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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
December 18, 1997
Advanta Mortgage Loan Trust 1997-4
(Exact name of registrant as specified in its charter)
New York 333-37107 Application Pending
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
c/o Advanta Mortgage Conduit 92127
Services, Inc. (Zip Code)
Attention: Milton Riseman
16875 West Bernardo Drive
San Diego, California
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (619) 674-1800
- -------------------------------------------------------------------------------
No change
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Advanta Mortgage Conduit Services, Inc. registered an issuance
of $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 Mortgage Loan Trust 1997-4 (the "Registrant" or the "Trust")
issued approximately $900,000,000 in aggregate principal amount of its Mortgage
Loan Asset-Backed Certificates, Series 1997-4 (the "Certificates"), on December
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 Certificates, the forms of which were filed
as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") attached hereto as
Exhibit 4.1, dated as of December 1, 1997, among Advanta Mortgage Conduit
Services, Inc. (the "Company"), Advanta Mortgage Corp. USA, in its capacity as
Master Servicer (the "Master Servicer") and Bankers Trust Company of California,
N.A., in its capacity as Trustee (the "Trustee"). The Certificates consist of
fourteen classes, the Class A-1 Group I Certificates, the Class A-2 Group I
Certificates, the Class A-3 Group I Certificates, the Class A-4 Group I
Certificates, the Class A-5 Group I Certificates, the Class A-6 Group I
Certificates, the Class A-7 Group I Certificates, the Class A-IO Group I
Certificates, the Class A-8 Group II Certificates, the Class A-9 Group II
Certificates (collectively, the "Class A Certificates"), the Class M-1 Group I
Certificates, the Class M-2 Group I Certificates (together, the "Mezzanine
Certificates"), the Class B-1 Group I Certificates (the "Class B Certificates"
and together with the Mezzanine Certificates, the "Subordinate Certificates")
and the Class R Certificates (Residual Interest) (the "Class R Certificates").
The Class A Certificates and the Subordinate Certificates, collectively, are the
"Offered Certificates". The Offered Certificates and the Class R Certificates
are together referred to herein as the "Certificates". The Certificates
initially evidence, in the aggregate, 100% of the undivided beneficial ownership
interests in the Trust.
The assets of the Trust initially will include two investment
pools (each, a "Mortgage Loan Group" or "Group") of closed-end mortgage loans
(the "Mortgage Loans") secured by mortgages or deeds of trust (the "Mortgages")
on one-to-four family residential properties. The Class A Certificates (other
than the Class A-8 and Class A-9 Certificates) and the Subordinate Certificates
represent undivided ownership interests in a pool of fixed-rate Mortgage Loans
secured by Mortgages which may be either in a first or in a junior lien
position. The Class A-8 and Class A-9 Certificates represent undivided ownership
interests in a group of adjustable rate Mortgage Loans secured by Mortgages
which may be either in a first or in a junior lien position.
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Interest distributions on the Offered Certificates are based
on the Certificate Principal Balance thereof and the then applicable
Pass-Through Rate thereof.
The Class A-1 Certificates have an aggregate principal amount
of $146,039,000. The Class A-2 Certificates have an aggregate principal amount
of $91,159,000. The Class A-3 Certificates have an aggregate principal amount of
$33,579,000. The Class A-4 Certificates have an aggregate principal amount of
$59,837,000. The Class A-5 Certificates have an aggregate principal amount of
$15,601,000. The Class A-6 Certificates have an aggregate principal amount of
$41,285,000. The Class A-7 Certificates have an aggregate principal amount of
$50,000,000. The Class A-8 Certificates have an aggregate principal amount of
$98,000,000. The Class A-9 Certificates have an aggregate principal amount of
$302,000,000. The Class M-1 Certificates have an aggregate principal amount of
$17,500,000. The Class M-2 Certificates have an aggregate principal amount of
$30,000,000. The Class B-1 Certificates have an aggregate principal amount of
$15,000,000. No principal payments are distributed with respect to the Class
A-IO Certificates. Interest on the Class A-IO will be distributed and calculated
on the basis of a notional principal balance equal to the aggregate outstanding
Principal Balance of the Class A-7 Certificates (the "Notional Principal
Balance").
As of the Closing Date, the Mortgage Loans had the
characteristics described in the Prospectus dated October 30, 1997 and the
Prospectus Supplement dated December 4, 1997 filed pursuant to Rule 424(b)(5) of
the Act with the Commission.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated December 4, 1997, among
Advanta Mortgage Conduit Services, Inc. and Lehman Brothers Inc., as
Representative of the Underwriters (the "Representative").
4.1 Pooling and Servicing Agreement, dated as of December 1,
1997, among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, and Bankers Trust Company of California,
N.A., as Trustee.
4.2 Master Loan Transfer Agreement, dated June 15, 1997, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta National Bank,
Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic II,
Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey, Advanta
Mortgage Corp. Northeast, Advanta Finance Corp. and Advanta Mortgage Corp. USA
(collectively, the "Affiliated Originators"), Advanta Conduit Receivables Inc.
and Bankers Trust Company of California, N.A., as Trustee.
4.3 Conveyance Agreement, dated December 18, 1997, among
Advanta Mortgage Conduit Services, Inc., the Affiliated Originators, Advanta
Conduit Receivables, Inc. and Bankers Trust Company of California, N.A..
4.4 Class A-8 and Class A-9 Certificate Guaranty Insurance
Policy, dated December 17, 1997 and delivered by Ambac Assurance Corporation.
4.5 Advanta Mortgage Holding Company Guaranty.
10.1 Indemnification Agreement, dated December 18, 1997, among
Ambac Assurance Corporation and the Representative.
23.1 Consent of KPMG Peat Marwick LLP regarding financial
statements of Ambac Assurance Corporation and their report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANTA MORTGAGE LOAN
TRUST 1997-4
By: Advanta Mortgage Conduit Services,
Inc., as Sponsor
By:/s/ Mark T. Dunsheath
---------------------
Name: Mark T. Dunsheath
Title: Vice President
Dated December 18, 1997
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EXHIBIT INDEX
Exhibit No. Description
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1.1 Underwriting Agreement, dated December 4, 1997, among Advanta
Mortgage Conduit Services, Inc. and Lehman Brothers Inc., as
Representative of the Underwriters (the "Representative").
4.1 Pooling and Servicing Agreement, dated as of December 1, 1997,
among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, and Bankers Trust Company
of California, N.A., as Trustee.
4.2 Master Loan Transfer Agreement, dated June 15, 1997, among Advanta
Mortgage Conduit Services, Inc., as Sponsor, Advanta National
Bank, Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp.
Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage
Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta
Finance Corp. and Advanta Mortgage Corp. USA (collectively, the
"Affiliated Originators"), Advanta Conduit Receivables Inc. and
Bankers Trust Company of California, N.A., as Trustee.
4.3 Conveyance Agreement, dated December 18, 1997, among Advanta
Mortgage Conduit Services, Inc., the Affiliated Originators,
Advanta Conduit Receivables, Inc. and Bankers Trust Company of
California, N.A..
4.4 Class A-8 and Class A-9 Certificate Guaranty Insurance Policy,
dated December 17, 1997 and delivered by Ambac Assurance
Corporation.
4.5 Advanta Mortgage Holding Company Guaranty.
10.1 Indemnification Agreement, dated December 18, 1997, among Ambac
Assurance Corporation and the Representative.
23.1 Consent of KPMG Peat Marwick LLP regarding financial statements of
AMBAC Assurance Corporation and their report.
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Exhibit 1.1
Execution Copy
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Mortgage Loan Asset-Backed Certificates,
Series 1997-4
UNDERWRITING AGREEMENT
December 4, 1997
LEHMAN BROTHERS INC.
As Representative of the Underwriters
named in Schedule I
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc. (the "Company") has authorized
the issuance and sale of Mortgage Loan Asset-Backed Certificates, Series 1997-4,
(the "Certificates") consisting of (i) the Class A-1 Fixed Rate Group
Certificates, the Class A-2 Fixed Rate Group Certificates, the Class A-3 Fixed
Rate Group Certificates, the Class A-4 Fixed Rate Group Certificates, the Class
A-5 Fixed Rate Group Certificates, the Class A-6 Fixed Rate Group Certificates,
the Class A-7 Fixed Rate Group Certificates, the Class A-IO Fixed Rate Group
Certificates, the Class A-8 Adjustable Rate Group Certificates and the Class A-9
Adjustable Rate Group Certificates (collectively, the "Class A Certificates"),
(ii) the Class M-1 Certificates (the "Class M-1 Certificates"), (iii) the Class
M-2 Certificates (the "Class M-2 Certificates", and collectively with the Class
M-1 Certificates, the "Mezzanine Certificates"), (iv) the Class B-1 Certificates
(the "Class B Certificates" and collectively with the Mezzanine Certificates,
the "Subordinate Certificates") and (v) the residual class with respect to each
REMIC held by the Trust (the "Class R Certificates"). Only the Class A
Certificates and the Subordinate Certificates (collectively, the "Offered
Certificates") are being offered. The Certificates will be issued by the Advanta
Mortgage Loan Trust 1997-4 (the "Trust"), and will evidence in the aggregate the
entire beneficial interest in a trust estate (the "Trust Estate") consisting
primarily of two segregated pools (the "Mortgage Pools") of closed-end mortgage
loans (the "Mortgage Loans"), and certain related property. The Mortgage Loans
shall have, as of the opening of business the Closing Date (as defined herein),
an aggregate principal balance of approximately $900,000,000. The certificates
are to be issued under a pooling and servicing agreement, to be dated as of
December 1, 1997 (the "Pooling and Servicing Agreement"), among the Company, as
sponsor, Advanta Mortgage Corp. USA, as master servicer, and Bankers Trust
Company of California, N.A., as trustee (the "Trustee").
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On or prior to the date of issuance of the Certificates, the Company
will obtain a guaranty insurance policy (the "Policy") issued by AMBAC Assurance
Corporation (the "Insurer") which will unconditionally and irrevocably guarantee
to the Trustee for the benefit of the holders of the Class A-8 Adjustable Rate
Group Certificates and the Class A-9 Adjustable Rate Group Certificates the
amount by which the sum of the Adjustable Rate Group Interest Distribution
Amount and the related Subordination Deficit, if any, exceeds the Group II Total
Available Funds.
Only the Offered Certificates are being purchased by the Underwriters.
The Certificates are more fully described in a Registration Statement
which the Company has furnished to the Underwriters. Capitalized terms used but
not defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
Simultaneously with the execution of the Pooling and Servicing
Agreement, the Company will enter into a conveyance agreement pursuant to the
Master Loan Transfer Agreement dated as of June 15, 1997 among the Trustee, and
the Affiliated Originators named thereon (together, the "Purchase Agreement"),
pursuant to which the Affiliated Originators will transfer to the Company all of
their right, title and interest in and to the Mortgage Loans as of the Closing
Date.
The Company will also enter into an Indemnification Agreement (the
"Indemnification Agreement") dated as of December 18, 1997, among the
Underwriters, the Company and the Insurer, governing the liability of the
several parties with respect to the losses resulting from material misstatements
or omissions contained in the Prospectus Supplement.
SECTION I Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the Underwriters that:
A. Registration Statements on Form S-3, as amended by
Post-Effective Amendments thereto, have (i) been prepared by the
Company in conformity with the requirements of the Securities Act of
1933 (the "Securities Act") and the rules and regulations (the
"Rules and Regulations") of the United States Securities and
Exchange Commission (the "Commission") thereunder, (ii) been filed
with the Commission under the Securities Act and (iii) become
effective under the Securities Act. Copies of such Registration
Statements have been delivered by the Company to the Underwriters.
As used in this Agreement, "Effective Time" means the date and the
time as of which such Registration Statements, or the most recent
post-effective amendment thereto, if any, was declared effective by
the Commission; "Effective Date" means the date of the Effective
Time; "Preliminary Prospectus" means each prospectus included in
such Registration Statements, or amendments thereof, including a
preliminary prospectus supplement which, as completed, is proposed
to be used in connection with the sale of the Offered Certificates
and any prospectus filed with the Commission by the Company with the
consent of the Underwriters pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration
statements, as amended by all Post-Effective Amendments thereto
heretofore filed with the Commission, at the Effective Time,
including any documents incorporated by reference therein at such
time; and "Prospectus" means such final prospectus, as first
supplemented by a prospectus supplement (the "Prospectus
Supplement") relating to the Offered Certificates, as first filed
with the Commission pursuant to paragraph (1) or (4) of Rule 424(b)
of the Rules and Regulations. Reference made herein to any
Preliminary Prospectus or to the Prospectus shall be deemed to refer
to and include
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any documents incorporated by reference therein pursuant to Item 12
of Form S-3 under the Securities Act, as of the date of such
Preliminary Prospectus or the Prospectus, as the case may be, and
any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
any document filed under the Securities Exchange Act of 1934 (the
"Exchange Act") after the date of such Preliminary Prospectus or the
Prospectus, as the case may be, and incorporated by reference in
such Preliminary Prospectus or the Prospectus, as the case may be;
and any reference to any amendment to the Registration Statement
shall be deemed to include any report of the Company filed with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
after the Effective Time that is incorporated by reference in the
Registration Statement. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus.
There are no contracts or documents of the Company which are
required to be filed as exhibits to the Registration Statement
pursuant to the Securities Act or the Rules and Regulations which
have not been so filed or incorporated by reference therein on or
prior to the Effective Date of the Registration Statements. The
conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
To the extent that any Underwriter (i) has provided to the Company
Collateral term sheets (as hereinafter defined) that such
Underwriter has provided to a prospective investor, the Company has
filed such Collateral term sheets as an exhibit to a report on Form
8-K within two business days of its receipt thereof, or (ii) has
provided to the Company Structural term sheets or Computational
Materials (each as defined below) that such Underwriter has provided
to a prospective investor, the Company will file or cause to be
filed with the Commission a report on Form 8-K containing such
Structural term sheet and Computational Materials, as soon as
reasonably practicable after the date of this Agreement, but in any
event, not later than the date on which the Prospectus is filed with
the Commission pursuant to Rule 424 of the Rules and Regulations.
B. The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement
or the Prospectus will, when they become effective or are filed with
the Commission, as the case may be, conform in all respects to the
requirements of the Securities Act and the Rules and Regulations.
The Registration Statement, as of the Effective Date thereof and of
any amendment thereto, did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
The Prospectus as of its date, and as amended or supplemented as of
the Closing Date (as hereinafter defined) does not and will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as
to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity with
written information furnished to the Company in writing by the
Underwriters expressly for use therein.
C. The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements
of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and
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none of such documents contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and any further documents so filed and incorporated by reference in
the Prospectus, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all
material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
D. Since the respective dates as of which information is given
in the Prospectus, there has not been any material adverse change in
the general affairs, management, financial condition, or results of
operations of the Company, otherwise than as set forth or
contemplated in the Prospectus as supplemented or amended as of the
Closing Date.
E. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the conduct of its
business requires such qualification, and has all power and
authority necessary to own or hold its properties, to conduct the
business in which it is engaged and to enter into and perform its
obligations under this Agreement, the Pooling and Servicing
Agreement, the Indemnification Agreement and the Purchase Agreement,
and to cause the Certificates to be issued.
F. There are no actions, proceedings or investigations pending
before or threatened by any court, administrative agency or other
tribunal to which the Company is a party or of which any of its
properties is the subject (a) which if determined adversely to the
Company would have a material adverse effect on the business or
financial condition of the Company, (b) which asserts the invalidity
of this Agreement, the Pooling and Servicing Agreement, the
Indemnification Agreement, the Purchase Agreement, or the
Certificates, (c) which seeks to prevent the issuance of the
Certificates or the consummation by the Company of any of the
transactions contemplated by the Pooling and Servicing Agreement,
the Indemnification Agreement, the Purchase Agreement or this
Agreement, as the case may be, or (d) which might materially and
adversely affect the performance by the Company of its obligations
under, or the validity or enforceability of, the Pooling and
Servicing Agreement, the Indemnification Agreement, the Purchase
Agreement, this Agreement or the Certificates.
G. This Agreement has been, and the Pooling and Servicing
Agreement, the Indemnification Agreement and the Purchase Agreement
when executed and delivered as contemplated hereby and thereby will
have been, duly authorized, executed and delivered by the Company,
and this Agreement constitutes, and the Pooling and Servicing
Agreement, the Indemnification Agreement and the Purchase Agreement
when executed and delivered as contemplated herein, will constitute,
legal, valid and binding instruments enforceable against the Company
in accordance with their respective terms, subject as to
enforceability to (x) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors'
rights generally, (y) general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law),
and (z) with respect to rights of
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indemnity under this Agreement, the Indemnification Agreement and
limitations of public policy under applicable securities laws.
H. The execution, delivery and performance of this Agreement,
the Pooling and Servicing Agreement, the Indemnification Agreement
and the Purchase Agreement by the Company and the consummation of
the transactions contemplated hereby and thereby, and the issuance
and delivery of the Certificates do not and will not conflict with
or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company is a party, by which the Company is bound or to which any of
the property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or by-laws of the
Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company
or any of its properties or assets.
I. Arthur Andersen LLP are independent public accountants with
respect to the Company as required by the Securities Act and the
Rules and Regulations.
J. The direction by the Company to the Trustee to execute,
authenticate, issue and deliver the Certificates has been duly
authorized by the Company, and assuming the Trustee has been duly
authorized to do so, when executed, authenticated, issued and
delivered by the Trustee in accordance with the Pooling and
Servicing Agreement, the Certificates will be validly issued and
outstanding and will be entitled to the benefits provided by the
Pooling and Servicing Agreement.
K. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of
the United States is required for the issuance of the Certificates
and the sale of the Offered Certificates to the Underwriters, or the
consummation by the Company of the other transactions contemplated
by this Agreement, the Pooling and Servicing Agreement, the
Indemnification Agreement and the Purchase Agreement, except such
consents, approvals, authorizations, registrations or qualifications
as may be required under State securities or Blue Sky laws in
connection with the purchase and distribution of the Offered
Certificates by the Underwriters or as have been obtained.
L. The Company possesses all material licenses, certificates,
authorities or permits issued by the appropriate State, Federal or
foreign regulatory agencies or bodies necessary to conduct the
business now conducted by it and as described in the Prospectus, and
the Company has not received notice of any proceedings relating to
the revocation or modification of any such license, certificate,
authority or permit which if decided adversely to the Company would,
singly or in the aggregate, materially and adversely affect the
conduct of its business, operations or financial condition.
M. At the time of execution and delivery of the Pooling and
Servicing Agreement, the Company will: (i) have good title to the
interest in the Mortgage Loans conveyed by the Affiliated
Originators, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest (collectively,
"Liens"); (ii) not have assigned to any person any of its right,
title or interest in the Mortgage Loans, in the Purchase Agreement,
in the Pooling and Servicing
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Agreement or in the Offered Certificates being issued pursuant
thereto; and (iii) have the power and authority to sell its interest
in the Mortgage Loans to the Trustee and to sell the Offered
Certificates to the Underwriters. Upon execution and delivery of the
Pooling and Servicing Agreement by the Trustee, the Trustee will
have acquired beneficial ownership of all of the Company's right,
title and interest in and to the Mortgage Loans. Upon delivery to
the Underwriters of the Offered Certificates, the Underwriters will
have good title to the Offered Certificates, free of any Liens.
