jurisdiction over such Affiliated Originator or any of its
properties.
(iii) This Agreement and the Conveyance Agreements to
which such Affiliated Originator is a party, assuming due
authorization, execution and delivery by the other parties hereto
and thereto, each constitutes a valid, legal and binding obligation
of such Affiliated Originator, enforceable against it in accordance
with the terms hereof, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity (whether considered in
a proceeding or action in equity or at law).
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(iv) Such Affiliated Originator is not in default with
respect to any order or decree of any court or any order, regulation
or demand of any federal, state, municipal or governmental agency,
which might have consequences that would materially and adversely
affect the condition (financial or other) or operations of such
Affiliated Originator or its properties, or might have consequences
that would materially and adversely affect its performance hereunder
and under the other Conveyance Agreements to which such Affiliated
Originator is a party, or which would draw into question the
validity of this Agreement or the Mortgage Loans taken as a whole or
of any action taken or to be taken in connection with the
obligations of the Affiliated Originator contemplated herein.
(v) No litigation is pending or, to the best of such
Affiliated Originator's knowledge, threatened against such
Affiliated Originator which litigation might have consequences that
would prohibit its entering into this Agreement or any Conveyance
Agreements to which it is a party or that would materially and
adversely affect the condition (financial or otherwise) or
operations of such Affiliated Originator or its properties or might
have consequences that would materially and adversely affect its
performance hereunder and under the Conveyance Agreements to which
such Affiliated Originator is a party.
(vi) Neither this Agreement nor any certificate of an
officer, statement furnished in writing or report delivered pursuant
to the terms hereof by such Affiliated Originator contains any
untrue statement of a material fact or omits to state any material
fact necessary to make the certificate, statement or report not
misleading.
(vii) Upon the receipt of each Mortgage Loan and other
items of the Mortgage by the Trustee under this Agreement, the
related Advanta Trust will have good and marketable title to such
Mortgage Loan and such other items of the related Trust Estate free
and clear of any lien (other than liens which will be simultaneously
released).
(viii) Neither such Affiliated Originator nor any
affiliate thereof will report on any financial statement any part of
the Servicing Fee as an adjustment to the sales price of the
Mortgage Loans.
(ix) All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained, as the
case may be, by or from any federal, state or other governmental
authority or agency (other than any such actions, approvals, etc.,
under any state securities laws, real estate syndication or "Blue
Sky" statutes, as to which such Affiliated Originator makes no such
representation or warranty), that are necessary or advisable in
connection with the sale of the Mortgage Loans and the execution and
delivery by such Affiliated Originator of this Agreement and the
Conveyance Agreements to which it is a party, have been duly taken,
given or obtained, as the case may be, are in full force and effect
on the date
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hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time
within which any appeal therefrom may be taken or review thereof may
be obtained has expired or no review thereof may be obtained or
appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and
the conveyance Agreements on the part of such Affiliated Originator
and the performance by such Affiliated Originator of its obligations
under this Agreement and such of the Conveyance Agreements to which
it is a party.
(x) The origination practices used by such Affiliated
Originator with respect to the Mortgage Loans originated by such
Affiliated Originator have been, (i) in all material respects,
legal, proper, prudent and customary in the mortgage loan lending
business and (ii) in compliance with the Servicer's underwriting
criteria as described in the Prospectus.
(xi) The transactions contemplated by this Agreement are
in the ordinary course of business of such Affiliated Originator.
The transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by the Servicer pursuant to this Agreement are not
subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction.
(xii) Such Affiliated Originator received fair
consideration and reasonably equivalent value in exchange for the
sale of the interests in the Mortgage Loans.
(xiii) Such Affiliated Originator did not sell any
interest in any Mortgage Loan with any intent to hinder, delay or
defraud any of its respective creditors.
(xiv) Such Affiliated Originator is solvent, and such
Affiliated Originator will not be rendered insolvent as a result of
the sale of the Mortgage Loans to the related Advanta Trust.
The representations and warranties set forth in this paragraph (a) shall survive
the sale and assignment of the Mortgage Loans to the Sponsor.
In addition, each Affiliated Originator hereby covenants to
perform the obligations, if any, imposed upon it by the related Advanta Pooling
Agreement.
(b) The Sponsor hereby represents and warrants to each
Affiliated Originator and the Trustee that, as of the date hereof:
(i) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all licenses and qualifications necessary to carry
on its business as now being conducted and to perform its
obligations hereunder; the Sponsor has the power and authority to
execute and deliver this Agreement and to perform its obligations in
accordance herewith; the execution, delivery and performance of this
Agreement (including
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any Conveyance Agreement and any other instruments of transfer to be
delivered pursuant to this Agreement) by the Sponsor and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action and do not
violate the organization documents of the Sponsor, contravene or
violate any law, regulation, rule, order, judgement or decree to
which the Sponsor or its properties are subject or contravene,
violate or result in any breach of any provision of, or constitute a
default under, or result in the imposition of any lien on any assets
of the Sponsor pursuant to the provisions of, any mortgage,
indenture, contract, agreement or other undertaking to which the
Sponsor is a party or which purports to be binding upon Sponsor or
any of Sponsor's assets; this Agreement evidences the valid and
binding obligation of the Sponsor enforceable against the Sponsor in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditor's rights generally or the
application of equitable principles in any proceeding, whether at
law or in equity;
(ii) All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained, as the
case may be, by or from any federal, state or other governmental
authority or agency, that are necessary in connection with the
execution and delivery by the Sponsor of this Agreement, have been
duly taken, given or obtained, as the case may be, are in full force
and effect, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of
the transactions contemplated by this Agreement on the part of the
Sponsor and the performance by the Sponsor of its obligations under
this Agreement; and
(iii) There is no action, suit, proceeding or
investigation pending or, to the best of the Sponsor's knowledge,
threatened against the Sponsor which, either in any one instance or
in the aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets of
the Sponsor or in any material impairment of the right or ability of
the Sponsor to carry on its business substantially as now conducted,
or in any material liability on the part of the Sponsor or which
would draw into question the validity of this Agreement or of any
action taken or to be taken in connection with the obligations of
the Sponsor contemplated herein, or which would be likely to impair
the ability of the Sponsor to perform under the terms of this
Agreement.
The representations and warranties set forth in this paragraph (b) shall survive
the sale and assignment of the Mortgage Loans to the Sponsor. Upon discovery of
a breach of any of the foregoing representations and warranties which materially
and adversely affects the interests of the Affiliated Originator, the Affiliated
Originator shall give prompt written notice to the Sponsor. Within 30 days of
its receipt of notice of breach, the Sponsor shall cure such breach in all
material respects.
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Section 5. Representations and Warranties of the Affiliated
Originators Regarding the Mortgage Loans. (a) Set forth in paragraph (b) below
is a listing of representations and warranties which will be deemed to have been
made by each Affiliated Originator in connection with each conveyance of a Pool
from the Conduit Acquisition Trust to the related Advanta Trust. In addition, a
Conveyance Agreement may, with respect to the Mortgage Loans in the related
Pool, delete or modify any of such representations and warranties, or may add
additional representations and warranties ("Additional Representations and
Warranties"). The representations and warranties listed in paragraph (b) below,
together with any Additional Representations and Warranties, are the
"Representations and Warranties". Reference to the Cut-Off Date are as of the
Cut-Off Date set forth in the related Conveyance Agreement with respect to a
Mortgage Loan.
(b) With respect to each Mortgage Loan, each Affiliated Originator
hereby represents, warrants and covenants to the Sponsor and the Trustee, as of
the related Cut-Off Date, as follows, on which representations, warranties and
covenants the Trustee relies in accepting the Mortgage Loans:
(i) The information with respect to each Mortgage Loan set
forth in the Schedules of Mortgage Loans is true and correct as of
the Cut-Off Date;
(ii) All of the original or certified documentation
required to be delivered to the Trustee pursuant to the related
Advanta Pooling Agreement (including all material documents related
thereto) with respect to each Mortgage Loan has been or will be
delivered to the Trustee in accordance with the terms of such
Advanta Pooling Agreement. Each of the documents and instruments
specified to be included therein has been duly executed and in due
and proper form, and each such document or instrument is in a form
generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage
Loans for sale to prudent investors in the secondary market that
invest in mortgage loans such as the Mortgage Loans.
