<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 18, 1997
Advanta Revolving Home Equity Loan Trust 1997-A
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 333-37107 Application Pending
-------- ---------------- ---------------------
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
c/o Advanta Mortgage Conduit 92127
-----
Services, Inc. (Zip Code)
Attention: Milton Riseman
16875 West Bernardo Drive
San Diego, California
---------------------
(Address of Principal Executive Offices)
</TABLE>
Registrant's telephone number, including area code (619) 674-1800
- -------------------------------------------------------------------------------
No change
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
Description of the Class A Notes and the Mortgage Loans
Advanta Mortgage Conduit Services, Inc. registered an issuance
of $3,500,000,000 in principal amount of Mortgage Loan Asset-Backed
Certificates on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by the Registration Statement
on Form S-3 (File No. 333-37107) (the "Registration Statement"). Pursuant to
the Registration Statement, Advanta Revolving Home Equity Loan Trust 1997-A
(the "Registrant" or the "Trust") issued approximately $100,000,000 in
aggregate principal amount of its Revolving Home Equity Loan Asset-Backed
Notes, Series 1997-A (the "Class A Notes"), on November 18, 1997 (the "Closing
Date"). This Current Report on Form 8-K is being filed to satisfy an
undertaking to file copies of certain agreements executed in connection with
the issuance of the Class A Notes, the forms of which were filed as Exhibits to
the Registration Statement.
The Class A Notes were issued pursuant to an Indenture (the
"Indenture") attached hereto as Exhibit 4.1, dated as of November 1, 1997,
between Advanta Revolving Home Equity Loan Trust 1997-A (the "Trust") and
Bankers Trust Company of California, N.A., in its capacity as Indenture Trustee
(the "Trustee"). The Class A Notes evidence indebtedness of the Trust, the
assets of which consist primarily of certain home equity revolving credit line
loan agreements which are secured by first or junior mortgages on residential
properties. Also issued, but not offered, by the Trust are Certificates
("Certificates") evidencing the ownership interest in the Trust. The
Certificates will initially be retained by Advanta Finance Corp. and Advanta
National Bank (together, the "Originators").
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated November 14, 1997,
among Advanta Mortgage Conduit Services, Inc., as Sponsor, J.P. Morgan
Securities Inc., as the Underwriter, and Advanta National Bank and Advanta
Finance Corp, each as an Originator.
4.1 Indenture, dated as of November 1, 1997, between
Advanta Revolving Home Equity Loan Trust 1997-A and Bankers Trust of
California, N.A., as Indenture Trustee.
4.2. Trust Agreement, dated as of November 1, 1997,
between Advanta Mortgage Conduit Services, Inc., as Sponsor, and Wilmington
Trust Company, as Owner Trustee.
4.3. Sale and Servicing Agreement, dated as of November 1,
1997, among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, Advanta Revolving Home Equity Loan
Trust 1997-A, as Issuer, and Bankers Trust Company of California, N.A., as
Indenture Trustee.
4.4 Certificate Guaranty Insurance Policy, dated November
20, 1997, and issued and delivered by AMBAC Assurance Corporation.
10.1 Purchase Agreement, dated as of November 1, 1997,
between Advanta Mortgage Conduit Services, Inc., as Purchaser, and Advanta
Finance Corp. and Advanta National Bank, as Sellers.
10.2 Indemnification Agreement, dated November 14, 1997,
between AMBAC Assurance Corporation and J.P. Morgan Securities Inc.
23.1 Consent of KPMG Peat Marwick LLP regarding financial
statements of AMBAC Assurance Corporation and their report.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANTA REVOLVING HOME
EQUITY LOAN TRUST 1997-A
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By:/s/ Mark T. Dunsheath
---------------------
Name: Mark T. Dunsheath
Title: Vice President
Dated November 18, 1997
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1.1 Underwriting Agreement, dated November 14, 1997, among Advanta
Mortgage Conduit Services, Inc., as Sponsor, J.P. Morgan Securities Inc.,
as the Underwriter, and Advanta National Bank and Advanta Finance
Corp, each as an Originator.
4.1 Indenture, dated as of November 1, 1997, between Advanta Revolving
Home Equity Loan Trust 1997-A and Bankers Trust of California, N.A., as
Indenture Trustee.
4.2 Trust Agreement, dated as of November 1, 1997, between Advanta
Mortgage Conduit Services, Inc., as Sponsor, and Wilmington Trust
Company, as Owner Trustee.
4.3 Sale and Servicing Agreement, dated as of November 1, 1997, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta Mortgage
Corp. USA, as Master Servicer, Advanta Revolving Home Equity Loan
Trust 1997-A, as Issuer, and Bankers Trust Company of California, N.A.,
as Indenture Trustee.
4.4 Certificate Guaranty Insurance Policy, dated November 20, 1997, and
issued and delivered by AMBAC Assurance Corporation.
10.1 Purchase Agreement, dated as of November 1, 1997, between Advanta
Mortgage Conduit Services, Inc., as Purchaser, and Advanta Finance Corp.
and Advanta National Bank, as Sellers.
10.2 Indemnification Agreement, dated November 14, 1997, between AMBAC
Assurance Corporation and J.P. Morgan Securities Inc.
23.1 Consent of KPMG Peat Marwick LLP regarding financial statements of
AMBAC Assurance Corporation and their report.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
<PAGE> 2
EXHIBIT 1.1
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA NATIONAL BANK
ADVANTA FINANCE CORP.
ADVANTA REVOLVING HOME EQUITY LOAN ASSET-BACKED NOTES,
SERIES 1997-A, CLASS A NOTES
UNDERWRITING AGREEMENT
November 14, 1997
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. as Sponsor (the "Sponsor") has
authorized the issuance and sale of Revolving Home Equity Loan Asset-Backed
Notes, Series 1997-A consisting of variable rate pass-through Class A Notes
(the "Notes"). The Notes will be issued pursuant to an indenture (the
"Indenture"), dated as of November __, 1997, between the Advanta Revolving Home
Equity Loan Trust 1997-A (the "Trust") and Bankers Trust Company of California,
N.A., as Indenture Trustee (the "Indenture Trustee"). The Trust will be formed
pursuant to a Trust Agreement to be dated as of November 1, 1997 and entered
into by and between the Sponsor and Wilmington Trust Company, as Owner Trustee.
The Notes will be secured by certain adjustable rate home equity revolving
credit line loans, made or to be made in the future (the "Mortgage Loans")
under certain home equity revolving credit line loan agreements (the "Credit
Line Agreements") to be transferred by the Sponsor to the Trust pursuant to a
sale and servicing agreement (the "Sale and Servicing Agreement"), dated as of
November 1, 1997, among the Sponsor, the Trust, Advanta Mortgage Corp. USA, as
Master Servicer (the "Master Servicer"), and the Indenture Trustee. Advanta
National Bank and Advanta Finance Corp. (each an "Originator", and together the
"Originators") will retain, initially, the remaining undivided interest in the
trust assets (the "Originators' Interest") which may be sold or pledged at
anytime, subject to certain conditions specified in the Trust
<PAGE> 3
Agreement. The Class A Principal Balance of the Notes as of the opening of
business on November 20, 1997 (the "Closing Date"), shall be $100,000,000.
On or prior to the date of issuance of the Notes, the Sponsor will
obtain a guaranty insurance policy (the "Policy") issued by AMBAC Indemnity
Corporation (the "Insurer") which will unconditionally and irrevocably
guarantee to the Indenture Trustee for the benefit of the Noteholders on any
Payment Date, the amount by which the (i) Class A Principal Balance exceeds the
(ii) Trust Collateral Value minus the Non-Subordinated Originators' Interest,
and (iii) any accrued and unpaid interest due on the Notes.
The Notes and the Originators' Interest are more fully described in a
registration statement which the Sponsor has furnished to J.P. Morgan
Securities Inc. (the "Underwriter"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Sale and Servicing
Agreement.
The Sponsor will also enter into an Insurance Agreement, dated as of
November 20, 1997 (the "Insurance Agreement"), with the Indenture Trustee and
the Insurer, governing the liability of the several parties with respect to the
losses resulting from material misstatements or omissions contained in the
Prospectus Supplement. The Sponsor will also enter into an Indemnification
Agreement, dated as of November 14, 1997 (the "Indemnification Agreement"),
with the Underwriter and the Insurer, governing the liability of the several
parties with respect to the losses resulting from material misstatements or
omissions contained in the Prospectus Supplement. "Documents" shall mean the
Indenture, the Trust Agreement, the Sale and Servicing Agreement, the
Underwriting Agreement, the Insurance Agreement and the Indemnification
Agreement.
SECTION 1. Representations and Warranties of the Sponsor
and the Originators. The Sponsor and each Originator each represent and
warrant to, and agree with the Underwriter that:
A. Registration Statements on Form S-3, as amended by
Post-Effective Amendments thereto, have (i) been prepared by the
Sponsor and the Originators 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 Sponsor 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 Notes and any
prospectus filed with the Commission by the
2
<PAGE> 4
Sponsor with the consent of the Underwriter pursuant to Rule 424(a) of
the Rules and Regulations; "Registration Statement" means such
registration statements, as amended by all Post-Effective Amendments
thereto heretofore filed with the Commission, at the Effective Time,
including any documents incorporated by reference therein at such
time; and "Prospectus" means such final prospectus, as first
supplemented by a prospectus supplement (the "Prospectus Supplement")
relating to the Notes, 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 Sponsor 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 Sponsor 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
Sponsor Collateral term sheets (as hereinafter defined) that the
Underwriter has provided to a prospective investor, the Sponsor 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 Sponsor Structural term sheets or Computational
Materials (each as defined below) that the Underwriter has provided to
a prospective investor, the Sponsor 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
3
<PAGE> 5
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Prospectus as of its date, and as amended or
supplemented as of the Closing Date (as hereinafter defined) does not
and will not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that no representation or warranty is made as
to information contained in or omitted from the Registration Statement
or the Prospectus in reliance upon and in conformity with written
information furnished to the Sponsor in writing by the Underwriter
expressly for use therein.
C. The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the 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 Sponsor or any Originator, otherwise than
as set forth or contemplated in the Prospectus as supplemented or
amended as of the Closing Date.
E. Each of the Sponsor and each Originator has been duly
incorporated and is validly existing as a corporation or national
banking association, as the case may be, in good standing under the
laws of its jurisdiction of incorporation, is duly qualified to do
business and is in good standing as a foreign corporation or national
banking association in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires such
qualification, and has all power and authority necessary to own or
hold its properties, to conduct the business in which it is engaged
and to enter into and perform its obligations under the Documents to
which it is a party, and to cause the Notes to be issued.
F. There are no actions, proceedings or investigations
pending before or threatened by any court, administrative agency or
other tribunal to which the Sponsor or any Originator is a party or of
which any of its properties is the subject (a) which if determined
adversely to the Sponsor or
4
<PAGE> 6
any Originator would have a material adverse effect on the business or
financial condition of the Sponsor or any Originator, (b) which
asserts the invalidity of the Documents or the Notes, (c) which seeks
to prevent the issuance of the Notes or the consummation by the
Sponsor or any Originator of any of the transactions contemplated by
the Documents to which they are a party or (d) which might materially
and adversely affect the performance by the Sponsor or any Originator
of its obligations under, or the validity or enforceability of, the
Documents to which they are a party or the Notes.
G. The Documents, when executed and delivered as contemplated
hereby and thereby, will have been duly authorized, executed and
delivered by the Sponsor or any Originator, as the case may be, and
will constitute, legal, valid and binding instruments enforceable
against the Sponsor or any Originator in accordance with their
respective terms, subject as to enforceability to (x) applicable
bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditors' rights generally, (y) general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law) and (z) with respect to rights of indemnity under
this Agreement, the Indemnification Agreement and the Insurance
Agreement, limitations of public policy under applicable securities
laws.
H. The execution, delivery and performance of the Documents
by the Sponsor and each Originator, as the case may be, and the
consummation of the transactions contemplated hereby and thereby, and
the issuance and delivery of the Notes do not and will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to
which the Sponsor or any Originator is a party, by which the Sponsor
or any Originator is bound or to which any of the property or assets
of the Sponsor, the Originators or any of their subsidiaries are
subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or by-laws of the Sponsor
or of the Originators or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Sponsor or the Originators or any of their properties or assets.
I. Arthur Andersen LLP are independent public accountants
with respect to the Sponsor and the Originators as required by the
Securities Act and the Rules and Regulations.
J. The direction by the Sponsor to the Indenture Trustee to
execute, authenticate, issue and deliver the Notes has been duly
authorized by the Sponsor, and assuming the Indenture Trustee has been
duly authorized to do so, when executed, authenticated, issued and
delivered by the Indenture Trustee in accordance with the Indenture,
the Notes will be validly issued and outstanding and will be entitled
to the benefits provided by the Indenture.
K. No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
of the United States is
5
<PAGE> 7
required for the issuance of the Notes and the sale of the Notes to
the Underwriter, or the consummation by the Sponsor or each Originator
of the other transactions contemplated by the Documents, except such
consents, approvals, authorizations, registrations or qualifications
as may be required under State securities or Blue Sky laws in
connection with the purchase and distribution of the Notes by the
Underwriter or as have been obtained.
L. Each Originator possesses all material licenses, Notes,
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
neither Originator has received notice of any proceedings relating to
the revocation or modification of any such license, certificate,
authority or permit which if decided adversely to such Originator
would, singly or in the aggregate, materially and adversely affect the
conduct of its business, operations or financial condition.
M. At the time of execution and delivery of the Sale and
Servicing Agreement, the Sponsor will: (i) have good title to the
interest in the Mortgage Loans conveyed by the Sponsor, free and clear
of any lien, mortgage, pledge, charge, encumbrance, adverse claim or
other security interest (collectively, "Liens"); (ii) not have
assigned to any person any of its right, title or interest in the
Mortgage Loans, in the Sale and Servicing Agreement or in the Notes
being issued pursuant thereto; and (iii) have the power and authority
to sell its interest in the Mortgage Loans to the Indenture Trustee
and to sell the Notes to the Underwriter. Upon execution and delivery
of the Sale and Servicing Agreement by the Indenture Trustee, the
Indenture Trustee will have acquired all of the Sponsor's right, title
and interest in and to the Mortgage Loans. Upon delivery to the
Underwriter of the Notes, the Underwriter will have good title to the
Notes, free of any Liens.
N. As of opening of business on November 1, 1997 (the
"Cut-Off Date"), each of the Mortgage Loans will meet the eligibility
criteria described in the Prospectus and will conform to the
descriptions thereof contained in the Prospectus.
O. None of the Sponsor, any Originator or the Trust created
by the Trust Agreement is an "investment company" within the meaning
of such term under the Investment Company Act of 1940 (the "1940 Act")
and the rules and regulations of the Commission thereunder.
P. At the Closing Date, the Notes and the Indenture will
conform in all material respects to the descriptions thereof contained
in the Prospectus.
Q. At the Closing Date, the Notes shall have been rated in
the highest rating category by at least two nationally recognized
rating agencies.
6
<PAGE> 8
R. Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the Documents
and the Notes have been paid or will be paid at or prior to the
Closing Date.
S. At the Closing Date, each of the representations and
warranties of the Sponsor set forth in the Sale and Servicing
Agreement, the Insurance Agreement and the Indemnification Agreement
will be true and correct in all material respects.
Any certificate signed by an officer of the Sponsor or any Originator
and delivered to the Underwriter or counsel for the Underwriter in connection
with an offering of the Notes shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section 1 are made.
SECTION 2. Purchase and Sale. The commitment of the
Underwriter to purchase the Notes pursuant to this Agreement shall be deemed to
have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth.
The Sponsor agrees to instruct the Indenture Trustee to issue and agrees to
sell to the Underwriter, and the Underwriter agrees (except as provided in
Sections 6 and 10 hereof) to purchase from the Sponsor the aggregate initial
principal amount of the Notes set forth on Schedule A, at the purchase price or
prices set forth in Schedule A.
SECTION 3. Delivery and Payment. Delivery of and
payment for the Notes to be purchased by the Underwriter shall be made at the
offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New
York 10019, at 10:00 A.M. New York City time on the Closing Date or at such
other time or date as shall be agreed upon in writing by the Underwriter, the
Sponsor and the Originators. Payment shall be made to the Originators by wire
transfer of same day funds payable to the account of the Originators. Delivery
of the Notes shall be made to the Underwriter against payment of the purchase
price thereof. The Notes shall be in such denominations and registered in such
names as the Underwriter may request in writing at least two business days
prior to the Closing Date. The Notes will be made available for examination by
the Underwriter no later than 4:00 P.M. New York City time on the first
business day prior to the Closing Date.
SECTION 4. Offering by the Underwriter. It is
understood that, subject to the terms and conditions hereof, the Underwriter
proposes to offer the Notes for sale to the public as set forth in the
Prospectus.
SECTION 5. Covenants of the Sponsor. The Sponsor and
each Originator agree as follows:
A. To prepare the Prospectus in a form approved by the
Underwriter and to file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than the Commission's close of business
on the second business day following the
7
<PAGE> 9
execution and delivery of this Agreement; to make no further amendment
or any supplement to the Registration Statement or to the Prospectus
prior to the Closing Date except as permitted herein; to advise the
Underwriter, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Underwriter with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Sponsor with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and, for so long
as the delivery of a prospectus is required in connection with the
offering or sale of the Notes, to promptly advise the Underwriter of
its receipt of notice of the issuance by the Commission of any stop
order or of: (i) any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus; (ii) the suspension of the
qualification of the Notes for offering or sale in any jurisdiction;
(iii) the initiation of or threat of any proceeding for any such
purpose; (iv) any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information. In the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, the Sponsor promptly shall use its best efforts to
obtain the withdrawal of such order or suspension.
B. To furnish promptly to the Underwriter and to counsel for
the Underwriter a signed copy of the Registration Statement as
originally filed with the Commission, and of each amendment thereto
filed with the Commission, including all consents and exhibits filed
therewith.
C. To deliver promptly to the Underwriter such number of the
following documents as the Underwriter shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed
with the Commission and each amendment thereto (in each case including
exhibits); (ii) each Preliminary Prospectus, the Prospectus and any
amended or supplemented Prospectus; and (iii) any document
incorporated by reference in the Prospectus (including exhibits
thereto). If the delivery of a prospectus is required at any time
prior to the expiration of nine months after the Effective Time in
connection with the offering or sale of the Notes, and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if 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 Sponsor shall notify the Underwriter and, upon the
Underwriter's request, shall file such document and prepare and
furnish without charge to the Underwriter and to any dealer in
securities as many copies as the
8
<PAGE> 10
Underwriter may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case the
Underwriter is required to deliver a Prospectus in connection with
sales of any of the Notes at any time nine months or more after the
Effective Time, upon the request of the Underwriter but at the expense
of the Underwriter, the Sponsor shall prepare and deliver to the
Underwriter as many copies as the Underwriter may reasonably request
of an amended or supplemented Prospectus complying with Section
10(a)(3) of the 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 Sponsor or the
Underwriter, be required by the Securities Act or requested by the
Commission.
E. Prior to filing with the Commission any (i) Preliminary
Prospectus, (ii) amendment to the Registration Statement or supplement
to the Prospectus, or document incorporated by reference in the
Prospectus or (iii) Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the Underwriter and counsel
for the Underwriter and obtain the consent of the Underwriter to the
filing.
F. To make generally available to holders of the Notes as
soon as practicable, but in any event not later than 90 days after the
close of the period covered thereby, a statement of earnings of the
Trust (which need not be audited) complying with Section 11(a) of the
Securities Act and the Rules and Regulations (including, at the option
of the Sponsor, Rule 158) and covering a period of at least twelve
consecutive months beginning not later than the first day of the first
fiscal quarter following the Closing Date.
G. To use their best efforts, in cooperation with the
Underwriter, to qualify the Notes for offering and sale under the
applicable securities laws of such states and other jurisdictions of
the United States as the Underwriter may designate, and maintain or
cause to be maintained such qualifications in effect for as long as
may be required for the distribution of the Notes. The Sponsor will
file or cause the filing of such statements and reports as may be
required by the laws of each jurisdiction in which the Notes have been
so qualified.
H. Not, without the Underwriter's prior written consent, to
publicly offer or sell or contract to sell any mortgage pass-through
securities, collateralized mortgage obligations or other similar
securities representing interests in or secured by other
mortgage-related assets originated or owned by the Sponsor for a
period of 5 business days following the commencement of the offering
of the Notes to the public.
I. So long as the Notes shall be outstanding, to deliver to
the Underwriter as soon as such statements are furnished to the
Indenture Trustee the annual
9
<PAGE> 11
statement as to compliance delivered to the Indenture Trustee pursuant
to Section 3.9 of the Indenture.
J. To apply the net proceeds from the sale of the Notes in
the manner set forth in the Prospectus.
SECTION 6. Conditions to the Underwriter's Obligation.
The obligation of the Underwriter to purchase the Notes pursuant to this
Agreement are subject to: (i) the accuracy on and as of the Closing Date of
the representations and warranties on the part of the Sponsor and each
Originator herein contained; (ii) the performance by the Sponsor and each
Originator of all of their respective obligations hereunder; and (iii) the
following conditions as of the Closing Date:
A. The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission. Any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus shall have been complied with.
B. The Underwriter shall not have discovered and disclosed to
the Sponsor on or prior to the Closing Date that the Registration
Statement or the Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact or omits to state a fact which,
in the opinion of Dewey Ballantine LLP, counsel for the Underwriter,
is material and is required to be stated therein or is necessary to
make the statements therein not misleading.
C. All corporate proceedings and other legal matters relating
to the authorization, form and validity of the Documents, the Notes,
the Registration Statement and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all respects to counsel for the
Underwriter, and the Sponsor shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.
D. The Underwriter shall have received the favorable opinion
of Dewey Ballantine LLP, special counsel to the Sponsor and each
Originator with respect to the following items, dated the Closing
Date, to the effect that:
1. Each of the Sponsor and each Originator has been duly
organized and is validly existing as a corporation or national banking
association, as the case may be, in good standing under the laws of
its jurisdiction of incorporation, and is qualified to do business in
each state necessary to enable it to perform its obligations as
Sponsor or Originator, as the case may be, under the Documents to
which they are a party. Each of the Sponsor and each Originator has
the requisite power and authority to execute and deliver, engage in
the transactions
10
<PAGE> 12
contemplated by, and perform and observe the conditions of the
Documents to which they are a party.
2. The Documents to which they are a party to have been
duly and validly authorized, executed and delivered by the Sponsor
and each Originator, as the case may be, and all requisite corporate
action having been taken with respect
thereto, and the Notes constitute the valid, legal and binding
agreement of the Sponsor or an Originator, as the case may be.
3. Neither the transfer of the Mortgage Loans to the
Trust, the issuance or sale of the Notes nor the execution, delivery
or performance by the Sponsor or any Originator of the Documents to
which they are a party to, (A) conflicts or will conflict with or
results or will result in a breach of, or constitutes or will
constitute a default under, (i) any term or provision of the
certificate of incorporation or by-laws of the Sponsor or any
Originator; (ii) any term or provision of any material agreement,
contract, instrument or indenture, to which the Sponsor or any
Originator is a party or is bound and known to such counsel; or (iii)
any order, judgment, writ, injunction or decree of any court or
governmental agency or body or other tribunal having jurisdiction over
the Sponsor or any Originator and known to such counsel; or (B)
results in, or will result in the creation or imposition of any lien,
charge or encumbrance upon any of the Trust's assets or upon the
Notes, except as otherwise contemplated by the Sale and Servicing
Agreement.
4. The endorsement and delivery of each Credit Line
Agreement, and the preparation, delivery and recording of an
Assignment with respect to each Mortgage is sufficient to fully
transfer to the Indenture Trustee for the benefit of the Noteholders
all right, title and interest of the Sponsor in the Credit Line
Agreement and Mortgage, as noteholder and mortgagee or assignee
thereof, subject to any exceptions set forth in such opinion, and will
be sufficient to permit the Indenture Trustee to avail itself of all
protection available under applicable law against the claims of any
present or future creditors of the Sponsor and to prevent any other
sale, transfer, assignment, pledge or other encumbrance of the
Mortgage Loans by the Sponsor from being enforceable.
5. No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental agency
or body or other tribunal is required under the laws of the State of
New York, for the execution, delivery and performance of the Documents
or the offer, issuance, sale or delivery of the Notes or the
consummation of any other transaction contemplated thereby by the
Sponsor and the Originators, except such which have been obtained.
6. There are no actions, proceedings or investigations,
to such counsel's knowledge, pending or threatened against the Sponsor
or any Originator before any court, governmental agency or body or
other tribunal (i) asserting the invalidity of the Documents to which
they are a party to or the Notes, (ii) seeking to prevent the issuance
of the Notes or the consummation of any of the
11
<PAGE> 13
transactions contemplated by the Documents or (iii) which would
materially and adversely affect the performance by the Sponsor or the
Originators of obligations under, or the validity or enforceability
of, the Notes or Documents to which they are a party.
7. To the best knowledge of such counsel, the Commission
has not issued any stop order suspending the effectiveness of the
Registration Statement or any order directed to any prospectus
relating to the Notes (including the Prospectus), and has not
initiated or threatened any proceeding for that purpose.
8. The Registration Statement and the Prospectus (other
than the financial and statistical data included therein, as to which
such counsel need express no opinion), including the incorporated
documents, as of the date on which the Registration Statement was
declared effective and as of the date hereof, comply as to form in all
material respects with the requirements of the 1933 Act and the rules
and regulations thereunder and the Exchange Act and the rules and
regulations thereunder, and such counsel does not know of any
amendment to the Registration Statement required to be filed, or of
any contracts, indentures or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement which has not been filed or
described as required.
9. The Indenture, when executed and delivered, will have been
duly qualified under the Trust Indenture Act.
10. The statements in the Prospectus and Prospectus
Supplement set forth under the captions "ERISA CONSIDERATIONS,"
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES," and the statements in the
Prospectus set forth under the caption "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS AND RELATED MATTERS," to the extent that they
constitute matters of federal, New York or California law, or federal,
New York or California legal conclusions provide a fair and accurate
summary of such law or conclusions.
11. No information has come to such counsel's attention
which causes them to believe that the Prospectus (other than the
financial statement and other financial and statistical data contained
therein, as to which such counsel need express no opinion), as of the
date thereof, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
12. Such other matters as the Underwriter may reasonably request.
In rendering its opinions, the counsel described above may rely, as to
matters of fact, on certificates of responsible officers of the Sponsor and the
Originators, the Indenture Trustee and public officials. Such opinions may
also assume the due
12
<PAGE> 14
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Sponsor and the Originators.
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 Originators.
F. The Notes shall have been rated in the highest rating
category by Standard & Poor's Ratings Group and by Moody's Investors
Service, Inc., and such ratings shall not have been rescinded or
downgraded. The Underwriter and counsel for the Underwriter shall
have received copies of any opinions of counsel supplied to the rating
organizations relating to any matters with respect to the Notes. Any
such opinions shall be dated the Closing Date and addressed to the
Underwriter or accompanied by reliance letters to the Underwriter or
shall state that the Underwriter may rely upon them.
G. The Underwriter shall have received from the Sponsor a
certificate, signed by the president, a senior vice president or a
vice president of the Sponsor, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Registration Statement, the Sale and Servicing Agreement, and this
Agreement and that, to the best of his or her knowledge based upon
reasonable investigation:
1. the representations and warranties of the Sponsor in
this Agreement, as of the Closing Date, and in the Sale and Servicing
Agreement, the Insurance Agreement, and in all related agreements, as
of the date specified in such agreements, are true and correct, and
the Sponsor, has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
2. there are no actions, suits or proceedings pending,
or to the best of such officer's knowledge, threatened against or
affecting the Sponsor which if adversely determined, individually or
in the aggregate, would be reasonably likely to adversely affect the
Sponsor's obligations under the Documents to which it is a party in
any material way; and no merger, liquidation, dissolution or
bankruptcy of the Sponsor is pending or contemplated;
3. the information contained in the Registration
Statement and the Prospectus relating to the Sponsor, the Mortgage
Loans or the servicing procedures of it or its affiliates or
subservicer is true and accurate in all material 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;
13
<PAGE> 15
4. the information set forth in the Schedule of Mortgage
Loans required to be furnished pursuant to the Sale and Servicing
Agreement is true and correct in all material respects;
5. there has been no amendment or other document filed
affecting the articles of incorporation or by-laws of the Sponsor
since September 30, 1997, and no such amendment has been authorized.
No event has occurred since September 30, 1997, which has affected
the good standing of the Sponsor under the laws of the State of
Delaware;
6. there has not occurred any material adverse change,
or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Sponsor and its subsidiaries, taken as a whole, from
September 30, 1997;
7. on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating, if any,
accorded the Sponsor or in any rating accorded any securities of the
Sponsor, if any, by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the 1933 Act;
and
8. each person who, as an officer or representative of
the Sponsor, signed or signs the Registration Statement, the Documents
or any other document delivered pursuant hereto, on the date of such
execution, or on the Closing Date, as the case may be, in connection
with the transactions described in the Documents was, at the
respective times of such signing and delivery, and is now, duly
elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
The Sponsor shall attach to such certificate a true and correct copy
of its certificate or articles of incorporation, as appropriate, and by-laws
which are in full force and effect on the date of such certificate and a
certified true copy of the resolutions of its Board of Directors with respect
to the transactions contemplated herein.
H. The Underwriter shall have received a favorable
opinion of counsel to the Indenture Trustee, dated the Closing Date
and in form and substance satisfactory to the Underwriter, to the
effect that:
1. the Indenture Trustee is a national banking
association duly organized, validly existing and in good standing
under the laws of the United States and has the power and authority to
enter into and to take all actions required of it under the Documents
to which it is a party to;
2. the Documents to which the Indenture Trustee is a
party have been duly authorized, executed and delivered by the
Indenture Trustee and such Documents constitute the legal, valid and
binding obligation of the Indenture Trustee, enforceable against the
Indenture
14
<PAGE> 16
Trustee in accordance with its terms, except as enforceability thereof
may be limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally,
as such laws would apply in the event of a bankruptcy, insolvency or
reorganization or similar occurrence affecting the Indenture Trustee,
and (B) general principles of equity regardless of whether such
enforcement is sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action
by any governmental agency or body or other tribunal is required on
the part of the Indenture Trustee in connection with its execution and
delivery of the Documents to which it is a party or the performance of
its obligations thereunder;
4. the Notes have been duly executed, authenticated and
delivered by the Indenture Trustee; and
5. the execution and delivery of, and performance by the
Indenture Trustee of its obligations under, the Documents to which it
is a party do not conflict with or result in a violation of any
statute or regulation applicable to the Indenture Trustee, or the
charter or by-laws of the Indenture Trustee, or to the best knowledge
of such counsel, any governmental authority having jurisdiction over
the Indenture Trustee or the terms of any indenture or other agreement
or instrument to which the Indenture Trustee is a party or by which it
is bound.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Sponsor, the Indenture
Trustee and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Indenture Trustee.
I. The Underwriter shall have received from the Indenture
Trustee a certificate, signed by the President, a senior vice
president or a vice president of the Indenture Trustee, dated the
Closing Date, to the effect that each person who, as an officer or
representative of the Indenture Trustee, signed or signs the Notes,
the Sale and Servicing Agreement, the Indenture or any other document
delivered pursuant hereto, on the date hereof or on the Closing Date,
in connection with the transactions described in the Sale and
Servicing Agreement and the Indenture was, at the respective times of
such signing and delivery, and is now, duly elected or appointed,
qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their
genuine signatures.
J. The Policy relating to the Notes shall have been duly
executed and issued at or prior to the Closing Date and shall conform
in all material respects to the description thereof in the Prospectus.
15
<PAGE> 17
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 Wisconsin-domiciled stock insurance
corporation, duly incorporated and validly existing under the laws of
the State of Wisconsin. The Insurer is validly licensed to do
business in New York and is authorized to issue the Policy and perform
its obligations under the Policy in accordance with the terms thereof.
2. The execution and delivery by the Insurer of the
Policy, the Insurance Agreement and the Indemnification Agreement are
within the corporate power of the Insurer and have been authorized by
all necessary corporate action on the part of the Insurer; the Policy
has been duly executed and is the valid and binding obligation of the
Insurer enforceable in accordance with its terms except that the
enforcement of the Policy may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by
general principles of equity.
3. The Insurer is authorized to deliver the Insurance
Agreement and the Indemnification Agreement, and such agreements have
been duly executed and delivered and constitute the legal, valid and
binding obligations of the Insurer enforceable in accordance with its
terms except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by
general principles of equity and by public policy considerations
relating to indemnification for securities law violations.
4. No consent, approval, authorization or order of any
state or federal court or governmental agency or body is required on
the part of the Insurer, the lack of which would adversely affect the
validity or enforceability of the Policy; to the extent required by
applicable legal requirements that would adversely affect validity or
enforceability of the Policy, the form of the Policy has been filed
with, and approved by, all governmental authorities having
jurisdiction over the Insurer in connection with the Policy.
5. The Policy is not required to be registered under the
Securities Act.
6. The information set forth under the caption "THE
POLICY" and "THE 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 Sponsor, the Originators,
the Indenture Trustee, the Insurer and public officials. Such opinion may
assume the due authorization,
16
<PAGE> 18
execution and delivery of the instruments and documents referred to therein by
the parties thereto other than the Insurer.
L. Except for the downgrading of Advanta National Bank on
_____, 1997, on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating, if any,
accorded the Sponsor or the Originators or in any rating accorded any
securities of the Sponsor, if any, by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of the 1933 Act.
M. On or prior to the Closing Date, there shall not have
occurred any downgrading, nor shall any notice have been given of (A)
any intended or potential downgrading or (B) any review or possible
change in rating the direction of which has not been indicated, in the
rating accorded the Insurer's claims paying ability by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of the 1933 Act.
N. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since September
30, 1997, of (A) the Sponsor, the Originators and any subsidiaries or
(B) the Insurer, that is in the Underwriter's judgment material and
adverse and that makes it in the Underwriter's judgment impracticable
to market the Notes on the terms and in the manner contemplated in the
Prospectus.
O. The Underwriter shall have received from the Insurer a
certificate, signed by the president, a senior vice president or a
vice president of the Insurer, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the Policy,
the Insurance Agreement, the Indemnification Agreement and the related
documents and that, to the best of his or her knowledge based on
reasonable investigation:
1. There are no actions, suits or proceedings pending or
threatened against or affecting the Insurer which, if adversely
determined, individually or in the aggregate, would adversely affect
the Insurer's performance under the Policy, the Indemnification
Agreement or the Insurance Agreement;
2. Each person who as an officer or representative of
the Insurer, signed or signs the Policy, the Insurance Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection
with the transactions described in this Agreement was, at the
respective times of such signing and delivery, and is now, duly
elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures;
17
<PAGE> 19
3. The information contained in the Prospectus under the
captions "THE POLICY" and "THE 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 POLICY" and "THE INSURER" presents
accurately and fairly the capitalization of the Insurer as of
September 30, 1997;
5. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating accorded
the claims paying ability of the Insurer by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of the 1933 Act;
6. The audited balance sheet of the Insurer as of
December 31, 1996 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 September 30, 1997 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, 1996 audited statements;
7. To the best knowledge of such officer, since
September 30, 1997, no material adverse change has occurred in the
financial position of the Insurer other than as set forth in the
Prospectus Supplement.
The officer of the Insurer certifying to items 5-7 shall be an officer
in charge of a principal financial function.
The Insurer shall attach to such certificate a true and correct copy
of its certificate or articles of incorporation, as appropriate, and its
by-laws, all of which are in full force and effect on the date of such
certificate.
P. The Underwriter shall have received from Dewey Ballantine
LLP, special counsel to the Sponsor and the Originators, a survey in
form and substance satisfactory to the Underwriter, indicating the
requirements of applicable local
18
<PAGE> 20
law which must be complied with in order to transfer and service the
Mortgage Loans pursuant to the Sale and Servicing Agreement and each
Originator shall have complied with all such requirements.
Q. The Underwriter 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
Notes, the Prospectus and such other related matters as the
Underwriter shall reasonably require.
R. The Underwriter and counsel for the Underwriter shall have
received copies of any opinions of counsel to the Sponsor, the
Originators or the Insurer supplied to the Indenture Trustee relating
to matters with respect to the Notes or the Policy. Any such opinions
shall be dated the Closing Date and addressed to the Underwriter or
accompanied by reliance letters to the Underwriter or shall state the
Underwriter may rely thereon.
S. The Underwriter shall have received such further
information, Notes and documents as the Underwriter may reasonably
have requested not fewer than three (3) full business days prior to
the Closing Date.
T. There shall have been executed and delivered by Advanta
Mortgage Holding Company, the corporate parent of the Sponsor
("AMHC"), a letter agreement with the Indenture Trustee and the
Insurer, pursuant to which AMHC agrees to become jointly and severally
liable with the Sponsor, the Originators and the Master Servicer for
the payment of the Joint and Several Obligations (as defined in such
letter agreement).
U. There shall have been executed and delivered by AMHC, the
corporate parent of the Sponsor, a letter agreement with the
Underwriter and the Insurer substantially in the form of Exhibit A
hereto.
V. Prior to the Closing Date, counsel for the Underwriter
shall have been furnished with such documents and opinions as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Notes as herein contemplated and related
proceedings or in order to evidence the accuracy and completeness of
any of the representations and warranties, or the fulfillment of any
of the conditions, herein contained, and all proceedings taken by any
Originator in connection with the issuance and sale of the Notes as
herein contemplated shall be satisfactory in form and substance to the
Underwriter and counsel for the Underwriter.
W. Subsequent to the execution and delivery of this Agreement
none of the following shall have occurred: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange
or the over-the-counter 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;
19
<PAGE> 21
(i) a banking moratorium shall have been declared by Federal or state
authorities; (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation of hostilities
involving the United States or there shall have been a declaration of
a national emergency or war by the United States; or (iii) there shall
have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international
conditions on the financial markets of the United States shall be
such) as to make it, in the judgment of the Underwriter, impractical
or inadvisable to proceed with the public offering or delivery of the
Notes on the terms and in the manner contemplated in the Prospectus.
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Underwriter by notice to the Sponsor and the Originators at
any time at or prior to the Closing Date, and such termination shall be without
liability of any party to any other party except as provided in Section 7.
All opinions, letters, evidence and Notes mentioned above or elsewhere
in this Agreement shall be deemed to be in compliance with the provisions
hereof only if they are in form and substance reasonably satisfactory to
counsel for the Underwriter.
SECTION 7. Payment of Expenses. The Sponsor and the
Originators agree to pay: (a) the costs incident to the authorization,
issuance, sale and delivery of the Notes and any taxes payable in connection
therewith; (b) the costs incident to the preparation, printing and filing under
the 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 Notes under the securities laws of the several jurisdictions
as provided in Section 5(G) hereof and of preparing, printing and distributing
a Blue Sky Memorandum and a Legal Investment Survey (including related fees and
expenses of counsel to the Underwriter); (f) any fees charged by securities
rating services for rating the Notes; (g) half of the costs and expenses of
Dewey Ballantine LLP; and (h) all other costs and expenses incident to the
performance of the obligations of the Sponsor and the Originators; provided
that, except as provided in this Section 7, the Underwriter shall pay its own
costs and expenses, including half of the costs and expenses of Dewey
Ballantine LLP, any transfer taxes on the Notes which they may sell and the
expenses of advertising any offering of the Notes made by the Underwriter.
If this Agreement is terminated by the Underwriter, in accordance with
the provisions of Section 6 or Section 10, the Sponsor and the Originators
shall reimburse the Underwriter for its respective reasonable out-of-pocket
expenses, including fees and disbursements of Dewey Ballantine LLP, counsel for
the Underwriters.
20
<PAGE> 22
SECTION 8. Indemnification and Contribution.
A. The Sponsor and the Originators agree to indemnify and
hold harmless the Underwriter and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all loss, claim, damage or liability, joint
or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the Notes), to which the Underwriter or any
such controlling person may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue statement or
alleged untrue statement of a material fact contained in the
Prospectus or (iv) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and shall reimburse the Underwriter and each
such controlling person promptly upon demand for any legal or other
expenses reasonably incurred by the Underwriter or such controlling
person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that neither the
Sponsor nor the Originator shall be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary
Prospectus, the Prospectus or the Registration Statement in reliance
upon and in conformity with written information (including any Derived
Information) furnished to the Sponsor by the Underwriter specifically
for inclusion therein; and provided, further, that as to any
Preliminary Prospectus this indemnity shall not inure to the benefit
of the Underwriter or any controlling person on account of any loss,
claim, damage, liability or action arising from the sale of the Notes
to any person by the Underwriter if the Underwriter failed to send or
give a copy of the Prospectus, as amended or supplemented, to that
person within the time required by the 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 Sponsor or any Originator
with Section 5(C). For purposes of the last proviso to the
immediately preceding sentence, the term "Prospectus" shall not be
deemed to include the documents incorporated therein by reference, and
the Underwriter shall not be obligated to send or give any supplement
or amendment to any document incorporated therein by reference to any
person other than a person to whom the Underwriter had delivered such
incorporated document or documents in response to a written request
therefor. The foregoing indemnity agreement is in addition to any
liability which the Sponsor or any Originator may otherwise have to
the Underwriter or any controlling person of the Underwriter.
21
<PAGE> 23
B. The Underwriter agrees to indemnify and hold harmless the
Sponsor, the Originators, each of their respective directors, each of
their respective officers who signed the Registration Statement, and
each person, if any, who controls the Sponsor or the Originators
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 Sponsor or the Originators 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 (excluding any Derived Information which is
covered in paragraph (E) below) furnished to the Sponsor by or on
behalf of the Underwriter specifically for inclusion therein, and
shall reimburse the Sponsor, the Originators and any such director,
officer or controlling person for any legal or other expenses
reasonably incurred by the Sponsor or the Originators or any director,
officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which the
Underwriter may otherwise have to the Sponsor, the Originators or any
such director, officer or controlling person.
C. Promptly after receipt by any indemnified party under this
Section 8 of notice of any claim or the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure; and provided, further, that the failure to notify any
indemnifying party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this Section 8 for
22
<PAGE> 24
any legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if
such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriter, if the indemnified
parties under this Section 8 consist of the Underwriter or any of its
controlling persons, or by the Sponsor or the Originator, as the case may be,
if the indemnified parties under this Section 8 consist of the Sponsor or the
Originator, as the case may be, or any of the Sponsor's directors, officers or
controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(A) and (B), shall use its best efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
D. The Underwriter agrees to deliver to the Sponsor a copy of
its Derived Information no later than one (1) business day prior to
the date such information is required to be filed, pursuant to the
No-Action Letters (as defined herein), with the Commission on Form
8-K.
23
<PAGE> 25
E. The Underwriter agrees, assuming all Sponsor-Provided
Information (defined below) is accurate and complete in all material
respects, to indemnify and hold harmless the Sponsor, the Originators,
each of the Sponsor's and the Originators' respective officers and
directors and each person who controls the Sponsor or the Originators
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 are incurred. The
obligations of the Underwriter under this Section 8(E) shall be in
addition to any liability which the Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally
applicable to this Section 8(E).
F. For purposes of this Section 8, the term "Derived
Information" means such portion, if any, of the information delivered
to the Sponsor pursuant to Section 8(D) for filing with the Commission
on Form 8-K as:
(i) is not contained in the Prospectus without
taking into account information incorporated
therein by reference;
(ii) does not constitute Sponsor-Provided
Information; and
(iii) is of the type of information defined as
Collateral term sheets, Structural term sheets or
Computational Materials (as such terms are interpreted in the
No-Action Letters).
"Sponsor-Provided Information" means any computer tape furnished to
the Underwriter by the Sponsor and the Originators 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
24
<PAGE> 26
with the PSA Letter, the "No-Action Letters") of Brown & Wood on
behalf of Kidder, Peabody & Co., Inc. (which letter, and the SEC
staff's response thereto, were publicly available May 20, 1994).
G. If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party under Section 8(A) or (B) in respect of
any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative benefits
received by the Sponsor and the Originators on the one hand and the
Underwriter on the other from the offering of the Notes or if the
allocation provided by clause (i) above is not permitted by applicable
law or if the indemnified party failed to give the notice required
under Section 8(C), in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but
also the relative fault of the Sponsor and the Originators on the one
hand and the Underwriter on the other with respect to the statements
or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations.
The relative benefits of the Underwriter and the Sponsor and any
Originator shall be deemed to be in such proportion so that the Underwriter is
responsible for that portion represented by the percentage that the
underwriting discount appearing on the cover page of the Prospectus bears to
the public offering price appearing on the cover page of the Prospectus.
The relative fault of the Underwriter and the Sponsor and any
Originator shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Sponsor and any Originator
or by the Underwriter, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission and other equitable considerations.
The Sponsor, the Originators and the Underwriter agree that it would
not be just and equitable if contributions pursuant to this Section 8(G) were
to be determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 8(G) shall be deemed to include, for purposes of this
Section 8(G), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
In no case shall the Underwriter be responsible for any amount in
excess of the underwriting discount applicable to the Notes purchased by the
Underwriter hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of
25
<PAGE> 27
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
H. The Underwriter confirms that the information set forth
(i) in the Prospectus Supplement relating to market making and (ii) in
the third paragraph under the caption "UNDERWRITING" in the Prospectus
Supplement, together with the Derived Information, is correct and
constitutes the only information furnished in writing to the Sponsor
and the Originators by or on behalf of the Underwriter specifically
for inclusion in the Registration Statement and the Prospectus.
SECTION 9. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or contained in Notes of officers of the Sponsor or each
Originator submitted pursuant hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Underwriter or controlling persons thereof, or by or on behalf of the Sponsor
or any Originator and shall survive delivery of any Notes to the Underwriter.
SECTION 10. Termination of Agreement . The Underwriter
may terminate this Agreement immediately upon notice to the Sponsor and each
Originator, at any time at or prior to the Closing Date if any of the events or
conditions described in Section 6(W) of this Agreement shall occur and be
continuing. In the event of any such termination, the covenant set forth in
Section 5(G), the provisions of Section 7, the indemnity agreement set forth in
Section 8, and the provisions of Sections 9 and 13 shall remain in effect.
SECTION 11. Notices. All statements, requests, notices
and agreements hereunder shall be in writing, and:
A. if to the Underwriter, shall be delivered or sent by mail,
telex or facsimile transmission to J.P. Morgan Securities Inc., 60
Wall Street, New York, New York 10260, Attention: Syndicate Desk
(Fax: 212-648-5909);
B. if to the Sponsor, shall be delivered or sent by mail, telex
or facsimile transmission to Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive, San Diego, California 92127 Attention:
General Counsel (Fax: 619-674-3592);
C. if to Advanta National Bank, shall be delivered or sent by
mail to Advanta National Bank, Brandywine Corporate Center, 650
Naamans Road, Claymont, Delaware 19703 (Telephone: 302-791-4400);
D. if to Advanta Finance Corp., 16875 West Bernardo Drive, San
Diego, CA 92127.
SECTION 12. Persons Entitled to the Benefit of this
Agreement. This Agreement shall inure to the benefit of and be binding upon
the Underwriter, the
26
<PAGE> 28
Sponsor, each Originator and their respective successors. This Agreement and
the terms and provisions hereof are for the sole benefit of only those persons,
except that the representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control the Underwriter within the meaning of
Section 15 of the Securities Act, and for the benefit of directors of the
Sponsor or of the Originators, officers of the Sponsor who have signed the
Registration Statement and any person controlling the Sponsor or the
Originators 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 13. Survival. The respective indemnities,
representations, warranties and agreements of the Sponsor, the Originators and
the Underwriter contained in this Agreement, or made by or on behalf of them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Notes and shall remain in full force and effect, regardless of
any investigation made by or on behalf of any of them or any person controlling
any of them.
SECTION 14. Definition of the Term "Business Day". For
purposes of this Agreement, "Business Day" means any day on which the New York
Stock Exchange, Inc. is open for trading.
SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
AND SHALL BE CONSTRUED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY
TIME.
SECTION 16. Counterparts. This Agreement may be
executed in counterparts and, if executed in more than one counterpart, the
executed counterparts shall each be deemed to be an original but all such
counterparts shall together constitute one and the same instrument.
SECTION 17. Headings. The headings herein are inserted
for convenience of reference only and are not intended to be part of, or to
affect the meaning or interpretation of, this Agreement.
27
<PAGE> 29
If the foregoing correctly sets forth the agreement between the
Sponsor and the Underwriter, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By:
---------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
J.P. MORGAN SECURITIES INC.
By:
-------------------------------
Name:
Title:
[Underwriting Agreement]
28
<PAGE> 30
CONFIRMED AND ACCEPTED, as of
the date first above written:
ADVANTA NATIONAL BANK
By:
-----------------------------
Name:
Title:
ADVANTA FINANCE CORP.
By:
-----------------------------
Name:
Title:
[Underwriting Agreement]
29
<PAGE> 31
<TABLE>
<CAPTION>
SCHEDULE A
Purchase Price
to Underwriter
Initial Principal Amount of Notes disregarding
Class Purchased by the Underwriter accrued interest
----- ---------------------------- ----------------
<S> <C> <C>
Class A $100,000,000 99.75%
</TABLE>
<PAGE> 32
EXHIBIT A
As of November 20, 1997
J.P. Morgan & Co.
60 Wall Street
New York, New York 10260
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
Re: Underwriting Agreement dated November 14, 1997 (the
"Underwriting Agreement") among Advanta Mortgage Conduit
Services, Inc. (the "Sponsor"), Advanta National Bank and
Advanta Finance Corp. (the "Originators") and J.P. Morgan
& Co. (the "Underwriter"); Indemnification Agreement dated
November 14, 1997 (the "Indemnification Agreement")
among the Sponsor, the Underwriter and AMBAC Indemnity
Corporation (the "Insurer"); the Insurance Agreement dated as
of November 1, 1997 (the "Insurance Agreement") among the
Insurer, the Sponsor, and the Indenture Trustee
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, the Indemnification Agreement
and the Insurance Agreement (together, the "Designated Agreements"), the
Sponsor and the Originators have undertaken certain financial obligations with
respect to the indemnification of the Underwriter and of the Insurer with
respect to the Registration Statement, the Prospectus and the Prospectus
Supplement described in the Designated Agreements. Any financial obligations
of the Sponsor and the Originators under the Designated Agreements, whether or
not specifically enumerated in this paragraph, are hereinafter referred to as
the "Joint and Several Obligations"; provided, however, that "Joint and Several
Obligations" shall mean only the financial obligations of the Sponsor and the
Originators under the Designated Agreements (including the payment of money
damages for a breach of any of the Sponsor's and the Originators' obligations
under the Designated Agreements, whether financial or otherwise) but shall not
include any obligations not relating to the payment of money.
<PAGE> 33
As a condition of their respective executions of the Designated
Agreements, the Underwriter and the Insurer have required the undersigned,
Advanta Mortgage Holding Company ("AMHC"), the parent corporation of the
Sponsor and the Originators, to acknowledge its joint-and-several liability
with the Sponsor and the Originators for the payment of the Joint and Several
Obligations under the Designated Agreements.
Now, therefore, the Underwriter, the Insurer and AMHC do hereby agree
that:
(i) AMHC hereby agrees to be absolutely and
unconditionally jointly and severally liable with the Sponsor
and the Originators to the Underwriter for the payment of the
Joint and Several Obligations under the Underwriting
Agreement.
(ii) AMHC may honor its obligations hereunder
either by direct payment of any Joint and Several Obligations
or by causing any Joint and Several Obligations to be paid to
the Underwriter or to the Insurer, as applicable, by the
Sponsor or another affiliate of AMHC.
A-2
<PAGE> 34
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING
COMPANY
By:
-------------------------
Authorized Signatory
CONFIRMED AND ACCEPTED,
as of the date first above written:
AMBAC ASSURANCE CORPORATION
By:
----------------------------------
Authorized Signatory
J.P. MORGAN SECURITIES INC.
By:
----------------------------------
Authorized Signatory
A-3
<PAGE> 1
EXHIBIT 4.1
<PAGE> 2
EXHIBIT 4.1
EXECUTION COPY
- --------------------------------------------------------------------------------
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1997-A
Class A Asset Backed Notes
-----------------
INDENTURE
Dated as of November 1, 1997
-----------------
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Indenture Trustee
- --------------------------------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2. Incorporation by Reference of the Trust Indenture Act . . . . . . . . . . . . 24
SECTION 1.3. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.4. Action by or Consent of Noteholders . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.5. Conflict with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II. THE NOTES
SECTION 2.1. Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.2. Execution, Authentication and Delivery . . . . . . . . . . . . . . . . . . . 26
SECTION 2.3. Registration; Registration of Transfer and Exchange . . . . . . . . . . . . . 26
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . . . . . . . . . . 27
SECTION 2.5. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.6. Payment of Principal and Interest; Defaulted Interest . . . . . . . . . . . . 29
SECTION 2.7. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.8. Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.9. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.10. Notices to Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.11. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III. COVENANTS
SECTION 3.1. Payment of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.3. Money for Payments to be Held in Trust . . . . . . . . . . . . . . . . . . . 32
SECTION 3.4. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.5. Protection of Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.6. Opinions as to Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.7. Performance of Obligations; Servicing of Mortgage Loans . . . . . . . . . . . 35
SECTION 3.8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.9. Annual Statement as to Compliance . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.10. Issuer May Not Consolidate or Transfer Assets . . . . . . . . . . . . . . . . 37
SECTION 3.11. No Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.12. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.13. Guarantees, Loans, Advances and Other Liabilities . . . . . . . . . . . . . . 37
SECTION 3.14. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.15. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
SECTION 3.16. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.17. Notice of Rapid Amortization Events and Events of Servicing Termination . . . 38
SECTION 3.18. Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.19. Amendments of Sale and Servicing Agreement and Trust Agreement . . . . . . . 38
SECTION 3.20. Income Tax Characterization . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IV. SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . 39
SECTION 4.2. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.3. Repayment of Monies Held by Note Paying Agent . . . . . . . . . . . . . . . . 40
ARTICLE V. REMEDIES
SECTION 5.1. Rights Upon a Rapid Amortization Event . . . . . . . . . . . . . . . . . . . 40
SECTION 5.2. Limitation of Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.3. Unconditional Rights of Noteholders To Receive Principal and Interest . . . . 41
SECTION 5.4. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.5. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.6. Delay or Omission Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.7. Control by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.8. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.9. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.10. Action on Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.11. Performance and Enforcement of Certain Obligations . . . . . . . . . . . . . 43
SECTION 5.12. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.13. Preference Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI. THE INDENTURE TRUSTEE
SECTION 6.1. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.2. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.3. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . 48
SECTION 6.4. Indenture Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.6. Reports by Indenture Trustee to Holders . . . . . . . . . . . . . . . . . . . 48
SECTION 6.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.8. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.9. Successor Indenture Trustee by Merger . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee . . . . . . 51
SECTION 6.11. Eligibility: Disqualification . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.12. Preferential Collection of Claims Against Issuer . . . . . . . . . . . . . . 52
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 6.13. Appointment and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.14. Performance of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.15. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.16. Reliance Upon Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.17. Representations and Warranties of the Indenture Trustee . . . . . . . . . . . 54
SECTION 6.18. Waiver of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.19. Control by the Controlling Party . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.20. Trustee May Enforce Claims Without Possession of Notes . . . . . . . . . . . 54
SECTION 6.21. Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.22. Mortgagor Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VII. NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1. Issuer To Furnish To Indenture Trustee Names and Addresses of Noteholders . . 56
SECTION 7.2. Preservation of Information; Communications to Noteholders . . . . . . . . . 56
SECTION 7.3. Reports by Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.4. Reports by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII. PAYMENTS AND STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS;
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1. Collection of Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.2. Release of Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.3. Establishment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.4. The Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.5. Pre-Funding Account and Capitalized Interest Account . . . . . . . . . . . . 59
SECTION 8.6. Flow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.7. Investment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.8. Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.9. Reports by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.10. Additional Reports by Indenture Trustee . . . . . . . . . . . . . . . . . . . 65
SECTION 8.11. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE IX. SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders . . . . . . . . . . . 66
SECTION 9.2. Supplemental Indentures with Consent of Noteholders . . . . . . . . . . . . . 67
SECTION 9.3. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.4. Effect of Supplemental Indenture . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.5. Conformity With Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.6. Reference in Notes to Supplemental Indentures . . . . . . . . . . . . . . . . 69
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE X. REDEMPTION OF NOTES
SECTION 10.1. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.2. Surrender of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.3. Form of Redemption Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.4. Notes Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XI. MISCELLANEOUS
SECTION 11.1. Compliance Certificates and Opinions, etc. . . . . . . . . . . . . . . . . . 72
SECTION 11.2. Form of Documents Delivered to Indenture Trustee . . . . . . . . . . . . . . 73
SECTION 11.3. Acts of Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.4. Notices, etc. to Indenture Trustee, Issuer and Rating Agencies . . . . . . . 74
SECTION 11.5. Notices to Noteholders; Waiver . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.6. Alternate Payment and Notice Provisions . . . . . . . . . . . . . . . . . . . 76
SECTION 11.7. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.8. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . 76
SECTION 11.9. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.10. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.11. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.15. Recording of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.16. Trust Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.17. No Petition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.19. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE XII. RAPID AMORTIZATION EVENTS
SECTION 12.1. Rapid Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . 78
EXHIBITS
Exhibit A -- Form of Class A Note
Exhibit B -- Form of Monthly Report
</TABLE>
iv
<PAGE> 7
INDENTURE dated as of November 1, 1997, between ADVANTA
REVOLVING HOME EQUITY LOAN TRUST 1997-A, a Delaware business trust (the
"Issuer"), and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a national banking
association, as trustee (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's
Class A Asset Backed Notes (the "Class A Notes"):
As security for the payment and performance by the Issuer of
its obligations under this Indenture and the Class A Notes, the Issuer has
agreed to assign the Collateral (as defined below) to the Indenture Trustee on
behalf of the Noteholders.
Ambac Assurance Corporation (the "Insurer") has issued and
delivered a financial guaranty insurance policy, dated as of the Closing Date
(the "Policy"), pursuant to which the Insurer guarantees the Guaranteed
Distributions (as defined below).
As an inducement to the Insurer to issue and deliver the
Policy, the Issuer and the Insurer have executed and delivered the Insurance
Agreement, dated as of November 1, 1997 (as amended from time to time, the
"Insurance Agreement"), among the Insurer, the Issuer, Advanta Mortgage Conduit
Services, Inc. and the Indenture Trustee.
As an additional inducement to the Insurer to issue the
Policy, and as security for the performance by the Issuer of the Insurer Issuer
Secured Obligations and as security for the performance by the Issuer of the
Indenture Trustee Issuer Secured Obligations, the Issuer has agreed to grant
and assign the Collateral (as defined below) to the Indenture Trustee for the
benefit of the Issuer Secured Parties, as their respective interests may
appear.
<PAGE> 8
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, for the benefit of the Issuer Secured Parties all of the Issuer's
right, title and interest in and to (i) certain adjustable rate home equity
revolving credit line loans (the "Mortgage Loans") (including any Additional
Balances) made or to be made and conveyed to the Issuer under certain home
equity revolving credit line loan agreements ("Credit Line Agreements"); (ii)
collections in respect of the Mortgage Loans with due dates after the Initial
Cut-Off Date, (iii) property that secured a Mortgage Loan that has been
acquired by foreclosure or deed in lieu of foreclosure; (iv) rights of the
Sponsor under hazard insurance policies covering the Mortgaged Properties; (v)
the Policy; (vi) amounts on deposit in the Note Account; (vii) amounts on
deposit in the Pre-Funding Account; (viii) amounts on deposit in the
Capitalized Interest Account; (ix) amounts on deposit in the Principal and
Interest Account; (x) any and all Subsequent Mortgage Loans (including any
Additional Balances related thereto); (xi) all rights under the Purchase
Agreement assigned to the Issuer (including all representations and warranties
of the Originators contained therein) and all rights of the Issuer under the
Sale and Servicing Agreement; and (xii) any and all proceeds of the foregoing
(the foregoing, collectively, "Collateral").
The foregoing Grant is made in trust to the Indenture Trustee,
for the benefit first, of the Holders of the Notes, and second, for the benefit
of the Insurer. The Indenture Trustee hereby acknowledges such Grant, accepts
the trusts under this Indenture in accordance with the provisions of this
Indenture and agrees to perform the duties required of it by this Indenture to
the best of its ability to the end that the interests of such parties,
recognizing the priorities of their respective interests, may be adequately and
effectively protected.
ARTICLE I.
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Except as otherwise
specified herein, the following terms have the respective meanings set forth
below for all purposes of this Indenture. In addition, other capitalized terms
used herein and not defined herein shall have their respective meanings as set
forth in the Sale and Servicing Agreement.
"Accelerated Principal Payments": With respect to any
Payment Date, a payment received as a payment of principal by the Noteholders
of the Class A Notes, for the purpose of increasing the Overcollateralization
Amount to the Specified Overcollateralization Amount applicable to such Payment
Date, and to be paid from amounts remaining in the Note Account on such Payment
Date, after deduction of the amounts described in clauses (i) through (viii) of
Section 8.6(b) hereof on such Payment Date;
"Account": Any account established in accordance with
Section 8.3 hereof or Section 4.8 of the Sale and Servicing Agreement.
"Act" has the meaning specified in Section 11.3(a).