N. As of the opening of business on December 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. Neither the Company nor the Trust created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of
such term under the Investment Company Act of 1940 (the "1940 Act")
and the rules and regulations of the Commission thereunder.
P. At the Closing Date, the Certificates and the Pooling and
Servicing Agreement will conform in all material respects to the
descriptions thereof contained in the Prospectus.
Q. At the Closing Date, the Offered Certificates shall have
been rated in the highest rating category by at least two nationally
recognized rating agencies.
R. Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of this Agreement, the
Pooling and Servicing Agreement, the Indemnification Agreement, the
Purchase Agreement and the Certificates have been paid or will be
paid at or prior to the Closing Date.
S. At the Closing Date, each of the representations and
warranties of the Company set forth in the Pooling and Servicing
Agreement will be true and correct in all material respects.
Any certificate signed by an officer of the Company and delivered to the
Representative or counsel for the Underwriters in connection with an offering of
the Offered Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section I are made.
SECTION II Purchase and Sale. The commitment of the Underwriters to
purchase the Offered Certificates pursuant to this Agreement shall be deemed to
have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth. The
Company agrees to instruct the Trustee to issue and agrees to sell to the
Underwriters, and the Underwriters agree (except as provided in Sections X and
XI hereof) to purchase from the Company the aggregate initial principal amounts
of Offered Certificates set forth on Schedule A, at the purchase price or prices
set forth in Schedule A.
The obligations of the Underwriters hereunder to purchase the Offered
Certificates of each Class shall be several and not joint. Each Underwriter's
obligation shall be to purchase the aggregate principal amount of Offered
Certificates of the related Class as set forth in Schedule B. The right of the
Company and a non-defaulting Underwriter shall be as set forth in Section XIII
hereof.
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SECTION III Delivery and Payment. Delivery of and payment for the
Offered Certificates to be purchased by the Underwriters shall be made at the
offices of Dewey Ballantine LLP, 1301 Sixth Avenue, New York, New York 10019, or
at such other place as shall be agreed upon by the Representative and the
Company at 10:00 A.M. New York City time on December 18, 1997 or at such other
time or date as shall be agreed upon in writing by the Representative and the
Company (such date being referred to as the "Closing Date"). Payment shall be
made to the Company by wire transfer of same day funds payable to the account of
the Company. Delivery of the Offered Certificates shall be made to the
Representative for the accounts of the Underwriters against payment of the
purchase price thereof. The Offered Certificates shall be in such denominations
and registered in such names as the Representative may request in writing at
least two business days prior to the Closing Date. The Offered Certificates will
be made available for examination by the Representative no later than 2:00 p.m.
New York City time on the first business day prior to the Closing Date.
SECTION IV Offering by the Underwriters. It is understood that, subject
to the terms and conditions hereof, the Underwriters proposes to offer the
Offered Certificates for sale to the public as set forth in the Prospectus.
SECTION V Covenants of the Company. The Company agrees as follows:
A. To prepare the Prospectus in a form approved by the
Representative and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than the Commission's close of
business on the second business day following the execution and
delivery of this Agreement; to make no further amendment or any
supplement to the Registration Statement or to the Prospectus prior
to the Closing Date except as permitted herein; to advise the
Representative, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Representative
with copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and, for
so long as the delivery of a prospectus is required in connection
with the offering or sale of the Offered Certificates, to promptly
advise the Representative of its receipt of notice of the issuance
by the Commission of any stop order or of: (i) any order preventing
or suspending the use of any Preliminary Prospectus or the
Prospectus; (ii) the suspension of the qualification of the Offered
Certificates for offering or sale in any jurisdiction; (iii) the
initiation of or threat of any proceeding for any such purpose; (iv)
any request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information. In the event of the issuance of any stop order or of
any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification,
the Company promptly shall use its best efforts to obtain the
withdrawal of such order or suspension.
B. To furnish promptly to the Representative and to counsel for
the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and of each amendment thereto
filed with the Commission, including all consents and exhibits filed
therewith.
C. To deliver promptly to the Representative such number of the
following documents as the Representative shall reasonably request:
(i) conformed
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copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case including
exhibits); (ii) each Preliminary Prospectus, the Prospectus and any
amended or supplemented Prospectus; and (iii) any document
incorporated by reference in the Prospectus (including exhibits
thereto). If the delivery of a prospectus is required at any time
prior to the expiration of nine months after the Effective Time in
connection with the offering or sale of the Offered Certificates,
and if at such time any events shall have occurred as a result of
which the Prospectus as then amended or supplemented would include
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such same period to amend or supplement
the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with
the Securities Act or the Exchange Act, the Company shall notify the
Representative and, upon the Representative's request, shall file
such document and prepare and furnish without charge to the
Underwriters and to any dealer in securities as many copies as the
Representative may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which corrects
such statement or omission or effects such compliance, and in case
any of the Underwriters are required to deliver a Prospectus in
connection with sales of any of the Offered Certificates at any time
nine months or more after the Effective Time, upon the request of
the Representative but at the expense of such Underwriter, the
Company shall prepare and deliver to such Underwriter as many copies
as such Underwriter may reasonably request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the
Securities Act.
D. To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the
Representative, be required by the Securities Act or requested by
the Commission.
E. Prior to filing with the Commission any (i) Preliminary
Prospectus, (ii) amendment to the Registration Statement or
supplement to the Prospectus, or document incorporated by reference
in the Prospectus, or (iii) Prospectus pursuant to Rule 424 of the
Rules and Regulations, to furnish a copy thereof to the
Representative and counsel for the Underwriters and obtain the
consent of the Representative to the filing.
F. To make generally available to holders of the Offered
Certificates as soon as practicable, but in any event not later than
90 days after the close of the period covered thereby, a statement
of earnings of the Trust (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158) and covering a
period of at least twelve consecutive months beginning not later
than the first day of the first fiscal quarter following the Closing
Date.
G. To use its best efforts, in cooperation with the
Representative, to qualify the Offered Certificates for offering and
sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Representative may
designate, and maintain or cause to be maintained such
qualifications in effect for as long as may be required for the
distribution of the Offered Certificates. The
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<PAGE> 9
Company will file or cause the filing of such statements and reports
as may be required by the laws of each jurisdiction in which the
Offered Certificates have been so qualified.
H. Not, without the Representative's prior written consent, to
publicly offer or sell or contract to sell any mortgage pass-through
securities, collateralized mortgage obligations or other similar
securities representing interests in or secured by other
mortgage-related assets originated or owned by the Company for a
period of 5 business days following the commencement of the offering
of the Offered Certificates to the public.
I. So long as the Offered Certificates shall be outstanding, to
deliver to the Representative as soon as such statements are
furnished to the Trustee: (i) the annual statement as to compliance
delivered to the Trustee pursuant to Section 8.16 of the Pooling and
Servicing Agreement; (ii) the annual statement of a firm of
independent public accountants furnished to the Trustee pursuant to
Section 8.17 of the Pooling and Servicing Agreement; and (iii) the
Monthly Statement furnished to the Certificateholders pursuant to
Section 7.8 of the Pooling and Servicing Agreement.
J. To apply the net proceeds from the sale of the Offered
Certificates in the manner set forth in the Prospectus.
SECTION VI Conditions to the Underwriters' Obligations. The obligations
of the Underwriters to purchase the Offered Certificates pursuant to this
Agreement are subject to: (i) the accuracy on and as of the Closing Date of the
representations and warranties on the part of the Company herein contained; (ii)
the performance by the Company of all of their respective obligations hereunder;
and (iii) the following conditions as of the Closing Date:
A. The Representative shall have received confirmation of the
effectiveness of the Registration Statement. No stop order
suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission.
Any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus shall
have been complied with.
B. None of the Underwriters shall have discovered and disclosed
to the Company on or prior to the Closing Date that the Registration
Statement or the Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact or omits to state a fact
which, in the opinion of Dewey Ballantine LLP, counsel for the
Underwriters, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
C. All corporate proceedings and other legal matters relating
to the authorization, form and validity of this Agreement, the
Pooling and Servicing Agreement, the Purchase Agreement, the
Indemnification Agreement, the Offered Certificates, the
Registration Statement and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all respects to counsel for the
Underwriters, and the Company shall have furnished to such counsel
all documents and information that they may reasonably request to
enable them to pass upon such matters.
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<PAGE> 10
D. The Representative shall have received the favorable opinion
of Dewey Ballantine LLP, special counsel to the Company with respect
to the following items, dated the Closing Date, to the effect that:
1. The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, and is qualified to do business in each state necessary to
enable it to perform its obligations as Sponsor under the Pooling
and Servicing Agreement. The Company has the requisite power and
authority to execute and deliver, engage in the transactions
contemplated by, and perform and observe the conditions of, this
Agreement, the Pooling and Servicing Agreement, the Indemnification
Agreement and the Purchase Agreement.
2. This Agreement, the Certificates, the Pooling and Servicing
Agreement, the Indemnification Agreement and the Purchase Agreement
have been duly and validly authorized, executed and delivered by the
Company, all requisite corporate action having been taken with
respect thereto, and each (other than the Certificates) constitutes
the valid, legal and binding agreement of the Company.
3. Neither the transfer of the Mortgage Loans to the Trust, the
issuance or sale of the Certificates nor the execution, delivery or
performance by the Company of the Pooling and Servicing Agreement,
this Agreement, the Indemnification Agreement or the Purchase
Agreement (A) conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default
under, (i) any term or provision of the certificate of incorporation
or bylaws of the Company; (ii) any term or provision of any material
agreement, contract, instrument or indenture, to which the Company
is a party or is bound and known to such counsel; or (iii) any
order, judgment, writ, injunction or decree of any court or
governmental agency or body or other tribunal having jurisdiction
over the Company and known to such counsel; or (B) results in, or
will result in the creation or imposition of any lien, charge or
encumbrance upon the Trust Estate or upon the Certificates, except
as otherwise contemplated by the Pooling and Servicing Agreement.
4. The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment with respect to
each Mortgage is sufficient to fully transfer to the Trustee for the
benefit of the Owners all right, title and interest of the Company
in the Note and Mortgage, as noteholder and mortgagee or assignee
thereof, subject to any exceptions set forth in such opinion, and
will be sufficient to permit the Trustee to avail itself of all
protection available under applicable law against the claims of any
present or future creditors of the Company and to prevent any other
sale, transfer, assignment, pledge or other encumbrance of the
Mortgage Loans by the Company from being enforceable.
5. No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental
agency or body or other tribunal is required under the laws of the
State of New York, for the execution, delivery and performance of
the Pooling and Servicing Agreement, this Agreement, the
Indemnification Agreement, the Purchase Agreement or the offer,
issuance, sale or delivery of the Certificates or the consummation
of any other transaction contemplated thereby by the Company, except
such which have been obtained.
6. There are no actions, proceedings or investigations, to such
counsel's knowledge, pending or threatened against the Company
before any court,
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governmental agency or body or other tribunal (i) asserting the
invalidity of the Pooling and Servicing Agreement, the
Indemnification Agreement, this Agreement, the Purchase Agreement or
the Certificates, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by the Pooling and Servicing Agreement, the
Indemnification Agreement, or this Agreement, (iii) which would
materially and adversely affect the performance by the Company of
obligations under, or the validity or enforceability of, the Pooling
and Servicing Agreement, the Indemnification Agreement, the
Certificates, the Purchase Agreement or this Agreement or (iv) that
would adversely affect the status of the Trust Estate as a "real
estate mortgage investment conduit" ("REMIC") as such term is
defined in the Internal Revenue Code of 1986, as amended.
7. To the best of the knowledge of such counsel, the Commission
has not issued any stop order suspending the effectiveness of the
Registration Statement or any order directed to any prospectus
relating to the Certificates (including the Prospectus), and has not
initiated or threatened any proceeding for that purpose.
8. The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which
such counsel need express no opinion), including the Incorporated
Documents, as of the date on which the Registration Statement was
declared effective and as of the date hereof, comply as to form in
all material respects with the requirements of the 1933 Act and the
rules and regulations thereunder and the Exchange Act and the rules
and regulations thereunder, and such counsel does not know of any
amendment to the Registration Statement required to be filed, or of
any contracts, indentures or other documents of a character required
to be filed as an exhibit to the Registration Statement or required
to be described in the Registration Statement which has not been
filed or described as required.
9. Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the registration
of the Trust created by such Agreement under the Investment Company
Act of 1940 is presently required.
10. The statements in the Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES," "THE POOLING AND SERVICING
AGREEMENT" and the statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE CERTIFICATES," to the extent
such statements purport to summarize certain provisions of the
Certificates or of the Pooling and Servicing Agreement, are fair and
accurate in all material respects.
11. The statements in the Prospectus and Prospectus Supplement
set forth under the captions "ERISA CONSIDERATIONS," "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," and the statements in the
Prospectus set forth under the caption "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS AND RELATED MATTERS," to the extent that they
constitute matters of federal, New York or California law, or
federal, New York or California legal conclusions provide a fair and
accurate summary of such law or conclusions.
12. Assuming that (a) the Trustee causes the Trust created
under the Pooling and Servicing Agreement to elect, as the Trustee
has covenanted to do in the Pooling and Servicing Agreement, to be
treated as a REMIC and (b) the parties to the Pooling and Servicing
Agreement comply with the terms thereof, the Trust will be treated
as a REMIC, the Offered Certificates issued pursuant to the Pooling
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<PAGE> 12
and Servicing Agreement will be treated as the "regular interests"
in the REMIC and the Class R Certificates issued pursuant to the
Pooling and Servicing Agreement will be treated as the sole
"residual interest" in the REMIC. The Trust will not be subject to
tax upon its income or assets by any taxing authority of the State
of New York or New York City or of the State of California (except
that no opinion need be expressed with respect to any minimum tax).
13. Such opinion shall also relate to comparable matters with
respect to the Affiliated Originators and Advanta Mortgage Holding
Company.
14. No information has come to such counsel's attention which
causes them to believe that the Prospectus (other than the financial
statement and other financial and statistical data contained
therein, as to which such counsel need express no opinion), as of
the date thereof, contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
15. Such other matters as the Representative may reasonably
request.
In rendering its opinions, the counsel described above may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinions may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Company.
E. The Representative shall have received letters, including
bring-down letters, from Arthur Andersen LLP, dated on or before the
Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters, to the effect that
they have performed certain specified procedures requested by the
Representative with respect to the information set forth in the
Prospectus and certain matters relating to the Company.
F. The Offered Certificates shall have received the ratings
listed on Schedule A hereto, and such ratings shall not have been
rescinded or downgraded. The Representative and counsel for the
Underwriters shall have received copies of any opinions of counsel
supplied to the rating organizations relating to any matters with
respect to the Certificates. Any such opinions shall be dated the
Closing Date and addressed to the Underwriters or accompanied by
reliance letters to the Underwriters or shall state that the
Underwriters may rely upon them.
G. The Representative shall have received from the Company a
certificate, signed by the president, a senior vice president or a
vice president of the Company, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Registration Statement, the Pooling and Servicing Agreement and this
Agreement and that, to the best of his or her knowledge based upon
reasonable investigation:
1. the representations and warranties of the Company in this
Agreement, as of the Closing Date, and in the Pooling and Servicing
Agreement, the Indemnification Agreement, the Purchase Agreement and
in all related agreements, as of the date specified in such
agreements, are true and correct, and the Company has complied with
all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to the Closing Date;
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2. there are no actions, suits or proceedings pending, or to
the best of such officer's knowledge, threatened against or
affecting the Company which if adversely determined, individually or
in the aggregate, would be reasonably likely to adversely affect the
Company's obligations under the Pooling and Servicing Agreement, the
Indemnification Agreement, this Agreement or the Purchase Agreement
in any material way; and no merger, liquidation, dissolution or
bankruptcy of the Company is pending or contemplated;
3. the information contained in the Registration Statement and
the Prospectus relating to the Company, the Mortgage Loans or the
servicing procedures of it or its affiliates or subservicer is true
and accurate in all material respects and nothing has come to his or
her attention that would lead such officer to believe that the
Registration Statement or Prospectus includes any untrue statement
of a material fact or omits to state a material fact necessary to
make the statements therein not misleading;
4. the information set forth in the Schedule of Mortgage Loans
required to be furnished pursuant to the Pooling and Servicing
Agreement is true and correct in all material respects;
5. there has been no amendment or other document filed
affecting the articles of incorporation or bylaws of the Company
since 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 Company under the laws of the State of
Delaware;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole,
from September 30, 1997;
7. on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in
rating the direction of which has not been indicated, in the rating,
if any, accorded the Company or in any rating accorded any
securities of the Company, if any, by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act; and
8. each person who, as an officer or representative of the
Company, signed or signs the Registration Statement, the Pooling and
Servicing Agreement, the Indemnification Agreement, this Agreement,
or any other document delivered pursuant hereto, on the date of such
execution, or on the Closing Date, as the case may be, in connection
with the transactions described in the Pooling and Servicing
Agreement, the Indemnification Agreement, the Purchase Agreement and
this Agreement was, at the respective times of such signing and
delivery, and is now, duly elected or appointed, qualified and
acting as such officer or representative, and the signatures of such
persons appearing on such documents are their genuine signatures.
The Company shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and bylaws which
are in full force and effect on the date of such certificate and a certified
true copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
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H. The Representative shall have received a favorable opinion
of counsel to the Trustee, dated the Closing Date and in form and
substance satisfactory to the Representative, to the effect that:
1. the Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of
the United States and has the power and authority to enter into and
to take all actions required of it under the Pooling and Servicing
Agreement;
2. the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the Pooling
and Servicing Agreement constitutes the legal, valid and binding
obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, except as enforceability thereof may be
limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the
Trustee, and (B) general principles of equity regardless of whether
such enforcement is sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the
part of the Trustee in connection with its execution and delivery of
the Pooling and Servicing Agreement or the performance of its
obligations thereunder;
4. the Certificates have been duly executed, authenticated and
delivered by the Trustee; and
5. the execution and delivery of, and performance by the
Trustee of its obligations under, the Pooling and Servicing
Agreement do not conflict with or result in a violation of any
statute or regulation applicable to the Trustee, or the charter or
bylaws of the Trustee, or to the best knowledge of such counsel, any
governmental authority having jurisdiction over the Trustee or the
terms of any indenture or other agreement or instrument to which the
Trustee is a party or by which it is bound.
In rendering such opinion, such counsel may rely, as to matters of fact,
on certificates of responsible officers of the Company, the Trustee and public
officials. Such opinion may also assume the due authorization, execution and
delivery of the instruments and documents referred to therein by the parties
thereto other than the Trustee.