(iii) Each Mortgage Loan being transferred to the Sponsor
is a Qualified Mortgage and is a Mortgage;
(iv) Each Property is improved by a single (one-to-four)
family residential dwelling, which may include manufactured homes
which qualify as eligible for inclusion in a REMIC, condominiums and
townhouses but shall not include cooperatives;
(v) No Mortgage Loan had a Combined Loan-to-Value Ratio in
excess of 100%;
(vi) Each Mortgage is either a valid and subsisting first,
second or third lien of record on the Property (subject in the case
of any Second Mortgage Loan or Third Mortgage Loan only to a Senior
Lien on such Property) and subject in all cases to the exceptions to
title set forth in the title insurance policy, with
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respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular
mortgage lending activities, and such other exceptions to which
similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect
the benefits of the security intended to be provided by such
Mortgage;
(vii) Immediately prior to the transfer and assignment
herein contemplated, each Affiliated Originator held good and
indefeasible title to, and was the sole owner of, each Mortgage Loan
conveyed by such Affiliated Originator subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will
be released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated,
the Trustee will hold good and indefeasible title to, and be the
sole owner of, each Mortgage Loan subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will
be released simultaneously with such transfer and assignment;
(viii) As of the related Cut-Off Date, no Mortgage Loan is
30 or more days Delinquent, except for any portion of the Mortgage
Loans which the related Advanta Pooling Agreement permits to be more
than 30 days Delinquent;
(ix) There is no delinquent tax or assessment lien or
mechanic's lien on any Property, and each Property is free of
substantial damage and is in good repair;
(x) There is no valid and enforceable right of rescission
offset, defense or counterclaim to any Note or Mortgage, including
the obligation of the related Mortgagor to pay the unpaid principal
of or interest on such Note or the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the Mortgage,
or the exercise of any right thereunder, render either the Mortgage
Note or the Mortgage unenforceable in whole or in part, or subject
to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto;
(xi) There is no mechanics' lien or claim for work, labor
or material affecting any Property which is or may be a lien prior
to, or equal with, the lien of the related Mortgage except those
which are insured against by any title insurance policy referred to
in paragraph (xiii) below;
(xii) Each Mortgage Loan at the time it was made complied
in all material respects with all applicable state and federal laws
and regulations, including, without limitation, the federal
Truth-in-Lending Act and other consumer protection laws, real estate
settlement procedure, usury, equal credit opportunity, disclosure
and recording laws;
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(xiii) With respect to each Mortgage Loan, a lender's
title insurance policy, issued in standard California Land Title
Association form or American Land Title Association form, or other
form acceptable in a particular jurisdiction by a title insurance
company authorized to transact business in the state in which the
related Property is situated, in an amount at least equal to the
Original Principal Amount of such Mortgage Loan insuring the
mortgagee's interest under the related Mortgage Loan as the holder
of a valid first, second or third mortgage lien of record on the
real property described in the related Mortgage, as the case may be,
subject only to exceptions of the character referred to in paragraph
(vi) above, was effective on the date of the origination of such
Mortgage Loan, and, as of the Cut-Off Date such policy will be valid
and thereafter such policy shall continue in full force and effect;
(xiv) The improvements upon each Property are covered by a
valid and existing hazard insurance policy (which may be a blanket
policy of the type described in the related Advanta Pooling
Agreement) with a generally acceptable carrier that provides for
fire and extended coverage representing coverage not less than the
least of (A) the outstanding principal balance of the related
Mortgage Loan (together, in the case of a Second Mortgage Loan, with
the outstanding principal balance of the Senior Lien), (B) the
minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the full insurable value of the
Property;
(xv) If the Mortgage Loan at the time of origination
relates to a Property in an area identified in the Federal Register
by the Federal Emergency Management Agency as having special flood
hazards, (which may be a blanket policy of the type described in the
related Advanta Pooling Agreement) a flood insurance policy in a
form meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable carrier
is in effect with respect to such Property in an amount representing
coverage, and which provides for a recovery by the Master Servicer
of insurance proceeds relating to such Mortgage Loan of not less
than the least of (i) the outstanding principal balance of the
Mortgage Loan, (ii) the minimum amount required to compensate for
damage or loss on a replacement cost basis and (iii) the maximum
amount of insurance that is available under the Flood Disaster
Protection Act of 1973;
(xvi) Each Mortgage and Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in
a proceeding or action in equity or at law), and all parties to each
Mortgage Loan had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein
purported to be conveyed;
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(xvii) Each Affiliated Originator has caused and will
cause to be performed any and all acts required to be performed to
preserve the rights and remedies of the servicer in any Insurance
Policies applicable to any Mortgage Loans delivered by such
Affiliated Originator including, to the extent such Mortgage Loan is
not covered by a blanket policy described in the Advanta Pooling
Agreement, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured,
joint loss payee and mortgagee rights in favor of the servicer;
(xviii) Each original Mortgage was recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the
lien thereof for the benefit of the applicable Affiliated
Originator, subject to the provisions of Section 3.5(b) of the
Advanta Pooling Agreement, (or are in the process of being
recorded);
(xix) The terms of each Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a
written instrument which has been recorded, if necessary, to protect
the interest of the owners and which has been delivered to the
Trustee. The substance of any such alteration or modification is
reflected on the related Schedule of Mortgage Loans and has been
approved by the primary mortgage guaranty insurer, if any;
(xx) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee
to make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with.
All costs, fees and expenses incurred in making or closing or
recording such Mortgage Loans were paid;
(xxi) Except as otherwise required by law or pursuant to
the statute under which the related Mortgage Loan was made, the
related Note is not and has not been secured by any collateral,
pledged account or other security except the lien of the
corresponding Mortgage;
(xxii) No Mortgage Loan was originated under a buydown
plan;
(xxiii) No Mortgage Loan provides for negative
amortization, has a shared appreciation feature, or other contingent
interest feature;
(xxiv) Each Property is located in the state identified in
the Schedule of Mortgage Loans and consists of one or more parcels
of real property with a residential dwelling erected thereon;
(xxv) Each Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of the
related Mortgage Loan in the event the related Property is sold
without the prior consent of the mortgagee thereunder;
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(xxvi) Any advances made after the date of origination of
a Mortgage Loan but prior to the Cut-Off Date, have been
consolidated with the outstanding principal amount secured by the
related Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term reflected on
the Schedule of Mortgage Loans. The consolidated principal amount
does not exceed the original principal amount of the related
Mortgage Loan. No Note permits or obligates the Master Servicer, the
Sub-Servicer or the Sponsor to make future advances to the related
Mortgagor at the option of the Mortgagor;
(xxvii) There is no proceeding pending or threatened for
the total or partial condemnation of any Property, nor is such a
proceeding currently occurring, and each Property is undamaged by
waste, fire, earthquake or earth movement, flood, tornado or other
casualty, so as to affect adversely the value of the Property as
security for the Mortgage Loan or the use for which the premises
were intended;
(xxviii) All of the improvements which were included for
the purposes of determining the Appraised Value of any Property lie
wholly within the boundaries and building restriction lines of such
Property, and no improvements on adjoining properties encroach upon
such Property, and, if a title insurance policy exists with respect
to such Property, are stated in such title insurance policy and
affirmatively insured;
(xxix) No improvement located on or being part of any
Property is in violation of any applicable zoning law or regulation.