2
<PAGE> 9
"Affiliate" means, with respect to any specified Person,
any other Person controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" means the power to
direct the management and policies of a Person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AMHC": Advanta Mortgage Holding Company, a Delaware
corporation and the corporate parent of Advanta Mortgage Corp. USA, and the
indirect corporate parent of Advanta Mortgage Conduit Services, Inc.
"Authorized Newspapers": Any of the following, The Wall
Street Journal, the New York Times, the Washington Post, the Los Angeles Times
or such other newspaper determined by the Indenture Trustee in its sole
judgment.
"Authorized Officer": With respect to any Person, any
person who is authorized to act for such Person in matters relating to this
Agreement, and whose action is binding upon such Person and, with respect to
the Indenture Trustee, the Master Servicer and the Sponsor, initially including
those individuals whose names appear on the lists of Authorized Officers
delivered on the Closing Date.
"Available Funds": As defined in Section 8.4(a) hereof.
"Available Funds Shortfall": As defined in Section 8.4(b)
hereof.
"Billing Cycle": With respect to any Mortgage Loan and
Remittance Period, the billing period specified in the related Credit Line
Agreement and with respect to which amounts billed are received during such
Remittance Period.
"Book Entry Notes" means a beneficial interest in the
Notes, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.9.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York or
in the city in which the principal Corporate Trust Office of the Indenture
Trustee is located, are authorized or obligated by law or executive order to be
closed.
"Capitalized Interest Account": The Capitalized Interest
Account established in accordance with Section 8.3 hereof and maintained by the
Indenture Trustee.
"Capitalized Interest Account Deposit": $83,058.64.
"Capitalized Interest Amount": With respect to any
Determination Date, the amount on deposit in the Capitalized Interest Account.
3
<PAGE> 10
"Capitalized Interest Requirement": As to any Payment Date
occurring during the Pre-Funding Period, the difference, if any, between (x)
the interest due on the Class A Notes on such Payment Date plus the Premium
Amount, the Indenture Trustee's Fee and the Owner Trustee's Fee as of such
Payment Date and (y) the sum of (i) one month's interest on the aggregate
Principal Balances of all Mortgage Loans as of the close of business on the
last day of the immediately preceding Remittance Period, calculated at the
Class A Interest Rate, plus the Premium Amount, the Indenture Trustee's Fee and
the Owner Trustee's Fee as of such Payment Date and (ii) any Pre-Funding
Earnings to be transferred to the Note Account on such Payment Date pursuant to
Section 8.5(c) hereof.
"Certificate": As defined in the Trust Agreement.
"Certificate of Trust": means the certificate of trust of
the Issuer substantially in the form of Exhibit B to the Trust Agreement.
"Certificateholders": The holders of the Certificates
issued pursuant to the Trust Agreement.
"Civil Relief Act": The Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
"Class A Formula Rate": For any Interest Accrual Period,
(x) with respect to any Payment Date which occurs on or prior to the Optional
Redemption Date, LIBOR plus .20% per annum and (y) for any Payment Date
thereafter, LIBOR plus .40% per annum.
"Class A Interest Distribution Amount": With respect to
any Payment Date, the product of (x) one-twelfth of the Class A Interest Rate
applicable to such Payment Date and (y) the Class A Principal Balance
immediately prior to such Payment Date (based on a 360-day year and the actual
number of days in the prior calendar month).
"Class A Interest Rate": As to any Payment Date, the
lesser of (i) the Class A Formula Rate and (ii) the Net Funds Cap Rate.
"Class A Note": As defined in the Sale and Servicing
Agreement.
"Class A Note Balance": The Class A Principal Balance.
"Class A Principal Balance": As of any time of
determination, the Original Class A Principal Balance of the Class A Notes less
any amounts actually distributed theretofore as principal thereon to the Class
A Notes on all prior Payment Dates.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
4
<PAGE> 11
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date": November 20, 1997.
"Code": The Internal Revenue Code of 1986, as amended and
any successor statute.
"Collateral": As defined in the Recitals hereof.
"Combined Loan-to-Value Ratio" : With respect to any
Mortgage Loan as of any date, the percentage equivalent of a fraction, the
numerator of which is the sum of (i) the Credit Limit and (ii) the outstanding
principal balance as of the date of execution of the related Credit Line
Agreement (or as of any subsequent date, if any, as of which such outstanding
principal balance may be determined in connection with an increase in the
Credit Limit for such Mortgage Loan) of any mortgage loan or mortgage loans
that are senior in priority to the Mortgage Loan and which is secured by the
same Mortgaged Property and the denominator of which is the lesser of (i) the
Appraised Value of the related Mortgaged Property as set forth in the Mortgage
File on such date of execution or on such subsequent date, if any, or (ii) in
the case of a Mortgaged Property purchased within one year of such date of
execution, the purchase price thereof.
"Controlling Party" means the Insurer, so long as no
Insurer Default shall have occurred and be continuing, and the Indenture
Trustee, for so long as an Insurer Default shall have occurred and be
continuing.
"Corporate Trust Office": The Indenture Trustee's office
at 3 Park Plaza, 16th Floor, Irvine, California 92614.
"Credit Limit": As to any Mortgage Loan, the maximum
principal balance permitted under the terms of the related Credit Line
Agreement.
"Credit Limit Utilization Rate": As to any Mortgage Loan,
the percentage equivalent of a fraction the numerator of which is the Principal
Balance for such Mortgage Loan and the denominator of which is the related
Credit Limit.
"Credit Line Agreement": With respect to any Mortgage
Loan, the related home equity line of credit agreement, security instrument and
promissory note executed by the related Mortgagor and any amendment or
modification thereof.
"Cut-Off Date": With respect to each Initial Mortgage
Loan, the Initial Cut-Off Date. With respect to any Subsequent Mortgage Loan,
the Subsequent Cut-Off Date related to such Subsequent Mortgage Loan. With
respect to each Qualified Replacement Mortgage, the Replacement Cut-off Date
related to such Qualified Replacement Mortgage.
5
<PAGE> 12
"Cut-Off Date Pool Balance": The aggregate Principal
Balances of all the Mortgage Loans as of the related Cut-Off Date; as of the
Initial Cut-Off Date, $86,835,573.71.
"Cut-Off Date Principal Balance": With respect to any
Mortgage Loan, the unpaid principal balance thereof as of the related Cut-Off
Date.
"Debt Service Reduction": With respect to any Mortgage
Loan, a reduction by a court of competent jurisdiction of the Minimum Monthly
Payment due on such Mortgage Loan.
"Default" means any occurrence that is, or with notice or
the lapse of time or both would become, a Rapid Amortization Event.
"Deficiency Amount": (a) For any Payment Date, any
shortfalls in amounts available in the Note Account to pay, in full on such
Payment Date, the Class A Interest Distribution Amount (excluding any Net Funds
Cap Carry-Forward Amounts, any Prepayment Interest Shortfalls and any Relief
Act Shortfalls), and (b) for any Payment Date, any shortfalls in amounts
available in the Note Account to pay the Overcollateralization Deficit and (c)
on the Final Scheduled Payment Date, any shortfall in amounts available in the
Note Account to pay the outstanding Class A Principal Balance.
"Deficient Valuation": With respect to any Mortgage Loan,
a valuation of the related Mortgaged Property by a court of competent
jurisdiction in an amount less than the then outstanding Principal Balance of
the Mortgage Loan, which valuation results from a proceeding initiated under
the United States Bankruptcy Code.
"Definitive Notes" has the meaning specified in Section
2.9.
"Delinquent": A Mortgage Loan is "delinquent" if any
payment due thereon is not made by the close of business on the day such
payment is scheduled to be due. A Mortgage Loan is "30 days delinquent" if
such payment has not been received by the close of business on the
corresponding day of the month immediately succeeding the month in which such
payment was due, or, if there is no such corresponding day (e.g., as when a
30-day month follows a 31-day month in which a payment was due on the 31st day
of such month) then on the last day of such immediately succeeding month.
Similarly for "60 days delinquent," "90 days delinquent" and so on.
"Depository": The Depository Trust Company, 7 Hanover
Square, New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the
Principal and Interest Account, an institution whose deposits are insured by
the Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC,
the long-term deposits of which shall be rated (x) A or better by S&P and (y)
A2 or better by Moody's and in one of the two highest short-term rating
categories, unless otherwise approved in writing by the Insurer and each of
Moody's and S&P, and which is any of the following: (i) a federal savings and
loan association duly organized, validly existing and in good standing under
the federal banking laws, (ii) an institution duly
6
<PAGE> 13
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the
Insurer, Moody's and S&P and, in each case acting or designated by the Master
Servicer as the depository institution for the Principal and Interest Account;
provided, however, that any such institution or association shall have combined
capital, surplus and undivided profits of at least $100,000,000.
Notwithstanding the foregoing, the Principal and Interest Account may be held
by an institution otherwise meeting the preceding requirements except that the
only applicable rating requirement shall be that the unsecured and
uncollateralized debt obligations thereof shall be rated Baa3 or better by
Moody's if such institution has trust powers and the Principal and Interest
Account is held by such institution in its trust capacity and not in its
commercial capacity.
"Determination Date": As to each Payment Date, the third
Business Day next preceding such Payment Date or such earlier day as shall be
agreed to by the Insurer and Indenture Trustee.
"Direct Participant" or "DTC Participant": Any
broker-dealer, bank or other financial institution for which the Depository
holds the Class A Notes from time to time as a securities depository.
"Draw": With respect to any Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the related Cut-Off Date in accordance
with the related Credit Line Agreement.
"Draw Period": With respect to any Mortgage Loan, the
period of time specified in the related Credit Line Agreement whereby a
Mortgagor may make a Draw under the related Credit Line Agreement, not to
exceed three years unless extended pursuant to such Credit Line Agreement.
"Eligible Investments": Those investments so designated
pursuant to Section 8.8 hereof.
"ERISA" means Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the
Emergency Home Finance Act of 1970, as amended, or any successor thereof.
"Final Scheduled Payment Date": The Payment Date in
February 2024 whereby the Class A Noteholders of the Class A Notes shall be
entitled to receive a payment of principal in an amount equal to the
outstanding Class A Principal Balance. The Final Scheduled Payment
7
<PAGE> 14
Date is the date which is one year after the date which is the latest possible
maturity date of a Mortgage Loan which amortizes according to its terms.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Mortgaged Property.
"Fixed Allocation Percentage": 98%.
"Floating Allocation Percentage": The percentage
equivalent of a fraction, (i) the numerator of which is the excess of (a) the
Trust Collateral Value as of such Payment Date over (b) the Non-Subordinated
Originators' Interest as of such Payment Date and (ii) the denominator of which
is the Trust Collateral Value as of such Payment Date.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, create, grant a lien upon
and a security interest in and right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Collateral and all other
monies payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring proceedings in the name of the Granting party or otherwise
and generally to do and receive anything that the Granting party is or may be
entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a
Note is registered on the Note Register.
"Indebtedness" means, with respect to any Person at any
time, (a) indebtedness or liability of such Person for borrowed money whether
or not evidenced by bonds, debentures, notes or other instruments, or for the
deferred purchase price of property or services (including trade obligations);
(b) obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles,
recorded as capital leases; (c) current liabilities of such Person in respect
of unfunded vested benefits under plans covered by Title IV of ERISA; (d)
obligations issued for or liabilities incurred on the account of such Person;
(e) obligations or liabilities of such Person arising under acceptance
facilities; (f) obligations of such Person under any guarantees, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or otherwise to assure a creditor against
loss; (g) obligations of such Person secured by any lien on property or assets
of such Person, whether or not the obligations have been assumed by such
Person; or (h) obligations of such Person under any interest rate or currency
exchange agreement.
8
<PAGE> 15
"Indemnification Agreement": The Indemnification Agreement
dated as of November 20, 1997 among the Sponsor, the Insurer and the
Underwriter.
"Indenture" means this Indenture as amended and
supplemented from time to time.
"Indenture Trustee": Bankers Trust Company of California,
N.A., located on the date of execution of this Agreement at 3 Park Plaza, 16th
Floor, Irvine, California 92614, not in its individual capacity but solely as
Indenture Trustee under this Agreement, and any successor hereunder.
"Indenture Trustee's Fee": With respect to any Payment
Date, the product of (x) one-twelfth of .015% and (y) the Pool Balance as of
the end of the immediately preceding Remittance Period.
"Indenture Trustee Issuer Secured Obligations" means all
amounts and obligations which the Issuer may at any time owe to the Indenture
Trustee for the benefit of the Noteholders under this Indenture or the Notes.
"Independent" means, when used with respect to any
specified Person, that the person (a) is in fact independent of the Issuer, any
other obligor upon the Notes, the Sponsor and any Affiliate of any of the
foregoing persons, (b) does not have any direct financial interest or any
material indirect financial interest in the Issuer, any such other obligor, the
Sponsor or any Affiliate of any of the foregoing Persons and (c) is not
connected with the Issuer, any such other obligor, the Sponsor or any Affiliate
of any of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions.
"Independent Certificate" means a certificate or opinion to
be delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1, prepared
by an Independent appraiser or other expert appointed pursuant to an Issuer
Order and approved by the Indenture Trustee in the exercise of reasonable care,
and such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
"Indirect Participant" shall mean any financial institution
for whom any Direct Participant holds an interest in the Class A Notes.
"Initial Cut-Off Date": With respect to the Initial
Mortgage Loans, the opening of business on November 1, 1997.
"Initial Mortgage Loans": Mortgage Loans delivered by the
Sponsor to the Trust on the Closing Date.
"Initial Premium": The initial premium payable by the
Sponsor on behalf of the Trust to the Insurer in consideration of the delivery
to the Indenture Trustee of the Insurance Policy.
9
<PAGE> 16
"Initial Specified Overcollateralization Amount": As
defined in the Insurance Agreement.
"Insurance Agreement": The Insurance Agreement dated as of
November 20, 1997 among the Sponsor, the Master Servicer, the Indenture Trustee
and the Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage
insurance policy relating to a Mortgage Loan.
"Insurance Proceeds": Proceeds paid by any insurer (other
than the Insurer) pursuant to any Insurance Policy covering a Mortgage Loan, or
amounts required to be paid by the Master Servicer pursuant to the last
sentence of the first paragraph of Section 4.11(b) of the Sale and Servicing
Agreement, or the penultimate sentence of Section 4.11(c) of the Sale and
Servicing Agreement, net of any component thereof (i) covering any expenses
incurred by or on behalf of the Master Servicer in connection with obtaining
such proceeds, (ii) that is applied to the restoration or repair of the related
Mortgaged Property, (iii) released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures, or (iv) required to be paid to
any holder of a mortgage senior to such Mortgage Loan.
"Insured Payment": As of any Payment Date, (i) any
Deficiency Amount and (ii) any Preference Amount.
"Insurer": Ambac Assurance Corporation or any successor
thereto, as issuer of the Policy.
"Insurer Default" means the failure by the Insurer to make
a payment required under the Policy in accordance with the terms thereof.
"Insurer Issuer Secured Obligations" means all amounts and
obligations which the Issuer may at any time owe to or on behalf of the Insurer
under this Indenture, the Insurance Agreement or any other Operative Document.
"Interest Accrual Period": With respect to the Class A
Notes, the period commencing on the prior Payment Date (or on the Closing Date
with respect to the December 26, 1997 Payment Date) and ending on the day
immediately preceding such Payment Date.
"Interest Collections": For any Payment Date, amounts
collected during the related Remittance Period, including the portion of Net
Liquidation Proceeds allocated to interest pursuant to the terms of the Credit
Line Agreements, less the Servicing Fee for the related Remittance Period.
"Interest Determination Date": With respect to any
Interest Accrual Period for the Class A Notes (other than the initial Interest
Accrual Period), the second London Business Day preceding such first day of
such Interest Accrual Period.
10
<PAGE> 17
"Interest Remittance Amount": As of any Remittance Date,
the sum, without duplication, of (i) all interest collected by the Master
Servicer during the related Remittance Period with respect to the Mortgage
Loans (net of the Servicing Fee), except that with respect to Prepaid
Installments, interest shall be remitted in the related Remittance Period and
(ii) all Net Liquidation Proceeds actually collected by the Master Servicer
with respect to the Mortgage Loans during the related Remittance Period (to the
extent such Net Liquidation Proceeds relate to interest).
"Issuer" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the Notes.
"Issuer Order" and "Issuer Request" means a written order
or request signed in the name of the Issuer by any one of its Authorized
Officers and delivered to the Indenture Trustee.
"Issuer Secured Obligations" means the Insurer Issuer
Secured Obligations and the Indenture Trustee Issuer Secured Obligations.
"Issuer Secured Parties" means each of the Indenture
Trustee in respect of the Indenture Trustee Issuer Secured Obligations and the
Insurer in respect of the Insurer Issuer Secured Obligations.
"Late Payment Rate": For any Payment Date, the rate of
interest, as it is publicly announced by Citibank, N.A. at its principal
office in New York, New York as its prime rate (any change in such prime rate
of interest to be effective on the date such change is announced by Citibank,
N.A.) plus 2%. The Late Payment Rate shall be computed on the basis of a year
of 365 days calculating the actual number of days elapsed. In no event shall
the Late Payment Rate exceed the maximum rate permissible under any applicable
law limiting interest rates.
"LIBOR": With respect to any Interest Accrual Period for
the Class A Notes, the rate determined by the Indenture Trustee on the related
Interest Determination Date appearing on the Telerate Screen Page 3750, as of
11:00 AM, London Time, on the second LIBOR Business Day prior to the first day
of such Interest Accrual Period. If such rate does not appear on such page (or
such other page as may replace that page on that service, or if such service is
no longer offered, such other service for displaying LIBOR or comparable rates
as may be selected by the Sponsor after consultation with the Indenture
Trustee), the rate will be the Reference Bank Rate.
"LIBOR Business Day": Any day other than (i) a Saturday or
a Sunday or (ii) a day on which banking institutions in the State of New York
or in the city of London, England are required or authorized by law to be
closed.
"Lifetime Rate Cap": With respect to each Mortgage Loan
with respect to which the related Credit Line Agreement provides for a lifetime
rate cap, the maximum Loan Rate permitted over the life of such Mortgage Loan
under the terms of the related Credit Line Agreement.
11
<PAGE> 18
"Liquidated Mortgage Loan": As defined in the Sale and
Servicing Agreement.
"Liquidation Expenses": Expenses which are incurred by the
Master Servicer or any Sub-Servicer in connection with the liquidation of any
defaulted Mortgage Loan, such expenses, including, without limitation, legal
fees and expenses, and any unreimbursed Servicing Advances expended by the
Master Servicer or any Sub-Servicer pursuant to Section 4.9 of the Sale and
Servicing Agreement with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated
Mortgage Loan, any amounts (including the proceeds of any Insurance Policy but
excluding any amounts drawn on the Insurance Policy) recovered by the Master
Servicer in connection with such Liquidated Mortgage Loan, whether through
Indenture Trustee's sale, foreclosure sale or otherwise.
"Loan Rate": With respect to any Mortgage Loan and as of
any day, the per annum rate of interest applicable under the related Credit
Line Agreement to the calculation of interest for such day on the Principal
Balance of such Mortgage Loan.
"Loan Rate Cap": With respect to each Mortgage Loan, the
lesser of (i) the Lifetime Rate Cap, if any, or (ii) the applicable state usury
ceiling, if any.
"London Business Day": A day on which banks are open for
dealing in foreign currency, and exchange in London and New York City.
"Managed Amortization Period": The Period commencing on
December 26, 1997 and ending on the earlier to occur of (x) the December, 2000
Payment Date and (y) the Payment Date which immediately precedes the occurrence
of a Rapid Amortization Event.
"Margin": With respect to each Mortgage Loan with an
adjustable rate, the fixed percentage amount set forth in the related Credit
Line Agreement which amount is added to Prime in accordance with the terms of
the related Credit Line Agreement to determine, on each Interest Determination
Date, the Loan Rate for such Mortgage Loan, subject to any maximum.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Master Servicer Affiliate": A Person (i) controlling,
controlled by or under common control with the Master Servicer and (ii) which
is qualified to service residential mortgage loans.
"Maximum Principal Payment": With respect to any Payment
Date, the Fixed Allocation Percentage of the Principal Collections relating to
such Payment Date.
"Maximum Step-Down Amount": As of any Payment Date, the
excess of (i) the aggregate, cumulative amount of Overcollateralization Release
Amounts for such current, and all prior, Payment Dates over (ii) the aggregate,
cumulative amount of all payments made with respect to Step-Down Amounts for
all prior Payment Dates; provided, that for any Payment Date
12
<PAGE> 19
on which the Specified Overcollateralization Amount exceeds the
Overcollateralization Amount, the Step-Down Amount will be reduced (but not
below zero) by the amount of any such excess.
"Minimum Monthly Payment": With respect to any Mortgage
Loan and any month, the minimum amount required to be paid by the related
Mortgagor in that month.
"Minimum Originators' Interest": With respect to any date,
an amount equal to 2% of the Trust Collateral Value.
"Monthly Remittance Amount": As of any Remittance Date,
the sum of (i) the Interest Remittance Amount for such Remittance Date and (ii)
the Principal Remittance Amount for such Remittance Date.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing a Credit Line Agreement.
"Mortgage Files": As defined in the Sale and Servicing
Agreement.
"Mortgage Loans": As defined in the Sale and Servicing
Agreement.
"Mortgagor": The obligor on a Credit Line Agreement.
"Net Funds Cap Carry-Forward Amount": In the event that,
on any Payment Date, the Net Funds Cap Rate is less than the Class A Formula
Rate (i.e., the Class A Interest Rate equals the Net Funds Cap Rate), the
excess of the amount of interest due based on the Class A Formula Rate, over
the interest due based on the Net Funds Cap Rate, together with interest
thereon at the then-applicable Class A Formula Rate.
"Net Funds Cap Rate": For any Interest Accrual Period, (x)
the fraction, expressed as an annual percentage rate, (i) the numerator of
which is twelve times the interest due on the Mortgage Loans during the prior
Remittance Period, net of the amount of Prepayment Interest Shortfalls, Relief
Act Shortfalls, Servicing Fee, Indenture Trustee's Fee, Owner Trustee's Fee and
Premium Amount for the related Remittance Period and (ii) the denominator of
which is the Trust Collateral Value immediately prior to the related Payment
Date (y) less, commencing on the tenth Payment Date, 0.50%.
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of, without duplication, Liquidation Expenses
and unreimbursed Servicing Advances and accrued and unpaid Servicing Fees
through the date of liquidation relating to such Liquidated Mortgage Loan. In
no event shall Net Liquidation Proceeds with respect to any Liquidated Mortgage
Loan be less than zero.
"Net Principal Collections": With respect to any Payment
Date, the excess of (x) Principal Collections with respect to the related
Remittance Period over (y) the aggregate
13
<PAGE> 20
principal amount of all Additional Balances arising during such related
Remittance Period; provided that in no event will Net Principal Collections be
less than zero with respect to any Payment Date.
"Non-Subordinated Originators' Interest": As of any date
of determination, that portion of the Originators' Interest which is not
represented by the Specified Overcollateralization Amount as of such date.
"Note" means a Class A Note.
"Note Account": The Note Account established in accordance
with Section 8.3 hereof and maintained by the Indenture Trustee.
"Note Owner" means, with respect to a Book-Entry Note, the
person who is the owner of such Book-Entry Note or following the issuance of
Definitive Notes, the registered owner of the Notes.
"Note Paying Agent" means the Indenture Trustee or any
other Person that meets the eligibility standards for the Indenture Trustee
specified in Section 6.11 and is authorized by the Issuer to make payments to
and distributions from the Note Account, including payment of principal of or
interest on the Notes on behalf of the Issuer.
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 2.3.
"Officer's Certificate" means a certificate signed by any
Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 and TIA
Section 314, and delivered to the Indenture Trustee.
"Operative Documents": Collectively, this Indenture, the
Trust Agreement, the Sale and Servicing Agreement, the Subsequent Transfer
Agreements, the Insurance Policy, the Class A Notes, the Indemnification
Agreement and the Insurance Agreement.
"Opinion of Counsel" means one or more opinions of counsel
who may, except as otherwise expressly provided in this Indenture, be employees
of or counsel to the Issuer and, if addressed to the Insurer, satisfactory to
the Insurer, and which shall comply with any applicable requirements of Section
11.1, and if addressed to the Insurer, satisfactory to the Insurer.
"Optional Redemption Date": The date on which the Sponsor
exercises its right of optional redemption of the Class A Notes pursuant to
Section 10.1(b) herein.
"Original Class A Principal Balance": $100,000,000.
"Original Cut-Off Date Pool Balance": The Pool Balance
calculated as of the Initial Cut-Off Date.
14
<PAGE> 21
"Original Pre-Funded Amount": The amount deposited in the
Pre-Funding Account on the Closing Date, from the proceeds of the sale of the
Class A Notes, which amount is $15,205,242.62.
"Original Principal Amount": With respect to any
particular Class A Note, an amount equal to the product of (i) the Percentage
Interest of such Class A Note and (ii) the Original Class A Principal Balance.
"Original Principal Balance": With respect to each Credit
Line Agreement, the principal amount of such Credit Line Agreement or the
mortgage note relating to a Senior Lien, as the case may be, on the date of
origination thereof.
"Originators": Advanta National Bank and Advanta Finance
Corp.
"Originators' Current Amount": On any Payment Date the sum
of (I) the product of (x) 100% minus the Floating Allocation Percentage for
such Payment Date and (y) Interest Collections for such Payment Date plus (II)
the product of (x) the difference between (i) during the Managed Amortization
Period, the Net Principal Collections on the Mortgage Loans received during the
related Remittance Period, and during the Rapid Amortization Period, the
Principal Collections on the Mortgage Loans received during the related
Remittance Period, and (ii) during the Managed Amortization Period, the lesser
of the Net Principal Collections and the Maximum Principal Payment for such
Payment Date, and during the Rapid Amortization Period, the Maximum Principal
Payment for such Payment Date and (y) a fraction, equal to the Non-Subordinated
Originators' Interest divided by the Originators' Interest.
"Originators' Interest": As of any Payment Date, is the
excess, if any, of (x) the Trust Collateral Value as of such Payment Date over
(y) the Class A Principal Balance as of such Payment Date (after taking into
account reductions therein on such Payment Date).
"Outstanding": With respect to all Notes, as of any date of
determination, all such Notes theretofore executed and delivered hereunder
except:
Notes theretofore cancelled by the
Indenture Trustee or delivered to the Indenture Trustee for
cancellation;
Notes or portions thereof for which full
and final payment money in the necessary amount has been
theretofore deposited with the Indenture Trustee in trust
for the Class A Noteholders of such Notes;
Notes in exchange for or in lieu of which
other Notes have been executed and delivered pursuant to
this Agreement, unless proof satisfactory to the Indenture
Trustee is presented that any such Notes are held by a bona
fide purchaser; and
Notes alleged to have been destroyed,
lost or stolen for which replacement Notes have been issued
as provided for in Section 2.4 hereof.
"Overcollateralization Amount": As of any Payment Date,
the lesser of (x) the Originators' Interest as of such date and (y) the
Specified Overcollateralization Amount for such Payment Date.
15
<PAGE> 22
"Overcollateralization Deficiency Amount": With respect to
any Payment Date, the difference, if any, between (i) the Specified
Overcollateralization Amount applicable to such Payment Date and (ii) the
Overcollateralization Amount applicable to such Payment Date.
"Overcollateralization Deficit": With respect to any
Payment Date, the amount, if any, by which (i) the aggregate Class A Principal
Balance, after taking into account the payment to the Class A Noteholders of
the Class A Notes of all principal from sources other than the Insurance Policy
on such Payment Date, exceeds (ii) the excess of (x) the Trust Collateral Value
as of such Payment Date over (y) the Non-Subordinated Originators' Interest as
of such Payment Date.
"Overcollateralization Release Amount": With respect to
any Payment Date on which the Originators' Interest is greater than the
Specified Overcollateralization Amount, if the Specified Overcollateralization
Amount is reduced, the corresponding increase in the Non-Subordinated
Originators' Interest which shall be equal to the reduction in the Specified
Overcollateralization Amount.
"Owner Trustee": Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust
Agreement.
"Owner Trustee's Fee": A fee which is separately agreed to
between the Sponsor and the Owner Trustee.
"Payment Date": Any date on which the Indenture Trustee is
required to make distributions to the Class A Noteholders, which shall be the
25th day of each month, commencing in the month following the Closing Date or,
if such day is not a Business Day, then on the succeeding Business Day.
"Percentage Interest": As to any Class A Note that
percentage, expressed as a fraction, the numerator of which is the Class A
Principal Balance of such Class A Note as of the related Cut-Off Date and the
denominator of which is the Original Class A Principal Balance of all Class A
Notes; and as to any Certificate, that Percentage Interest set forth on such
Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Policy": The financial guaranty insurance policy dated
November 20, 1997, issued by the Insurer to the Indenture Trustee for the
benefit of the Noteholders.
"Policy Claim Amount": With respect to any Payment Date,
an amount equal to the related Available Funds Shortfall plus the related
Preference Amount.
"Pool Balance": With respect to any date, the Principal
Balances of the Mortgage Loans as of such date.
16
<PAGE> 23
"Pool Factor": A seven-digit decimal which the Indenture
Trustee shall compute monthly expressing the Class A Principal Balance as of
each Payment Date (after giving effect to any distribution of principal on such
Payment Date) as a proportion of the Original Class A Principal Balance. On
the Closing Date, the Pool Factor will be 1.0000000. Thereafter, the Pool
Factor shall decline to reflect reductions in the related Class A Principal
Balance resulting from distributions of principal to the Class A Notes.
"Predecessor Note" means, with respect to any particular
Note, every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.4 in lieu of a mutilated,
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Preference Amount": As defined in the Policy.
"Pre-Funded Amount": With respect to any Determination
Date, the amount on deposit in the Pre-Funding Account.
"Pre-Funded Mortgage Loans": Subsequent Mortgage Loans
assigned to the Trust in consideration of amounts released to the Originators
from the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established
in accordance with Section 8.3 hereof and maintained by the Indenture Trustee.
"Pre-Funding Earnings": With respect to any Payment Date,
the actual investment earnings then on deposit in the Pre-Funding Account.
"Pre-Funding Period": The period commencing on the Closing
Date and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which a Rapid Amortization Event occurs
and (iii) February 20, 1998.
"Pre-Funding Transfer Date": Any Subsequent Transfer Date
on which Pre-Funded Mortgage Loans are assigned to the Trust.
"Premium Amount": As to any Payment Date, the product of
(x) one-twelfth of the Premium Percentage and (y) the Class A Principal Balance
on such Payment Date (before taking into account any distributions of the
Scheduled Principal Distribution Amount to be made on such Payment Date).
"Premium Percentage": As defined in the Insurance
Agreement.
"Prepaid Installment": With respect to any Mortgage Loan,
any installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
17
<PAGE> 24
"Prepayment": Any payment of principal of a Mortgage Loan
which is received by the Master Servicer in advance of the scheduled due date
for the payment of such principal (other than the principal portion of any
Prepaid Installment), and the proceeds of any Insurance Policy which are to be
applied as a payment of principal on the related Mortgage Loan shall be deemed
to be Prepayments for all purposes of this Agreement.
"Prepayment Interest Shortfall": With respect to any
Remittance Period, for each Mortgage Loan that was the subject during the
related Remittance Period of a Prepayment, an amount equal to the excess, if
any, of (i) 30 days' interest on the Principal Balance of such Mortgage Loan as
of the first day of such Remittance Period at a per annum rate equal to the
Loan Rate (or at such lower rate as may be in effect for such Mortgage Loan
pursuant to application of the Civil Relief Act, any Deficient Valuation and/or
any Debt Service Reduction) minus the Servicing Fee over (ii) the amount of
interest actually remitted by the Mortgagor in connection with such Prepayment
less the Servicing Fee for such Mortgage Loan in such month.
"Preservation Expenses": Expenditures made by the Master
Servicer or any Sub-Servicer in connection with a foreclosed Mortgage Loan
prior to the liquidation thereof, including, without limitation, expenditures
for real estate property taxes, hazard insurance premiums, property restoration
or preservation.
"Prime": The Prime rate of interest charged from time to
time as set forth in the related Credit Line Agreement.
"Principal and Interest Account": Collectively, each
principal and interest account created by the Master Servicer or any
Sub-Servicer pursuant to Section 4.8(a) of the Sale and Servicing Agreement.
"Principal Balance": As to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any date, the related Cut-Off Date
Principal Balance, plus (i) any Additional Balance in respect of such Mortgage
Loan, minus (ii) all collections credited as principal against the Principal
Balance of any such Mortgage Loan in accordance with the related Credit Line
Agreement prior to such day. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have a Principal Balance of zero as of the
first day of the Remittance Period following the Remittance Period in which
such Mortgage Loan becomes a Liquidated Mortgage Loan and at all times
thereafter.
"Principal Collections": As to any Payment Date, the sum
of all payments by or on behalf of Mortgagors and any other amounts
constituting principal (including, but not limited to, and Substitution Amounts
any portion of Insurance Proceeds or Net Liquidation Proceeds allocable to
principal of the applicable Mortgage Loan, but excluding Foreclosure Profits)
collected by the Master Servicer under the Mortgage Loans during the related
Remittance Period. The terms of the related Credit Line Agreement shall
determine the portion of each payment in respect of a Mortgage Loan that
constitutes principal or interest.
"Principal Remittance Amount": As of any Remittance Date,
the sum, without duplication, of (i) the principal actually collected by the
Master Servicer with respect to
18
<PAGE> 25
Mortgage Loans during the related Remittance Period, (ii) the Principal Balance
of each such Mortgage Loan that either was repurchased by the Originators or
purchased by the Master Servicer on such Remittance Date, to the extent such
Principal Balance was actually deposited in the Principal and Interest Account,
(iii) any Substitution Amounts delivered by the Originators in connection with
a substitution of a Mortgage Loan, to the extent such Substitution Amounts were
actually deposited in the Principal and Interest Account on such Remittance
Date, and (iv) all Net Liquidation Proceeds actually collected by the Master
Servicer with respect to the Mortgage Loans during the related Remittance
Period (to the extent such Liquidation Proceeds related to principal).
"Proceeding" means any suit in equity, action at law or
other judicial or administrative proceeding.
"Prospectus": That certain Prospectus dated October 30,
1997 naming Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage Corp.
USA as registrants and describing certain mortgage loan asset-backed securities
to be issued from time to time as described in related Prospectus Supplements.
"Prospectus Supplement": That certain Prospectus
Supplement dated November 14, 1997, describing the Class A Notes issued by the
Trust.
"Purchase Agreement" means the Mortgage Loan Purchase
Agreement dated as of November 1, 1997 between the Originators and the Sponsor
with respect to the Mortgage Loans.
"Rapid Amortization Commencement Date": The earlier of (i)
the Payment Date in December, 2000, and (ii) the Payment Date next succeeding
the Remittance Period in which a Rapid Amortization Event is deemed to occur
pursuant to Section 12.1.
"Rapid Amortization Event": As defined in Section 12.1.
"Rapid Amortization Period": The period which follows the
earlier to occur of (x) the end of the Managed Amortization Period and (y) the
occurrence of a Rapid Amortization Event.
"Rating Agency" means Moody's and Standard & Poor's. If
such agency or a successor is no longer in existence, "Rating Agency" shall be
such statistical credit rating agency, or other comparable Person, designated
by the Sponsor and the Insurer, notice of which designation shall be given to
the Indenture Trustee. References herein to the highest short term unsecured
rating category of a Rating Agency shall means A1+ or better in the case of
Standard & Poor's and P1 or better in the case of Moody's, and in the case of
any other Rating Agency shall mean the ratings such other Rating Agency deems
equivalent to the foregoing ratings. References herein to the highest
long-term rating category of a Rating Agency shall mean "AAA" in the case of
Standard & Poor's and "Aaa" in the case of Moody's, and in the case of any
other Rating Agency, the rating such other Rating Agency deems equivalent to
the foregoing ratings.
19
<PAGE> 26
"Realized Loss": As to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance thereof as of the date of
liquidation is in excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last
Business Day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs.
"Redemption Date" means, in the case of a redemption of the
Notes pursuant to Section 10.1(a), the Payment Date specified by the Master
Servicer or the Issuer pursuant to Section 10.2(a).
"Redemption Price" means, in the case of a redemption of
the Notes pursuant to Section 10.1(a), an amount equal to the unpaid principal
amount of the then outstanding principal amount of each class of Notes being
redeemed plus accrued and unpaid interest thereon to but excluding the
Redemption Date.
"Reference Bank Rate" shall be determined on the basis of
the rates at which deposits in U.S. Dollars are offered by the reference banks
(which shall be three major banks that are engaged in transactions in the
London interbank market, selected by the Sponsor after consultation with the
Indenture Trustee) as of 11:00 A.M., London time, on the day that is two LIBOR
Business Days prior to the immediately preceding Payment Date to prime banks in
the London interbank market for a period of one month in amounts approximately
equal to the principal amount of the Class A Notes then outstanding. The
Indenture Trustee will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the
quotations. If on such date fewer than two quotations are provided as
requested, the rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Sponsor after consultation
with the Indenture Trustee, as of 11:00 A.M., New York City time, on such date
for loans in U.S. Dollars to leading European banks for a period of one month
in amounts approximately equal to the principal amount of the Class A Notes
then outstanding. If no such quotations can be obtained, the rate will be
LIBOR for the prior Payment Date.
"Reference Banks": Bankers Trust Company, Barclay's Bank
PLC, The Bank of Tokyo and National Westminster Bank PLC; provided that if any
of the foregoing banks are not suitable to serve as a Reference Bank, then any
leading banks selected by the Indenture Trustee which are engaged in
transactions in Eurodollar deposits in the international Eurocurrency market
(i) with an established place of business in London, (ii) not controlling,
under the control of or under common control with the Originators or any
affiliate thereof, (iii) whose quotations appear on the Telerate Screen Page
3750 on the relevant Interest Determination Date and (iv) which have been
designated as such by the Indenture Trustee.
"Registration Statement": The Registration Statement filed
by the Sponsor with the Securities and Exchange Commission, including all
amendments thereto and including the Prospectus and the Prospectus Supplement
relating to the Class A Notes constituting a part thereof.
20
<PAGE> 27
"Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all payments made pursuant to the Policy previously received by the
Indenture Trustee and all Preference Amounts previously paid to the Indenture
Trustee by the Insurer and in each case not previously repaid to the Insurer
pursuant to Section 8.6(b)(viii) hereof plus (ii) interest accrued on each such
payment made pursuant to the Policy not previously repaid calculated at the
Late Payment Rate from the date the Indenture Trustee received the related
payment made pursuant to the Policy and (y)(i) any amounts then due and owing
to the Insurer under the Insurance Agreement plus (ii) interest on such amounts
at the Late Payment Rate. The Insurer shall notify the Indenture Trustee and
the Sponsor of the amount of any Reimbursement Amount.
"Relief Act Shortfall": With respect to any Remittance
Period, for any Mortgage Loan as to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Remittance
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (i) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (ii) the sum of (a) one month's
interest on the Principal Balance of such Mortgage Loan at the rate equal to
the sum of the Class A Interest Rate, the rate at which the Indenture Trustee's
Fee is calculated and the Premium Percentage, plus (b) the aggregate Servicing
Fee for such Mortgage Loan payable to the Master Servicer in such calendar
month.
"Remittance Date": Any date on which the Master Servicer
is required to remit monies on deposit in the Principal and Interest Account to
the Indenture Trustee, which shall be the 18th day or, if such day is not a
Business Day, the next preceding Business Day, of each month, commencing in the
month following the month in which the Closing Date occurs.
"Remittance Period": As to any Payment Date, the calendar
month preceding the month of such Payment Date.
"REO Property": A Mortgaged Property acquired by the
Master Servicer or any Sub-Servicer on behalf of the Trust through foreclosure
or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or
agreements with, the Depository to effectuate a book entry system with respect
to the Class A Notes registered in the Register under the nominee name of the
Depository.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement dated as of November 1, 1997, among the Issuer, the Sponsor, the
Master Servicer and the Indenture Trustee, as the same may be amended or
supplemented from time to time.
21
<PAGE> 28
"Schedule of Mortgage Loans": The Schedule of Mortgage
Loans, attached hereto as Schedule II, as it may be further supplemented in
connection with Subsequent Transfers.
"Scheduled Principal Distribution Amount": On any Payment
Date during the Managed Amortization Period, the excess (but in no event less
than zero) of (x) the lesser of (i) the Maximum Principal Payment and (ii) the
Net Principal Collections over (y) the Step-Down Amount, if any, with respect
to such Payment Date. Beginning with the first Payment Date in the Rapid
Amortization Period, the excess of (x) the Maximum Principal Payment over (y)
the Step-Down Amount, if any, with respect to such Payment Date.
"Second Mortgage Loan": A Mortgage Loan which constitutes
a second priority mortgage lien with respect to the related Mortgaged Property.
"Securities Act": The Securities Act of 1933, as amended.
"Servicing Advance": As defined in the Sale and Servicing
Agreement.
"Servicing Fee": With respect to any Payment Date, the
product of (i) one-twelfth of the Servicing Fee Rate and (ii) the aggregate
Principal Balance of the Mortgage Loans on the first day of the Remittance
Period preceding such Payment Date (or at the Cut-Off Date with respect to the
first Payment Date).
"Servicing Fee Rate": 0.50% per annum.
"Specified Overcollateralization Amount": As defined in
the Insurance Agreement.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a
Delaware Corporation.
"Standard & Poor's": Standard & Poor's Rating Group, a
division of The McGraw Hill Companies.
"Step-Down Amount": As of any Payment Date, the lesser of
(x) the Maximum Step-Down Amount for such Payment Date and (y) the Maximum
Principal Payment or the Net Principal Collections as applicable to such
Payment Date; provided, that for any Payment Date on which the Specified
Overcollateralization Amount exceeds the Overcollateralization Amount, the
Step-Down Amount shall be reduced (but not below zero) by the amount of any
such excess.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loan, the opening of business on the first day of the calendar month
in which the related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loans" As defined in the Sale and
Servicing Agreement.
22
<PAGE> 29
"Subsequent Transfer Agreement": Each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Indenture
Trustee and the Sponsor substantially in the form of Exhibit L of the Sale and
Servicing Agreement, by which Subsequent Mortgage Loans are assigned to the
Trust.
"Subsequent Transfer Date": The date specified in each
Subsequent Transfer Agreement, which must, with respect to any Payment Date, be
a date occurring during the calendar month in which such Payment Date occurs,
at least [five Business Days] prior to the Remittance Date occurring in such
month.
"Substitution Amount": In connection with the delivery of
any Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Principal Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Loan Rate net of
the Servicing Fee, if any, of the Mortgage Loan being replaced.
"Telerate Screen Page 3750": The display designated as
page 3750 on the Telerate Service (or such other page as may replace page 3750
on that service for the purpose of displaying London interbank offered rates of
major banks).
"Termination Date" means the latest of (i) the termination
of the Policy and the return of the Policy to the Insurer for cancellation,
(ii) the date on which the Insurer shall have received payment and performance
of all Insurer Issuer Secured Obligations and (iii) the date on which the
Indenture Trustee shall have received payment and performance of all Indenture
Trustee Issuer Secured Obligations.
"Trust": Advanta Revolving Home Equity Loan Trust 1997-A.
"Trust Agreement": The Trust Agreement dated as of
November 1, 1997 between the Issuer and the Sponsor.
"Trust Collateral Value": As of any Payment Date, the sum
of (i) the Pool Balance at the end of the prior calendar month, (ii) the
aggregate Principal Balances as of the related Cut-Off Dates of all Subsequent
Mortgage Loans previously assigned to the Trust during the calendar month in
which such Payment Date occurs and (iii) the amounts, if any, on deposit in the
Pre-Funding Account at the close of business on such Payment Date.
"Trust Estate": Collectively, all money, instruments and
other property, to the extent such money, instruments and other property are
subject or intended to be held in trust, and in the subtrusts, for the benefit
of the Class A Noteholders and the Insurer, including all proceeds thereof
including, without limitation, (i) the Initial Mortgage Loans, Qualified
Replacement Mortgages and Subsequent Mortgage Loans, (ii) such amounts,
including Eligible Investments, as from time to time may be held in all
Accounts (except as otherwise provided herein), (iii) any Mortgaged Property,
the Class A Noteholdership of which has been effected on behalf of the Trust as
a result of foreclosure or acceptance by the Master Servicer or any
Sub-Servicer of a
23
<PAGE> 30
deed in lieu of foreclosure and that has not been withdrawn from the Trust,
(iv) any Insurance Policies relating to the Mortgage Loans and any rights of
the Trust and the Originators under any Insurance Policies, (v) Net Liquidation
Proceeds with respect to any Liquidated Mortgage Loan, (vi) the Insurance
Policy, (vii) such amounts held in the Capitalized Interest Account, and (viii)
such amounts held in the Pre-Funding Account, the Principal and Interest
Account and the Note Account.
"Trust Indenture Act" or "TIA" means the Trust Indenture
Act of 1939, as amended and as in force on the date hereof, unless otherwise
specifically provided.
"UCC" means, unless the context otherwise requires, the
Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended
from time to time.
"Underwriter": J.P. Morgan Securities Inc.
"Unpaid Class A Note Interest Shortfall": As of any
Payment Date, the amount, if any, by which (x) the Class A Interest
Distribution Amount for the prior Payment Date, plus the Unpaid Class A Note
Interest Shortfall, if any, with respect to such prior Payment Date, exceeded
(y) the amount actually distributed to the Noteholders pursuant to Section
8.6(b)(iv) on such prior Payment Date.
Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the Sale and Servicing
Agreement or the Trust Agreement.
SECTION 1.2. Incorporation by Reference of the Trust
Indenture Act. Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined
by the TIA, or defined by Commission rule have the meaning assigned to them by
such definitions.
SECTION 1.3. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
24
<PAGE> 31
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words
in the plural include the singular.
SECTION 1.4. Action by or Consent of Noteholders.
Whenever any provision of this Agreement refers to action to be taken, or
consented to, by Noteholders, such provision shall be deemed to refer to the
Noteholder of record as of the Record Date immediately preceding the date on
which such action is to be taken, or consent given, by Noteholders. Solely for
the purposes of any action to be taken, or consented to, by Noteholders, any
Note registered in the name of Headlands Mortgage Company or any Affiliate
thereof shall be deemed not to be outstanding; provided, however, that, solely
for the purpose of determining whether the Indenture Trustee or the Owner
Trustee is entitled to rely upon any such action or consent, only Notes which
the Owner Trustee or the Indenture Trustee, respectively, knows to be so owned
shall be so disregarded.
SECTION 1.5. Conflict with TIA. If any provision
hereof limits, qualifies or conflicts with a provision of the TIA that is
required under the TIA to be part of and govern this Indenture, the latter
provision shall control and all provisions required by the TIA are hereby
incorporated by reference. If any provision of this Indenture modifies or
excludes any provision of the TIA that may be so modified or excluded, the
latter provisions shall be deemed to apply to this Indenture as so modified or
to be excluded, as the case may be.
ARTICLE II.
The Notes
SECTION 2.1. Form. The Class A Notes, together
with the Indenture Trustee's certificate of authentication, shall be in
substantially the form set forth in Exhibit A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
Each Note shall be dated the date of its authentication.
The terms of the Note set forth in Exhibit A are part of the terms of this
Indenture.
25
<PAGE> 32
SECTION 2.2. Execution, Authentication and Delivery.
The Notes shall be executed on behalf of the Issuer by any of its Authorized
Officers. The signature of any such Authorized Officer on the Notes may be
original or facsimile.
Notes bearing the original or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
The Indenture Trustee, upon receipt of a written Issuer
Order, shall authenticate and deliver Class A Notes for original issue in an
aggregate principal amount of $100,000,000. The Class A Notes outstanding at
any time may not exceed such amounts except as provided in Section 2.6.
Each Note shall be dated the date of its authentication.
The Notes shall be issuable as registered Notes in the minimum denomination of
$1000 and in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there appears
attached to such Note a certificate of authentication substantially in the form
provided for herein executed by the Indenture Trustee by the manual signature
of one of its authorized signatories, and such certificate attached to any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Subject to Section 2.11, the Notes
shall be Book-Entry Notes.
SECTION 2.3. Registration; Registration of Transfer
and Exchange. The Issuer shall cause to be kept a register (the "Note
Register") in which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Notes and the
registration of transfers of Notes. The Indenture Trustee shall be "Note
Registrar" for the purpose of registering Notes and transfers of Notes as
herein provided. Upon any resignation of any Note Registrar, the Issuer shall
promptly appoint a successor or, if it elects not to make such an appointment,
assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed
by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee
prompt written notice of the appointment of such Note Registrar and of the
location, and any change in the location, of the Note Register, and the
Indenture Trustee shall have the right to inspect the Note Register at all
reasonable times and to obtain copies thereof. The Indenture Trustee shall
have the right to rely upon a certificate executed on behalf of the Note
Registrar by an Authorized Officer thereof as to the names and addresses of the
Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration or transfer of any Note at
the office or agency of the Issuer to be maintained as provided in Section 3.2,
and if the requirements of Section 8-401(1) of the UCC are met, the Issuer
shall execute or cause the Indenture Trustee to authenticate one or more new
Notes, in any authorized denominations, of the same class and a
26
<PAGE> 33
like aggregate principal amount. A Noteholder may also obtain from the
Indenture Trustee, in the name of the designated transferee or transferees one
or more new Notes, in any authorized denominations, of the same class and a
like aggregate principal amount. Such requirements shall not be deemed to
create a duty in the Indenture Trustee to monitor the compliance by the Issuer
with Section 8-401 of the UCC.
At the option of the Holder, Notes may be exchanged for
other Notes in any authorized denominations, of the same class and a like
aggregate principal amount, upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, and if
the requirements of Section 8-401(1) of the UCC are met, the Issuer shall
execute and upon its request the Indenture Trustee shall authenticate the Notes
which the Noteholder making the exchange is entitled to receive. Such
requirements shall not be deemed to create a duty in the Indenture Trustee to
monitor the compliance by the Issuer with Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be (i) duly endorsed by, or be accompanied by a
written instrument of transfer in the form attached to Exhibit A, duly executed
by the Holder thereof or such Holder's attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar all in accordance with the Exchange Act,
and (ii) accompanied by such other documents as the Note Registrar may require.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Note Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.4 or 9.6 not
involving any transfer.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen
Notes. If (i) any mutilated Note is surrendered to the Note Registrar, or the
Note Registrar receives evidence to its satisfaction of the destruction, loss
or theft of any Note, and (ii) there is delivered to the Indenture Trustee and
the Insurer such security or indemnity as may be required by it to hold the
Issuer, the Indenture Trustee and the Insurer harmless, then, in the absence of
notice to the
27
<PAGE> 34
Issuer, the Note Registrar or the Indenture Trustee that such Note has been
acquired by a bona fide purchaser, and provided that the requirements of
Section 8-405 of the UCC are met, the Issuer shall execute and upon its request
the Indenture Trustee shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note
(such requirement shall not be deemed to create a duty in the Indenture Trustee
to monitor the compliance by the Issuer with Section 8-405); provided, however,
that if any such destroyed, lost or stolen Note, but not a mutilated Note,
shall have become or within seven days shall be due and payable, or shall have
been called for redemption, the Issuer may, instead of issuing a replacement
Note, direct the Indenture Trustee, in writing, to pay such destroyed, lost or
stolen Note when so due or payable or upon the Redemption Date without
surrender thereof. If, after the delivery of such replacement Note or payment
of a destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the
Issuer, the Indenture Trustee and the Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred
by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this
Section, the Issuer may require the payment by the Holder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.5. Persons Deemed Owners. Prior to due
presentment for registration of transfer of any Note, the Issuer, the Indenture
Trustee and the Insurer and any agent of the Issuer, the Indenture Trustee and
the Insurer may treat the Person in whose name any Note is registered (as of
the related Record Date) as the owner of such Note for the purpose of receiving
payments of principal of and interest, if any on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Issuer, the Insurer, the Indenture Trustee nor any agent of the Issuer, the
Insurer or the Indenture Trustee shall be affected by notice to the contrary.
28
<PAGE> 35
SECTION 2.6. Payment of Principal and Interest;
Defaulted Interest. (a) The Notes shall accrue interest as provided herein,
and such amount shall be due and payable on each Payment Date as specified
herein. Any installment of interest or principal, if any, payable on any Note
which is punctually paid or duly provided for by the Issuer on the applicable
Payment Date shall be paid to the Person in whose name such Note (or one or
more Predecessor Notes) is registered on the Record Date, by check mailed
first-class, postage prepaid, to such Person's address as it appears on the
Note Register on such Record Date, except that, unless Definitive Notes have
been issued pursuant to Section 2.11, with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a Payment
Date or on the Final Scheduled Payment Date (and except for the Redemption
Price for any Note called for redemption pursuant to Section 10.1(a)) which
shall be payable as provided below. The funds represented by any such checks
returned undelivered shall be held in accordance with Section 3.3.
(b) Upon written notice from the Issuer, the Indenture
Trustee shall notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Payment Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior to
such final Payment Date and shall specify that such final installment will be
payable only upon presentation and surrender of such Note and shall specify the
place where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed
to Noteholders as provided in Section 10.2.
(c) If the Issuer defaults in a payment of interest on
the Notes, the Issuer shall pay defaulted interest (plus interest on such
defaulted interest to the extent lawful) at the applicable Interest Rate to the
extent lawful. The Issuer may pay such defaulted interest to the Persons who
are Noteholders on a subsequent special record date, which date shall be at
least five Business Days prior to the payment date. The Issuer shall fix or
cause to be fixed any such special record date and payment date, and, at least
15 days before any such special record date, the Issuer shall mail to each
Noteholder and the Indenture Trustee a notice that states the special record
date, the payment date and the amount of defaulted interest to be paid.
(d) Promptly following the date on which all principal of
and interest on the Notes has been paid in full and the Notes have been
surrendered to the Indenture Trustee, the Indenture Trustee shall, upon written
notice from the Master Servicer of the amounts, if any, that the Insurer has
paid in respect of the Notes under the Policy or otherwise which has not been
reimbursed to it, deliver such surrendered Notes to the Insurer to the extent
not previously cancelled or destroyed.
SECTION 2.7. Cancellation. Subject to Section 2.6(d), all
Notes surrendered for payment, registration of transfer, exchange or redemption
shall, if surrendered to any Person other than the Indenture Trustee, be
delivered to the Indenture Trustee and shall be promptly canceled by the
Indenture Trustee. Subject to Section 2.6(d), the Issuer may at any time
deliver
29
<PAGE> 36
to the Indenture Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. Subject to Section 2.6(d), all canceled Notes may
be held or disposed of by the Indenture Trustee in accordance with its standard
retention or disposal policy as in effect at the time unless the Issuer shall
direct by an Issuer Order that they be destroyed or returned to it; provided
that such Issuer Order is timely and the Notes have not been previously
disposed of by the Indenture Trustee.
SECTION 2.8. Release of Collateral. The Indenture Trustee
shall, on or after the Termination Date, release any remaining portion of the
Trust Estate from the lien created by this Indenture and deposit in the Note
Account any funds then on deposit in any other Account. The Indenture Trustee
shall release property from the lien created by this Indenture pursuant to this
Section 2.8 only upon receipt of an Issuer Request by it accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Section 314(c) and 314(d)(1)
meeting the applicable requirements of Section 11.1.
SECTION 2.9. Book-Entry Notes. The Notes, upon original
issuance, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company or its
custodian, the initial Clearing Agency, by, or on behalf of, the Issuer. Such
Notes shall initially be registered on the Note Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Note Owner will receive
a Definitive Note representing such Note Owner's interest in such Note, except
as provided in Section 2.11. Unless and until definitive, fully registered
Notes (the "Definitive Notes") have been issued to Note Owners pursuant to
Section 2.11:
(i) the provisions of this Section shall be in full force
and effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole Holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions
of this Section shall control;
(iv) the rights of Note Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Note Owners and the Clearing Agency
and/or the Clearing Agency Participants. Unless and until Definitive
Notes are issued pursuant to Section 2.11, the initial Clearing Agency
will make book-entry transfers among the Clearing Agency Participants
and receive and
30
<PAGE> 37
transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Notes and has delivered such instructions
to the Indenture Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Indenture Trustee at the Corporate Trust
Office.
SECTION 2.10. Notices to Clearing Agency. Whenever a notice
or other communication to the Noteholders is required under this Indenture,
unless and until Definitive Notes shall have been issued to Note Owners
pursuant to Section 2.11, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to the Note Owners.
SECTION 2.11. Definitive Notes. If (i) the Master Servicer
advises the Indenture Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to the
Notes, and the Master Servicer is unable to locate a qualified successor, (ii)
the Master Servicer at its option advises the Indenture Trustee in writing that
it elects to terminate the book-entry system through the Clearing Agency or
(iii) after the occurrence of a Rapid Amortization Event, Note Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Indenture Trustee through the
Clearing Agency in writing that the continuation of a book entry system through
the Clearing Agency is no longer in the best interests of the Note Owners, then
the Clearing Agency shall notify all Note Owners and the Indenture Trustee of
the occurrence of any such event and of the availability of Definitive Notes to
Note Owners requesting the same. Upon surrender to the Indenture Trustee of
the typewritten Note or Notes representing the Book-Entry Notes by the Clearing
Agency, accompanied by registration instructions, the Issuer shall execute and
the Indenture Trustee shall authenticate the Definitive Notes in accordance
with the instructions of the Clearing Agency. None of the Issuer, the Note
Registrar or the Indenture Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
31
<PAGE> 38
ARTICLE III.
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer
will duly and punctually pay the principal of and interest on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting
the foregoing, the Issuer will cause to be distributed all amounts on deposit
in the Note Account on a Payment Date deposited therein pursuant to the Sale
and Servicing Agreement for the benefit of the Class A Notes, to Class A
Noteholders. Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer
will maintain in Irvine, California, an office or agency where Notes may be
surrendered for registration, transfer or exchange of the Notes, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the
Issuer shall fail to maintain any such office or agency or shall fail to
furnish the Indenture Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust Office, and
the Issuer hereby appoints the Indenture Trustee as its agent to receive all
such surrenders, notices and demands.
SECTION 3.3. Money for Payments to be Held in Trust. The
Issuer will cause each Note Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee and the Insurer an instrument in
which such Note Paying Agent shall agree with the Indenture Trustee (and if the
Indenture Trustee acts as Note Paying Agent, it hereby so agrees), subject to
the provisions of this Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee written notice of any
default by the Issuer (or any other obligor upon the Notes) of which
it has actual knowledge in the making of any payment required to be
made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Note
Paying Agent;
(iv) immediately resign as a Note Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it in trust
for the payment of Notes if at any time it
32
<PAGE> 39
ceases to meet the standards required to be met by a Note Paying Agent
at the time of its appointment; and
(v) comply with all requirements of the Code with respect
to the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Note Paying Agent to pay to the Indenture Trustee all
sums held in trust by such Note Paying Agent, such sums to be held by the
Indenture Trustee upon the same trusts as those upon which the sums were held
by such Note Paying Agent; and upon such a payment by any Note Paying Agent to
the Indenture Trustee, such Note Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to the escheat of
funds, any money held by the Indenture Trustee or any Note Paying Agent in
trust for the payment of any amount due with respect to any Note and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request, and
shall be deposited by the Indenture Trustee in the Note Account; and the Holder
of such Note shall thereafter, as an unsecured general creditor, look only to
the Issuer for payment thereof (but only to the extent of the amounts so paid
to the Issuer), and all liability of the Indenture Trustee or such Note Paying
Agent with respect to such trust money shall thereupon cease.
SECTION 3.4. Existence. Except as otherwise permitted by
the provisions of Section 3.10, the Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other state or of the United States of
America, in which case the Issuer will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Trust Estate, the Notes, and each other
instrument or agreement included in the Trust Estate.
SECTION 3.5. Protection of Trust Estate. The Issuer
intends the security interest granted pursuant to this Indenture in favor of
the Issuer Secured Parties to be prior to all other liens in respect of the
Trust Estate, and the Issuer shall take all actions necessary to obtain and
maintain, in favor of the Indenture Trustee, for the benefit of the Issuer
Secured Parties, a first lien on and a first priority, perfected security
interest in the Trust Estate. The Issuer will from time to time prepare (or
shall cause to be prepared), execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and will take such
other action necessary or advisable to:
33
<PAGE> 40
(i) Grant more effectively all or any portion of the
Trust Estate;
(ii) maintain or preserve the lien and security interest
(and the priority thereof) in favor of the Indenture Trustee for the
benefit of the Issuer Secured Parties created by this Indenture or
carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee in such Trust Estate against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon
the Trust Estate when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee pursuant to this Section;
provided that, such designation shall not be deemed to create a duty in the
Indenture Trustee or the Indenture Trustee to monitor the compliance of the
Issuer with respect to its duties under this Section 3.5 or the adequacy of any
financing statement, continuation statement or other instrument prepared by the
Issuer.
SECTION 3.6. Opinions as to Trust Estate. (a) On the
Closing Date, the Issuer shall furnish to the Indenture Trustee and the Insurer
an Opinion of Counsel stating that, in the opinion of such counsel, such
actions have been taken with respect to the recording and filing of this
Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the first priority lien and security interest in favor of the
Indenture Trustee, for the benefit of the Issuer Secured Parties, created by
this Indenture.
(b) Within 90 days after the beginning of each calendar
year, beginning with the first calendar year beginning more than six months
after the Closing Date, the Issuer shall furnish to the Indenture Trustee and
the Insurer, an Opinion of Counsel either stating that, in the opinion of such
counsel, such actions have been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as are necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel, no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements
and continuation statements that will, in the opinion of such counsel, be
required to maintain the lien and security interest of this Indenture.