I. The Representative shall have received from the Trustee a
certificate, signed by the President, a senior vice president or a
vice president of the Trustee, dated the Closing Date, to the effect
that each person who, as an officer or representative of the
Trustee, signed or signs the Certificates, the Pooling and Servicing
Agreement or any other document delivered pursuant hereto, on the
date hereof or on the Closing Date, in connection with the
transactions described in the Pooling and Servicing Agreement was,
at the respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
J. The Policy relating to the Certificates shall have been duly
executed and issued at or prior to the Closing Date and shall
conform in all material respects to the description thereof in the
Prospectus.
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K. The Representative shall have received a favorable opinion
of in-house counsel to the Insurer, dated the Closing Date and in
form and substance satisfactory to counsel for the Underwriters, to
the effect that:
1. The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of
Wisconsin. The Insurer is validly licensed to do business in New
York and is authorized to issue the Policy and perform its
obligations under the Policy in accordance with the terms thereof.
2. The execution and delivery by the Insurer of the Policy, and
the Indemnification Agreement are within the corporate power of the
Insurer and have been authorized by all necessary corporate action
on the part of the Insurer; the Policy has been duly executed and is
the valid and binding obligation of the Insurer enforceable in
accordance with its terms except that the enforcement of the Policy
may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws
affecting creditors' rights generally and by general principles of
equity.
3. The Insurer is authorized to deliver the Indemnification
Agreement, and such agreement has been duly executed and delivered
and constitute the legal, valid and binding obligations of the
Insurer enforceable in accordance with its terms except that the
enforcement of the Indemnification Agreement may be limited by laws
relating to bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and by public policy
considerations relating to indemnification for securities law
violations.
4. No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part
of the Insurer, the lack of which would adversely affect the
validity or enforceability of the Policy; to the extent required by
applicable legal requirements that would adversely affect validity
or enforceability of the Policy, the form of the Policy has been
filed with, and approved by, all governmental authorities having
jurisdiction over the Insurer in connection with the Policy.
5. The Policy is not required to be registered under the
Securities Act.
6. The information set forth in the Prospectus Supplement under
the captions "CREDIT ENHANCEMENT", "THE CLASS A-8 AND CLASS A-9
INSURER" and "THE CLASS A-8 AND CLASS A-9 INSURANCE POLICY" insofar
as such statements constitute a description of the Policy,
accurately summarizes the Policy.
In rendering this opinion, such counsel may rely, as to matters of fact,
on certificates of responsible officers of the Company, the Trustee, the Insurer
and public officials. Such opinion may assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Insurer.
L. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in
rating the direction of which has not been indicated, in the rating,
if any, accorded the Insurer's claims paying ability by any
"nationally recognized statistical rating organization," as such
term is defined for purposes of the 1933 Act.
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M. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in
rating the direction of which has not been indicated, in the rating,
if any, accorded the Company or in any rating accorded any
securities of the Company, if any, by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act.
N. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since
September 30, 1997, of (A) the Company and its subsidiaries or (B)
the Insurer, that is in the Representative's judgment material and
adverse and that makes it in the Representative's judgment
impracticable to market the Offered Certificates on the terms and in
the manner contemplated in the Prospectus.
O. The Representative shall have received from the Insurer a
certificate, signed by the president, a senior vice president or a
vice president of the Insurer, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Policy, the Indemnification Agreement and the related documents and
that, to the best of his or her knowledge based on reasonable
investigation:
1. There are no actions, suits or proceedings pending or
threatened against or affecting the Insurer which, if adversely
determined, individually or in the aggregate, would adversely affect
the Insurer's performance under the Policy or the Indemnification
Agreement;
2. Each person who as an officer or representative of the
Insurer, signed or signs the Policy, the Indemnification Agreement
or any other document delivered pursuant hereto, on the date
thereof, or on the Closing Date, in connection with the transactions
described in this Agreement was, at the respective times of such
signing and delivery, and is now, duly elected or appointed,
qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their
genuine signatures;
3. The information contained in the Prospectus Supplement under
the captions "CREDIT ENHANCEMENT", "THE CLASS A-8 and CLASS A-9
INSURER" and "THE CLASS A-8 and CLASS A-9 INSURANCE POLICY" is true
and correct in all material respects and does not omit to state a
material fact with respect to the description of the Policy or the
ability of the Insurer to meet its payment obligations under the
Policy;
4. The tables regarding the Insurer's capitalization set forth
under the caption "THE CLASS A-8 and CLASS A-9 INSURER" presents
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,
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<PAGE> 17
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 bylaws,
all of which are in full force and effect on the date of such certificate.
P. The Representative shall have received from Dewey Ballantine
LLP, special counsel to the Company, a survey in form and substance
satisfactory to the Representative, indicating the requirements of
applicable local law which must be complied with in order to
transfer and service the Mortgage Loans pursuant to the Pooling and
Servicing Agreement and the Company shall have complied with all
such requirements.
Q. The Representative shall have received from Dewey Ballantine
LLP, special counsel to the Underwriters, such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of the
Certificates, the Prospectus and such other related matters as the
Representative shall reasonably require.
R. The Representative and counsel for the Underwriters shall
have received copies of any opinions of counsel to the Company
supplied to the Trustee relating to matters with respect to the
Certificates. Any such opinions shall be dated the Closing Date and
addressed to the Underwriters or accompanied by reliance letters to
the Underwriters or shall state the Underwriters may rely thereon.
S. The Representative shall have received such further
information, certificates and documents as the Representative may
reasonably have requested not fewer than three (3) full business
days prior to the Closing Date.
T. There shall have been executed and delivered by Advanta
Mortgage Holding Company, the corporate parent of the Company
("AMHC"), a letter agreement with the Trustee and the Insurer,
pursuant to which AMHC agrees to become jointly and severally liable
with the Company and Advanta Mortgage Corp. USA for the payment of
the Joint and Several Obligations (as defined in such letter
agreement).
17
<PAGE> 18
U. There shall have been executed and delivered by AMHC, the
corporate parent of the Company, a letter agreement with the
Underwriters substantially in the form of Exhibit A hereto.
V. Prior to the Closing Date, counsel for the Underwriters
shall have been furnished with such documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon
the issuance and sale of the Offered Certificates as herein
contemplated and related proceedings or in order to evidence the
accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein
contained, and all proceedings taken by the Company in connection
with the issuance and sale of the Certificates as herein
contemplated shall be satisfactory in form and substance to the
Representative and counsel for the Underwriters.
W. Subsequent to the execution and delivery of this Agreement
none of the following shall have occurred: (i) trading in securities
generally on the New York Stock Exchange, the American Stock
Exchange or the over-the-counter market shall have been suspended or
minimum prices shall have been established on either of such
exchanges or such market by the Commission, by such exchange or by
any other regulatory body or governmental authority having
jurisdiction; (ii) a banking moratorium shall have been declared by
Federal or state authorities; (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation
of hostilities involving the United States or there shall have been
a declaration of a national emergency or war by the United States;
or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect
of international conditions on the financial markets of the United
States shall be such) as to make it, in the judgment of the
Representative, impractical or inadvisable to proceed with the
public offering or delivery of the Certificates on the terms and in
the manner contemplated in the Prospectus.
X. The Certificates shall have received the ratings set forth
on Schedule A hereto.
If any condition specified in this Section VI shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representative by notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
SECTION VII Payment of Expenses. The Company agrees to pay: (a) the
costs incident to the authorization, issuance, sale and delivery of the Offered
Certificates and any taxes payable in connection therewith; (b) the costs
incident to the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), the Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus or any document incorporated by reference therein,
all as provided in this Agreement; (d) the costs of reproducing and distributing
this Agreement; (e) the fees and expenses of qualifying the Offered Certificates
under the securities laws of the several jurisdictions as provided in Section
V(G) hereof and of preparing, printing and distributing a Blue Sky Memorandum
and a Legal Investment Survey (including related
18
<PAGE> 19
fees and expenses of counsel to the Underwriters); (f) any fees charged by
securities rating services for rating the Offered Certificates; (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 Company; provided that,
except as provided in this Section VII, the Underwriters shall pay their own
costs and expenses, including half of the costs and expenses of Dewey Ballantine
LLP, which is to be split evenly among the Underwriters, any transfer taxes on
the Offered Certificates which they may sell and the expenses of advertising any
offering of the Offered Certificates made by the Underwriters.
If this Agreement is terminated by the Representative, in accordance
with the provisions of Section VI or Section X, the Company shall reimburse the
Underwriters for their respective reasonable out-of-pocket expenses, including
fees and disbursements of Dewey Ballantine LLP, counsel for the Underwriters.
SECTION VIII Indemnification and Contribution
A. The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls such Underwriter within the meaning of
Section 15 of the Securities Act from and against any and all loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of the Offered Certificates), to which such
Underwriter or any such controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
(iii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or (iv) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and shall reimburse such Underwriter and each such
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Prospectus or the
Registration Statement in reliance upon and in conformity with written
information (including any Derived Information) furnished to the Company through
the Representative specifically for inclusion therein unless such untrue
statement or alleged untrue statement or omission or alleged omission was
derived from an inaccuracy or omission in the Company-Provided Information; and
provided, further, that as to any Preliminary Prospectus this indemnity shall
not inure to the benefit of any Underwriter or any controlling person on account
of any loss, claim, damage, liability or action arising from the sale of the
Offered Certificates to any person by such Underwriter if such Underwriter
failed to send or give a copy of the Prospectus, as amended or supplemented, to
that person within the time required by the Securities Act, and the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact in the Preliminary Prospectus was
corrected in the Prospectus, unless such failure resulted from non-compliance by
the Company with Section V(C). For purposes of the last proviso to the
immediately preceding sentence, the term "Prospectus" shall not be deemed to
include the documents incorporated therein by reference, and none of the
Underwriters shall be obligated to send or give any supplement or amendment to
any document incorporated therein by reference to any person other than a person
to whom such Underwriter had delivered such incorporated document or documents
in response to a written request therefor. The foregoing indemnity agreement is
in
19
<PAGE> 20
addition to any liability which the Company may otherwise have to any
Underwriters or any controlling person of such Underwriter.
B. Each Underwriter agrees severally, and not jointly to indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act against any and
all loss, claim, damage or liability, or any action in respect thereof, to which
the Company or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus or (iv) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
(excluding any Derived Information which is covered in paragraph (E) below)
furnished to the Company by or on behalf of such Underwriter specifically for
inclusion therein, and shall reimburse the Company and any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by the Company or any director, officer or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred. The
foregoing indemnity agreement is in addition to any liability which any
Underwriter may otherwise have to the Company or any such director, officer or
controlling person.
C. Promptly after receipt by any indemnified party under this Section
VIII of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section VIII, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section VIII except to the extent it has
been materially prejudiced by such failure, and provided, further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section
VIII.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section VIII for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
Any indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party 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
20
<PAGE> 21
satisfactory to the indemnified party, in which case, if such indemnified party
notifies the indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party, it being understood, however, the indemnifying party shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to local
counsel) at any time for all such indemnified parties, which firm shall be
designated in writing by the Underwriters, if the indemnified parties under this
Section VIII consist of the Underwriters or any of their controlling persons, or
by the Company, if the indemnified parties under this Section VIII consist of
the Company or any of the Company's directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section VIII(A) and (B), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
D. Each Underwriter agrees to deliver to the Company a copy of its
Derived Information no later than one business day prior to the date such
information is required to be filed, pursuant to the No-Action Letters (as
defined herein), with the Commission on Form 8-K.
E. Each Underwriter agrees, assuming all Company-Provided Information
(defined below) is accurate and complete in all material respects, to severally
and not jointly indemnify and hold harmless the Company, each of the Company's
officers and directors and each person who controls the Company within the
meaning of Section 15 of the Securities Act against any and all losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of a material fact contained in the Derived Information
provided by such Underwriter, or arise out of or are based upon the omission or
alleged omission to state therein, when read in conjunction with the Prospectus,
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party for
any legal or other expenses reasonably incurred by him, her or it in connection
with investigating or defending or preparing to defend any such loss, claim,
damage, liability or action as such expenses are incurred. The obligations of
each of the Underwriters under this Section VIII(E) shall be in addition to any
liability which such Underwriter may otherwise have.
The procedures set forth in Section VIII(C) shall be equally applicable
to this Section VIII(E).
21
<PAGE> 22
F. For purposes of this Section VIII, the term "Derived Information"
means such portion, if any, of the information delivered to the Company pursuant
to Section VIII(D) for filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into account
information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
(iii) is of the type of information defined as Collateral term
sheets, Structural term sheets or Computational Materials (as
such terms are interpreted in the No-Action Letters).
"Company-Provided Information" means any computer tape furnished to the
Underwriters by the Company concerning the Mortgage Loans comprising the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall have
the respective meanings assigned to them in the February 13, 1995 letter (the
"PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the SEC staff's response thereto, were
publicly available February 17, 1995). The term "Collateral term sheet" as used
herein includes any subsequent Collateral term sheet that reflects a substantive
change in the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder letter" and
together with the PSA Letter, the "No-Action Letters") of Brown & Wood on behalf
of Kidder, Peabody & Co., Inc. (which letter, and the SEC staff's response
thereto, were publicly available May 20, 1994).
G. If the indemnification provided for in this Section VIII shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section VIII(A) or (B) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Offered Certificates or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law or if the indemnified party
failed to give the notice required under Section VIII(C), in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations.
The relative benefits of the Underwriters and the Company shall be
deemed to be in such proportion so that the Underwriters are responsible for
that portion represented by the percentage that the underwriting discount
appearing on the cover page of the Prospectus bears to the public offering price
appearing on the cover page of the Prospectus.
The relative fault of the Underwriters and the Company shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by one of the Underwriters, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission and other equitable
considerations.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section VIII(G) were to be
determined by pro rata allocation or by any
22
<PAGE> 23
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section VIII(G) shall be deemed to include,
for purposes of this Section VIII(G), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim.
In no case shall any Underwriter be responsible for any amount in excess
of the underwriting discount applicable to the Certificates purchased by such
Underwriter hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
H. The Underwriters severally confirm that the information set forth (i)
in the Prospectus Supplement relating to market making and (ii) in the fourth
paragraph under the caption "Underwriting" in the Prospectus Supplement,
together with the Derived Information, is correct and constitutes the only
information furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
SECTION IX Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Underwriters or controlling
persons thereof, or by or on behalf of the Company and shall survive delivery of
any Offered Certificates to the Underwriters.
SECTION X Termination of Agreement. The Representative may terminate
this Agreement immediately upon notice to the Company, at any time at or prior
to the Closing Date if any of the events or conditions described in Section
VI(W) of this Agreement shall occur and be continuing. In the event of any such
termination, the covenant set forth in Section V(G), the provisions of Section
VII, the indemnity agreement set forth in Section VIII, and the provisions of
Sections IX and XIII shall remain in effect.
SECTION XI Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A. if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., as
Representative of the Underwriters, Three World Financial Center,
New York, New York, 10285, Attention: Syndicate Registration
Department (Fax: 212-528-8822);
B. if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive, San Diego, California 92127 Attention:
General Counsel (Fax: 619- 674-3592).
SECTION XII Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriters and
the Company, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the representations, warranties, indemnities and agreements contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control the Underwriters within the meaning of Section 15 of the
Securities Act, and for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Securities Act.
23
<PAGE> 24
Nothing in this Agreement is intended or shall be construed to give any person,
other than the persons referred to in this Section XII, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
SECTION XIII Default by One of the Underwriters. If one of the
Underwriters shall fail on the Closing Date to purchase the Offered Certificates
which it is obligated to purchase hereunder (the "Defaulted Certificates"), the
remaining Underwriters (the "Non-Defaulting Underwriter"), shall have the right,
but not the obligation within one (1) Business Day thereafter, to make
arrangements to purchase all, but not less than all, of the Defaulted
Certificates upon the terms herein set forth; if, however, the Non-Defaulting
Underwriter shall not have completed such arrangements within such one (1)
Business Day period, then this Agreement shall terminate without liability on
the part of the Non-Defaulting Underwriter.
No action taken pursuant to this Section XIII shall relieve the
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Non-Defaulting Underwriter or the Company shall
have the right to postpone the Closing Date for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
SECTION XIV Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement, or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Certificates and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
SECTION XV Definition of the Term "Business Day". For purposes of this
Agreement, "Business Day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
SECTION XVI GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND SHALL BE
CONSTRUED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION XVII Counterparts. This Agreement may be executed in
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
SECTION XVIII Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
SECTION XIX Representations of Underwriters. The Representative will
act for the several Underwriters in connection with the transactions
contemplated by this Agreement, and any action under this Agreement taken by the
Representative will be binding upon all of the Underwriters.
24
<PAGE> 25
If the foregoing correctly sets forth the agreement between the Company and the
Underwriters, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT SERVICES INC.
By: /s/ Mark T. Dunsheath
----------------------------------
Name: Mark T. Dunsheath
Title: Vice President
CONFIRMED AND ACCEPTED, as of
the date first above written:
LEHMAN BROTHERS INC.
as Representative of the Underwriters
By: /s/ William E. Lighten
Name: William E. Lighten
Title: Managing Director
[Underwriting Agreement]
25
<PAGE> 26
<TABLE>
<CAPTION>
==========================================================================================
SCHEDULE A
- ------------------------------------------------------------------------------------------
Class Required Ratings Initial Principal Coupon Purchase Price
S&P/Moody's Amount of Offered to Underwriters
Certificates Purchased disregarding
by Underwriters accrued interest
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 AAA/Aaa $146,039,000 * 99.750000%
- ------------------------------------------------------------------------------------------
Class A-2 AAA/Aaa $91,159,000 6.53% 99.734375%
- ------------------------------------------------------------------------------------------
Class A-3 AAA/Aaa $33,579,000 6.55% 99.734375%
- ------------------------------------------------------------------------------------------
Class A-4 AAA/Aaa $59,837,000 6.66% 99.718750%
- ------------------------------------------------------------------------------------------
Class A-5 AAA/Aaa $15,601,000 6.72% 99.750000%
- ------------------------------------------------------------------------------------------
Class A-6 AAA/Aaa $41,285,000 7.10% 99.734375%
- ------------------------------------------------------------------------------------------
Class A-7 AAA/Aaa $50,000,000 6.63% 99.734375%
- ------------------------------------------------------------------------------------------
Class A-IO AAAr/Aaa ** 5.00% 10.799164%
- ------------------------------------------------------------------------------------------
Class A-8 AAA/Aaa $98,000,000 * 99.750000%
- ------------------------------------------------------------------------------------------
Class A-9 AAA/Aaa $302,000,000 * 99.750000%
- ------------------------------------------------------------------------------------------
Class M-1 AA/Aa2 $17,500,000 7.04% 99.718750%
- ------------------------------------------------------------------------------------------
Class M-2 A/A2 $30,000,000 7.24% 99.734375%
- ------------------------------------------------------------------------------------------
Class B-1 BBB/Baa2 $15,000,000 7.54% 99.734375%
==========================================================================================
</TABLE>
*Floating
**Notional Balance
26
<PAGE> 27
SCHEDULE B
Class A-1 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 36,512,000
J.P. Morgan Securities, Inc. $ 36,509,000
Morgan, Stanley & Co. Incorporated $ 36,509,000
Prudential Securities Incorporated $ 36,509,000
Class A-2 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 45,581,000
J.P. Morgan Securities, Inc. $ 22,789,000
Morgan, Stanley & Co. Incorporated $ 0
Prudential Securities Incorporated $ 22,789,000
Class A-3 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 8,397,000
J.P. Morgan Securities, Inc. $ 8,394,000
Morgan, Stanley & Co. Incorporated $ 8,394,000
Prudential Securities Incorporated $ 8,394,000
Class A-4 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 14,960,000
J.P. Morgan Securities, Inc. $ 14,959,000
Morgan, Stanley & Co. Incorporated $ 14,959,000
Prudential Securities Incorporated $ 14,959,000
27
<PAGE> 28
Class A-5 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 3,901,000
J.P. Morgan Securities, Inc. $ 3,900,000
Morgan, Stanley & Co. Incorporated $ 3,900,000
Prudential Securities Incorporated $ 3,900,000
Class A-6 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 10,322,000
J.P. Morgan Securities, Inc. $ 10,321,000
Morgan, Stanley & Co. Incorporated $ 10,321,000
Prudential Securities Incorporated $ 10,321,000
Class A-7 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 2,530,000
J.P. Morgan Securities, Inc. $ 12,500,000
Morgan, Stanley & Co. Incorporated $ 22,470,000
Prudential Securities Incorporated $ 12,500,000
Class A-IO Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $0*
* No principal payments are distributed with respect to the Class A-IO
Certificates. Interest will be distributed and calculated on the basis of the
Notional Principal Balance of the Class A-7 Certificates. Lehman Brothers Inc.
is the sole underwriter with respect to the Class A-IO Certificates.