All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of each Property and,
with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities and such Property is lawfully occupied under the
applicable law;
(xxx) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by the Sponsor or the related Trust to the trustee under the
deed of trust, except in connection with a trustee's sale after
default by the related Mortgagor;
(xxxi) With respect to each Second Mortgage Loan and each
Third Mortgage Loan, either (A) no consent for such Mortgage Loan
was required by the holder of the related Senior Lien (and, in the
case of a Third Mortgage Loan, the holder of the related second
lien) prior to the making of such Mortgage Loan or (B) such consent
has been obtained and is contained in the related File;
(xxxii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder
thereof adequate for the realization against the related Property of
the benefits of the security, including
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(A) in the case of a Mortgage designated as a deed of trust, by
trustee's sale and (B) otherwise by judicial foreclosure. There is
no homestead or other exemption available which materially
interferes with the right to sell the related Property at a
trustee's sale or the right to foreclose the related Mortgage;
(xxxiii) Except as provided by clause (viii) of this
Section, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Note and no
event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration; and the applicable
Affiliated Originator has not waived any default, breach, violation
or event of acceleration;
(xxxiv) Except for any Bulk Acquisition Loan, no
instrument of release or waiver has been executed in connection with
any Mortgage Loan, and no Mortgagor has been released, in whole or
in part, except in connection with an assumption agreement which has
been approved by the primary mortgage guaranty insurer, if any, and
which has been delivered to the Trustee;
(xxxv) Except for any Bulk Acquisition Loan, the maturity
date of each Mortgage Loan which is a Second Mortgage Loan or a
Third Mortgage Loan is at least twelve months prior to the maturity
date of the related first mortgage loan if such first mortgage loan
provides for a balloon payment;
(xxxvi) The credit underwriting guidelines applicable to
each Mortgage Loan which is not a Bulk Acquisition Loan or an
Unaffiliated Originator Loan conform in all material respects to the
Sponsor's underwriting guidelines;
(xxxvii) All parties to the Note and the Mortgage had
legal capacity to execute the Note and the Mortgage and each Note
and Mortgage have been duly and properly executed by such parties;
and
(xxxviii) The related Affiliated Originator has no actual
knowledge that there exist on any Property any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act,
the Resource Conservation and Recovery Act of 1976, or other
federal, state or local environmental legislation.
(c) No Originator Payment Obligations. There is no
obligation on the part of the Servicer or any other party to make payments in
addition to those made by the Mortgagor except for delinquency.
The Representations and Warranties shall survive the
transfer and assignment of the Mortgage Loans to the related Advanta Trust. Upon
discovery by the Affiliated Originator or the Sponsor of a breach of any of the
Representations and Warranties, without regard to any limitation set forth in
such Representation or Warranty concerning the knowledge of the Affiliated
Originator as to the facts stated therein, which breach, in the opinion of the
Sponsor, materially and adversely affects the interests of the Sponsor, the
Owners or of the Certificate Insurer in the related Mortgage Loan or
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Mortgage Loans, the party discovering such breach shall give prompt written
notice to the other party, and the related Affiliated Originator shall be
required to take the remedial actions required by the related Advanta Pooling
Agreement within the time periods required thereto. Each Affiliated Originator
hereby acknowledges that a breach of any of the Representations and Warranties
listed in clauses (iii), (x), (xvi) and (xxxviii) above a priori materially and
adversely affects the interests of the related Advanta Trust, the related Owners
and the Certificate Insurer.
Section 6. Authorized Representatives. The names of the
officers of the Affiliated Originators and of the Sponsor who are authorized to
give and receive notices, requests and instructions and to deliver certificates
and documents in connection with this Agreement on behalf of the Affiliated
Originator and of the Sponsor ("Authorized Representatives") are set forth on
Exhibit B. From time to time, the Affiliated Originator and the Sponsor may, by
delivering to the Trustee a revised exhibit, change the information previously
given, but the Trustee shall be entitled to rely conclusively on the last
exhibit until receipt of a superseding exhibit.
Section 7. Notices. All demands, notices and communications
relating to this Agreement shall be in writing and shall be deemed to have been
duly given when received by the other party or parties at the address shown
below, or such other address as may hereafter be furnished to the other party or
parties by like notice. Any such demand, notice or communication hereunder shall
be deemed to have been received on the date delivered to or received at the
premises of the addressee.
If to the Trustee:
Bankers Trust Company of California, N.A.
3 Park Plaza
Irvine, CA 92714
Telecopy: (714) 253-7577
Telephone: (714) 253-7575
If to the Affiliated Originators or the Sponsor:
Advanta Mortgage Corp. USA
500 Office Center Drive
Suite 400
Ft. Washington, PA 19034
Attention: Treasurer
Telecopy: (215) 283-4745
Telephone: (215) 283-4376
14
<PAGE> 18
Section 8. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to conflict of laws rules applied in the State of New York.
Section 9. Assignment. No party to this Agreement may assign
its rights or delegate its obligations under this Agreement without the express
written consent of the other parties, except as otherwise set forth in this
Agreement.
Section 10. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which shall be
deemed to be an original, and together shall constitute and be one and the same
instrument.
Section 11. Amendment. This Agreement may be amended from time
to time by the Affiliated Originators, the Sponsor and the Trustee only by a
written instrument executed by such parties and with the prior written consent
of the Certificate Insurer.
Section 12. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 13. No Agency; No Partnership or Joint Venture.
Neither the Affiliated Originators nor the Sponsor is the agent or
representative of the other, and nothing in this Agreement shall be construed to
make either the Affiliated Originator nor the Sponsor liable to any third party
for services performed by it or for debts or claims accruing to it against the
other party. Nothing contained herein nor the acts of the parties hereto shall
be construed to create a partnership or joint venture between the Sponsor and
the Affiliated Originator.
Section 14. Further Assurances. The Affiliated Originators and
Sponsor agree to cooperate reasonably and in good faith with one another in the
performance of this Agreement.
Section 15. The Certificate Insurer. The Certificate Insurer
is a third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligation's under the related
Certificate Insurance Policies. During any period of suspension, the Certificate
Insurer's rights hereunder shall vest in the Owners of the related Offered
Certificates and shall be exercisable by the owners of at least a majority in
Percentage Interest of the related Offered Certificates then outstanding. At
such time as the related Offered Certificates are no longer Outstanding under
the related Advanta Pooling Agreement and the Certificate Insurer has been
reimbursed for all Insured
15
<PAGE> 19
Payments to which it is entitled under the related Advanta Pooling Agreement,
the Certificate Insurer's rights hereunder shall terminate.
Section 16. Maintenance of Records. Each Affiliated Originator
shall each continuously keep an original executed counterpart of this Agreement
in its official records.
16
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers, all as of the day
and year first above written.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK
The Sellers and
ADVANTA CONDUIT RECEIVABLES, INC.
An Affiliate
By: /s/ Mark Dunsheath
-------------------------------------------
Name: Mark Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee and not in its individual
capacity
By: /s/ Mark M. McNeil
-------------------------------------------
Name: Mark M. McNeil
Title: Assistant Secretary
ADVANTA MORTGAGE CONDUIT SERVICES,
INC. as Sponsor
By: /s/ Mark Dunsheath
-------------------------------------------
Name: Mark Dunsheath
Title: Vice President
ADVANTA FINANCE CORP.
By: /s/ Charles G. Dahl
-------------------------------------------
Name: Charles G. Dahl
Title: Vice President
[MASTER LOAN TRANSFER AGREEMENT]
17
<PAGE> 21
EXHIBIT A
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic,
Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta
Mortgage Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Finance
Corp. and Advanta National Bank, as Affiliated Originators, Advanta Conduit
Receivables, Inc., as an Affiliate, and Advanta Mortgage Conduit Services, Inc.,
as Sponsor, pursuant to the Master Loan Transfer Agreement dated as of June 15,
1997 among themselves and Bankers Trust Company of California, N.A. as Trustee
(the "Mortgage Transfer Agreement"), hereby confirm their understanding with
respect to the conveyance by each Affiliated Originator, the Affiliate and the
Sponsor of those Mortgage Loans listed on the attached Schedule of Mortgage
Loans (the "Transferred Mortgage Loans") from the Conduit Acquisition Trust to
the Advanta Mortgage Loan Trust_____-__.