34
<PAGE> 41
SECTION 3.7. Performance of Obligations; Servicing of
Mortgage Loans. (a) The Issuer will not take any action and will use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the Trust Estate or that would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as ordered by any bankruptcy or other court or as expressly provided in
this Indenture, the Operative Documents or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable
to the Insurer to assist it in performing its duties under this Indenture, and
any performance of such duties by a Person identified to the Indenture Trustee
and the Insurer in an Officer's Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the
Master Servicer to assist the Issuer in performing its duties under this
Indenture.
(c) The Issuer will punctually perform and observe all of
its obligations and agreements contained in this Indenture, the Operative
Documents and in the instruments and agreements included in the Trust Estate,
including, but not limited, to preparing (or causing to be prepared) and filing
(or causing to be filed) all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture and the Sale and
Servicing Agreement in accordance with and within the time periods provided for
herein and therein. Except as otherwise expressly provided therein, the Issuer
shall not waive, amend, modify, supplement or terminate any Operative Document
or any provision thereof without the consent of the Indenture Trustee, the
Insurer or the Holders of at least a majority of the Outstanding Amount of the
Notes.
(d) If an Authorized Officer of the Owner Trustee shall
have actual knowledge of the occurrence of an Event of Servicing Termination
under the Sale and Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee, the Insurer and the Rating Agencies thereof in accordance
with Section 11.4, and shall specify in such notice the action, if any, the
Issuer is taking in respect of such default. If an Event of Servicing
Termination shall arise from the failure of the Master Servicer to perform any
of its duties or obligations under the Sale and Servicing Agreement with
respect to the Mortgage Loans, the Issuer shall take all reasonable steps
available to it to remedy such failure.
(e) The Issuer agrees that it will not waive timely
performance or observance by the Master Servicer or the Sponsor of their
respective duties under the Operative Documents (x) without the prior consent
of the Insurer or (y) if the effect thereof would adversely affect the Holders
of the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or
the Operative Documents, sell, transfer, exchange or otherwise dispose
of any of the properties or assets
35
<PAGE> 42
of the Issuer, including those included in the Trust Estate, without
the consent of the Insurer (which consent may not be unreasonably
withheld; provided, that if an Insurer Default has occurred and is
continuing, the Noteholders representing 66-2/3% of the Noteholders
may direct the Indenture Trustee to sell or dispose of the Trust
Estate if the Indenture Trustee receives the Liquidation Price, as
described in Section 12.1.
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Indenture
Trustee created by this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be
created on or extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on a Mortgaged Property and
arising solely as a result of an action or omission of the related
Mortgagor), (C) permit the lien of this Indenture not to constitute a
valid first priority (other than with respect to any such tax,
mechanics' or other lien) security interest in the Trust Estate or (D)
amend, modify or fail to comply with the provisions of the Operative
Documents without the prior written consent of the Insurer, which
consent may not be unreasonably withheld.
SECTION 3.9. Annual Statement as to Compliance. The Issuer
will deliver to the Indenture Trustee and the Insurer, within 90 days after the
end of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 1997), and otherwise in compliance with the requirements of TIA
Section 314(a)(4) an Officer's Certificate stating, as to the Authorized
Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such
year and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
36
<PAGE> 43
SECTION 3.10. Issuer May Not Consolidate or Transfer
Assets. (a) The Issuer may not consolidate or merge with or into any other
Person.
(b) Except as otherwise provided in the Sale and
Servicing Agreement, the Issuer shall not convey or transfer all or
substantially all of its properties or assets, including those included in the
Trust Estate, to any Person.
SECTION 3.11. No Other Business. The Issuer shall not
engage in any business other than purchasing, owning, selling and managing the
Mortgage Loans and other assets in the manner contemplated by this Indenture
and the Operative Documents and activities incidental thereto.
SECTION 3.12. No Borrowing. The Issuer shall not issue,
incur, assume, guarantee or otherwise become liable, directly or indirectly,
for any Indebtedness except for (i) the Notes, (ii) obligations owing from time
to time to the Insurer under the Insurance Agreement and (iii) any other
Indebtedness permitted by or arising under the Operative Documents. The
proceeds of the Notes shall be used exclusively to fund the Issuer's purchase
of the Mortgage Loans and the other assets specified in the Sale and Servicing
Agreement, to fund the Pre-Funding Account and the Capitalized Interest Account
and to pay the Issuer's organizational, transactional and start-up expenses.
SECTION 3.13. Guarantees, Loans, Advances and Other
Liabilities. Except as contemplated by the Sale and Servicing Agreement or this
Indenture, the Issuer shall not make any loan or advance or credit to, or
guarantee (directly or indirectly or by an instrument having the effect of
assuring another's payment or performance on any obligation or capability of so
doing or otherwise), endorse or otherwise become continently liable, directly
or indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or make
any capital contribution to, any other Person.
SECTION 3.14. Capital Expenditures. The Issuer shall not
make any expenditure (by long-term or operating lease or otherwise) for capital
assets (either realty or personalty).
SECTION 3.15. Compliance with Laws. The Issuer shall comply
with the requirements of all applicable laws, the non-compliance with which
would, individually or in the aggregate, materially and adversely affect the
ability of the Issuer to perform its obligations under the Notes, this
Indenture or any Operative Document.
SECTION 3.16. Restricted Payments. The Issuer shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial interest
in the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Master Servicer, (ii) redeem, purchase,
retire or otherwise acquire for value any such ownership or equity interest or
security or (iii) set aside or otherwise segregate any amounts for any such
purpose; provided, however, that the Issuer may
37
<PAGE> 44
make, or cause to be made, distributions to the Master Servicer, the Owner
Trustee, the Indenture Trustee and the Certificateholders as permitted by, and
to the extent funds are available for such purpose under, the Sale and
Servicing Agreement, this Indenture, or Trust Agreement. The Issuer will not,
directly or indirectly, make payments to or distributions from the Note Account
except in accordance with this Indenture and the Operative Documents.
SECTION 3.17. Notice of Rapid Amortization Events and
Events of Servicing Termination. Upon a Responsible Officer of the Owner
Trustee having actual knowledge thereof, the Issuer agrees to give the
Indenture Trustee, the Insurer and the Rating Agencies prompt written notice of
each Rapid Amortization Event hereunder or Event of Servicing Termination under
the Sale and Servicing Agreement.
SECTION 3.18. Further Instruments and Acts. Upon request of
the Indenture Trustee or the Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 3.19. Amendments of Sale and Servicing Agreement
and Trust Agreement. The Issuer shall not agree to any amendment to Section
9.01 of the Sale and Servicing Agreement or Section 11.1 of the Trust Agreement
to eliminate the requirements thereunder that the Indenture Trustee, the
Insurer or the Holders of the Notes consent to amendments thereto as provided
therein.
SECTION 3.20. Income Tax Characterization. For purposes of
federal income, state and local income and franchise and any other income
taxes, the Issuer will treat the Notes as indebtedness of the Sponsor and
hereby instructs the Indenture Trustee to treat the Notes as indebtedness of
the Sponsor for federal and state tax reporting purposes.
38
<PAGE> 45
ARTICLE IV.
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. Upon
payment in full of the Notes, this Indenture shall cease to be of further
effect with respect to the Notes except as to (i) rights of registration of
transfer and exchange, (ii) substitution of mutilated, destroyed, lost or
stolen Notes, (iii) rights of Noteholders to receive payments of principal
thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8, 3.10, 3.12,
3.13 and 3.20, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.7 and the obligations of the Indenture Trustee under Section 4.2) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on written demand in the form of an Issuer Order and at the
expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen and
that have been replaced or paid as provided in Section 2.4 and (ii)
Notes for which payment money has theretofore been deposited in trust
or segregated and held in trust by the Issuer and thereafter repaid to
the Issuer or discharged from such trust, as provided in Section 3.3)
have been delivered to the Indenture Trustee for cancellation and the
Policy has terminated and been returned to the Insurer for
cancellation and all amounts owing to the Insurer have been paid in
full; or
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their
respective Final Scheduled Payment Dates within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Indenture Trustee
for the giving of notice of redemption by the Indenture
Trustee in the name, and at the expense, of the Issuer,
and in the case of (i), (ii) or (iii) above
(A) the Issuer, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or direct obligations of
or obligations guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Indenture Trustee for cancellation when due on
the Final
39
<PAGE> 46
Scheduled Payment Date or Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.1(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all Insurer
Issuer Secured Obligations and all Indenture Trustee Issuer Secured
Obligations; and
(C) the Issuer has delivered to the Indenture Trustee
and the Insurer an Officer's Certificate, an Opinion of Counsel and if required
by the TIA, the Indenture Trustee or the Insurer an Independent Certificate
from a firm of certified public accountants, each meeting the applicable
requirements of Section 11.1(a) and each stating that all conditions precedent
herein provided relating to the satisfaction and discharge of this Indenture
have been complied with.
SECTION 4.2. Application of Trust Money. All monies
deposited with the Indenture Trustee pursuant to Section 4.1 hereof shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Note Paying
Agent, as the Indenture Trustee may determine, to the Holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Indenture Trustee, of all sums due and to become due thereon for
principal and interest.
SECTION 4.3. Repayment of Monies Held by Note Paying
Agent. In connection with the satisfaction and discharge of this Indenture with
respect to the Notes, all monies then held by any Note Paying Agent other than
the Indenture Trustee under the provisions of this Indenture with respect to
such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee
to be held and applied according to Section 3.3 and thereupon such Note Paying
Agent shall be released from all further liability with respect to such monies.
ARTICLE V.
Remedies
SECTION 5.1. Rights Upon a Rapid Amortization Event. If a
Rapid Amortization Event as described in Article XII shall have occurred and be
continuing, the Rapid Amortization Period shall immediately commence and the
Class A Noteholders shall be entitled on each Payment Date to an amount equal
to the Maximum Principal Payment. The rights contained in this Article V are
in addition to any rights which the Noteholders possess pursuant to Article
XII.
SECTION 5.2. Limitation of Suits. No Holder of any Note
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:
(i) such Holder has previously given written notice to
the Indenture Trustee of a continuing Rapid Amortization Event;
40
<PAGE> 47
(ii) the Holders of not less than 25% of the Outstanding
Amount of the Notes have made written request to the Indenture Trustee
to institute such proceeding in respect of such Rapid Amortization
Event in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee indemnity reasonably satisfactory to it against the costs,
expenses and liabilities to be incurred in complying with such
request;
(iv) the Indenture Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute
such proceedings;
(v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Holders of a majority of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be
continuing;
it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.3. Unconditional Rights of Noteholders To
Receive Principal and Interest. Notwithstanding any other provisions in this
Indenture, the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the respective due dates thereof expressed in such Note
or in this Indenture (or, in the case of redemption, on or after the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
SECTION 5.4. Restoration of Rights and Remedies. If the
Controlling Party or any Noteholder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, then and in every such case the
Issuer, the Indenture Trustee and the Noteholders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Indenture Trustee and the Noteholders shall continue as though no such
proceeding had been instituted.
41
<PAGE> 48
SECTION 5.5. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Controlling Party or to the
Noteholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.6. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee, Controlling Party or any Holder of any Note
to exercise any right or remedy accruing upon any Default or Rapid Amortization
Event shall impair any such right or remedy or constitute a waiver of any such
Default or Rapid Amortization Event or an acquiescence therein. Every right
and remedy given by this Article V or by law to the Indenture Trustee or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee or by the Noteholders, as the case may be.
SECTION 5.7. Control by Noteholders. If the Indenture
Trustee is the Controlling Party, the Holders of a majority of the Outstanding
Amount of the Notes, with the consent of the Insurer, shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee pursuant to Section 12.1 with respect to the
Notes or exercising any trust or power conferred on the Indenture Trustee;
provided that
(i) such direction shall not be in conflict with any rule
of law or with this Indenture;
(ii) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction;
provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to
such action.
SECTION 5.8. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by such Holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Indenture Trustee for any action taken,
suffered or omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to (a) any suit
instituted by the Indenture Trustee, (b) any suit instituted by any Noteholder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on
42
<PAGE> 49
any Note on or after the respective due dates expressed in such Note and in
this Indenture (or, in the case of redemption, on or after the Redemption
Date).
SECTION 5.9. Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance
of this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Indenture Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 5.10. Action on Notes. The Indenture Trustee's
right to seek and recover judgment on the Notes or under this Indenture shall
not be affected by the seeking, obtaining or application of any other relief
under or with respect to this Indenture. Neither the lien of this Indenture nor
any rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Trust Estate or upon any of the assets of the Issuer.
SECTION 5.11. Performance and Enforcement of Certain
Obligations. (a) Promptly following a request from the Indenture Trustee to do
so and at the Master Servicer's expense, the Issuer agrees to take all such
lawful action as the Indenture Trustee may request to compel or secure the
performance and observance by the Sponsor and the Master Servicer, as
applicable, of each of their obligations to the Issuer under or in connection
with the Sale and Servicing Agreement in accordance with the terms thereof, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and Servicing
Agreement to the extent and in the manner directed by the Indenture Trustee,
including the transmission of notices of default on the part of the Sponsor or
the Master Servicer thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by the Sponsor or the
Master Servicer of each of their obligations under the Sale and Servicing
Agreement.
(b) If the Indenture Trustee is a Controlling Party and
if a Rapid Amortization Event has occurred and is continuing, the Indenture
Trustee may, and, at the written direction of the Holders of 66-2/3% of the
Outstanding Amount of the Notes shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Sponsor or the Master Servicer
under or in connection with the Sale and Servicing Agreement, including the
right or power to take any action to compel or secure performance or observance
by the Sponsor or the Master Servicer of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Sale and Servicing Agreement, and any
right of the Issuer to take such action shall be suspended.
SECTION 5.12. Subrogation. The Indenture Trustee shall
receive as attorney-in-fact of each Noteholder any Policy Claim Amount from the
Insurer. Any and all Policy Claim
43
<PAGE> 50
Amounts disbursed by the Indenture Trustee from claims made under the Policy
shall not be considered payment by the Trust, and shall not discharge the
obligations of the Trust with respect thereto. The Insurer shall, to the
extent it makes any payment with respect to the Notes, become subrogated to the
rights of the recipient of such payments to the extent of such payments.
Subject to and conditioned upon any payment with respect to the Notes by or on
behalf of the Insurer, the Indenture Trustee shall assign to the Insurer all
rights to the payment of interest or principal with respect to the Notes which
are then due for payment to the extent of all payments made by the Insurer, and
the Insurer may exercise any option, vote right, power or the like with respect
to the Notes to the extent that it has made payment pursuant to the Policy.
SECTION 5.13. Preference Claims. (a) In the event that the
Indenture Trustee has received a certified copy of an order of the appropriate
court that any payment on a Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Indenture Trustee shall
so notify the Insurer, shall comply with the provisions of the Policy to obtain
payment by the Insurer of such avoided payment, and shall, at the time it
provides notice to the Insurer, notify Holders of the Notes by mail that, in
the event that any Noteholder's payment is so recoverable, such Noteholder will
be entitled to payment pursuant to the terms of the Policy. The Indenture
Trustee shall furnish to the Insurer at its written request, the requested
records it holds in its possession evidencing the payments of principal of and
interest on Notes, if any, which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made. Pursuant to the terms of the Policy, the Insurer will make such
payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order (as
defined in the Policy) and not to the Indenture Trustee or any Noteholder
directly.
(b) The Indenture Trustee shall promptly notify the
Insurer of any proceeding or the institution of any action (of which the
Indenture Trustee has actual knowledge) seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership, rehabilitation
or similar law (a "Preference Claim") of any distribution made with respect to
the Notes. Each Holder, by its purchase of Notes, and the Indenture Trustee
hereby agree that so long as an Insurer Default shall not have occurred and be
continuing, the Insurer may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim including, without limitation, (i) the direction of any appeal
of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedes or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth
in Section 5.12, the Insurer shall be subrogated to, and each Noteholder and
the Indenture Trustee hereby delegate and assign, to the fullest extent
permitted by law, the rights of the Indenture Trustee and each Noteholder in
the conduct of any proceeding with respect to a Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
44
<PAGE> 51
ARTICLE VI.
The Indenture Trustee
SECTION 6.1. Duties of Indenture Trustee. (a) If a Rapid
Amortization Event has occurred and is continuing, the Indenture Trustee shall
exercise the rights and powers vested in it by this Indenture and the Operative
Documents and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs; provided, however, that if the Indenture Trustee is
acting as Master Servicer, it shall use the same degree of care and skill as is
required of the Master Servicer under the Sale and Servicing Agreement.
(b) Except during the continuance of a Rapid Amortization
Event:
(i) The Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform on their face to the
requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless
it is proved that the Indenture Trustee was negligent in ascertaining
the pertinent facts;
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.11;
and
(iv) the Indenture Trustee shall not be charged with
knowledge of any failure by the Master Servicer to comply with the
obligations of the Master Servicer referred to in clauses (i) and (ii)
of Section 5.1 of the Sale and Servicing Agreement unless a
Responsible Officer of the Indenture Trustee at the Corporate Trust
Office obtains actual knowledge of such failure or occurrence or the
Indenture Trustee receives written notice of such failure or
occurrence from the Master Servicer, the Insurer or the Holders of
Notes evidencing Voting Rights aggregating not less than 51%.
45
<PAGE> 52
(d) The Indenture Trustee shall not be liable for
interest on any money received by it except as the Indenture Trustee may agree
in writing with the Issuer.
(e) No provision of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if it shall have reasonable grounds to believe
that repayment of such funds or indemnity reasonably satisfactory to it against
such risk or liability is not reasonably assured to it.
(f) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Indenture
Trustee shall be subject to the provisions of this Section and to the
provisions of the TIA.
(g) The Indenture Trustee shall, upon two Business Days'
prior written notice to the Indenture Trustee, permit any representative of the
Insurer, during the Indenture Trustee's normal business hours, to examine all
books of account, records, reports and other papers of the Indenture Trustee
relating to the Notes, to make copies and extracts therefrom and to discuss the
Indenture Trustee's affairs and actions, as such affairs and actions relate to
the Indenture Trustee's duties with respect to the Notes, with the Indenture
Trustee's officers and employees responsible for carrying out the Indenture
Trustee's duties with respect to the Notes.
(h) The Indenture Trustee shall, and hereby agrees that
it will, perform all of the obligations and duties required of it under the
Sale and Servicing Agreement.
(i) The Indenture Trustee shall, and hereby agrees that
it will, hold the Policy in trust, and will hold any proceeds of any claim on
the Policy in trust solely for the use and benefit of the Noteholders.
(j) In no event shall Bankers Trust Company of
California, N.A., in any of its capacities hereunder, be deemed to have assumed
any duties of the Owner Trustee under the Delaware Business Trust Statute,
common law, or the Trust Agreement.
46
<PAGE> 53
SECTION 6.2. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document reasonably believed by it to be
genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may require an Officer's Certificate or an Opinion of Counsel. The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on the Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided, however, that the
Indenture Trustee's conduct does not constitute willful misconduct, negligence
or bad faith.
(e) The Indenture Trustee may consult with counsel, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Indenture Trustee shall be under no obligation to
institute, conduct or defend any litigation under this Indenture or in relation
to this Indenture, at the request, order or direction of any of the Holders of
Notes or the Controlling Party, pursuant to the provisions of this Indenture,
unless such Holders of Notes or the Controlling Party shall have offered to the
Indenture Trustee reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred therein or thereby; provided, however,
that the Indenture Trustee shall, upon the occurrence of a Rapid Amortization
Event or Event of Servicing Termination as defined in the Sale and Servicing
Agreement (that has not been cured or waived), exercise the rights and powers
vested in it by this Indenture or the Sale and Servicing Agreement with
reasonable care and skill.
(g) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing to do so
by the Insurer or by the Holders of Notes evidencing not less than 25% of the
Outstanding Amount thereof; provided, however, that if the payment within a
reasonable time to the Indenture Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Indenture Trustee, not reasonably assured to the Indenture
Trustee by the security afforded to it by the terms of this Indenture or the
Sale and Servicing Agreement, the Indenture Trustee may require indemnity
reasonably satisfactory to it
47
<PAGE> 54
against such cost, expense or liability as a condition to so proceeding; the
reasonable expense of every such examination shall be paid by the Person making
such request, or, if paid by the Indenture Trustee shall be reimbursed by the
Person making such request upon demand.
(h) The Indenture Trustee shall not be accountable, shall
have no liability and makes no representation as to any acts or omissions
hereunder of the Master Servicer until such time as, and only to the extent
that, the Indenture Trustee may be required to act as Master Servicer.
SECTION 6.3. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any Note
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee must comply with Sections
6.11 and 6.12.
SECTION 6.4. Indenture Trustee's Disclaimer. The Indenture
Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture, the Trust Estate or the Notes, it shall
not be accountable for the Issuer's use of the proceeds from the Notes, and it
shall not be responsible for any statement of the Issuer in the Indenture or in
any document issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
SECTION 6.5. Notice of Defaults. If a Rapid Amortization
Event or an Event of Servicing Termination occurs and is continuing and if it
is either known by, or written notice of the existence thereof has been
delivered to, a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall mail to each Noteholder and to the Insurer of such event within
10 days after such knowledge or notice occurs. Except in the case of a Default
in payment of principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of
Noteholders.
SECTION 6.6. Reports by Indenture Trustee to Holders. Upon
written request, the Note Paying Agent or the Master Servicer shall on behalf
of the Issuer deliver to each Noteholder such information as may be reasonably
required to enable such Holder to prepare its Federal and state income tax
returns required by law.
SECTION 6.7. Compensation and Indemnity. (a) Pursuant to
Section 8.6 and subject to Section 6.18 herein, the Issuer shall, or shall
cause the Master Servicer to, pay to the Indenture Trustee from time to time
compensation for its services. The Indenture Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Issuer shall or shall cause the Master Servicer to reimburse the Indenture
Trustee for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Indenture Trustee's agents,
48
<PAGE> 55
counsel, accountants and experts. The Issuer shall or shall cause the Master
Servicer to indemnify the Indenture Trustee and its respective officers,
directors, employees and agents against any and all loss, liability or expense
(including attorneys' fees and expenses) incurred by each of them in connection
with the acceptance or the administration of this trust and the performance of
its duties hereunder. The Indenture Trustee shall notify the Issuer and the
Master Servicer promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Issuer and the Master Servicer shall
not relieve the Issuer of its obligations hereunder or the Master Servicer of
its obligations under Article VIII of the Sale and Servicing Agreement. The
Issuer shall or shall cause the Master Servicer to defend the claim, the
Indenture Trustee may have separate counsel and the Issuer shall or shall cause
the Master Servicer to pay the fees and expenses of such counsel. Neither the
Issuer nor the Master Servicer need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith. The
indemnification provided in this Section 6.7(a) shall survive the discharge or
termination of this Indenture and the resignation or removal of the Indenture
Trustee.
(b) The Issuer's payment obligations to the Indenture
Trustee pursuant to this Section shall survive the discharge of this Indenture.
Notwithstanding anything else set forth in this Indenture or the Operative
Documents, the Indenture Trustee agrees that the obligations of the Issuer (but
not the Master Servicer) to the Indenture Trustee hereunder and under the
Operative Documents shall be recourse to the Trust Estate only and specifically
shall not be recourse to the assets of the Issuer or any Securityholder. In
addition, the Indenture Trustee agrees that its recourse to the Issuer, the
Trust Estate, the Sponsor and amounts held in the Spread Account, the Deferred
Interest Account, and the Funding Account shall be limited to the right to
receive the distributions referred to herein.
SECTION 6.8. Replacement of Indenture Trustee. The
Indenture Trustee may resign at any time by so notifying the Issuer and the
Insurer by written notice. Upon receiving such notice of resignation, the
Issuer shall promptly appoint a successor Indenture Trustee (approved in
writing by the Insurer, so long as such approval is not unreasonably withheld)
by written instrument, in duplicate, one copy of such instrument shall be
delivered to the resigning Indenture Trustee (who shall deliver a copy to the
Master Servicer) and one copy to the successor Trustee; provided, however, that
any such successor Indenture Trustee shall be subject to the prior written
approval of the Master Servicer, which approval shall not be unreasonably
withheld. The Issuer may and, at the request of the Insurer shall, remove the
Indenture Trustee, if:
(i) the Indenture Trustee fails to comply with Section
6.11;
(ii) a court having jurisdiction in the premises in
respect of the Indenture Trustee in an involuntary case or proceeding
under federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting relief or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or similar official)
for the Indenture Trustee or for any substantial part of the Indenture
49
<PAGE> 56
Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy
laws, as now or hereafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law is commenced
with respect to the Indenture Trustee and such case is not dismissed
within 60 days;
(iv) the Indenture Trustee commences a voluntary case
under any federal or state banking or bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or consents to the
appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or other
similar official) for the Indenture Trustee or for any substantial
part of the Indenture Trustee's property, or makes any assignment for
the benefit of creditors or fails generally to pay its debts as such
debts become due or takes any corporate action in furtherance of any
of the foregoing; or
(v) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Insurer. If the Issuer fails to appoint such a successor Indenture Trustee,
the Insurer may appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Insurer
and to the Issuer. Thereupon the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
under this Indenture. The successor Indenture Trustee shall mail a notice of
its succession to Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within
30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Issuer or the Holders of a majority in
Outstanding Amount of the Notes may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee acceptable to
the Insurer.
If the Indenture Trustee fails to comply with Section 6.11,
any Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture Trustee
acceptable to the Insurer.
Any resignation or removal of the Indenture Trustee and
appointment of a successor Indenture Trustee pursuant to any of the provisions
of this Section shall not become effective until acceptance of appointment by
the successor Indenture Trustee pursuant to Section 6.8 and payment of all fees
and expenses owed to the outgoing Indenture Trustee.
50
<PAGE> 57
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Issuer's and the Master Servicer's indemnity
obligations under Section 6.7 shall continue for the benefit of the retiring
Indenture Trustee and the Master Servicer shall pay any amounts owing to the
Indenture Trustee.
SECTION 6.9. Successor Indenture Trustee by Merger. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the
trusts created by this Indenture any of the Notes shall have been authenticated
but not delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Indenture Trustee shall
have.
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee. (a) Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust may at the time be located, the
Indenture Trustee with the consent of the Insurer shall have the power and may
execute and deliver all instruments to appoint one or more Persons to act as a
co-trustee or co-trustees, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity
and for the benefit of the Noteholders, such title to the Trust, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.11 and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately
without the Indenture Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust or any
51
<PAGE> 58
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder,
including acts or omissions of predecessor or successor trustees; and
(iii) the Indenture Trustee and the Master Servicer acting
jointly may at any time accept the resignation of or remove any
separate trustee or co-trustee except that following the occurrence of
an Event of Servicing Termination, the Indenture Trustee acting alone
may accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article VI. Each separate trustee
and co-trustee, upon its acceptance of the trusts conferred, shall be vested
with the estates or property specified in its instrument of appointment, either
jointly with the Indenture Trustee or separately, as may be provided therein,
subject to all the provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting the liability
of, or affording protection to, the Indenture Trustee. Every such instrument
shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, dissolve, become insolvent, become incapable
of acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Indenture Trustee, to
the extent permitted by law, without the appointment of a new or successor
trustee.
(e) The Master Servicer shall be responsible for the fees
of any co-trustee or separate trustee appointed hereunder.
SECTION 6.11. Eligibility: Disqualification. The Indenture
Trustee shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Indenture Trustee shall provide copies of such reports to the
Insurer upon request. The Indenture Trustee shall comply with TIA Section
310(b), including the optional provision permitted by the second sentence of
TIA Section 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against
Issuer. The Indenture Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in
52
<PAGE> 59
TIA Section 311(b). An Indenture Trustee who has resigned or been removed shall
be subject to TIA Section 311(a) to the extent indicated.
SECTION 6.13. Appointment and Powers. Subject to the terms
and conditions hereof, each of the Issuer Secured Parties hereby appoints
Bankers Trust Company of California, N.A. as the Indenture Trustee with respect
to the Collateral, and Bankers Trust Company of California, N.A. hereby accepts
such appointment and agrees to act as Indenture Trustee with respect to the
Trust Estate for the Issuer Secured Parties, to maintain custody and possession
of such Trust Estate (except as otherwise provided hereunder) and to perform
the other duties of the Indenture Trustee in accordance with the provisions of
this Indenture and the other Operative Documents. Each Issuer Secured Party
hereby authorizes the Indenture Trustee to take such action on its behalf, and
to exercise such rights, remedies, powers and privileges hereunder, as the
Controlling Party may direct and as are specifically authorized to be exercised
by the Indenture Trustee by the terms hereof, together with such actions,
rights, remedies, powers and privileges as are reasonably incidental thereto.
The Indenture Trustee shall act upon and in compliance with the written
instructions of the Controlling Party delivered pursuant to this Indenture
promptly following receipt of such written instructions; provided that the
Indenture Trustee shall not act in accordance with any instructions (i) which
are not authorized by, or in violation of the provisions of, this Indenture or
(ii) for which the Indenture Trustee has not received reasonable indemnity.
Receipt of such instructions shall not be a condition to the exercise by the
Indenture Trustee of its express duties hereunder, except where this Indenture
provides that the Indenture Trustee is permitted to act only following and in
accordance with such instructions.
SECTION 6.14. Performance of Duties. The Indenture Trustee
shall have no duties or responsibilities except those expressly set forth in
this Indenture and the other Operative Documents to which the Indenture Trustee
is a party or as directed by the Controlling Party in accordance with this
Indenture. The Indenture Trustee shall not be required to take any
discretionary actions hereunder except at the written direction and with the
indemnification of the Controlling Party. The Indenture Trustee shall, and
hereby agrees that it will, perform all of the duties and obligations required
of it under the Sale and Servicing Agreement.
SECTION 6.15. Limitation on Liability. Neither the
Indenture Trustee nor any of its directors, officers, employees and agents
shall be liable for any action taken or omitted to be taken by it or them
hereunder, or in connection herewith, except that the Indenture Trustee shall
be liable for its negligence, bad faith or willful misconduct; nor shall the
Indenture Trustee be responsible for the validity, effectiveness, value,
sufficiency or enforceability against the Issuer of this Indenture or any of
the Trust Estate (or any part thereof).
SECTION 6.16. Reliance Upon Documents. In the absence of
negligence, bad faith or willful misconduct on its part, the Indenture Trustee
shall be entitled to rely on any communication, instrument, paper or other
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such
document or instrument.
53
<PAGE> 60
SECTION 6.17. Representations and Warranties of the
Indenture Trustee. The Indenture Trustee represents and warrants to the Issuer
and to each Issuer Secured Party as follows:
(a) Due Organization. The Indenture Trustee is a
national banking association, duly organized, validly existing and in good
standing under the laws of the United States and is duly authorized and
licensed under applicable law to conduct its business as presently conducted.
(b) Corporate Power. The Indenture Trustee has all
requisite right, power and authority to execute and deliver this Indenture and
to perform all of its duties as the Indenture Trustee hereunder.
(c) Due Authorization. The execution and delivery by the
Indenture Trustee of this Indenture and the other Operative Documents to which
it is a party, and the performance by the Indenture Trustee of its duties
hereunder and thereunder, have been duly authorized by all necessary corporate
proceedings, are required for the valid execution and delivery by the Indenture
Trustee, or the performance by the Indenture Trustee, of this Indenture and
such other Operative Documents.
(d) Valid and Binding Indenture. The Indenture Trustee
has duly executed and delivered this Indenture and each other Operative
Document to which it is a party, and each of this Indenture and each such other
Operative Document constitutes the legal, valid and binding obligation of the
Indenture Trustee, enforceable against the Indenture Trustee in accordance with
its terms, except as (i) such enforceability may be limited by bankruptcy,
insolvency, reorganization and similar laws relating to or affecting the
enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
SECTION 6.18. Waiver of Setoffs. The Indenture Trustee
hereby expressly waives any and all rights of setoff that the Indenture Trustee
may otherwise at any time have under applicable law with respect to any Account
and agrees that amounts in the Accounts shall at all times be held and applied
solely in accordance with the provisions hereof.
SECTION 6.19. Control by the Controlling Party. The
Indenture Trustee shall comply with notices and instructions given by the
Issuer only if accompanied by the written consent of the Controlling Party.
SECTION 6.20. Trustee May Enforce Claims Without Possession
of Notes. All rights of action and claims under this Agreement or the Notes may
be prosecuted and enforced by the Indenture Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and such proceeding instituted by the Indenture Trustee shall be brought in its
own name or in its capacity as Indenture Trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Indenture Trustee, its agents and
counsel, be for the ratable benefit of the Noteholders in respect of which such
judgment has been recovered.
54
<PAGE> 61
SECTION 6.21. Suits for Enforcement. In case an Event of
Servicing Termination or other default by the Master Servicer or the Sponsor
hereunder shall occur and be continuing, the Indenture Trustee, if the
Controlling Party (and if not the Controlling Party, with the consent of the
Insurer), may proceed to protect and enforce its rights and the rights of the
Noteholders under this Agreement by a suit, action or proceeding in equity or
at law or otherwise, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the execution of any power
granted in this Agreement or for the enforcement of any other legal, equitable
or other remedy, as the Indenture Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Indenture
Trustee and the Noteholders.
SECTION 6.22. Mortgagor Claims. In connection with any
offset defenses, or affirmative claim for recovery, asserted in legal actions
brought by Mortgagors under one or more Mortgage Loans based upon provisions
therein or upon other rights or remedies arising from any requirements of law
applicable to the Mortgage Loans:
(a) The Indenture Trustee is the holder of the Mortgage
Loans only as trustee on behalf of the holders of the Notes, and not as a
principal or in any individual or personal capacity.
(b) The Indenture Trustee shall not be personally liable
for, or obligated to pay Mortgagors, any affirmative claims asserted thereby,
or responsible to holders of the Notes for any offset defense amounts applied
against Mortgage Loan payments, pursuant to such legal actions.
(c) The Indenture Trustee will pay, solely from available
Trust money, affirmative claims for recovery by Mortgagors only pursuant to
final judicial orders or judgments, or judicially-approved settlement
agreements, resulting from such legal actions.
(d) The Indenture Trustee will comply with judicial
orders and judgments which require its actions or cooperation in connection
with Mortgagors' legal actions to recover affirmative claims against holders of
the Notes.
(e) The Indenture Trustee will cooperate with and assist
the Master Servicer, the Sponsor, or holders of the Notes in their defense of
legal actions by Mortgagors to recover affirmative claims if such cooperation
and assistance is not contrary to the interests of the Indenture Trustee as a
party to such legal actions and if the Indenture Trustee is satisfactorily
indemnified for all liability, costs and expenses arising therefrom.
(f) The Issuer hereby agrees to cause the Master Servicer
to indemnify, hold harmless and defend the Indenture Trustee from and against
any and all liability, loss, costs and expenses of the Indenture Trustee
resulting from any affirmative claims for recovery asserted or collected by
Mortgagors under the Mortgage Loans.
55
<PAGE> 62
ARTICLE VII.
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish To Indenture Trustee Names
and Addresses of Noteholders. The Issuer will furnish or cause to be furnished
to the Indenture Trustee (a) not more than five days after the earlier of (i)
each Record Date and (ii) three months after the last Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished. The Indenture Trustee or, if the Indenture
Trustee is not the Note Registrar, the Issuer shall furnish to the Insurer or
the Issuer in writing upon their written request and at such other times as the
Insurer or the Issuer may request a copy of the list.
SECTION 7.2. Preservation of Information; Communications
to Noteholders. (a) The Indenture Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of the Holders contained
in the most recent list furnished to the Indenture Trustee as provided in
Section 7.1 and the names and addresses of Holders received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy
any list furnished to it as provided in such Section 7.1 upon receipt of a new
list so furnished.
(b) Noteholders may communicate pursuant to TIA Section
312(b) with other Noteholders with respect to their rights under this Indenture
or under the Notes.
(c) The Issuer, the Indenture Trustee and the Note
Registrar shall have the protection of TIA Section 312(c).
SECTION 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after
the Issuer is required to file the same with the Commission, copies of
the annual reports and copies of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe)
which the Issuer may be required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any
56
<PAGE> 63
information, documents and reports required to be filed by the Issuer
pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be
required by rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal
year of the Issuer shall end on December 31 of each year.
SECTION 7.4. Reports by Indenture Trustee. If required by
TIA Section 313(a), within 60 days after each August 31, beginning with August
31, 1998, the Indenture Trustee shall mail to each Noteholder as required by
TIA Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Indenture Trustee also shall comply with TIA Section
313(b).
A copy of each report at the time of its mailing to
Noteholders shall be filed by the Indenture Trustee with the Commission and
each stock exchange, if any, on which the Notes are listed. The Issuer shall
notify the Indenture Trustee if and when the Notes are listed on any stock
exchange.
ARTICLE VIII.
Payments and Statements to Noteholders and Certificateholders;
Accounts, Disbursements and Releases
SECTION 8.1. Collection of Money. Except as otherwise
expressly provided herein, the Indenture Trustee may demand payment or delivery
of, and shall receive and collect, directly and without intervention or
assistance of any fiscal agent or other intermediary, all money and other
property payable to or receivable by the Indenture Trustee pursuant to this
Indenture and the Sale and Servicing Agreement. The Indenture Trustee shall
apply all such money received by it as provided in this Indenture and the Sale
and Servicing Agreement. Except as otherwise expressly provided in this
Indenture or in the Sale and Servicing Agreement, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Trust Estate, the Indenture Trustee may take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings.
SECTION 8.2. Release of Trust Estate. (a) Subject to
Section 8.11 and the payment of its fees and expenses pursuant to Section 6.7,
the Indenture Trustee may, and when required by the Issuer and the provisions
of this Indenture shall, execute instruments to release property from the lien
of this Indenture, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture or the Sale and Servicing
Agreement. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
(b) The Indenture Trustee shall, at such time as there
are no Notes outstanding and all sums due the Indenture Trustee pursuant to
Section 6.7 and to the Insurer pursuant to the
57
<PAGE> 64
Insurance Agreement have been paid, release any remaining portion of the Trust
Estate that secured the Notes from the lien of this Indenture and release to
the Issuer or any other Person entitled thereto any funds then on deposit in
the Accounts. The Indenture Trustee shall release property from the lien of
this Indenture pursuant to this Section 8.2(b) only upon receipt of an Issuer
Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA) Independent Certificates in accordance with TIA Section
314(c) and 314(d)(1) meeting the applicable requirements of Section 11.1.
SECTION 8.3. Establishment of Accounts. The Sponsor shall
cause to be established, and the Indenture Trustee shall maintain, at the
corporate trust office of the Indenture Trustee, a Note Account, a Pre-Funding
Account and a Capitalized Interest Account, each to be held by the Indenture
Trustee in the name of the Trust for the benefit of the Class A Noteholders and
the Insurer, as their interests may appear.
SECTION 8.4. The Policy. On each Determination Date the
Indenture Trustee shall determine with respect to the immediately following
Payment Date, the amount (the "Available Funds") to be on deposit in the Note
Account on such Payment Date, as described in Section 8.6(a) hereof (excluding
the amounts of any payments made pursuant to the Policy, the Indenture
Trustee's Fee, the Owner Trustee's Fee, the Servicing Fee and the Premium
Amount, but including amounts transferred from the Capitalized Interest Account
and the Pre-Funding Account).
(a) If (i) the Available Funds for such Payment Date are
not sufficient to pay the Class A Interest Distribution Amount and/or (ii)
following the application of all Available Funds, an Overcollateralization
Deficit would exist (either such event being an "Available Funds Shortfall"),
the Indenture Trustee shall complete a Notice in the form of Exhibit A to the
Policy and submit such notice to the Insurer no later than 12:00 noon New York
City time on the second Business Day preceding such Payment Date as a claim for
a payment in an amount equal to the aggregate Available Funds Shortfall.
(b) Upon receipt of payments made pursuant to the Policy
from the Insurer on behalf of Class A Noteholders, the Indenture Trustee shall
deposit such payments in the Note Account and shall distribute such payments,
or the proceeds thereof, in accordance with Section 8.6 hereof to the Class A
Noteholders.
(c) The Indenture Trustee shall (i) receive payments made
pursuant to the Policy as attorney-in-fact of each Class A Noteholder receiving
any Insured Payment from the Insurer and (ii) disburse such Insured Payment to
the Class A Noteholders as set forth in Section 8.6 hereof. The Insurer shall
be entitled to receive the related Reimbursement Amount pursuant to Section
8.6(b)(viii) hereof with respect to each Insured Payment made by the Insurer.
The Indenture Trustee hereby agrees on behalf of each Class A Noteholder and
the Trust for the benefit of the Insurer that it recognizes that to the extent
the Insurer makes payments made pursuant to the Policy, either directly or
indirectly (as by paying through the Indenture Trustee), to the Class A
Noteholders, the Insurer will be entitled to receive such related Reimbursement
Amount.
58
<PAGE> 65
SECTION 8.5. Pre-Funding Account and Capitalized Interest
Account. (a) On the Closing Date, the Indenture Trustee will deposit from the
proceeds of the sale of the Class A Notes, on behalf of the Class A Noteholders
and the Insurer, in the Pre-Funding Account, the Original Pre-Funded Amount and
in the Capitalized Interest Account, the Capitalized Interest Account Deposit.
(b) On each Pre-Funding Transfer Date, the Sponsor shall
instruct the Indenture Trustee to withdraw from the Pre-Funding Account and
release to the related Originator an amount equal to 100% of the Principal
Balance of the Pre-Funded Mortgage Loans transferred to the Trust on such
Pre-Funding Transfer Date upon satisfaction of the conditions set forth in
Section 2.4 of the Sale and Servicing Agreement with respect to such transfer.
(c) On the Payment Dates occurring in December, 1997,
January, 1998 and February, 1998, the Indenture Trustee shall transfer from the
Pre-Funding Account to the Note Account the Pre-Funding Earnings, if any,
applicable to each such Payment Date.
(d) On each Payment Date occurring during the Pre-Funding
Period, the Indenture Trustee shall transfer from the Capitalized Interest
Account to the Note Account the Capitalized Interest Requirement, if any, for
such Payment Dates.
On the Payment Date which immediately follows the end of the
Pre-Funding Period, and following any withdrawals from the Capitalized Interest
Account on such Payment Date, the Capitalized Interest Account shall be closed
and any remaining amount on deposit therein shall be paid to the related
Originator in proportion to their Originator's Interest (as set forth in the
report delivered to the Indenture Trustee pursuant to Section 4.8(d)(ii) of the
Sale and Servicing Agreement).
SECTION 8.6. Flow of Funds. (a) The Indenture Trustee
shall deposit to the Note Account, without duplication, upon receipt, (i) any
payments made pursuant to the Policy, (ii) the proceeds of any liquidation of
the assets of the Trust, the Monthly Remittance Amount remitted by the Master
Servicer or any Sub-Servicer, together with any Substitution Amounts, and any
Loan Purchase Price amounts received by the Indenture Trustee, (iii) on the
Payment Dates occurring in December, 1997, January, 1998 and February 1998, the
Pre-Funding Earnings transferred by the Indenture Trustee pursuant to Section
8.5(c) hereof, (iv) the Capitalized Interest Requirement to be transferred on
such Payment Dates from the Capitalized Interest Account, pursuant to Section
8.5(d) hereof and (v) the portion of the amount, if any, to be transferred on
such Payment Date from the Pre-Funding Account, pursuant to Section 8.6(b)(vi)
hereof.
(b) With respect to the Note Account, on each Payment
Date, the Indenture Trustee shall make the following allocations, disbursements
and transfers in the following order of priority, and each such allocation,
transfer and disbursement shall be treated as having occurred only after all
preceding allocations, transfers and disbursements have occurred:
(i) first, to the Indenture Trustee, the Indenture
Trustee's Fee then due and to the Owner Trustee, the Owner Trustee's
Fee then due;
59
<PAGE> 66
(ii) second, to each Originator, each Originator's
proportionate interest in the Originator's Current Amount, if any, for
such Payment Date;
(iii) third, from amounts then on deposit in the Account,
the Premium Amount to the Insurer for such Payment Date.
(iv) fourth, to the Class A Noteholders, the Class A
Interest Distribution Amount and the Unpaid Class A Note Interest
Shortfall, if any, for such Payment Date;
(v) fifth, to the Class A Noteholders, as a distribution
of principal, the Overcollateralization Deficit for such Payment Date;
(vi) sixth, if such Payment Date is the first Payment Date
following the end of the Pre-Funding Period, to the Class A
Noteholders as a distribution of principal any amount remaining in the
Pre-Funding Account (after taking into account all transfers of
Subsequent Mortgage Loans on or prior to such Payment Date);
(vii) seventh, to the Class A Noteholders as a distribution
of principal, the Scheduled Principal Distribution Amount for such
Payment Date;
(viii) eighth, to the Insurer, the Reimbursement Amount, if
any, then due to it;
(ix) ninth, to the Class A Noteholders as a distribution
of principal up to an amount equal to the Overcollateralization
Deficiency Amount (the "Accelerated Principal Payment");
(x) tenth, to the Master Servicer, reimbursement for
Servicing Advances to the extent not previously reimbursed and
reimbursement for Servicing Advances which have been deemed
Nonrecoverable Advances;
(xi) eleventh, to the Class A Noteholders, the amount of
any Net Funds Cap Carry-Forward Amount then due; and
(xii) twelfth, to the Certificateholders, which shall
initially be the Originators, any amount remaining on deposit in the
Note Account.
SECTION 8.7. Investment of Accounts. (a) So long as no
event described in Section 5.1(a) of the Sale and Servicing Agreement shall
have occurred and be continuing, and consistent with any requirements of the
Code, all or a portion of the Accounts held by the Indenture Trustee shall be
invested and reinvested by the Indenture Trustee in the name of the Indenture
Trustee for the benefit of the Class A Noteholders and the Insurer, as directed
in writing by the Master Servicer, in one or more Eligible Investments bearing
interest or sold at a discount. During the continuance of an event described
in Section 5.1(a) of the Sale and Servicing Agreement and following any removal
of the Master Servicer, the Insurer shall direct such investments. No
investment in any Account shall mature later than the Business Day immediately
preceding the next Payment Date.
60
<PAGE> 67
(b) If any amounts are needed for disbursement from any
Account held by the Indenture Trustee and sufficient uninvested funds are not
available to make such disbursement, the Indenture Trustee shall cause to be
sold or otherwise converted to cash a sufficient amount of the investments in
such Account. No investments will be liquidated prior to maturity unless the
proceeds thereof are needed for disbursement.
(c) The Indenture Trustee shall not in any way be held
liable by reason of any insufficiency in any Account held by the Indenture
Trustee resulting from any loss on any Eligible Investment included therein.
(d) The Indenture Trustee shall hold funds in the
Accounts held by the Indenture Trustee uninvested upon the occurrence of either
of the following events:
(i) the Master Servicer or the Insurer, as the case may
be, shall have failed to give investment directions to the Indenture
Trustee; or
(e) the Master Servicer or the Insurer, as the case may
be, shall have failed to give investment directions to the Indenture Trustee by
11:15 a.m. New York time (or such other time as may be agreed by the Master
Servicer or the Insurer, as the case may be, and the Indenture Trustee) on any
Business Day (any such investment by the Indenture Trustee pursuant to this
clause (ii) to mature on the next Business Day after the date of such
investment).
SECTION 8.8. Eligible Investments. The following are
Eligible Investments:
(a) Direct general obligations of the United States or
the obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(b) Federal Housing Administration debentures.
(c) FHLMC participation certificates and senior debt
obligations.
(d) Federal Home Loan Banks' consolidated senior debt
obligations.
(e) FNMA mortgage-backed securities (other than stripped
mortgage securities which are valued greater than par on the portion of unpaid
principal) and senior debt obligations.
(f) Federal funds, certificates of deposit, time and
demand deposits, and bankers' acceptances (having original maturities of not
more than 365 days) of any domestic bank, the short-term debt obligations of
which have been rated A-1 or better by S&P and P-1 by Moody's.
(g) Investment agreements approved by the Insurer
provided:
61
<PAGE> 68
1. The agreement is with a bank or insurance company
which has an unsecured, uninsured and unguaranteed obligation (or
claims-paying ability) rated Aa2 or better by Moody's and AA or better
by S&P, or is the lead bank of a parent bank holding company with an
uninsured, unsecured and unguaranteed obligation meeting such rating
requirements, and
2. Monies invested thereunder may be withdrawn
without any penalty, premium or charge upon not more than one day's
notice (provided such notice may be amended or canceled at any time
prior to the withdrawal date), and
3. The agreement is not subordinated to any other
obligations of such insurance company or bank, and
4. The same guaranteed interest rate will be paid on
any future deposits made pursuant to such agreement, and
5. The Indenture Trustee and the Insurer receive an
opinion of counsel that such agreement is an enforceable obligation of
such insurance company or bank.
(h) Commercial paper (having original maturities of not
more than 365 days) rated A-1 or better by S&P and P-1 or better by Moody's.
(i) Investments in money market funds rated AAAm or
AAAm-G by S&P and AAA or P-1 by Moody's.
(j) Investments approved in writing by the Insurer and
acceptable to Moody's and S&P.
Provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
SECTION 8.9. Reports by Indenture Trustee. (a) On each
Payment Date, to the extent that the related report described in Section
4.8(d)(ii) of the Sale and Servicing Agreement has been received by the
Indenture Trustee, the Indenture Trustee shall provide to each Class A
Noteholder, to the Master Servicer, to the Insurer, to each Underwriter, to the
Sponsor, to S&P and to Moody's a written report in substantially the form set
forth as Exhibit B hereto, as such form may be revised by the Indenture
Trustee, the Master Servicer, Moody's and S&P from time to time, but in every
case setting forth the information requested on Exhibit B hereto and the
following information:
(i) the Class A Note Distribution Amount;
62
<PAGE> 69
(ii) the amount of such distributions allocable to
principal;
(iii) the amount of such distributions allocable to
interest and the related Class A Note;
(iv) the amount of any Unpaid Class A Note Interest
Shortfall in such distribution;
(v) the amount of any Insured Payment included in the
amounts distributed to the Notes on such Payment Date;
(vi) information furnished by the Sponsor pursuant to
Section 6049(d)(7)(C) of the Code and the regulations promulgated
thereunder to assist the Class A Noteholders in computing their market
discount;
(vii) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(viii) for Payment Dates during the Pre-Funding Period, the
remaining Pre-Funded Amount;
(ix) for the final Subsequent Transfer Date, the amount of
any remaining Pre-Funded Amount that has not been used to fund the
purchase of Subsequent Mortgage Loans and that will be distributed to
the Class A Noteholders as principal, if any, on the immediately
following Payment Date;
(x) the amounts, if any, of any Realized Losses for the
related Remittance Period; and
(xi) the amount, if any, of principal in such
distribution, separately stating the components thereof;
(xii) the Servicing Fee for such Payment Date;
(xiii) the Class A Principal Balance and the Pool Factor,
each after giving effect to such distribution;
(xiv) the Pool Balance as of the end of the preceding
Remittance Period and the Pool Balance at the close of business on the
last day of the related Remittance Period;
(xv) the number and aggregate Principal Balances of
Mortgage Loans as to which the Minimum Monthly Payment is Delinquent
for 30-59 days, 60-89 days and 90 or more days, respectively, as of
the end of the preceding Remittance Period;
(xvi) the book value (within the meaning of 12 C.F.R.
Section 571.13 or comparable provision) of any REO Property;
63
<PAGE> 70
(xvii) the Class A Interest Rate applicable to the
distribution on the following Payment Date;
(xviii) the number and principal balances of any Mortgage
Loans retransferred to the Sponsor pursuant to (a) Section 2.2 and (b)
Section 2.5 of the Sale and Servicing Agreement;
(xix) the Overcollateralization Deficit;
(xx) the aggregate Principal Balance of the Subsequent
Mortgage Loans delivered during the related Remittance Period;
(xxi) the amount of the Accelerated Principal Payment, if
any, for the related Payment Date;
(xxii) the amount of any Net Funds Cap Carry-Forward Amount;
(xxiii) the amount of any Step-Down Amount;
(xxiv) the amount of the Originator's Interest; and
(xxv) the amount of the Non-Subordinated Originator's
Interest.
Items (i) through (iii) above shall, with respect to each
Note, be presented on the basis of a Note having a $1,000 denomination. In
addition, by January 31 of each calendar year following any year during which
the Notes are outstanding, the Indenture Trustee shall furnish a report to each
holder of record at any time during each calendar year as to the aggregate of
amounts reported pursuant to (i), (ii) and (iii) with respect to the Notes for
such calendar year.
(b) In addition, on each Payment Date the Indenture
Trustee will distribute to each Holder, to the Insurer, to the Underwriter, to
the Master Servicer, to the Sponsors, to S&P and to Moody's, together with the
information described in Subsection (a) preceding, the following information as
of the close of business on the last Business Day of the prior calendar month,
which is hereby required to be prepared by the Master Servicer and furnished to
the Indenture Trustee for such purpose on or prior to the related Remittance
Date:
(i) the total number of Mortgage Loans and the Principal
Balances thereof, together with the number, aggregate Principal
Balances of such Mortgage Loans and the percentage (based on the
aggregate Principal Balance of the Mortgage Loans) of the aggregate
Principal Balance of such Mortgage Loans to the aggregate Principal
Balance of all Mortgage Loans (a) 30-59 days Delinquent, (b) 60-89
days Delinquent and (c) 90 or more days Delinquent;
(ii) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balance of the Mortgage Loans) of the aggregate Principal Balance
64
<PAGE> 71
of such Mortgage Loans to the aggregate Principal Balance of all
Mortgage Loans in foreclosure proceedings (and whether any such
Mortgage Loans are also included in any of the statistics described in
the foregoing clause (i));
(iii) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balance of the Mortgage Loans) of the aggregate Principal Balance of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans relating to Mortgagors in bankruptcy proceedings (and whether
any such Mortgage Loans are also included in any of the statistics
described in the foregoing clause (i));
(iv) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balance of the Mortgage Loans) of the aggregate Principal Balance of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans relating to REO Properties (and whether any such Mortgage Loans
are also included in any of the statistics described in the foregoing
clause (i)); and
(v) the book value of any REO Property.
(c) The foregoing reports shall be sent be to an Class A
Noteholder only insofar as such holder owns a Note.
SECTION 8.10. Additional Reports by Indenture Trustee. (a)
The Indenture Trustee shall report to the Sponsor, the Master Servicer and the
Insurer with respect to the amount then held in each Account (including
investment earnings accrued or scheduled to accrue) held by the Indenture
Trustee and the identity of the investments included therein, as the Sponsor,
the Master Servicer or the Insurer may from time to time request. Without
limiting the generality of the foregoing, the Indenture Trustee shall, at the
request of the Sponsor, the Master Servicer or the Insurer, transmit promptly
to the Sponsor, the Master Servicer and the Insurer copies of all accounting of
aggregate receipts in respect of the Mortgage Loans furnished to it by the
Master Servicer pursuant to Section 4.8(d)(ii) of the Sale and Servicing
Agreement and shall notify the Sponsor, the Master Servicer and the Insurer if
any such receipts have not been received by the Indenture Trustee.
(b) From time to time, at the request of the Insurer, the
Indenture Trustee shall report to the Insurer with respect to its actual
knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth
in Section 3.3(a) of the Sale and Servicing Agreement. On the date that is
eighteen months after the Closing Date, the Indenture Trustee shall provide the
Insurer with a written report of all of such inaccuracies to such date of which
it has actual knowledge, without independent investigation, and of the action
taken by the Sponsors under Section 3.4(b) of the Sale and Servicing Agreement
with respect thereto.
SECTION 8.11. Opinion of Counsel. The Indenture Trustee
shall receive at least seven days' notice when requested by the Issuer to take
any action pursuant to Section 8.2(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require as a condition to such
action, an Opinion of Counsel, stating the legal effect of any such
65
<PAGE> 72
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with
and such action will not materially and adversely impair the security for the
Notes or the rights of the Noteholders or the Insurer in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the Trust
Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX.
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders. (a) Without the consent of the Holders of any Notes but with the
consent of the Insurer, as evidenced to the Indenture Trustee, the Issuer and
the Indenture Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in force at the
date of the execution thereof), in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property
at any time subject to the lien of this Indenture, or better to
assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or
power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the
66
<PAGE> 73
provisions of this Indenture as shall be necessary to facilitate the
administration of the trusts hereunder by more than one trustee,
pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture and to make any further
appropriate agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized
by an Issuer Order, may, also without the consent of any of the Holders of the
Notes but with the prior written consent of the Insurer and with prior notice
to the Rating Agencies by the Issuer, as evidenced to the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders. The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, also may, with prior notice to the Rating Agencies, with the consent of
the Insurer and with the consent of the Holders of not less than a majority of
the Outstanding Notes, by Act of such Holders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided,
however, that, subject to the express rights of the Insurer under the Operative
Documents, no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Note, or reduce the principal amount
thereof, the interest rate thereon or the Redemption Price with
respect thereto, change the provision of this Indenture relating to
the application of collections on, or the proceeds of the sale of, the
Trust Estate to payment of principal of or interest on the Notes, or
change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(iii) reduce the percentage of the Outstanding Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of
67
<PAGE> 74
which is required for any waiver of compliance with certain provisions
of this Indenture or certain defaults hereunder and their consequences
provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Notes
required to direct the Indenture Trustee to direct the Issuer to sell
or liquidate the Trust Estate pursuant to Section 12.1;
(vi) modify any provision of this Section except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Operative Documents
cannot be modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(vii) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest or principal due on any Note on any Payment Date
(including the calculation of any of the individual components of such
calculation); or
(viii) permit the creation of any lien ranking prior to or
on a parity with the lien of this Indenture with respect to any part
of the Trust Estate or, except as otherwise permitted or contemplated
herein or in any of the Operative Documents, terminate the lien of
this Indenture on any property at any time subject hereto or deprive
the Holder of any Note of the security provided by the lien of this
Indenture.
The Indenture Trustee may determine whether or not any Notes
would be adversely affected by any supplemental indenture upon receipt of an
Opinion of Counsel to that effect and any such determination shall be
conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Indenture Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section, the Indenture
Trustee shall mail to the Holders of the Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Indenture Trustee shall
68
<PAGE> 75
be entitled to receive, and subject to Sections 6.1 and 6.2, shall be fully
protected in relying upon, an Opinion of Counsel (and, if requested, an
Officer's Certificate) stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Indenture Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
that affects the Indenture Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and immunities
under this Indenture of the Indenture Trustee, the Issuer and the Holders of
the Notes shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.5. Conformity With Trust Indenture Act. Every
amendment of this Indenture and every supplemental indenture executed pursuant
to this Article IX shall conform to the requirements of the Trust Indenture Act
as then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
SECTION 9.6. Reference in Notes to Supplemental
Indentures. Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and if required by the
Indenture Trustee shall, bear a notation in form approved by the Indenture
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer or the Indenture Trustee shall so determine, new Notes so modified as to
conform, in the opinion of the Indenture Trustee and the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Indenture Trustee in exchange for
Outstanding Notes.
ARTICLE X.
Redemption of Notes
SECTION 10.1. Redemption. (a) The Notes are subject to
redemption following the later of (A) the Payment Date following payment in
full of all amounts owing to the Insurer and (B) the earliest of (i) the
transfer, under the conditions specified in Section 10.1(b), to the Master
Servicer of the Noteholders' interest in each Mortgage Loan and all property
acquired in respect of any Mortgage Loan remaining in the Trust for an amount
equal to the sum of (w) the Class A Principal Balance, (x) the sum of accrued
and unpaid Class A Interest Distribution Amount through the day preceding the
final Payment Date, (ii) the day following the Payment Date on which the
distribution made to Class A Noteholders has reduced the Class A Principal
Balance to zero and no other amounts are owed to the Class A Noteholders, (iii)
the final payment or other liquidation of the last Mortgage Loan remaining in
the Trust (including,
69
<PAGE> 76
without limitation, the disposition of the Mortgage Loan pursuant to Section
12.1 hereof) or the disposition of all property acquired upon foreclosure
or deed in lieu of foreclosure of any Mortgage Loan and (iv) the
Payment Date in February 2024; provided, however, that in no event shall the
trust created hereby continue beyond the expiration of 21 years from the date
of death of the last surviving descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date
hereof. Upon termination in accordance with clause (B)(i) of this Section
10.1(a), the Indenture Trustee shall execute such documents and instruments of
transfer presented by the Sponsor, in each case without recourse,
representation or warranty, and take such other actions as the Sponsor may
reasonably request to effect the transfer of the Mortgage Loan to the Sponsor.
(b) The Class A Notes shall be subject to optional
transfer to the Sponsor on any Payment Date after the Class A Principal Balance
has been reduced to an amount less than or equal to $10,000,000 (10% of the
Original Class A Principal Balance) and all amounts due and owing to the
Insurer as a Reimbursement Amount have been paid. Such transfer shall only be
permitted if the Sponsor delivers to the Indenture Trustee an amount equal to
the sum of the outstanding Class A Principal Balance and accrued and unpaid
interest thereon at the Class A Interest Rate through the day preceding the
final Payment Date plus all Reimbursement Amounts (such amount, the "Redemption
Price"). In connection with such purchase, the Master Servicer shall remit to
the Indenture Trustee all amounts then on deposit in the Principal and Interest
Account for deposit to the Note Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
(c) Promptly following any such purchase, the Indenture
Trustee will release the Mortgage Files to the Master Servicer, or otherwise
upon their order, in a manner similar to that described in Section 4.14 of the
Sale and Servicing Agreement.