Class A-8 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 24,500,000
J.P. Morgan Securities, Inc. $ 24,500,000
Morgan, Stanley & Co. Incorporated $ 24,500,000
Prudential Securities Incorporated $ 24,500,000
28
<PAGE> 29
Class A-9 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 75,500,000
J.P. Morgan Securities, Inc. $ 75,500,000
Morgan, Stanley & Co. Incorporated $ 75,500,000
Prudential Securities Incorporated $ 75,500,000
Class M-1 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 4,375,000
J.P. Morgan Securities, Inc. $ 4,375,000
Morgan, Stanley & Co. Incorporated $ 4,375,000
Prudential Securities Incorporated $ 4,375,000
Class M-2 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 7,500,000
J.P. Morgan Securities, Inc. $ 7,500,000
Morgan, Stanley & Co. Incorporated $ 7,500,000
Prudential Securities Incorporated $ 7,500,000
Class B-1 Certificates
Underwriters Principal Amount
- ------------ ----------------
Lehman Brothers Inc. $ 3,750,000
J.P. Morgan Securities, Inc. $ 3,750,000
Morgan, Stanley & Co. Incorporated $ 3,750,000
Prudential Securities Incorporated $ 3,750,000
29
<PAGE> 30
EXHIBIT A
As of December __, 1997
Lehman Brothers Inc.
As Representative of the Underwriters
named in Schedule I
Re: Underwriting Agreement dated December 4, 1997 (the "Underwriting
Agreement") between Advanta Mortgage Conduit Services, Inc.
("Advanta") and Lehman Brothers Inc. (the "Representative") and
Indemnification Agreement dated as of December 18, 1997 (the
"Indemnification Agreement") among AMBAC Assurance Corporation
(the "Insurer"), Advanta and the Representative
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement and the Indemnification Agreement
(together, the "Designated Agreements"), Advanta has undertaken certain
financial obligations with respect to the indemnification of the Underwriters
and the Insurer with respect to the Registration Statement, the Prospectus and
the Prospectus Supplement described in the Designated Agreements. Any financial
obligations of Advanta under the Designated Agreements, whether or not
specifically enumerated in this paragraph, are hereinafter referred to as the
"Joint and Several Obligations"; provided, however, that "Joint and Several
Obligations" shall mean only the financial obligations of Advanta under the
Designated Agreements (including the payment of money damages for a breach of
any of Advanta's obligations under the Designated Agreements, whether financial
or otherwise) but shall not include any obligations not relating to the payment
of money.
As a condition of their respective executions of the Underwriting
Agreement and of the Indemnification Agreement, the Underwriters and the Insurer
have required the undersigned, Advanta Mortgage Holding Company ("AMHC"), the
parent corporation of Advanta, to acknowledge its joint-and-several liability
with Advanta for the payment of the Joint and Several Obligations under the
Designated Agreements.
Now, therefore, the Underwriters, the Insurer and AMHC do hereby agree
that:
(i) AMHC hereby agrees to be absolutely and unconditionally
jointly and severally liable with Advanta to the Underwriters
for the 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 Underwriters
by Advanta or another affiliate of AMHC.
<PAGE> 31
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING COMPANY
By:__________________________________
Name: Mark T. Dunsheath
Title: Vice President
LEHMAN BROTHERS INC.
as Representative of the Underwriters
By:__________________________________
Name:
Title:
AMBAC ASSURANCE CORPORATION
By:__________________________________
Name:
Title:
[AMHC Guaranty]
<PAGE> 32
SCHEDULE I
Lehman Brothers Inc.
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
<PAGE> 1
EXHIBIT 4.1
Execution Copy
POOLING AND SERVICING AGREEMENT
Relating to
ADVANTA MORTGAGE LOAN TRUST
1997-4
Among
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
Dated as of December 1, 1997
<PAGE> 2
TABLE OF CONTENTS
(Not a Part of this Agreement)
<TABLE>
<CAPTION>
Page
<S> <C>
Parties..................................................................................................1
Recitals.................................................................................................1
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION.............................................................2
SECTION 1.1. DEFINITIONS........................................................................2
Accepted Servicing Practices.......................................................................2
Account............................................................................................2
Accrual Period.....................................................................................2
Addition Notice....................................................................................2
Advanta Mortgage Files.............................................................................2
Advanta Servicing Fee..............................................................................2
Affiliated Originators.............................................................................3
Aggregate Certificate Principal Balance............................................................3
Agreement..........................................................................................3
AMHC...............................................................................................3
Appraised Value....................................................................................3
Authorized Officer.................................................................................3
Balloon Loan.......................................................................................3
Business Day.......................................................................................3
Capitalized Interest Account.......................................................................3
Certificate........................................................................................3
Certificate Account................................................................................3
Certificate Insurance Policy.......................................................................3
Certificate Principal Balance......................................................................4
Civil Relief Act...................................................................................4
Civil Relief Act Shortfalls........................................................................4
Class..............................................................................................4
Class A Certificate................................................................................4
Class A Certificate Principal Balance..............................................................4
Class A Current Interest...........................................................................5
Class A Distribution Amount........................................................................5
Class A Interest Carry Forward Amount..............................................................5
Class A-1 Certificate..............................................................................5
Class A-1 Certificate Principal Balance............................................................5
Class A-1 Certificate Termination Date.............................................................5
Class A-1 Current Interest.........................................................................5
Class A-1 Distribution Amount......................................................................5
Class A-1 Interest Carry Forward Amount............................................................5
Class A-1 Pass-Through Rate........................................................................6
Class A-2 Certificate..............................................................................6
Class A-2 Certificate Principal Balance............................................................6
Class A-2 Certificate Termination Date.............................................................6
Class A-2 Current Interest.........................................................................6
Class A-2 Distribution Amount......................................................................6
Class A-2 Interest Carry Forward Amount............................................................6
Class A-2 Pass-Through Rate........................................................................6
Class A-3 Certificate..............................................................................6
Class A-3 Certificate Principal Balance............................................................6
Class A-3 Certificate Termination Date.............................................................6
Class A-3 Current Interest.........................................................................7
Class A-3 Distribution Amount......................................................................7
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
Class A-3 Interest Carry Forward Amount............................................................7
Class A-3 Pass-Through Rate........................................................................7
Class A-4 Certificate..............................................................................7
Class A-4 Certificate Principal Balance............................................................7
Class A-4 Certificate Termination Date.............................................................7
Class A-4 Current Interest.........................................................................7
Class A-4 Distribution Amount......................................................................7
Class A-4 Interest Carry Forward Amount............................................................7
Class A-4 Pass-Through Rate........................................................................8
Class A-5 Certificate..............................................................................8
Class A-5 Certificate Principal Balance............................................................8
Class A-5 Certificate Termination Date.............................................................8
Class A-5 Current Interest.........................................................................8
Class A-5 Distribution Amount......................................................................8
Class A-5 Interest Carry Forward Amount............................................................8
Class A-5 Pass-Through Rate........................................................................8
Class A-3 Certificate..............................................................................8
Class A-3 Certificate Principal Balance............................................................8
Class A-3 Certificate Termination Date.............................................................8
Class A-3 Current Interest.........................................................................9
Class A-3 Distribution Amount......................................................................9
Class A-3 Interest Carry Forward Amount............................................................9
Class A-6 Pass-Through Rate........................................................................9
Class A-3 Certificate..............................................................................9
Class A-3 Certificate Principal Balance............................................................9
Class A-3 Certificate Termination Date.............................................................9
Class A-3 Current Interest.........................................................................9
Class A-3 Distribution Amount......................................................................9
Class A-3 Interest Carry Forward Amount............................................................9
Class A-5 Lockout Distribution Amount.............................................................10
Class A-5 Lockout Percentage......................................................................10
Class A-5 Lockout Pro Rata Distribution Amount....................................................10
Class A-7 Pass-Through Rate.......................................................................10
Class A-6 Certificate.............................................................................10
Class A-6 Certificate Principal Balance...........................................................10
Class A-6 Certificate Termination Date............................................................10
Class A-6 Current Interest........................................................................10
Class A-6 Distribution Amount.....................................................................10
Class A-6 Distribution Amount.....................................................................11
Full Interest Distribution Amount.................................................................11
Class A-6 Interest Carry Forward Amount...........................................................11
Class A-8 Interest Distribution Amount............................................................11
Class A-8 Interest Shortfall......................................................................11
Class A-6 Pass-Through Rate.......................................................................11
Class A-8 Principal Distribution Amount...........................................................11
Class A-8 and A-9 Applied Realized Loss Amount....................................................11
Class A-8 and Class A-9 Certificate Insurer.......................................................11
Class A-8 and Class A-9 Certificate Insurer.......................................................11
Class A-6 Certificate.............................................................................12
Class A-6 Certificate Principal Balance...........................................................12
Class A-6 Certificate Termination Date............................................................12
Class A-6 Current Interest........................................................................12
Class A-6 Distribution Amount.....................................................................12
Formula Rate......................................................................................12
Class A-6 Distribution Amount.....................................................................12
Class A-6 Interest Carry Forward Amount...........................................................12
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
Class A-9 Interest Distribution Amount............................................................12
Class A-9 Interest Shortfall......................................................................12
Class A-6 Pass-Through Rate.......................................................................13
Class A-9 Principal Distribution Amount...........................................................13
Class A-IO Certificate............................................................................13
Class A-IO Notional Certificate Principal Balance.................................................13
Class A-IO Current Interest.......................................................................13
Class A-IO Distribution Amount....................................................................13
Class A-IO Interest Carry Forward Amount..........................................................13
Class A-IO Pass-Through Rate......................................................................13
Class B-1 Applied Realized Loss Amount............................................................13
Class B-1 Certificate.............................................................................13
Class B-1 Certificate Principal Balance...........................................................13
Class B-1 Certificate Termination Date............................................................14
Class B-1 Current Interest........................................................................14
Class B-1 Distribution Amount.....................................................................14
Class B-1 Interest Carry Forward Amount...........................................................14
Class B-1 Pass-Through Rate.......................................................................14
Class B-1 Principal Distribution Amount...........................................................14
Class B-1 Realized Loss Amortization Amount.......................................................14
Class M-1 Applied Realized Loss Amount............................................................14
Class M-1 Certificate.............................................................................15
Class M-1 Certificate Principal Balance...........................................................15
Class M-1 Certificate Termination Date............................................................15
Class M-1 Current Interest........................................................................15
Class M-1 Distribution Amount.....................................................................15
Class M-1 Interest Carry Forward Amount...........................................................15
Class M-1 Pass-Through Rate.......................................................................15
Class M-1 Principal Distribution Amount...........................................................15
Class M-1 Realized Loss Amortization Amount.......................................................15
Class M-2 Applied Realized Loss Amount............................................................16
Class M-2 Certificate.............................................................................16
Class M-2 Certificate Principal Balance...........................................................16
Class M-2 Certificate Termination Date............................................................16
Class M-2 Current Interest........................................................................16
Class M-2 Distribution Amount.....................................................................16
Class M-2 Interest Carry Forward Amount...........................................................16
Class M-2 Pass-Through Rate.......................................................................16
Class M-2 Principal Distribution Amount...........................................................16
Class M-2 Realized Loss Amortization Amount.......................................................17
Class R Certificate...............................................................................17
Clean-Up Call Date................................................................................17
Code..............................................................................................17
Combined Loan-to-Value Ratio......................................................................17
Commitment........................................................................................17
Compensating Interest.............................................................................17
Conduit Acquisition Trust.........................................................................17
Conduit Mortgage Files............................................................................17
Control Party.....................................................................................17
Coupon Rate.......................................................................................17
Current Interest..................................................................................17
Cut-Off Date......................................................................................18
Date-of-Payment Loan..............................................................................18
Delinquency Advance...............................................................................18
Delinquent........................................................................................18
Delivery Order....................................................................................18
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C>
Depository........................................................................................18
Designated Depository Institution.................................................................18
Designated Residual Owner.........................................................................18
Determination Date................................................................................19
Direct Participant" or "DTC Participant...........................................................19
Disqualified Organization.........................................................................19
Document Delivery Requirements....................................................................19
Eligible Investments..............................................................................19
Event of Default..................................................................................19
FDIC..............................................................................................19
File..............................................................................................19
Final Determination...............................................................................19
First Mortgage Loan...............................................................................19
FNMA..............................................................................................19
Formula Interest Shortfall........................................................................19
Freddie Mac.......................................................................................19
Funding Period....................................................................................19
Gross Margin......................................................................................20
Group.............................................................................................20
Group I...........................................................................................20
Group I Applied Realized Loss Amount..............................................................20
Group I Available Funds Cap Rate..................................................................20
Group I Certificates..............................................................................20
Group I Class A Principal Distribution Amount.....................................................20
Group I Class A-1 Available Funds Cap Rate........................................................20
Group I Cumulative Realized Losses................................................................21
Group I Delinquency Trigger Event.................................................................21
Group I Extra Principal Distribution Amount.......................................................21
Group I Interest Amount Available.................................................................21
Group I Interest Remittance Amount................................................................21
Group I Monthly Excess Cashflow Amount............................................................21
Group I Monthly Excess Interest Amount............................................................22
Group I Monthly Remittance Amount.................................................................22
Group I Net Weighted Average Coupon Rate..........................................................22
Group I Overcollateralization Amount..............................................................22
Group I Overcollateralization Deficiency..........................................................22
Group I Overcollateralization Release Amount......................................................22
Group I Principal Distribution Amount.............................................................23
Group I Principal Remittance Amount...............................................................23
Group I Senior Enhancement Percentage.............................................................23
Group I Senior Specified Enhancement Percentage...................................................23
Group I Stepdown Date.............................................................................23
Group I Targeted Overcollateralization Amount.....................................................23
Group I Weighted Average Pass-Through Rate\.......................................................24
Group II..........................................................................................24
Group II Applied Realized Loss Amount.............................................................24
Group II Available Funds..........................................................................24
Group II Available Funds Cap Rate.................................................................24
Group II Certificate Principal Balance............................................................24
Group II Certificates.............................................................................24
Group II Cumulative Realized Losses...............................................................25
Group II Deficiency Amount........................................................................25
Group II Extra Principal Distribution Amount......................................................25
Group II Insured Distribution Amount..............................................................25
Group II Insured Payment..........................................................................25
Group II Interest Amount Available................................................................25
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C>
Group II Interest Remittance Amount...............................................................25
Group II Monthly Excess Cashflow Amount...........................................................25
Group II Monthly Excess Interest Amount...........................................................25
Group II Monthly Remittance Amount................................................................25
Group II Net Weighted Average Coupon Rate.........................................................26
Group II Overcollateralization Amount.............................................................26
Group II Overcollateralization Deficiency.........................................................26
Group II Overcollateralization Release Amount.....................................................26
Group II Preference Amount........................................................................26
Group II Principal Distribution Amount............................................................26
Group II Principal Remittance Amount..............................................................27
Group II Reimbursement Amount.....................................................................27
Group II Stepdown Date............................................................................27
Group II Targeted Overcollateralization Amount....................................................27
Group II Total Available Funds....................................................................27
Indemnification Agreement.........................................................................27
Index.............................................................................................27
Indirect Participant..............................................................................28
Initial Mortgage Loans............................................................................28
Insurance Agreement...............................................................................28
Insurance Policy..................................................................................28
Insured Payment...................................................................................28
Interest Advance..................................................................................28
Interest Determination Date.......................................................................28
Interest Rate Adjustment Date.....................................................................28
IO Period.........................................................................................28
Late Payment Rate.................................................................................28
LIBOR.............................................................................................28
Liquidated Loan...................................................................................29
Liquidation Expenses..............................................................................29
Liquidation Proceeds..............................................................................29
Loan Balance......................................................................................29
Loan Purchase Price...............................................................................29
London Business Day...............................................................................29
Lower-Tier A-1 Monthly Interest...................................................................29
Lower-Tier A-1 Pass-Through Rate..................................................................30
Lower-Tier A-2 Monthly Interest...................................................................30
Lower-Tier A-2 Pass-Through Rate..................................................................30
Lower-Tier A-3 Monthly Interest...................................................................30
Lower-Tier A-3 Pass-Through Rate..................................................................30
Lower-Tier A-4 Monthly Interest...................................................................30
Lower-Tier A-4 Pass-Through Rate..................................................................30
Lower-Tier A-5 Monthly Interest...................................................................30
Lower-Tier A-5 Pass-Through Rate..................................................................30
Lower-Tier A-6 Monthly Interest...................................................................30