Conveyance of Transferred Mortgage Loans. Each Affiliated
Originator, the Affiliate and the Sponsor, concurrently with the execution and
delivery of this Conveyance Agreement, does hereby irrevocably transfer, assign,
set over and otherwise convey, and does direct the Trustee to convey from the
Conduit Acquisition Trust to the Advanta Mortgage Loan Trust - , without
recourse (except as otherwise explicitly provided for herein) all of its right,
title and interest in and to the Transferred Mortgage Loans being conveyed by
it, including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling Agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes, including
all interest and principal received by such Affiliated Originator on or with
respect to such Transferred Mortgage Loans on or after the related Cut-off Date,
together with all of its right, title and interest in and to the proceeds
received on or after the related Cut-off Date of any related insurance policies.
If an Affiliated Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, such Affiliated Originator shall
promptly deliver to the Trustee such original Mortgage or mortgage assignment
with evidence of recording indicated thereon upon receipt thereof from the
public recording official.
The costs relating to the delivery of the documents specified in
this Conveyance Agreement shall be borne by each Affiliated Originator.
The Affiliated Originators hereby make the Representations and
Warranties set forth in Section 5(b) of the Master Transfer Agreement with
respect to the Transferred Mortgage Loans.
A-1
<PAGE> 22
The "Cut-Off Date" with respect to such Transferred Mortgage Loans
shall be ________,______.
All terms and conditions of the Mortgage Transfer Agreement are
hereby incorporated herein, provided that in the event of any conflict the
provisions of this Conveyance Agreement shall control over the conflicting
provisions of the Mortgage Transfer Agreement.
For purposes of this Conveyance Agreement, the "related Advanta
Pooling Agreement" is the Pooling and Servicing Agreement dated as of
_________,_____ relating to Advanta Mortgage Loan Trust ______-__.
A-2
<PAGE> 23
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Mortgage Transfer Agreement.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK,
as Affiliated Originators
and
ADVANTA CONDUIT RECEIVABLES, INC.
as an Affiliate
By:___________________________________________
Mark Dunsheath, Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC., as Sponsor
By:___________________________________________
Mark Dunsheath, Vice President
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., as Trustee
By:___________________________________________
Name:
Title:
ADVANTA FINANCE CORP.
By:___________________________________________
Name:
Title:
Dated:
A-3
<PAGE> 24
EXHIBIT B
AUTHORIZED REPRESENTATIVES
Reference is hereby made to the Master Loan Transfer Agreement,
dated as of June 15, 1997 (the "Agreement"), among Advanta Mortgage Corp. USA,
Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic II,
Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey, Advanta
Mortgage Corp. Northeast, Advanta Finance Corp. and Advanta National Bank, as
Affiliated Originators, Advanta Conduit Receivables, Inc., as an Affiliate,
Advanta Mortgage Conduit Services, Inc., as Sponsor and Bankers Trust Company of
California, N.A., as Trustee:
The following are the Affiliated Originators' Authorized
Representatives for purposes of the Agreement:
Name Title
[Annette Aguirre] [Senior Vice President, General Counsel
and Secretary]
[Mark Dunsheath] [Treasurer]
The following are the Sponsor's Authorized Representatives for
purposes of the Agreement:
Name Title
[Annette Aguirre] [Senior Vice President, General Counsel
and Secretary]
[Mark Dunsheath] [Treasurer]
B-1
<PAGE> 1
EXHIBIT 4.3
10
<PAGE> 2
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA ("USA"), Advanta Mortgage Corp. Midatlantic,
Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta
Mortgage Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Finance
Corp. and Advanta National Bank, as Affiliated Originators, Advanta Conduit
Receivables, Inc., as an Affiliate (the "Affiliate"), Advanta Mortgage Conduit
Services, Inc. as Sponsor (the "Sponsor"), pursuant to the Master Loan Transfer
Agreement dated as of June 15, 1997 (the "Mortgage Transfer Agreement") among
themselves and Bankers Trust Company of California, N.A. as conduit trustee (the
"Conduit Trustee"), hereby confirm their understanding with respect to the
conveyance by each Affiliated Originator, the Affiliate and the Sponsor of those
Mortgage Loans listed on the Schedule of Mortgage Loans (the "Transferred
Mortgage Loans") (attached as Schedule I to the Pooling and Servicing Agreement
dated as of September 1, 1998 among the Sponsor, USA and Bankers Trust Company
of California, N.A., as Trustee) from the Conduit Acquisition Trust to the
Advanta Mortgage Loan Trust 1998-3 (the "Trust").
Conveyance of Transferred Mortgage Loans. Each Affiliated Originator,
the Affiliate and the Sponsor, concurrently with the execution and delivery of
this Conveyance Agreement, does hereby irrevocably transfer, assign, set over
and otherwise convey, and does direct the Conduit Trustee:
(i) to convey to Advanta Conduit Receivables, Inc., without recourse
(except as otherwise explicitly provided for herein) all of its right, title and
interest in and to the Transferred Mortgage Loans being conveyed by it,
including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling Agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes, including
all interest and principal received by such Affiliated Originator on or with
respect to such Transferred Mortgage Loans on or after the related Cut-off Date,
together with all of its right, title and interest in and to the proceeds
received on or after the related Cut-off Date of any related insurance policies;
and (ii) to convey, from Advanta Conduit Receivables, Inc. to the Trust, without
recourse (except as otherwise explicitly provided for herein) all of its right,
title and interest in and to the Transferred Mortgage Loans being conveyed by
it, including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes, including
all interest and principal received by Advanta Conduit Receivables, Inc. on or
with respect to such Transferred Mortgage Loans on or after the related Cut-off
Date, together with all of its right, title and interest in and to the proceeds
received on or after the related Cut-off Date of any related insurance policies.
If an Affiliated Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, such Affiliated Originator shall
promptly deliver to Bankers Trust Company of California, N.A., in its capacity
as Trustee (the "Trustee") such original Mortgage or mortgage assignment with
evidence of recording indicated thereon upon receipt thereof from the public
recording official.
<PAGE> 3
The costs relating to the delivery of the documents specified in this
Conveyance Agreement shall be borne by each Affiliated Originator.
The Affiliated Originators hereby make the Representations and
Warranties set forth in Section 5(b) of the Master Transfer Agreement with
respect to the Transferred Mortgage Loans, together with the following
additional representation and warranty:
As of the Startup Day, no Mortgagor is currently a debtor in a case
under Title 11 of the United States Code, or any similar state insolvency
proceeding.
The Trustee and the Trust are intended beneficiaries of this Agreement
and of the foregoing representations, warranties and agreements.
The "Cut-Off Date" with respect to such Transferred Mortgage Loans
shall be September 1, 1998.
All terms and conditions of the Master Transfer Agreement are hereby
incorporated herein; provided that in the event of any conflict the provisions
of this Conveyance Agreement shall control over the conflicting provisions of
the Master Transfer Agreement.
For purposes of this Conveyance Agreement, the "related Advanta Pooling
Agreement" with respect to the Transferred Mortgage Loans is the Pooling and
Servicing Agreement dated as of September 1, 1998 by and among the Sponsor, USA
and the Trustee.
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Mortgage Transfer Agreement.
2
<PAGE> 4
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK,
as Affiliated Originators
and
ADVANTA CONDUIT RECEIVABLES, INC.,
as an Affiliate
By: /s/ Mark T. Dunsheath
-------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC., as Sponsor
By: /s/ Mark T. Dunsheath
-------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee
By: /s/ Mark M. McNeill
-------------------------------------
Name: Mark M. McNeill
Title: Assistant Secretary
ADVANTA FINANCE CORP.