(d) Advanta National Bank may not participate in any
purchase described in this Section 10.1(b), or fund any portion of the purchase
price, unless the then-outstanding Principal Balances of the Mortgage Loans in
the Trust Estate is less than or equal to five percent of the sum of the
aggregate Loan Balances of all Mortgage Loans in the Trust Estate as of the
Initial Cut-Off Date and the Original Pre-Funded Amount.
(e) If the Notes are to be redeemed pursuant to this
Section 10.1(a), the Master Servicer or the Issuer shall furnish notice of such
election to the Indenture Trustee not later than 45 days prior to the
Redemption Date and the Issuer shall deposit with the Indenture Trustee in the
Note Account the Redemption Price of the Notes not less than five Business Days
prior to the Redemption Date whereupon all such Notes shall be due and payable
on the Redemption Date upon the furnishing of a notice complying with Section
10.2.
SECTION 10.2. Surrender of Notes. (a) Notice of any
termination, specifying the Payment Date (which shall be a date that would
otherwise be a Payment Date) upon which the Noteholders may surrender their
Notes to the Indenture Trustee for payment of the final distribution and
cancellation, shall be given promptly by the Indenture Trustee (upon receipt of
written directions from the Sponsor, if the Sponsor is exercising its right to
transfer of the
70
<PAGE> 77
Mortgage Loans, given not later than the first day of the month preceding the
month of such final distribution) to the Insurer and to the Master Servicer and
by letter to Noteholders mailed not earlier than the 15th day and not later
than the 25th day of the month next preceding the month of such final
distribution specifying (i) the Payment Date upon which final distribution of
the Notes will be made upon presentation and surrender of Notes at the office
or agency of the Indenture Trustee therein designated, (ii) the amount of any
such final distribution and (iii) that the Record Date otherwise applicable to
such Payment Date is not applicable, distributions being made only upon
presentation and surrender of the Notes at the office or agency of the
Indenture Trustee therein specified.
(b) Any money held by the Indenture Trustee in trust for
the payment of any amount due with respect to any Class A Note and remaining
unclaimed by the related Class A Noteholder for the period then specified in
the escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first, to the Insurer
on account of any Reimbursement Amounts, and second, to the Certificateholders
of the Originators' Interest; and such Class A Noteholder shall thereafter, as
an unsecured general creditor, look only to the Insurer or the
Certificateholders of the Originators' Interest for payment thereof (but only
to the extent of the amounts so paid to the Insurer or the Certificateholders
of the Originators' Interest), and all liability of the Indenture Trustee with
respect to such trust money shall thereupon cease; provided, however, that the
Indenture Trustee, before being required to make any such payment, shall at the
expense of the Trust cause to be published once, in the eastern edition of The
Wall Street Journal, notice that such money remains unclaimed and that, after a
date specified therein, which shall be not fewer than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
paid to the Insurer or the Certificateholders of the Originators' Interest.
The Indenture Trustee shall, at the direction of the Sponsor, also adopt and
employ, at the expense of the Trust, any other reasonable means of notification
of such payment (including, but not limited to, mailing notice of such payment
to Class A Noteholders whose right to or interest in monies due and payable but
not claimed is determinable from the Note Register at the last address of
record for each such Class A Noteholder).
SECTION 10.3. Form of Redemption Notice. Notice of
redemption supplied to the Indenture Trustee by the Master Servicer under
Section 10.1(a) shall be given by the Indenture Trustee by facsimile or by
first-class mail, postage prepaid, transmitted or mailed prior to the
applicable Redemption Date to each Holder of Notes of record, as of the close
of business on the date which is not less than 5 days prior to the applicable
Redemption Date, at such Holder's address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
71
<PAGE> 78
(iii) that the Record Date otherwise applicable to such
Redemption Date is not applicable and that payments shall be made only
upon presentation and surrender of such Notes at the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Issuer to be maintained as
provided in Section 3.2); and
(iv) that interest on the Notes shall cease to accrue on
the Redemption Date.
Notice of redemption of the Notes shall be given by the
Indenture Trustee in the name and at the expense of the Issuer. Failure to
give notice of redemption, or any defect therein, to any Holder of any Note
shall not impair or affect the validity of the redemption of any other Note.
SECTION 10.4. Notes Payable on Redemption Date. The Notes
to be redeemed shall, following notice of redemption as required by Section
10.2, on the Redemption Date become due and payable at the Redemption Price and
(unless the Issuer shall default in the payment of the Redemption Price) no
interest shall accrue on the Redemption Price for any period after the date to
which accrued interest is calculated for purposes of calculating the Redemption
Price.
ARTICLE XI.
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc.
Upon any application or request by the Issuer to the Indenture Trustee to take
any action under any provision of this Indenture, the Issuer shall furnish to
the Indenture Trustee and to the Insurer if the application or request is made
to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with and (iii) (if required by the TIA) an Independent
Certificate from a firm of certified public accountants meeting the applicable
requirements of this Section, except that, in the case of any such application
or request as to which the furnishing of such documents is specifically
required by any provision of this Indenture, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate
or opinion has read or has caused to be read such covenant or
condition and the definitions herein relating thereto;
72
<PAGE> 79
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or investigation
as is necessary to enable such signatory to express an informed
opinion as to whether or not such covenant or condition has been
complied with; and
(iv) a statement as to whether, in the opinion of each
such signatory such condition or covenant has been complied with.
SECTION 11.2. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate
or opinion is based are erroneous. Any such certificate of an Authorized
Officer or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Master Servicer, the Sponsor or the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Master Servicer, the Sponsor or the Issuer, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Whenever in this Indenture, in connection with any application
or certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof, it
is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case
be conditions precedent to the right of the Issuer to have such application
granted or to the sufficiency of such certificate or report. The foregoing
shall not, however, be construed to affect the Indenture Trustee's right to
conclusively
73
<PAGE> 80
rely upon the truth and accuracy of any statement or opinion contained in any
such document as provided in Article VI.
SECTION 11.3. Acts of Noteholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Noteholders may be embodied
in and evidenced by one or more instruments of substantially similar tenor
signed by such Noteholders in person or by agents duly appointed in writing;
and except as herein otherwise expressly provided such action shall become
effective when such instrument or instruments are delivered to the Indenture
Trustee, and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Section 6.1) conclusive in favor
of the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of
any such instrument or writing may be proved in any customary manner of the
Indenture Trustee.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Holder of any Notes shall bind
the Holder of every Note issued upon the registration thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Indenture Trustee or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Note.
SECTION 11.4. Notices, etc. to Indenture Trustee, Issuer
and Rating Agencies. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders or other documents provided or permitted
by this Indenture to be made upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the
Issuer shall be sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed first-class and shall be deemed to
have been duly given upon receipt to the Indenture Trustee at its Corporate
Trust Office and any notice delivered by facsimile shall be addressed to the
Corporate Trust Office, telecopy number (714) 253-7577, or
(b) The Issuer by the Indenture Trustee or by any
Noteholder shall be in writing and shall be sufficient for every purpose
hereunder if personally delivered, delivered by facsimile or overnight courier
or mailed first class, and shall deemed to have been duly given upon receipt to
the Issuer addressed to: Advanta Home Equity Loan Trust 1997-A, in care of
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, DE 19890-0001 Attention: Corporate Trust Administration, or at any
other address previously furnished in writing to the Indenture Trustee by
Issuer. The Issuer shall promptly transmit any notice received by it from the
Noteholders to the Indenture Trustee.
74
<PAGE> 81
(c) The Insurer by the Issuer or the Indenture Trustee
shall be sufficient for any purpose hereunder if in writing and mailed by
first-class mail, personally delivered, or telecopied to the recipient as
follows:
To the Insurer: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Howard Pfeffer
Structured Finance Department
Telecopy: (212) 363-1459
Notices required to be given to the Rating Agencies by the
Issuer, the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered, delivered by overnight courier or first class or via
facsimile to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004, Fax No:
(212) 533-0355 and (ii) in the case of S&P, at the following address: Standard
& Poor's Ratings Group, 26 Broadway (15th Floor), New York, New York 10004,
Attention: Asset Backed Surveillance Department, Fax No: (212) 412-0224; or as
to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 11.5. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder.
75
<PAGE> 82
SECTION 11.6. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Note Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such methods
are reasonable and consented to by the Indenture Trustee (which consent shall
not be unreasonably withheld). The Issuer will furnish to the Indenture Trustee
a copy of each such agreement and the Indenture Trustee will cause payments to
be made and notices to be given in accordance with such agreements.
SECTION 11.7. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
The provisions of TIA Section 310 through 317 that impose
duties on any person (including the provisions automatically deemed included
herein unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
SECTION 11.8. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 11.9. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors.
SECTION 11.10. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. The Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture. Nothing in this Indenture or in the Notes,
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, the Insurer and the Noteholders, and any other
party secured hereunder, and any other person with an ownership interest in any
part of the Trust Estate, any benefit or any legal or equitable right, remedy
or claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture (in which case the Indenture Trustee may exercise
such right or power hereunder), but not its duties and obligations under the
Policy, upon delivery of a written notice to the Indenture Trustee.
SECTION 11.12. Legal Holidays. In any case where the date on
which any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Notes or this Indenture) payment need not be made on
such date, but may be made on the next
76
<PAGE> 83
succeeding Business Day with the same force and effect as if made on the date
on which nominally due, and no interest shall accrue for the period from and
after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and
the same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such
recording is to be effected by the Issuer and at its expense accompanied by an
Opinion of Counsel (which may be counsel to the Trust or any other counsel
reasonably acceptable to the Indenture Trustee and the Insurer) to the effect
that such recording is necessary either for the protection of the Noteholders
or any other person secured hereunder or for the enforcement of any right or
remedy granted to the Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the
Sponsor, any Originator, the Master Servicer, the Owner Trustee or the
Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Sponsor, any Originator, the Master Servicer, the Indenture Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent,
officer, director, employee or agent of the Sponsor, any Originator, the Master
Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Sponsor, any
Originator, the Master Servicer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Sponsor, any Originator, the Master Servicer,
the Indenture Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Indenture,
in the performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of Articles VI, VII and VIII of the Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by
entering into this Indenture, and each Noteholder, by accepting a Note, hereby
covenant and agree that they will not at any time institute against the
Sponsor, or the Issuer, or join in any institution against the Sponsor, or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation
77
<PAGE> 84
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Operative Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee or of the Insurer, during the Issuer's normal business hours, to
examine all the books of account, records, reports, and other papers of the
Issuer, to make copies and extracts therefrom, to cause such books to be
audited by independent certified public accountants, and to discuss the
Issuer's affairs, finances and accounts with the Issuer's officers, employees,
and independent certified public accountants, all at such reasonable times and
as often as may be reasonably requested. The Indenture Trustee shall and shall
cause its representatives to hold in confidence all such information except to
the extent disclosure may be required by law (and all reasonable applications
for confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its Obligations hereunder.
SECTION 11.19. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure
of any obligation, representation, warranty or covenant made or undertaking by
the Issuer under this Agreement or any related documents.
ARTICLE XII.
Rapid Amortization Events
SECTION 12.1. Rapid Amortization Events. The following
shall constitute Rapid Amortization Events:
(a) failure on the part of Sponsor (i) to make a payment
or deposit required under the Sale and Servicing Agreement within four Business
Days after the date such payment or deposit is required to be made or (ii) to
observe or perform in any material respect any other covenants or agreements of
the Sponsor set forth in the Sale and Servicing Agreement, which failure
continues unremedied for a period of 60 days after written notice;
78
<PAGE> 85
(b) any representation or warranty made by the Sponsor in
the Sale and Servicing Agreement proves to have been incorrect in any material
respect when made and continues to be incorrect in any material respect for a
period of 60 days after written notice and as a result of which the interests
of the Holders or the Insurer are materially and adversely affected: provided,
however, that a Rapid Amortization Event shall not be deemed to occur if the
Sponsor has purchased or made a substitution for the related Mortgage Loan or
Mortgage Loans if applicable during such period (or within an additional 60
days with the consent of the Indenture Trustee and the Insurer) in accordance
with the provisions of the Sale and Servicing Agreement;
(c) the occurrence of certain events of bankruptcy,
insolvency or receivership relating to the Originators;
(d) the Trust becomes subject to regulation by the
Securities and Exchange Commission as an investment company within the meaning
of the Investment Company Act of 1940, as amended;
(e) the occurrence of an event permitting the removal of
the Master Servicer. See "Certain Matters Regarding the Master Servicer"
herein;
(f) default in the payment of any interest, principal or
any installment of principal on any Note when the same becomes due and payable,
and such default continues for a period of five days; and
(g) the aggregate of all draws under the Policy exceeds
1% of the Cut-Off Date Pool Balance.
In the case of any event described in clause (a), (b), (e) or
(g), a Rapid Amortization Event will be deemed to have occurred only if, after
the applicable grace period, if any, described herein or in the Indenture or
Sale and Servicing Agreement either (i) the Indenture Trustee or Holders
holding Class A Notes evidencing more than 51% of the aggregate principal
amount of the Class A Notes with the consent of the Insurer (so long as there
is no continuing default by the Insurer in the performance of its obligations
under the Policy) or the Insurer (so long as there is no continuing default by
the Insurer in the performance of its obligations under the Policy), by written
notice to the Insurer, the Sponsor, the Originators, the Rating Agencies, and
the Master Servicer (and to the Indenture Trustee, if given by the Holders or
the Insurer) declare that a Rapid Amortization Event has occurred as of the
date of such notice. In the case of any event described in clause (c), (d) or
(f), a Rapid Amortization Event will be deemed to have occurred without any
notice or other action on the part of the Indenture Trustee, the Holders or the
Insurer immediately upon the occurrence of such event.
In addition to the consequences of a Rapid Amortization Event
discussed above, if any Originator voluntarily files a bankruptcy petition or
goes into liquidation or any person is appointed a receiver or bankruptcy
trustee of the related Originator, on the day of any such filing or appointment
no further Additional Balances will be transferred to the Trust, and the
related Originator will promptly give notice to the Indenture Trustee and the
Insurer of any such filing or
79
<PAGE> 86
appointment. Within 15 days, the Indenture Trustee will publish a notice of
the liquidation or the filing or appointment relating to such Originator.
Unless otherwise instructed within 60 days by the Holders representing
undivided interests aggregating more than 51% of the aggregate principal amount
of the Class A Notes, the Indenture Trustee will sell, dispose of or otherwise
liquidate the Trust Estate in a commercially reasonable manner and on
commercially reasonable terms. Any such sale, disposal or liquidation and such
sale, disposal or liquidation will be "servicing retained" by the Master
Servicer. The net proceeds of such sale will first (if an Insurer Default
shall not have occurred and be continuing) be paid to the Insurer to the extent
of unreimbursed draws under the Policy and other amounts owing to the Insurer.
The lesser of (i) the amount required to reduce the Class A Principal Balance,
together with all accrued and unpaid interest due thereon, to zero and (ii) the
Floating Allocation Percentage times such remaining amounts will be distributed
to the Holders of the Class A Notes; the Policy will cover any amount by which
such remaining net proceeds are insufficient to pay the Class A Principal
Balance in full.
80
<PAGE> 87
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers,
hereunto duly authorized, all as of the day and year first above written.
ADVANTA REVOLVING HOME EQUITY LOAN
TRUST 1997-A,
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee,
By:
-------------------------------------
Name:
Title:
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., not in its individual
capacity but solely as
Indenture Trustee,
By:
-------------------------------------
Name:
Title:
<PAGE> 88
EXHIBIT A
[Form of Note]
REGISTERED $100,000,000
No. A
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. _________
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1997-A
CLASS A ASSET BACKED NOTES
Advanta Home Equity Loan Trust 1997-A, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($100,000,000), such amount payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is $100,000,000 and the denominator of
which is $100,000,000 by (ii) the aggregate amount, if any, payable from the
Certificate Account in respect of principal on the Class A Notes pursuant to
Section 8.6 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the February, 2024,
Payment Date (the "Final Scheduled Payment Date"). The Issuer will pay
interest on this Note at the rate per annum provided in the Indenture on each
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Payment Date (after giving effect to all payments of principal made on the
preceding Payment Date). Interest on this Note will accrue for each Payment
Date from the most recent Payment Date on which interest has been
B-1
<PAGE> 89
paid to but excluding such Payment Date or, if no interest has yet been paid,
from November 20, 1997. Interest will be computed on the basis of the actual
number of days elapsed in a 360-day year. Such principal of and interest on
this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments on each Payment Date, all as more fully set
forth in the Indenture.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and hereby instructs the Indenture Trustee to treat
the Notes as indebtedness of the Issuer for federal state tax reporting
purposes.
Each Noteholder or Note Owner, by acceptance of this Note or,
in the case of a Note Owner, a beneficial interest in a Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on
the Notes or under the Indenture or any certificate or other writing delivered
in connection therewith, against (i) the Sponsor, any Originator, the Master
Servicer, the Indenture Trustee, or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, any
Originator, the Master Servicer, the Indenture Trustee, or the Owner Trustee in
its individual capacity, any holder of a beneficial interest in the Issuer, the
Sponsor, any Originator, the Master Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Sponsor, any Originator,
the Master Servicer, the Indenture Trustee, or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such owner or
beneficiary shall be fully liable, to the extent provided by applicable law,
for any unpaid consideration for stock, unpaid capital contribution or failure
to pay any installment or call owing to such entity.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-2
<PAGE> 90
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes,
or to whom the Notes are transferred, will be deemed to have represented that
the acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
B-3
<PAGE> 91
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: November __, 1997 ADVANTA REVOLVING HOME EQUITY LOAN
TRUST 1997-A
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as
Owner Trustee under the Trust
Agreement
By:
-------------------------------------
Name:
Title:
B-4
<PAGE> 92
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: November __, 1997 BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely
as Indenture Trustee,
By:
-------------------------------------
Authorized Signatory
B-5
<PAGE> 93
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its Class A Asset Backed Notes (herein called the "Class
A Notes"), all issued under an Indenture dated as of November 1, 1997 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Bankers Trust Company of California, N.A., as trustee
(the "Indenture Trustee", which term includes any successor Indenture Trustee
under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture. All terms
used in this Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A Notes are and will be secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment
Date in an amount described on the face hereof. "Payment Date" means the
twenty-fifth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing December 26, 1997. The term "Payment
Date," shall be deemed to include the Final Scheduled Payment Date.
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Scheduled Payment
Date and the Redemption Date, if any, pursuant to Section 10.1(a) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable if any Originator voluntarily files a
bankruptcy petition or goes into liquidation or any person is appointed a
receiver or bankruptcy trustee of the related Originator and the Indenture
Trustee or the Holders of the Notes representing at least 51% of the
Outstanding Amount of the Notes shall have the right to direct the Indenture
Trustee to sell or liquidate the Trust Estate as provided in Section 12.1 of
the Indenture. All principal payments on the Class A Notes shall be made pro
rata to the Class A Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and
of any Note issued upon the registration of
B-6
<PAGE> 94
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture,
for payment in full of the then remaining unpaid principal amount of this Note
on a Payment Date, then the Indenture Trustee, in the name of and on behalf of
the Issuer, will notify the Person who was the Holder hereof as of the Record
Date preceding such Payment Date by notice mailed prior to such Payment Date
and the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of
interest at the Class A Note Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed
pursuant to Section 10.1(b) of the Indenture, in whole, but not in part, at the
option of the Sponsor, on any Payment Date on or after the date on which the
Class A Note Principal Balance is less than or equal to 10% of the Original
Class A Note Principal Balance.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, (i)
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
his attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the Note Registrar
which requirements include membership or participation in Securities Transfer
Agents Medallion Program ("Stamp") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by
such other documents as the Indenture Trustee may require, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, any Originator, the Master
Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, any
Originator, the Master Servicer, the Indenture Trustee or the Owner Trustee in
its individual capacity, any holder of a beneficial interest in the Issuer, the
Sponsor, any Originator, the Master Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Sponsor, any Originator,
the Master Servicer, the Indenture
B-7
<PAGE> 95
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such owner or beneficiary shall be fully liable,
to the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not
at any time institute against the Sponsor, or the Issuer or join in any
institution against the Sponsor, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings, under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Operative Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Holders of the Notes under the
Indenture at any time by the Issuer with the consent of the Insurer and of the
Holders of Notes representing a majority of the Outstanding Amount of all Notes
at the time Outstanding. Any such consent or waiver by the Holder of this Note
(or any one of more Predecessor Notes) shall be conclusive and binding upon
such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Note. The Indenture also permits the Indenture Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Notes issued thereunder but with the consent of the Insurer.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of
law provisions, and the obligations, rights and remedies of the parties
hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional,
B-8
<PAGE> 96
to pay the principal of and interest on this Note at the times, place, and
rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Operative Documents, neither
Wilmington Trust Company in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Issuer for the sole purposes of binding
the interests of the Issuer in the assets of the Issuer. The Holder of this
Note by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Operative Documents, in the case of an Rapid Amortization
Event under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
B-9
<PAGE> 97
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for
registration thereof, with full power of substitution in the premises.
Dated: (1)
--------------------------- -------------------------------
Signature Guaranteed:
--------------------------- -------------------------------
- --------------------------
(1) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
B-10
<PAGE> 1
EXHIBIT 4.2
<PAGE> 2
EXHIBIT 4.2
EXECUTION COPY
TRUST AGREEMENT
between
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Sponsor
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of November 1, 1997
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Capitalized Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitional Provisions. (a) . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.3 Action by or Consent of Noteholders and Certificateholders . . . . . . . . 3
ARTICLE II. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.3 Purposes and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.4 Appointment of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.5 Initial Capital Contribution of Trust Estate . . . . . . . . . . . . . . . 5
SECTION 2.6 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.7 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.8 Title to Trust Property . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.9 Situs of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.10 Representations and Warranties of the Sponsor . . . . . . . . . . . . . . . 6
SECTION 2.11 Federal Income Tax Allocations . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.12 Covenants of the Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.13 Covenants of the Certificateholders . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III. Certificates and Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.1 Initial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.2 The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.3 Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.4 Registration of Transfer and Exchange of Certificates . . . . . . . . . . . 9
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . 10
SECTION 3.6 Persons Deemed Certificateholders . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.7 Access to List of Certificateholders' Names and Addresses . . . . . . . . . 10
SECTION 3.8 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.10 Restrictions on Transfer of Certificates . . . . . . . . . . . . . . . . . 11
SECTION 3.11 Acceptance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.12 Payments on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV. Voting Rights and Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.1 Prior Notice to Holders with Respect to Certain Matters . . . . . . . . . . 12
SECTION 4.2 Action by Certificateholders with Respect to Certain Matters . . . . . . . 13
SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy . . . . . . . . . . 13
SECTION 4.4 Restrictions on Certificateholders' Power . . . . . . . . . . . . . . . . . 13
SECTION 4.5 Majority Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.6 Rights of Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE V. Certain Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.1 Accounting and Records to the Noteholders, Certificateholders, the
Internal Revenue Service and Others . . . . . . . . . . . . . . . . . . . 14
SECTION 5.2 Signature on Returns; Tax Matters Partner . . . . . . . . . . . . . . . . . 15
ARTICLE VI. Authority and Duties of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.1 General Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.2 General Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.3 Action upon Instruction . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.4 No Duties Except as Specified in this Agreement or in Instructions . . . . 16
SECTION 6.5 No Action Except under Specified Documents or Instructions . . . . . . . . 16
SECTION 6.6 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII. Concerning the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.1 Acceptance of Trust and Duties . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7.2 Furnishing of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.3 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.4 Reliance; Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.5 Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.6 Owner Trustee Not Liable for Certificates or Mortgage Loans . . . . . . . . 19
SECTION 7.7 Owner Trustee May Own Certificates and Notes . . . . . . . . . . . . . . . 19
SECTION 7.8 Payments from Owner Trust Estate . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.9 Doing Business in Other Jurisdictions . . . . . . . . . . . . . . . . . . . 20
ARTICLE VIII. Compensation of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.1 Owner Trustee's Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.3 Payments to the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.4 Non-recourse Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX. Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.1 Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE X. Successor Owner Trustees and Additional Owner Trustees . . . . . . . . . . . . . . . . 22
SECTION 10.1 Eligibility Requirements for Owner Trustee . . . . . . . . . . . . . . . . 22
SECTION 10.2 Resignation or Removal of Owner Trustee . . . . . . . . . . . . . . . . . . 22
SECTION 10.3 Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 10.4 Merger or Consolidation of Owner Trustee . . . . . . . . . . . . . . . . . 23
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee . . . . . . . . . 24
ARTICLE XI. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.1 Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.2 No Legal Title to Owner Trust Estate in Certificateholders . . . . . . . . 26
SECTION 11.3 Limitations on Rights of Others . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 11.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.6 Separate Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.7 Assignments; Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.8 No Petition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.9 No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.12 Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
iii
<PAGE> 6
TRUST AGREEMENT dated as of November 1, 1997 between ADVANTA
MORTGAGE CONDUIT SERVICES, INC., a Delaware corporation (the "Sponsor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation as Owner Trustee.
ARTICLE I.
Definitions
SECTION 1.1 Capitalized Terms. For the purposes of this
Agreement, the following terms shall have the meanings set forth below. All
other capitalized terms used herein but not defined shall have the meanings set
forth in the Sale and Servicing Agreement.
"Affiliate" shall mean with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, or owns,
directly or indirectly, 50% or more of, the Person specified.
"Agreement" shall mean this Trust Agreement, as the same may be
amended and supplemented from time to time.
"Benefit Plan" shall have the meaning assigned to such term in
Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et. seq. as the same may be amended
from time to time.
"Certificate" means a trust certificate evidencing the beneficial
ownership interest of a Certificateholder in the Trust, substantially in the
form of Exhibit A attached hereto.
"Certificate Account" shall mean the account designated as such as
established and maintained pursuant to the Indenture.
"Certificate of Trust" shall mean the Certificate of Trust in the
form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register maintained and the registrar appointed pursuant to Section 3.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at such other address as the
Owner Trustee may designate by notice to the Certificateholders and the
Sponsor, or the principal corporate trust office of any successor Owner Trustee
(the address of which the successor owner trustee will notify the
Certificateholders and the Sponsor).
"Definitive Certificates" shall mean Certificates issued in
certificated, fully registered form.
"ERISA" shall have the meaning assigned to such term in Section
3.9.
"Expenses" shall have the meaning assigned to such term in Section
8.2.
<PAGE> 7
"Holder" or "Certificateholder" shall mean the Person in whose name
a Certificate is registered on the Certificate Register.
"Indemnification Agreement" shall mean the Indemnification
Agreement dated as of November 20, 1997 among the Insurer, the Sponsor and J.P.
Morgan & Co..
"Indemnified Parties" shall have the meaning assigned to such term
in Section 8.2.
"Indenture" shall mean the Indenture dated as of November 1, 1997,
among the Issuer and Bankers Trust Company of California, N.A., as Indenture
Trustee, as the same may be amended and supplemented from time to time.
"Indenture Trustee" shall mean, initially Bankers Trust Company of
California, N.A., in its capacity as indenture trustee, including its
successors in interest, until and unless a successor Person shall have become
the Indenture Trustee pursuant to the Sale and Servicing Agreement and
thereafter "Indenture Trustee" shall mean such successor Person.
"Instructing Party" shall have the meaning assigned to such term in
Section 6.3.
"Insurance Agreement" shall mean the Insurance Agreement dated as
of November 1, 1997 among the Insurer, the Sponsor, the Master Servicer and the
Indenture Trustee.
"Insurer" shall mean Ambac Assurance Corporation, or its successor
in interest.
"Issuer" shall mean Advanta Revolving Home Equity Loan Trust
1997-A.
"Master Servicer" shall mean Advanta Mortgage Corp. USA.
"Operative Documents" shall mean this Agreement, the Certificate of
Trust, the Sale and Servicing Agreement, the Indemnification Agreement, the
Insurance Agreement, the Indenture and the other documents and certificates
delivered in connection therewith.
"Originators" shall mean Advanta National Bank and Advanta Finance
Corp..
"Owner Trust Estate" shall mean all right, title and interest of
the Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Account and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor Owner Trustee hereunder.
"Record Date" shall mean with respect to any Payment Date, the
close of business on the last Business Day immediately preceding such Payment
Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement among the Trust, Advanta Mortgage Conduit Services, Inc., as Sponsor,
Advanta Mortgage Corp. USA, as Master Servicer and the Indenture Trustee, dated
as of November 1, 1997, as the same may be amended and supplemented from time
to time.
2
<PAGE> 8
"Secretary of State" shall mean the Secretary of State of the State
of Delaware.
"Security Majority" means a majority by principal amount of the
Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Sponsor" shall mean Advanta Mortgage Conduit Services, Inc. in its
capacity as Sponsor hereunder.
"Treasury Regulations" shall mean regulations, including proposed
or temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Accounts" shall have the meaning ascribed thereto in the
Sale and Servicing Agreement.
SECTION 1.2 Other Definitional Provisions. (a) Capitalized
terms used herein and not otherwise defined have the meanings assigned to them
in the Sale and Servicing Agreement or, if not defined therein, in the
Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles as in effect on
the date of this Agreement or any such certificate or other document, as
applicable. To the extent that the definitions of accounting terms in this
Agreement or in any such certificate or other document are inconsistent with
the meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such certificate or other
document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and
Exhibit references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
SECTION 1.3 Action by or Consent of Noteholders and
Certificateholders. Whenever any provision of this Agreement refers to action
to be taken, or consented to, by Noteholders or Certificateholders, such
provision shall be deemed to refer to the Certificateholder or Noteholder, as
the case may be, of record as of the Record Date immediately preceding the date
on which such action is to be taken, or consent given, by Noteholders or
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Noteholders or Certificateholders, any Note or Certificate
registered in the name of the Sponsor or any Affiliate thereof shall be deemed
not to be outstanding;
3
<PAGE> 9
provided, however, that, solely for the purpose of determining whether the
Indenture Trustee is entitled to rely upon any such action or consent, only
Notes or Certificates which the Owner Trustee, or the Indenture Trustee,
respectively, knows to be so owned shall be so disregarded.
ARTICLE II.
Organization
SECTION 2.1 Name. There is hereby formed a trust to be known as
"Advanta Revolving Home Equity Loan Trust 1997-A", in which name the Owner
Trustee may conduct the business of the Trust, make and execute contracts and
other instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care
of the Owner Trustee at the Corporate Trust Office or at such other address as
the Owner Trustee may designate by written notice to the Certificateholders and
the Sponsor.
SECTION 2.3 Purposes and Powers. The purpose of the Trust is,
and the Trust shall have the power and authority, to engage in the following
activities:
(i) to issue the Notes pursuant to the Indenture and
the Certificates pursuant to this Agreement, and to sell the Notes;
(ii) with the proceeds of the sale of the Notes, to fund
the Pre-Funding Account and to pay the organizational, start-up and
transactional expenses of the Trust and to pay the balance to the
Sponsor pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and
convey the Owner Trust Estate to the Indenture Trustee on behalf of
the Noteholders and for the benefit of the Insurer and to hold,
manage and distribute to the Certificateholders pursuant to the
terms of the Sale and Servicing Agreement any portion of the Owner
Trust Estate released from the Lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the
Operative Documents to which it is a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith; and
(vi) subject to compliance with the Operative Documents,
to engage in such other activities as may be required in connection
with conservation of the Owner Trust Estate and the making of
distributions to the Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Operative Documents.
4
<PAGE> 10
SECTION 2.4 Appointment of Owner Trustee. The Sponsor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein and in the
Business Trust Statute.
SECTION 2.5 Initial Capital Contribution of Trust Estate. The
Sponsor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Sponsor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Account. On or prior to the Closing
Date, the Owner Trustee will also, upon receipt thereof, acknowledge on behalf
of the Trust receipt of the Mortgage Loans pursuant to the Sale and Servicing
Agreement. The Sponsor shall pay organizational expenses of the Trust as they
may arise.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject to
the conditions set forth herein for the use and benefit of the
Certificateholders, subject to the obligations of the Trust under the Operative
Documents. It is the intention of the parties hereto that the Trust constitute
a business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. It is the
intention of the parties hereto that, solely for income tax purposes, the Trust
shall be treated as a branch; provided, however, that in the event Certificates
are owned by more than one Certificateholder, it is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Trust
shall then be treated as a partnership and that, unless otherwise required by
appropriate tax authorities, only after such time the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for such tax
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and to the extent not inconsistent
herewith, in the Business Trust Statute with respect to accomplishing the
purposes of the Trust. The Owner Trustee shall file the Certificate of Trust
with the Secretary of State.
SECTION 2.7 Liability. No Holder shall have any personal
liability for any liability or obligation of the Trust.
SECTION 2.8 Title to Trust Property. (a) Legal title to all
of the Owner Trust Estate shall be vested at all times in the Trust as a
separate legal entity except where applicable law in any jurisdiction requires
title to any part of the Owner Trust Estate to be vested in a trustee or
trustees, in which case title shall be deemed to be vested in the Owner
Trustee, a co-trustee and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the
Trust Property. The Holders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Article IX. No transfer, by operation of law or otherwise, of any right, title
or interest by any Certificateholder of its ownership interest in the Owner
Trust Estate shall operate to terminate this Agreement or the trusts hereunder
or entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Trust Property.
SECTION 2.9 Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of Delaware
or the State of New York. Payments will be received by the Trust only in
Delaware or New York and payments will be made by the Trust only from Delaware
or New York. The Trust shall not have any employees in any state other than
Delaware; provided, however, that nothing herein shall restrict or prohibit the
Owner Trustee, the Master Servicer or any agent of the Trust
5
<PAGE> 11
from having employees within or without the State of Delaware. The only office
of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Sponsor. The
Sponsor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Certificates and upon which the Insurer relies in issuing the Policy.
(a) The Sponsor is duly organized and validly existing as a
Delaware corporation with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business
is presently conducted and is proposed to be conducted pursuant to this
Agreement and the Operative Documents;
(b) It is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of its
property, the conduct of its business and the performance of its obligations
under this Agreement and the Operative Documents requires such qualification;
(c) The Sponsor has the corporate power and authority to
execute and deliver this Agreement and to carry out its terms; the Sponsor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Sponsor has duly authorized
such sale and assignment and deposit to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement has been
duly authorized by the Sponsor by all necessary corporate action. The Sponsor
has duly executed this Agreement and this Agreement constitutes a legal, valid
and binding obligation of the Sponsor enforceable against the Sponsor, in
accordance with its terms.
(d) To the best knowledge of the Sponsor, no consent, license,
approval or authorization or registration or declaration with, any Person or
with any governmental authority, bureau or agency is required in connection
with the execution, delivery or performance of this Agreement and the Operative
Documents, except for such as have been obtained, effected or made;
(e) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the certificate of
incorporation or by-laws of the Sponsor, or any material indenture, agreement
or other instrument to which the Sponsor is a party or by which it is bound;
nor result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Operative Documents); nor violate any law or, to
the best of the Sponsor's knowledge, any order, rule or regulation applicable
to the Sponsor of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Sponsor or its properties; and
(f) There are no proceedings or investigations pending or, to
its knowledge threatened against it before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over it or its properties (A) asserting the invalidity of this
Agreement or any of the Operative Documents, (B) seeking to prevent the
issuance of the Certificates or the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Documents,
(C) seeking any determination or ruling that might materially and adversely
affect its performance of its obligations under, or the validity or
enforceability
6
<PAGE> 12
of, this Agreement or any of the Operative Documents, or (D) seeking to
adversely affect the federal income tax or other federal, state or local tax
attributes of the Notes or the Certificates.
SECTION 2.11 Federal Income Tax Allocations. In the event that
the Trust is treated as a partnership for Federal income tax purposes, net
income of the Trust for any month as determined for Federal income tax purposes
(and each item of income, gain, loss, credit and deduction entering into the
computation thereof) shall be allocated to the extent of available net income,
among the Certificateholders as of the first Record Date following the end of
such month, in proportion to their ownership percentage of principal amount of
Certificates on such date.
Net losses of the Trust, if any, for any month as determined for
Federal income tax purposes (and each item of income, gain, loss, credit and
deduction entering into the computation thereof) shall be allocated among the
Certificateholders as of the Record Date in proportion to their ownership
percentage of principal amount of Certificates on such Record Date until the
principal balance of the Certificates is reduced to zero. The Sponsor, as
agent on behalf of the Originators, is authorized to modify the allocations in
this paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the
Certificateholders, or as otherwise required by the Code.
SECTION 2.12 Covenants of the Sponsor. The Sponsor agrees and
covenants for the benefit of each Certificateholder, the Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
(a) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as permitted by
its certificate of incorporation and the Operative Documents;
(b) it shall not, for any reason, institute proceedings for the
Trust to be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Trust or a substantial part of the property of
the Trust or cause or permit the Trust to make any assignment for the benefit
of creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Operative
Document to which it or the Trust is a party and each other agreement entered
into on or after the date hereof to which it or the Trust is a party, an
agreement by each such counterparty that prior to the occurrence of the event
specified in Section 9.1(e) such counterparty shall not institute against, or
join any other Person in instituting against, it or the Trust, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States; and
(d) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to be
adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a petition seeking or
consenting to reorganization or relief under any applicable federal or state
law relating to bankruptcy, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of it
or a substantial part of its property, or make any assignment for the benefit
of creditors, or admit in writing
7
<PAGE> 13
its inability to pay its debts generally as they become due, or declare or
effect a moratorium on its debt or take any action in furtherance of any such
action.
SECTION 2.13 Covenants of the Certificateholders. Each
Certificateholder agrees:
(a) to be bound by the terms and conditions of the Certificates
and of this Agreement, including any supplements or amendments hereto and to
perform the obligations of a Certificateholder as set forth therein or herein,
in all respects as if it were a signatory hereto. This undertaking is made for
the benefit of the Trust, the Owner Trustee, the Insurer and all other
Certificateholders present and future;
(b) to hereby appoint the Sponsor as such Certificateholder's
agent and attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust, if any, and agree that, if requested by the
Trust, it will sign such federal income tax information return in its capacity
as holder of an interest in the Trust. Each Certificateholder also hereby
agrees that in its tax returns it will not take any position inconsistent with
those taken in any tax returns that may be filed by the Trust;
(c) if such Certificateholder is other than an individual or
other entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of a
Certificate in a taxable sale or exchange, within 30 days of the date of the
transfer; and
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or the
Sponsor to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust, or file
a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Sponsor or the Trust or a substantial part of
its property, or cause or permit the Sponsor or the Trust to make any
assignment for the benefit of its creditors, or admit in writing its inability
to pay its debts generally as they become due, or declare or effect a
moratorium on its debt or take any action in furtherance of any such action.
Except as provided in Section 2.13, and notwithstanding any other
provision to the contrary in this Agreement, no Certificateholder shall be
deemed to have adopted, be bound by, or succeed in any way to any
representation by, or duty of indemnification by or any other duty of, the
Sponsor, including those contained in Sections 2.10, 2.12, 3.6, 8.2 or
elsewhere herein.
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1 Initial Ownership. Upon the formation of the Trust
by the contribution by the Sponsor pursuant to Section 2.5, the Owner Trustee,
contemporaneously therewith, having full power, authority, and authorization to
do so, has executed, authenticated, dated, issued, and delivered, in the name
and on behalf of the Trust, to each Originator, two or more Certificates
representing in the aggregate a 100% interest in the Trust, and has registered
such Certificate(s) on the Certificate Register in the names of the
Originators. The Originators shall be the sole beneficiaries of the Trust.
Such Certificate(s) are duly authorized, validly issued, and entitled to the
benefits of this
8
<PAGE> 14
Agreement. For so long as the Originators shall together own such 100%
interest in the Trust, the Originators shall be the sole beneficial owners of
the Trust.
SECTION 3.2 The Certificates. The Certificates shall be issued
in denominations of $1,000 and integral multiples of $1000 in excess thereof.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of an authorized officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized to
sign on behalf of the Trust, shall be validly issued and entitled to the
benefit of this Agreement, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of authentication
and delivery of such Certificates. A transferee of a Certificate shall become
a Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder, upon due registration of such
Certificate in such transferee's name pursuant to Section 3.4.
SECTION 3.3 Authentication of Certificates. Concurrently with
the initial sale of the Mortgage Loans to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause each Certificate, which
Certificate Balance may increase or decrease in accordance with each
Originator's proportionate interest in the Originators' Interest, to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Sponsor, signed by its chairman of the board, its
president or any vice president, its treasurer or any assistant treasurer
without further corporate action by the Sponsor, in authorized denominations.
No Certificate shall entitle its holder to any benefit under this Agreement, or
shall be valid for any purpose, unless there shall appear on such Certificate a
certificate of authentication substantially in the form set forth in Exhibit A,
executed by the Owner Trustee, by manual signature; such authentication shall
constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates shall be dated the
date of their authentication.
SECTION 3.4 Registration of Transfer and Exchange of
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Owner Trustee shall be the
initial Certificate Registrar.
In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Certificate, specifically acknowledges
that it has no right to or interest in any monies at any time held in the
Pre-Funding Account or the Funding Account or prior to the release of such
monies pursuant to Section 8.6(b)(xii) of the Indenture, such monies being held
in trust for the benefit of the Noteholders and the Insurer. Notwithstanding
the foregoing, in the event that it is ever determined that the monies held in
the Pre-Funding Account constitute a pledge of collateral, then the provisions
of the Sale and Servicing Agreement shall be considered to constitute a
security agreement and the Sponsor and the Certificateholders hereby grant to
the Indenture Trustee and the Insurer a first priority perfected security
interest in such amounts. In addition, each Certificateholder, by acceptance
of its Certificate, hereby appoints the Sponsor as its agent to pledge a first
priority perfected security interest in the Pre-Funding Account and the Funding
Account, and any amounts held therein from time to time to the Indenture
Trustee and the Insurer and agrees to execute and deliver such instruments of
conveyance, assignment, grant, confirmation, etc., as well as any financing
statements, in each case as the Insurer shall consider reasonably necessary in
order to perfect the Indenture Trustee's security interest in the Mortgage
Loans.
9
<PAGE> 15
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
shall be delivered to the Certificate Registrar, the Owner Trustee and the
Insurer such security or indemnity as may be required by them to save each of
them harmless, then in the absence of notice that such Certificate shall have
been acquired by a bona fide purchaser, the Owner Trustee on behalf of the
Trust shall execute and the Owner Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like class, tenor and denomination. In
connection with the issuance of any new Certificate under this Section, the
Owner Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
SECTION 3.6 Persons Deemed Certificateholders. Every Person by
virtue of becoming a Certificateholder in accordance with this Agreement and
the rules and regulations of the Certificate Registrar shall be deemed to be
bound by the terms of this Agreement. Prior to due presentation of a
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar and the Insurer and any agent of the Owner Trustee, the Certificate
Registrar and the Insurer, may treat the Person in whose name any Certificate
shall be registered in the Certificate Register as the owner of such
Certificate for the purpose of receiving distributions pursuant to the Sale and
Servicing Agreement and the Indenture and for all other purposes whatsoever,
and none of the Owner Trustee, the Certificate Registrar or the Insurer nor any
agent of the Owner Trustee, the Certificate Registrar or the Insurer shall be
bound by any notice to the contrary.
SECTION 3.7 Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Master Servicer, the Sponsor or the Insurer, within 15 days after receipt by
the Owner Trustee of a request therefor from such Person in writing, a list, of
the names and addresses of the Certificateholders as of the most recent Record
Date. If three or more Holders of Certificates or one or more Holders of
Certificates evidencing not less than 25% by Percentage Interest apply in
writing to the Owner Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their
rights under this Agreement or under the Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Certificate, shall be deemed to have agreed not to hold
any of the Sponsor, the Master Servicer, the Owner Trustee or the Insurer or
any agent thereof accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee
shall maintain in Wilmington, Delaware an office or offices or agency or
agencies where Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee in respect
of the Certificates and the Operative Documents may be served. The Owner
Trustee initially designates its Corporate Trust Office for such purposes. The
Owner Trustee shall give prompt written notice to the Sponsor, the
Certificateholders and the Insurer of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.9 ERISA. The Certificates may not be acquired by or
for the account of (i) an employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is subject to the provisions of Title I of ERISA, (ii) a plan
10
<PAGE> 16
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding its beneficial ownership interest in its Certificate, the
Holder thereof shall be deemed to have represented and warranted that it is not
a Benefit Plan.
SECTION 3.10 Restrictions on Transfer of Certificates. (a)
The Certificates shall be assigned, transferred, exchanged, pledged, financed,
hypothecated or otherwise conveyed (collectively, for purposes of this Section
3.10 and any other Section referring to the Certificates, "transferred" or a
"transfer") only in accordance with this Section 3.10.
(b) No transfer of a Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. Except for the initial issuance of the
Certificate to the Originators, the Owner Trustee shall require (i) the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Owner Trustee and the Insurer certifying to the
Owner Trustee and the Insurer the facts surrounding such transfer, which
investment letter shall not be an expense of the Owner Trustee or the Insurer
or (ii) if the investment letter is not delivered, a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Owner Trustee, the
Insurer and the Sponsor that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor from said
Act or is being made pursuant to said Act, which Opinion of Counsel shall not
be an expense of the Owner Trustee, the Insurer or the Sponsor. The Holder of
a Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Sponsor, the Owner Trustee and the Insurer against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
[(c) The Certificates and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent:
(i) the Person that acquires a Certificate shall (A) be organized and existing
under the laws of the United States of America or any state thereof or the
District of Columbia; (B) expressly assume, by an agreement supplemental
hereto, executed and delivered to the Owner Trustee, the performance of every
covenant and obligation of the Sponsor hereunder except for the covenants and
obligations contained in Sections 2.1, 2.2, 2.3, 2.4, 3.3, 3.4 of the Sale and
Servicing Agreement, 8.6(b)(vii), 8.6(b)(x) and 7.1 of the Indenture and under
the Credit Line Agreements; (ii) the person that acquires a Certificate shall
deliver to the Owner Trustee and the Insurer an Officer's Certificate stating
that such transfer and such supplemental agreement comply with this Section
3.10 and that all conditions precedent provided by this subsection 3.10 have
been complied with and an Opinion of Counsel stating that such transfer and
such supplemental agreement comply with this Section 3.10 and that all
conditions precedent provided by this Section 3.10 have been complied with, and
the Owner Trustee may conclusively rely on such Officer's Certificate, shall
have no duty to make inquiries with regard to the matters set forth therein and
shall incur no liability in so relying; (iii) the person that acquires a
Certificate shall deliver to the Owner Trustee and the Insurer a letter from
each Rating Agency confirming that its rating of the Class A Notes, after
giving effect to such transfer, will not be reduced or withdrawn without regard
to the Policy; (iv) the person that acquires a Certificate shall deliver to the
Owner Trustee and the Insurer an Opinion of Counsel to the effect that (a) such
transfer will not adversely affect the treatment of the Class A Notes after
such transfer as debt for federal and applicable state income tax purposes, (b)
such transfer will not result in the Trust being subject to tax at the entity
level for federal or applicable state tax purposes, (c) such transfer will not
have any material adverse impact on the federal or applicable state income
taxation of a Class A Noteholder and (d) such transfer will not result in the
arrangement created by this Agreement or any "portion" of the Trust, being
treated as a taxable mortgage pool as defined in Section 7701(i) of the Code;
(v) all filings and other actions necessary to continue the perfection of the
interest of the Trust in the Mortgage Loans and the other property conveyed
hereunder shall have been taken or made.
11
<PAGE> 17
Notwithstanding the foregoing, the requirement set forth in subclause (i)(A) of
this Section 3.10 shall not apply in the event the Owner Trustee and the
Insurer shall have received a letter from each Rating Agency confirming that
its rating of the Class A Notes, after giving effect to a proposed transfer to
a Person that does not meet the requirement set forth in subclause (i)(A),
shall not be reduced or withdrawn without regard to the Policy.
Notwithstanding the foregoing, the requirements set forth in this paragraph (b)
shall not apply to the initial issuance of the Certificates to the Originators.
(d) Except for the initial issuance of the Certificates to the
Originators, no transfer of a Certificate shall be made unless the Owner
Trustee shall have received a representation letter from the transferee of such
Certificate, acceptable to and in form and substance satisfactory to the Owner
Trustee, to the effect that such transferee is not a Benefit Plan, which
representation letter shall not be an expense of the Owner Trustee.
(e) No transfer or pledge of the Certificates shall result in
more than 98 other holders of Certificates.
SECTION 3.11 Acceptance of Obligations. The Sponsor agrees to
be bound by and to perform all the duties of the Sponsor set forth in this
Agreement.
SECTION 3.12 Payments on Certificates. The Holders of the
Certificates will be entitled to distributions on each Payment Date, as
provided in the Indenture.
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1 Prior Notice to Holders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not
take action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute or unless such amendment would not materially and
adversely affect the interests of the Holders);
(b) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Certificateholders;
or
(d) except pursuant to Section [___] of the Sale and Servicing
Agreement, the amendment, change or modification of the Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or supplement any
provision in a manner that would not materially adversely affect the interests
of the Certificateholders.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, or Certificate Registrar within five
Business Days thereof.
12
<PAGE> 18
SECTION 4.2 Action by Certificateholders with Respect to
Certain Matters. (a) The Owner Trustee shall not have the power, except
upon the direction of the Insurer or in the event that an Insurer Default shall
have occurred and is continuing, the Security Majority in accordance with the
Operative Documents, to (i) remove the Master Servicer under the Sale and
Servicing Agreement or (ii) except as expressly provided in the Operative
Documents, sell the Mortgage Loans after the termination of the Indenture. The
Owner Trustee shall take the actions referred to in the preceding sentence only
upon written instructions signed by the Insurer or the Securityholders, as the
case may be, and the furnishing of indemnification satisfactory to the Owner
Trustee by the Certificateholders.
(b) Upon the written request of any Certificateholder (a
"Proposer"), the Owner Trustee shall distribute promptly to all
Certificateholders any request for action or consent of Certificateholders
submitted by such Proposer. The Owner Trustee shall provide a reasonable
method for collecting responses to such request and shall tabulate and report
the results thereof to the Certificateholders and the Sponsor. The Owner
Trustee shall have no responsibility or duty to determine if any such proposed
action or consent is permitted under the terms of this Agreement or applicable
law.
SECTION 4.3 Action by Certificateholders with Respect to
Bankruptcy. Until one year and one day following the day on which the Notes
have been paid in full, the Owner Trustee shall not have the power to, and
shall not, commence any proceeding or other actions contemplated by Section
2.12(b) relating to the Trust without the prior written consent of the Insurer
(unless an Insurer Default shall have occurred and is continuing) or the
Security Majority upon an Insurer Default. Until one year and one day
following the day on which the Notes have been paid in full, all amounts due
to the Insurer under the Insurance Agreement have been paid in full, the Policy
has terminated and the Indenture Trustee has surrendered the Policy to the
Insurer, the Owner Trustee shall not have the power to, and shall not, commence
any proceeding or other actions contemplated by Section 2.12(b) relating to the
Trust without the prior written consent of all of the Certificateholders and
the delivery to the Owner Trustee by each such Certificateholder of a
certificate certifying that such Certificateholder reasonably believes that the
Trust is insolvent.
SECTION 4.4 Restrictions on Certificateholders' Power. (a)
The Certificateholders shall not direct the Owner Trustee to take or refrain
from taking any action if such action or inaction would be contrary to any
obligation of the Trust or the Owner Trustee under this Agreement or any of the
Operative Documents or would be contrary to Section 2.3 or otherwise contrary
to law nor shall the Owner Trustee be obligated to follow any such direction,
if given.
(b) No Certificateholder (other than the Originators) shall
have any right by virtue or by availing itself of any provisions of this
Agreement to institute any suit, action, or proceeding in equity or at law upon
or under or with respect to this Agreement or any Operative Document, unless
the Certificateholders are the Instructing Party pursuant to Section 6.3 and
unless a Certificateholder previously shall have given to the Owner Trustee a
written notice of default and of the continuance thereof, as provided in this
Agreement, and also unless Certificateholders evidencing not less than 25% by
Percentage Interest shall have made written request upon the Owner Trustee to
institute such action, suit or proceeding in its own name as Owner Trustee
under this Agreement and shall have offered to the Owner Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Owner Trustee, for 30
days after its receipt of such notice, request, and offer of indemnity, shall
have neglected or refused to institute any such action, suit, or proceeding,
and during such 30-day period no request or waiver inconsistent with such
written request has been given to the Owner Trustee pursuant to and in
compliance with this Section or Section 6.3; it being understood and intended,
and being expressly covenanted by each Certificateholder with every
13
<PAGE> 19
other Certificateholder and the Owner Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner provided in this Agreement and for the equal, ratable, and common
benefit of all Certificateholders. For the protection and enforcement of the
provisions of this Section 4.4, each and every Certificateholder and the Owner
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 4.5 Majority Control. No Certificateholder shall have
any right to vote or in any manner otherwise control the operation and
management of the Trust except as expressly provided in this Agreement. Except
as expressly provided herein, any action that may be taken by the
Certificateholders under this Agreement may be taken by the Holders of
Certificates evidencing not less than a majority interest in the Trust. Except
as expressly provided herein, any written notice of the Certificateholders
delivered pursuant to this Agreement shall be effective if signed by
Certificateholders evidencing not less than a majority interest in the Trust at
the time of the delivery of such notice.
SECTION 4.6 Rights of Insurer. Notwithstanding anything to the
contrary in the Operative Documents, without the prior written consent of the
Insurer (or if an Insurer Default shall have occurred and is continuing, the
Security Majority) the Owner Trustee shall not (i) remove the Master Servicer,
(ii) initiate any claim, suit or proceeding by the Trust or compromise any
claim, suit or proceeding brought by or against the Trust, other than with
respect to the enforcement of any Mortgage Loan or any rights of the Trust
thereunder, (iii) authorize the merger or consolidation of the Trust with or
into any other business trust or other entity (other than in accordance with
Section 3.10 of the Indenture), (iv) amend the Certificate of Trust or (v)
amend this Agreement in accordance with Section 11.1 of this Agreement.
ARTICLE V.
Certain Duties
SECTION 5.1 Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to
Sections 5.1(b)(iii) and 5.1(c) of the Sale and Servicing Agreement, the
Sponsor shall (a) maintain (or cause to be maintained) the books of the Trust
on a calendar year basis on the accrual method of accounting, including,
without limitation, the allocations of net income under Section 2.11 hereof,
(b) deliver (or cause to be delivered) to each Certificateholder, as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1, if applicable) to enable each
Certificateholder to prepare its Federal and state income tax returns, (c) file
or cause to be filed, if necessary, such tax returns relating to the Trust
(including a partnership information return, Form 1065), and direct the Owner
Trustee or the Master Servicer, as the case may be, to make such elections as
may from time to time be required or appropriate under any applicable state or
Federal statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a branch, or if applicable, as a partnership, for Federal
income tax purposes and (d) collect or cause to be collected any withholding
tax as described in and in accordance with Section 5.1(b)(ii) of the Sale and
Servicing Agreement with respect to income or distributions to
Certificateholders and the appropriate forms relating thereto. The Owner
Trustee or the Master Servicer, as the case may be, shall make all elections
pursuant to this Section as directed in writing by the Sponsor. The Owner
Trustee shall sign all tax information returns presented to it in final
execution form, if any, filed pursuant to this Section 5.1 and any other
returns as may be required by law, and in doing so shall rely entirely upon,
and shall have no liability for information
14
<PAGE> 20
provided by, or calculations provided by, the Sponsor or the Master Servicer.
The Owner Trustee shall elect under Section 1278 of the Code to include in
income currently any market discount that accrues with respect to the Mortgage
Loans. The Owner Trustee shall not make the election provided under Section
754 of the Code.
SECTION 5.2 Signature on Returns; Tax Matters Partner. (a)
Notwithstanding the provisions of Section 5.1 and in the event that the Trust
is characterized as a partnership, the Owner Trustee shall sign on behalf of
the Trust the tax returns of the Trust presented to it in final execution form,
unless applicable law requires a Certificateholder to sign such documents, in
which case such documents shall be signed by the Sponsor, as agent, on behalf
of the Certificateholders.
(b) In the event that the Trust is characterized as a
partnership, each Originator shall be the "tax matters partner" of the Trust
pursuant to the Code.
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1 General Authority. The Owner Trustee is authorized
and directed to execute and deliver the Operative Documents to which the Trust
is named as a party and each certificate or other document attached as an
exhibit to or contemplated by the Operative Documents to which the Trust is
named as a party and any amendment thereto, in each case, in such form as the
Sponsor shall approve as evidenced conclusively by the Owner Trustee's
execution thereof, and on behalf of the Trust, to direct the Indenture Trustee
to authenticate and deliver Class A Notes in the aggregate principal amount of
$100,000,000. In addition to the foregoing, the Owner Trustee is authorized,
but shall not be obligated, to take all actions required of the Trust pursuant
to the Operative Documents. The Owner Trustee is further authorized from time
to time to take such action as the Instructing Party recommends with respect to
the Operative Documents so long as such activities are consistent with the
terms of the Operative Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and to administer the Trust in the
interest of the Holders, subject to the Operative Documents and in accordance
with the provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Operative Documents to the extent the Master Servicer
has agreed in the Sale and Servicing Agreement to perform any act or to
discharge any duty of the Trust or the Owner Trustee hereunder or under any
Operative Document, and the Owner Trustee shall not be liable for the default
or failure of the Master Servicer to carry out its obligations under the Sale
and Servicing Agreement.
SECTION 6.3 Action upon Instruction. (a) Subject to Article
IV, the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) or the Certificateholders (if an Insurer Default shall have
occurred and be continuing) (the "Instructing Party") shall have the exclusive
right to direct the actions of the Owner Trustee in the management of the
Trust, so long as such instructions are not inconsistent with the express terms
set forth herein or in any Operative Document. The Instructing Party shall not
instruct the Owner Trustee in a manner inconsistent with this Agreement or the
Operative Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Operative Document if the Owner Trustee shall have
reasonably determined, or shall have been
15
<PAGE> 21
advised by counsel, that such action is likely to result in liability on the
part of the Owner Trustee or is contrary to the terms hereof or of any
Operative Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Operative Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Instructing Party received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Operative Documents, as it shall deem
to be in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Operative Document or any
such provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action, not inconsistent with this Agreement or the
Operative Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action
or inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement or
in Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of,
or otherwise deal with the Owner Trust Estate, or to otherwise take or refrain
from taking any action under, or in connection with, any document contemplated
hereby to which the Owner Trustee is a party, except as expressly provided by
the terms of this Agreement or in any document or written instruction received
by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any Operative Document against
the Owner Trustee. The Owner Trustee shall have no responsibility for filing
any financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Commission filing for the
Trust or to record this Agreement or any Operative Document. The Owner Trustee
nevertheless agrees that it will, at its own cost and expense, promptly take
all action as may be necessary to discharge any Liens on any part of the Owner
Trust Estate that result from actions by, or claims against, the Owner Trustee
(solely in its individual capacity) and that are not related to the ownership
or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the
Owner Trustee pursuant to this Agreement, (ii) in accordance with the Operative
Documents and
16
<PAGE> 22
(iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation or a publicly traded
partnership for Federal income tax purposes. The Certificateholders shall not
direct the Owner Trustee to take action that would violate the provisions of
this Section.
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1 Acceptance of Trust and Duties. The Owner Trustee
accepts the trust hereby created and agrees to perform its duties hereunder
with respect to such trust but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all monies actually received by it
constituting part of the Owner Trust Estate upon the terms of the Operative
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Operative Document under any circumstances,
except (i) for its own willful misconduct, bad faith or gross negligence, (ii)
in the case of the inaccuracy of any representation or warranty contained in
Section 7.3 expressly made by the Owner Trustee in its individual capacity,
(iii) for liabilities arising from the failure of the Owner Trustee to perform
obligations expressly undertaken by it in the last sentence of Section 6.4
hereof, (iv) for any investments issued by the Owner Trustee or any branch or
affiliate thereof in its commercial capacity or (v) for taxes, fees or other
charges on, based on or measured by, any fees, commissions or compensation
received by the Owner Trustee. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment, not constituting gross negligence, made by a Responsible Officer of
the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it if such action or omission is in
accordance with the instructions of the Instructing Party, the Sponsor, the
Master Servicer or any Certificateholder pursuant to the terms hereof;
(c) no provision of this Agreement or any Operative Document
shall require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Operative Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Operative Documents,
including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Sponsor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Operative Documents, other than
the certificate of authentication on the Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty or obligation to
17
<PAGE> 23
the Sponsor, the Insurer, Indenture Trustee, any Certificateholder, other than
as expressly provided for herein and in the Operative Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Sponsor, the Insurer, the Indenture Trustee, or the Master
Servicer under any of the Operative Documents or otherwise and the Owner
Trustee shall have no obligation or liability to perform the obligations under
this Agreement or the Operative Documents that are required to be performed by
the Sponsor under this Agreement, by the Indenture Trustee under the Indenture
or the Master Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Operative Document, at the request, order or
direction of the Instructing Party or any of the Certificateholders, unless
such Instructing Party or Certificateholders have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Operative Document shall not be construed as a duty, and
the Owner Trustee shall not be answerable for other than its negligence, bad
faith or willful misconduct in the performance of any such act.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall
furnish to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Operative Documents.