Lower-Tier A-6 Pass-Through Rate..................................................................30
Lower-Tier A-7 Monthly Interest...................................................................30
Lower-Tier A-7/A-IO Pass-Through Rate.............................................................31
Lower-Tier A-8 Monthly Interest...................................................................31
Lower-Tier A-8 Pass-Through Rate..................................................................31
Lower-Tier A-9 Monthly Interest...................................................................31
Lower-Tier A-IO Monthly Interest..................................................................31
Lower-Tier B-1 Monthly Interest...................................................................31
Lower-Tier B-1 Pass-Through Rate..................................................................31
Lower-Tier Balance................................................................................31
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Page
<S> <C>
Lower-Tier Group I Distribution Amount............................................................31
Lower-Tier Group II Distribution Amount...........................................................32
Lower-Tier Interest A-1...........................................................................32
Lower-Tier Interest A-2...........................................................................32
Lower-Tier Interest A-3...........................................................................32
Lower-Tier Interest A-4...........................................................................32
Lower-Tier Interest A-5...........................................................................32
Lower-Tier Interest A-6...........................................................................32
Lower-Tier Interest A-7...........................................................................32
Lower-Tier Interest A-8...........................................................................32
Lower-Tier Interest A-9...........................................................................32
Lower-Tier Interest B-1...........................................................................32
Lower-Tier Interest M-1...........................................................................32
Lower-Tier Interest M-2...........................................................................32
Lower-Tier Interest A-1 Termination Date..........................................................32
Lower-Tier Interest A-2 Termination Date..........................................................33
Lower-Tier Interest A-3 Termination Date..........................................................33
Lower-Tier Interest A-4 Termination Date..........................................................33
Lower-Tier Interest A-5 Termination Date..........................................................33
Lower-Tier Interest A-6 Termination Date..........................................................33
Lower-Tier Interest A-8 Termination Date..........................................................33
Lower-Tier Interest A-9 Termination Date..........................................................33
Lower-Tier Interest B-1 Termination Date..........................................................33
Lower-Tier Interest M-1 Termination Date..........................................................33
Lower-Tier Interest M-2 Termination Date..........................................................33
Lower-Tier M-1 Monthly Interest...................................................................33
Lower-Tier M-1 Pass-Through Rate..................................................................33
Lower-Tier M-2 Monthly Interest...................................................................34
Lower-Tier M-2 Pass-Through Rate..................................................................34
Lower-Tier Pass-Through Rate......................................................................34
Lower-Tier REMIC..................................................................................34
Lower-Tier REMIC Residual Class...................................................................34
Master Servicer...................................................................................34
Master Servicer's Trust Receipt...................................................................34
Master Servicing Fee..............................................................................34
Master Transfer Agreement.........................................................................34
Mezzanine Certificates............................................................................34
Monthly Remittance Amount.........................................................................34
Moody's...........................................................................................34
Mortgage..........................................................................................35
Mortgage Loan Group...............................................................................35
Mortgage Loans....................................................................................35
Mortgagor.........................................................................................35
Net Available Distribution Amount.................................................................35
Net Liquidation Proceeds..........................................................................35
Nonrecoverable Advances...........................................................................35
Note..............................................................................................35
Offered Certificates..............................................................................35
Officer's Certificate.............................................................................35
Operative Documents...............................................................................36
Original Principal Amount.........................................................................36
Originator........................................................................................36
Outstanding.......................................................................................36
Overcollateralization Release Amount..............................................................36
Owner.............................................................................................36
Pass-Through Rate.................................................................................36
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
Page
<S> <C>
Payment Date......................................................................................36
Percentage Interest...............................................................................36
Person............................................................................................37
Pool Cumulative Realized Losses...................................................................37
Pool Delinquency Rate.............................................................................37
Pool Principal Balance............................................................................37
Pool Rolling Six Month Delinquency Rate...........................................................37
Pre-Funded Amounts................................................................................37
Pre-Funding Account...............................................................................37
Premium Amount....................................................................................37
Premium Percentage................................................................................37
Prepaid Installment...............................................................................37
Prepayment........................................................................................37
Preservation Expenses.............................................................................37
Principal and Interest Account....................................................................38
Principal Remittance Amount.......................................................................38
Prohibited Transaction............................................................................38
Property..........................................................................................38
Purchase Option Period............................................................................38
Qualified Liquidation.............................................................................38
Qualified Mortgage................................................................................38
Qualified Replacement Mortgage....................................................................38
Realized Loss.....................................................................................39
Record Date.......................................................................................39
Reference Banks...................................................................................39
Register..........................................................................................39
Registrar.........................................................................................39
Registration Statement............................................................................39
REMIC.............................................................................................39
REMIC Provisions..................................................................................39
REMIC Trust.......................................................................................39
Remittance Date...................................................................................39
Remittance Period.................................................................................40
REO Property......................................................................................40
Replacement Cut-Off Date..........................................................................40
Representation Letter.............................................................................40
Representative....................................................................................40
Schedules of Mortgage Loans.......................................................................40
Second Mortgage Loan..............................................................................40
Securities Act....................................................................................40
Senior Lien.......................................................................................40
Servicer Affiliate................................................................................40
Servicing Advance.................................................................................40
Servicing Fee.....................................................................................40
Sponsor...........................................................................................40
Standard & Poor's.................................................................................41
Startup Day.......................................................................................41
Subordinate Certificates..........................................................................41
Substitution Amount...............................................................................41
Sub-Servicer......................................................................................41
Sub-Servicing Agreement...........................................................................41
Supplemental Interest Payment Account.............................................................41
Supplemental Interest Payment Amount Available....................................................41
Supplemental Interest Trust.......................................................................41
Tax Matters Person................................................................................41
Tax Matters Person Residual Interest..............................................................42
</TABLE>
vii
<PAGE> 9
<TABLE>
<CAPTION>
Page
<S> <C>
Termination Notice................................................................................42
Termination Price.................................................................................42
Third Mortgage Loan...............................................................................42
Transaction Documents.............................................................................42
Trust.............................................................................................42
Trust Estate......................................................................................42
Trustee...........................................................................................42
Trustee's Fees....................................................................................42
Unaffiliated Originator Loan......................................................................42
Unaffiliated Originators..........................................................................42
Uncertificated Interest...........................................................................42
Underwriters......................................................................................43
Unpaid Realized Loss Amount.......................................................................43
Upper-Tier Group I Distribution Account...........................................................43
Upper-Tier Group II Distribution Account..........................................................43
Upper-Tier REMIC..................................................................................43
SECTION 1.2. USE OF WORDS AND PHRASES..........................................................43
SECTION 1.3. CAPTIONS; TABLE OF CONTENTS.......................................................43
SECTION 1.4. OPINIONS..........................................................................43
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST..................................................43
SECTION 2.1. ESTABLISHMENT OF THE TRUST........................................................43
SECTION 2.2. OFFICE............................................................................44
SECTION 2.3. PURPOSES AND POWERS...............................................................44
SECTION 2.4. APPOINTMENT OF THE TRUSTEE; DECLARATION OF TRUST..................................44
SECTION 2.5. EXPENSES OF THE TRUST.............................................................44
SECTION 2.6. OWNERSHIP OF THE TRUST............................................................44
SECTION 2.7. SITUS OF THE TRUST................................................................44
SECTION 2.8. MISCELLANEOUS REMIC PROVISIONS....................................................44
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS............................................................47
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR.....................................47
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE MASTER SERVICER............................48
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR WITH RESPECT TO THE
MORTGAGE LOANS....................................................................51
SECTION 3.4. COVENANTS OF SPONSOR TO TAKE CERTAIN ACTIONS WITH RESPECT TO THE MORTGAGE
LOANS IN CERTAIN SITUATIONS.......................................................52
SECTION 3.5. CONVEYANCE OF THE MORTGAGE LOANS..................................................53
SECTION 3.6. ACCEPTANCE BY TRUSTEE; CERTAIN SUBSTITUTIONS OF MORTGAGE LOANS;
CERTIFICATION BY TRUSTEE..........................................................56
SECTION 3.7. COOPERATION PROCEDURES............................................................57
SECTION 3.8. CONVEYANCE OF THE SUBSEQUENT MORTGAGE LOANS.......................................57
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES............................................................60
SECTION 4.1. ISSUANCE OF CERTIFICATES..........................................................60
SECTION 4.2. SALE OF CERTIFICATES..............................................................60
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS........................................................60
SECTION 5.1. TERMS.............................................................................60
SECTION 5.2. FORMS.............................................................................61
SECTION 5.3. EXECUTION, AUTHENTICATION AND DELIVERY............................................61
SECTION 5.4. REGISTRATION AND TRANSFER OF CERTIFICATES.........................................61
SECTION 5.5. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.................................63
SECTION 5.6. PERSONS DEEMED OWNERS.............................................................64
</TABLE>
viii
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<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 5.7. CANCELLATION......................................................................64
SECTION 5.8. LIMITATION ON TRANSFER OF OWNERSHIP RIGHTS........................................64
SECTION 5.9. ASSIGNMENT OF RIGHTS..............................................................65
ARTICLE VI COVENANTS....................................................................................65
SECTION 6.1. DISTRIBUTIONS.....................................................................65
SECTION 6.2. MONEY FOR DISTRIBUTIONS TO BE HELD IN TRUST; WITHHOLDING..........................66
SECTION 6.3. PROTECTION OF TRUST ESTATE........................................................66
SECTION 6.4. PERFORMANCE OF OBLIGATIONS........................................................67
SECTION 6.5. NEGATIVE COVENANTS................................................................67
SECTION 6.6. NO OTHER POWERS...................................................................68
SECTION 6.7. LIMITATION OF SUITS...............................................................68
SECTION 6.8. UNCONDITIONAL RIGHTS OF OWNERS TO RECEIVE DISTRIBUTIONS...........................69
SECTION 6.9. RIGHTS AND REMEDIES CUMULATIVE....................................................69
SECTION 6.10. DELAY OR OMISSION NOT WAIVER......................................................69
SECTION 6.11. CONTROL BY OWNERS.................................................................69
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES........................................................70
SECTION 7.1. COLLECTION OF MONEY...............................................................70
SECTION 7.2. ESTABLISHMENT OF CERTIFICATE ACCOUNT..............................................70
SECTION 7.3. THE CERTIFICATE INSURANCE POLICY..................................................70
SECTION 7.4. PRE-FUNDING ACCOUNT AND CAPITALIZED INTEREST ACCOUNT..............................72
SECTION 7.5. FLOW OF FUNDS.....................................................................72
SECTION 7.6. INVESTMENT OF ACCOUNTS............................................................78
SECTION 7.7. ELIGIBLE INVESTMENTS..............................................................79
SECTION 7.8. REPORTS BY TRUSTEE................................................................80
SECTION 7.9. ADDITIONAL REPORTS BY TRUSTEE.....................................................84
SECTION 7.10. SUPPLEMENTAL INTEREST PAYMENT ACCOUNT, SUPPLEMENT INTEREST PAYMENTS AND
CLASS R DISTRIBUTION ACCOUNT......................................................84
ARTICLE VIII SERVICING AND ADMINISTRATION OF MORTGAGE LOANS.............................................85
SECTION 8.1. MASTER SERVICER AND SUB-SERVICERS.................................................85
SECTION 8.2. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS......................................87
SECTION 8.3. SUB-SERVICING AGREEMENTS BETWEEN MASTER SERVICER AND SUB-SERVICERS................88
SECTION 8.4. SUCCESSOR SUB-SERVICERS...........................................................88
SECTION 8.5. LIABILITY OF MASTER SERVICER......................................................88
SECTION 8.6. NO CONTRACTUAL RELATIONSHIP BETWEEN SUB-SERVICER AND TRUSTEE OR THE OWNERS........88
SECTION 8.7. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENT BY TRUSTEE...................88
SECTION 8.8. PRINCIPAL AND INTEREST ACCOUNT....................................................89
SECTION 8.9. DELINQUENCY ADVANCES, COMPENSATING INTEREST AND SERVICING ADVANCES................90
SECTION 8.10. PURCHASE OF MORTGAGE LOANS........................................................91
SECTION 8.11. MAINTENANCE OF INSURANCE..........................................................92
SECTION 8.12. DUE-ON-SALE CLAUSES; ASSUMPTION AND SUBSTITUTION AGREEMENTS.......................93
SECTION 8.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS.........................................93
SECTION 8.14. TRUSTEE TO COOPERATE; RELEASE OF FILES............................................95
SECTION 8.15. SERVICING COMPENSATION............................................................96
SECTION 8.16. ANNUAL STATEMENT AS TO COMPLIANCE.................................................96
SECTION 8.17. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORTS..........................96
SECTION 8.18. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE MORTGAGE
LOANS.............................................................................97
SECTION 8.19. ASSIGNMENT OF AGREEMENT...........................................................97
SECTION 8.20. REMOVAL OF MASTER SERVICER; RESIGNATION OF MASTER SERVICER........................97
</TABLE>
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<TABLE>
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SECTION 8.21. INSPECTIONS BY THE CLASS A-8 AND CLASS A-9 CERTIFICATE INSURER AND THE
TRUSTEE; ERRORS AND OMISSIONS INSURANCE..........................................101
SECTION 8.22. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF MASTER
SERVICER.........................................................................101
SECTION 8.23. NOTICES OF MATERIAL EVENTS.......................................................102
ARTICLE IX TERMINATION OF TRUST........................................................................102
SECTION 9.1. TERMINATION OF TRUST.............................................................102
SECTION 9.2. TERMINATION UPON OPTION OF MASTER SERVICER.......................................103
SECTION 9.3. TERMINATION UPON LOSS OF REMIC STATUS............................................103
SECTION 9.4. DISPOSITION OF PROCEEDS..........................................................105
SECTION 9.5. NETTING OF AMOUNTS...............................................................105
ARTICLE X THE TRUSTEE..................................................................................105
SECTION 10.1. CERTAIN DUTIES AND RESPONSIBILITIES..............................................105
SECTION 10.2. REMOVAL OF TRUSTEE FOR CAUSE.....................................................106
SECTION 10.3. CERTAIN RIGHTS OF THE TRUSTEE....................................................107
SECTION 10.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CERTIFICATES.........................108
SECTION 10.5. MAY HOLD CERTIFICATES............................................................108
SECTION 10.6. MONEY HELD IN TRUST..............................................................108
SECTION 10.7. NO LIEN FOR FEES.................................................................109
SECTION 10.8. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY..........................................109
SECTION 10.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR................................109
SECTION 10.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE...................................110
SECTION 10.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF THE TRUSTEE.......111
SECTION 10.12. REPORTING; WITHHOLDING...........................................................111
SECTION 10.13. LIABILITY OF THE TRUSTEE.........................................................111
SECTION 10.14. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE....................................112
ARTICLE XI MISCELLANEOUS...............................................................................113
SECTION 11.1. COMPLIANCE CERTIFICATES AND OPINIONS.............................................113
SECTION 11.2. FORM OF DOCUMENTS DELIVERED TO THE TRUSTEE.......................................113
SECTION 11.3. ACTS OF OWNERS...................................................................114
SECTION 11.4. NOTICES, ETC. TO TRUSTEE.........................................................115
SECTION 11.5. NOTICES AND REPORTS TO OWNERS; WAIVER OF NOTICES.................................115
SECTION 11.6. RULES BY TRUSTEE AND SPONSOR.....................................................115
SECTION 11.7. SUCCESSORS AND ASSIGNS...........................................................115
SECTION 11.8. SEVERABILITY.....................................................................115
SECTION 11.9. BENEFITS OF AGREEMENT............................................................116
SECTION 11.10. LEGAL HOLIDAYS...................................................................116
SECTION 11.11. GOVERNING LAW....................................................................116
SECTION 11.12. COUNTERPARTS.....................................................................116
SECTION 11.13. USURY............................................................................116
SECTION 11.14. AMENDMENT........................................................................116
SECTION 11.15. REMIC STATUS; TAXES..............................................................117
SECTION 11.16. ADDITIONAL LIMITATION ON ACTION AND IMPOSITION OF TAX............................119
SECTION 11.17. APPOINTMENT OF TAX MATTERS PERSON................................................119
SECTION 11.18. THE CLASS A-8 AND CLASS A-9 CERTIFICATE INSURER..................................119
SECTION 11.19. MAINTENANCE OF RECORDS...........................................................120
SECTION 11.20. NOTICES..........................................................................120
</TABLE>
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SCHEDULE I -- Schedules of Mortgage Loans
EXHIBIT A -- Form of Certificates
EXHIBIT B -- Contents of Mortgage Loan File
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EXHIBIT C -- Form of Certificate Re: Mortgage Loans Prepaid in full After the Cut-Off Date
EXHIBIT D -- Form of Trustee's Acknowledgement of Receipt
EXHIBIT E -- Form of Certification
EXHIBIT F -- Form of Delivery Order
EXHIBIT G -- Form of Class R Tax Matters Transfer Certificate
EXHIBIT H -- Power of Attorney
EXHIBIT I -- Form of Monthly Report
EXHIBIT J -- Form of Master Servicer's Trust Receipt
EXHIBIT K -- Form of Subsequent Transfer Agreement
</TABLE>
<PAGE> 13
POOLING AND SERVICING AGREEMENT, relating to ADVANTA MORTGAGE
LOAN TRUST 1997-4, dated as of December 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
trustee (the "Trustee").
WHEREAS, the Sponsor wishes to establish a trust, and to
provide for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Master Servicer has agreed to service the
Mortgage Loans, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done;
WHEREAS, Bankers Trust Company of California, N.A. is willing
to serve in the capacity of Trustee hereunder; and
WHEREAS, Ambac Assurance Corporation (the "Class A-8 and Class
A-9 Certificate Insurer") is intended to be a third party beneficiary of this
Agreement and is hereby recognized by the parties hereto to be a third-party
beneficiary of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Sponsor, the Master Servicer and the
Trustee hereby agree as follows:
<PAGE> 14
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.1. DEFINITIONS. For all purposes of this
Agreement, the following terms shall have the meanings set forth below, unless
the context clearly indicates otherwise:
"Accepted Servicing Practices": The Master Servicer's normal
servicing practices in servicing and administering mortgage loans for its own
account, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Properties are located and will give due consideration to the
Certificateholders' reliance on the Master Servicer.
"Account": Any account established in accordance with Sections
7.2, 7.10 or 8.8 hereof each of which shall be established at a Designated
Depository Institution.
"Accrual Period": With respect to the Group I Certificates
except the Class A-1 Certificates and any Payment Date, the calendar month
immediately preceding the month in which the Payment Date occurs. A "calendar
month" shall be deemed to be 30 days. With respect to the Group II Certificates
and the Class A-1 Certificates and any Payment Date, the period commencing on
the immediately preceding Payment Date (or the Startup Day in the case of the
first Payment Date) to and including the day prior to the current Payment Date.
All calculations of interest on the Group I Certificates except the Class A-1
Certificates will be made on the basis of a 360-day year assumed to consist of
twelve 30-day months and calculations of interest on the Group II Certificates
and the Class A-1 Certificates will be made on the basis of the actual number of
days elapsed in the related Accrual Period in a year of 360 days.
"Addition Notice": With respect to the transfer of Subsequent
Mortgage Loans to the Trust pursuant to Section 3.8(b) of this Agreement,
notice, which shall be given not later than three Business Days prior to the
related Subsequent Transfer Date, of the Sponsor's designation of Subsequent
Mortgage Loans to be sold to the Trust and the aggregate Loan Balance and the
weighted average Coupon Rate of such Subsequent Mortgage Loans. Such Addition
Notice shall include an electronic data file in a form agreeable to the Trustee,
the Class A-8 and Class A-9 Certificate Insurer and the Master Servicer.