By: /s/ Mark T. Dunsheath
-------------------------------------
Name: Mark T. Dunsheath
Title: Vice President
Dated: September 23, 1998
[Conveyance Agreement]
3
<PAGE> 1
EXHIBIT 4.4
11
<PAGE> 2
[MBIA LOGO]
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: Advanta Mortgage Loan Trust 1998-3, POLICY NUMBER: 27585
Mortgage Loan Asset-Backed Certificates, Series 1998-3,
$500,000,000 Floating Rate Class A-1 Group I Certificates and
$500,000,000 Floating Rate Class A-2 Group II Certificates
(collectively, the "Obligations")
MBIA Insurance Corporation (the "Certificate Insurer"), in
consideration of the payment of the premium and subject to the terms of this
Certificate Guaranty Insurance Policy (this "Policy"), hereby unconditionally
and irrevocably guarantees to any Owner that an amount equal to each full and
complete Insured Payment will be received by Bankers Trust Company of
California, N.A. or its successors, as trustee for the Owners (the "Trustee"),
on behalf of the Owners, from the Certificate Insurer, for distribution by the
Trustee to each Owner of each Owner's proportionate share of the Insured
Payment. The Certificate Insurer's obligations hereunder with respect to a
particular Insured Payment shall be discharged to the extent funds equal to the
applicable Insured Payment are received by the Trustee, whether or not such
funds are properly applied by the Trustee. Insured Payments shall be made only
at the time set forth in this Policy and no accelerated Insured Payments shall
be made regardless of any acceleration of the Obligations, unless such
acceleration is at the sole option of the Certificate Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust, any REMIC, or
the Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability). This Policy does not cover, and Insured Payments
do not include, any Civil Relief Act Shortfalls, or any Class A-1 Supplemental
Interest Amounts or Class A-2 Supplemental Interest Amounts.
The Certificate Insurer will pay any Insured Payment that is a
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent (as described below) of (i) a certified copy of the order requiring
the return of such a preference payment, (ii) an opinion of counsel satisfactory
to the Certificate Insurer that such order is final and not subject to appeal,
(iii) an assignment in such form as is reasonably required by the Certificate
Insurer, irrevocably assigning to the Certificate Insurer all rights and claims
of the Owner relating to or arising under the Obligations against the debtor
which made such preference payment or otherwise with respect to such preference
payment and (iv) appropriate instruments to effect the appointment of the
Certificate Insurer as agent for such Owner in any legal proceeding related to
such preference payment, such instruments being in a form satisfactory to the
Certificate Insurer, provided that if such documents are received after 12:00
noon New York City time on such Business Day, they will be deemed to be received
on the following Business Day. Such payments shall be disbursed to the receiver
or trustee in bankruptcy named in the final order of the court exercising
jurisdiction on behalf of the Owner and not to any Owner directly unless such
Owner has returned principal or interest paid on the Obligations to such
receiver or trustee in bankruptcy, in which case such payment shall be disbursed
to such Owner.
<PAGE> 3
[MBIA LOGO]
The Certificate Insurer will pay any other amount payable hereunder no
later than 12:00 noon New York City time on the later of the Payment Date on
which the related Deficiency Amount is due or the third Business Day following
receipt in New York, New York on a Business Day by State Street Bank and Trust
Company, N.A., as Fiscal Agent for the Certificate Insurer or any successor
fiscal agent appointed by the Certificate Insurer (the "Fiscal Agent") of a
Notice (as described below); provided that if such Notice is received after
12:00 noon New York City time on such Business Day, it will be deemed to be
received on the following Business Day. If any such Notice received by the
Fiscal Agent is not in proper form or is otherwise insufficient for the purpose
of making claim hereunder it shall be deemed not to have been received by the
Fiscal Agent for purposes of this paragraph, and the Certificate Insurer or the
Fiscal Agent, as the case may be, shall promptly so advise the Trustee and the
Trustee may submit an amended Notice.
Insured Payments due hereunder unless otherwise stated herein will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Certificate Insurer only and the
Fiscal Agent shall in no event be liable to Owners for any acts of the Fiscal
Agent or any failure of the Certificate Insurer to deposit or cause to be
deposited, sufficient funds to make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Pooling and Servicing Agreement, dated as of
September 1, 1998, among Advanta Mortgage Corp. USA, as Master Servicer, Advanta
Mortgage Conduit Services, Inc., as Sponsor, and Bankers Trust Company of
California, N.A., as Trustee, without regard to any amendment or supplement
thereto.
"Applied Realized Loss Amount" means the sum of the Group I
Subordination Deficit and the Group II Subordination Deficit.
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which the Certificate Insurer is closed or banking institutions in
the State of New York, the State of California or the city in which the
principal corporate trust office of the Trustee under the Agreement is located,
are authorized or obligated by law or executive order to be closed.
"Deficiency Amount" means the excess, if any, of Required Distributions
over the Net Available Distribution Amount.
2
<PAGE> 4
[MBIA LOGO]
"Insured Payment" means (i) as of any Payment Date, any Deficiency
Amount and (ii) any Preference Amount (without duplication).
"Net Available Distribution Amount" means the sum of the Group I Total
Available Funds and the Group II Total Available Funds.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by fax substantially in the form of Exhibit A attached hereto, the
original of which is subsequently delivered by registered or certified mail,
from the Trustee specifying the Insured Payment which shall be due and owing on
the applicable Payment Date.
"Owner" means each Owner (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Required Distributions" means, as of any Payment Date, the sum of (i)
the Class A-1 Current Interest and the Class A-2 Current Interest, (ii) any
Class A-1 Interest Carry Forward Amount and any Class A-2 Interest Carry Forward
Amount and (iii) any Applied Realized Loss Amount as of such Payment Date.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment to
or modification of the Agreement unless such amendment or modification has been
approved in writing by the Certificate Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be
made at the address listed below for the Fiscal Agent or such other address as
the Certificate Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
THIS POLICY IS BEING ISSUED UNDER AND PURSUANT TO, AND SHALL BE
CONSTRUED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
3
<PAGE> 5
[MBIA LOGO]
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Certificate Insurer has caused this Policy to
be executed and attested this 23rd day of September, 1998.
MBIA INSURANCE CORPORATION
/s/ Richard Weill
---------------------------------
President
Attest: /s/ ILLEGIBLE
---------------------------------
Assistant Secretary
4
<PAGE> 6
[MBIA LOGO]
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 27585
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 27585
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF TRUSTEE], as
trustee (the "Trustee"), hereby certifies to State Street Bank and Trust
Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Certificate Insurer"), with reference to Certificate Guaranty Insurance Policy
Number: 27585 (the "Policy") issued by the Certificate Insurer in respect of the
Advanta Mortgage Loan Trust 1998-3, Mortgage Loan Asset-Backed Certificates,
Series 1998-3, $500,000,000 Floating Rate Class A-1 Group I Certificates and
$500,000,000 Floating Rate Class A-2 Group II Certificates.
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of September 1, 1998 among Advanta Mortgage Corp.
USA, as Master Servicer, Advanta Mortgage Conduit Services, Inc., as
Sponsor, and the Trustee, as trustee for the Owners;
(ii) the amount due under the definition of Deficiency Amount
for the Payment Date occurring on (the "Applicable Payment Date")
is $ (the "Deficiency Amount");
(iii) the amount of previously distributed payments on the
Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the
Bankruptcy Code in accordance with a final nonappealable order of a
court having competent jurisdiction is $ (the "Preference
Amount");
<PAGE> 7
[MBIA LOGO]
(iv) the total Insured Payment due is $ , which amount
equals the sum of the Deficiency Amount and the Preference Amount;
(v) the Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Insured Payment set
forth in (ii) above to be applied to the payment of the Deficiency
Amount for the Applicable Payment Date in accordance with the Agreement
and for the dollar amount of the Insured Payment set forth in (iii)
above to be applied to the payment of any Preference Amount; and
(vi) the Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy: [TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance
Company Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A Civil
Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The Claim
For Each Such Violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
[NAME OF TRUSTEE], as Trustee
By ________________________________
Title _____________________________
2
<PAGE> 1
EXHIBIT 4.5
12
<PAGE> 2
September 23, 1998
Advanta Mortgage Loan Trust
1998-3 (the "Trust")
c/o Bankers Trust Company
of California, N.A.