SECTION 7.3 Representations and Warranties. The Owner Trustee
hereby represents and warrants, in its individual capacity, to the Sponsor and
the Holders (which shall have relied on such representations and warranties in
issuing the Policy), that:
(a) It is a Delaware banking corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware state law, governmental rule or regulation governing
the banking or trust powers of the Owner Trustee or any judgment or order
binding on it, or constitute any default under its charter documents or by-laws
or any indenture, mortgage, contract, agreement or instrument to which it is a
party or by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel. (a) The Owner
Trustee shall incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper believed by it to be genuine and
believed by it to be signed by the proper party or parties. The Owner Trustee
may accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full
force and effect. As to any fact or matter the method of the determination of
which is not specifically
18
<PAGE> 24
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer,
secretary or other authorized officers of the relevant party, as to such fact
or matter, and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or
the Operative Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
(ii) may consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it. The Owner Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the written opinion or advice of any such counsel, accountants
or other such persons and according to such opinion not contrary to this
Agreement or any Operative Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as
provided in this Article VII, in accepting the trusts hereby created Wilmington
Trust Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any Operative Document
shall look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Sponsor and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any Operative Document or of the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates) or the
Notes, or of any Mortgage Loan or related documents. The Owner Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage Loan, or the perfection
and priority of any security interest created by any Mortgage Loan or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments
to be distributed to Certificateholders under this Agreement or the Noteholders
under the Indenture, including, without limitation: the existence, condition
and ownership of any Mortgage Loan; the existence and enforceability of any
insurance thereon; the existence and contents of any Mortgage Loan on any
computer or other record thereof; the validity of the assignment of any
Mortgage Loan to the Trust or of any intervening assignment; the completeness
of any Mortgage Loan; the performance or enforcement of any Mortgage Loan; the
compliance by the Sponsor, the Master Servicer or any other Person with any
warranty or representation made under any Operative Document or in any related
document or the accuracy of any such warranty or representation or any action
of the Indenture Trustee or the Master Servicer or any SubMaster Servicer taken
in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates or Notes and may deal with the Sponsor, the Indenture
Trustee and the Master Servicer in banking transactions with the same rights as
it would have if it were not Owner Trustee.
SECTION 7.8 Payments from Owner Trust Estate. All payments to
be made by the Owner Trustee under this Agreement or any of the Operative
Documents to which the Trust or the Owner Trustee is a party shall be made only
from the income and proceeds of the Owner Trust Estate and only to the extent
that the Owner Trust shall have received income or proceeds from the Owner
Trust Estate to make such payments in accordance with the terms hereof.
Wilmington Trust Company,
19
<PAGE> 25
or any successor thereto, in its individual capacity, shall not be liable for
any amounts payable under this Agreement or any of the Operative Documents to
which the Trust or the Owner Trustee is a party.
SECTION 7.9 Doing Business in Other Jurisdictions.
Notwithstanding anything contained to the contrary, neither Wilmington Trust
Company or any successor thereto, nor the Owner Trustee shall be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 10.5 hereof, (i) require the
consent or approval or authorization or order of or the giving of notice to, or
the registration with or the taking of any other action in respect of, any
state or other governmental authority or agency of any jurisdiction other than
the State of Delaware; (ii) result in any fee, tax or other governmental
charge under the laws of the State of Delaware becoming payable by Wilmington
Trust Company (or any successor thereto); or (iii) subject Wilmington Trust
Company (or any successor thereto) to personal jurisdiction in any jurisdiction
other than the State of Delaware for causes of action arising from acts
unrelated to the consummation of the transactions by Wilmington Trust Company
(or any successor thereto) or the Owner Trustee, as the case may be,
contemplated hereby.
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner
Trustee shall receive as compensation for its services hereunder such fees as
have been separately agreed upon before the date hereof between the Sponsor and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Sponsor for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder and under the Operative Documents.
SECTION 8.2 Indemnification. The Sponsor shall be liable as
primary obligor for, and shall indemnify the Owner Trustee (in its individual
and trust capacities) and its officers, directors, successors, assigns, agents
and servants (collectively, the "Indemnified Parties") from and against, any
and all liabilities, obligations, losses, damages, taxes, claims, actions and
suits, and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may (in its trust or individual capacities) at
any time be imposed on, incurred by, or asserted against the Owner Trustee or
any Indemnified Party in any way relating to or arising out of this Agreement,
the Operative Documents, the Owner Trust Estate, the administration of the
Owner Trust Estate or the action or inaction of the Owner Trustee hereunder,
except only that the Sponsor shall not be liable for or required to indemnify
the Owner Trustee from and against Expenses arising or resulting from any of
the matters described in the third sentence of Section 7.1. The indemnities
contained in this Section and the rights under Section 8.1 shall survive the
resignation or termination of the Owner Trustee or the termination of this
Agreement. In any event of any claim, action or proceeding for which indemnity
will be sought pursuant to this Section, the Owner Trustee's choice of legal
counsel shall be subject to the approval of the Sponsor which approval shall
not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to
the Owner Trustee pursuant to this Article VIII shall be deemed not to be a
part of the Owner Trust Estate immediately after such payment.
20
<PAGE> 26
SECTION 8.4 Non-recourse Obligations. Notwithstanding anything
in this Agreement or any Operative Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that all
obligations of the Trust to the Owner Trustee individually or as Owner Trustee
for the Trust shall be recourse to the Owner Trust Estate only and specifically
shall not be recourse to the assets of any Certificateholder.
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1 Termination of Trust Agreement. (a) This
Agreement and the Trust shall terminate and be of no further force or effect
upon the later of (i) the maturity or other liquidation of the last Mortgage
Loan (including the redemption by the Sponsor at its option of the corpus of
the Trust as described in Section 10.1(b) of the Indenture) and the subsequent
distribution of amounts in respect of such Mortgage Loans as provided in the
Operative Documents or (ii) the payment to Certificateholders of all amounts
required to be paid to them pursuant to this Agreement and the payment to the
Insurer of all amounts payable or reimbursable to it pursuant to the Sale and
Servicing Agreement and the Insurance Agreement; provided, however, that the
rights to indemnification under Section 8.2 and the rights under Section 8.1
shall survive the termination of the Trust. The Master Servicer shall promptly
notify the Owner Trustee and the Insurer of any prospective termination
pursuant to this Section 9.1. The bankruptcy, liquidation, dissolution, death
or incapacity of any Certificateholder shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or Owner Trust Estate nor (z) otherwise affect the rights, obligations
and liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Sponsor nor
any other Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which the Certificateholders shall surrender their
Certificates to the Indenture Trustee for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders mailed within five Business Days of receipt of notice of
such redemption from the Master Servicer given pursuant to Section 10.1 of the
Sale and Servicing Agreement, stating (i) the Payment Date upon or with respect
to which final payment of the Certificates shall be made upon presentation and
surrender of the Certificates at the office of the Indenture Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Payment Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office of the Indenture Trustee therein specified. The Owner Trustee shall give
such notice to the Certificate Registrar (if other than the Owner Trustee) and
the Indenture Trustee at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Certificates, the Indenture Trustee
shall cause to be distributed to Certificateholders amounts distributable on
such Payment Date pursuant to Section 8.6(b)(xii) of the Indenture.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to
contact the
21
<PAGE> 27
remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to applicable escheat
laws, by the Owner Trustee to the Sponsor and Holders shall look solely to the
Sponsor for payment.
(d) Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution shall be
distributed by the Owner Trustee to the Sponsor.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1 Eligibility Requirements for Owner Trustee. The
Owner Trustee shall at all times be a corporation (i) satisfying the provisions
of Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; (iv) having (or having a parent which has) a rating of at least
Baa3 by Moody's or A-1 by Standard & Poors or being otherwise acceptable to the
Rating Agencies; and (v) acceptable to the Insurer in its sole discretion. If
such corporation shall publish reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Owner Trustee shall resign immediately
in the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Sponsor, the Insurer and the Master
Servicer. Upon receiving such notice of resignation, the Sponsor shall
promptly appoint a successor Owner Trustee, meeting the qualifications set
forth in Section 10.1 herein, by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Owner Trustee and one copy
to the successor Owner Trustee, provided that the Sponsor shall have received
written confirmation from each of the Rating Agencies that the proposed
appointment will not result in an increased capital charge to the Insurer by
either of the Rating Agencies. If no successor Owner Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Owner Trustee or the Insurer may petition
any court of competent jurisdiction for the appointment of a successor Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Sponsor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or
a receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then a majority of the Certificateholders with the consent of the
Insurer (so long as no Insurer Default shall have occurred and is continuing)
may remove the Owner Trustee. If a majority of the Certificateholders shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Sponsor shall promptly appoint a successor Owner Trustee,
22
<PAGE> 28
meeting the qualifications set forth in Section 10.1 herein, by written
instrument, in duplicate, one copy of which instrument shall be delivered to
the outgoing Owner Trustee so removed, one copy to the Insurer and one copy to
the successor Owner Trustee and the Sponsor shall pay all fees owed to the
outgoing Owner Trustee, if not previously paid by the Trust.
Any resignation or removal of the Owner Trustee and appointment of
a successor Owner Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.3 and payment of all reasonable fees and
expenses owed to the outgoing Owner Trustee.
Notwithstanding any other provision of this Agreement, and in
addition to any other method of removal of the Owner Trustee contained herein,
upon a proposal made pursuant to Section 4.2(b) and the subsequent consent of
Certificateholders representing no less than a 66-2/3% interest in the Trust,
the Owner Trustee may be removed as Owner Trustee, subject to the consent of
the Insurer (so long as no Insurer Default shall have occurred and is
continuing), which consent is not to be unreasonably withheld. In the event
the Owner Trustee is removed pursuant to this paragraph, the provisions of this
Agreement, including Article X herein, shall apply as if the Owner Trustee had
resigned hereunder.
SECTION 10.3 Successor Owner Trustee. Any successor Owner
Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and
deliver to the Sponsor, the Master Servicer, the Insurer and to its predecessor
Owner Trustee an instrument accepting such appointment under this Agreement,
and thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor under this Agreement, with like
effect as if originally named as Owner Trustee. The predecessor Owner Trustee
shall upon payment of its fees and expenses deliver to the successor Owner
Trustee all documents and statements and monies held by it under this
Agreement; and the Sponsor and the predecessor Owner Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Owner Trustee
all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Master Servicer shall mail notice of the
successor of such Owner Trustee to all Certificateholders, the Indenture
Trustee and the Noteholders. If the Master Servicer shall fail to mail such
notice within 10 days after acceptance of appointment by the successor Owner
Trustee, the successor Owner Trustee shall cause such notice to be mailed at
the expense of the Master Servicer.
The successor Owner Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State reflecting the name and
principal place of business of such successor Owner Trustee in the State of
Delaware.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section
10.1, without the execution or filing of any instrument or any further act
23
<PAGE> 29
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided further that the Owner Trustee shall mail notice of
such merger or consolidation to the Rating Agencies.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Owner Trust Estate or any Mortgaged Property may at the time be
located, the Master Servicer and the Owner Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Owner Trustee and the Insurer to act as co-trustee,
jointly with the Owner Trustee, or separate trustee or separate trustees, of
all or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Owner Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Owner Trustee
subject to the approval of the Insurer (which approval shall not be
unreasonably withheld) shall have the power to make such appointment. No
co-trustee or separate trustee under this Agreement shall be required to meet
the terms of eligibility as a successor trustee pursuant to Section 10.1 and no
notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred upon and
exercised or performed by the Owner Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Owner Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Owner Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the Owner
Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Master Servicer and the Owner Trustee acting
jointly may at any time accept the resignation of or remove any separate
trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Owner Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Master Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the
Owner Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful
24
<PAGE> 30
act under or in respect of this Agreement on its behalf and in its name. If
any separate trustee or co-trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Owner Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
ARTICLE XI.
Miscellaneous
SECTION 11.1 Supplements and Amendments. (a) This Agreement
may be amended by the Sponsor and the Owner Trustee, with the prior written
consent of the Insurer (so long as no Insurer Default shall have occurred and
is continuing), without the consent of any of the Noteholders (i) to cure any
ambiguity or defect or (ii) to correct, supplement or modify any provisions in
this Agreement; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel which may be based upon a certificate of the Master
Servicer, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time, with
the prior written consent of the Insurer (so long as no Insurer Default shall
have occurred and is continuing) by the Sponsor and the Owner Trustee, with
prior written notice to the Rating Agencies, and, to the extent such amendment
materially and adversely affects the interests of the Noteholders, with the
consent of the Noteholders evidencing not less than a majority of the
Outstanding Amount of the Notes and, the consent of the Certificateholders
evidencing not less than a majority interest in the Trust (which consent of
any Holder of a Certificate or Note given pursuant to this Section or pursuant
to any other provision of this Agreement shall be conclusive and binding on
such Holder and on all future Holders of such Certificate or Note and of any
Certificate or Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the
Certificate or Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that, subject to the express rights of
the Insurer under the Operative Documents, no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Mortgage Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes and the Certificates, the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all the
outstanding Notes and Holders of all outstanding Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder and the Indenture Trustee.
It shall not be necessary for the consent of Certificateholders,
the Noteholders or the Indenture Trustee pursuant to this Section to approve
the particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents (and any other consents of Certificateholders provided
for in this Agreement or in any other Operative Document) and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject
to such reasonable requirements as the Owner Trustee may prescribe. Promptly
after the execution of any amendment to the Certificate of Trust, the Owner
Trustee shall cause the filing of such amendment with the Secretary of State.
25
<PAGE> 31
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their ownership interest therein only in
accordance with Article IX. No transfer, by operation of law or otherwise, of
any right, title or interest of the Certificateholders to and in their
ownership interest in the Owner Trust Estate shall operate to terminate this
Agreement or the trusts hereunder or entitle any transferee to an accounting or
to the transfer to it of legal title to any part of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. Except for
Section 11.7, the provisions of this Agreement are solely for the benefit of
the Owner Trustee, the Sponsor, the Certificateholders, the Master Servicer
and, to the extent expressly provided herein, the Insurer, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be in writing and
shall be deemed given upon receipt personally delivered, delivered by overnight
courier or mailed first class mail or certified mail, in each case return
receipt requested, and shall be deemed to have been duly given upon receipt, if
to the Owner Trustee, addressed to the Corporate Trust Office; if to the
Sponsor, addressed to Advanta Mortgage Conduit Services, Inc., 500 Office
Center Drive, Suite 400, Fort Washington, PA 19034; if to the Insurer,
addressed to Insurer, AMBAC Assurance Corporation, One State Street Plaza, New
York, New York 10004, Attention: Howard Pfeffer, Structured Finance Department,
Telecopy No.: (212) 363-1459; or, as to each party, at such other address as
shall be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
SECTION 11.5 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdictional shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.7 Assignments; Insurer. (a) This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
26
<PAGE> 32
This Agreement shall also inure to the benefit of the Insurer for so long as an
Insurer Default shall not have occurred and be continuing. Without limiting
the generality of the foregoing, all covenants and agreements in this Agreement
which confer rights upon the Insurer shall be for the benefit of and run
directly to the Insurer, and the Insurer shall be entitled to rely on and
enforce such covenants, subject, however, to the limitations on such rights
provided in this Agreement and the Operative Documents. The Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Policy) upon delivery of a written notice to the
Owner Trustee.
SECTION 11.8 No Petition. The Owner Trustee (not in its
individual capacity but solely as Owner Trustee), by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the
Indenture Trustee and each Noteholder by accepting the benefits of this
Agreement, hereby covenants and agrees that they will not at any time institute
against the Sponsor, or join in any institution against the Sponsor of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates,
the Notes, this Agreement or any of the Operative Documents.
SECTION 11.9 No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Master Servicer, the Sponsor, the Owner Trustee, the
Indenture Trustee, the Insurer or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Certificates or the Operative Documents.
SECTION 11.10 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12 Master Servicer. The Master Servicer is authorized
to prepare, or cause to be prepared, execute and deliver on behalf of the Trust
all such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Trust or Owner Trustee to prepare, file or deliver
pursuant to the Operative Documents. Upon written request, the Owner Trustee
shall execute and deliver to the Master Servicer a limited power of attorney
appointing the Master Servicer the Trust's agent and attorney-in-fact to
prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.
27
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
WILMINGTON TRUST COMPANY, as Owner
Trustee
By
--------------------------------
Name:
Title:
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Sponsor
By:
--------------------------------
Name:
Title:
<PAGE> 34
Exhibit A-1
CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE REPRESENTS CERTAIN RESIDUAL RIGHTS TO PAYMENT TO THE
EXTENT DESCRIBED HEREIN AND IN THE TRUST AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED STATES
PERSON.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3.10 OF THE TRUST AGREEMENT
REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS THE TRANSFEREE
PROVIDES A REPRESENTATION LETTER FROM THE TRANSFEREE OF SUCH CERTIFICATE,
ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE
AND THE INSURER, TO THE EFFECT THAT SUCH TRANSFEREE IS NOT (i) AN
EMPLOYEE BENEFIT PLAN SUBJECT TO SECTION 406 OF ERISA, (ii) A PLAN
DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE, NOR (iii) A
PERSON ACTING ON BEHALF OF OR USING THE ASSETS OF ANY SUCH PLAN, WHICH
REPRESENTATION LETTER SHALL NOT BE AN EXPENSE OF THE INDENTURE TRUSTEE OR
THE INSURER.
NO TRANSFER OF A CERTIFICATE SHALL BE MADE UNLESS SUCH TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE IN
ACCORDANCE WITH SAID ACT AND LAWS. EXCEPT FOR THE INITIAL ISSUANCE OF
THE CERTIFICATES TO THE ORIGINATORS, THE INDENTURE TRUSTEE SHALL REQUIRE
(i) THE TRANSFEREE TO EXECUTE AN INVESTMENT LETTER ACCEPTABLE TO AND IN
FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND THE INSURER
CERTIFYING TO THE OWNER TRUSTEE AND THE INSURER THE FACTS SURROUNDING
SUCH TRANSFER, WHICH INVESTMENT LETTER SHALL NOT BE AN EXPENSE OF THE
OWNER TRUSTEE OR THE INSURER OR (ii) IF THE INVESTMENT LETTER IS NOT
DELIVERED, A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO AND IN FORM AND
SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE, THE INSURER AND THE SPONSOR
THAT SUCH TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION, DESCRIBING THE
APPLICABLE EXEMPTION AND THE BASIS THEREFOR, FROM SAID ACT OR IS BEING
MADE PURSUANT TO SAID ACT, WHICH OPINION OF COUNSEL SHALL NOT BE AN
EXPENSE OF THE OWNER TRUSTEE, THE INSURER OR THE SPONSOR. THE HOLDER OF
A CERTIFICATE DESIRING TO EFFECT SUCH TRANSFER SHALL, AND DOES HEREBY
AGREE TO, INDEMNIFY THE SPONSOR AND THE INSURER AGAINST ANY LIABILITY
THAT MAY RESULT IF THE TRANSFER IS NOT SO EXEMPT OR IS NOT MADE IN
ACCORDANCE WITH SUCH FEDERAL AND STATE LAWS.
<PAGE> 35
THE CERTIFICATES AND ANY INTEREST THEREIN SHALL NOT BE TRANSFERRED EXCEPT
UPON SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT: (I) THE PERSON
THAT ACQUIRES A CERTIFICATE SHALL (A) BE ORGANIZED AND EXISTING UNDER THE
LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE OR THE DISTRICT OF
COLUMBIA THEREOF, (B) EXPRESSLY ASSUME, BY AN AGREEMENT SUPPLEMENTAL
HERETO, EXECUTED AND DELIVERED TO THE OWNER TRUSTEE, THE PERFORMANCE OF
EVERY COVENANT AND OBLIGATION OF THE SPONSOR UNDER THE TRUST AGREEMENT,
EXCEPT FOR THE COVENANTS AND OBLIGATIONS CONTAINED IN SECTIONS 2.1, 2.2,
2.3, 2.4, 3.3, 3.4 OF THE SALE AND SERVICING AGREEMENT, 8.6(b)(vii),
8.6(b)(x) AND 7.1 OF THE INDENTURE AND UNDER THE CREDIT LINE AGREEMENTS;
(II) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER TO THE OWNER
TRUSTEE AND THE INSURER AN OFFICER'S CERTIFICATE STATING THAT SUCH
TRANSFER AND SUCH SUPPLEMENTAL AGREEMENT COMPLY WITH SECTION 3.10 OF THE
TRUST AGREEMENT AND THAT ALL CONDITIONS PRECEDENT PROVIDED BY SECTION
3.10 OF THE TRUST AGREEMENT HAVE BEEN COMPLIED WITH AND AN OPINION OF
COUNSEL STATING THAT SUCH TRANSFER AND SUCH SUPPLEMENTAL AGREEMENT COMPLY
WITH SECTION 3.10 AND THAT ALL CONDITIONS PRECEDENT PROVIDED BY SECTION
3.10 HAVE BEEN COMPLIED WITH, AND THE OWNER TRUSTEE MAY CONCLUSIVELY RELY
ON SUCH OFFICER'S CERTIFICATE, SHALL HAVE NO DUTY TO MAKE INQUIRIES WITH
REGARD TO THE MATTERS SET FORTH THEREIN AND SHALL INCUR NO LIABILITY IN
SO RELYING; (III) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER TO
THE OWNER TRUSTEE AND THE INSURER A LETTER FROM EACH RATING AGENCY
CONFIRMING THAT ITS RATING OF THE NOTES, AFTER GIVING EFFECT TO SUCH
TRANSFER, WILL NOT BE REDUCED OR WITHDRAWN WITHOUT REGARD TO THE POLICY;
(IV) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER TO THE OWNER
TRUSTEE AND THE INSURER AN OPINION OF COUNSEL TO THE EFFECT THAT (A) SUCH
TRANSFER WILL NOT ADVERSELY AFFECT THE TREATMENT OF THE NOTES AFTER SUCH
TRANSFER AS DEBT FOR FEDERAL AND APPLICABLE STATE INCOME TAX PURPOSES,
(B) SUCH TRANSFER WILL NOT RESULT IN THE TRUST BEING SUBJECT TO TAX AT
THE ENTITY LEVEL FOR FEDERAL OR APPLICABLE STATE TAX PURPOSES, (C) SUCH
TRANSFER WILL NOT HAVE ANY MATERIAL ADVERSE IMPACT ON THE FEDERAL OR
APPLICABLE STATE INCOME TAXATION OF A NOTEHOLDER AND (D) SUCH TRANSFER
WILL NOT RESULT IN THE ARRANGEMENT CREATED BY THE TRUST AGREEMENT OR ANY
"PORTION" OF THE TRUST, BEING TREATED AS A TAXABLE MORTGAGE POOL AS
DEFINED IN SECTION 7701(I) OF THE CODE; (V) ALL FILINGS AND OTHER ACTIONS
NECESSARY TO CONTINUE THE PERFECTION OF THE INTEREST OF THE TRUST IN THE
MORTGAGE LOANS AND THE OTHER PROPERTY CONVEYED UNDER THE TRUST AGREEMENT
SHALL HAVE BEEN TAKEN OR MADE.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
<PAGE> 36
ADVANTA REVOLVING HOME EQUITY LOAN TRUST
1997-A CERTIFICATE
Percentage Interest: ___%
Date of Cut-Off Date:
November 1, 1997
First Payment Date: Issue Date: November 20, 1997
December 25, 1997
No. 1
---------------------------------
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY
not in its individual
capacity but solely as
Owner Trustee
by:
----------------------------
Authenticating Agent
The Trust was created pursuant to a Trust Agreement dated as of
November 1, 1997 (the "Trust Agreement"), between the Sponsor and Wilmington
Trust Company, as owner trustee (the "Owner Trustee"), a summary of certain of
the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as Advanta Home Equity Loan "Asset Backed Certificates" (herein
called the "Certificates"). Also issued under the Indenture dated as of
November 1, 1997, among the Trust and Bankers Trust Company of California,
N.A., as indenture trustee (the "Indenture Trustee") are Class A Notes (the
"Class A Notes"). These Certificates are issued under and are subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust includes
a pool of adjustable-rate home equity revolving credit line loans secured by
first or second deeds of trust or Mortgages on primarily one-to-four family
residential properties.
Under the Trust Agreement, there will be distributed on the 25th
day of each month or, if such 25th day is not a Business Day, the next Business
Day (the "Payment Date"), commencing on December 26, 1997, to the Person in
whose name this Certificate is registered at the close of business on
<PAGE> 37
the Business Day preceding such Payment Date (the "Record Date") such
Certificateholder's Percentage Interest in the amount to be distributed to
Certificateholders on such Payment Date.
The holder of this Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Certificate are subordinated
to the rights of the Noteholders as described in the Sale and Servicing
Agreement, the Indenture and the Trust Agreement, as applicable.
The holder of this Certificate, by acceptance of this Certificate,
specifically acknowledges that it has no right to or interest in any monies at
any time held pursuant to the Pre-Funding Account or prior to the release of
such monies pursuant to Section 8.6____ of the Indenture, such monies being
held in trust for the benefit of the Noteholders and the Insurer.
Notwithstanding the foregoing, in the event that it is ever determined that the
monies held in the Pre-Funding Account constitute a pledge of collateral, then
the provisions of the Sale and Servicing Agreement shall be considered to
constitute a security agreement and the holder of this Certificate hereby
grants to the Indenture Trustee and the Insurer a first priority perfected
security interest in such amounts. In addition, each Certificateholder, by
acceptance of its Certificate, hereby appoints the Sponsor as its agent to
pledge a first priority perfected security interest in the Pre-Funding Account
and agrees to execute and deliver such instruments of conveyance, assignment,
grant, confirmation, etc., as well as any financing statements, in each case as
the Insurer shall consider reasonably necessary in order to perfect the
Indenture Trustee's security interest in the Trust Property.
It is the intent of the Sponsor, the Master Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will
be treated as a branch. In the event that the Certificates are held by more
than one Holder, it is the intent of the Sponsor, the Master Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will
be treated as a partnership and the Certificateholders will be treated as
partners in that partnership. The Sponsor and any other Certificateholders, by
acceptance of a Certificate, agree to treat, and to take no action inconsistent
with the treatment of, the Certificates for such tax purposes as partnership
interests in the Trust. Each Certificateholder, by its acceptance of a
Certificate, covenants and agrees that such Certificateholder will not at any
time institute against the Trust or the Sponsor, or join in any institution
against the Trust or the Sponsor of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, the Trust Agreement or
any of the Operative Documents.
Distributions on this Certificate will be made as provided in the
Sale and Servicing Agreement and the Indenture by the Indenture Trustee by wire
transfer or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the
making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any
purpose.
<PAGE> 38
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Certificate to be duly
executed.
ADVANTA REVOLVING HOME EQUITY LOAN
TRUST 1997-A
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as Owner
Trustee
Dated: November 20, 1997
By:
------------------------------------
Name:
Title:
<PAGE> 39
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an interest
in, the Originators, the Sponsor, the Master Servicer, the Insurer, the Owner
Trustee or any Affiliates of any of them and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated herein or in the Trust Agreement, the Indenture or the Operative
Documents. In addition, this Certificate is not guaranteed by any governmental
agency or instrumentality and is limited in right of payment to certain
collections with respect to the Mortgage Loans, as more specifically set forth
herein, in the Sale and Servicing Agreement and in the Indenture. A copy of
each of the Sale and Servicing Agreement and the Trust Agreement may be
examined during normal business hours at the principal office of the Sponsor,
and at such other places, if any, designated by the Sponsor, by any
Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Sponsor and the rights of the Certificateholders under the
Trust Agreement at any time by the Sponsor and the Owner Trustee with the prior
written consent of the Insurer and with the consent of the holders of the Notes
and the Certificates evidencing not less than a majority of the outstanding
Notes and the Certificates. Any such consent by the holder of this Certificate
shall be conclusive and binding on such holder and on all future holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the holders
of any of the Certificates (other than the Sponsor or the Insurer).
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Corporate Trust Office, accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate Registrar
appointed under the Trust Agreement is Wilmington Trust Company.
Except for Certificates issued to the Sponsor, the Certificates are
issuable only as registered Certificates without coupons in denominations of
$1,000 or integral multiples of $1,000 in excess thereof. As provided in the
Trust Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates in authorized denominations
evidencing the same aggregate denomination, as requested by the holder
surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and any
agent of the Owner Trustee, the Certificate Registrar, the Insurer or the
Insurer may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes, and none of the Owner Trustee, the
Certificate Registrar, the Insurer nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement, the Indenture and the Sale and Servicing Agreement and the
disposition of all property held as part of the Trust. The Sponsor may at its
option redeem the corpus of the Trust at a price specified in the Sale and
Servicing Agreement, and such purchase of the
<PAGE> 40
Mortgage Loans and other property of the Trust will effect a transfer of the
Certificates; however, such right of purchase is exercisable, subject to
certain restrictions, only on any Payment Date on or after the Payment Date
immediately prior to which the Class A Note Principal Balance is less than 10%
of the Original Class A Note Principal Balance and all amounts due and owing to
the Insurer for unpaid premiums and unreimbursed draws on the Policy and all
other amounts due and owing to the Insurer pursuant to the Insurance Agreement,
together with interest thereon as provided under the Insurance Agreement, have
been paid.
The recitals contained herein shall be taken as the statements of
the Sponsor or the Master Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Certificate or of
any Mortgage Loan or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
<PAGE> 41
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________________________
Attorney to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
*
----------------------------
Signature Guaranteed:
*
----------------------------
- --------------------
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined by
the Certificate Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE> 42
EXHIBIT B
CERTIFICATE OF TRUST OF
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1997-A
This Certificate of Trust of Advanta Revolving Home Equity Loan
Trust 1997-A (the "Trust"), dated as of November __, 1997, is being duly
executed and filed by Wilmington Trust Company, a Delaware banking corporation,
as trustee, to form a business trust under the Delaware Business Trust Act (12
Del. Code, Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is
Advanta Revolving Home Equity Loan Trust 1997-A.
2. Delaware Trust. The name and business address of the Owner
Trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
Attn: Corporate Trust Administration.
3. This Certificate of Trust will be effective November __,
1997.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY
not in its individual capacity but solely as
Owner Trustee of the Trust.
By:
---------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
<PAGE> 2
EXHIBIT 4.3
Execution Copy
SALE AND SERVICING AGREEMENT
Among
ADVANTA REVOLVING HOME EQUITY LOAN TRUST
1997-A
as Issuer,
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Indenture Trustee
Dated as of November 1, 1997
<PAGE> 3
TABLE OF CONTENTS
(Not a Part of this Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article I DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Accepted Servicing Practices" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
----------------------------
"Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------
"Addition Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---------------
"Additional Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------------
"AMHC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
----
"Appraised Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---------------
"Assignment of Mortgage" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
----------------------
"Authorized Officer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------------
"Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------
"Capitalized Interest Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
----------------------------
"Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
"Civil Relief Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------
"Class A Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------
"Class A Principal Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------------------------
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----
"Combined Loan-to-Value Ratio" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------------------
"Credit Limit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------
"Credit Limit Utilization Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-----------------------------
"Credit Line Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
"Cut-Off Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------
"Cut-Off Date Pool Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
"Cut-Off Date Principal Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------------------------------
"Date-of-Payment Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------------------
"Debt Service Reduction" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------------------
"Defective Mortgage Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------------
"Deficient Valuation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------
"Delinquent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------
"Depository" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------
"Designated Depository Institution" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------------------------------
"Determination Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------
"Direct Participant" or "DTC Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------ ---------------
"Document Delivery Requirements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------
"Draw" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
----
"Draw Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------
"Event of Servicing Termination" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
"FDIC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
----
"FHLMC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----
"First Mortgage Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------------
"Foreclosure Profit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------
"FNMA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----
"Highest Lawful Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------
"Holder" or "Noteholder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------ ----------
"Indemnification Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------------
"Indenture": . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------
"Indenture Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-----------------
"Indenture Trustee's Fee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-----------------------
"Indirect Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------
"Initial Cut-Off Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------
"Initial Mortgage Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------------------
"Initial Premium" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------
"Insurance Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------
"Insurance Policy" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------------
"Insurance Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------------
"Insurer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------
"Interest Collections" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------------
"Interest Remittance Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------------------
"Issuer" or "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------ -----
"Late Payment Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------
"Lifetime Rate Cap" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------
"Liquidated Mortgage Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------------------
"Liquidation Expenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------------
"Liquidation Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------------
"Liquidation Report" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------
"Loan Purchase Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------
"Loan Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
---------
"Loan Rate Cap" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------
"Margin" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------
"Master Servicer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
---------------
"Master Servicer Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------------
"Master Servicer's Trust Receipt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------------------
"Minimum Monthly Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-----------------------
"Minimum Originators' Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-----------------------------
"Moody's" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------
"Mortgage" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------
"Mortgage Files" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
"Mortgage Loan Schedule" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------------------
"Mortgage Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
"Mortgaged Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------
"Mortgagor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
---------
"Net Liquidation Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------------
"Nonrecoverable Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------------------
"Note Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
"Officer's Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
---------------------
"Operative Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------
"Original Class A Principal Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------------------------------
"Original Principal Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------------
"Original Principal Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------------------
"Originators" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-----------
"Originators' Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
---------------------
"Outstanding" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-----------
"Owner Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------
"Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------
"Percentage Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------------
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------
"Policy" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------
"Pool Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------
"Pool Certification" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------------
"Pool Factor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-----------
"Pre-Funded Mortgage Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------------------
"Pre-Funding Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------------
"Pre-Funding Transfer Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------------------
"Prepaid Installment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------
"Preference Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-----------------
"Prepayment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
----------
"Preservation Expenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------------------
"Prime" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-----
"Principal and Interest Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
------------------------------
"Principal Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-----------------
"Principal Collections" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------------------
"Principal Remittance Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------------------------
"Prospectus" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
----------
"Prospectus Supplement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------------
"Qualified Replacement Mortgage" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------------------------
"Realized Loss" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------------
"Record Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-----------
"Register" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--------
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---------
"Registration Statement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------------------
"Reimbursement Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--------------------
"REO Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
------------
"Remittance Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---------------
"Remittance Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-----------------
"Replacement Cut-Off Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
------------------------
"Representation Letter" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---------------------
"Standard & Poor's" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-----------------
"Schedule of Mortgage Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------------------------
"Second Mortgage Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------------------
"Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------------
"Senior Lien" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C>
"Servicing Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------------
"Servicing Fee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------------
"Servicing Fee Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
------------------
"Sponsor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------
"Subsequent Cut-Off Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------------------
"Subsequent Mortgage Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------------------------
"Subsequent Transfer Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------------------------
"Subsequent Transfer Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
------------------------
"Substitution Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------------------
"Sub-Servicer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
------------
"Sub-Servicing Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------------
"Telerate Screen Page 3750" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------------------------
"Termination Fees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
----------------
"Transfer Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------------
"Transfer Notice Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------------
"Trust Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
---------------
"Trust Collateral Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
----------------------
"Trust Estate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
------------
"Underwriter" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-----------
Section 1.2. Use of Words and Phrases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.3. Captions; Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.4. Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Article II CONVEYANCE OF MORTGAGE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1. Conveyance of the Initial Mortgage Loans . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2. Acceptance by Indenture Trustee; Certain Substitutions of Mortgage Loans;
Certification by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.3. Cooperation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.4. Conveyance of the Subsequent Mortgage Loans . . . . . . . . . . . . . . . . . . . 24
Section 2.5. Retransfers of Mortgage Loans at Election of Sponsor . . . . . . . . . . . . . . . 26
Article III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR AND THE MASTER SERVICER . . . . . 27
Section 3.1. Representations and Warranties of the Sponsor . . . . . . . . . . . . . . . . . . 27
Section 3.2. Representations and Warranties of the Master Servicer . . . . . . . . . . . . . . 29
Section 3.3. Representations and Warranties of the Sponsor with Respect to the Mortgage Loans;
Retransfer of Certain Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.4. Covenants of Sponsor to Take Certain Actions with Respect to the Mortgage Loans
In Certain Situations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Article IV SERVICING AND ADMINISTRATION OF MORTGAGE LOANS . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.1. Master Servicer and Sub-Servicers. . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.2. Collection of Certain Mortgage Loan Payments . . . . . . . . . . . . . . . . . . . 42
</TABLE>
iv
<PAGE> 7
<TABLE>
<S> <C>
Section 4.3. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers . . . . . . . 43
Section 4.4. Successor Sub-Servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.5. Liability of Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.6. No Contractual Relationship Between Sub-Servicer and Indenture Trustee or the Class
A Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.7. Assumption or Termination of Sub-Servicing Agreement by Indenture Trustee . . . . 44
Section 4.8. Principal and Interest Account. . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.9. Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.10. Purchase of Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.11. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.12. Due-on-Sale Clauses; Assumption and Substitution Agreements . . . . . . . . . . . 47
Section 4.13. Realization Upon Defaulted Mortgage Loans . . . . . . . . . . . . . . . . . . . . 48
Section 4.14. Indenture Trustee to Cooperate; Release of Mortgage Files . . . . . . . . . . . . 49
Section 4.15. Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.16. Annual Statement as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.17. Annual Independent Certified Public Accountants' Reports . . . . . . . . . . . . . 52
Section 4.18. Access to Certain Documentation and Information Regarding the Mortgage Loans . . . 52
Section 4.19. Assignment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Article V SERVICING TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.1. Events of Servicing Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.2. Inspections by Insurer; Errors and Omissions Insurance . . . . . . . . . . . . . . 57
Section 5.3. Merger, Conversion, Consolidation or Succession to Business of Master Servicer . . 57
Section 5.4. Notification to Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Article VI ADMINISTRATIVE DUTIES OF THE MASTER SERVICER . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.1. Administrative Duties with Respect to the Indenture . . . . . . . . . . . . . . . . 57
Section 6.2. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 6.3. Additional Information to be Furnished to the Issuer . . . . . . . . . . . . . . . 59
Article VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.1. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.2. Form of Documents Delivered to the Indenture Trustee . . . . . . . . . . . . . . . 60
Section 7.3. Acts of Class A Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 7.4. Notices, etc. to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 7.5. Notices and Reports to Class A Noteholders; Waiver of Notices . . . . . . . . . . . 61
Section 7.6. Rules by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
v
<PAGE> 8
<TABLE>
<S> <C> <C>
Section 7.7. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.9. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.10. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.13. Usury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.14. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.15. The Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 7.16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 7.17. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SCHEDULE I -- Schedules of Mortgage Loans
EXHIBIT A-1 -- Form of Class A Note
EXHIBIT A-2 -- Form of Originators Certificate
EXHIBIT B -- Contents of Mortgage Files
EXHIBIT C -- Form of Credit Line Agreement
EXHIBIT D -- Form of Certificate Re: Mortgage Loans Prepaid in
full After the Initial Cut-Off Date
EXHIBIT E -- Form of Indenture Trustee's Receipt
EXHIBIT F -- Form of Pool Certification
EXHIBIT G -- [RESERVED]
EXHIBIT H -- [RESERVED]
EXHIBIT I -- [RESERVED]
EXHIBIT J -- [RESERVED]
EXHIBIT K -- Form of Master Servicer's Trust Receipt
EXHIBIT L -- Subsequent Transfer Agreement
EXHIBIT M -- Form of Liquidation Report
EXHIBIT N -- [RESERVED]
EXHIBIT O -- [RESERVED]
</TABLE>
vi
<PAGE> 9
SALE AND SERVICING AGREEMENT, relating to ADVANTA REVOLVING HOME
EQUITY LOAN TRUST 1997-A (the " Trust" or the " Issuer"), dated as of November
1, 1997, 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 Indenture Trustee (the
"Indenture Trustee").
WHEREAS, the Issuer desires to purchase a portfolio of Mortgage
Loans arising in connection with Credit Line Agreements originated by Advanta
Finance Corp. and Advanta National Bank (each an "Originator" and together the
"Originators");
WHEREAS the Sponsor has purchased such Mortgage Loans from the
Originators and is willing to sell such Mortgage Loans to the Issuer;
WHEREAS, the Issuer desires to purchase Subsequent Mortgage Loans
arising in connection with Credit Line Agreements to be originated by the
Originators.
WHEREAS, the Sponsor has an agreement to purchase such Subsequent
Mortgage Loans from the Originators and is willing to sell such Subsequent
Mortgage Loans to the Issuer;
WHEREAS, the Master Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the Trust Estate;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Sponsor, the Master Servicer, the Issuer and
the Indenture Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise. In addition, capitalized terms used herein and
not defined herein shall have their respective meanings as set forth in the
Indenture.
"Accepted Servicing Practices": shall mean the Master
Servicer's normal servicing practices in servicing and administering mortgage
loans for its own account, which in general will conform to the mortgage
servicing practices of prudent mortgage lending institutions which service for
their own account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located and will
give due consideration to the Insurer's and the Noteholders' reliance on the
Master Servicer.
<PAGE> 10
"Account": Any account established in accordance with Section 4.8
hereof and Section 8.3 of the Indenture.
"Addition Notice": With respect to the transfer of Subsequent
Mortgage Loans to the Trust pursuant to Section 2.4(b) of this Agreement, a
notice in the form of Exhibit N hereto, which shall be given not later than
five Business Days prior to the related Subsequent Transfer Date, of the
Sponsor's designation of Subsequent Mortgage Loans to be sold to the Trust and
the aggregate Principal Balance of such Subsequent Mortgage Loans.
"Additional Balance": As to any Mortgage Loan and day, the
aggregate amount of all Draws conveyed to the Trust pursuant to Section 2.1.
"Agreement": This Sale and Servicing Agreement, as it may be
amended from time to time, and including the Exhibits hereto.
"AMHC": Advanta Mortgage Holding Company, a Delaware corporation
and the corporate parent of Advanta Mortgage Corp. USA, and the indirect
corporate parent of Advanta Mortgage Conduit Services, Inc.
"Appraised Value": As to any Mortgaged Property, the value
established by a drive by inspection or a full appraisal of such Mortgaged
Property in order to establish compliance with the underwriting criteria then
in effect in connection with the application for the Mortgage Loan secured by
such Mortgaged Property.
"Assignment of Mortgage": With respect to each Mortgage Loan, an
assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect the recordation of the pledge
of the Mortgage Loans to the Indenture Trustee for the benefit of the Class A
Noteholders.
"Authorized Officer": With respect to any Person, any person who
is authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Indenture
Trustee, the Master Servicer and the Sponsor, initially including those
individuals whose names appear on the lists of Authorized Officers delivered on
the Closing Date.
"Business Day": Any day that is not a Saturday, Sunday or other
day on which commercial banking institutions in the State of New York, the
State of California or in the city in which the principal corporate trust
office of the Indenture Trustee is located, are authorized or obligated by law
or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 8.3 of the Indenture and maintained by
the Indenture Trustee.
"Certificate": As defined in the Trust Agreement.
2
<PAGE> 11
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
"Class A Note": Any Note designated as a "Class A Note" on the
face thereof, in the form of Exhibit A-1 hereto. The Class A Notes shall be
issued with an initial aggregate Class A Principal Balance equal to the
Original Class A Principal Balance therefor.
"Class A Principal Balance": As of any time of determination,
the Original Class A Principal Balance of the Class A Notes less any amounts
actually distributed theretofore as principal thereon to the Class A Notes of
the Class A Notes on all prior Payment Dates.
"Closing Date": November 20, 1997.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Combined Loan-to-Value Ratio": With respect to any Mortgage
Loan as of any date, the percentage equivalent of a fraction, the numerator of
which is the sum of (i) the Credit Limit and (ii) the outstanding principal
balance as of the date of execution of the related Credit Line Agreement (or as
of any subsequent date, if any, as of which such outstanding principal balance
may be determined in connection with an increase in the Credit Limit for such
Mortgage Loan) of any mortgage loan or mortgage loans that are senior in
priority to the Mortgage Loan and which is secured by the same Mortgaged
Property and the denominator of which is the lesser of (i) the Appraised Value
of the related Mortgaged Property as set forth in the Mortgage File on such
date of execution or on such subsequent date, if any, or (ii) in the case of a
Mortgaged Property purchased within one year of such date of execution, the
purchase price thereof.
"Credit Limit": As to any Mortgage Loan, the maximum principal
balance permitted under the terms of the related Credit Line Agreement.
"Credit Limit Utilization Rate": As to any Mortgage Loan, the
percentage equivalent of a fraction the numerator of which is the Principal
Balance for such Mortgage Loan and the denominator of which is the related
Credit Limit.
"Credit Line Agreement": With respect to any Mortgage Loan, the
related home equity line of credit agreement, security instrument and
promissory note executed by the related Mortgagor and any amendment or
modification thereof.
"Cut-Off Date": With respect to each Initial Mortgage Loan, the
Initial Cut-Off Date. With respect to any Subsequent Mortgage Loan, the
Subsequent Cut-Off Date related to such Subsequent Mortgage Loan. With respect
to each Qualified Replacement Mortgage, the Replacement Cut-off Date related to
such Qualified Replacement Mortgage.
3
<PAGE> 12
"Cut-Off Date Pool Balance": The aggregate Principal Balances of
all the Mortgage Loans as of the related Cut-Off Date; as of the Initial
Cut-Off Date, $86,835,573.71.
"Cut-Off Date Principal Balance": With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the related Cut-Off Date.
"Date-of-Payment Loans": Any Mortgage Loan as to which, pursuant
to the Credit Line Agreement relating thereto, interest is computed and charged
to the Mortgagor at the rate on the outstanding principal balance of such
Credit Line Agreement based on the number of days elapsed between receipt of
the Mortgagor's last payment through receipt of the Mortgagor's most current
payment.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Minimum Monthly Payment
due on such Mortgage Loan.
"Defective Mortgage Loan": A Mortgage Loan determined not to
satisfy the criteria set forth in this Agreement.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent
jurisdiction in an amount less than the then outstanding Principal Balance of
the Mortgage Loan, which valuation results from a proceeding initiated under
the United States Bankruptcy Code.
"Delinquent": A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment
has not been received by the close of business on the corresponding day of the
month immediately succeeding the month in which such payment was due, or, if
there is no such corresponding day (e.g., as when a 30-day month follows a
31-day month in which a payment was due on the 31st day of such month) then on
the last day of such immediately succeeding month. Similarly for "60 days
delinquent," "90 days delinquent" and so on.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the
Principal and Interest Account, an institution whose deposits are insured by
the Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC,
the long-term deposits of which shall be rated (x) A or better by Standard &
Poor's and (y) A2 or better by Moody's and in one of the two highest short-term
rating categories, unless otherwise approved in writing by the Insurer and each
of Moody's and Standard & Poor's, and which is any of the following: (i) a
federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or
4
<PAGE> 13
(v) approved in writing by the Insurer, Moody's and Standard & Poor's and, in
each case acting or designated by the Master Servicer as the depository
institution for the Principal and Interest Account; provided, however, that any
such institution or association shall have combined capital, surplus and
undivided profits of at least $100,000,000. Notwithstanding the foregoing, the
Principal and Interest Account may be held by an institution otherwise meeting
the preceding requirements except that the only applicable rating requirement
shall be that the unsecured and uncollateralized debt obligations thereof shall
be rated Baa3 or better by Moody's if such institution has trust powers and the
Principal and Interest Account is held by such institution in its trust
capacity and not in its commercial capacity.
"Determination Date": As to each Payment Date, the third
Business Day next preceding such Payment Date or such earlier day as shall be
agreed to by the Insurer and Indenture Trustee.
"Direct Participant" or "DTC Participant": Any broker-dealer,
bank or other financial institution for which the Depository holds the Class A
Notes from time to time as a securities depository.
"Document Delivery Requirements": The Sponsor's obligations to
deliver certain legal documents, to prepare and record certain Mortgage
assignments or to deliver certain opinions relating to Mortgage assignments, in
each case with respect to the Mortgage Loans upon certain conditions as set
forth in Section 2.1 hereof.
"Draw": With respect to any Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the related Cut-Off Date in accordance
with the related Credit Line Agreement.
"Draw Period": With respect to any Mortgage Loan, the period of
time whereby a Mortgagor may make a Draw under the related Credit Line
Agreement; such period not exceed ten years, unless extended at the option of
the related Originator and/or the Master Servicer
"Event of Servicing Termination": As defined in Section 5.1
hereof.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Mortgaged Property.
"Foreclosure Profit": With respect to a Liquidated Mortgage
Loan, the amount, if any, by which (i) the aggregate of its Net Liquidation
Proceeds exceeds (ii) the related Principal Balance (plus accrued and unpaid
interest thereon at the applicable Loan
5
<PAGE> 14
Rate from the date interest was last paid through the date of receipt of the
final Liquidation Proceeds) of such Liquidated Mortgage Loan immediately prior
to the final recovery of its Liquidation Proceeds.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor
thereof.
"Highest Lawful Rate": As defined in Section 7.13.
"Holder" or "Noteholder": means the Person in whose name a Note
is registered on the Note Register.
"Indemnification Agreement": The Indemnification Agreement
dated as of November 20, 1997 among the Sponsor, the Insurer and the
Underwriter.
"Indenture": The Indenture dated as of November 1, 1997 between
the Issuer and the Indenture Trustee, as the same may be amended and
supplemented from time to time.
"Indenture Trustee": Bankers Trust Company of California, N.A.,
located on the date of execution of this Agreement at 3 Park Plaza, 16th Floor,
Irvine, California 92614, not in its individual capacity but solely as
Indenture Trustee under this Agreement, and any successor hereunder.
"Indenture Trustee's Fee": With respect to any Payment Date, the
product of (x) one-twelfth of .015% and (y) the Pool Balance as of the end of
the immediately preceding Remittance Period.
"Indirect Participant" shall mean any financial institution for
whom any Direct Participant holds an interest in the Class A Notes.
"Initial Cut-Off Date": With respect to the Initial Mortgage
Loans, the opening of business on November 1, 1997.
"Initial Mortgage Loans": Mortgage Loans delivered by the
Sponsor to the Trust on the Closing Date.
"Initial Premium": The initial premium payable by the Sponsor on
behalf of the Trust to the Insurer in consideration of the delivery to the
Indenture Trustee of the Insurance Policy.
"Insurance Agreement": The Insurance Agreement dated as of
November 20, 1997 among the Sponsor, the Master Servicer, the Indenture Trustee
and the Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage
insurance policy relating to a Mortgage Loan.
6
<PAGE> 15
"Insurance Proceeds": Proceeds paid by any insurer (other than
the Insurer) pursuant to any Insurance Policy covering a Mortgage Loan, or
amounts required to be paid by the Master Servicer pursuant to the last
sentence of the first paragraph of Section 4.11(b), or the penultimate sentence
of Section 4.11(c), net of any component thereof (i) covering any expenses
incurred by or on behalf of the Master Servicer in connection with obtaining
such proceeds, (ii) that is applied to the restoration or repair of the related
Mortgaged Property, (iii) released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures, or (iv) required to be paid to
any holder of a mortgage senior to such Mortgage Loan.
"Insurer": Ambac Assurance Corporation or any successor thereto,
as issuer of the Insurance Policy.
"Interest Collections": For any Payment Date, amounts collected
during the related Remittance Period, including the portion of Net Liquidation
Proceeds allocated to interest pursuant to the terms of the Credit Line
Agreements, less the Servicing Fee for the related Remittance Period.
"Interest Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) all interest collected by the Master Servicer
during the related Remittance Period with respect to the Mortgage Loans (less
the Servicing Fee), except that with respect to Prepaid Installments, interest
shall be remitted in the related Remittance Period and (ii) all Net Liquidation
Proceeds actually collected by the Master Servicer with respect to the Mortgage
Loan during the related Remittance Period (to the extent such Net Liquidation
Proceeds relate to interest).
"Issuer" or "Trust": Advanta Revolving Home Equity Loan Trust
1997-A created by the Trust Agreement.
"Late Payment Rate": For any Payment Date, the rate of interest,
as it is publicly announced by Citibank, N.A. at its principal office in New
York, New York as its prime rate (any change in such prime rate of interest to
be effective on the date such change is announced by Citibank, N.A.) plus 2%.
The Late Payment Rate shall be computed on the basis of a year of 365 days
calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"Lifetime Rate Cap": With respect to each Mortgage Loan with
respect to which the related Credit Line Agreement provides for a lifetime rate
cap, the maximum Loan Rate permitted over the life of such Mortgage Loan under
the terms of the related Credit Line Agreement, as set forth on Exhibit C
hereto.
"Liquidated Mortgage Loan": As defined in Section 4.13(b)
hereof. A Mortgage Loan which is purchased from the Trust pursuant to Section
3.3, 3.4, 3.6(b) or 4.10 hereof is not a "Liquidated Mortgage Loan".
"Liquidation Expenses": Expenses which are incurred by the
Master Servicer or any Sub-Servicer in connection with the liquidation of any
defaulted
7
<PAGE> 16
Mortgage Loan, such expenses, including, without limitation, legal fees and
expenses, and any unreimbursed Servicing Advances expended by the Master
Servicer or any Sub-Servicer pursuant to Section 4.9 with respect to the
related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Mortgage
Loan, any amounts (including the proceeds of any Insurance Policy but excluding
any amounts drawn on the Insurance Policy) recovered by the Master Servicer in
connection with such Liquidated Mortgage Loan, whether through Indenture
Trustee's sale, foreclosure sale or otherwise.
"Liquidation Report": As set forth in Exhibit M.
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Section 2.2(b), 3.3,
3.4, or 4.10 hereof, an amount equal to the Principal Balance of such Mortgage
Loan as of the date of purchase, plus one month's interest on the outstanding
Principal Balance thereof as of the beginning of the preceding Remittance
Period computed at the Loan Rate, if any, together with, without duplication,
the aggregate amount of (i) all delinquent interest, all Servicing Advances
theretofore made with respect to such Mortgage Loan and not subsequently
recovered from the related Mortgage Loan and (ii) any Reimbursement Amount
relating to such Mortgage Loan.
"Loan Rate": With respect to any Mortgage Loan and as of any
day, the per annum rate of interest applicable under the related Credit Line
Agreement to the calculation of interest for such day on the Principal Balance
of such Mortgage Loan.
"Loan Rate Cap": With respect to each Mortgage Loan, the lesser
of (i) the Lifetime Rate Cap, if any, or (ii) the applicable state usury
ceiling, if any.
"Margin": With respect to each Mortgage Loan with an adjustable
rate, the fixed percentage amount set forth in the related Credit Line
Agreement which amount is added to Prime in accordance with the terms of the
related Credit Line Agreement to determine the Loan Rate for such Mortgage
Loan, subject to any maximum.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Master Servicer Affiliate": A Person (i) controlling,
controlled by or under common control with the Master Servicer and (ii) which
is qualified to service residential mortgage loans.
"Master Servicer's Trust Receipt": The Master Servicer's trust
receipt in the form set forth as Exhibit K hereto.
"Minimum Monthly Payment": With respect to any Mortgage Loan and
any month, the minimum amount required to be paid by the related Mortgagor in
that month.
8
<PAGE> 17
"Minimum Originators' Interest": With respect to any date, an
amount equal to 2% of the Trust Collateral Value.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing a Credit Line Agreement.
"Mortgage Files": For each Mortgage Loan, the items listed on
Exhibit B hereto.
"Mortgage Loan Schedule": A schedule of Mortgage Loans
transferred to the Trust, attached hereto as Schedule II, as it may be further
supplemented in connection with subsequent transfers of Subsequent Mortgage
Loans.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 2.1(a) and 2.4 hereof, together with
any Qualified Replacement Mortgages substituted therefor in accordance with
this Agreement, as from time to time are held as a part of the Trust Estate,
the Mortgage Loans originally so held being identified in the Schedule of
Mortgage Loans. The term "Mortgage Loan" includes the terms "First Mortgage
Loan" and "Second Mortgage Loan". The term "Mortgage Loan" includes any
Mortgage Loan which is Delinquent, which relates to a foreclosure or which
relates to a Mortgaged Property which is REO Property prior to such Mortgaged
Property's disposition by the Trust. Any mortgage loan which, although
intended by the parties hereto to have been, and which purportedly was,
transferred and assigned to the Trust by the Sponsor, in fact was not
transferred and assigned to the Trust for any reason whatsoever shall
nevertheless be considered a "Mortgage Loan" for all purposes of this
Agreement. The term "Mortgage Loan" includes the terms "Initial Mortgage
Loan," and "Subsequent Mortgage Loan".
"Mortgaged Property": The underlying property securing a
Mortgage Loan.
"Mortgagor": The obligor on a Credit Line Agreement.
"Net Liquidation Proceeds": As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances and accrued and unpaid Servicing Fees through
the date of liquidation relating to such Liquidated Mortgage Loan. In no event
shall Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan be
less than zero.
"Nonrecoverable Advance" shall mean, with respect to any Mortgage
Loan, any Servicing Advance previously made and not reimbursed pursuant to
Section 4.9 which, in the good faith business judgment of the Master Servicer,
as evidenced by an Officer's Certificate delivered to the Insurer and the
Indenture Trustee on or prior to the related Remittance Date, would not be
ultimately recoverable.
9
<PAGE> 18
"Note Account": The Note Account established in accordance with
Section 8.3 of the Indenture and maintained by the Indenture Trustee.
"Officer's Certificate": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the
Indenture Trustee.
"Operative Documents": Collectively, this Agreement, the
Indenture, the Trust Agreement, the Subsequent Transfer Agreements, the
Insurance Policy, the Class A Notes, the Indemnification Agreement and the
Insurance Agreement.
"Original Class A Principal Balance": $100,000,000.
"Original Principal Amount": With respect to any particular
Class A Note, an amount equal to the product of (i) the Percentage Interest of
such Class A Note and (ii) the Original Class A Principal Balance.
"Original Principal Balance": With respect to each Credit Line
Agreement, the principal amount of such Credit Line Agreement or the mortgage
note relating to a Senior Lien, as the case may be, on the date of origination
thereof.
"Originators": As defined in the Recitals.
"Originators' Interest": As of any Payment Date, is the excess,
if any, of (x) the Trust Collateral Value as of such Payment Date over (y) the
Class A Principal Balance as of such Payment Date (after taking into account
reductions therein on such Payment Date).
"Outstanding": With respect to Class A Notes, as of any date of
determination, all such Class A Notes theretofore executed and delivered
hereunder except:
(i) Class A Notes theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation;
(ii) Class A Notes or portions thereof for which full and
final payment money in the necessary amount has been theretofore
deposited with the Indenture Trustee in trust for the Class A
Noteholders;
(iii) Class A Notes in exchange for or in lieu of which
other Class A Notes have been executed and delivered pursuant to this
Agreement, unless proof satisfactory to the Indenture Trustee is
presented that any such Class A Notes are held by a bona fide purchaser;
and
(iv) Class A Notes alleged to have been destroyed, lost or
stolen for which replacement Class A Notes have been issued as provided
for in Section 2.4 of the Indenture.
10
<PAGE> 19
"Owner Trustee": Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"Payment Date": Any date on which the Indenture Trustee is
required to make distributions to the Class A Noteholders, which shall be the
25th day of each month, commencing in the month following the Closing Date or,
if such day is not a Business Day, then on the succeeding Business Day.
"Percentage Interest": As to any Class A Note that percentage,
expressed as a fraction, the numerator of which is the Class A Principal
Balance of such Class A Note as of the related Cut-Off Date and the denominator
of which is the Original Class A Principal Balance of all Class A Notes of the
same Class; and as to any Certificate, Percentage Interest set forth on such
Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Policy": The financial guaranty insurance policy dated November
20, 1997, issued by the Insurer to the Indenture Trustee for the benefit of the
Noteholders.
"Pool Balance": With respect to any date, the Principal
Balances of the Mortgage Loans as of such date.
"Pool Certification": As defined in Exhibit F attached hereto.
"Pool Factor": A seven-digit decimal which the Indenture Trustee
shall compute monthly expressing the Class A Principal Balance as of each
Payment Date (after giving effect to any distribution of principal on such
Payment Date) as a proportion of the Original Class A Principal Balance. On
the Closing Date, the Pool Factor will be 1.0000000. Thereafter, the Pool
Factor shall decline to reflect reductions in the related Class A Principal
Balance resulting from distributions of principal to the Class A Notes.
"Pre-Funded Mortgage Loans": Subsequent Mortgage Loans assigned
to the Trust in consideration of amounts released to the Originators from the
Pre-Funding Account.
"Pre-Funding Period": The period commencing on the Closing Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which a Rapid Amortization Event occurs
and (iii) the February, 1998 Payment Date.
"Pre-Funding Transfer Date": Any Subsequent Transfer Date on
which Pre-Funded Mortgage Loans are assigned to the Trust.
11
<PAGE> 20
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
"Preference Amount": As defined in the Policy.
"Prepayment": Any payment of principal of a Mortgage Loan which
is received by the Master Servicer in advance of the scheduled due date for the
payment of such principal (other than the principal portion of any Prepaid
Installment), and the proceeds of any Insurance Policy which are to be applied
as a payment of principal on the related Mortgage Loan shall be deemed to be
Prepayments for all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Master
Servicer or any Sub-Servicer in connection with a foreclosed Mortgage Loan
prior to the liquidation thereof, including, without limitation, expenditures
for real estate property taxes, hazard insurance premiums, property restoration
or preservation.
"Prime": The Prime rate of interest charged from time to time as
set forth in the related Credit Line Agreement.
"Principal and Interest Account": Collectively, each principal
and interest account created by the Master Servicer or any Sub-Servicer
pursuant to Section 4.8(a) hereof, or pursuant to any Sub-Servicing Agreement.
"Principal Balance": As to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any date, the related Cut-Off Date
Principal Balance, plus (i) any Additional Balance in respect of such Mortgage
Loan, minus (ii) all collections credited as principal against the Principal
Balance of any such Mortgage Loan in accordance with the related Credit Line
Agreement prior to such day. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have a Principal Balance of zero as of the
first day of the Remittance Period following the Remittance Period in which
such Mortgage Loan becomes a Liquidated Mortgage Loan and at all times
thereafter.