"Advanta Mortgage Files": For any Mortgage Loan identified on
the related Schedule of Mortgage Loans with an "A" code, the items listed as
(a), (b), (c), (d) and (f) on Exhibit B hereto.
"Advanta Servicing Fee": With respect to any Mortgage Loan
that is not an Unaffiliated Originator Loan, an amount retained by the Master
Servicer or by any successor thereto as compensation for servicing and
administration duties relating to such Mortgage Loan pursuant to Section 8.15
hereof and equal to 0.50% per annum of the then outstanding Loan Balance of such
Mortgage Loan as of the opening of business on the first day of each calendar
month payable on a monthly basis.
2
<PAGE> 15
"Affiliated Originators": Advanta Mortgage Corp. USA, a
Delaware corporation, Advanta Mortgage Corp. Midatlantic, a Pennsylvania
corporation, Advanta Mortgage Corp. Midatlantic II, a Pennsylvania corporation,
Advanta Mortgage Corp. Midwest, a Pennsylvania corporation, Advanta Mortgage
Corp. of New Jersey, a New Jersey corporation, Advanta Mortgage Corp. Northeast,
a New York corporation, Advanta National Bank, a national banking association,
Advanta Finance Corp., a Nevada corporation.
"Aggregate Certificate Principal Balance": As of any date of
determination thereof, the sum of the then outstanding Certificate Principal
Balance of the Class A Certificates (other than the Class A-IO Certificates),
the Mezzanine Certificates and the Class B Certificates.
"Agreement": This Pooling and Servicing Agreement, as it may
be amended from time to time, and including the Exhibits hereto.
"AMHC": Advanta Mortgage Holding Company, a Delaware
corporation and the corporate parent of Advanta Mortgage Corp. USA, and the
indirect corporate parent of Advanta Mortgage Conduit Services, Inc.
"Appraised Value": The appraised value of any Property based
upon the appraisal or other valuation made at the time of the origination of the
related Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase
money mortgage, the sales price of the Property at such time of origination, if
such sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person
who is authorized to act for such Person in matters relating to this Agreement,
and whose action is binding upon such Person and, with respect to the Trustee,
the Sponsor and the Master Servicer, initially including those individuals whose
names appear on the lists of Authorized Officers delivered on the Startup Day.
"Balloon Loan": Any Mortgage Loan which has an amortization
schedule which extends beyond its maturity date, resulting in a relatively large
unamortized principal balance due in a single payment at maturity.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York, the
State of California or in the city in which the principal corporate trust office
of the Trustee is located, are authorized or obligated by law or executive order
to be closed.
"Capitalized Interest Account": The Capitalized Interest
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Certificate": Any one of the Class A Certificates, Mezzanine
Certificates, Class B Certificates, or Class R Certificates, each representing
the interests and the rights described in this Agreement.
"Certificate Account": The Certificate Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Certificate Insurance Policy": The certificate guaranty
insurance policy dated December 18, 1997 issued by the Class A-8 and Class A-9
Certificate Insurer to the Trustee for
3
<PAGE> 16
the benefit of the Owners of the Class A-8 Certificates and the Owners of the
Class A-9 Certificates.
"Certificate Principal Balance": As of the Startup Day as to
each of the following Classes of Certificates, the Certificate Principal
Balances thereof, as follows:
Class A-1 Certificates = $ 146,039,000
Class A-2 Certificates = $ 91,159,000
Class A-3 Certificates = $ 33,579,000
Class A-4 Certificates = $ 59,837,000
Class A-5 Certificates = $ 15,601,000
Class A-6 Certificates = $ 41,285,000
Class A-7 Certificates = $ 50,000,000
Class A-8 Certificates = $ 98,000,000
Class A-9 Certificates = $ 302,000,000
Class M-1 Certificates = $ 17,500,000
Class M-2 Certificates = $ 30,000,000
Class B-1 Certificates = $ 15,000,000
As of any Payment Date with respect to the Class A-1, A-2, A-3, A-4, A-5, A-6,
A-7, A-8, A-9, M-1, M-2 and B-1 Certificates, the Class A-1 Certificate
Principal Balance, the Class A-2 Certificate Principal Balance, the Class A-3
Certificate Principal Balance, the Class A-4 Certificate Principal Balance, the
Class A-5 Certificate Principal Balance, the Class A-6 Certificate Principal
Balance, the Class A-7 Certificate Principal Balance, the Class A-8 Certificate
Principal Balance, the Class A-9 Certificate Principal Balance, the Class M-1
Certificate Principal Balance, the Class M-2 Certificate Principal Balance, and
the Class B-1 Certificate Principal Balance, respectively, as of such Payment
Date. The Class A-IO Certificates and the Class R Certificates do not have a
Certificate Principal Balance.
"Civil Relief Act": The Soldiers and Sailors' Civil Relief Act
of 1940, as amended from time to time.
"Civil Relief Act Shortfalls": Interest shortfalls resulting
from the application of the Civil Relief Act.
"Class": Any Class of the Class A Certificates, either Class
of the Mezzanine Certificates, the Class B Certificates, or the Class R
Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates,
Class A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class
A-5 Certificates, Class A-6 Certificates, Class A-7 Certificates, Class A-8
Certificates, Class A-9 Certificates or Class A-IO Certificates.
"Class A Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A Certificates less any amounts actually distributed on such Class A
Certificates with respect to the Class A Principal Distribution Amount pursuant
to Section 7.5(d) hereof with respect to principal thereon on all prior Payment
Dates.
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<PAGE> 17
"Class A Current Interest": With respect to any Payment Date,
the Class A-1 Current Interest, the Class A-2 Current Interest, the Class A-3
Current Interest, the Class A-4 Current Interest, the Class A-5 Current
Interest, the Class A-6 Current Interest, the Class A-7 Current Interest, the
Class A-8 Current Interest, the Class A-9 Current Interest or the Class A-IO
Current Interest.
"Class A Distribution Amount": The sum of the Class A-1
Distribution Amount, the Class A-2 Distribution Amount, the Class A-3
Distribution Amount, the Class A-4 Distribution Amount, the Class A-5
Distribution Amount, the Class A-6 Distribution Amount, the Class A-7
Distribution Amount, the Class A-8 Distribution Amount, the Class A-9
Distribution Amount, and the Class A-IO Distribution Amount.
"Class A Interest Carry Forward Amount": With respect to any
Payment Date, the Class A-1 Interest Carry Forward Amount, the Class A-2
Interest Carry Forward Amount, the Class A-3 Interest Carry Forward Amount, the
Class A-4 Interest Carry Forward Amount, the Class A-5 Interest Carry Forward
Amount, the Class A-6 Interest Carry Forward Amount, the Class A-7 Interest
Carry Forward Amount, the Class A-8 Interest Carry Forward Amount, the Class A-9
Interest Carry Forward Amount or the Class A-IO Interest Carry Forward Amount.
"Class A-1 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-1 Certificate, substantially in the
form annexed hereto as Exhibit A-1, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-1 Certificates less any amounts actually distributed with respect to the
Class A-1 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-1 Certificate Termination Date": The Payment Date on
which the Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-1 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-1 Pass-Through Rate.
"Class A-1 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-1 Current Interest, (y) the Class A-1 Interest
Carry Forward Amount, if any and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-1 Certificates pursuant to Section 7.5
hereof.
"Class A-1 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-1 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-1 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-1 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-1
Pass-Through Rate.
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<PAGE> 18
"Class A-1 Pass-Through Rate": For any Payment Date, the
lesser of (i) LIBOR plus 0.14% per annum and (ii) the Group I Class A-1
Available Funds Cap Rate for such Payment Date.
"Class A-2 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-2 Certificate, substantially in the
form annexed hereto as Exhibit A-2, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-2 Certificates less any amounts actually distributed with respect to the
Class A-2 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-2 Certificate Termination Date": The Payment Date on
which the Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-2 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-2 Pass-Through Rate.
"Class A-2 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-2 Current Interest, (y) the Class A-2 Interest
Carry Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-2 Certificates pursuant to Section 7.5
hereof.
"Class A-2 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-2 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-2 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-2 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-2
Pass-Through Rate.
"Class A-2 Pass-Through Rate": With respect to any Payment
Date, 6.53% per annum.
"Class A-3 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-3 Certificate, substantially in the
form annexed hereto as Exhibit A-3, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-3 Certificates less any amounts actually distributed with respect to the
Class A-3 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-3 Certificate Termination Date": The Payment Date on
which the Class A-3 Certificate Principal Balance is reduced to zero.
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<PAGE> 19
"Class A-3 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-3 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-3 Pass-Through Rate.
"Class A-3 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-3 Current Interest, (y) the Class A-3 Interest
Carry Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-3 Certificates pursuant to Section 7.5
hereof.
"Class A-3 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-3 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-3 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-3 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-3
Pass-Through Rate.
"Class A-3 Pass-Through Rate" With respect to any Payment
Date, 6.55% per annum.
"Class A-4 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-4 Certificate, substantially in the
form annexed hereto as Exhibit A-4, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-4 Certificates less any amounts actually distributed with respect to the
Class A-4 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-4 Certificate Termination Date": The Payment Date on
which the Class A-4 Certificate Principal Balance is reduced to zero.
"Class A-4 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-4 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-4 Pass-Through Rate.
"Class A-4 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-4 Current Interest, (y) the Class A-4 Interest
Carry Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-4 Certificates pursuant to Section 7.5
hereof.
"Class A-4 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-4 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-4 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-4 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-4
Pass-Through Rate.
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<PAGE> 20
"Class A-4 Pass-Through Rate": With respect to any Payment
Date, 6.66% per annum.
"Class A-5 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-5 Certificate, substantially in the
form annexed hereto as Exhibit A-5, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-5 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-5 Certificates less any amounts actually distributed with respect to the
Class A-5 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-5 Certificate Termination Date": The Payment Date on
which the Class A-5 Certificate Principal Balance is reduced to zero.
"Class A-5 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-5 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-5 Pass-Through Rate.
"Class A-5 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-5 Current Interest, (y) the Class A-5 Interest
Carry Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-5 Certificates pursuant to Section 7.5
hereof.
"Class A-5 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-5 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-5 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-5 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-5
Pass-Through Rate.
"Class A-5 Pass-Through Rate": With respect to any Payment
Date, 6.72% per annum.
"Class A-6 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-6 Certificate, substantially in the
form annexed hereto as Exhibit A-6, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-6 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-6 Certificates less any amounts actually distributed with respect to the
Class A-6 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-6 Certificate Termination Date": The Payment Date on
which the Class A-6 Certificate Principal Balance is reduced to zero.
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<PAGE> 21
"Class A-6 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-6 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-6 Pass-Through Rate.
"Class A-6 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-6 Current Interest, (y) the Class A-6 Interest
Carry Forward Amount, if any, and (z) the Group I Class A Principal Distribution
Amount payable to the Owners of Class A-6 Certificates pursuant to Section 7.5
hereof.
"Class A-6 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-6 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-6 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-6 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-6
Pass-Through Rate.
"Class A-6 Pass-Through Rate": With respect to any Payment
Date, the lesser of (x) 7.10% per annum and (y) the Group I Available Funds Cap
Rate for such Payment Date.
"Class A-7 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-7 Certificate, substantially in the
form annexed hereto as Exhibit A-7, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-7 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-7 Certificates less any amounts actually distributed with respect to the
Class A-7 Certificates pursuant to Section 7.5(d) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-7 Certificate Termination Date": The Payment Date on
which the Class A-7 Certificate Principal Balance is reduced to zero.
"Class A-7 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-7 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-7 Pass-Through Rate.
"Class A-7 Distribution Amount": With respect to any Payment
Date, the sum of (w) the Class A-7 Current Interest, (x) the Class A-7 Interest
Carry Forward Amount, if any, (y) the Class A-7 Lockout Distribution Amount
payable to the Owners of the Class A-7 Certificates pursuant to Section 7.5(d),
and (z) the Group I Class A Principal Distribution Amount payable to the Owners
of Class A-7 Certificates pursuant to Section 7.5 hereof.
"Class A-7 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-7 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-7 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-7 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-7
Pass-Through Rate.
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<PAGE> 22
"Class A-7 Lockout Distribution Amount": With respect to any
Payment Date, the product of (i) the applicable Class A-7 Lockout Percentage for
such Payment Date and (ii) the Class A-7 Lockout Pro Rata Distribution Amount
for such Payment Date; provided, that in no event shall the Class A-7 Lockout
Distribution Amount exceed the Group I Class A Principal Distribution Amount for
the related Payment Date.
"Class A-7 Lockout Percentage": For each Payment Date, the
percentage set forth below:
<TABLE>
<CAPTION>
CLASS A-7
PAYMENT DATES LOCKOUT PERCENTAGE
<S> <C>
January 1998-December 2000 0%
January 2001-December 2002 45%
January 2003-December 2003 80%
January 2004-December 2004 100%
January 2005 and thereafter 300%
</TABLE>
"Class A-7 Lockout Pro Rata Distribution Amount": With respect
to any Payment Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Class A-7 Certificate Principal Balance immediately
prior to such Payment Date and the denominator of which is the aggregate
Certificate Principal Balance of the Class A Certificates immediately prior to
such Payment Date and (y) the Group I Class A Principal Distribution Amount for
such Payment Date.
"Class A-7 Pass-Through Rate": With respect to any Payment
Date, the lesser of (x) 6.63% per annum and (y) the Group I Available Funds Cap
Rate for such Payment Date.
"Class A-8 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-8 Certificate, substantially in the
form annexed hereto as Exhibit A-8, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-8 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-8 Certificates less any amounts actually distributed with respect to the
Class A-8 Certificates pursuant to Section 7.5(e) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-8 Certificate Termination Date": The Payment Date on
which the Class A-8 Certificate Principal Balance is reduced to zero.
"Class A-8 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-8 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-8 Pass-Through Rate.
"Class A-8 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-8 Current Interest, (y) the Class A-8 Interest
Carry Forward Amount, if any, and (z) the Group II Class A Principal
Distribution Amount payable to the Owners of Class A-8 Certificates pursuant to
Section 7.5 hereof.
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<PAGE> 23
"Class A-8 Formula Rate": With respect to any Payment Date and
the Class A-8 Certificates, the rate determined in accordance with clause (i) of
the definition of the "Class A-8 Pass-Through Rate."
"Class A-8 Full Interest Distribution Amount": With respect to
the Class A-8 Certificates and any Payment Date, the interest due with respect
to the Class A-8 Certificates, calculated using the Class A-8 Formula Rate with
respect thereto.
"Class A-8 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-8 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-8 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-8 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-8
Pass-Through Rate.
"Class A-8 Interest Distribution Amount": With respect to the
Class A-8 Certificates for any Payment Date, the sum of (x) the Class A-8
Current Interest and (y) the Class A-8 Interest Carry Forward Amount.
"Class A-8 Interest Shortfall": As defined in Section 7.10(b)
hereof.
"Class A-8 Pass-Through Rate": For any Payment Date, the
lesser of (i) LIBOR plus 0.17% per annum and (ii) the Group II Available Funds
Cap Rate for such Payment Date.
"Class A-8 Principal Distribution Amount": With respect to the
Class A-8 Certificates (a) for any Payment Date prior to the date on which the
Class A-8 Certificate Principal Balance has been reduced to zero, an amount
equal to the product of (x) 37.5% and (y) the Group II Principal Distribution
Amount and (b) thereafter, zero.
"Class A-8 and A-9 Applied Realized Loss Amount": The Group II
Applied Realized Loss Amount.
"Class A-8 and Class A-9 Certificate Insurer" means Ambac
Assurance Corporation, a Wisconsin stock insurance company.
"Class A-8 and Class A-9 Certificate Insurer Default" means,
any one of the following events shall have occurred and be continuing:
(a) The Class A-8 and Class A-9 Certificate Insurer shall have
failed to make a payment required under the Certificate Insurance Policy;
(b) The Class A-8 and Class A-9 Certificate Insurer shall have
(i) filed a petition or commenced any case or proceeding under any provision or
chapter of the United States Bankruptcy Code or any other similar Federal or
state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (ii) made a general assignment for the benefit of its creditors,
or (iii) had an order for relief entered against it under the United States
Bankruptcy Code or any other similar Federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is
final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of
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<PAGE> 24
Insurance, or other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Class A-8 and Class A-9 Certificate Insurer or for all
or any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Class A-8 and Class
A-9 Certificate Insurer (or the taking of possession of all or any material
portion of the property of the Class A-8 and Class A-9 Certificate Insurer).
"Class A-9 Certificate": Any one of the Certificates
designated on the face thereof as a Class A-9 Certificate, substantially in the
form annexed hereto as Exhibit A-9, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-9 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-9 Certificates less any amounts actually distributed with respect to the
Class A-9 Certificates pursuant to Section 7.5(e) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-9 Certificate Termination Date": The Payment Date on
which the Class A-9 Certificate Principal Balance is reduced to zero.
"Class A-9 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-9 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class A-9 Pass-Through Rate.
"Class A-9 Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-9 Current Interest, (y) the Class A-9 Interest
Carry Forward Amount, if any, and (z) the Group II Class A Principal
Distribution Amount payable to the Owners of Class A-9 Certificates pursuant to
Section 7.5 hereof.
"Class A-9 Formula Rate": With respect to any Payment Date and
the Class A-9 Certificates, the rate determined in accordance with clause (i) of
the definition of "Class A-9 Pass Through Rate".
"Class A-9 Full Interest Distribution Amount": With respect to
the Class A-9 Certificates and any Payment Date, the interest due with respect
to the Class A-9 Certificates, calculated using the Class A-9 Formula Rate with
respect thereto.
"Class A-9 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-9 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class A-9 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-9 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class A-9
Pass-Through Rate.
"Class A-9 Interest Distribution Amount": With respect to the
Class A-9 Certificates for any Payment Date, the sum of (x) the Class A-9
Current Interest and (y) the Class A-9 Interest Carry Forward Amount.
"Class A-9 Interest Shortfall": As defined in Section 7.10(b)
hereof.
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<PAGE> 25
"Class A-9 Pass-Through Rate": For any Payment Date, the
lesser of (i) LIBOR plus (a) in any month up to and including the month in which
the Clean-Up Call Date occurs 0.24% per annum and (b) in any month thereafter,
0.48% per annum and (ii) the Group II Available Funds Cap Rate for such Payment
Date.
"Class A-9 Principal Distribution Amount": With respect to the
Class A-9 Certificates (a) for any Payment Date, prior to the date on which the
Class A-8 Certificates have been reduced to zero, an amount equal to the product
of (x) 62.5% and (y) the Group II Principal Distribution Amount and (b)
thereafter, 100% of the Group II Principal Distribution Amount.
"Class A-IO Certificate": Any one of the Certificates
designated on the face thereof as a Class A-IO Certificate, substantially in the
form annexed hereto as Exhibit A-10, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-IO Notional Certificate Principal Balance": With
respect to any date on or prior to the 30th Payment Date, the Class A-7
Certificate Principal Balance as of such date. With respect to any date after
the 30th Payment Date, zero.