Three Park Plaza
16th Floor
Irvine, California 92714
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Pooling and Servicing Agreement dated as of September 1, 1998
(the "Pooling Agreement") among Advanta as the Sponsor (the
"Sponsor"), Advanta Mortgage Corp. USA ("USA"), as Master
Servicer, and Bankers Trust Company of California, N.A. as
Trustee (the "Trustee") and the Master Loan Transfer Agreement
dated as of June 15, 1997 (the "Master Transfer Agreement")
among the Sponsor, the Trustee, Advanta Conduit Receivables,
Inc. as an Affiliate and the Affiliated Originators named
therein (the "Affiliated Originators")
Ladies and Gentlemen:
Pursuant to the Agreements, USA in its capacity as Master Servicer, has
undertaken certain financial obligations with respect to its servicing of the
Mortgage Loans, including, but not limited to, the making of Delinquency
Advances and Servicing Advances. In addition, the Sponsor and the Affiliated
Originators have, in the Agreement and in the Master Transfer Agreement
undertaken certain financial obligations, including, but not limited to, the
payment of the Loan Purchase Price relating to the repurchase of defective
Mortgage Loans, the payment of Substitution Amounts in connection with the
substitution of Qualified Replacement Mortgages and the payment of certain
expenses of the Trust. Any financial obligations of USA, the Sponsor or any
Affiliated Originator under the Agreement or the Master Transfer Agreement,
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
USA, the Sponsor or any Affiliated Originator under the Agreement or the Master
Transfer Agreement (including the payment of money damages for a breach of any
of USA's, the
<PAGE> 3
Sponsor's or any Affiliated Originator's obligations under the Agreement or the
Master Transfer Agreement, whether financial or otherwise) but shall not include
any obligations not relating to the payment of money (e.g., the obligation to
service the Mortgage Loans).
The Certificate Insurer has required the undersigned, Advanta Mortgage
Holding Company ("AMHC"), the parent corporation of USA and the indirect
corporate parent of the Sponsor, to acknowledge its joint-and-several liability
with USA, the Sponsor and the Affiliated Originators for the payment of the
Joint and Several Obligations under the Agreement and the Master Transfer
Agreement.
Now, therefore, the Trust, the Certificate Insurer and AMHC do hereby
agree that:
(i) AMHC hereby agrees to be absolutely and unconditionally
jointly and severally liable with USA, the Sponsor and the
Affiliated Originators to the Trust and the Certificate
Insurer for the payment of the Joint and Several Obligations.
(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 Trust and the
Certificate Insurer by USA, the Sponsor, any Affiliated
Originator or another affiliate of AMHC.
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
<PAGE> 4
Very truly yours,
ADVANTA MORTGAGE
HOLDING COMPANY
By: /s/ Mark T. Dunsheath
---------------------------------
Name: Mark T. Dunsheath
Title: Vice President
Acknowledged and Agreed:
ADVANTA MORTGAGE LOAN
TRUST, 1998-3
By: Bankers Trust Company
of California, N.A.,
as Trustee
By: /s/ Mark M. McNeill
---------------------------------
Name: Mark M. McNeill
Title: Assistant Secretary
Acknowledged:
MBIA INSURANCE CORPORATION
By:
---------------------------------
Name:
Title:
Dated: September 23, 1998
<PAGE> 1
EXHIBIT 10.1
13
<PAGE> 2
EXECUTION COPY
- --------------------------------------------------------------------------------
MBIA INSURANCE CORPORATION,
as Certificate Insurer,
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
and
SALOMON SMITH BARNEY, INC.,
LEHMAN BROTHERS INC.,
J.P. MORGAN SECURITIES INC. and
PRUDENTIAL SECURITIES INCORPORATED
as Underwriters
INDEMNIFICATION AGREEMENT
Advanta Mortgage Loan Trust 1998-3,
Mortgage Loan Asset-Backed Certificates, Series 1998-3,
$500,000,000 Floating Rate Class A-1 Group I Certificates and
$500,000,000 Floating Rate Class A-2 Group II Certificates
Dated as of September 10, 1998
- --------------------------------------------------------------------------------
<PAGE> 3
INDEMNIFICATION AGREEMENT
Section 1. Definitions........................................................1
Section 2. Representations and Warranties of the Certificate Insurer..........2
Section 3. Agreements, Representations and Warranties of the Underwriters.....4
Section 4. Agreements, Representations and Warranties of the Sponsor..........4
Section 5. Indemnification....................................................5
Section 6. Notice To Be Given.................................................5
Section 7. Contribution.......................................................7
Section 8. Notices............................................................8
Section 9. Governing Law, Etc.................................................8
Section 10. Underwriting Agreement; Pooling and Servicing Agreements...........9
Section 11. Limitations........................................................9
Section 12. Counterparts.......................................................9
<PAGE> 4
INDEMNIFICATION AGREEMENT
This Agreement, dated as of September 10, 1998, is by and among MBIA
INSURANCE CORPORATION (the "Certificate Insurer"), as the Certificate Insurer
under the Certificate Guaranty Insurance Policy (the "Policy") issued in
connection with the Advanta Mortgage Loan Trust 1998-3, Mortgage Loan
Asset-Backed Certificates, Series 1998-3, $500,000,000 Floating Rate Class A-1
Group I Certificates and $500,000,000 Floating Rate Class A-2 Group II
Certificates, described below, ADVANTA MORTGAGE CONDUIT SERVICES, INC. (the
"Sponsor") and SALOMON SMITH BARNEY INC., LEHMAN BROTHERS INC., J.P. MORGAN
SECURITIES INC. AND PRUDENTIAL SECURITIES INCORPORATED, as the Underwriters
(together the "Underwriters").
Section 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings stated herein, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.
Capitalized terms used in this Agreement but not otherwise defined herein will
have the meanings ascribed to such terms in the Pooling and Servicing Agreements
(as described below).
"Act" means the Securities Act of 1933, as amended, together with all
related rules and regulations.
"Agreement" means this Indemnification Agreement by and among the
Insurer, the Sponsor and the Underwriters.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 5 below, as the context requires.
"Insurance Agreement" means the Insurance Agreement, dated as of
September 1, 1998, by and among the Certificate Insurer, the Sponsor, the Master
Servicer, the Joint Obligor, and the Trustee.
"Insured Certificates" means the Class A-1 Group I Certificates and the
Class A-2 Group II Certificates.
"Insurer Party" means the Certificate Insurer and its respective
parents, subsidiaries and affiliates and any shareholder, director, officer,
employee, agent or any "controlling person" (as such term is used in the Act) of
any of the foregoing.
"Losses" means (i) any actual out-of-pocket loss paid by the party
entitled to indemnification or contribution hereunder and (ii) any actual
out-of-pocket costs and expenses paid by such party, including reasonable fees
and expenses of its counsel, to the extent not paid, satisfied or reimbursed
from funds provided by any other Person (provided that the foregoing shall not
create or imply any obligation to pursue recourse against any such other
Person).
"Master Servicer" means Advanta Mortgage Corp. USA, as Master Servicer.
<PAGE> 5
"Offered Certificates" means the Advanta Mortgage Loan Trust 1998-3,
Mortgage Loan Asset-Backed Certificates, Series 1998-3, $500,000,000 Floating
Rate Class A-1 Group I Certificates and $500,000,000 Floating Rate Class A-2
Group II Certificates issued pursuant to the Pooling and Servicing Agreement.
"Person" means any individual, partnership, joint venture, corporation,
trust or unincorporated organization or any government or agency or political
subdivision thereof.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of September 1, 1998 by and among the Sponsor, the Master
Servicer and the Trustee.
"Prospectus" means the form of final Prospectus included in the
Registration Statement on each date that the Registration Statement and any post
effective amendment or amendments thereto became effective.
"Prospectus Supplement" means the form of final Prospectus Supplement
dated September 10, 1998.
"Registration Statement" means the registration statement on Form S-3
of the Sponsor relating to the Offered Certificates.
"Sponsor Party" means the Sponsor, each of its parents, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
"State Securities Law" means any state, local or foreign statute, and
any rule or regulation thereunder, regulating (i) transactions and dealings in
securities, (ii) any Person or entity engaging in such transactions or advising
with respect to securities or (iii) investment companies.
"Trustee" means Bankers Trust Company of California, N.A., or any
successor thereto.