"Principal Collections": As to any Payment Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
principal (including, but not limited to, and Substitution Amounts any portion
of Insurance Proceeds or Net Liquidation Proceeds allocable to principal of the
applicable Mortgage Loan, but excluding Foreclosure Profits) collected by the
Master Servicer under the Mortgage Loans during the related Remittance Period.
The terms of the related Credit Line Agreement shall determine the portion of
each payment in respect of a Mortgage Loan that constitutes principal or
interest.
"Principal Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) the principal actually collected by the Master
Servicer with respect to Mortgage Loans during the related Remittance Period,
(ii) the Principal
12
<PAGE> 21
Balance of each such Mortgage Loan that either was repurchased by the Sponsor
or purchased by the Master Servicer, to the extent such Principal Balance was
actually deposited in the Principal and Interest Account on such Remittance
Date, (iii) any Substitution Amounts delivered by the Sponsor in connection
with a substitution of a Mortgage Loan, to the extent such Substitution Amounts
were actually deposited in the Principal and Interest Account on such
Remittance Date, and (iv) all Net Liquidation Proceeds actually collected by
the Master Servicer with respect to such Mortgage Loans during the related
Remittance Period (to the extent such Liquidation Proceeds related to
principal).
"Prospectus": That certain Prospectus dated October 30, 1997
naming Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage Corp. USA
as registrants and describing certain mortgage loan asset-backed securities to
be issued from time to time as described in related Prospectus Supplements.
"Prospectus Supplement": That certain Prospectus Supplement
dated November 14, 1997, describing the Class A Notes issued by the Trust.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 2.2(b), 3.3 or 3.4 hereof, which (i) bears a
variable rate of interest, (ii) has a Loan Rate at least equal to the Loan Rate
of the Mortgage Loan being replaced, (which shall mean a Mortgage Loan having
the same interest rate index, a margin over such index and a maximum interest
rate at least equal to those applicable to the Mortgage Loan being replaced),
(iii) is of the same or better property type and the same or better occupancy
status as the replaced Mortgage Loan, (iv) shall be of the same or better
credit quality classification (determined in accordance with the respective
Originator's credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than the Payment Date occurring in
February, 2023, (vi) has a Combined Loan-to-Value Ratio as of the Initial
Cut-Off Date or Subsequent Cut-Off Date, as applicable, no higher than the
Combined Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (vii)
has a Principal Balance as of the related Replacement Cut-Off Date equal to or
less than the Principal Balance of the replaced Mortgage Loan as of such
Replacement Cut-Off Date, (viii) is in the same lien position or better.
Except with respect to clause (vi) above, in the event that one or more
mortgage loans are proposed to be substituted for one or more mortgage loans,
the Insurer may allow the foregoing tests to be met on a weighted average basis
or other aggregate basis acceptable to the Insurer, as evidenced by a written
approval delivered to the Indenture Trustee by the Insurer.
"Realized Loss": As to any Liquidated Mortgage Loan, the amount,
if any, by which the Principal Balance thereof as of the date of liquidation is
in excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last day
of the calendar month immediately preceding the calendar month in which such
Payment Date occurs.
13
<PAGE> 22
"Register": The register maintained by the Indenture Trustee in
accordance with Section 2.3 of the Indenture, in which the names of the Class A
Noteholders are set forth.
"Registrar": The Indenture Trustee, acting in its capacity as
Indenture Trustee appointed pursuant to Section 2.3 of the Indenture, or any
duly appointed and eligible successor thereto.
"Registration Statement": The Registration Statement filed by
the Sponsor with the Securities and Exchange Commission, including all
amendments thereto and including the Prospectus and the Prospectus Supplement
relating to the Class A Notes constituting a part thereof.
"Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all payments made pursuant to the Insurance Policy previously received
by the Indenture Trustee and all Preference Amounts previously paid to the
Indenture Trustee by the Insurer and in each case not previously repaid to the
Insurer pursuant to Section 8.06(b)(viii) of the Indenture plus (ii) interest
accrued on each such payment made pursuant to the Insurance Policy not
previously repaid calculated at the Late Payment Rate from the date the
Indenture Trustee received the related payment made pursuant to the Insurance
Policy and (y)(i) any amounts then due and owing to the Insurer under the
Insurance Agreement plus (ii) interest on such amounts at the Late Payment
Rate. The Insurer shall notify the Indenture Trustee and the Sponsor of the
amount of any Reimbursement Amount.
"REO Property": A Mortgaged Property acquired by the Master
Servicer or any Sub-Servicer on behalf of the Trust through foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
"Remittance Date": Any date on which the Master Servicer is
required to remit monies on deposit in the Principal and Interest Account to
the Indenture Trustee, which shall be the 18th day or, if such day is not a
Business Day, the next preceding Business Day, of each month, commencing in the
month following the month in which the Closing Date occurs.
"Remittance Period": As to any Payment Date, the calendar month
preceding the month of such Payment Date.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or agreements with,
the Depository to effectuate a book entry system with respect to the Class A
Notes registered in the Register under the nominee name of the Depository.
"Standard & Poor's": Standard & Poor's Rating Group, a division
of The McGraw Hill Companies.
14
<PAGE> 23
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans,
attached hereto as Schedule II, as it may be further supplemented in connection
with Subsequent Transfers.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Mortgaged Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Mortgaged Property having a first
priority lien.
"Servicing Advance": As defined in Section 4.9 and Section 4.13
hereof.
"Servicing Fee": With respect to any Payment Date, the product
of (i) one-twelfth of the Servicing Fee Rate and (ii) the aggregate Principal
Balance of the Mortgage Loans on the first day of the Remittance Period
preceding such Payment Date (or at the Cut-Off Date with respect to the first
Payment Date).
"Servicing Fee Rate": 0.50% per annum.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware
Corporation.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loan, the opening of business on the first day of the calendar month
in which the related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loans": The Mortgage Loans assigned to the
Trust pursuant to Section 2.4 of the Agreement, which shall be listed on the
Schedule of Mortgage Loans attached to the Subsequent Transfer Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Indenture
Trustee and the Sponsor substantially in the form of Exhibit L hereto, by which
Subsequent Mortgage Loans are assigned to the Trust.
"Subsequent Transfer Date": The date specified in each
Subsequent Transfer Agreement, which must, with respect to any Payment Date, be
a date occurring during the calendar month in which such Payment Date occurs,
and on or prior to the Remittance Date occurring in such month.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Principal Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on
15
<PAGE> 24
such amount calculated at the Loan Rate net of the Servicing Fee, if any, of
the Mortgage Loan being replaced.
"Sub-Servicer": Any Person with whom the Master Servicer has
entered into a Sub-Servicing Agreement and who satisfies any requirements set
forth in Section 4.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and any Sub-Servicer relating to the servicing and/or
administration of certain Mortgage Loans as permitted by Section 4.3.
"Telerate Screen Page 3750": The display designated as page 3750
on the Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates of major
banks).
"Termination Fees": With respect to Mortgage Loans which prepay
in full or in part and are secured by Mortgaged Properties in certain
jurisdictions, an account termination fee generally not exceeding $500 may be
charged by the Master Servicer and retained as additional servicing
compensation pursuant to Section 4.15. Such Termination Fees may not be
applicable to accounts terminated subsequent to a date designated in the
related Credit Line Agreement which depending on the jurisdiction may be during
the Draw Period.
"Transfer Date": As defined in Section 2.5 herein.
"Transfer Notice Date": As defined in Section 2.5 herein.
"Trust Agreement": The Trust Agreement dated as of November 1,
1997 between the Issuer and the Sponsor.
"Trust Collateral Value": As of any Payment Date, the sum of (i)
the Pool Balance at the end of the prior calendar month, (ii) the aggregate
Principal Balances as of the related Cut-Off Dates of all Subsequent Mortgage
Loans previously assigned to the Trust during the calendar month in which such
Payment Date occurs and (iii) the amounts, if any, on deposit in the
Pre-Funding Account at the close of business on such Payment Date.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, for the benefit of the Class A Noteholders and
the Insurer, including all proceeds thereof including, without limitation, (i)
the Initial Mortgage Loans, Qualified Replacement Mortgages and Subsequent
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts (except as otherwise provided herein),
(iii) any Mortgaged Property, the Class A Noteholder of which has been effected
on behalf of the Trust as a result of foreclosure or acceptance by the Master
Servicer or any Sub-Servicer of a deed in lieu of foreclosure and that has not
been withdrawn from the Trust, (iv) any Insurance Policies relating to the
Mortgage Loans and any rights of the Trust and the Sponsor under any Insurance
Policies, (v) Net
16
<PAGE> 25
Liquidation Proceeds with respect to any Liquidated Mortgage Loan, (vi) the
Insurance Policy, (vii) such amounts held in the Capitalized Interest Account,
and (viii) such amounts held in the Pre-Funding Account, the Principal and
Interest Account and the Note Account.
"Underwriter": J.P. Morgan Securities Inc.
Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or headings
in this Agreement and the Table of Contents are for convenience only and in no
way define, limit or describe the scope and intent of any provisions of this
Agreement.
Section 1.4. Opinions. Each opinion with respect to the validity,
binding nature and enforceability of documents or Notes may be qualified to the
extent that the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law) and may state that no
opinion is expressed on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy. Any opinion required to be
furnished by any Person hereunder must be delivered by counsel upon whose
opinion the addressee of such opinion may reasonably rely, and such opinion may
state that it is given in reasonable reliance upon an opinion of another, a
copy of which must be attached, concerning the laws of a foreign jurisdiction.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.1. Conveyance of the Initial Mortgage Loans. (a) The
Sponsor, concurrently with the execution and delivery hereof, hereby transfers,
assigns, sets over and otherwise conveys without recourse, to the Indenture
Trustee, all right, title and interest of the Sponsor in and to (i) each
Initial Mortgage Loan listed on the Schedule of Mortgage Loans, including its
Principal Balance (including all Additional Balances) and all collections in
respect thereof received on or after the Initial Cut-Off Date (excluding
payments in respect of accrued interest due prior to the Initial Cut-Off Date);
(ii) property that secured a Mortgage Loan that is acquired by foreclosure or
deed in lieu of foreclosure; (iii) the Sponsor's rights under the hazard
insurance policies; and (iv) all other assets included or to be included in the
Trust for the benefit of Class A Noteholders and the Insurer; provided,
however, neither the Indenture Trustee nor the Trust assumes the obligation
under any Credit Line Agreement that provides for the funding of future
advances to the Mortgagor thereunder, and neither the Trust nor the Indenture
Trustee
17
<PAGE> 26
shall be obligated or permitted to fund any such future advances. Additional
Balances shall be part of the related Principal Balance and are hereby
transferred to the Trust for application to the Originators' Interest only on
the Closing Date pursuant to this Section 2.1, and therefor part of the Trust
estate. In addition, on or prior to the Closing Date, the Sponsor shall cause
the Insurer to deliver the Policy to the Indenture Trustee for the benefit of
the Class A Noteholders of the Class A Notes. The foregoing transfer,
assignment, set-over and conveyance to the Trust shall be made to the Indenture
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfer, assignment, set-over and conveyance shall be construed accordingly.
The Sponsor agrees to take or cause to be taken such actions and
execute such documents (including, without limitation, the filing of all
necessary continuation statements for the UCC-1 financing statements filed in
the State of New York (which shall have been filed within 90 days of the
Closing Date) describing the Mortgage Loans and naming the Sponsor as debtor
and the Indenture Trustee as secured party and any amendments to UCC-1
financing statements required to reflect a change in the name or corporate
structure of the Sponsor or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the Sponsor (within 90
days of any event necessitating such filing)) as are necessary to perfect and
protect the Class A Noteholders' and the Insurer's interests in each Mortgage
Loan and the proceeds thereof.
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Sponsor agrees to:
(i) cause to be delivered, without recourse to the
Indenture Trustee, on the Closing Date with respect to the Initial
Mortgage Loans or, on the Subsequent Transfer Date with respect to
Subsequent Mortgage Loans, or, on the Transfer Date with respect to the
Qualified Replacement Mortgage listed on the Schedule of Mortgage
Loans, the items listed as items (a) through (f) in Exhibit B hereto;
and
cause, within 75 Business Days following the Closing Date,
Assignments of Mortgage to be submitted for recording in the
appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof as against creditors of or purchasers from
the Sponsor to the Indenture Trustee; provided, however, that
Assignments of Mortgage shall not be required to be submitted for
recording with respect to any Mortgage Loan as to which the
recordholder is one of the Originators (under, with respect to
Advanta National Bank, either its current name, "Advanta National
Bank" or its prior name, "Advanta National Bank USA"), unless the
related Mortgaged Property is not located in a jurisdiction in
which, as evidenced by an Opinion of Counsel delivered to the
Indenture Trustee within 30 Business Days following the Closing
Date, recordation of such Assignment of Mortgage is not necessary
to perfect the lien of the Indenture Trustee in the related
Mortgage Loan.
18
<PAGE> 27
All recording, if required pursuant to this Section 2.1, shall be
accomplished at the expense of the Sponsor. Notwithstanding anything to the
contrary contained in this Section 2.1, in those instances where the public
recording office retains the original Mortgage, the assignment of a Mortgage or
the intervening assignments of the Mortgage after it has been recorded, the
Sponsor shall be deemed to have satisfied its obligations hereunder upon
delivery to the Indenture Trustee of a copy of such Mortgage, such assignment
or assignments of Mortgage certified by the public recording office to be a
true copy of the recorded original thereof.
Copies of all Mortgage assignments and any Assignment of Mortgage
in recordable form received by the Indenture Trustee shall be kept in the
related Mortgage File.
(c) In the case of Initial Mortgage Loans which have been
prepaid in full on or after the Initial Cut-Off Date and prior to the Closing
Date, or with respect to Subsequent Mortgage Loans which have been prepaid in
full on or after the Subsequent Cut-Off Date and prior to the Subsequent
Transfer Date, the Sponsor, in lieu of the foregoing, will deliver within 15
Business Days after the Closing Date, or Subsequent Transfer Date, as
applicable, to the Indenture Trustee a certification of an Authorized Officer
in the form set forth in Exhibit D.
(d) The Sponsor shall transfer, assign, set over and otherwise
convey without recourse, to the Indenture Trustee all right, title and interest
of the Sponsor in and to any Qualified Replacement Mortgage delivered to the
Indenture Trustee on behalf of the Trust by the Sponsor pursuant to Section,
2.2, Section 3.3, Section 3.4 hereof and all its right, title and interest to
principal collected and interest accruing on such Qualified Replacement
Mortgage on and after the applicable Replacement Cut-Off Date; provided,
however, that the Sponsor shall reserve and retain all right, title and
interest in and to payments of principal and interest due on such Qualified
Replacement Mortgage prior to the applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage therefor,
the Indenture Trustee will transfer, assign, set over and otherwise convey
without recourse, on the Sponsor order, all of its right, title and interest in
and to such released Mortgage Loan and all the Trust's right, title and
interest to principal collected and interest accruing on such released Mortgage
Loan on and after the applicable Replacement Cut-Off Date; provided, however,
that the Trust shall reserve and retain all right, title and interest in and to
payments of principal collected and interest accruing on such released Mortgage
Loan prior to the applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Indenture Trustee on behalf of the Trust,
the Sponsor agrees to cause to be delivered to the Indenture Trustee the items
described in Section 2.1(b) on the date of such transfer and assignment or, if
a later delivery time is permitted by Section 2.1(b), then no later than such
later delivery time.
19
<PAGE> 28
(g) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the
Indenture Trustee shall deliver on the date of conveyance of such Qualified
Replacement Mortgage and on the order of the Sponsor (i) the original Credit
Line Agreement, or the certified copy, relating thereto, endorsed without
recourse, to the Sponsor and (ii) such other documents as constituted the
Mortgage File with respect thereto.
(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Sponsor shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
(i) The Sponsor shall reflect on its records that the Mortgage
Loans have been sold to the Trust.
(j) If the Master Servicer's shareholders' equity (on a
consolidated basis with AMHC) calculated pursuant to generally accepted
accounting principles, as evidenced by the Financial Statements (as defined in
the Insurance Agreement, and which the Master Servicer hereby agrees to provide
to the Insurer on a quarterly basis promptly after the same are available),
falls below $5,000,000, then the Sponsor shall promptly prepare and deliver to
the Indenture Trustee the Mortgage assignments. Upon the direction of the
Insurer, the Indenture Trustee shall submit such assignments for recording in
the appropriate jurisdictions. The Master Servicer shall pay the anticipated
recording costs to the Indenture Trustee on the date of delivery of the
assignments to the Indenture Trustee, and if the Master Servicer fails to do so
or the actual recording costs exceed the anticipated recording costs then the
Indenture Trustee shall pay such costs and shall be entitled to reimbursement
therefor from amounts otherwise distributable to the Class A Noteholders.
(k) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Advanta National Bank or of its ultimate corporate parent
are satisfactory to the Insurer, Moody's and Standard & Poor's, then any of the
Document Delivery Requirements described above may be waived by an instrument
signed by the Insurer, Standard & Poor's and Moody's (or any documents
theretofore delivered to the Indenture Trustee returned to Advanta National
Bank) on such terms and subject to such conditions as the Insurer, Moody's and
Standard & Poor's may permit.
Section 2.2. Acceptance by Indenture Trustee; Certain Substitutions
of Mortgage Loans; Certification by Indenture Trustee. (a) The Indenture
Trustee hereby acknowledges its receipt of the Policy and agrees to execute and
deliver on the Closing Date and on each Subsequent Transfer Date and each
Transfer Date an acknowledgment of receipt of the Credit Line Agreements
delivered by the Sponsor in the form attached as Exhibit E hereto, and declares
that it will hold such documents and any amendments, replacement or supplements
thereto, as well as any other assets included in the definition of Trust Estate
and delivered to the Indenture Trustee, as Indenture Trustee in trust upon and
subject to the conditions set forth herein for the benefit of the Class A
Noteholders and the Insurer. The Indenture Trustee further agrees to review
any other documents
20
<PAGE> 29
delivered by the Sponsor within 90 days after the Closing Date (or within 90
days with respect to any Subsequent Mortgage Loan or Qualified Replacement
Mortgage after the assignment thereof) and to deliver to the Sponsor, the
Master Servicer and the Insurer a Pool Certification in the form attached
hereto as Exhibit F to the effect that, as to each Mortgage Loan listed in the
Schedule of Mortgage Loans (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in such Pool Certification as not covered
by such Pool Certification), (i) all documents required to be delivered to it
pursuant to this Agreement are in its possession and (ii) such documents have
been reviewed by it and on their face appear to relate to such Mortgage Loan;
provided, however, that such Pool Certification shall not be delivered prior to
90 days after the Closing Date with respect to the Initial Mortgage Loans and
90 days after the Pre-Funding Period with respect to the Pre-Funded Mortgage
Loans. The Indenture Trustee shall be under no duty or obligation to inspect,
review or examine any such documents, instruments, certificates or other papers
to verify the validity, legality, enforceability, sufficiency, due
authorization, recordability or genuineness of same or to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face, nor shall the
Indenture Trustee be under any duty to determine independently whether there
are any intervening assignments or assumption or modification agreements with
respect to any Mortgage Loan.
(b) If the Indenture Trustee during such 90-day period finds any
document constituting a part of a Mortgage File which is not properly executed,
has not been received within the specified period, or is unrelated to the
Mortgage Loans identified in the Schedules of Mortgage Loans, or that any
Mortgage Loan does not conform in a material respect to the description thereof
as set forth in the Schedules of Mortgage Loans, the Indenture Trustee shall
promptly so notify the Sponsor and the Insurer. In performing any such review,
the Indenture Trustee may conclusively rely on the Sponsor as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the Indenture Trustee's review of the items delivered by the
Sponsor pursuant to Section 2.1(b)(i) is limited solely to confirming that the
documents listed in Section 2.1(b)(i) have been executed and received, on their
face, appear to relate to the Mortgage Files identified in the Schedules of
Mortgage Loans and conform materially to the description thereof in the
Schedule of Mortgage Loans. The Sponsor agrees to use reasonable efforts to
remedy a material defect in a document constituting part of a Mortgage File of
which it is so notified by the Indenture Trustee. If, however, within 60 days
after the Indenture Trustee's notice to it respecting such defect the Sponsor
has not remedied or caused to be remedied the defect and the defect materially
and adversely affects the interest in the related Mortgage Loan of the Class A
Noteholders or of the Insurer, the Sponsor will then on the next succeeding
Business Day (i) substitute in lieu of such Mortgage Loan a Qualified
Replacement Mortgage and, deliver the Substitution Amount applicable thereto to
the Master Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Mortgage Loan at a purchase price equal to the Loan Purchase
Price thereof, which purchase price shall be delivered to the Master Servicer
for deposit in the Principal and Interest Account. Upon receipt of any
Qualified Replacement Mortgage or of written notification signed by a Servicing
Officer to the effect that the Loan Purchase Price in respect of a Defective
Mortgage Loan has been deposited into the Principal and Interest Account, then
as promptly as
21
<PAGE> 30
practicable, the Indenture Trustee shall execute such documents and instruments
of transfer presented by the Sponsor, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Sponsor to effect such transfer by the Trust of such Defective
Mortgage Loan pursuant to this Section. It is understood and agreed that the
obligation of the Sponsor to accept a transfer of a Defective Mortgage Loan and
to either convey a Qualified Replacement Mortgage or to make a deposit of any
related Loan Purchase Price into the Principal and Interest Account shall
constitute the sole remedy respecting such defect available to Class A
Noteholders, the Indenture Trustee and the Insurer against the Sponsor.
The Sponsor, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall deliver an
amended Mortgage Loan Schedule to the Indenture Trustee and the Insurer and
shall make appropriate entries in its general account records to reflect such
transfer. The Sponsor shall, following such retransfer, appropriately mark its
records to indicate that it is no longer servicing such Mortgage Loan on behalf
of the Trust. The Sponsor, promptly following such transfer, shall
appropriately mark its electronic ledger and make appropriate entries in its
general account records to reflect such transfer.
(c) As to any Qualified Replacement Mortgage, the Sponsor shall,
if required to deliver any such Qualified Replacement Mortgage, deliver to the
Indenture Trustee with respect to such Qualified Replacement Mortgage such
documents and agreements as are required to be held by the Indenture Trustee in
accordance with Section 2.2. For any Remittance Period during which the
Sponsor substitutes one or more Qualified Replacement Mortgages, the Master
Servicer shall determine the Substitution Amount which amount shall be
deposited by the Sponsor in the Principal and Interest Account at the time of
substitution. All amounts received in respect of the Qualified Replacement
Mortgage during the Remittance Period in which the circumstances giving rise to
such substitution occur shall not be a part of the Trust Estate and shall not
be deposited by the Master Servicer in the Principal and Interest Account. All
amounts received by the Master Servicer during the Remittance Period in which
the circumstances giving rise to such substitution occur in respect of any
Defective Mortgage Loan so removed by the Trust Estate shall be deposited by
the Master Servicer in the Principal and Interest Account. Upon such
substitution, the Qualified Replacement Mortgage shall be subject to the terms
of this Agreement in all respects, and the Sponsor shall be deemed (i) to have
made with respect to such Qualified Replacement Mortgage or Loans, as of the
date of substitution, the covenants, representations and warranties set forth
in Section 3.3 and (ii) to have certified that such Mortgage Loan(s) is/are
Qualified Replacement Loan(s). The procedures applied by the Sponsor in
selecting each Qualified Replacement Mortgage shall not be materially adverse
to the interests of the Indenture Trustee, the Class A Noteholders or the
Insurer.
(d) The Master Servicer or the related Originator may consent to
the placing of a lien senior to that of any Mortgage on the related Mortgaged
Property, provided that
22
<PAGE> 31
(x) such Mortgage succeeded to a first lien position after the
related Mortgage Loan was conveyed to the Trust and, immediately
following the placement of such senior lien, such Mortgage is in a
second lien position and the outstanding principal amount of the
mortgage loan secured by such subsequent senior lien is no greater than
the outstanding principal amount of the senior mortgage loan secured by
the Mortgaged Property as of the date the related Mortgage Loan was
originated; or
(y) the Mortgage relating to such Mortgage Loan was in a second
lien position as of the related Cut-Off Date and the new senior lien
secures a mortgage loan that refinances an existing first mortgage loan
and the outstanding principal amount and interest rate of the
replacement first mortgage loan immediately following such refinancing
is not greater than the outstanding principal amount and interest rate
of such existing first mortgage loan at the date of origination of such
Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Master Servicer
or the Related Originator can consent to the placing of liens senior to that of
a Mortgage on the related Mortgaged Property only if the Combined Loan-to-Value
Ratio and second mortgage ratio is less than or equal to the original Combined
Loan-to-Value Ratio and second mortgage ratio; provided, however, the Master
Servicer or the related Originator may consent to the placing of a senior lien
on up to 5% of the Mortgage Loans if the Combined Loan-to-Value Ratios of any
such Mortgage Loan will not increase to greater than 100%; provided, further,
that the Master Servicer or the related Originator may only approve
modifications if the related Mortgagor has used the Credit Line Agreement in
the past twelve months and has made timely payments, the current
characteristics of the related Mortgagor meet the related Originator's
underwriting guidelines used at the time of origination and the related
Originators receives verbal verification of employment of the related
Mortgagor.
The Master Servicer or the related Originator may also, without
prior approval from the Rating Agencies or the Insurer, increase the Credit
Limits on Mortgage Loans provided that (i) new appraisals are obtained and the
Combined Loan-to-Value Ratios of the Mortgage Loans after giving effect to such
increase are less than or equal to the Combined Loan-to-Value Ratios of the
Mortgage Loans as of the related Cut-Off Date, (ii) such increases are
consistent with the Originator's underwriting policies, (iii) the related
Mortgagor has used the Credit Line Agreement in the past twelve months and has
made timely payments and (iv) the Master Servicer receives verbal verification
of employment of the related Mortgagor. In addition, the Master Servicer may
increase the Credit Limits on Mortgage Loans having aggregate balances of up to
5% of the Pool Balance, without obtaining new appraisals provided that (i) the
increase in the Credit Limit does not cause the Combined Loan-to-Value Ratios
of the Mortgage Loans to exceed 80%, (ii) the increase is consistent with the
related Originator's underwriting policies, (iii) the related Mortgagor has
used the Credit Line Agreement in the past twelve months and has made timely
payments and (iv) the Master Servicer receives verbal verification of
employment of the related Mortgagor.
23
<PAGE> 32
Furthermore, the Master Servicer or the related Originator may,
without prior approval from the Rating Agencies and the Insurer solicit
Mortgagors for a reduction in Loan Rates of no more than .50%; provided that
the related Originator can only reduce such Loan Rates on up to 5% of the
Mortgage Loans by Pool Balance. Any such solicitations shall not result in a
reduction in the weighted average Margin of the Mortgage Loans in the pool by
more than 2.5 basis points taking into account any such prior reductions.
Subject to the above limitations, the Originators or the Master
Servicer, may agree to changes in the terms of a Mortgage Loan at the request
of the Mortgagor; provided, that such changes (i) do not materially and
adversely affect the interests of Holders or the Insurer and (ii) are
consistent with Accepted Servicing Practices.
Notwithstanding anything to the contrary, neither the Originators
nor the Master Servicer shall agree to any changes or modifications in the
terms of any Mortgage Loan that, after giving effect to such change or
modifications, would cause any criteria set forth in Section 2.4 to be
violated.
Section 2.3. Cooperation Procedures. (a) The Sponsor shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Indenture Trustee, provide the Indenture Trustee with the information set forth
in the Schedules of Mortgage Loans with respect to such Qualified Replacement
Mortgage.
(b) The Sponsor, the Master Servicer and the Indenture Trustee
covenant to provide each other with all data and information required to be
provided by them hereunder at the times required hereunder, and additionally
covenant reasonably to cooperate with each other in providing any additional
information required by any of them in connection with their respective duties
hereunder.
Section 2.4. Conveyance of the Subsequent Mortgage Loans. (a) The
Sponsor may, on Subsequent Transfer Dates, deliver to the Indenture Trustee
loans eligible to become Subsequent Mortgage Loans on the next following
Payment Date, in exchange, on such Payment Date, for monies released to the
Originators pursuant to Section 8.5(b) of the Indenture, or a corresponding
increase in the Originators' Interest.
Upon assignment of any Pre-Funded Mortgage Loan, the Indenture
Trustee shall release to the Sponsor an amount equal to the Principal Balance
thereof as of the related Subsequent Cut-Off Date from amounts then on deposit
in the Pre-Funding Account.
(b) The Sponsor shall transfer to the Indenture Trustee the
Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date.
(i) the Sponsor shall have provided the Indenture Trustee
and the Insurer with a timely Addition Notice and shall have provided
any information
24
<PAGE> 33
reasonably requested by any of the foregoing with respect to the
Subsequent Mortgage Loans;
(ii) the Sponsor shall have delivered to the Indenture
Trustee a duly executed written assignment (including an acceptance by
the Indenture Trustee) in substantially the form of Exhibit L (the
"Subsequent Transfer Agreement"), which shall include Schedules of
Mortgage Loans, listing the Subsequent Mortgage Loans and any other
exhibits listed thereon;
(iii) the Master Servicer shall have deposited in the
Principal and Interest Account all collections in respect of the
Subsequent Mortgage Loans received on or after the related Subsequent
Cut-Off Date;
(iv) as of each Subsequent Transfer Date, neither the
Master Servicer nor the Sponsor was insolvent nor will any of them have
been made insolvent by such transfer nor is any of them aware of any
pending insolvency;
(v) such addition will not result in a material adverse
tax consequence to the Trust or the Class A Noteholders;
(vi) with respect to Subsequent Mortgage Loans which are
Pre-Funded Mortgage Loans, the Pre-Funding Period shall not have
terminated; and
(vii) the Sponsor shall have delivered to the Indenture
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b) and paragraphs (c)
and (d) below and in the related Subsequent Transfer Agreement;
(c) The obligation of the Trust to accept the assignment of a
Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the
following requirements: (i) such Subsequent Mortgage Loan may not be more
than 59 days contractually delinquent as of the related Subsequent Cut-Off
Date.
(d) The obligation of the Trust to accept the assignment of a
Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the
following additional requirements, any of which may be waived or modified in
any respect by the Insurer by a written instrument executed by the Insurer:
(1) (i) No such Subsequent Mortgage Loan may have (i) a Combined
Loan-to-Value Ratio greater than 100%; (ii) a final maturity date later
than the Payment Date in February 2023; (iii) a Principal Balance in
excess of $280,000; (iv) a remaining term to stated maturity in excess
of 300 months; (v) a Loan Rate (as of the related Subsequent Cut-Off
Date) below 8.00%; (vi) a Margin below 1% or (vii) be more than 59 days
Delinquent (as of the related Subsequent Cut-off Date).
(2) After giving effect to the assignment to the Trust of any such
Subsequent Mortgage Loan (i) the weighted average net Loan Rate of all
25
<PAGE> 34
Mortgage Loans shall be no less than 11.7%; (ii) the Mortgage Loans
shall have weighted average Combined Loan-to-Value Ratio no greater than
77.5%; (iii) the weighted average margin shall not be less than 3.3%;
(iv) the weighted average term to stated maturity shall not exceed 255
months and (v) no more the 1.5% of the Pool Balance as of such
Subsequent Transfer Date shall relate to Mortgaged Properties in any one
zip code.
(e) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Sponsor agrees to satisfy the conditions set
forth in Sections 2.1(b)-(j), 2.2 and 2.3.
(f) In connection with the transfer of any Subsequent Mortgage
Loans to the Trust the Sponsor, the Master Servicer and the Indenture Trustee
may, with the prior written consent of the Insurer, amend the definition of
"Specified Overcollateralization Amount" for the purpose of changing the
related Specified Overcollateralization Amount; provided, however, that any
such amendment must comply with the provisions of Sections 7.14(b) and 7.14(d)
hereof.
Section 2.5. Retransfers of Mortgage Loans at Election of Sponsor.
Subject to the conditions set forth below, the Sponsor may, but shall not be
obligated to (except the Sponsor shall be obligated upon a breach of a
representation or warranty), accept the reassignment of Mortgage Loans from the
Trust as of the close of business on a Payment Date (the "Transfer Date"). On
the fifth Business Day (the "Transfer Notice Date") prior to the Transfer Date
designated in such notice, the Sponsor shall give the Indenture Trustee, the
Insurer and the Master Servicer a notice of the proposed reassignment that
contains a list of the Mortgage Loans to be reassigned. Such reassignment of
Mortgage Loans shall be permitted upon satisfaction of the following
conditions:
(i) No Rapid Amortization Event has occurred or will occur
as a result of such removal;
(ii) On the Transfer Notice Date the Originators' Interest
(after giving effect to the removal from the Trust of the Mortgage Loans
proposed to be retransferred) is at least equal to the Minimum
Originators' Interest;
(iii) the Overcollateralization Amount as of such Payment
Date (after giving effect to the removal as described in Section 2.5(ii)
above) equals or exceeds the then Specified Overcollateralization
Amount.
(iv) The transfer of any Mortgage Loans on any Transfer
Date during the Managed Amortization Period shall not, in the reasonable
belief of the Sponsor cause a Rapid Amortization Event to occur or an
event which with notice or lapse of time or both would constitute a
Rapid Amortization Event;
(v) On or before the Transfer Date, the Sponsor shall have
delivered to the Indenture Trustee, the Insurer and the Rating Agencies
a revised Mortgage Loan Schedule, reflecting the proposed transfer and
the Transfer Date,
26
<PAGE> 35
and the Master Servicer shall have marked its servicing records to show
that the Mortgage Loans reassigned to the holder of the Sponsor are no
longer owned by the Trust;
(vi) The Sponsor shall represent and warrant that random
selection procedures were used in selecting the Mortgage Loans and no
other selection procedures were used which are adverse to the interests
of the Sponsor of the Class A Noteholders or the Insurer were utilized
in selecting the Mortgage Loans to be removed from the Trust;
(vii) The Sponsor shall have delivered to the Indenture
Trustee and the Insurer an Officer's Certificate certifying that the
items set forth in subparagraphs (i) through (vi), inclusive, have been
performed or are true and correct, as the case may be. The Indenture
Trustee may conclusively rely on such Officer's Certificate, shall have
no duty to make inquiries with regard to the matters set forth therein
and shall incur no liability in so relying.
Upon receiving the requisite information from the Sponsor, the Master Servicer
shall perform in a timely manner those acts required of it, as specified above.
Upon satisfaction of the above conditions, on the Transfer Date the Indenture
Trustee shall deliver, or cause to be delivered, to the Sponsor the Mortgage
File for each Mortgage Loan being so reassigned, and the Indenture Trustee
shall execute and deliver to the Sponsor such other documents prepared by the
Sponsor as shall be reasonably necessary to reassign such Mortgage Loans to the
Sponsor. Any such transfer of the Trust's right, title and interest in and to
Mortgage Loans shall be without recourse, representation or warranty by or of
the Indenture Trustee or the Trust to the Sponsor.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER
Section 3.1. Representations and Warranties of the Sponsor. The
Sponsor hereby represents, warrants and covenants to the Indenture Trustee, the
Master Servicer, the Insurer and to the Class A Noteholders as of the Closing
Date that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is in good standing as a foreign corporation in each jurisdiction in
which the nature of its respective business, or the properties owned or
leased by it make such qualification necessary. The Sponsor has all
requisite corporate power and authority to own and operate its
respective properties, to carry out its respective business as presently
conducted and as proposed to be conducted and to enter into and
discharge its respective obligations under this Agreement and the other
Operative Documents to which it is a party.
27
<PAGE> 36
(b) The execution and delivery of this Agreement and the
other Operative Documents to which the Sponsor is a party by the Sponsor
and its respective performance and compliance with the terms of this
Agreement and of the other Operative Documents to which it is a party
have been duly authorized by all necessary corporate action on the part
of the Sponsor and will not violate the Sponsor's Articles of
Incorporation or Bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other
instrument to which the Sponsor is a party or by which the Sponsor is
bound, or violate any statute or any order, rule or regulation of any
court, governmental agency or body or other tribunal having jurisdiction
over the Sponsor or any of its properties.
(c) This Agreement and the other Operative Documents to
which the Sponsor is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Sponsor enforceable against
it in accordance with the terms hereof and thereof, except as the
enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law).
(d) The Sponsor is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Sponsor or its properties or
might have consequences that would materially and adversely affect its
performance hereunder and under the other Operative Documents to which
it is a party.
(e) No litigation is pending or, to the best of the
Sponsor's knowledge, threatened against the Sponsor which litigation
might have consequences that would prohibit its entering into this
Agreement or any other Operative Document to which it is a party or that
would materially and adversely affect the condition (financial or
otherwise) or operations of the Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a
party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Sponsor
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report not
misleading.
(g) The statements contained in the Registration Statement
which describe the Sponsor, or matters or activities for which the
Sponsor is responsible in accordance with the Operative Documents or
which are attributed to the Sponsor therein are true and correct in all
material respects, and the
28
<PAGE> 37
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 make no such representation or warranty), that are necessary or
advisable in connection with the purchase and sale of the Notes and the
execution and delivery by the Sponsor of the Operative Documents to
which it is a party, have been duly taken, given or obtained, as the
case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may
be taken or review thereof may be obtained has expired or no review
thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this
Agreement and the other Operative Documents on the part of the Sponsor
and the performance by the Sponsor of its respective obligations under
this Agreement and such of the other Operative Documents to which it is
a party.
It is understood and agreed that the representations and warranties
set forth in this Section 3.1 shall survive delivery of the Mortgage Loans to
the Indenture Trustee.
Section 3.2. Representations and Warranties of the Master Servicer.
The Master Servicer hereby represents, warrants and covenants to the Indenture
Trustee, the Sponsor, the Insurer and to the Class A Noteholders as of the
Closing Date that:
(a) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, is, in compliance with the laws of each state in which any
Mortgaged Property is located to the extent necessary to enable it to
perform its obligations hereunder and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business, or
the properties owned or leased by it make such qualification necessary.
The Master Servicer has all requisite corporate power and authority to
own and operate its properties, to carry out its business as presently
conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative
Documents to which it is a party. The Master Servicer has, on a
consolidated
29
<PAGE> 38
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, enforceable against it in accordance with the terms hereof,
except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at
law).
(d) The Master Servicer is not in default with respect to
any order or decree of any court or any order, regulation or demand of
any federal, state, municipal or governmental agency, which might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Master Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other Operative
Documents to which the Master Servicer is a party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
litigation might have consequences that would prohibit its entering into
this Agreement or any other Operative Document to which it is a party or
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Master Servicer or its properties or
might have consequences that would materially and adversely affect its
performance hereunder and under the other Operative Documents to which
the Master Servicer is a party.
(f) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state securities
laws, real estate syndication or "Blue Sky" statutes, as to which the
Master Servicer makes no such representation or warranty), that
30
<PAGE> 39
are necessary or advisable in connection with the execution and delivery
by the Master Servicer of the Operative Documents to which it is a
party, have been duly taken, given or obtained, as the case may be, are
in full force and effect on the date hereof, are not subject to any
pending proceedings or appeals (administrative, judicial or otherwise)
and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the
other Operative Documents on the part of the Master Servicer and the
performance by the Master Servicer of its obligations under this
Agreement and such of the other Operative Documents to which it is a
party.
It is understood and agreed that the representations and warranties
set forth in this Section 3.2 shall survive delivery of the Mortgage Loans to
the Indenture Trustee.
Upon discovery by the Master Servicer, the Sponsor, the Insurer or
the Indenture Trustee of a breach of any of the representations and warranties
set forth in this Section 3.2 which materially and adversely affects the
interests of the Class A Noteholders or of the Insurer, the party discovering
such breach shall give prompt written notice to the other parties. Within 60
days of its discovery or its receipt of notice of breach, the Master Servicer
shall cure such breach in all material; provided, however, that if the Master
Servicer can demonstrate to the reasonable satisfaction of the Insurer that it
is diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Insurer.
Section 3.3. Representations and Warranties of the Sponsor with
Respect to the Mortgage Loans; Retransfer of Certain Mortgage Loans.
(a) The Sponsor makes the following representations and
warranties as to the Mortgage Loans on which the Indenture Issuer relies in
accepting the Mortgage Loans and on which the Insurer relies in issuing the
Insurance Policy. Such representations and warranties speak as of the Closing
Date with respect to the Initial Mortgage Loans, and as of the related
Subsequent Transfer Date with respect to any Subsequent Mortgage Loan (unless
otherwise specified below), but shall in each case survive the sale, transfer,
and assignment of the Mortgage Loans to the Indenture Issuer and the pledge
thereof to the Indenture pursuant to the Indenture:
(i) All of the original or certified documentation set
forth in Section 2.1 (including all material documents related thereto)
with respect to each Initial Mortgage Loan has been or will be delivered
to the Indenture Trustee on the Closing Date or, with respect to any
Subsequent Mortgage Loans, on the related Subsequent Transfer Date, or
as otherwise provided in Section 3.2. All such documentation is true
and accurate in all material respects. Each of the documents and
instruments specified to be included therein has been duly executed and
in due and proper form, and each such document or instrument is in a
form generally acceptable to prudent mortgage lenders that regularly
originate
31
<PAGE> 40
or purchase mortgage loans comparable to the Mortgage Loans for sale to
prudent investors in the secondary market that invest in mortgage loans
such as the Mortgage Loans;
(ii) Each Mortgage Loan is being serviced by the Master
Servicer or a Person controlling, controlled by or under common control
with the Master Servicer and qualified to service mortgage loans;
(iii) As of the Closing Date with respect to the Initial
Mortgage Loans and the related Subsequent Transfer Date with respect to
any Subsequent Mortgage Loan (unless otherwise specified), and the
applicable Transfer Date with respect to any Qualified Replacement
Mortgage, this Agreement constitutes a valid transfer and assignment to
the Trust of all right, title and interest of the Sponsor in and to the
related Cut-Off Date Principal Balances with respect to the applicable
Mortgage Loans, all monies due or to become due with respect thereto
(excluding payments in respect of accrued interest due prior to the
related Cut-Off Date), and all proceeds of such related Cut-Off Date
Principal Balances with respect to the Mortgage Loans and such funds as
are from time to time deposited in the Principal and Interest Account
(excluding any investment earnings thereon) and all other property
specified in the definition of "Mortgage Loan" as being part of the
corpus of the Trust conveyed to the Trust by the Sponsor, and upon
payment for the Additional Balances, will constitute a valid transfer
and assignment to the Indenture Trustee of all right, title and interest
of the Sponsor in and to the Additional Balances, all monies due or to
become due with respect thereto, and all proceeds of such Additional
Balances and all other property specified in the definition of "Mortgage
Loan" relating to the Additional Balances. However, if this Agreement
is not deemed to be a valid transfer and assignment to the Indenture
Trustee of such right, title and interest, this Agreement shall in any
event constitute a grant of a security interest (as defined in the UCC
as in effect in New York) in such property to the Indenture Trustee on
behalf of the Trust. If this Agreement constitutes the grant of a
security interest to the Trust in such property, and if the Indenture
Trustee maintains possession of the Mortgage File for each Mortgage
Loan, the Trust shall have a first priority perfected security interest
in such property, subject to the effect of Section 9-306 of the UCC with
respect to collections on the Mortgage Loans that are deposited in the
Principal and Interest Account;
(iv) As of the Closing Date with respect to the Initial
Mortgage Loans, the related Subsequent Transfer Date with respect to any
Subsequent Mortgage Loan (unless otherwise specified) and the applicable
Transfer Date with respect to any Qualified Replacement Mortgage and as
of the date any Additional Balance is created, the information set forth
in the Mortgage Loan Schedule for such Mortgage Loans is true and
correct in all material respects;
(v) As of the Closing Date and any Subsequent Transfer
Date, no more than 1.50% of the related Cut-Off Date Pool Balance of the
Mortgage
32
<PAGE> 41
Loans is secured by Mortgaged Properties located within any single zip
code area. None of the Mortgage Loans consists of Date-of-Payment
Loans;
(vi) The Mortgages and Credit Line Agreements have not
been assigned or pledged, and the Sponsor is the sole owner and holder
of the Mortgages and Credit Line Agreements free and clear of any and
all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full right
and authority, under all governmental and regulatory bodies having
jurisdiction over the Class A Noteholder of the applicable Mortgage
Loan, to sell, assign or transfer the same;
(vii) As of the Closing Date with respect to the Initial
Mortgage Loans, the Subsequent Transfer Date with respect to the
Subsequent Mortgage Loans and the applicable Transfer Date with respect
to any Qualified Replacement Mortgage, there is no valid offset, defense
or counterclaim of any obligor under any Credit Line Agreement or
Mortgage. Neither the operation of any of the terms of each Credit Line
Agreement and each Mortgage nor the exercise of any right thereunder
will render either the Credit Line Agreement or the Mortgage
unenforceable, in whole or in part, nor subject to any right of
rescission, set-off, claim, counterclaim or defense, including, without
limitation, the defense of usury and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
(viii) No Minimum Monthly Payment is more than 59 days
delinquent (measured on a contractual basis); and with respect to the
Initial Mortgage Loans no more than 1.35% (by Initial Cut-Off Date Pool
Balance) were 30-59 days delinquent (measured on a contractual basis).
No Subsequent Mortgage Loan will be more than 59 days delinquent;
(ix) As of the related Cut-Off Date with respect to the
Mortgage Loans and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage, each Credit Line Agreement and each
Mortgage Loan is an enforceable obligation of the related Mortgagor,
except as the enforceability thereof may be limited by the bankruptcy,
insolvency or similar laws affecting creditors' rights generally;
(x) The weighted average remaining term to maturity of
the Initial Mortgage Loans on a contractual basis as of the Initial
Cut-Off Date for the Mortgage Loans is approximately 253 months. On
each date that the Loan Rates have been adjusted, interest rate
adjustments on the Mortgage Loans were made in compliance with the
related Mortgage and Credit Line Agreement and applicable law. Over the
term of each Initial Mortgage Loan, the Loan Rate may not exceed the
related Loan Rate Cap, if any. The Loan Rate Caps for the Initial
Mortgage Loans range between 16.00% and 24.25%. The Initial Mortgage
Loans margins range between 0.00% and 7.75% and the weighted average
margin is approximately 3.32% as of the related Cut-Off Date for the
Initial Mortgage
33
<PAGE> 42
Loans. The Loan Rates on such Initial Mortgage Loans range between 8.50%
and 16.25% and the weighted average Loan Rate is approximately 11.82%;
and
(xi) The Credit Limits on the Initial Mortgage Loans
range between $10,000 and $300,000 with an average of 33,561.98. As of
the Initial Cut-Off Date for the Initial Mortgage Loans, no Initial
Mortgage Loan had a principal balance in excess of approximately
$279,000 and the average principal balance of the Initial Mortgage Loans
is equal to approximately $31,924.84.
(xii) Each Mortgage Loan being transferred to the Trust is
a Mortgage;
(xiii) Each Subsequent Mortgage Loan complies with the
requirements in Section 2.4 of this Agreement, including without
limitation the conditions described in subsections (c) and (d) of such
Section 2.4;
(xiv) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include
manufactured homes, condominiums and townhouses but shall not include
cooperatives or other property which constitutes other than real
property under applicable state law;
(xv) No Mortgage Loan had a Combined Loan-to-Value Ratio
in excess of 100%;
(xvi) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to any
Subsequent Mortgage Loans, each Mortgage is either a valid and
subsisting first or second lien of record on the Mortgaged Property
(subject in the case of any Second Mortgage Loan only to a Senior Lien
on such Mortgaged Property) and subject in all cases to the exceptions
to title set forth in the title insurance policy, with respect to the
related Mortgage Loan, which exceptions are generally acceptable to
banking institutions in connection with their regular mortgage lending
activities, and except for liens for (i) real estate taxes and special
assessments not yet delinquent, (ii) income taxes, (iii) any covenants,
conditions and restrictions, rights of way, easements, and other matters
of public record and such other exceptions to which similar properties
are commonly subject and which do not individually, or in the aggregate,
materially and adversely affect the benefits of the security intended to
be provided by such Mortgage;
(xvii) Immediately prior to the transfer and assignment
herein contemplated, the Sponsor held good and indefeasible title to,
and was the sole owner of, each Mortgage Loan conveyed by the Sponsor
(including its Cut-Off Date Pool Balance), all monies due or to become
due with respect thereto, and all proceeds of such Cut-Off Date Pool
Balances with respect to the Mortgage Loans is subject to no liens,
charges, mortgages, encumbrances or rights of others except liens which
will be released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated, the
34
<PAGE> 43
Indenture Trustee will hold good and indefeasible title to, and be the
sole owner of, each Mortgage Loan subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be
released simultaneously with such transfer and assignment;
(xviii) There is no delinquent tax or assessment lien or
mechanic's lien on any Mortgaged Property, and each Mortgaged Property
is free of substantial damage and is in good repair;
(xix) Each Mortgage Loan at the time it was made complied
in all material respects with all applicable state and federal laws and
regulations, including, without limitation, the federal Truth-in-Lending
Act and other consumer protection laws, real estate settlement
procedure, usury, equal credit opportunity, disclosure and recording
laws;
(xx) With respect to each First Mortgage Loan, and, to
the best of the Sponsor's knowledge, with respect to each Second
Mortgage Loan, a lender's title insurance policy, issued in standard
California Land Title Association form or American Land Title
Association form, or other form acceptable in a particular jurisdiction
by a title insurance company authorized to transact business in the
state in which the related Mortgaged Property is situated, was issued on
the date of origination of the Mortgage Loan and as of the Cut-Off Date
and each applicable Transfer Date with respect to the Subsequent
Mortgage Loan, each such policy is valid and remains in full force and
effect, or a title search or guaranty of title customary in the relevant
jurisdiction was obtained with respect to a Mortgage Loan as to which no
title insurance policy or binder was issued.
(xxi) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Subsequent
Mortgage Loan, each Credit Line Agreement is the legal, valid, binding
and enforceable obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity (whether considered in a proceeding
or action in equity or at law), and all parties to each Mortgage Loan
had full legal capacity to execute all documents relating to such
Mortgage Loan and convey the estate therein purported to be conveyed;
(xxii) The terms of each Credit Line Agreement and each
Mortgage have not been impaired, altered or modified in any respect,
except by a written instrument which has been recorded, if necessary, to
protect the interest of the Class A Noteholders and which has been
delivered to the Indenture Trustee. The substance of any such
alteration or modification is reflected on the related Schedule of
Mortgage Loans and has been approved by the primary mortgage guaranty
insurer, if any;
35
<PAGE> 44
(xxiii) Except as otherwise required by law, pursuant to the
statute under which the related Mortgage Loan was made, or in the case
of Mortgage Loans originated by Advanta Finance Corp., the related
Credit Line Agreement is not and has not been secured by any collateral,
pledged account or other security except the lien of the corresponding
Mortgage;
(xxiv) Each Mortgaged Property is located in the state
identified in the Schedule of Mortgage Loans and consists of one or more
parcels of real property with a residential dwelling erected thereon;
(xxv) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is undamaged
by waste, fire, earthquake or earth movement, flood, tornado or other
casualty, so as to affect adversely the value of the Mortgaged Property
as security for the Mortgage Loan or the use for which the premises were
intended;
(xxvi) With respect to each Second Mortgage Loan, either
(A) no consent for such Mortgage Loan was required by the holder of the
related Senior Lien prior to the making of such Mortgage Loan or (B)
such consent has been obtained and is contained in the related Mortgage
File;
(xxvii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by Indenture Trustee's sale and (B)
otherwise by judicial foreclosure. There is no homestead or other
exemption available which materially interferes with the right to sell
the related Mortgaged Property at a Indenture Trustee's sale or the
right to foreclose the related Mortgage;
(xxviii) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to the Subsequent
Mortgage Loans, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Credit Line
Agreement and no event which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration; and the Sponsor has
not waived any default, breach, violation or event of acceleration;
(xxix) To the best knowledge of the Sponsor, all parties to
the Credit Line Agreement and the Mortgage had legal capacity to execute
the Credit Line Agreement and the Mortgage and each Credit Line
Agreement and Mortgage have been duly and properly executed by such
parties;
(xxx) No selection procedures reasonably believed by the
Sponsor to be adverse to the interests of the Class A Noteholders or the
Insurer was utilized in selecting the Mortgage Loans;
36
<PAGE> 45
(xxxi) No Mortgagor has been released, in whole or in part,
except in connection with an assumption agreement which has been
approved by the applicable title insurer (to the extent required by such
title insurer) and which is part of the Mortgage File delivered to the
Indenture Trustee;
(xxxii) With respect to each Mortgage Loan that is not a
first mortgage loan, the related prior lien requires equal monthly
payments. At the time of origination of each Mortgage Loan that is not
a first mortgage loan, the related prior lien was not more than 30 days
delinquent;
(xxxiii)All required inspections, licenses and certificates
with respect to the use and occupancy of all occupied portions of all
property securing the Mortgages have been made, obtained or issued, as
applicable;
(xxxiv) No more than 81% of the Mortgage Loans are second
mortgage loans;
(xxxv) With respect to each Mortgage Loan that is not a
first mortgage loan, the related prior lien does not provide for
negative amortization;
(xxxvi) With respect to each Mortgage Loan that is not a
first mortgage loan, the maturity date of the Mortgage Loan is prior to
the maturity date of the related prior lien if such prior lien provides
for a balloon payment;
(xxxvii)Each Mortgage Loan is secured by a property having
an appraised value of less than $1,500,000;
(b) Upon the discovery by the Master Servicer, the Sponsor, the
Insurer or the Indenture Trustee of a breach of any of the representations and
warranties made in respect of any Mortgage Loan which materially and adversely
affects the interests of the Class A Noteholders or of the Insurer in such
Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties. The Master Servicer shall promptly notify the
Sponsor of such breach and request that the Sponsor cure such breach or take
the actions described in Section 3.4(b) hereof within the time periods required
thereby, and the Sponsor shall cure such breach or take such actions; provided,
however, that the cure for any breach of a representation and warranty relating
to the characteristics of the Mortgage Loans in the aggregate shall be a
reassignment of, or substitution for, only those Mortgage Loans necessary to
cause such characteristics to be in compliance with the related representation
and warranty. Upon accepting such transfer and making any required deposit
into the Principal and Interest Account or substitution of a Qualified
Replacement Mortgage, as the case may be, the Sponsor shall be entitled to
receive an instrument of assignment or transfer from the Indenture Trustee to
the same extent as set forth in Section 2.2 with respect to the transfer of
Mortgage Loans under that Section.
It is understood and agreed that the obligation of the Sponsor to
accept a transfer of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit in the Principal and Interest
Account or to substitute an
37
<PAGE> 46
Qualified Replacement Mortgage, as the case may be, shall constitute the sole
remedy against the Sponsor respecting such breach available to Class A
Noteholders of the Class A Notes, the Indenture Trustee on behalf of the Class
A Noteholders of the Class A Notes and the Insurer.
Section 3.4. Covenants of Sponsor to Take Certain Actions with
Respect to the Mortgage Loans In Certain Situations. (a) With the provisos and
limitations as to remedies set forth in this Section 3.4, upon the discovery by
Sponsor, the Master Servicer, the Sponsor, the Insurer, any Sub-Servicer or the
Indenture Trustee that the representations and warranties set forth in Section
3.3 of this Agreement were untrue in any material respect as of the Closing
Date (or the Subsequent Transfer Date, or the Transfer Date, as the case may
be) and such breaches of the representations and warranties materially and
adversely affect the interests of the Class A Noteholders or of the Insurer,
the party discovering such breach shall give prompt written notice to the other
parties.
The Sponsor acknowledges that a breach of any representation or
warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan, (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Mortgaged Property or (z) set
forth in clause (viii) of Section 3.3 above constitutes breach of a
representation or warranty which "materially and adversely affects the
interests of the Class A Noteholders or of the Insurer" in such Mortgage Loan.
(b) Upon the earliest to occur of the Sponsor's discovery, its
receipt of notice of breach from any one of the other parties hereto or from
the Insurer or such time as a breach of any representation and warranty
materially and adversely affects the interests of the Class A Noteholders or of
the Insurer as set forth above, the Sponsor hereby covenants and warrants that
it shall promptly cure such breach in all material respects or it shall (or
shall cause an affiliate of the Sponsor to), subject to the further
requirements of this paragraph, on the second Remittance Date next succeeding
such discovery, receipt of notice or such other time (i) substitute in lieu of
each Mortgage Loan which has given rise to the requirement for action by the
Sponsor a Qualified Replacement Mortgage and deliver the Substitution Amount
applicable thereto, together with the aggregate amount of all Servicing
Advances theretofore made with respect to such Mortgage Loan, to the Master
Servicer for deposit in the Principal and Interest Account or (ii) purchase
such Mortgage Loan from the Trust at a purchase price equal to the Loan
Purchase Price thereof, which purchase price shall be delivered to the Master
Servicer for deposit in the Principal and Interest Account. It is understood
and agreed that the obligation of the Sponsor to cure the defect, or substitute
for, or purchase any Mortgage Loan as to which a representation or warranty is
untrue in any material respect and has not been remedied shall constitute the
sole remedy available to the Class A Noteholders, the Indenture Trustee or the
Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by the Sponsor to the Trust pursuant to Section 2.2, Section 3.3 or
Section 3.4 hereof, the Sponsor shall be obligated to take the actions
described in Section 3.4(b) with respect to such Qualified Replacement Mortgage
upon the discovery by any of the Class A
38
<PAGE> 47
Noteholders, the Master Servicer, the Sponsor, the Insurer, or the Indenture
Trustee that the representations and warranties set forth in Section 3.3 above
are untrue in any material respect on the date such Qualified Replacement
Mortgage is conveyed to the Trust such that the interests of the Class A
Noteholders or the Insurer in the related Qualified Replacement Mortgage are
materially and adversely affected; provided, however, that for the purposes of
this subsection (c) the representations and warranties set forth in Section 3.3
above referring to items "as of the Initial Cut-Off Date" or "as of the
Subsequent Cut-Off Date" or "as of the related Cut-Off Date" or "as of the
Closing Date" or "as of the Subsequent Transfer Date" shall be deemed to refer
to such items as of the date such Qualified Replacement Mortgage is conveyed to
the Trust.
(d) It is understood and agreed that the covenants set forth in
this Section 3.4 shall survive the pledge of the respective Mortgage Loans
(including Qualified Replacement Mortgage Loans) to the Indenture Trustee on
behalf of the Trust.
ARTICLE IV
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 4.1. Master Servicer and Sub-Servicers.
(a) Advanta Mortgage Corp. USA agrees to act as the Master
Servicer and to perform all servicing duties under this Agreement subject to
the terms hereof.
(b) The Master Servicer shall service and administer the
Mortgage Loans on behalf of the Indenture Trustee and the Insurer and shall
have full power and authority, acting alone or through one or more
Sub-Servicers, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Master Servicer, in its own name or the name
of a Sub-Servicer, may, and is hereby authorized and empowered by the Indenture
Trustee to, execute and deliver, on behalf of itself, the Class A Noteholders,
the Insurer and the Indenture Trustee or any of them, any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge and
all other comparable instruments, with respect to the Mortgage Loans, the
insurance policies and accounts related thereto and the properties subject to
the Mortgages in accordance with the terms of this Agreement. Upon the
execution and delivery of this Agreement, and from time to time as may be
required thereafter, the Indenture Trustee shall furnish the Master Servicer or
its Sub-Servicers with any powers of attorney and such other documents as may
be necessary or appropriate to enable the Master Servicer to carry out its
servicing and administrative duties hereunder.
In servicing and administering the Mortgage Loans, the Master
Servicer shall employ procedures consistent with Accepted Servicing Practices
and in a manner consistent with recovery under any insurance policy required to
be maintained by the Master Servicer pursuant to this Agreement.
39
<PAGE> 48
Costs incurred by the Master Servicer in effectuating the timely
payment of taxes and assessments on the property securing a Credit Line
Agreement and foreclosure costs may be added by the Master Servicer to the
amount owing under such Credit Line Agreement where the terms of such Credit
Line Agreement so permit; provided, however, that the addition of any such cost
shall not be taken into account for purposes of calculating the principal
amount of the Credit Line Agreement and the Mortgage Loan secured by the Credit
Line Agreement or distributions to be made to Class A Noteholders. Such costs
shall be recoverable by the Master Servicer pursuant to Section 4.9 and 4.13.
(c) Without limiting the generality of the foregoing, the Master
Servicer shall continue, and is hereby authorized and empowered by the
Indenture Trustee, to execute and deliver, on behalf of itself, the Class A
Noteholders, the Insurer and the Indenture Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the related Properties, including consenting to the
placement of a lien senior to that of any Mortgage on the related Mortgaged
Property;
provided, that,
(x) such Mortgage succeeded to a first lien position after the
related Mortgage Loan was conveyed to the Trust and, immediately
following the placement of such senior lien, such Mortgage is in a
second lien position and the outstanding principal amount of the
mortgage loan secured by such subsequent senior lien is no greater than
the outstanding principal amount of the senior mortgage loan secured by
the Mortgaged Property as of the date the related Mortgage Loan was
originated; or
(y) the Mortgage relating to such Mortgage Loan was in a second
lien position as of the related Cut-Off Date and the new senior lien
secures a mortgage loan that refinances an existing first mortgage loan
and the outstanding principal amount and interest rate of the
replacement first mortgage loan immediately following such refinancing
is not greater than the outstanding principal amount and interest rate
of such existing first mortgage loan at the date of origination of such
Mortgage Loan;
provided, further, that such senior lien does not secure a note that
provides for negative amortization. Notwithstanding the foregoing, the
Master Servicer can consent to the placing of liens senior to that of a
Mortgage on the related Mortgaged Property only if the Combined
Loan-to-Value Ratio and second mortgage ratio is less than or equal to
the original Combined Loan-to-Value Ratio and second mortgage ratio;
provided, however, the Master Servicer may consent to the placing of a
senior lien on up to 5% of the Mortgage Loans if the Combined
Loan-to-Value Ratios of any such Mortgage Loan will not increase to
greater than 100%; provided, further, that the Master Servicer may only
approve modifications if the related Mortgagor has used the Credit Line
Agreement in the past twelve
40
<PAGE> 49
months and has made timely payments, the current characteristics of the
related Mortgagor are consistent with the Accepted Servicing Practices
and the Master Servicer receives verbal verification of employment of
the related Mortgagor.