"Class A-IO Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class A-IO Notional Certificate
Principal Balance immediately prior to such Payment Date during the related
Accrual Period at the Class A-IO Pass-Through Rate.
"Class A-IO Distribution Amount": With respect to any Payment
Date, the sum of (x) the Class A-IO Current Interest and (y) the Class A-IO
Interest Carry Forward Amount.
"Class A-IO Interest Carry Forward Amount": With respect to
any Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A)
the Class A-IO Current Interest as of the immediately preceding Payment Date and
(B) any unpaid Class A-IO Interest Carry Forward Amount from all previous
Payment Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class A-IO Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class
A-IO Pass-Through Rate.
"Class A-IO Pass-Through Rate": 5.00% per annum.
"Class B-1 Applied Realized Loss Amount": As to any Payment
Date, the lesser of (x) the Class B-1 Certificate Principal Balance (after
taking into account the distribution of the Group I Principal Distribution
Amount on such Payment Date, but prior to the application of the Class B-1
Applied Realized Loss Amount, if any, on such Payment Date) and (y) the Group I
Applied Realized Loss Amount as of such Payment Date.
"Class B-1 Certificate": Any one of the Certificates
designated on the face thereof as a Class B-1 Certificate, substantially in the
form annexed hereto as Exhibit A-11, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class B-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class B-1 Certificates less the sum of (x) any amounts actually distributed to
the Owners of the Class B-1 Certificates pursuant to
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<PAGE> 26
Section 7.5 hereof with respect to principal on all prior Payment Dates and (y)
the aggregate cumulative amount of the Class B-1 Applied Realized Loss Amounts
on all prior Payment Dates.
"Class B-1 Certificate Termination Date": The Payment Date on
which the Class B-1 Certificate Principal Balance is reduced to zero.
"Class B-1 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class B-1 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class B-1 Pass-Through Rate.
"Class B-1 Distribution Amount": With respect to any Payment
Date, the sum of (w) the Class B-1 Current Interest, (x) the Class B-1 Principal
Distribution Amount, if any, (y) the Class B-1 Interest Carry Forward Amount, if
any, and (z) the Class B-1 Realized Loss Amortization Amount, if any.
"Class B-1 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class B-1 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class B-1 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class B-1 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class B-1
Pass-Through Rate.
"Class B-1 Pass-Through Rate": With respect to any Payment
Date, the lesser of (x) 7.54% per annum and (y) the Group I Available Funds Cap
Rate for such Payment Date.
"Class B-1 Principal Distribution Amount": As of any Payment
Date on or after the Group I Stepdown Date and as long as a Group I Delinquency
Trigger Event is not in effect, the excess of (x) the sum of (i) the aggregate
Certificate Principal Balance of the Class A Certificates with respect to Group
I (after taking into account the payment of the Group I Class A Principal
Distribution Amount on such Payment Date), (ii) the Class M-1 Certificate
Principal Balance (after taking into account the payment of the Class M-1
Principal Distribution Amount on such Payment Date), (iii) the Class M-2
Principal Certificate Principal Balance (after taking into account the payment
of the Class M-2 Principal Distribution Amount on such Payment Date) and (iv)
the Class B-1 Certificate Principal Balance immediately prior to such Payment
Date over (y) the product of (i) 95.00% and (ii) the outstanding aggregate Loan
Balance of the Mortgage Loans in Group I as of the last day of the related
Remittance Period.
"Class B-1 Realized Loss Amortization Amount": As of any
Payment Date, the lesser of (x) the Unpaid Realized Loss Amount with respect to
the Class B-1 Certificates as of such Payment Date and (y) the excess of (i) the
Group I Monthly Excess Cashflow Amount over (ii) the sum of the Group I Extra
Principal Distribution Amount, the Class M-1 Realized Loss Amortization Amount,
the Class M-2 Realized Loss Amortization Amount, the Class M-1 Interest Carry
Forward Amount, the Class M-2 Interest Carry Forward Amount and the Class B-1
Interest Carry Forward Amount in each case for such Payment Date.
"Class M-1 Applied Realized Loss Amount": As to any Payment
Date, the lesser of (x) the Class M-1 Certificate Principal Balance (after
taking into account the distribution of the Group I Principal Distribution
Amount on such Payment Date, but prior to the application of the Class M-1
Applied Realized Loss Amount, if any, on such Payment Date) and (y) the excess
of (i) the Group I Applied Realized Loss Amount as of such Payment Date over
(ii) the sum of the
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<PAGE> 27
Class M-2 Applied Realized Loss Amount and the Class B-1 Applied Realized Loss
Amount, in each case as of such Payment Date.
"Class M-1 Certificate": Any one of the Certificates
designated on the face thereof as a Class M-1 Certificate, substantially in the
form annexed hereto as Exhibit A-12, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class M-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class M-1 Certificates less the sum of (x) any amounts actually distributed to
the Owners of the Class M-1 Certificates pursuant to Section 7.5 hereof with
respect to the principal on all prior Payment Dates and (y) the aggregate
cumulative amount of Class M-1 Applied Realized Loss Amounts on all prior
Payment Dates.
"Class M-1 Certificate Termination Date": The Payment Date on
which the Class M-1 Certificate Principal Balance is reduced to zero.
"Class M-1 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class M-1 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class M-1 Pass-Through Rate.
"Class M-1 Distribution Amount": With respect to any Payment
Date, the sum of (w) the Class M-1 Current Interest, (x) the Class M-1 Principal
Distribution Amount, if any, (y) the Class M-1 Interest Carry Forward Amount, if
any, and (z) the Class M-1 Realized Loss Amortization Amount, if any.
"Class M-1 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class M-1 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class M-1 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class M-1 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class M-1
Pass-Through Rate.
"Class M-1 Pass-Through Rate": With respect to any Payment
Date, the lesser of (x) 7.04% per annum and (y) the Group I Available Funds Cap
Rate for such Payment Date.
"Class M-1 Principal Distribution Amount": As of any Payment
Date on or after the Group I Stepdown Date and as long as a Group I Delinquency
Trigger Event is not in effect, the excess of (x) the sum of (i) the aggregate
Certificate Principal Balance of the Class A Certificates related to Group I
(after taking into account the payment of the Group I Class A Principal
Distribution Amount on such Payment Date) and (ii) the Class M-1 Certificate
Principal Balance immediately prior to such Payment Date over (y) the product of
(i) 77.00% and (ii) the outstanding Principal Balance of the Mortgage Loans in
Group I as of the last day of the related Remittance Period.
"Class M-1 Realized Loss Amortization Amount": As of any
Payment Date, the lesser of (x) the Unpaid Realized Loss Amount with respect to
the Class M-1 Certificates as of such Payment Date and (y) the excess of (i) the
Group I Monthly Excess Cashflow Amount over (ii) the sum of the Group I Extra
Principal Distribution Amount and the Class M-1 Interest Carry Forward Amount,
in each case for such Payment Date.
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<PAGE> 28
"Class M-2 Applied Realized Loss Amount": As to any Payment
Date, the lesser of (x) the Class M-2 Certificate Principal Balance (after
taking into account the distribution of the Group I Principal Distribution
Amount on such Payment Date, but prior to the application of the Class M-2
Applied Realized Loss Amount, if any, on such Payment Date) and (y) the excess
of (i) the Group I Applied Realized Loss Amount as of such Payment Date over
(ii) the Class B-1 Applied Realized Loss Amount as of such Payment Date.
"Class M-2 Certificate": Any one of the Certificates
designated on the face thereof as a Class M-2 Certificate, substantially in the
form annexed hereto as Exhibit A-13, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class M-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class M-2 Certificates less the sum of (x) any amounts actually distributed to
the Owners of the Class M-2 Certificates, pursuant to Section 7.5 hereof on all
prior Payment Dates and (y) the aggregate, cumulative amount of Class M-2
Applied Realized Loss Amounts on all prior Payment Dates.
"Class M-2 Certificate Termination Date": The Payment Date on
which the Class M-2 Certificate Principal Balance is reduced to zero.
"Class M-2 Current Interest": With respect to any Payment
Date, the amount of interest accrued on the Class M-2 Certificate Principal
Balance immediately prior to such Payment Date during the related Accrual Period
at the Class M-2 Pass-Through Rate.
"Class M-2 Distribution Amount": With respect to any Payment
Date, the sum of (w) the Class M-2 Current Interest, (x) the Class M-2 Principal
Distribution Amount, if any, (y) the Class M-2 Interest Carry Forward Amount, if
any, and (z) the Class M-2 Realized Loss Amortization Amount, if any.
"Class M-2 Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class M-2 Current Interest as of the immediately preceding Payment Date and (B)
any unpaid Class M-2 Interest Carry Forward Amount from all previous Payment
Dates exceeds (ii) the amount of the actual distribution with respect to
interest made to the Owners of the Class M-2 Certificates on such immediately
preceding Payment Date and (y) 30 days' interest on such amount at the Class M-2
Pass-Through Rate.
"Class M-2 Pass-Through Rate": With respect to any Payment
Date, the lesser of (x) 7.24% per annum and (y) the Group I Available Funds Cap
Rate for such Payment Date.
"Class M-2 Principal Distribution Amount": As of any Payment
Date on or after the Group I Stepdown Date and as long as a Group I Delinquency
Trigger Event is not in effect, the excess of (x) the sum of (i) the aggregate
Certificate Principal Balance of the Class A Certificates related to Group I
(after taking into account the payment of the Group I Class A Principal
Distribution Amount on such Payment Date), (ii) the Class M-1 Certificate
Principal Balance (after taking into account the payment of the Class M-1
Principal Distribution Amount on such Payment Date) and (iii) the Class M - 2
Certificate Principal Balance immediately prior to such Payment Date over (y)
the product of (i) 89.00% and (ii) the outstanding aggregate Principal Balance
of the Mortgage Loans in Group I as of the last day of the related Remittance
Period.
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<PAGE> 29
"Class M-2 Realized Loss Amortization Amount": As of any
Payment Date, the lesser of (x) the Unpaid Realized Loss Amount with respect to
the Class M-2 Certificates as of such Payment Date and (y) the excess of (i) the
Group I Monthly Excess Cashflow Amount over (ii) the sum of the Group I Extra
Principal Distribution Amount, the Class M-1 Realized Loss Amortization Amount,
the Class M-1 Interest Carry Forward Amount and the Class M-2 Interest Carry
Forward Amount, in each case for such Payment Date.
"Class R Certificate": Any one of the Certificates designated
on the face thereof as a Class R Certificate, substantially in the form annexed
hereto as Exhibit A-14, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein, and evidencing an interest
designated as the "residual interest" in the Upper-Tier REMIC for the purposes
of the REMIC Provisions.
"Clean-Up Call Date": The first Remittance Date following the
date on which the aggregate Loan Balances of all Mortgage Loans has declined to
10% or less of the aggregate principal balance of the Mortgage Loans as of the
Startup Day.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Combined Loan-to-Value Ratio": With respect to any First
Mortgage Loan, the percentage equal to the Original Principal Amount of the
related Note divided by the Appraised Value of the related Property and with
respect to any Second Mortgage Loan or Third Mortgage Loan, the percentage equal
to (a) the sum of (i) the remaining principal balance, as of origination of the
Second Mortgage Loan or Third Mortgage Loan, as appropriate, of the Senior Lien
note(s) relating to such Second Mortgage Loan or Third Mortgage Loan, as
appropriate, and (ii) the Original Principal Amount of the Note relating to such
Second Mortgage Loan or Third Mortgage Loan, as appropriate, divided by (b) the
Appraised Value.
"Commitment": The Commitment to Issue a Certificate Guaranty
Insurance Policy dated December 2, 1997 and issued by the Class A-8 and Class
A-9 Certificate Insurer.
"Compensating Interest": As defined in Section 8.9(b) hereof.
"Conduit Acquisition Trust": The trust described in the
Pooling and Servicing Agreement dated as of May 1, 1997 among the Sponsor,
Bankers Trust Company of California, N.A., as trustee, Advanta Mortgage Corp.
USA, as the master servicer, and the "Borrowers" named therein.
"Conduit Mortgage Files": For any Mortgage Loan identified on
the related Schedule of Mortgage Loans with a "B" code, the items listed on
Exhibit B hereto.
"Control Party": Until the last sentence of Section 11.18
hereof is applicable and so long as no Class A-8 and Class A-9 Certificate
Insurer Default has occurred and is continuing, the Class A-8 and Class A-9
Certificate Insurer, and thereafter, the Trustee.
"Coupon Rate": The rate of interest borne by each Note.
"Current Interest": With respect to any Payment Date, the sum
of the Class A-1 Current Interest, the Class A-2 Current Interest, the Class A-3
Current Interest, the Class A-4 Current Interest, the Class A-5 Current
Interest, the Class A-6 Current Interest, the Class A-7
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<PAGE> 30
Current Interest, the Class A-8 Current Interest, the Class A-9 Current
Interest, the Class A-IO Current Interest, the Class M-1 Current Interest, the
Class M-2 Current Interest and the Class B-1 Current Interest.
"Cut-Off Date": The date as of which Initial Mortgage Loans
are transferred and assigned to the Trust, the opening of business December 1,
1997.
"Date-of-Payment Loan": Any Mortgage Loan as to which,
pursuant to the Note relating thereto, interest is computed and charged to the
Mortgagor at the Coupon Rate on the outstanding principal balance of such Note
based on the number of days elapsed between receipt of the Mortgagor's last
payment through receipt of the Mortgagor's most current payment.
"Deficiency Amount": The excess, if any, of the Required
Distributions over the Net Available Distribution Amount.
"Delinquency Advance": As defined in Section 8.9(a) hereof.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as
Exhibit F hereto and delivered by the Sponsor to the Trustee on the Startup Day
pursuant to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to each
Account, an institution whose deposits are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund of the FDIC, the long-term deposits of
which shall be rated A2 or better by Moody's and in the highest short-term
rating category for Moody's, unless otherwise approved in writing by the Trustee
and Moody's, and which is any of the following: (i) a federal savings and loan
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a bank
holding company, or (v) approved in writing by the Trustee and Moody's and, in
each case acting or designated by the Master Servicer as the depository
institution for the Principal and Interest Account; provided, however, that any
such institution or association shall have combined capital, surplus and
undivided profits of at least $100,000,000. Notwithstanding the foregoing, an
Account may be held by an institution otherwise meeting the preceding
requirements except that the only applicable rating requirement shall be that
the unsecured and uncollateralized debt obligations thereof shall be rated Baa3
or better by Moody's if such institution has trust powers and the Principal and
Interest Account is held by such institution in its corporate trust department.
"Designated Residual Owner": Advanta Conduit Receivables, Inc.
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<PAGE> 31
"Determination Date": As to each Payment Date, the third
Business Day preceding such Payment Date or such earlier day as shall be agreed
to by the Class A-8 and Class A-9 Certificate Insurer and the Trustee.
"Direct Participant" or "DTC Participant" means any
broker-dealer, bank or other financial institution for which the Depository
holds Offered Certificates from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall
have the meaning set forth from time to time in the definition thereof at
Section 860E(e)(5) of the Code (or any successor statute thereto) and applicable
to the Trust.
"Document Delivery Requirements": The Sponsor's obligations to
deliver certain legal documents, to prepare and record certain Mortgage
assignments or to deliver certain opinions relating to Mortgage assignments, in
each case with respect to the Mortgage Loans and as set forth in Section 3.5
hereof.
"Eligible Investments": Those investments so designated
pursuant to Section 7.7 hereof.
"Event of Default": Any event described in clauses (a) or (b)
of Section 8.20 hereof.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"File": The documents delivered to the Trustee pursuant to
Section 3.5 hereof pertaining to a particular Mortgage Loan and any additional
documents required to be added to the Advanta Mortgage File or Conduit Mortgage
File, as appropriate, pursuant to this Agreement.
"Final Determination": As defined in Section 9.3(a) hereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Property.
"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.
"Formula Interest Shortfall": As defined in Section 7.10(b)
hereof.
"Freddie Mac": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
"Full Interest Distribution Amount": The sum of (i) the Class
A-8 Full Interest Distribution Amount and (ii) the Class A-9 Full Interest
Distribution Amount.
"Funding Period": The period commencing on the Startup Day and
ending on the earliest to occur of (i) the date on which each Pre-Funded Amount
(exclusive of any investment earnings) is less than $100,000, (ii) the date on
which any Event of Default occurs and (iii) January 16, 1998.
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<PAGE> 32
"Gross Margin": With respect to each Mortgage Loan with an
adjustable rate, the fixed percentage amount set forth in the related Mortgage
Note which amount is added to the Index in accordance with the terms of the
related Mortgage Note to determine, on each Interest Rate Adjustment Date, the
Coupon Rate for such Mortgage Loan, subject to any maximum.
"Group": Group I or Group II.
"Group I": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group I, including
any Qualified Replacement Mortgages delivered in replacement thereof and any
Subsequent Mortgage Loans assigned to Group I.
"Group I Applied Realized Loss Amount": As of any Payment
Date, the excess of (x) the Aggregate Certificate Principal Balance of the Group
I Certificates on such Payment Date, after taking into account the distribution
of the Group I Principal Distribution Amount on such Payment Date but prior to
the application of the Group I Applied Realized Loss Amount, if any, on such
Payment Date over (y) the aggregate outstanding Loan Balance of the Mortgage
Loans in Group I as of the last day of the related Remittance Period. Group I
Applied Realized Loss Amounts shall be applied against the Certificate Principal
Balances of the Class B-1, Class M-2 and Class M-1 Certificates as provided
herein; no Group I Applied Realized Loss Amounts shall be applied against the
Certificate Principal Balance of any Class A Certificates relating to Group I
except if any balance is outstanding on the last Payment Date.
"Group I Available Funds Cap Rate": With respect to any
Payment Date, an amount, expressed as a per annum rate, equal to (a)(i) the
aggregate amount of interest due and collected (or advanced) on all of the
Mortgage Loans in Group I for the related Remittance Period minus (ii) the
aggregate of the Trustee's Fee and the Servicing Fee for Group I with respect to
such Payment Date and minus (iii) an amount equal to the Current Interest
payable to the Owners of the Class A-IO Certificates on such Payment Date,
divided by (b) the Loan Balances of the Mortgage Loans in Group I as of the
beginning of the prior Remittance Period, calculated on the basis of a 360-day
year consisting of twelve 30-day months.
"Group I Capitalized Interest Requirement": With respect to
the Payment Date occurring in January 1998, $245,951.71.
"Group I Certificates": The Class A Certificates (other than
the Class A-8 Certificates and the Class A-9 Certificates), the Class M-1
Certificates, the Class M-2 Certificates and the Class B-1 Certificates.
"Group I Class A Principal Distribution Amount": As of any
Payment Date (a) prior to the Group I Stepdown Date or with respect to which a
Group I Delinquency Trigger Event is in effect, 100% of the Group I Principal
Distribution Amount and (b) on or after the Group I Stepdown Date and as long as
a Group I Delinquency Trigger Event is not in effect, the excess of (x) the
Aggregate Certificate Principal Balance of the Group I Class A Certificates
immediately prior to such Payment Date over (y) the product of (i) 70.00% and
(ii) the outstanding Principal Balance of the Mortgage Loans in Group I as of
the last day of the related Remittance Period.