"Underwriter Party" means each Underwriter and each of its parents,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Act) of any of the
foregoing.
"Underwriters" means Salomon Smith Barney Inc., Lehman Brothers Inc.,
J.P. Morgan Securities Inc. and Prudential Securities Incorporated.
"Underwriting Agreements" means the Underwriting Agreements by and
between the Sponsor and the Underwriters, dated September 9, 1998.
Section 2. Representations and Warranties of the Certificate Insurer.
The Certificate Insurer represents and warrants to the Underwriters and the
Sponsor as follows:
(a) Organization and Licensing. The Certificate Insurer is a
duly incorporated and existing New York stock insurance company
licensed to do business in the State of New York.
2
<PAGE> 6
(b) Corporate Power. The Certificate Insurer has the corporate
power and authority to issue the Policies and to execute and deliver
this Agreement and the Insurance Agreement and to perform all of its
obligations hereunder and thereunder.
(c) Authorization; Approvals. The issuance of the Policies and
the execution, delivery and performance of this Agreement and the
Insurance Agreement have been duly authorized by all necessary
corporate proceedings. No further approvals or filings of any kind,
including, without limitation, any further approvals of or further
filings with any governmental agency or other governmental authority,
or any approval of the Insurer's board of directors or stockholders,
are necessary for the Policies, this Agreement and the Insurance
Agreement to constitute the legal, valid and binding obligations of the
Certificate Insurer.
(d) Enforceability. The Policies, when issued, and this
Agreement and the Insurance Agreement will each constitute a legal,
valid and binding obligation of the Certificate Insurer, enforceable in
accordance with its terms, subject to applicable laws affecting the
enforceability of creditors' rights generally.
(e) Financial Information. The consolidated financial
statements of the Certificate Insurer as of December 31, 1997 and
December 31, 1996 and for each of the three years ended December 31,
1997 incorporated by reference in the Prospectus Supplement (the
"Certificate Insurer Audited Financial Statements"), fairly present in
all material respects the financial condition of the Certificate
Insurer as of such date and for the period covered by such statements
in accordance with generally accepted accounting principles
consistently applied. The consolidated financial statements of the
Certificate Insurer and its subsidiaries for the six months ended June
30, 1998 incorporated by reference in the Prospectus Supplement (the
"Certificate Insurer Unaudited Financial Statements") fairly present in
all material respects the financial condition of the Certificate
Insurer as of such date and for the period covered by such statements
in accordance with generally accepted accounting principles applied in
a manner consistent with the accounting principles used in preparing
the Certificate Insurer Audited Financial Statements, and, since June
30, 1998, there has been no material change in such financial condition
of the Certificate Insurer which would materially and adversely affect
its ability to perform its obligations under the Policy.
(f) Certificate Insurer Information. The information in the
Prospectus Supplement as of the date hereof under the captions "THE
CERTIFICATE INSURER" and "THE CERTIFICATE INSURANCE POLICY" (the
"Insurer Information") is true and correct in all material respects and
does not contain any untrue statement of a fact that is material to the
Certificate Insurer's ability to perform its obligations under the
Policy.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Certificate Insurer's
knowledge, threatened against it at law or in equity or before or by
any court, governmental agency, board or commission or any arbitrator
which, if decided adversely, would materially and adversely affect its
condition (financial or otherwise) or operations or which would
materially and adversely affect its
3
<PAGE> 7
ability to perform its obligations under this Agreement, the Policy or
the Insurance Agreement.
Section 3. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE
UNDERWRITERS. Each Underwriter represents and warrants to and agrees with the
Sponsor and the Insurer that the statements in the Prospectus Supplement made in
reliance upon and in conformity with written information relating to such
Underwriter furnished to the Sponsor specifically for use in the preparation of
the Prospectus Supplement, and acknowledged in writing as described in the
applicable Underwriting Agreement (referred to herein as the "Underwriter
Information"), are true and correct in all material respects. It is hereby
acknowledged that the Underwriter Information furnished by Lehman Brothers Inc.,
J.P. Morgan Securities Inc. and Prudential Securities Incorporated relates only
to the Group I Certificates.
Section 4. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE SPONSOR.
The Sponsor represents and warrants to and agrees with the Certificate Insurer
and the Underwriters as follows:
(a) Registration Statement. The information in the
Registration Statement, the Prospectus and the Prospectus Supplement,
other than the Insurer Information, and the Underwriter Information, is
true and correct in all material respects and does not contain any
untrue statement of a fact that is material or omit to state a fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) Organization. The Sponsor is duly incorporated and
existing under the laws of the State of Delaware and is in good
standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it, makes
such qualification necessary.
(c) Corporate Power. The Sponsor has the corporate power and
authority to execute and deliver this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement, the Master Transfer
Agreements and the Insurance Agreement and to perform all of its
obligations hereunder and thereunder.
(d) Authorization; Approvals. The execution, delivery and
performance of this Agreement, the Underwriting Agreement, the Master
Transfer Agreements, the Pooling and Servicing Agreement and the
Insurance Agreement by the Sponsor have been duly authorized by all
necessary corporate proceedings. No further approvals or filings of any
kind, including, without limitation, any further approvals of or
further filing with any governmental agency or other governmental
authority, or any approval of the Sponsor's board of directors or
stockholders, are necessary for this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and the Insurance
Agreement to constitute the legal, valid and binding obligations of the
Sponsor.
(e) Enforceability. This Agreement, the Pooling and Servicing
Agreement, the Master Transfer Agreements, the Underwriting Agreement
and the Insurance Agreement will each constitute a legal, valid and
binding obligation of the Sponsor, each
4
<PAGE> 8
enforceable in accordance with its terms, subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of
creditors' rights generally applicable in the event of the bankruptcy,
insolvency or reorganization of the Sponsor and to general principles
of equity.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Sponsor's knowledge,
threatened against it at law or in equity or before any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would materially and adversely affect its condition
(financial or otherwise) or operations of it or would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Underwriting Agreement, the Master Transfer Agreements,
the Pooling and Servicing Agreement or the Insurance Agreement.
Section 5. INDEMNIFICATION. (a) The Certificate Insurer hereby agrees,
upon the terms and subject to the conditions of this Agreement, to indemnify,
defend and hold harmless each Sponsor Party and each Underwriter Party against
any and all Losses incurred by them with respect to the offer and sale of any of
the Offered Certificates and resulting from the Certificate Insurer's breach of
any of its representations and warranties set forth in Section 2 of this
Agreement.
(b) Each Underwriter hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Offered Certificates and resulting from such
Underwriter's breach of any of its representations and warranties set forth in
Section 3 of this Agreement
(c) The Sponsor hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Offered Certificates and resulting from the
Sponsor's breach of any of its representations and warranties set forth in
Section 4 of this Agreement.
(d) Upon the incurrence of any Losses entitled to indemnification
hereunder, the Indemnifying Party shall reimburse the Indemnified Party promptly
upon establishment by the Indemnified Party to the Indemnifying Party of the
Losses incurred.
Section 6. NOTICE TO BE GIVEN. (a) Except as provided in Section 7
below with respect to contribution, the indemnification provided herein by the
Indemnifying Party shall be the exclusive remedy of each Indemnified Party for
the Losses resulting from the Indemnifying Party's breach of a representation,
warranty or agreement hereunder; provided, however, that each Indemnified Party
shall be entitled to pursue any other remedy at law or in equity for any such
breach so long as the damages sought to be recovered shall not exceed the Losses
incurred thereby resulting from such breach.
(b) In the event that any action or regulatory proceeding shall be
commenced or claim asserted which may entitle an Indemnified Party to be
indemnified under this Agreement, such
5
<PAGE> 9
party shall give the Indemnifying Party written or facsimile notice of such
action or claim reasonably promptly after receipt of written notice thereof.
(c) Upon request of the Indemnified Party, the Indemnifying Party shall
retain counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Indemnifying Party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. The Indemnifying Party may, at its option, at any time upon
written notice to the Indemnified Party, assume the defense of any proceeding
and may designate counsel reasonably satisfactory to the Indemnified Party in
connection therewith provided that the counsel so designated would have no
actual or potential conflict of interest in connection with such representation.