At the written direction of the Originators, the Master Servicer
may also, without prior approval from the Rating Agencies or the Insurer,
increase the Credit Limits on Mortgage Loans provided that (i) new appraisals
are obtained and the Combined Loan-to-Value Ratios of any such Mortgage Loan of
the Mortgage Loans after giving effect to such increase are less than or equal
to the Combined Loan-to-Value Ratios of the Mortgage Loans as of the related
Cut-Off Date, (ii) such increases are consistent with the Accepted Servicing
Practices, (iii) the related Mortgagor has used the Credit Line Agreement in
the past twelve months and has made timely payments and (iv) the Master
Servicer receives verbal verification of employment of the related Mortgagor.
In addition, the Master Servicer, at the written direction of the Originators,
may increase the Credit Limits on Mortgage Loans having aggregate balances of
up to 5% of the Pool Balance, without obtaining new appraisals provided that
(i) the increase in the Credit Limit does not cause the Combined Loan-to-Value
Ratios of the Mortgage Loans to exceed 100%, (ii) the increase is consistent
with Accepted Servicing Practices, (iii) the related Mortgagor has used the
Credit Line Agreement in the past twelve months and has made timely payments
and (iv) the Master Servicer receives verbal verification of employment of the
related Mortgagor.
Furthermore, the Master Servicer may, without prior approval from
the Rating Agencies and the Insurer solicit Mortgagors for a reduction in Loan
Rates of no more than .50%; provided that the Master Servicer can only reduce
such Loan Rates on up to 5% of the Mortgage Loans by Pool Balance. Any such
solicitations shall not result in a reduction in the weighted average Margin of
the Mortgage Loans in the pool by more than 2.5 basis points taking into
account any such prior reductions.
Subject to the above limitations, the Master Servicer may agree to
changes in the terms of a Mortgage Loan at the request of the Mortgagor;
provided, that such changes (i) do not materially and adversely affect the
interests of Class A Noteholders or the Insurer and (ii) are consistent with
Accepted Servicing Practices.
Notwithstanding anything to the contrary, the Master Servicer shall
not agree to any changes or modifications in the terms of any Mortgage Loan
that, after giving effect to such change or modification, would cause any
criteria set forth in Section 2.4 to be violated.
(d) The relationship of the Master Servicer (and of any
successor to the Master Servicer as servicer under this Agreement) to the
Indenture Trustee under this Agreement is intended by the parties to be that of
an independent contractor and not that of a joint venturer, partner or agent.
In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements
41
<PAGE> 50
with any subservicer or assume the terminated Master Servicer's rights under
such subservicing arrangements which termination or assumption will not violate
the terms of such arrangements.
(e) The Master Servicer may, and is hereby authorized to,
perform any of its servicing responsibilities with respect to all or certain of
the Mortgage Loans through a Sub-Servicer as it may from time to time
designate, but no such designation of a Sub-Servicer shall serve to release the
Master Servicer from any of its obligations under this Agreement. Such
Sub-Servicer shall have all the rights and powers of the Master Servicer with
respect to such Mortgage Loans under this Agreement.
(f) Without limiting the generality of the foregoing, but
subject to Sections 4.13 and 4.14, the Master Servicer in its own name or in
the name of a Sub-Servicer may be authorized and empowered pursuant to a power
of attorney executed and delivered by the Indenture Trustee to execute and
deliver, and may be authorized and empowered by the Indenture Trustee, to
execute and deliver, on behalf of itself, the Class A Noteholders and the
Indenture Trustee or any of them, (i) any and all instruments of satisfaction
or cancellation or of partial or full release or discharge and all other
comparable instruments with respect to the Mortgage Loans and with respect to
the Properties, (ii) and to institute foreclosure proceedings or obtain a deed
in lieu of foreclosure so as to effect Class A Noteholdership of any Mortgaged
Property on behalf of the Indenture Trustee, and (iii) to hold title to any
Mortgaged Property upon such foreclosure or deed in lieu of foreclosure on
behalf of the Indenture Trustee; provided, however, that Section 4.14(a) shall
constitute a power of attorney from the Indenture Trustee to the Master
Servicer to execute an instrument of satisfaction (or assignment of mortgage
without recourse) with respect to any Mortgage Loan paid in full (or with
respect to which payment in full has been escrowed). Subject to Sections 4.13
and 4.14, the Indenture Trustee shall furnish the Master Servicer and any
Sub-Servicer with any powers of attorney and other documents as the Master
Servicer or such Sub-Servicer shall reasonably request to enable the Master
Servicer and such Sub-Servicer to carry out their respective servicing and
administrative duties hereunder.
(g) The Master Servicer shall give prompt notice to the
Indenture Trustee of any action, of which the Master Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
(h) Servicing Advances incurred by the Master Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Mortgaged Property shall be recoverable by the Master
Servicer or such Sub-Servicer to the extent described in Section 4.9 and in
Section 8.6(b)(x) of the Indenture.
Section 4.2. Collection of Certain Mortgage Loan Payments. (a)
In accordance with Accepted Servicing Practices and subject to the limitations
set forth in Section 4.1, the Master Servicer may in its discretion (i) waive
any assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the
42
<PAGE> 51
Mortgage Loans, (ii) if a Mortgagor is in default or about to be in default
because of a Mortgagor's financial condition, arrange with the Mortgagor a
schedule for the payment of delinquent payments due on the related Mortgage
Loan; provided, however, the Master Servicer shall not reschedule the payment
of delinquent payments more than one time in any twelve consecutive months with
respect to any Mortgagor nor extend the maturity of any Mortgage Loan beyond
the Payment Date in February 2023; or (iii) modify payments of monthly
principal and interest on any Mortgage Loan becoming subject to the terms of
the Civil Relief Act, as amended, in accordance with the Master Servicer's
general policies of the comparable mortgage loans subject to such Act.
(b) The Master Servicer shall hold in escrow on behalf of the
related Mortgagor all Prepaid Installments received by it, and shall apply such
Prepaid Installments as directed by such Mortgagor and as set forth in the
related Credit Line Agreement.
Section 4.3. Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers. The Master Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution which
is acceptable to the Insurer in compliance with the laws of each state
necessary to enable it to perform its obligations under such Sub-Servicing
Agreement. The Master Servicer shall give notice to the Insurer of the
appointment of any Sub-Servicer and shall furnish to the Insurer a copy of the
Subservicing Agreement. For purposes of this Agreement, the Master Servicer
shall be deemed to have received payments on Mortgage Loans when any
Sub-Servicer has received such payments. Any such Sub-Servicing Agreement shall
be consistent with and not violate the provisions of this Agreement.
Section 4.4. Successor Sub-Servicers. The Master Servicer may
terminate any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement and to either directly service the
related Mortgage Loans itself or enter into a Sub-Servicing Agreement with a
successor Sub-Servicer that qualifies under Section 4.3.
Section 4.5. Liability of Master Servicer. The Master Servicer
shall not be relieved of its obligations under this Agreement notwithstanding
any Sub-Servicing Agreement or any of the provisions of this Agreement relating
to agreements or arrangements between the Master Servicer and a Sub-Servicer or
otherwise, and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to
enter into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in such Sub-Servicing
Agreement shall be deemed to limit or modify this Agreement. The Trust shall
not indemnify the Master Servicer for any losses due to the Master Servicer's
or any Sub-Servicer's negligence.
Section 4.6. No Contractual Relationship Between Sub-Servicer and
Indenture Trustee or the Class A Noteholders. Any Sub-Servicing Agreement and
any other transactions or services relating to the Mortgage Loans involving a
Sub-Servicer
43
<PAGE> 52
shall be deemed to be between the Sub-Servicer and the Master Servicer alone
and the Insurer, the Indenture Trustee and the Class A Noteholders shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Sub-Servicer except as set forth in Section
4.7.
Section 4.7. Assumption or Termination of Sub-Servicing Agreement
by Indenture Trustee. In connection with the assumption of the
responsibilities, duties and liabilities and of the authority, power and rights
of the Master Servicer hereunder by the Indenture Trustee pursuant to Section
4.20, 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 Indenture
Trustee at its option.
The Master Servicer shall, upon request of the Indenture Trustee,
but at the expense of the Master Servicer, deliver to the assuming party
documents and records relating to each Sub-Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
Section 4.8. Principal and Interest Account.
(a) The Master Servicer and/or each Sub-Servicer, as applicable,
shall establish in the name of the Trust for the benefit of the Class A
Noteholders and the Insurer and maintain at one or more Designated Depository
Institutions the Principal and Interest Account.
Subject to Subsections (c) and (e) below, the Master Servicer and
any Sub-Servicer shall deposit all receipts related to the Mortgage Loans to
the Principal and Interest Account on a daily basis (but no later than the
second Business Day after receipt).
Within one Business Day of the Closing Date, and on each Subsequent
Transfer Date and each Transfer Date, the Sponsor shall cause the Master
Servicer to deposit to the Principal and Interest Account all receipts related
to the related Mortgage Loans received after the Initial Cut-Off Date or
related Replacement Cut-Off Date or related Subsequent Cut-Off Date, as the
case may be.
(b) All funds in the Principal and Interest Account may only be
held (i) uninvested, up to the limits insured by the FDIC or (ii) invested in
Eligible Investments. The Principal and Interest Account shall be held in
trust in the name of the Trust and for the benefit of the Class A Noteholders
and the Insurer. Any investment earnings on funds held in the Principal and
Interest Account shall be for the account of the Master Servicer and may only
be withdrawn from the Principal and Interest Account by the Master Servicer
immediately following the remittance of the Monthly Remittance Amounts by the
Master Servicer. Any references herein to amounts on deposit in the Principal
and Interest Account shall refer to amounts net of such investment earnings.
44
<PAGE> 53
The Master Servicer shall deposit the amount of any investment losses
immediately into the Principal and Interest Account as realized.
(c) Subject to Subsection (e) below, the Master Servicer shall
deposit to the Principal and Interest Account all principal and interest
collections on the Mortgage Loans received on or after the Initial Cut-Off Date
or related Subsequent Cut-Off Date, as the case may be, including any
Prepayments and Net Liquidation Proceeds, all Loan Purchase Prices and
Substitution Amounts received or paid by the Master Servicer with respect to
the Mortgage Loans and other recoveries or amounts related to the Mortgage
Loans received by the Master Servicer, together with any amounts which are
reimbursable from the Principal and Interest Account, but net of (i) the
Servicing Fee with respect to each Mortgage Loan and other servicing
compensation to the Master Servicer as permitted by Section 4.15 hereof, (ii)
principal (including Prepayments) collected on the related Mortgage Loans prior
to the Initial Cut-Off Date or related Subsequent Cut-Off Date, as the case may
be, (iii) interest accruing on the related Mortgage Loans prior to the Initial
Cut-Off Date or related Subsequent Cut-Off Date, as the case may be and (iv)
Net Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed the
Principal Balance of the related Mortgage Loan.
(d) (i) The Master Servicer may make withdrawals from the
Principal and Interest Account only for the following purposes:
(A) to effect the timely remittance to the Indenture Trustee of
the Monthly Remittance Amounts due on the Remittance Date;
(B) to pay to itself from any funds in the Principal and
Interest Account any accrued and unpaid Servicing Fees and
reimburse itself pursuant to Section 4.9(a) hereof for
unreimbursed Servicing Advances and Servicing Advances which
have been deemed Nonrecoverable Advances;
(C) to withdraw investment earnings on amounts on deposit in the
Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest Account
following the termination of the Trust Estate pursuant to
Articles X or XII of the Indenture.
(ii) On the tenth day of each month, the Master Servicer shall
send to the Indenture Trustee a report, in the form of a computer tape,
detailing the aggregate payments on the total Mortgage Loans during the prior
Remittance Period. Such tape shall be in the form and have the specifications
as may be agreed to between the Master Servicer and the Indenture Trustee from
time to time.
45
<PAGE> 54
(iii) On each Remittance Date the Master Servicer shall remit to
the Indenture Trustee by wire transfer, or otherwise make funds available in
immediately available funds, the Interest Remittance Amount and the Principal
Remittance Amount.
(e) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are satisfactory to the Insurer, Moody's and Standard &
Poor's, then the requirement to maintain the Principal and Interest Account may
be waived by an instrument signed by the Insurer, Standard & Poor's and
Moody's, and the Master Servicer may be allowed to co-mingle with its general
funds the amounts otherwise required to be deposited to the Principal and
Interest Account, on such terms and subject to such conditions as the Insurer,
Moody's and Standard & Poor's may permit.
Section 4.9. Servicing Advances . The Master Servicer will pay
all "out-of-pocket" costs and expenses incurred in the performance of its
servicing obligations, including, but not limited to, the cost of (i)
Preservation Expenses, (ii) any enforcement or judicial proceedings, including
foreclosures, and (iii) the management and liquidation of REO Property, but is
only required to pay such costs and expenses to the extent the Master Servicer
reasonably believes such costs and expenses will increase Net Liquidation
Proceeds on the related Mortgage Loan. Each such amount so paid will
constitute a "Servicing Advance". The Master Servicer may recover Servicing
Advances (x) from the Mortgagors to the extent permitted by the Mortgage Loans,
from Liquidation Proceeds realized upon the liquidation of the related Mortgage
Loan, from Insurance Proceeds, and (y) as provided in Section 8.6(b)(viii) of
the Indenture.
Section 4.10. Purchase of Mortgage Loans . The Master Servicer
may, but is not obligated to, purchase for its own account any Mortgage Loan
which becomes Delinquent, in whole or in part, as to 90 days or more or any
Mortgage Loan as to which enforcement proceedings have been brought by the
Master Servicer or by any Sub-Servicer pursuant to Section 4.13. Any such Loan
so purchased shall be purchased by the Master Servicer on a Remittance Date at
a purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Principal and Interest Account.
Section 4.11. Maintenance of Insurance . (a) The Master Servicer
shall cause to be maintained with respect to each Mortgage Loan a hazard
insurance policy with a generally acceptable carrier that provides for fire and
extended coverage, and which provides for a recovery by the Master Servicer on
behalf of the Trust of insurance proceeds relating to such Mortgage Loan in an
amount not less than the least of (i) the outstanding principal balance of the
Mortgage Loan or (ii) the maximum insurable value of the Mortgaged Property.
(b) If any Mortgage Loan originated by Advanta National Bank at
the time of origination relates to a Mortgaged Property in an area identified
in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, the Master Servicer will cause to be maintained with
respect thereto a flood insurance policy in a form meeting the requirements of
the current guidelines of the Federal
46
<PAGE> 55
Insurance Administration with a generally acceptable carrier in an amount
representing coverage, and which provides for a recovery by the Master Servicer
on behalf of the Trust of Insurance Proceeds relating to such Mortgage Loan of
not less than the least of (i) the outstanding Principal Balance of the
Mortgage Loan or (ii) the maximum amount of insurance that is available under
the Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify
the Trust and the Insurer out of the Master Servicer's own funds for any loss
to the Trust and the Insurer resulting from the Master Servicer's failure to
maintain the insurance required by this Section.
It is understood and agreed that such insurance shall be with
insurers approved by the Master Servicer and that no earthquake or other
additional insurance is to be required of any Mortgagor or to be maintained on
property acquired in respect of a defaulted loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. Any cost incurred by the Master Servicer in
maintaining any such insurance shall be added to the amount owing under the
Mortgage Loan where the terms of the Mortgage Loan so permit; provided,
however, that the addition of any such cost shall not be taken into account for
purposes of calculating the principal amount of the Credit Line Agreement or
the distributions to be made to the Class A Noteholders. Such costs shall be
recoverable by the Servicer pursuant to Section 4.9.
(c) In the event that the Master Servicer shall obtain and
maintain a blanket policy insuring against fire, flood and hazards of extended
coverage on all of the Mortgage Loans, then, to the extent such policy names
the Master Servicer as loss payee and provides coverage in an amount equal to
the aggregate unpaid principal balance on the Mortgage Loans without
co-insurance, and otherwise complies with the requirements of this Section
4.11, the Master Servicer shall be deemed conclusively to have satisfied its
obligations with respect to fire and hazard insurance coverage under this
Section 4.11, it being understood and agreed that such blanket policy may
contain a deductible clause, in which case the Master Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the preceding paragraphs of this Section 4.11,
and there shall have been a loss which would have been covered by such policy,
deposit in the Principal and Interest Account from the Master Servicer's own
funds the difference, if any, between the amount that would have been payable
under a policy complying with the preceding paragraphs of this Section 4.11 and
the amount paid under such blanket policy. Upon the request of the Indenture
Trustee or the Insurer, the Master Servicer shall cause to be delivered to the
Indenture Trustee or the Insurer, a certified true copy of such policy.
Section 4.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Mortgaged Property has been or is about to be conveyed by
the Mortgagor, the Master Servicer shall, to the extent it has knowledge of
such conveyance or prospective conveyance, exercise its rights to accelerate
the maturity of the related Mortgage Loan under any "due-on-sale" clause
contained in the related Mortgage or Credit Line Agreement; provided, however,
that the Master Servicer shall not exercise any such right if (i) the
"due-on-sale" clause, in the reasonable belief of the Master Servicer, is not
enforceable under applicable law or (ii) the Master Servicer reasonably
47
<PAGE> 56
believes that to permit an assumption of the Mortgage Loan would not materially
and adversely affect the interest of the Class A Noteholders or of the Insurer.
In such event, the Master Servicer shall enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Credit Line Agreement and, unless prohibited by applicable law or any of the
agreements, guaranties or assignments relating to the Mortgage Loans contained
in the Mortgage Files, the Mortgagor remains liable thereon. If the foregoing
is not permitted under applicable law, the Master Servicer is authorized to
enter into a substitution of liability agreement with such person, pursuant to
which the original Mortgagor is released from liability and such person is
substituted as Mortgagor and becomes liable under the Credit Line Agreement;
provided, however, that to the extent any such substitution of liability
agreement would be delivered by the Master Servicer outside of its usual
procedures for mortgage loans held in its own portfolio the Master Servicer
shall, prior to executing and delivering such agreement, obtain the prior
written consent of the Insurer. The Mortgage Loan, as assumed, shall conform
in all respects to the requirements, representations and warranties of this
Agreement. The Master Servicer shall notify the Indenture Trustee that any
such assumption or substitution agreement has been completed by forwarding to
the Indenture Trustee the original copy of such assumption or substitution
agreement, which copy shall be added by the Indenture Trustee to the related
Mortgage File and which shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. The Master Servicer shall be responsible for
recording any such assumption or substitution agreements. In connection with
any such assumption or substitution agreement, the required monthly payment on
the related Mortgage Loan shall not be changed but shall remain as in effect
immediately prior to the assumption or substitution, the stated maturity or
outstanding principal amount of such Mortgage Loan shall not be changed nor
shall any required monthly payments of principal or interest be deferred or
forgiven. Any fee collected by the Master Servicer or the Sub-Servicer for
consenting to any such conveyance or entering into an assumption or
substitution agreement shall be retained by or paid to the Master Servicer as
additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or any assumption which the
Master Servicer may be restricted by law from preventing, for any reason
whatsoever.
Section 4.13. Realization Upon Defaulted Mortgage Loans. (a) The
Master Servicer shall foreclose upon or otherwise comparably effect the
ownership on behalf of the Mortgaged Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Master Servicer has not purchased pursuant to
Section 4.10. In connection with such foreclosure or other conversion, the
Master Servicer shall exercise such of the rights and powers vested in it
hereunder, and use the same degree of care and skill in their exercise or use,
as prudent mortgage lenders would exercise or use under the circumstances in
the conduct of their own affairs, including, but not limited to, advancing
funds for the
48
<PAGE> 57
payment of taxes, amounts due with respect to Senior Liens, and insurance
premiums. Any amounts so advanced shall constitute "Servicing Advances" within
the meaning of Section 4.9 hereof.
Notwithstanding the generality of the foregoing provisions, the
Master Servicer shall manage, conserve, protect and operate each REO Property
for the Class A Noteholders solely for the purpose of its prompt disposition
and sale. Pursuant to its efforts to sell such REO Property, the Master
Servicer shall either itself or through an agent selected by the Master
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the Class
A Noteholders, rent the same, or any part thereof, as the Master Servicer deems
to be in the best interest of the Class A Noteholders for the period prior to
the sale of such REO Property. The Master Servicer shall take into account the
existence of any hazardous substances, hazardous wastes or solid wastes, as
such terms are defined in the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act of 1976, or other
federal, state or local environmental legislation, on a Mortgaged Property in
determining whether to foreclose upon or otherwise comparably convert the Class
A Noteholdership of such Mortgaged Property.
(b) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through Indenture
Trustee's sale, foreclosure sale or otherwise, all amounts it expects to
recover from or on account of such defaulted Mortgage Loan, whereupon such
Mortgage Loan shall become a "Liquidated Mortgage Loan" and shall promptly
deliver to the Insurer a related Liquidation Report with respect to such
Mortgage Loan.
Section 4.14. Indenture Trustee to Cooperate; Release of Mortgage
Files. (a) Upon the payment in full of the Principal Balance of any Mortgage
Loan (including the repurchase of any Mortgage Loan or any liquidation of such
Mortgage Loan through foreclosure or otherwise), or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer shall deliver to the Indenture
Trustee a Master Servicer's Trust Receipt. Upon receipt of such Master
Servicer's Trust Receipt, the Indenture Trustee shall promptly release the
related Mortgage File, in trust to (i) the Master Servicer, (ii) an escrow
agent or (iii) any employee, agent or attorney of the Indenture Trustee, in
each case pending its release by the Master Servicer, such escrow agent or such
employee, agent or attorney of the Indenture Trustee, as the case may be. Upon
any such payment in full, or the receipt of such notification that such funds
have been placed in escrow, the Master Servicer is authorized to give, as
attorney-in-fact for the Indenture Trustee and the mortgagee under the Mortgage
which secured the Credit Line Agreement, an instrument of satisfaction (or
assignment of Mortgage without recourse) regarding the Mortgaged Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed
that no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account. In lieu of executing any such satisfaction or assignment,
49
<PAGE> 58
as the case may be, the Master Servicer may prepare and submit to the Indenture
Trustee, a satisfaction (or assignment without recourse, if requested by the
Person or Persons entitled thereto) in form for execution by the Indenture
Trustee with all requisite information completed by the Master Servicer; in
such event, the Indenture Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related Mortgage File, as aforesaid.
(b) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Indenture Trustee shall (except in the case of the payment or
liquidation pursuant to which the related Mortgage File is released to an
escrow agent or an employee, agent or attorney of the Indenture Trustee), upon
request of the Master Servicer and delivery to the Indenture Trustee of a
Master Servicer's Trust Receipt in the form of Exhibit K hereto, release the
related Mortgage File to the Master Servicer and shall execute such documents
as shall be necessary to the prosecution of any such proceedings, including,
without limitation, an assignment without recourse of the related Mortgage to
the Master Servicer; provided, that there shall not be released and unreturned
at any one time more than 300 Mortgage Files. The Indenture Trustee shall
complete in the name of the Indenture Trustee any endorsement in blank on any
Credit Line Agreement prior to releasing such Credit Line Agreement to the
Master Servicer. Such receipt shall obligate the Master Servicer to return the
Mortgage File to the Indenture Trustee when the need therefor by the Master
Servicer no longer exists unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of the liquidation information, in physical or
electronic form, a copy of the Master Servicer's Trust Receipt shall be
released by the Indenture Trustee to the Master Servicer.
(c) The Master Servicer shall have the right to approve
applications of Mortgagors for consent to (i) partial releases of Mortgages,
(ii) alterations to Mortgaged Properties and (iii) removal, demolition or
division of Mortgaged Properties. No application for approval shall be
considered by the Master Servicer unless: (x) the provisions of the related
Credit Line Agreement and Mortgage have been complied with; (y) the Combined
Loan-to-Value Ratio (which may, for this purpose, be determined at the time of
any such action in a manner reasonably acceptable to the Insurer) and the
Mortgagor's debt-to-income ratio after any release does not exceed the maximum
Combined Loan-to-Value Ratio and debt-to-income ratio specified as the
then-current maximum levels under the Originator's underwriting guidelines for
a similar credit grade borrower and (z) the lien priority of the related
Mortgage is not adversely affected. Upon receipt by the Indenture Trustee and
the Insurer of an Officer's Certificate executed on behalf of the Master
Servicer setting forth the action proposed to be taken in respect of a
particular Mortgage Loan and certifying that the criteria set forth in the
immediately preceding sentence have been satisfied, the Indenture Trustee shall
execute and deliver to the Master Servicer the consent or partial release so
requested by the Master Servicer. A proposed form of consent or partial
release, as the case may be, shall accompany any Officer's Certificate
delivered by the Master Servicer pursuant to this paragraph.
50
<PAGE> 59
(d) No costs associated with the procedures described in this
Section 4.14 shall be an expense of the Trust.
(e) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given
by the Insurer, Moody's and Standard & Poor's pursuant to Section 2.1(k)
hereof.
(f) Each Master Servicer's Trust Receipt may be delivered to the
Indenture Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such
other means, including, without limitation, electronic or computer readable
medium, as the Master Servicer and the Indenture Trustee shall mutually agree.
The Indenture Trustee shall promptly release the related Mortgage File(s)
within seven (7) Business Days of receipt of a properly completed Master
Servicer's Trust Receipt pursuant to clauses (i), (ii) or (iii) above or such
shorter period as may be agreed upon by the Master Servicer and the Indenture
Trustee. Receipt of a Master Servicer's Trust Receipt pursuant to clauses (i),
(ii) or (iii) above shall be authorization to the Indenture Trustee to release
such Mortgage Files, provided the Indenture Trustee has determined that such
Master Servicer's Trust Receipt has been executed, with respect to clauses (i)
or (ii) above, or approved, with respect to clause (iii) above, by an
Authorized Officer of the Master Servicer or any Sub-servicer, and so long as
the Indenture Trustee complies with its duties and obligations under this
Agreement. If the Indenture Trustee is unable to release the Mortgage Files
within the time frames previously specified, the Indenture Trustee shall
immediately notify the Master Servicer or any Sub-servicer indicating the
reason for such delay, but in no event shall such notification be later than
seven Business Days after receipt of a Master Servicer's Trust Receipt. If the
Master Servicer is required to pay penalties or damages due solely to the
Indenture Trustee's negligent failure to release the related Mortgage File or
the Indenture Trustee's negligent failure to execute and release documents in a
timely manner, the Indenture Trustee shall be liable for such penalties or
damages.
(g) On each day that the Master Servicer remits to the Indenture
Trustee Master Servicer's Trust Receipts pursuant to clauses (ii) or (iii)
above, the Master Servicer or any Sub-servicer shall also submit to the
Indenture Trustee a summary of the total amount of such Master Servicer's Trust
Receipts requested on such day by the same method as described in such clauses
(ii) or (iii) above.
Section 4.15. Servicing Compensation. As compensation for its
activities hereunder, the Master Servicer shall be entitled to retain the
amount of the Servicing Fee with respect to each Mortgage Loan. Additional
servicing compensation in the form of prepayment charges, Termination Fees,
release fees, bad check charges, assumption fees, late payment charges, or any
other servicing-related fees, Net Liquidation Proceeds not required to be
deposited in the Principal and Interest Account pursuant to Section 4.8(c)(v)
and similar items may, to the extent collected from Mortgagors, be retained by
the Master Servicer.
Section 4.16. Annual Statement as to Compliance. The Master
Servicer, at its own expense, will deliver to the Indenture Trustee, Insurer,
Standard & Poor's and
51
<PAGE> 60
Moody's, on or before the fifteenth of April of each year, commencing in 1998,
an Officer's Certificate stating, as to each signer thereof, that (i) a review
of the activities of the Master Servicer during such preceding calendar year
and of performance under this Agreement has been made under such officers'
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officers and
the nature and status thereof including the steps being taken by the Master
Servicer to remedy such defaults.
Section 4.17. Annual Independent Certified Public Accountants'
Reports. On or before the fifteenth of April of each year, commencing in 1998,
the Master Servicer, at its own expense, shall cause to be delivered to the
Indenture Trustee, the Insurer, Standard & Poor's and Moody's a letter or
letters of a firm of independent, nationally recognized certified public
accountants reasonably acceptable to the Insurer stating that such firm has,
with respect to the Master Servicer's overall servicing operations (i)
performed applicable tests in accordance substantially in compliance with the
testing procedures as set forth in Appendix 3 of the Audit Guide for Audits of
HUD Approved Nonsupervised Mortgagees or (ii) examined such operations
substantially in compliance with the requirements of the Uniform Single
Attestation Program for Mortgage Bankers, and in either case stating such
firm's conclusions relating thereto.
Section 4.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans. The Master Servicer shall provide to the
Indenture Trustee, the Insurer, the FDIC and the supervisory agents and
examiners of each of the foregoing access to the documentation regarding the
Mortgage Loans required by applicable state and federal regulations, such
access being afforded without charge but only upon reasonable request and
during normal business hours at the offices of the Master Servicer designated
by it.
Upon any change in the format of the computer tape maintained by
the Master Servicer in respect of the Mortgage Loans, the Master Servicer shall
deliver a copy of such computer tape to the Indenture Trustee and in addition
shall provide a copy of such computer tape to the Indenture Trustee and the
Insurer at such other times as the Indenture Trustee or the Insurer may
reasonably request.
Section 4.19. Assignment of Agreement. The Master Servicer may not
assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Indenture Trustee and
Insurer, which such consent shall not be unreasonably withheld; provided,
however, that any assignee must meet the eligibility requirements set forth in
Section 5.1(g) hereof for a successor servicer. Notice of any such assignment
shall be given by the Master Servicer to the Indenture Trustee, the Insurer and
Moody's.
52
<PAGE> 61
ARTICLE V
SERVICING TERMINATION
Section 5.1. Events of Servicing Termination. (a) If any one of
the following events ("Event of Servicing Termination") shall occur and be
continuing:
(i) The Master Servicer shall fail to deliver to the
Indenture Trustee any proceeds or required payment, which failure
continues unremedied for five Business Days following written notice to
an Authorized Officer of the Master Servicer from the Indenture Trustee
or from Class A Noteholders evidencing Percentage Interest aggregating
not less than 25%.
(ii) The Master Servicer shall (I) apply for or consent
to the appointment of a receiver, Indenture Trustee, liquidator or
custodian or similar entity with respect to itself or its property, (II)
admit in writing its inability to pay its debts generally as they become
due, (III) make a general assignment for the benefit of creditors, (IV)
be adjudicated a bankrupt or insolvent, (V) commence a voluntary case
under the federal bankruptcy laws of the United States of America or
file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or (VI) take corporate action
for the purpose of effecting any of the foregoing;
(iii) If without the application, approval or consent of
the Master Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of
the Master Servicer an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a Indenture Trustee, receiver, liquidator or custodian or
similar entity with respect to the Master Servicer or of all or any
substantial part of its assets, or other like relief in respect thereof
under any bankruptcy or insolvency law, and, if such proceeding is being
contested by the Master Servicer in good faith, the same shall (A)
result in the entry of an order for relief or any such adjudication or
appointment or (B) continue undismissed or pending and unstayed for any
period of seventy-five (75) consecutive days; or
(iv) The Master Servicer shall fail to cure any breach of
any of its representations and warranties set forth in Section 3.2 which
materially and adversely affects the interests of the Class A
Noteholders or Insurer for a period of sixty (60) days after the Master
Servicer's discovery or receipt of notice thereof from the Indenture
Trustee, the Insurer, or Class A Noteholders evidencing Percentage
Interests aggregating not less than 25%; provided, however, that if the
Master Servicer can demonstrate to the reasonable satisfaction of the
Insurer that
53
<PAGE> 62
it is diligently pursuing remedial action, then the cure period may be
extended with the written consent of the Insurer.
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Master Servicer, either the
Indenture Trustee, the Insurer or the Class A Noteholders evidencing Percentage
Interests aggregating not less than 51% in each case with the consent of the
Insurer, or the Insurer, by notice then given in writing to the Master Servicer
(and to the Indenture Trustee if given by the Insurer of the Class A
Noteholders) may terminate all of the rights and obligations of the Master
Servicer as servicer under this Agreement. Any such notice to the Master
Servicer shall also be given to each Rating Agency and the Insurer. On and
after the receipt by the Master Servicer of such written notice, all authority
and power of the Master Servicer under this Agreement, whether with respect to
the Notes or the Mortgage Loans or otherwise, shall pass to and be vested in
the Indenture Trustee pursuant to and under this Section 5.1 and, without
limitation, the Indenture Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of
such notice of termination, whether to complete the transfer and endorsement of
each Mortgage Loan and related documents, or otherwise. The Master Servicer
agrees to cooperate with the Indenture Trustee in effecting the termination of
the responsibilities and rights of the Master Servicer hereunder, including,
without limitation, the transfer to the Indenture Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Master Servicer and to be deposited by it in the Note Account, or that have
been deposited by the Master Servicer in the Note Account or thereafter
received by the Master Servicer with respect to the Mortgage Loans. All
reasonable costs and expenses (including attorneys' fees) incurred in
connection with amending this Agreement to reflect such succession as Master
Servicer pursuant to this Section 5.1 shall be paid by the predecessor Master
Servicer (or if the predecessor Master Servicer is the Indenture Trustee, the
initial Master Servicer) upon presentation of reasonable documentation of such
costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 5.1(i) for a period of two Business Days or under Section 5.1(iv)
for a period of 60 days, shall not constitute an Event of Servicing Termination
if such delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and such delay or failure was caused by an act
of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence
shall not relieve the Master Servicer from using its best efforts to perform
its respective obligations in a timely manner in accordance with the terms of
this Agreement and the Master Servicer shall provide the Indenture Trustee, the
Sponsor, the Insurer and the Noteholders with an Officer's Certificate giving
prompt notice of such failure or delay by it, together with a description of
its efforts to so perform its obligations. The Master Servicer shall
immediately notify the Indenture Trustee and the Insurer in writing of any
Events of Servicing Termination.
54
<PAGE> 63
(b) In addition to the foregoing, the Insurer may remove the
Master Servicer upon the occurrence of an "Event of Serving Termination" under
the Insurance Agreement.
(c) The Master Servicer shall not resign from the obligations
and duties hereby imposed on it except by mutual written consent of the
Sponsor, the Master Servicer, the Insurer and the Indenture Trustee or upon
determination that its duties hereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with any
other activities carried on by it, the other activities of the Master Servicer
so causing such a conflict being of a type and nature carried on by the Master
Servicer at the date of this Agreement. Any such determination permitting the
resignation of the Master Servicer shall be evidenced by an opinion of counsel
to such effect which shall be delivered to the Indenture Trustee and the
Insurer.
(d) No removal or resignation of the Master Servicer shall
become effective until the Indenture Trustee or a successor servicer shall have
assumed the Master Servicer's responsibilities and obligations in accordance
with this Section.
(e) Upon removal or resignation of the Master Servicer, the
Master Servicer also shall promptly deliver or cause to be delivered to a
successor servicer or the Indenture Trustee all the books and records
(including, without limitation, records kept in electronic form) that the
Master Servicer has maintained for the Mortgage Loans, including all tax bills,
assessment notices, insurance premium notices and all other documents as well
as all original documents then in the Master Servicer's possession.
(f) Any collections received by the Master Servicer after
removal or resignation shall be endorsed by it to the Indenture Trustee and
remitted directly and immediately to the Indenture Trustee or the successor
Master Servicer.
(g) Upon removal or resignation of the Master Servicer, the
Indenture Trustee (x) may solicit bids for a successor servicer as described
below, and (y) pending the appointment of a successor Master Servicer as a
result of soliciting such bids, shall serve as Master Servicer. The Indenture
Trustee shall, if it is unable to obtain a qualifying bid and is prevented by
law from acting as Master Servicer, appoint, or petition a court of competent
jurisdiction to appoint, any housing and home finance institution, bank or
mortgage servicing institution which has shareholders' equity of not less than
$5,000,000, as determined in accordance with generally accepted accounting
principles, and acceptable to the Insurer as the successor to the Master
Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder. The
compensation of any successor servicer (including, without limitation, the
Indenture Trustee) so appointed shall be the aggregate Servicing Fees, together
with the other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided in Sections 4.8 and 4.15; provided,
however, that if the Indenture Trustee acts as successor Master Servicer then
the Sponsor agrees to pay to the Indenture Trustee at such time that the
Indenture Trustee becomes such successor Master Servicer a fee of twenty-five
dollars ($25.00) for each Mortgage Loan then included in the Trust Estate. The
Indenture Trustee shall be obligated to serve as
55
<PAGE> 64
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 Originators.
(h) In the event the Indenture Trustee solicits bids as provided
above, the Indenture Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor Master Servicer shall be entitled
to the full amount of the aggregate Servicing Fees as servicing compensation,
together with the other servicing compensation in the form of assumption fees,
late payment charges or otherwise as provided in Sections 4.8 and 4.15. Within
thirty days after any such public announcement, the Indenture Trustee shall
negotiate and effect the sale, transfer and assignment of the servicing rights
and responsibilities hereunder to the qualified party submitting the highest
satisfactory bid. The Indenture Trustee shall deduct from any sum received by
the Indenture Trustee from the successor to the Master Servicer in respect of
such sale, transfer and assignment all costs and expenses of any public
announcement and of any sale, transfer and assignment of the servicing rights
and responsibilities hereunder. After such deductions, the remainder of such
sum shall be paid by the Indenture Trustee to the Master Servicer at the time
of such sale, transfer and assignment to the Master Servicer's successor.
(i) The Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The Master Servicer agrees to cooperate with the Indenture
Trustee and any successor Master Servicer in effecting the termination of the
Master Servicer's servicing responsibilities and rights hereunder and shall
promptly provide the Indenture Trustee or such successor Master Servicer, as
applicable, all documents and records reasonably requested by it to enable it
to assume the Master Servicer's functions hereunder and shall promptly also
transfer to the Indenture Trustee or such successor Master Servicer, as
applicable, all amounts which then have been or should have been deposited in
the Principal and Interest Account by the Master Servicer or which are
thereafter received with respect to the Mortgage Loans. Neither the Indenture
Trustee nor any other successor Master Servicer shall be held liable by reason
of any failure to make, or any delay in making, any distribution hereunder or
any portion thereof caused by (i) the failure of the Master Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Master Servicer.
(j) The Master Servicer which is being removed or is resigning
shall give notice to the Mortgagors and to Moody's and Standard & Poor's of the
transfer of the servicing to the successor.
(k) The Indenture Trustee shall give notice to the Insurer,
Moody's and Standard & Poor's and to the Class A Noteholders of the occurrence
of any event specified in Section 5.1(a) of which the Indenture Trustee has
actual knowledge.
56
<PAGE> 65
Section 5.2. Inspections by Insurer; Errors and Omissions
Insurance. (a) At any reasonable time and from time to time upon reasonable
notice, the Insurer, the Indenture Trustee, or any agents or representatives
thereof may inspect the Master Servicer's servicing operations and discuss the
servicing operations of the Master Servicer with any of its officers or
directors.
(b) The Master Servicer agrees to maintain errors and omissions
coverage and a fidelity bond, each at least to the extent generally maintained
by prudent mortgage loan servicers having servicing portfolios of a similar
size.
Section 5.3. Merger, Conversion, Consolidation or Succession to
Business of Master Servicer. Any corporation into which the Master Servicer may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer shall be a party, or any corporation succeeding to all or
substantially all of the business of the Master Servicer, shall be the
successor of the Master Servicer hereunder, without the execution or filing of
any paper or any further act on the part of any of the parties hereto provided
that such corporation meets the qualifications set forth in Section 5.1(f).
Section 5.4. Notification to Noteholders. Upon any termination
or appointment of a successor to the Master Servicer pursuant to this Article
V, the Indenture Trustee shall give prompt written notice thereof to the
Noteholders at their respective addresses appearing in the Note Register, the
Insurer and each Rating Agency.
ARTICLE VI
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
Section 6.1. Administrative Duties with Respect to the
Indenture. The Master Servicer shall perform all its duties and the duties of
the Issuer under the Indenture. In addition, the Master Servicer shall
consult with the Owner Trustee as the Master Servicer deems appropriate
regarding the duties of the Issuer under the Indenture. The Master Servicer
shall monitor the performance of the Issuer and shall advise the Owner Trustee
when action is necessary to comply with the Issuer's duties under the
Indenture. The Master Servicer shall prepare for execution by the Issuer or
shall cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer to prepare, file or deliver pursuant to the Indenture. In
furtherance of the foregoing, the Master Servicer shall take all necessary
action that is the duty of the Issuer to take pursuant to the Indenture.
(a) Duties with Respect to the Issuer.
(i) In addition to the duties of the Master Servicer set forth
in this Agreement or any of the Documents, the Master Servicer shall
perform such calculations and shall prepare for execution by the Issuer
or the Owner Trustee or
57
<PAGE> 66
shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer or the Owner Trustee to prepare, file
or deliver pursuant to this Agreement or any of the Operative Documents
or under state and federal tax and securities laws, and at the request
of the Owner Trustee shall take all appropriate action that it is the
duty of the Issuer to take pursuant to this Agreement or any of the
Operative Documents. In accordance with the directions of the Issuer or
the Owner Trustee, the Master Servicer shall administer, perform or
supervise the performance of such other activities in connection with
the Mortgage Loans (including the Operative Documents) as are not
covered by any of the foregoing provisions and as are expressly
requested by the Issuer or the Owner Trustee and are reasonably within
the capability of the Master Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Operative Documents to the contrary, the Master Servicer shall be
responsible for promptly notifying the Owner Trustee and the Indenture
Trustee in the event that any withholding tax is imposed on the Issuer's
payments (or allocations of income) with respect to the Originators'
Interest as contemplated by this Agreement. Any such notice shall be in
writing and specify the amount of any withholding tax required to be
withheld by the Owner Trustee or the Indenture Trustee pursuant to such
provision.
(iii) Notwithstanding anything in this Agreement or the Operative
Documents to the contrary, the Master Servicer shall be responsible for
performance of the duties of the Issuer or the Sponsor set forth in
Section 5.1(a), (b), (c) and (d) of the Trust Agreement with respect to,
among other things, accounting and reports with respect to the
Originators' Interest.
(iv) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Master Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Master Servicer's opinion, no less favorable to the
Issuer in any material respect.
(b) Non-Ministerial Matters.
With respect to matters that in the reasonable judgment of the Master Servicer
are non-ministerial, the Master Servicer shall not take any action pursuant to
this Article VI unless within a reasonable time before the taking of such
action, the Master Servicer shall have notified the Owner Trustee and the
Insurer of the proposed action and the Owner Trustee and the Insurer shall not
have withheld consent or provided an alternative direction. For the purpose of
the preceding sentence, "non-ministerial matters" shall include:
(A) the amendment of or any supplement to the Indenture;
58
<PAGE> 67
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the Mortgage
Loans);
(C) the amendment, change or modification of this Agreement or
any of the Operative Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the Indenture
or the appointment of Successor Servicers or the consent to the
assignment by the Note Registrar, Paying Agent or Indenture Trustee of
its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(c) Exceptions. Notwithstanding anything to the contrary in this
Agreement, except as expressly provided herein or in the other Operative
Documents, the Master Servicer, in its capacity hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Noteholders to the
Originators under the Operative Documents, (2) sell the Trust Property pursuant
to Section 12.1 of the Indenture, (3) take any other action that the Issuer
directs the Servicer not to take on its behalf or (4) in connection with its
duties hereunder assume any indemnification obligation of any other Person.
(d) The Indenture Trustee or any successor Servicer shall not be
responsible for any obligations or duties of the Master Servicer under Section
6.1.
Section 6.2. Records. The Master Servicer shall maintain
appropriate books of account and records relating to services performed under
this Agreement, which books of account and records shall be accessible for
inspection by the Issuer and the Indenture Trustee at any time during normal
business hours.
Section 6.3. Additional Information to be Furnished to the
Issuer. The Master Servicer shall furnish to the Issuer and the Indenture
Trustee from time to time such additional information regarding the Mortgage
Loans as the Issuer and the Indenture Trustee shall reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Compliance Certificates and Opinions. Upon any
application or request by the Sponsor, the Insurer or the Class A Noteholders
to the Indenture Trustee to take any action under any provision of this
Agreement, the Sponsor, the Insurer or the Class A Noteholders, as the case may
be, shall furnish to the Indenture Trustee a certificate stating that all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with, except that in the case of any such
application or request as to which the furnishing of any documents is
59
<PAGE> 68
specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each certificate
or opinion with respect to compliance with a condition or covenant provided for
in this Agreement shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 7.2. Form of Documents Delivered to the Indenture
Trustee. In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate of an Authorized Officer of the Indenture Trustee
may be based, insofar as it relates to legal matters, upon an opinion of
counsel, unless such Authorized Officer knows, or in the exercise of reasonable
care should know, that the opinion is erroneous. Any such certificate of an
Authorized Officer of the Indenture Trustee or any opinion of counsel may be
based, insofar as it relates to factual matter upon a certificate or opinion
of, or representations by, one or more Authorized Officers of the Sponsor or of
the Master Servicer, stating that the information with respect to such factual
matters is in the possession of the Sponsor or of the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any opinion of counsel may also be based, insofar
as it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Indenture Trustee, stating
that the information with respect to such matters is in the possession of the
Indenture Trustee, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous. Any opinion of counsel may be based on
the written opinion of other counsel, in which event such opinion of counsel
shall be accompanied by a copy of such other counsel's opinion and shall
include a statement to the effect that such counsel believes that such counsel
and the Indenture Trustee may reasonably rely upon the opinion of such other
counsel.
60
<PAGE> 69
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 7.3. Acts of Class A Noteholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by the Class A Noteholders may
be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Class A Noteholders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Indenture Trustee, and, where it is hereby expressly required, to the
Sponsor. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "act" of the Class A
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement and conclusive in favor of the Indenture
Trustee and the Trust, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Whenever such execution is by an officer of a corporation or a member
of a partnership on behalf of such corporation or partnership, such certificate
or affidavit shall also constitute sufficient proof of his authority.
(c) The ownership of the Class A Notes shall be proved by the
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by any Class A Noteholder shall bind the Holder
of every Class A Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Indenture Trustee or the Trust in reliance thereon,
whether or not notation of such action is made upon such Class A Notes.
Section 7.4. Notices, etc. to Indenture Trustee. Any request,
demand, authorization, direction, notice, consent, waiver or act of the Class A
Noteholders or other documents provided or permitted by this Agreement to be
made upon, given or furnished to, or filed with the Indenture Trustee by any
Owner, the Insurer or by the Sponsor shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with and received
by the Indenture Trustee at its Corporate Trust Office as set forth in the
Indenture.
Section 7.5. Notices and Reports to Class A Noteholders; Waiver
of Notices. Where this Agreement provides for notice to Class A Noteholders of
any event
61
<PAGE> 70
or the mailing of any report to Class A Noteholders, such notice or report
shall be sufficiently given (unless otherwise herein expressly provided) if
mailed, first-class postage prepaid, to each Owner affected by such event or to
whom such report is required to be mailed, at the address of such Owner as it
appears on the Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice or the mailing of
such report. In any case where a notice or report to Class A Noteholders is
mailed in the manner provided above, neither the failure to mail such notice or
report nor any defect in any notice or report so mailed to any particular Owner
shall affect the sufficiency of such notice or report with respect to other
Class A Noteholders, and any notice or report which is mailed in the manner
herein provided shall be conclusively presumed to have been duly given or
provided.
Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Class A Noteholders shall be filed with the
Indenture Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Class A Noteholders when such notice is required
to be given pursuant to any provision of this Agreement, then any manner of
giving such notice as shall be satisfactory to the Indenture Trustee shall be
deemed to be a sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency that
rated any Class A Notes, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 7.6. Rules by Indenture Trustee. The Indenture Trustee
may make reasonable rules for any meeting of Class A Noteholders.
Section 7.7. Successors and Assigns. All covenants and agreements
in this Agreement by any party hereto shall bind its successors and assigns,
whether so expressed or not.
Section 7.8. Severability. In case any provision in this
Agreement or in the Class A Notes shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 7.9. Benefits of Agreement. Nothing in this Agreement or
in the Class A Notes, expressed or implied, shall give to any Person, other
than the Class A Noteholders, the Insurer and the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
Section 7.10. Legal Holidays. In any case where the date of any
Payment Date, any other date on which any distribution to any Holder is
proposed to be paid, or
62
<PAGE> 71
any date on which a notice is required to be sent to any Person pursuant to the
terms of this Agreement shall not be a Business Day, then (notwithstanding any
other provision of the Class A Notes or this Agreement) payment or mailing need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made or mailed on the nominal date of any
such Payment Date, or such other date for the payment of any distribution to
any Owner or the mailing of such notice, as the case may be, and no interest
shall accrue for the period from and after any such nominal date, provided such
payment is made in full on such next succeeding Business Day.
Section 7.11. Governing Law. In view of the fact that Class A
Noteholders are expected to reside in many states and outside the United States
and the desire to establish with certainty that this Agreement will be governed
by and construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Class A Note shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
Section 7.12. Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 7.13. Usury. The amount of interest payable or paid on any
Class A Note under the terms of this Agreement shall be limited to an amount
which shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the State of New York or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Class A Note exceeds the Highest Lawful Rate, the Trust stipulates that
such excess amount will be deemed to have been paid to the Owner of such Class
A Note inadvertently in error by the Indenture Trustee acting on behalf of the
Trust and the Owner receiving such excess payment shall promptly, upon
discovery of such error or upon notice thereof from the Indenture Trustee on
behalf of the Trust, refund the amount of such excess or, at the option of such
Owner, apply the excess to the payment of principal of such Class A Note, if
any, remaining unpaid in any event, the Indenture Trustee shall not be
responsible for any repayment of such excess payments. In addition, all sums
paid or agreed to be paid to the Indenture Trustee for the benefit of Class A
Noteholders of Class A Notes for the use, forbearance or detention of money
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Class A Notes.
Section 7.14. Amendment. (a) The Indenture Trustee, the Sponsor
and the Master Servicer, may at any time and from time to time, with the prior
approval of the Insurer but without the giving of notice to or the receipt of
the consent of the Class A Noteholders, amend this Agreement, and the Indenture
Trustee shall consent to such amendment, for the purpose of (i) curing any
ambiguity, or correcting or supplementing any provision hereof which may be
inconsistent with any other provision hereof, or to
63
<PAGE> 72
add provisions hereto which are not inconsistent with the provisions hereof, or
(ii) complying with the requirements of the Code and the regulations proposed
or promulgated thereunder; provided, however, that any such action shall not,
as evidenced by an opinion of counsel delivered to the Indenture Trustee,
materially and adversely affect the interests of any Owner (without its written
consent).
(b) The Indenture Trustee, the Sponsor and the Master Servicer
may, at any time and from time to time, with the prior approval of the Insurer
but without the giving of notice to or the receipt of the consent of the Class
A Noteholders, amend this Agreement, and the Indenture Trustee shall consent to
such amendment, for the purpose of changing the definition of "Specified
Overcollateralization Amount"; provided, however, that no such change shall
affect the weighted average life of the Class A Notes (assuming an appropriate
prepayment speed as determined by the Underwriter as evidenced in writing) by
more than five percent, as determined by the Underwriter.
(c) This Agreement may also be amended by the Indenture Trustee,
the Sponsor, and the Master Servicer at any time and from time to time, with
the prior written approval of the Insurer and not less than a majority of the
Percentage Interest represented by the Class A Notes then Outstanding, for the
purpose of adding any provisions or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Class A Noteholders hereunder; provided, however, that no such amendment
shall (a) change in any manner the amount of, or change the timing of, payments
which are required to be distributed to any Owner without the consent of the
Owner of such Class A Notes or (b) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such amendments,
without the consent of all Class A Noteholders then Outstanding.
(d) The Insurer, the Class A Noteholders, Moody's and Standard &
Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
Section 7.15. The Insurer. The Insurer is a third-party
beneficiary of this Agreement. Any right conferred to the Insurer shall be
suspended during any period in which the Insurer is in default in its payment
obligations under the Insurance Policy except with respect to amendments to
this Agreement pursuant to Section 11.14. During any period of suspension the
Insurer's rights hereunder shall vest in the Class A Noteholders of the Class A
Notes and shall be exercisable by the Class A Noteholders of at least a
majority in Percentage Interest of the Class A Notes then Outstanding. At such
time as the Class A Notes are no longer Outstanding hereunder and the Insurer
has been reimbursed for all payments made pursuant to the Insurance Policy to
which it is entitled hereunder, the Insurer's rights hereunder shall terminate.
Section 7.16. Notices. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
The Indenture Trustee: Bankers Trust Company
64
<PAGE> 73
of California, N.A.
3 Park Plaza
Irvine, CA 92614
Attention: ADVANTA REVOLVING HOME
EQUITY LOAN TRUST 1997-A
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: ADVANTA Mortgage Conduit
Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Vice President,
Structured Finance
Tel: (619) 674-3356
Fax: (619) 674-3666
with a copy addressed to the attention of the
General Counsel at the same address.
The Master Servicer: ADVANTA Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Senior Vice President, Loan Service
Tel: (619) 674-3356
Fax: (619) 674-3666
The Insurer: Ambac Assurance Corporation
One State Street Plaza
17th Floor
New York, New York 10004
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring Department
Standard & Poor's: Standard & Poor's Ratings Group
25 Broadway, 12th Floor
New York, New York 10004
Attention: Surveillance Dept.
The Trust: Advanta Revolving Home Equity Loan
Trust 1997-A
c/o Wilmington Trust Company, as Owner Trustee
65
<PAGE> 74
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Section 7.17. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure
of any obligation, representation, warranty or covenant made or undertaking by
the Issuer under this Agreement or any related documents.
66
<PAGE> 75
IN WITNESS WHEREOF, the Sponsor, the Issuer, the Master Servicer
and the Indenture Trustee have caused this Agreement to be duly executed by
their respective officers thereunto duly authorized, all as of the day and year
first above written.
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor
By:
-------------------------
Name: Mark T. Dunsheath
Title: Vice President
ADVANTA MORTGAGE CORP. USA, as Master
Servicer
By:
-------------------------
Name:
Title:
ADVANTA REVOLVING HOME EQUITY
LOAN TRUST 1997-A, as Issuer
by: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee,
By:
-------------------------
Name:
Title:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., not in its individual capacity,
but solely as Indenture Trustee
By:
-------------------------
Name:
Title:
67
<PAGE> 1
EXHIBIT 4.4
<PAGE> 2
EXHIBIT 4.4
[AMBAC LETTERHEAD]
<TABLE>
<S> <C>
Insured Obligations: $100,000,000 Policy Number AB0132BE
Advanta Revolving Home Equity
Loan Trust 1997-A, Advanta Revolving
Home Equity Loan Asset Backed Notes,
Series 1997-A, Class A Notes, Variable Premium: Calculated as set forth in
Rate Pass-Through Rate the Certificate Guaranty Insurance
Policy Endorsement attached hereto
</TABLE>
AMBAC ASSURANCE CORPORATION (AMBAC) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by
reason of Nonpayment.
Ambac will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification of Ambac of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such
payments of principal or interest shall be made only upon presentation of an
instrument of assignment in form and substance satisfactory to Ambac,
transferring to Ambac all rights under such Insured Obligations to receive the
principal of and interest on the Insured Obligation. Ambac shall be subrogated
to all the Holders' rights to payment on the Insured Obligations to the extent
of the insurance disbursements so made. Once payments of the Insured Amounts
have been made to the Trustee, Ambac shall have no further obligation hereunder
in respect of such Insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any
payment of principal or interest on an Insured Obligation which has become Due
for Payment and which is made to a Holder by or on behalf of the Trustee has
been deemed a preferential transfer and therefore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such Holder will be
entitled to payment from Ambac to the extent of such recovery if sufficient
funds are not otherwise available.
This Policy is noncancelable by Ambac for any reason, including failure to
receive payment of any premium due hereunder. The premium on this Policy is
not refundable for any reason. This Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation other than at the sole option of Ambac, nor
against any risk other than Nonpayment, including failure of the Trustee to make
any payment due Holders of Insured Amounts.
To the fullest extent permitted by applicable law, Ambac hereby waives and
agrees not to assert any and all rights and defenses, to the extent such rights
and defenses may be available to Ambac, to avoid payment of its obligations
under this Policy in accordance with the express provisions hereof.
Any capitalized terms not defined herein shall have the meaning given such
terms in the endorsement attached hereto or in the Agreement.
In witness whereof, Ambac has caused this Policy to be affixed with its
corporate seal and to be signed by its duly authorized officers in facsimile to
become effective as their original signatures and binding upon Ambac by virtue
of the countersignature of its duly authorized representative.
<TABLE>
<S> <C>
/s/ P. LASSITER AMBAC ASSURANCE CORPORATION /s/ ALEPH D. COOKE
- ----------------- CORPORATE -----------------
President --------- Secretary
SEAL
---------
WISCONSIN
Effective Date: November 20, 1997 Authorized Representative
</TABLE>
Form No. 2B0022 (7/97)
<PAGE> 1
EXHIBIT 10.1
<PAGE> 2
EXHIBIT 10.1
EXECUTION COPY
PURCHASE AGREEMENT
Between
ADVANTA NATIONAL BANK,
as Originator,
ADVANTA FINANCE CORP.,
as Originator
and
ADVANTA MORTGAGE CONTUIT SERVICES, INC.,
as Purchaser
Dated as of November 1, 1997
<PAGE> 3
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Procedures for Purchases of Mortgage Loans; Conditions Precedent;
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.01. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.02. Delivery of Documents; Purchase of Initial Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.03. Delivery of Documents; Purchases of Subsequent Mortgage Loans . . . . . . . . . . . . . . . . . . . . . 7
Section 2.04. Purchase Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.05. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.06. Proceeds of Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.07. Defective Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.01. Intent of Parties; Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.01. Representations and Warranties of each Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.02. Representations and Warranties Regarding Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.03. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.04. Remedies for Breach of Representations and Warranties; Repurchase Obligation . . . . . . . . . . . . 17
ARTICLE V Covenants and Warranties of the Originators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI Sale of Mortgage Loans from the Purchaser to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.01. Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII Termination; Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.01. Termination of Commitment to Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.02. Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VIII Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX Exclusive Benefit of Parties; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE X Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XI Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XII Effect of Invalidity of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XIII Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIV Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XV Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XVI Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XVII RESPA Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XVIII Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XIX Consent to Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XX Submission to Jurisdiction; Waiver of Trial by Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XXI Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XXII Further Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 5
PURCHASE AGREEMENT ("Agreement") dated as of November 1, 1997
among Advanta Finance Corp., a Nevada corporation (an "Originator"), Advanta
National Bank, a national banking association (an "Originator") and Advanta
Mortgage Conduit Services, Inc. ("Purchaser").
WHEREAS, the Originators desire to sell from time to time to
Purchaser the Initial Mortgage Loans and Subsequent Mortgage Loans (each as
hereinafter defined), and Purchaser desires to purchase such Initial Mortgage
Loans and Subsequent Mortgage Loans, each in accordance with the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, the parties, in consideration of good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Capitalized terms not defined herein shall have the meanings
set forth in the Sale and Servicing Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Additional Balance": As to any Mortgage Loan and day, the
aggregate amount of all Draws conveyed to the Trust pursuant to Section 2.1 of
the Sale and Servicing Agreement.
"Assignment of Mortgage": With respect to each Mortgage Loan,
an assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect the recordation of the pledge
of the Mortgage Loans to the Indenture Trustee for the benefit of the Class A
Noteholders.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York or
in the city in which the principal corporate trust office of the Indenture
Trustee is located, are authorized or obligated by law or executive order to be
closed.
"Class A Note": Any note executed and authenticated by the
Indenture Trustee substantially in the form set forth in Exhibit A-1 to the
Indenture.
"Class A Noteholder": The holder of a Class A Note.
"Closing Date": November 20, 1997.
"Collateral": As defined in Article III hereof.
<PAGE> 6
"Credit Line Agreement": With respect to any Mortgage Loan,
the related home equity line of credit agreement, security instrument and
promissory note executed by the related Mortgagor and any amendment or
modification thereof.
"Cut-Off Date": With respect to each Initial Mortgage Loan,
November 1, 1997 and with respect to each Subsequent Mortgage Loan, the date on
which such Subsequent Mortgage Loan was transferred to the Trust.
"Cut-Off Date Principal Balance": With respect to any
Mortgage Loan, the unpaid principal balance thereof as of the related Cut-Off
Date.
"Draw": With respect to any Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the Cut-Off Date in accordance with
the related Credit Line Agreement.
"Event of Termination": As defined in Article IX hereof.
"FHLMC": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the
Emergency Home Finance Act of 1970, as amended, or any successor thereof.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor
thereof.
"Indenture": The Indenture dated as of November 1, 1997
between the Trust and the Indenture Trustee.
"Indenture Trustee": Bankers Trust Company of California, N.A.
or any successor Indenture Trustee appointed in accordance with the Indenture
that has accepted such appointment in accordance with the Indenture.
"Initial Mortgage Loans": Mortgage Loans transferred and
assigned to the Indenture Trustee on the Closing Date.
"Issuer": Advanta Home Equity Loan Trust 1997-A.
"Liquidated Mortgage Loan": As defined in Section 4.13(b) of
the Sale and Servicing Agreement. A Mortgage Loan which is purchased from the
Trust pursuant to Section 3.3, 3.4, 3.6(b) or 4.10 of the Sale and Servicing
Agreement is not a "Liquidated Mortgage Loan".
"Loan Rate": As defined in the Sale and Servicing Agreement.
"Losses": Any and all out-of-pocket losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and
disbursements) directly incurred by any person specified in this Agreement,
resulting from transactions entered into under this Agreement (other than
liability for taxes). Losses must be accounted for and
2
<PAGE> 7
presented for reimbursement documented in reasonable detail and within a
reasonable time.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing a Credit Line Agreement.
"Mortgage Files": For each Mortgage Loan, the items listed on
Exhibit B of the Sale and Servicing Agreement.
"Mortgage Loan Schedule": A schedule of Mortgage Loans
transferred to the Trust, attached hereto as Schedule II, as it may be further
supplemented in connection with subsequent transfers of Subsequent Mortgage
Loans.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 2.1(a) of the Sale and Servicing
Agreement, together with any Qualified Replacement Mortgages substituted
therefor in accordance with this Agreement, as from time to time are held as a
part of the Trust Estate, the Mortgage Loans originally so held being
identified in the Schedule of Mortgage Loans. The term "Mortgage Loan"
includes the terms "First Mortgage Loan" and "Second Mortgage Loan". The term
"Mortgage Loan" includes any Mortgage Loan which is Delinquent, which relates
to a foreclosure or which relates to a Mortgaged Property which is REO Property
prior to such Mortgaged Property's disposition by the Trust. Any mortgage loan
which, although intended by the parties hereto to have been, and which
purportedly was, transferred and assigned to the Trust by the Sponsor, in fact
was not transferred and assigned to the Trust for any reason whatsoever shall
nevertheless be considered a "Mortgage Loan" for all purposes of this
Agreement. The term "Mortgage Loan" includes the terms "Initial Mortgage
Loan," and "Subsequent Mortgage Loan".
"Mortgaged Property": The underlying property securing a
Mortgage Loan.
"Mortgagor": The obligor on a Credit Line Agreement.
"Note Account": The note account established in accordance
with Section 8.3 of the Indenture and maintained by the Indenture Trustee.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Indenture Trustee.
"Payment Date": Any date on which the Indenture Trustee is
required to make distributions to the Class A Noteholders, which shall be the
25th day of each month, commencing in the month following the Closing Day or,
if such day is not a Business Day, then on the succeeding Business Day.
3
<PAGE> 8
"Policy": The financial guaranty insurance policy number
AB0132BE, dated as of the Closing Date, issued by Ambac Assurance Corporation to
the Indenture Trustee for the benefit of the Class A Noteholders.
"Principal Balance": As to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any date, the related Cut-Off Date
Principal Balance, plus (i) any Additional Balance in respect of such Mortgage
Loan, minus (ii) all collections credited as principal against the Principal
Balance of any such Mortgage Loan in accordance with the related Credit Line
Agreement prior to such day. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have a Principal Balance of zero as of the
first day of the Remittance Period following the Remittance Period in which
such Mortgage Loan becomes a Liquidated Mortgage Loan and at all times
thereafter.
"Purchase": Any purchase of Subsequent Mortgage Loans by
Purchaser from Originators pursuant to the terms hereof and of the applicable
Purchase Request.
"Purchase Date": With respect to the Subsequent Mortgage
Loans, the Subsequent Transfer Date.
"Purchase Price": With respect to the Principal Balance of
the Initial Mortgage Loans as of the Cut-Off Date 98%; with respect to the
Principal Balances of all Additional Balances and all Subsequent Mortgage Loans
98%.
"Purchase Request": A request for the purchase of Subsequent
Mortgage Loans in the form of Exhibit A hereto.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 2.2(b), 3.3 or 3.4 of the Sale and Servicing
Agreement, which (i) bears a variable rate of interest, (ii) has a Loan Rate at
least equal to the Loan Rate of the Mortgage Loan being replaced, (which shall
mean a Mortgage Loan having the same interest rate index, a margin over such
index and a maximum interest rate at least equal to those applicable to the
Mortgage Loan being replaced), (iii) is of the same or better property type and
the same or better occupancy status as the replaced Mortgage Loan, (iv) shall
be of the same or better credit quality classification (determined in
accordance with the respective Originator's credit underwriting guidelines) as
the Mortgage Loan being replaced, (v) shall mature no later than the Payment
Date occurring in February 20, 2024, (vi) has a Combined Loan-to-Value Ratio as
of the Initial Cut-Off Date or Subsequent Cut-Off Date, as applicable, no
higher than the Combined Loan-to-Value Ratio of the replaced Mortgage Loan at
such time, (vii) has a Principal Balance as of the related Replacement Cut-Off
Date equal to or less than the Principal Balance of the replaced Mortgage Loan
as of such Replacement Cut-Off Date, (viii) is in the same lien position or
better.
"Reference Bank": As defined in the Indenture.
"Reference Bank Rate": As defined in the Indenture.
4
<PAGE> 9
"Remittance Period": As to any Payment Date, the calendar
month preceding the month of such Payment Date.
"REO Property": A Mortgaged Property acquired by the Master
Servicer or any Sub-Servicer on behalf of the Trust through foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
"Repurchase Price": The sum of (a) product of (i) the
outstanding principal balance of the related Mortgage Loan as of such date of
repurchase and (ii) the related Purchase Price, plus (b) any accrued interest
as of such date.
"Sale and Servicing Agreement": The Sale and Servicing
Agreement dated as of November 1, 1997 among the Originator, the Purchaser, the
Issuer and the Indenture Trustee.
"SEC": The Securities and Exchange Commission and any
successor thereto.
"Shareholder's Equity": The aggregate "assets" of Originator
less the aggregate "liabilities" of Originator, with the term "asset" having
the meaning ascribed to such term by GAAP and the term "liabilities" being
those obligations or liabilities of the Originator which, in accordance with
GAAP, would be included on the liability side of the Originator's balance
sheet.
"Sponsor": Advanta Mortgage Conduit Services, Inc.
"Subsequent Mortgage Loans": Mortgage Loans sold by the
Originator to the Purchaser on any Subsequent Transfer Date.
"Subsequent Transfer Date": Any date on which the Originator
transfers to the Purchaser Subsequent Mortgage Loans in accordance with the
Sale and Servicing Agreement.
"Termination Date": The date of termination of the Trust in
accordance with the Trust Agreement.
"Trust": The trust created by the Trust Agreement, the corpus
of which consists of the Mortgage Loans, such other assets as shall from time
to time be identified as deposited in a Certificate Account in accordance with
the Sale and Servicing Agreement, property that secured a Mortgage Loan and
that has become REO, the rights of the Sponsor in certain hazard insurance
policies maintained by the Mortgagors or the Master Servicer in respect of the
Mortgage Loans, the Policy, an assignment of certain rights of the Sponsor
under this Agreement, such assets as may be deposited from time to time in a
pre-funding account, rights to certain amounts in a spread account and all
proceeds of each of the foregoing (exclusive of payments of accrued interest on
the Mortgage Loans which are due on or prior to the Cut-Off Date).
5
<PAGE> 10
"Trust Agreement": The Trust Agreement dated as of November
1, 1997 between the Sponsor and Wilmington Trust Company, as Owner Trustee.
ARTICLE II
Procedures for Purchases of Mortgage Loans;
Conditions Precedent; Settlements
Section 2.01. Purchase and Sale. (a) On the Closing Date
in consideration for the Purchase Price, each Originator hereby sells,
transfers, assigns, sets over and otherwise conveys to the Purchaser, without
recourse, all of its right, title and interest in and to (i) each Initial
Mortgage Loan, including its Principal Balances and all collections in respect
thereof received on or after the Cut-Off Date (excluding payments in respect of
accrued interest due prior to the Cut-Off Date); (ii) property that secured an
Initial Mortgage Loan that is acquired by foreclosure or deed in lieu of
foreclosure; (iii) each Originator's rights under the hazard insurance policies
and (iv) all proceeds with respect to the foregoing. From time to time, with
respect to any Subsequent Mortgage Loan, pursuant to the terms of this
Agreement, each Originator shall, on the related Subsequent Transfer Date
transfer, assign, set over and otherwise convey to the Purchaser without
recourse all of its right, title and interest in and to the Principal Balances
of the Subsequent Mortgage Loans and all collections in respect thereof
received after the Cut-Off Date for the Subsequent Mortgage Loans or, with
respect to any Additional Balances with respect thereto, on or after the date
of transfer to the Trust.
(b) Each such purchase with respect to the Subsequent
Mortgage Loans, shall be initiated by each Originator pursuant to the delivery
to Purchaser of a Purchase Request in the manner set forth in Section 2.04.
Section 2.02. Delivery of Documents; Purchase of Initial
Mortgage Loans. Prior to the purchase of Initial Mortgage Loans:
(a) Each Originator shall have delivered to the Purchaser
or any agent appointed by the Purchaser the Mortgage File for each of
the Mortgage Loans.
(b) Purchaser shall have received a Mortgage Loan
Schedule pertaining to the related Mortgage Loans.
(c) Purchaser shall have received copies of the
resolutions of the Board of Directors of each Originator, certified by
its respective Secretary, approving this Agreement.
(d) Purchaser shall have received the Articles of
Incorporation or Charter, respectively, of each Originator.
(e) Purchaser shall have received a certificate of the
Secretary or Assistant Secretary of each Originator certifying (i) the
names and signatures of the officers authorized on its behalf to
execute this Agreement, and any other
6
<PAGE> 11
documents to be delivered by it hereunder and (ii) a copy of each
Originator's By-laws.
(f) Purchaser shall have received an opinion of counsel
to the Originators as to the due authorization, execution and delivery
by each Originator of this Agreement and as to the validity and
enforceability of the transfers contemplated hereunder and addressing
such other matters as the Purchaser may reasonably request.
(g) Each Originator shall have instructed the applicable
debtor, trustee, paying agent, authenticating agent, transfer agent,
registrar, predecessor in interest, owner (if the Mortgage Loans are
in the form of a security agreement), or servicer, if any, in respect
of the related Mortgage Loans to reflect on their books and records
the transfer of such Mortgage Loans to Purchaser, as owner or secured
party (if the Mortgage Loans are in the form of a security agreement).
(h) Purchaser shall have received the most recent
available standard servicing or lien reports in summary form, if any,
with respect to all of the mortgages in each Originator's portfolio
similar to the Mortgage Loans.
(i) The Purchaser shall be permitted to perform its
standard loan review of each Mortgage Loan to be purchased.
(j) UCC-1 financing statements duly executed by each
Originator as debtor shall have been filed naming the Purchaser as
secured party and the Indenture Trustee on behalf of the Trust as
assignee.
Section 2.03. Delivery of Documents; Purchases of
Subsequent Mortgage Loans. Prior to any purchase of Subsequent Mortgage Loans
after the purchase of Initial Mortgage Loans, the actions, conditions and
deliveries specified in Section 2.02 shall have been taken or made, as the case
may be with respect to the Subsequent Mortgage Loans.
Section 2.04. Purchase Requests. Each Originator shall
deliver to Purchaser a Purchase Request at least three Business Days prior to
the proposed Purchase Date for any Purchase (unless otherwise agreed by the
parties). Purchaser shall indicate its acceptance or declination of each
Purchase Request by completing the appropriate section of the Purchase Request
and returning the copy thereof to the respective Originator; provided, however,
that Purchaser hereby agrees to accept each Purchase Request if all of the
conditions to such Purchase provided for in this Agreement (including, without
limitation, Section 2.02 hereof and the conditions with respect to the purchase
of Subsequent Mortgage Loans) have been satisfied.
With respect to all Purchase Requests, if Purchaser does not
send a copy of a completed Purchase Request to Originator within at least three
Business Days prior to the proposed Purchase Date (five Business Days, if the
related Purchase Request was received by Purchaser at least two calendar weeks
prior to the proposed Purchase Date), Purchaser shall be deemed to have
accepted such Purchase Request. Each Purchase
7
<PAGE> 12
Request accepted by Purchaser shall be irrevocable and binding on Purchaser and
the respective Originator. The respective Originator shall indemnify Purchaser
and hold it harmless against any Losses incurred by Purchaser as a result of
any failure by the respective Originator to timely deliver the Subsequent
Mortgage Loans subject to such Purchase. On the applicable Purchase Date, the
Purchaser shall pay Originator the Purchase Price for the related Subsequent
Mortgage Loans against receipt of the documents required to be delivered by
Originator pursuant to Section 2.03.
Section 2.05. Survival of Representations. The terms and
conditions of the purchase of each Mortgage Loan shall be as set forth in this
Agreement. Each Originator will be deemed on the Closing Date and on each
Purchase Date to have made to Purchaser the representations and warranties set
forth in Article IV hereof and such representations and warranties of each
Originator shall be true and correct on and as of the Closing Date and on and
as of such Purchase Date. Each Purchase Request made by each Originator shall
be deemed to be a restatement of each of the covenants of such Originator made
pursuant to Article V of this Agreement. In addition, each Originator shall
reaffirm the representations and warranties contained in Article IV on the date
of disposition of the Mortgage Loans by the Purchaser pursuant to the Sale and
Servicing Agreement.
Section 2.06. Proceeds of Mortgage Loans. The transfer and
sale hereby of all of the Originators' right, title and interest in and to each
Mortgage Loan shall include all proceeds, products and profits derived
therefrom, including, without limitation, all scheduled payments of principal
of and interest on such Mortgage Loan and other amounts due or payable or to
become due or payable in respect thereof and proceeds thereof, including,
without limitation, all monies, goods and other tangible or intangible property
received upon the liquidation or sale thereof, except any payments in respect
of accrued interest due prior to the Cut-Off Date.
Section 2.07. Defective Mortgage Loans. If any Mortgage
Loan is re-transferred to the Purchaser pursuant to Section 2.2(b) of the Sale
and Servicing Agreement, the respective Originator shall, at the Purchaser's
option, either (a) repurchase such Mortgage Loan at the Repurchase Price, or
(b) provide a Qualified Replacement Mortgage if the respective Originator has
any such loans available for sale at the time, subject to the terms and
conditions of the Sale and Servicing Agreement.
ARTICLE III
Section 3.01. Intent of Parties; Security Interest.
Purchaser and each Originator confirm that the transactions contemplated
herein are intended as purchases and sales rather than as loan transactions. In
the event, for any reason, and solely in such event, any transaction hereunder
is construed by any court or regulatory authority as a loan or other purchase
and sale of the related Mortgage Loans, each Originator shall be deemed to have
hereby pledged to Purchaser as security for the performance by each Originator
of all of its obligations from time to time arising hereunder and under any and
all Purchases effected pursuant thereto, and shall be deemed to have granted to
Purchaser a security interest in, the related Mortgage Loans and all
distributions in respect thereof,
8
<PAGE> 13
and the proceeds of any and all of the foregoing (collectively, the
"Collateral"). In furtherance of the foregoing, (i) this Agreement shall
constitute a security agreement, (ii) Purchaser shall have all of the rights of
a secured party with respect to the Collateral pursuant to applicable law and
(iii) Originator shall execute all documents, including, but not limited to,
financing statements under the Uniform Commercial Code as in effect in any
applicable jurisdictions, as the Purchaser may reasonably require to
effectively perfect and evidence Purchaser's first priority security interest
in the Collateral. Each Originator also covenants not to pledge, assign or
grant any security interest to any other party in any Mortgage Loan sold to
Purchaser.
ARTICLE IV
Representations and Warranties
Section 4.01. Representations and Warranties of each
Originator. Each Originator represents, warrants and covenants to the
Purchaser as of the Closing Date and with respect to the Subsequent Mortgage
Loans as of each related Subsequent Transfer Date that:
(i) each Originator is duly organized, validly
existing and in good standing under its respective jurisdiction of
incorporation and is duly authorized and qualified to transact any and
all business contemplated by this Agreement to be conducted by such
Originator in any state in which a Mortgaged Property is located to
the extent necessary to ensure the enforceability of each Mortgage
Loan in accordance with the terms of this Agreement;
(ii) each Originator has the full corporate power and
authority to originate each Mortgage Loan, and to execute, deliver and
perform, and to enter into and consummate the transactions
contemplated by this Agreement and the execution, delivery and
performance of this Agreement by each Originator has been duly
authorized by all necessary corporate action on the part of each
Originator; and this Agreement, assuming the due authorization,
execution and delivery thereof by the Purchaser, constitutes a legal,
valid and binding obligation of each Originator, enforceable against
each Originator in accordance with its respective terms, except to the
extent that (a) the enforceability thereof may be limited by federal
or state bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought;
(iii) the execution and delivery of this Agreement by
each Originator, the consummation by each Originator of the
transactions herein contemplated, and the fulfillment by each
Originator of or compliance by each Originator with the terms hereof
will not (A) result in a breach of any term or provision of the
charter or by-laws of each Originator or (B) conflict with, result in
a breach, violation or acceleration of, or result in a default under,
the terms of
9
<PAGE> 14
any other material agreement or instrument to which each Originator is
a party or by which it may be bound, or any statute, order or
regulation applicable to each Originator of any court, regulatory
body, administrative agency or governmental body having jurisdiction
over each Originator, which breach, violation, default or
non-compliance would have a material adverse effect on (a) the
business, operations, financial condition, properties or assets of
each Originator taken as a whole or (b) the ability of each Originator
to perform its obligations under this Agreement; and each Originator
is not a party to, bound by, or in breach or violation of any material
indenture or other material agreement or instrument, or subject to or
in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it, which materially and adversely affects or, to
such Originator's knowledge, would in the future reasonably be
expected to materially and adversely affect, (x) the ability of each
Originator to perform its obligations under this Agreement or (y) the
business, operations, financial condition, properties or assets of
each Originator taken as a whole;
(iv) each Originator is, and currently intends to
remain, in good standing and qualified to do business in each
jurisdiction where failure to be so qualified or licensed would have a
material adverse effect on (a) the business, operations, financial
condition, properties or assets of such Originator taken as a whole or
(b) the enforceability of any Mortgage Loan in accordance with the
terms of this Agreement;
(v) there is no litigation pending or, to each
Originator's actual knowledge, overtly threatened against such
Originator that would materially and adversely affect the execution,
delivery or enforceability of this Agreement or for each Originator to
perform any of its other obligations hereunder in accordance with the
terms hereof;
(vi) no consent, approval, authorization or order of
any court or governmental agency or body is required for the
execution, delivery and performance by each Originator of, or
compliance by each Originator with, this Agreement or the consummation
of the transactions contemplated hereby (except for such consents,
approvals, authorizations, or orders to be obtained in connection with
each Purchase Date with respect to future transactions to be
consummated hereunder), or if any such consent, approval,
authorization or order not relating to a future transaction is
required, each Originator has obtained the same; and
(vii) each Originator has caused to be performed any
and all acts required to preserve the rights and remedies of the
Purchaser in any insurance policies of such Originator or a mortgagee
applicable to the Mortgage Loans sold by such Originator.
Section 4.02. Representations and Warranties Regarding
Mortgage Loans. With respect to the Mortgage Loans, each Originator represents
and warrants to
10
<PAGE> 15
Purchaser as of the Closing Date with respect to each Initial Mortgage Loan
conveyed by such Originator and as of the related Subsequent Transfer Date with
respect to each Subsequent Mortgage Loan conveyed by such Originator as
follows:
(i) All of the original or certified documentation
set forth in Section 2.1 of the Sale and Servicing Agreement
(including all material documents related thereto) with respect to
each Initial Mortgage Loan has been or will be delivered to the
Purchaser on the Closing Day or, with respect to any Subsequent
Mortgage Loans, on the related Subsequent Transfer Date. All such
documentation is true and accurate in all material respects. Each of
the documents and instruments specified to be included therein has
been duly executed and in due and proper form, and each such document
or instrument is in a form generally acceptable to prudent mortgage
lenders that regularly originate or purchase mortgage loans comparable
to the Mortgage Loans for sale to prudent investors in the secondary
market that invest in mortgage loans such as the Mortgage Loans;
(ii) As of the Closing Day with respect to the Initial
Mortgage Loans, the related Subsequent Transfer Date with respect to
any Subsequent Mortgage Loan (unless otherwise specified) and the
applicable Transfer Date with respect to any Qualified Replacement
Mortgage and as of the date any Additional Balance is created, the
information set forth in the Mortgage Loan Schedule for such Mortgage
Loans is true and correct in all material respects;
(iii) As of the Closing Day and any Subsequent Transfer
Date, no more than 1.50% of the related Cut-Off Date Pool Balance of
the Mortgage Loans is secured by Mortgaged Properties located within
any single zip code area. None of the Mortgage Loans consists of
Date-of-Payment Loans;
(iv) The Mortgages and Credit Line Agreements have not
been assigned or pledged, and each Originator is the sole owner and
holder of the Mortgages and Credit Line Agreements free and clear of
any and all liens, claims, encumbrances, participation interests,
equities, pledges, charges or security interests of any nature, and
has full right and authority, under all governmental and regulatory
bodies having jurisdiction over the Class A Noteholder of the
applicable Mortgage Loan, to sell, assign or transfer the same;
(v) As of the Closing Day with respect to the Initial
Mortgage Loans, the Subsequent Transfer Date with respect to the
Subsequent Mortgage Loans and the applicable Transfer Date with
respect to any Qualified Replacement Mortgage, there is no valid
offset, defense or counterclaim of any obligor under any Credit Line
Agreement or. Mortgage. Neither the operation of any of the terms of
each Credit Line Agreement and each Mortgage nor the exercise of any
right thereunder will render either the Credit Line Agreement or the
Mortgage unenforceable, in whole or in part, nor subject to any right
of rescission, set-off, claim, counterclaim or defense, including,
without limitation,
11
<PAGE> 16
the defense of usury and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;
(vi) No Minimum Monthly Payment is more than 59 days
delinquent (measured on a contractual basis); and with respect to the
Initial Mortgage Loans no more than 1.35% (by Initial Cut-Off Date
Pool Balance) were 30-59 days delinquent (measured on a contractual
basis). No Subsequent Mortgage Loan will be more than 59 days
delinquent;
(vii) As of the related Cut-Off Date with respect to
the Mortgage Loans and the applicable Transfer Date with respect to
any Qualified Replacement Mortgage, each Credit Line Agreement and
each Mortgage Loan is an enforceable obligation of the related
Mortgagor, except as the enforceability thereof may be limited by the
bankruptcy, insolvency or similar laws affecting creditors' rights
generally;
(viii) The weighted average remaining term to maturity
of the Initial Mortgage Loans on a contractual basis as of the Initial
Cut-Off Date for the Mortgage Loans is approximately 253 months. On
each date that the Loan Rates have been adjusted, interest rate
adjustments on the Mortgage Loans were made in compliance with the
related Mortgage and Credit Line Agreement and applicable law. Over
the term of each Initial Mortgage Loan, the Loan Rate may not exceed
the related Loan Rate Cap, if any. The Loan Rate Caps for the Initial
Mortgage Loans range between 16.00% and 24.25%. The Initial Mortgage
Loans margins range between 0.00% and 7.75% and the weighted average
margin is approximately 3.32% as of the related Cut-Off Date for the
Initial Mortgage Loans. The Loan Rates on such Initial Mortgage Loans
range between 8.50% and 16.25% and the weighted average Loan Rate is
approximately 11.82%; and
(ix) The Credit Limits on the Initial Mortgage Loans
range between $10,000 and $300,000 with an average of $33,561.98. As
of the Initial Cut-Off Date for the Initial Mortgage Loans, no Initial
Mortgage Loan had a principal balance in excess of approximately
$279,000 and the average principal balance of the Initial Mortgage
Loans is equal to approximately $31,924.84.
(x) Each Mortgage Loan being transferred to the Trust
is a Mortgage;
(xi) Each Subsequent Mortgage Loan complies with the
requirements in Section 2.4 of the Sale and Servicing Agreement,
including without limitation the conditions described in subsections
(c) and (d) of such Section 2.4;
(xii) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include
condominiums and townhouses but shall not include cooperatives or
mobile homes attached to a foundation, or otherwise, or constitutes
other than real property under applicable state law;
12
<PAGE> 17
(xiii) No Mortgage Loan had a Combined Loan-to-Value
Ratio in excess of 100%;
(xiv) As of the Closing Day with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to any
Subsequent Mortgage Loans, each Mortgage is either a valid and
subsisting first or second lien of record on the Mortgaged Property
(subject in the case of any Second Mortgage Loan only to a Senior Lien
on such Mortgaged Property) and subject in all cases to the exceptions
to title set forth in the title insurance policy, with respect to the
related Mortgage Loan, which exceptions are generally acceptable to
banking institutions in connection with their regular mortgage lending
activities, and except for liens for (i) real estate taxes and special
assessments not yet delinquent, (ii) income taxes, (iii) any
covenants, conditions and restrictions, rights of way, easements, and
other matters of public record and such other exceptions to which
similar properties are commonly subject and which do not individually,
or in the aggregate, materially and adversely affect the benefits of
the security intended to be provided by such Mortgage;
(xv) Immediately prior to the transfer and assignment
herein contemplated, each Originator held good and indefeasible title
to, and was the sole owner of, each Mortgage Loan conveyed by such
Originator (including its Cut-Off Date Pool Balance), all monies due
or to become due with respect thereto, and all proceeds of such
Cut-Off Date Pool Balances with respect to the Mortgage Loans is
subject to no liens, charges, mortgages, encumbrances or rights of
others except liens which will be released simultaneously with such
transfer and assignment; and immediately upon the transfer and
assignment herein contemplated, the Indenture Trustee will hold good
and indefeasible title to, and be the sole owner of, each Mortgage
Loan subject to no liens, charges, mortgages, encumbrances or rights
of others except liens which will be released simultaneously with such
transfer and assignment;
(xvi) There is no delinquent tax or assessment lien or
mechanic's lien on any Mortgaged Property, and each Mortgaged Property
is free of substantial damage and is in good repair;
(xvii) Each Mortgage Loan at the time it was made
complied in all material respects with all applicable state and
federal laws and regulations, including, without limitation, the
federal Truth-in-Lending Act and other consumer protection laws, real
estate settlement procedure, usury, equal credit opportunity,
disclosure and recording laws;
(xviii) With respect to each First Mortgage Loan, and, to
the best of the Originator's knowledge, with respect to each Second
Mortgage Loan, a lender's title insurance policy, issued in standard
California Land Title Association form or American Land Title
Association form, or other form acceptable in a particular
jurisdiction by a title insurance company authorized to transact
business in the state in which the related Mortgaged Property is
situated,
13
<PAGE> 18
was issued on the date of origination of the Mortgage Loan and as of
the Cut-Off Date and each applicable Transfer Date with respect to the
Subsequent Mortgage Loan, each such policy is valid and remains in
full force and effect, or a title search or guaranty of title
customary in the relevant jurisdiction was obtained with respect to a
Mortgage Loan as to which no title insurance policy or binder was
issued.
(xix) As of the Closing Day with respect to the
Mortgage Loans and the applicable Transfer Date with respect to any
Subsequent Mortgage Loan, each Credit Line Agreement is the legal,
valid, binding and enforceable obligation of the maker thereof and is
enforceable in accordance with its terms, except only as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law),
and all parties to each Mortgage Loan had full legal capacity to
execute all documents relating to such Mortgage Loan and convey the
estate therein purported to be conveyed;
(xx) The terms of each Credit Line Agreement and each
Mortgage have not been impaired, altered or modified in any respect,
except by a written instrument which has been recorded, if necessary,
to protect the interest of the Purchaser. The substance of any such
alteration or modification is reflected on the related Schedule of
Mortgage Loans and has been approved by the primary mortgage guaranty
insurer, if any;
(xxi) Except as otherwise required by law, pursuant to
the statute under which the related Mortgage Loan was made, or in the
case of Mortgage Loans Originated by Advanta Finance Corp., the
related Credit Line Agreement is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxii) Each Mortgaged Property is located in the state
identified in the Schedule of Mortgage Loans and consists of one or
more parcels of real property with a residential dwelling erected
thereon;
(xxiii) There is no proceeding pending or threatened for
the total or partial condemnation of any Mortgaged Property, nor is
such a proceeding currently occurring, and each Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, flood, tornado
or other casualty, so as to affect adversely the value of the
Mortgaged Property as security for the Mortgage Loan or the use for
which the premises were intended;
(xxiv) With respect to each Second Mortgage Loan, either
(A) no consent for such Mortgage Loan was required by the holder of
the related Senior Lien prior to the making of such Mortgage Loan or
(B) such consent has been obtained and is contained in the related
Mortgage File;
14
<PAGE> 19
(xxv) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by Indenture Trustee's sale and (B)
otherwise by judicial foreclosure. There is no homestead or other
exemption available which materially interferes with the right to sell
the related Mortgaged Property at a Indenture Trustee's sale or the
right to foreclose the related Mortgage;
(xxvi) As of the Closing Day with respect to the
Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans, there is no default, breach, violation or
event of acceleration existing under any Mortgage or the related
Credit Line Agreement and no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration; and
the Sponsor has not waived any default, breach, violation or event of
acceleration;
(xxvii) To the best knowledge of each Originator, all
parties to the Credit Line Agreement and the Mortgage had legal
capacity to execute the Credit Line Agreement and the Mortgage and
each Credit Line Agreement and Mortgage have been duly and properly
executed by such parties;
(xxviii) No selection procedures reasonably believed by
each Originator to be adverse to the interests of the Purchaser was
utilized in selecting the Mortgage Loans;
(xxix) No Mortgagor has been released, in whole or in
part, except in connection with an assumption agreement which has been
approved by the applicable title insurer (to the extent required by
such title insurer) and which is part of the Mortgage File delivered
to the Purchaser;
(xxx) With respect to each Mortgage Loan that is not a
first mortgage loan, the related prior lien requires equal monthly
payments. At the time of origination of each Mortgage Loan that is
not a first mortgage loan, the related prior lien was not more than 30
days delinquent;
(xxxi) All required inspections, licenses and
certificates with respect to the use and occupancy of all occupied
portions of all property securing the Mortgages have been made,
obtained or issued, as applicable;
(xxxii) No more than 81% of the Mortgage Loans are second
mortgage loans;
(xxxiii) With respect to each Mortgage Loan that is not a
first mortgage loan, the related prior lien does not provide for
negative amortization;
15
<PAGE> 20
(xxxiv) With respect to each Mortgage Loan that is not a
first mortgage loan, the maturity date of the Mortgage Loan is prior
to the maturity date of the related prior lien if such prior lien
provides for a balloon payment;
(xxxv) Each Mortgage Loan is secured by a property
having an appraised value of less than $1,500,000;
Section 4.03. Representations and Warranties of Purchaser.
Purchaser hereby makes the following representations and warranties, each of
which representations and warranties (i) is material and being relied upon by
the Originators and (ii) is true in all respects as of the date of this
Agreement:
(i) Purchaser has been duly organized and is validly
existing as a corporation under the laws of the State of Delaware.
(ii) Purchaser has the requisite power and authority
and legal right to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and conditions of,
this Agreement to be performed by it.
(iii) This Agreement has been duly authorized and
executed by Purchaser, is valid, binding and enforceable against
Purchaser in accordance with its terms, and the execution, delivery
and performance by Purchaser of this Agreement does not conflict with
any material term or provision of any other agreement to which
Purchaser is a party or any term or provision of the Certificate of
Incorporation or the By-laws of the Purchaser, or any law, rule,
equation, order, judgment, writ, injunction or decree applicable to
Purchaser of any court, regulatory body, administrative agency or
governmental body having jurisdiction over Purchaser.
(iv) No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority
or court is required under applicable law in connection with the
execution and delivery by Purchaser of this Agreement.
(v) To the best knowledge of Purchaser, there is no
action, proceeding or investigation pending or threatened against
Purchaser before any court, administrative agency or other tribunal
(i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by
this Agreement, or (iii) which is likely to materially and adversely
affect the performance by Purchaser of its obligations under, or the
validity or enforceability of, this Agreement.
(vi) Each purchase of Initial Mortgage Loans and
Subsequent Mortgage Loans hereunder shall constitute a representation
by Purchaser to Originator that Purchaser understands, and that
Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of, its
investment in the relevant Mortgage Loans.
16
<PAGE> 21
Section 4.04. Remedies for Breach of Representations and
Warranties; Repurchase Obligation. It is understood and agreed that the
representations and warranties set forth in Section 4.01 and 4.02 shall survive
each sale of Mortgage Loans to the Purchaser and shall inure to the benefit of
the Purchaser and subsequent transferees notwithstanding any restrictive or
qualified endorsement on any Mortgage Note or Assignment of Mortgage or the
examination or failure to examine any Mortgage Loan File. With respect to the
representations and warranties contained in Sections 4.01 and 4.02 which are
made to the best of the Originator's knowledge or to the actual knowledge of
the Originator, if it is discovered by either the Originator or the Purchaser
that the substance of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan or the Purchaser's interest therein, then notwithstanding the Originator's
lack of knowledge with respect to the inaccuracy at the time the representation
or warranty was made, the Originator shall repurchase the related Mortgage Loan
in accordance with this Section 4.04 as if the applicable representation or
warranty was breached, subject to the terms and conditions of the Sale and
Servicing Agreement. Upon discovery by either the Originator or the Purchaser
of a breach of any of the foregoing representations and warranties which
materially and adversely affects the value of the Mortgage Loans or the
interest of the Purchaser (or which materially and adversely affects the
interests of the Purchaser in the related Mortgage Loan in the case of a
representation and warranty relating to a particular Mortgage Loan), the party
discovering such breach shall give prompt written notice to the others.
Within 60 days of the earlier of either discovery by or notice
to the respective Originator of any breach of a representation or warranty
which materially and adversely affects the value of any Mortgage Loan or the
Purchaser's interest therein, the respective Originator shall use its best
efforts promptly to cure such breach in all material respects and, if such
breach cannot be cured or is not cured or is not being diligently pursued as
evidenced by a notice acceptable to the Purchaser, as evidenced by the
Purchaser's agreement thereto, at the end of such 60-day period, the respective
Originator shall, at the Purchaser's option, either (a) repurchase such
Mortgage Loan at the Repurchase Price, or (b) provide a Qualified Replacement
Mortgage, if such Originator has any such loans available for sale at the time
subject to the terms and conditions of the Sale and Servicing Agreement.
At the time of repurchase or substitution, the Purchaser and
the respective Originator shall arrange for the assignment of such Mortgage
Loan to the respective Originator and the delivery by the Purchaser to the
respective Originator of the related Mortgage Loan Files.
In addition to such cure and repurchase obligation, the
respective Originator shall indemnify the Purchaser and hold it harmless
against any losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments, and other costs and expenses
resulting from any claim, demand, defense or assertion based on or grounded
upon, or resulting from, a breach of the representations and warranties
contained in this Article IV (notwithstanding any limitation in such
representation and warranty as to such Originator's knowledge). It is
17
<PAGE> 22
understood and agreed that the obligations of each Originator set forth in this
Section 4.04 to cure or repurchase a defective Mortgage Loan and to indemnify
the Purchaser as provided in this Section 4.04 constitute the sole remedies of
the Purchaser respecting a breach of the foregoing representations and
warranties.
Any cause of action against the respective Originator relating
to or arising out of the breach of any representations and warranties made in
Sections 4.01 or 4.02 shall accrue as to any Mortgage Loan upon (i) discovery
of such breach by the Purchaser or notice thereof by the respective Originator
to the Purchaser, (ii) failure by the respective Originator to cure such breach
or repurchase such Mortgage Loan as specified above, and (iii) demand upon the
respective Originator by the Purchaser for compliance with the relevant
provisions of this Agreement.
ARTICLE V
Covenants and Warranties of the Originators
So long as this Agreement remains in effect or any Originator
shall have any obligations hereunder, each Originator hereby covenants and
agrees with Purchaser as follows:
Section 5.01. Affirmative Covenants
(a) Each Originator shall do all things necessary to remain
duly incorporated, validly existing and in good standing in its jurisdiction of
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted except where failure to
maintain such authority would not have a material adverse effect on the ability
of such Originator to conduct its business or to perform its obligations under
this Agreement.
(b) At all times during this Agreement, each Originator
shall possess sufficient net capital and liquid assets (or ability to access
the same) to satisfy its obligations as they become due in the normal course of
business.
(c) Each Originator shall permit the Purchaser or its
accountants, attorneys or other agents access to all of the books and records
relating to Mortgage Loans purchased and retained by Purchaser for inspection
and copying during normal business hours at all places where such Originator
conducts business.
Section 5.02. Negative Covenants.
(a) Each Originator shall not assign or attempt to assign
this Agreement or any rights hereunder, without first obtaining the specific
written consent of Purchaser.
18
<PAGE> 23
(b) Each Originator shall not amend its Articles of
Incorporation or By-laws, which amendment shall have or is likely to have an
adverse effect upon Purchaser or its interests under this Agreement, without
the prior written consent of Purchaser.
(c) Each Originator shall not (i) dissolve or terminate
its existence or (ii) transfer any assets to any affiliate except as otherwise
expressly permitted or contemplated hereby.
(d) Except with the written consent of the Purchaser, the
Originators shall not guarantee, endorse or otherwise in any way become or be
responsible for any obligations of any other person, entity or affiliate,
including, without limitation, whether directly or indirectly by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies or services, or maintenance of working capital or other balance sheet
covenants or conditions, or by way of stock purchase, capital contribution,
advance or loan for the purposes of paying or discharging any indebtedness or
obligation of such other person or otherwise; provided, however, that nothing
contained herein shall prevent the Originators from indemnifying their
respective officers, directors and agents pursuant to their respective By-laws
and their Articles of Incorporation.
(e) Each Originator will not commit any act in violation
of applicable laws, or regulations promulgated pursuant thereto that relate to
the Mortgage Loans or that materially and adversely affect the operations or
financial conditions of such Originator.
ARTICLE VI
Sale of Mortgage Loans from the Purchaser to the Trust
Section 6.01. Sale and Servicing Agreement. It is the
intent of each Originator and the Purchaser that with respect to the Mortgage
Loans, the Purchaser shall concurrently sell all of its right, title and
interest to the Mortgage Loans and all other property conveyed to it hereunder
to the Trust pursuant to the Sale and Servicing Agreement.
With respect to such sale, each Originator agrees:
(i) to cooperate fully with the Purchaser and the
Trust with respect to all reasonable requests and due diligence
procedures including participating in meetings with rating agencies,
insurers and such other parties as the Purchaser shall designate and
participating in meetings with the Trust and providing information
reasonably requested by the Trust;
(ii) to execute all other necessary documents to
effect the transactions contemplated therein;
19
<PAGE> 24
(iii) each Originator shall make the representations
and warranties set forth herein regarding such Originator and the
Mortgage Loans as of the date of the transfer to the Trust;
(iv) to deliver to the Purchaser for inclusion in any
prospectus or other offering material such publicly available
information regarding the Originator, its financial condition and the
mortgage loan delinquency, foreclosure and loss experience of its
portfolio as is customarily set forth in a prospectus supplement with
respect to a comparable mortgage pool, the underwriting of mortgage
loans, the servicer, the servicing and collection of mortgage loans,
lending activities and loan sales of the servicer, regulatory matters
and delinquency and loss experience and any additional information
reasonably requested by the Purchaser, or as is otherwise reasonably
requested by the Purchaser and which each Originator is capable of
providing without unreasonable effort or expense, and to indemnify the
Purchaser and its affiliates for material misstatements or omissions
contained in such information;
(v) to deliver to the Purchaser, and to any Person
designated by the Purchaser, such legal documents and in-house
opinions of counsel as are customarily delivered by originators and
reasonably determined by the Purchaser to be necessary in connection
with the transactions contemplated by the Sale and Servicing
Agreement, it being understood that the cost of any opinions of
outside special counsel that may be required shall be the
responsibility of the respective Originator; and
(vi) to cooperate fully with the Purchaser and any
prospective Purchaser with respect to the preparation of Mortgage Loan
documents and other documents and with respect to servicing
requirements reasonably requested by the rating agencies and insurers.
ARTICLE VII
Termination; Additional Remedies
Section 7.01. Termination of Commitment to Purchase. The
agreement of the Purchaser to purchase Mortgage Loans from each Originator
hereunder, and the agreement of each Originator to sell Mortgage Loans
hereunder, shall terminate automatically on the first day of the Rapid
Amortization Period. All other provisions hereof shall continue in force and
effect until the Termination Date.
Section 7.02. Additional Remedies. Upon the occurrence of
a Rapid Amortization Event under the Indenture due to an act or omission of a
Originator (an "Event of Termination"), the Purchaser and its assignees shall
have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of each
applicable jurisdiction and other applicable laws, which rights shall be
cumulative. Without limiting the foregoing, the occurrence of an Event of
Termination shall not deny to the Purchaser or its assignees any remedy in
20
<PAGE> 25
addition to termination of its obligations to make purchases hereunder to which
the Purchaser or its assignee may be otherwise appropriately entitled, whether
by statute or applicable law, at law or in equity.
ARTICLE VIII
Term
This Agreement shall terminate on the Termination Date.
ARTICLE IX
Exclusive Benefit of Parties; Assignment
This Agreement is for the exclusive benefit of the parties
hereto and their respective successors and assigns and shall not be deemed to
give any legal or equitable right to any other person except the Sponsor, the
Trust, the holders of the Class A Notes and the Insurer. This Agreement may
not be assigned by any party hereto without the prior written consent of the
other party hereto except to the Trust.
ARTICLE X
Amendment; Waivers
This Agreement may be amended from time to time only by
written agreement of each Originator and Purchaser with the prior written
consent of the Insurer, which consent shall not be unreasonably withheld. Any
forbearance, failure, or delay by a party in exercising any right, power, or
remedy hereunder shall not be deemed to be a waiver thereof, and any single or
partial exercise by a party of any right, power or remedy hereunder shall not
preclude the further exercise thereof. Every right, power and remedy of a
party shall continue in full force and effect until specifically waived by it
in writing. No right, power or remedy shall be exclusive, and each such right,
power or remedy shall be cumulative and in addition to any other right, power
or remedy, whether conferred hereby or hereafter available at law or in equity
or by statute or otherwise.
ARTICLE XI
Execution in Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which shall constitute
one and the same instrument.
21
<PAGE> 26
ARTICLE XII
Effect of Invalidity of Provisions
In case any one or more of the provisions contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall in no way be affected, prejudiced or disturbed thereby.
ARTICLE XIII
Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its rules
regarding conflict of laws.
ARTICLE XIV
Notices
Any notices, consents, directions, demands and other
communications given under this Agreement (unless otherwise specified herein)
shall be in writing and shall be deemed to have been duly given when personally
delivered at or telecopied to the respective addresses or facsimile numbers, as
the case may be, set forth on the signature page hereof for each Originator and
Purchaser, or to such other address or facsimile number as either party shall
give notice to the other party pursuant to this Section. Notices, consents,
etc., may also be effected by first class mail, postage prepaid sent to the
foregoing addresses and will be effective upon receipt by the intended
recipient.
ARTICLE XV
Entire Agreement
This Agreement, including the Exhibits and Schedules hereto,
contains the entire agreement of the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements between
them, whether oral or written, of any nature whatsoever with respect to the
subject matter hereof.
ARTICLE XVI
Indemnities
Without limiting any other rights which Purchaser or each
Originator may have hereunder or under applicable law, and in addition to any
other indemnity provided hereunder, each Originator hereby agrees to indemnify
Purchaser and its respective
22
<PAGE> 27
officers, directors, agents and employees (each, an "Indemnified Party") from
and against any and all Losses incurred by any of them relating to or resulting
from:
(1) any representation or warranty made by each
Originator (or any officers, employees or agents of such Originator)
under or in connection with this Agreement, any periodic report
required to be furnished thereunder or any other information or
document delivered by such Originator pursuant hereto, which shall
have been false or incorrect in any material respect when made or
deemed made;
(2) the failure by such Originator to (a) comply with any
applicable law, rule or regulation with respect to any Purchase or (b)
perform or observe any material obligation or covenant hereunder; or
(3) the failure by such Originator (if so requested by
Purchaser) to execute and properly file, or any delay in executing and
properly filing, financing statements or other similar instruments or
documents under the Uniform Commercial Code of any applicable
jurisdiction or other applicable laws with respect to the Mortgage
Loans.
Promptly after receipt by an Indemnified Party under this
Article XVI of notice of the commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Article XVI, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability that it may have to any Indemnified Party
otherwise than under this Article XVI. In case any such action is brought
against any Indemnified Party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may elect by written notice delivered to the
Indemnified Party promptly after receiving the aforesaid notice from such
Indemnified Party, to assume the defense thereof, with counsel satisfactory to
such Indemnified Party; provided, however, that if the defendants in any such
action include both the Indemnified Party and the indemnifying party and the
Indemnified Party or parties shall have reasonably concluded that there may be
legal defenses available to it or them and/or other Indemnified Parties that
are different from or additional to those available to the indemnifying party,
the Indemnified Party or parties shall have the right to elect separate counsel
to assert such legal defenses and to otherwise participate in the defense of
such action on behalf of such Indemnified Party or parties. Upon receipt of
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense of such action and approval by the Indemnified Party of
counsel, the indemnifying party will not be liable for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof, unless (i) the Indemnified Party shall have employed separate
counsel in connection with the assertion of legal defenses in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by you in the case of Article XVI, representing the
Indemnified Parties under this Article XVI, who are parties to such action),
(ii) the indemnifying party shall not have employed counsel
23
<PAGE> 28
satisfactory to the Indemnified Party to represent the Indemnified Party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the Indemnified
Party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall only be in respect of the counsel
referred to in such clause (i) or (iii).
ARTICLE XVII
RESPA Obligations
Each Originator agrees to discharge on Purchaser's behalf all
obligations, including, without limitation, all disclosure obligations, which
Purchaser may have under the Real Estate Settlement Procedures Act of 1974, as
amended, in connection with Purchaser's purchases of Mortgage Loans hereunder.
Purchaser agrees to provide each Originator with such information as is
reasonably necessary for each Originator to discharge such obligations and
hereby appoints each Originator as its agent in its name for the purposes of,
and only for the purposes of, performing such obligations. Each Originator
hereby agrees to indemnify Purchaser and its respective officers, directors,
agents and employees from any losses suffered by any such party in connection
with each Originator's obligations under this Article XVII.
ARTICLE XVIII
Survival
All indemnities and undertakings of each Originator and
Purchaser hereunder shall survive the termination of this Agreement.
ARTICLE XIX
Consent to Service
Each party irrevocably consents to the service of process by
registered or certified mail, postage prepaid, to it at its address given
pursuant to Article XIV hereof.
ARTICLE XX
Submission to Jurisdiction; Waiver of Trial by Jury
With respect to any claim arising out of this Agreement each
party irrevocably submits to the exclusive jurisdiction of the courts of the
State of New York and the United States District Court located in the Borough
of Manhattan, City of New York, and each party irrevocably waives any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in any inconvenient forum and
24
<PAGE> 29
further irrevocably waives the right to object, with respect to such claim,
suit, action or proceeding brought in any such court, that such court does not
have jurisdiction over such party; provided that service of process is made as
set forth in Article XIX hereof, or by any other lawful means. To the extent
permitted by applicable law, Purchaser and each Originator each irrevocably
waive all right of trial by jury in any action, proceeding or counterclaim
arising out of or in connection with this Agreement or any matter arising
hereunder.
ARTICLE XXI
Construction
The headings in this Agreement are for convenience only and
are not intended to influence its construction. References to Articles,
Sections, Schedules and Exhibits in this Agreement are to the Articles,
Sections of and Schedules and Exhibits to this Agreement. The Schedules and
Exhibits are hereby incorporated into and form a part of this Agreement. In
this Agreement, the singular includes the plural, the plural the singular, the
words "and" and "or" are used in the conjunctive or disjunctive as the sense
and circumstances may require and the word "including" means "including, but
not limited to." Unless otherwise stated in this Agreement, in the computation
of a period of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each means "to
but excluding."
ARTICLE XXII
Further Agreements
Each Originator and the Purchaser each agree to execute and
deliver to the other such reasonable and appropriate additional documents,
instruments or agreements as may be necessary or appropriate to effectuate the
purposes of this Agreement.
25
<PAGE> 30
IN WITNESS WHEREOF, the Purchaser and each Originator have
caused their names to be signed hereto by their respective officers thereunto
duly authorized, all as of the date first written above.
ADVANTA MORTGAGE CONDUIT SERVICES INC.,
as Purchaser
By:
------------------------------------
Name:
Title:
ADVANTA FINANCE CORP.,
as Originator
By:
------------------------------------
Name:
Title:
ADVANTA NATIONAL BANK,
as Originator
By:
------------------------------------
Name:
Title:
26
<PAGE> 31
Purchase Agreement
EXHIBIT A
[Form of Purchase Request]
Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, California 92127
Fort Washington, PA 19034
Pursuant to Section 2.04 of the Purchase Agreement dated as of
November 1, 1997 between Advanta Finance Corp. and Advanta National Bank (the
"Originators") and you, we hereby offer to sell, transfer and assign to you all
of Originator's right, title and interest in and to the Subsequent Mortgage
Loans identified in the attached schedule on the following date (the "Purchase
Date"): , including any Additional Balances thereto.
Please acknowledge your acceptance of such offer by executing
this Purchase Request in the space provided below and returning it to Advanta
Mortgage Conduit Services, Inc. at _____________________________ by facsimile
with an original acceptance to follow by first class mail.
The failure of Advanta Mortgage Conduit Services, Inc. to
return this Purchase Request, after execution by Advanta Mortgage Conduit
Services, Inc., to the Originators in the manner provided above within three
Business Days prior to the Purchase Date (five business days, if this Purchase
Request was received by you at least two calendar weeks prior to the
above-referenced Purchase Date) shall constitute an acceptance of the offer
communicated hereby.
Very truly yours,
[Originator]
By:
-----------------------------
Name:
Title:
Agreed to and acknowledged
this ____ day of __________, ____.
Advanta Mortgage Conduit Services, Inc.
By:
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
AMBAC ASSURANCE CORPORATION,
and
J.P. MORGAN SECURITIES INC.
INDEMNIFICATION AGREEMENT
ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1997-A
Dated as of November 20, 1997
<PAGE> 2
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall
not be deemed to be part of this Indemnity Agreement. All capitalized terms used
in this Indemnity Agreement and not otherwise defined shall have the meanings
set forth in Article I of this Indemnity Agreement.)
Page
----
Section 1. Defined Terms............................................1
Section 2. Other Definitional Provisions............................1
Section 3. Representations and Warranties of the Underwriter........2
Section 4. Representations and Warranties of the Insurer............2
Section 5. Indemnification..........................................3
Section 6. Amendments, Etc..........................................5
Section 7. Notices..................................................5
Section 8. Severability.............................................6
Section 9. Governing Law............................................6
Section 10. Counterparts............................................6
Section 11. Headings................................................6
(i)
<PAGE> 3
INDEMNIFICATION AGREEMENT dated as of November 20, 1997 (the "Indemnity
Agreement"), by and among AMBAC ASSURANCE CORPORATION, as Insurer, and J.P.
MORGAN SECURITIES INC. (the"Underwriter").
Section 1. Defined Terms. Unless the context clearly requires
otherwise, all capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Sale and Servicing Agreement, the
Insurance Agreement or the Policy. For purposes of this Indemnity Agreement, the
following terms shall have the following meanings:
"Insurance Agreement" means the Insurance and Indemnity Agreement (as
may be amended, modified or supplemented from time to time) dated as of November
20, 1997 by and among the Advanta Mortgage Conduit Services, Inc., as Sponsor,
Advanta Mortgage Corp. USA, as Master Servicer, the Insurer and the Trust, as
Issuer.
"Insurer" means Ambac Assurance Corporation, or any successor thereto,
as issuer of the Policy.
"Insurer Information" has the meaning given such term in Section 4.
"Offering Document" means the Prospectus Supplement, dated November __,
1997, in respect of the Certificates, and any amendment or supplement thereto,
and any other offering document in respect of the Certificates that makes
reference to the Policy.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of November 1, 1997, relating to the Advanta Home Equity Loan
Asset-Backed Notes, Series 1997-A, by and among the Sponsor, the Master Servicer
and the Trustee (as may be amended, modified or supplemented from time to time
as set forth therein).
"Securities Act" means the Securities Act of 1933, including, unless
the context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Underwriter" means J.P. Morgan Securities Inc.
"Underwriter's Information" has the meaning given such term in
Section 3.
Section 2. Other Definitional Provisions. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Indemnity
Agreement shall refer to this Indemnity Agreement as a whole and not to any
particular provision of this Indemnity Agreement, and Section, subsection,
Schedule and Exhibit references are to this Indemnity Agreement unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation."
1
<PAGE> 4
Section 3. Representations and Warranties of the Underwriter. The
Underwriter represent and warrant as of the Closing Date as follows:
(a) Compliance With Laws. The Underwriter will comply in all
material respects with all legal requirements in connection with offers
and sales of the Notes and will make such offers and sales in the
manner to be provided in the Offering Document.
(b) Offering Document. The Underwriter will not use, or
distribute to other broker-dealers for use, any Offering Document in
connection with the offer and sale of the Notes unless such Offering
Document includes such information relating to the Insurer as has been
furnished by the Insurer for inclusion therein and has been approved by
the Insurer.
(c) Underwriter' Information. All material provided by the
Underwriter for inclusion in the Offering Document (as revised from
time to time), shall be true and correct in all material respects, it
being understood and agreed that the only such information furnished by
any Underwriter consists of the following information (collectively,
the "Underwriter's Information"): the information contained under the
heading "Underwriting" in the Offering Document.
Section 4. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Underwriter as follows:
(a) Organization and Licensing. The Insurer is a duly
organized and licensed and validly existing Wisconsin stock insurance
company duly qualified to conduct an insurance business in the State of
New York.
(b) Corporate Power. The Insurer has the corporate power and
authority to issue the Policy and execute this Indemnity Agreement and
to perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. Proceedings legally required for
the issuance of the Policy and the execution, delivery and performance
of this Indemnity Agreement have been taken and all material licenses,
orders, consents or other authorizations or approvals of any
governmental boards or bodies legally required for the enforceability
of the Policy have been obtained; any proceedings not taken and any
licenses, authorizations or approvals not obtained are not material to
the enforceability of the Policy.
(d) Enforceability. The Policy, when issued, and this
Indemnity Agreement will each constitute a legal, valid and binding
obligation of the Insurer, enforceable in accordance with its terms,
subject to insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity and subject to principles of public policy
limiting the right to enforce the indemnification provisions contained
therein and herein, insofar as such provisions relate to
indemnification for liabilities arising under federal securities laws.
2
<PAGE> 5
(e) Financial Information. The balance sheet of the Insurer as
of December 31, 1996 and the related statements of income,
stockholder's equity and cash flows for the two fiscal years ended
December 31, 1996, and the accompanying footnotes, together with an
opinion thereon dated January 30, 1997, 1997 of KPMG Peat Marwick,
independent certified public accountants, a copy of which is
incorporated by reference in the Offering Document, fairly present in
all material respects the financial condition of the Insurer as of such
dates and for the periods covered by such statements in accordance with
generally accepted accounting principles consistently applied. The
balance sheets of the Insurer as of June 30, 1996 and June 30, 1997
fairly present in all material respects the financial condition of the
Insurer as of such date in accordance with generally accepted
accounting principles consistently applied. Since March 31, 1997, there
has been no material change in such financial condition of the Insurer
that would materially and adversely affect its ability to perform its
obligations under the Policy.
(f) Insurer Information. The information in the Offering
Document as of the date hereof under the caption "THE INSURER AND THE
POLICY" (the "Insurer Information") is true and correct in all material
respects and does not contain any untrue statement of a material fact.
(g) Rating. The Insurer is not aware of any facts that if
disclosed to Moody's or Standard & Poor's would be reasonably expected
to result in a downgrade of the rating of the claims paying ability of
the Insurer by either of such Rating Agencies.
(h) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would result in a Material Adverse Change or would
materially and adversely affect its ability to perform its obligations
under the Policy or this Insurance Agreement.
(i) 1933 Act Registration. The Policy is exempt from
registration under the Act.
Section 5. Indemnification.
(a) The Underwriter hereby agrees to pay, and to protect,
indemnify and save harmless, the Insurer and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls
the Insurer within the meaning of either Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act from and against, any
and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or by
reason of any untrue statement of a material fact or an omission to
state a material fact necessary in order to make the statements therein
in light of the circumstances in which they were made not misleading,
contained in the Underwriter's Information or a
3
<PAGE> 6
breach of any of the representations and warranties of the Underwriter
contained in Section 3.
(b) The Insurer agrees to pay, and to protect, indemnify and
save harmless, the Underwriter and its respective officers, directors,
shareholders, employees, agents and each Person, if any, who controls
such Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) of any nature arising
out of or by reason of any untrue statement of a material fact or an
omission to state a material fact necessary in order to make the
statements therein in light of the circumstances in which they were
made not misleading, contained in the Insurer Information or a breach
of any of the representations and warranties of the Insurer contained
in Section 4.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") in respect of which the indemnity provided in
this Section 5(a) or (b) may be sought from any Underwriter, on the one
hand, or the Insurer, on the other (each, an "Indemnifying Party")
hereunder, each such Indemnified Party shall promptly notify the
Indemnifying Party in writing, and the Indemnifying Party shall assume
the defense thereof, including the employment of counsel satisfactory
to the Indemnified Party and the payment of all expenses. The
Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof at the
expense of the Indemnified Party; provided, however, that the fees and
expenses of such separate counsel shall be at the expense of the
Indemnifying Party if (i) the Indemnifying Party has agreed to pay such
fees and expenses, (ii) the Indemnifying Party shall have failed to
assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party, and the Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those
available to the Indemnifying Party (in which case, if the Indemnified
Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of
such action or proceeding on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for the Indemnified
Parties, which firm shall be designated in writing by the Indemnified
Party). The Indemnifying Party shall not be liable for any settlement
of any such action or proceeding effected without its written consent
to the extent that any such settlement shall be prejudicial to the
Indemnifying Party, but, if settled with its written consent, or if
there is a final judgment for the plaintiff in any such action or
proceeding with respect to which the Indemnifying Party shall have
4
<PAGE> 7
received notice in accordance with this subsection (c), the
Indemnifying Party agrees to indemnify and hold the Indemnified Parties
harmless from and against any loss or liability by reason of such
settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party
(other than due to application of this Section), each Indemnifying
Party shall contribute to the losses incurred by the Indemnified Party
on the basis of the relative fault of the Indemnifying Party, on the
one hand, and the Indemnified Party, on the other hand provided, that
no Underwriter shall be liable for any amount in excess of (i) the
excess of the sales prices of the Offered Certificates to the public
over the prices paid therefor by the Underwriter over (ii) the
aggregate amount of any damages which the Underwriter have otherwise
been required to pay in respect of the same or any substantially
similar claim.
The relative fault of each Indemnifying Party, on the
one hand, and each indemnified Party, on the other, shall be determined
by reference to, among other things, whether the breach of, or alleged
breach of, any of its representations and warranties set forth within
the control of, the Indemnifying Party or the Indemnified Party, and
the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such breach.
No person guilty of fraudulent misrepresentation
(within the meaning of Section (11)f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 6. Amendments, Etc. This Indemnity Agreement may be amended,
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto.
Section 7. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Indemnity Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - MBS
Telecopy No.: 212-363-1459
Confirmation: 212-668-0340
5
<PAGE> 8
(b) To any Underwriter:
J.P. Morgan & Co.
60 Wall Street
New York, New York 10260-0060
Attention: Jim Pomposelli
Telecopy No.: 212-648-5251
Confirmation: 212-648-6158
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 8. Severability. In the event that any provision of this
Indemnity Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 9. Governing Law. This Indemnity Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
Section 10. Counterparts. The Indemnity Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 11. Headings. The headings of Sections and the Table of
Contents contained in this Indemnity Agreement are provided for convenience
only. They form no part of this Indemnity Agreement and shall not affect its
construction or interpretation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement, all as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION,
as Insurer
By: /s/Thomas O. Adams
------------------
Name: THOMAS O. ADAMS
---------------
Title: VICE PRESIDENT
---------------
J.P. MORGAN SECURITIES INC.
By: /s/ James Pomposelli
--------------------
Name: JAMES POMPOSELLI
----------------
Title: VICE PRESIDENT
----------------
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ambac Assurance Corporation:
We consent to the incorporation by reference in the registration statement (No.
333-37107) of Advanta Mortgage Conduit Services, Inc. (the "Registrant") and
in the Prospectus Supplement of the Registrant (the "Prospectus Supplement"),
included in the Form 8-K of the Registrant dated November 18, 1997, of our
report dated January 30, 1997 on the consolidated financial statements of Ambac
Assurance Corporation (formerly AMBAC Indemnity Corporation) as of December 31,
1996 and 1995, and for each of the years in the three-year period ended
December 31, 1996, which report appears in the Form 8-K of Ambac Financial
Group, Inc. (formerly AMBAC Inc.) dated March 12, 1997 and to the reference to
our firm under the heading "Experts" in the Prospectus Supplement.
/s/ KPMG PEAT MARWICK LLP
New York, New York
November 18, 1997