Unless it shall assume the defense of any proceeding, the Indemnifying Party
shall not be liable for any settlement of any proceeding, effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. The Indemnifying Party shall be entitled to participate
in the defense of any such action or claim in reasonable cooperation with, and
with the reasonable cooperation of, each Indemnified Party.
(d) The Indemnified Party will have the right to employ its own counsel
in any such action, but the fees and expenses of such counsel will be at the
expense of such Indemnified Party unless (1) the employment of counsel by the
Indemnified Party at the Indemnifying Party's expense has been authorized in
writing by the Indemnifying Party, (2) the Indemnifying Party has not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action or (3) the named
parties to any such action include the Indemnifying Party on the one hand and,
on the other hand, the Indemnified Party, and representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on such Indemnified
Party's behalf), in each of which cases the reasonable fees and expenses of
counsel (including local counsel) will be at the expense of the Indemnifying
Party, and all such fees and expenses will be reimbursed promptly as they are
incurred. In the event that any expenses so paid by the Indemnifying Party are
subsequently determined to not be required to be borne by the Indemnifying Party
hereunder, the party which received such payment shall promptly refund to the
Indemnifying Party the amount so paid by such Indemnifying Party.
Notwithstanding the foregoing, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, the Indemnifying Party shall not
be liable for the fees and expenses of more than one counsel for all Seller
Parties, more than one counsel for all Underwriter Parties and more than one
counsel for all Insurer Parties, as applicable.
(e) The Indemnified Parties shall cooperate with the Indemnifying
Parties in resolving any event which would give rise to an indemnity obligation
pursuant to Section 5 hereof in the most efficient manner.
(f) No settlement of any such claim or action shall be entered into
without the consent of each Indemnified Party who is subject to such claim or
action, on the one hand, and
6
<PAGE> 10
each Indemnifying Party who is subject to such claim or action, on the other
hand; provided, however, that the consent of such Indemnified Party shall not be
required if such settlement fully discharges, with prejudice against the
plaintiff, the claim or action against such Indemnified Party.
(g) Any failure by an Indemnified Party to comply with the provisions
of this Section shall relieve the Indemnifying Party of liability only if such
failure is materially prejudicial to any legal pleadings, grounds, defenses or
remedies in respect thereof or the Indemnifying Party's financial liability
hereunder, and then only to the extent of such prejudice.
Section 7. CONTRIBUTION. (a) To provide for just and equitable
contribution if the indemnification provided by the Certificate Insurer is
determined to be unavailable for any Underwriter Party or Sponsor Party (other
than pursuant to Section 5 or 6 of this Agreement), the Certificate Insurer
shall contribute to the aggregate costs of liabilities arising from any breach
of a representation or warranty set forth in this Agreement on the basis of the
relative fault of all Underwriter Parties, all Sponsor Parties and all Insurer
Parties, respectively.
(b) To provide for just and equitable contribution if the
indemnification provided by the Sponsor is determined to be unavailable for any
Insurer Party (other than pursuant to Section 5 or 6 of this Agreement), the
Sponsor shall contribute to the aggregate costs of liabilities arising from any
breach of a representation or warranty set forth in this Agreement on the basis
of the relative fault of all Underwriter Parties, all Sponsor Parties and all
Insurer Parties.
(c) To provide for just and equitable contribution if the
indemnification provided by each Underwriter is determined to be unavailable for
any Insurer Party (other than pursuant to Section 5 or 6 of this Agreement),
such Underwriter shall contribute to the aggregate costs of liabilities arising
from any breach of a representation or warranty set forth in this Agreement on
the basis of the relative fault of all Underwriter Parties, all Sponsor Parties
and all Insurer Parties. In no case shall any Underwriter be responsible for any
amount in excess of the Underwriting discount applicable to the Certificates
purchased by such Underwriter pursuant to the Underwriting Agreement.
(d) The relative fault of each Indemnifying Party, on the one hand, and
of each Indemnified Party, on the other hand, shall be determined by reference
to, among other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth in Section 2, 3 or 4 of this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the Parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
(e) The Parties agree that the Certificate Insurer shall be solely
responsible for the Insurer Information and for the Insurer Financial
Statements, that each Underwriter shall be solely responsible for the
Underwriter Information provided by such Underwriter in writing for use in the
Prospectus Supplement and that the Sponsor shall be responsible for all other
information in the Registration Statement and the Prospectus Supplement.
7
<PAGE> 11
(f) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(g) The indemnity and contribution agreements contained in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter Party, any Sponsor
Party or any Insurer Party, (ii) the issuance of any Offered Certificates or the
Policy or (iii) any termination of this Agreement.
(h) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
Section 8. NOTICES. All notices and other communications provided for
under this Agreement shall be addressed to the address set forth below as to
each party or at such other address as shall be designated by a party in a
written notice to the other party.
8
<PAGE> 12
If to the Certificate Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio Management
-- Structured Finance (IPM-SF)
If to the Sponsor: Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: General Counsel
If to the Underwriters: Salomon Smith Barney
7 World Trade Center
New York, NY 10048
Lehman Brothers
200 Vesey Street, 12th Floor
3 World Trade Center
New York, NY 10285
J.P. Morgan Securities
60 Wall Street
New York, NY 10004
Prudential Securities Incorporated
One New York Plaza
New York, NY 10292-2015
Section 9. GOVERNING LAW, ETC. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ITS CONFLICTS OF LAWS PROVISIONS. This Agreement may not be assigned by any
party without the express written consent of each other party. Amendments of
this Agreement shall be in writing signed by each party. This Agreement shall
not be effective until executed by each of the Certificate Insurer, the Sponsor
and the Underwriters.
Section 10. UNDERWRITING AGREEMENT; POOLING AND SERVICING AGREEMENTS.
This Agreement in no way limits or otherwise affects the indemnification
obligations of the Sponsor under (a) the Underwriting Agreement or (b) the
Pooling and Servicing Agreement. Similarly this Agreement in no way limits or
otherwise affects the indemnification obligations of the Underwriters under the
related Underwriting Agreement.
Section 11. LIMITATIONS. Nothing in this Agreement shall be construed
as a representation or undertaking by the Certificate Insurer concerning
maintenance of the rating currently assigned to its claims-paying ability by
Moody's Investors Service, Inc. ("Moody's")
9
<PAGE> 13
and/or Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P") or any other rating agency (collectively, the "Rating
Agencies").
Section 12. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall together constitute but one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
10
<PAGE> 14
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, all as of the date first above written.
MBIA INSURANCE CORPORATION,
as Certificate Insurer
By /s/ ILLEGIBLE
-----------------------------------
Title Assistant Secretary
--------------------------------
ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Sponsor
By /s/ Mark T. Dunsheath
-----------------------------------
Title
--------------------------------
SALOMON SMITH BARNEY INC.,
as Underwriter
By /s/ ILLEGIBLE
-----------------------------------
Title Associate
--------------------------------
LEHMAN BROTHERS INC.,
as Underwriter
By
-----------------------------------
Title
--------------------------------
J.P. MORGAN SECURITIES INC.,
as Underwriter
By
-----------------------------------
Title
--------------------------------
Advanta Mortgage Loan Trust 1998-3
Indemnification Agreement Signature Page
<PAGE> 15
PRUDENTIAL SECURITIES INCORPORATED
as Underwriter
By
-----------------------------------
Title
--------------------------------
Advanta Mortgage Loan Trust 1998-3
Indemnification Agreement Signature Page
<PAGE> 1
EXHIBIT 23.1
14
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Advanta Mortgage Corp. relating to Advanta Mortgage Loan Trust 1998-3, of our
report dated February 3, 1998, on our audits of the consolidated financial
statements of MBIA Insurance Corporation and Subsidiaries as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997. We also consent to the reference to our firm under the caption "Experts".
PricewaterhouseCoopers LLP
New York, New York
September 18, 1998