"Group I Class A-1 Available Funds Cap Rate": With respect to
any Payment Date, an amount, expressed as a per annum rate, equal to (a)(i) the
aggregate amount of interest due and collected (or advanced) on all of the
Mortgage Loans in Group I for the related
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<PAGE> 33
Remittance Period minus (ii) the aggregate of the Trustee's Fee and the
Servicing Fee for Group I with respect to such Payment Date and minus (iii) an
amount equal to the Current Interest payable to the Owners of the Class A-IO
Certificates on such Payment Date, divided by (b) the Loan Balances of the
Mortgage Loans in Group I as of the beginning of the prior Remittance Period,
calculated on the basis of a 360 day year and the actual number of days elapsed.
"Group I Cumulative Realized Losses": As of any date of
determination, the aggregate amount of Realized Losses with respect to the
Mortgage Loans in Group I since the Cut-Off Date.
"Group I Cumulative Realized Loss Trigger Event": A Group I
Cumulative Realized Loss Trigger Event has occurred on any date of determination
if the amount of Group I Cumulative Realized losses expressed as a percentage of
the Group I Original Pool Balance on any date of determination equals or exceeds
the percentage for such date set below:
<TABLE>
<CAPTION>
Date Percentage
<S> <C>
January 1998 - December 2000 1.90%
January 2001 - December 2001 3.10%
January 2002 - December 2002 3.90%
January 2003 - December 2003 4.40%
January 2004 - December 2004 4.80%
January 2005 and thereafter 5.00%
</TABLE>
"Group I Delinquency Trigger Event": A Group I Delinquency
Trigger Event has occurred with respect to any Payment Date on or after the
Group I Stepdown Date if the percentage obtained by dividing (x) the amount of
60+ Day Delinquent Loans in Group I by (y) the aggregate outstanding Loan
Balance of the Mortgage Loans in Group I as of the last day of the immediately
preceding Remittance Period exceeds 50% of the Group I Senior Enhancement
Percentage as of the last day of the immediately preceding Remittance Period.
"Group I Extra Principal Distribution Amount": As of any
Payment Date, the lesser of (x) the Group I Monthly Excess Interest Amount for
such Payment Date plus any Group II Monthly Excess Cashflow Amount available
from Group II and (y) the Group I Overcollateralization Deficiency for such
Payment Date.
"Group I Interest Amount Available": As of any Payment Date,
the Group I Interest Remittance Amount less the portion of the Trustee's Fees
related to Group I.
"Group I Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all interest collected by the Master
Servicer during the related Remittance Period with respect to the Mortgage Loans
in Group I (less the Servicing Fee with respect to such Mortgage Loans), (ii)
all Delinquency Advances made by the Master Servicer on such Remittance Date
with respect to Group I, (iii) all Compensating Interest paid by the Master
Servicer on such Remittance Date with respect to Group I, net of amounts allowed
to be retained pursuant to Section 8.8(c) and (iv) the portion of the
Substitution Amount relating to interest on the Mortgage Loans in Group I.
"Group I Monthly Excess Cashflow Amount": For any Payment
Date, the sum of (x) the Group I Monthly Excess Interest Amount and (y) the
Group I Overcollateralization Release Amount for such Payment Date.
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<PAGE> 34
"Group I Monthly Excess Interest Amount": With respect to any
Payment Date, the excess, if any, of (i) the Group I Interest Amount Available
for the related Remittance Period over (ii) the Current Interest on the Group I
Certificates on such Payment Date.
"Group I Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group I Interest Remittance Amount for such Remittance
Date and (ii) the Group I Principal Remittance Amount for such Remittance Date.
"Group I Net Weighted Average Coupon Rate": With respect to
any Payment Date, the weighted average of the Coupon Rates of the Mortgage Loans
in Group I (weighted by the Loan Balances of the Mortgage Loans in Group I),
less the sum of (A) 0.50% per annum, (B) the Trustee's Fees related to Group I,
and (C) (i) with respect to the first Payment Date during the IO Period, .04999%
per annum and (ii) thereafter, an amount equal to the product of (a) 0.05 and
(b) a fraction, the numerator of which is the Class A-7 Certificate Principal
Balance as of such Payment Date and the denominator of which is the aggregate
Loan Balance of the Group I Mortgage Loans as of the last day of immediately
preceding Remittance Period.
"Group I Original Pool Balance": The sum of (x) the aggregate
principal balances of the Initial Mortgage Loans as of the related Cut-Off-Date
and (y) the Group I Original Pre-Funded Amount, which sum is $500,000,000.
"Group I Original Pre-Funded Amount": The amount deposited in
the Pre-Funding Account on the Startup Day, from the proceeds of the sale of the
Group I Certificates, which amount is $41,657,312.24.
"Group I Overcollateralization Amount": As of any Payment
Date, the difference between (x) the sum of (i) the Loan Balance of the Mortgage
Loans in Group I as of the last day of the immediately preceding Remittance
Period and (ii) any amount on deposit in the Pre-Funding Account at such time
and allocated to Group I and (y) the Aggregate Certificate Principal Balance of
the Group I Certificates (after taking into account all distributions of
principal on such Group I Certificates as of such Payment Date).
"Group I Overcollateralization Deficiency": As of any Payment
Date, the excess, if any, of (x) the Group I Targeted Overcollateralization
Amount for such Payment Date over (y) the Group I Overcollateralization Amount
for such Payment Date, calculated for this purpose after taking into account the
reduction on such Payment Date of the Aggregate Certificate Principal Balance of
the Group I Certificates resulting from the distribution of the Group I
Principal Remittance Amount (but not the Group I Extra Principal Distribution
Amount) on such Payment Date, but prior to taking into account any Group I
Applied Realized Loss Amount on such Payment Date.
"Group I Overcollateralization Release Amount": As of any
Payment Date, the lesser of (x) the Group I Principal Remittance Amount for such
Payment Date and (y) the excess of (i) the Group I Overcollateralization Amount
for such Payment Date, assuming that 100% of the Group I Principal Remittance
Amount is applied on such Payment Date to the payment of principal on the Group
I Certificates over (ii) the Group I Targeted Overcollateralization Amount for
such Payment Date.
"Group I Pre-Funded Amount": With respect to any Determinate
Date, the amount on deposit in the Pre-Funding Account and available for the
purchase of Group I Subsequent Mortgage Loans.
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<PAGE> 35
"Group I Pre-Funding Earnings": With respect to the January
26, 1998 Payment Date, the actual investment earnings related to Group I earned
during the period December 18, 1997 through January 16, 1998 (inclusive) on the
Pre-Funding Account during such period as calculated by the Trustee pursuant to
Section 3.8(f) hereof.
"Group I Principal Distribution Amount": As of any Payment
Date, the sum of (i) the Group I Principal Remittance Amount minus, for Payment
Dates occurring on and after the Group I Stepdown Date and with respect to which
a Group I Delinquency Trigger Event is not in effect, the Group I
Overcollateralization Release Amount, if any, (ii) the Group I Extra Principal
Distribution Amount, if any, and (iii) any monies released from the Pre-Funding
Account as a prepayment of the Group I Certificates on or prior to the January
1998 Payment Date.
"Group I Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Master Servicer with respect to Mortgage Loans in Group I during the related
Remittance Period, (ii) the Loan Balance of each such Mortgage Loan in Group I
was purchased from the Trustee on or prior to such Monthly Remittance Date, to
the extent such Loan Balance was actually deposited in the Principal and
Interest Account, (iii) any Substitution Amounts relating to principal delivered
by the Sponsor in connection with a substitution of a Mortgage Loan in Group I,
to the extent such Substitution Amounts were actually deposited in the Principal
and Interest Account on such Monthly Remittance Date, (iv) all Net Liquidation
Proceeds actually collected by the Master Servicer with respect to such Mortgage
Loans in Group I during the related Remittance Period (to the extent such
Liquidation Proceeds related to principal) net of amounts allowed to be retained
pursuant to Section 8.8(c) and (v) the proceeds of any liquidation of the Trust
Estate related to Group I.
"Group I Senior Enhancement Percentage": For any Payment Date,
the percentage obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal Balance of the Subordinate Certificates relating to Group I and (ii)
the Group I Overcollateralization Amount, in each case after taking into account
the distribution of the Group I Principal Distribution Amount on such Payment
Date by (y) the Loan Balance of the Mortgage Loans in Group I plus the Group I
Pre-Funded Amount, in each case as of the last day of the related Remittance
Period.
"Group I Senior Specified Enhancement Percentage": On any date
of determination thereof means 30%.
"Group I Stepdown Date": The latest to occur of (x) the
Payment Date in January 2001, (y) the first date on which principal equal to 50%
of the Group I Original Pool Balance has been received by the Trust and (z) the
first Payment Date on which the Group I Senior Enhancement Percentage equals
30%.
"Group I Targeted Overcollateralization Amount": On any
Payment Date (x) prior to the Group I Stepdown Date, 2.50% of the Group I
Original Pool Balance and (y) on or after the Group I Stepdown Date, (a) if
neither a Group I Delinquency Trigger Event nor a Group I Cumulative Realized
Loss Trigger Event is in effect, the greater of (i) 5.00% of the aggregate
outstanding Principal Balance of the Group I Mortgage Loans as of the last day
of the related Remittance Period and (ii) $2,500,000 or (b) if a Group I
Delinquency Trigger Event is in effect, whether or not a Group I Cumulative
Realized Loss Trigger Event is also in effect, the Targeted
Overcollateralization Amount shall be equal to the product of (i) 2.50% and (ii)
the Group I Original Pool Balance or (c) if a Group I Cumulative Realized Loss
Trigger Event is in effect (if a Group I Delinquency Trigger Event is not in
effect), the Targeted
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<PAGE> 36
Overcollateralization Amount shall be equal to the Targeted
Overcollateralization Amount for the immediately preceding Payment Date.
"Group I Weighted Average Pass-Through Rate": As to the Group
I Certificates and any Payment Date, the weighted average of the Class A-1
Pass-Through Rate, the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through
Rate, the Class A-4 Pass-Through Rate, the Class A-5 Pass-Through Rate, the
Class A-6 Pass-Through Rate, the Class A-7 Pass-Through Rate, the Class M-1
Pass-Through Rate, the Class M-2 Pass-Through Rate and the Class B-1
Pass-Through Rate, weighted by the Class A-1 Certificate Principal Balance, the
Class A-2 Certificate Principal Balance, the Class A-3 Certificate Principal
Balance, the Class A-4 Certificate Principal Balance, the Class A-5 Certificate
Principal Balance, the Class A-6 Certificate Principal Balance, the Class A-7
Certificate Principal Balance, the Class M-1 Certificate Principal Balance, the
Class M-2 Certificate Principal Balance, and the Class B-1 Certificate Principal
Balance as of such Payment Date, and prior to taking into account any
distributions to be made on such Payment Date.
"Group II": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group II,
including any Qualified Replacement Mortgages delivered in replacement thereof
and any Subsequent Mortgage Loans assigned to Group II.
"Group II Applied Realized Loss Amount": As of any Payment
Date, the excess of (x) the aggregate Certificate Principal Balance of the Group
II Certificates on such Payment Date, after taking into account the distribution
of the Group II Principal Distribution Amount on such Payment Date but prior to
the application of the Group II Applied Realized Loss Amount, if any, on such
Payment Date over (y) the aggregate outstanding Loan Balance of the Mortgage
Loans in Group II as of the last day of the related Remittance Period.
"Group II Available Funds": As defined in Section 7.3(a)
hereof.
"Group II Available Funds Cap Rate": With respect to any
Payment Date, an amount, expressed as a per annum rate, equal to (a)(i) the
aggregate amount of interest due and collected (or advanced) on all of the
Mortgage Loans in Group II for the related Remittance Period minus (ii) the
aggregate of the Trustee's Fee, the Premium Amount, and the Servicing Fee for
Group II with respect to such Payment Date and minus (iii) commencing on the 7th
Payment Date following the Startup Day an amount equal to 0.50% per annum times
the aggregate Principal Balance of the Mortgage Loans in Group II as of the
beginning of such related Remittance Period, divided by (b) the aggregate Loan
Balances of the Mortgage Loans in Group II as of the beginning of prior
Remittance Period, calculated on the basis of a 360-day year and the actual
number of days elapsed.
"Group II Capitalized Interest Requirement": With respect to
the Payment Date occurring in January 1998, $89,533.07.
"Group II Certificate Principal Balance": With respect to any
Payment Date, the sum of (i) the Class A-8 Certificate Principal Balance as of
such Payment Date and the Class A-9 Certificate Principal Balance as of such
Payment Date.
"Group II Certificates": The Class A-8 Certificates and the
Class A-9 Certificates.
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<PAGE> 37
"Group II Cumulative Realized Losses": As of any date of
determination, the aggregate amount of Realized Losses with respect to the
Mortgage Loans in Group II since the Cut-Off Date.
"Group II Deficiency Amount": As defined in Section 7.3(b).
"Group II Extra Principal Distribution Amount": As of any
Payment Date, the lesser of (x) the Group II Monthly Excess Interest Amount for
such Payment Date plus any Group I Monthly Excess Cashflow Amount available from
Group I, and (y) the Group II Overcollateralization Deficiency for such Payment
Date.
"Group II Insured Distribution Amount": As to the Group II
Certificates and any Payment Date, the sum of (x) the sum of the Group II
Interest Distribution Amount for such Payment Date, (y) the Group II Applied
Realized Loss Amount, if any, as of such Payment Date and (z) on the Class A-9
Final Scheduled Payment Date, the Class A-9 Certificate Principal Balance.
"Group II Insured Payment": An amount equal to the sum of (i)
as of each Payment Date, the Group II Deficiency Amount and (ii) any unpaid
Group II Preference Amount.
"Group II Interest Amount Available": As of any Payment Date,
the Group II Interest Remittance Amount less the portion of the Trustee's Fees
related to Group II and the Premium Amount for such Payment Date.
"Group II Interest Distribution Amount": As of any Payment
Date the sum of (i) the Class A-8 Interest Distribution Amount for such Payment
Date and (ii) the Class A-9 Interest Distribution Amount for such Payment Date.
"Group II Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all interest collected by the Master
Servicer during the related Remittance Period with respect to the Mortgage Loans
in Group II (less the Servicing Fee with respect to such Mortgage Loans), (ii)
all Delinquency Advances made by the Master Servicer on such Remittance Date
with respect to Group II, (iii) all Compensating Interest paid by the Master
Servicer on such Remittance Date with respect to Group II, net of amounts
allowed to be retained pursuant to Section 8.8(c) and (iv) the portion of the
Substitution Amount relating to interest on the Mortgage Loans in Group II.
"Group II Monthly Excess Cashflow Amount": For any Payment
Date, the sum of (x) the Group II Monthly Excess Interest Amount and (y) the
Group II Overcollateralization Release Amount for such Payment Date.
"Group II Monthly Excess Interest Amount": With respect to any
Payment Date, the excess, if any, of (i) the Group II Interest Amount Available
for the related Remittance Period over (ii) the Current Interest on the Group II
Certificates on such Payment Date.
"Group II Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group II Interest Remittance Amount for such Remittance
Date and (ii) the Group II Principal Remittance Amount for such Remittance Date.
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<PAGE> 38
"Group II Net Weighted Average Coupon Rate": With respect to any
Payment Date, the weighted average of the Coupon Rates of the Mortgage Loans in
Group II (weighted by the Loan Balances of the Mortgage Loans in Group II), less
0.50% per annum.
"Group II Original Pre-Funded Amount": The amount deposited in the
Pre-Funding Account on the Startup Day, from the proceeds of the sale of the
Group II Certificates, which amount is $16,935,637.05.
"Group II Overcollateralization Amount": As of any Payment Date, the
difference between (x) the sum of (i) the Loan Balance of the Mortgage Loans in
Group II as of the last day of the immediately preceding Remittance Period and
(ii) any amount on deposit in the Pre-Funded Account at such time and allocated
to Group II and (y) the Aggregate Certificate Principal Balance of the Group II
Certificates (after taking into account all distributions of principal on such
Group II Certificates as of such Payment Date).
"Group II Overcollateralization Deficiency": As of any Payment Date,
the excess, if any, of (x) the Group II Targeted Overcollateralization Amount
for such Payment Date over (y) the Group II Overcollateralization Amount for
such Payment Date, calculated for this purpose after taking into account the
reduction on such Payment Date of the Aggregate Certificate Principal Balance of
the Group II Certificate resulting from the distribution of the Group II
Principal Remittance Amount (but not the Group II Extra Principal Distribution
Amount) on such Payment Date, but prior to taking into account any Group II
Applied Realized Loss Amount on such Payment Date.
"Group II Overcollateralization Release Amount": As of any Payment
Date, the lesser of (x) the Group II Principal Remittance Amount for such
Payment Date and (y) the excess of (i) the Group II Overcollateralization Amount
for such Payment Date, assuming that 100% of the Group II Principal Remittance
Amount is applied on such Payment Date to the payment of principal on the Group
II Certificates and (ii) the Group II Targeted Overcollateralization Amount for
such Payment Date.
"Group II Preference Amount": Any amounts paid by the Class A-8 and
Class A-9 Certificate Insurer with respect to the Class A-8 Certificates or the
Class A-9 Certificates that are voided pursuant to a final, nonappealable order
under the Bankruptcy Code in an insolvency proceeding.
"Group II Pre-Funded Amount": With respect to any Determinate Date, the
amount on deposit in the Pre-Funding Account available for the purchase of Group
II Subsequent Mortgage Loans.
"Group II Pre-Funding Earnings": With respect to the January 26, 1998
Payment Date, the actual investment earnings related to Group II earned during
the period December 18, 1997 through January 16, 1998 (inclusive) on the
Pre-Funding Account during such period as calculated by the Trustee pursuant to
Section 3.8(f) hereof.
"Group II Principal Distribution Amount": As of any Payment Date, the
sum of (i) the Group II Principal Remittance Amount (minus, for Payment Dates
occurring on and after the Group II Stepdown Date, the Group II
Overcollateralization Release Amount, if any), (ii) the Group II Extra Principal
Distribution Amount, if any, (iii) the principal portion of any Group II Insured
Payment made by the Class A-8 and Class A-9 Certificate Insurer and (iv) any
monies
26
<PAGE> 39
released from the Pre-Funding Account as a prepayment of the Group I
Certificates on or prior to the January 1998 Payment Date.
"Group II Principal Remittance Amount": As of any Monthly Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Master Servicer with respect to Mortgage Loans in Group II during the
related Remittance Period, (ii) the Loan Balance of each Mortgage Loan in Group
II that was purchased from the Trustee on or prior to such Monthly Remittance
Date, to the extent such Loan Balance was actually deposited in the Principal
and Interest Account, (iii) any Substitution Amounts relating to principal
delivered by the Sponsor in connection with a substitution of a Mortgage Loan in
Group II to the extent such Substitution Amounts were actually deposited in the
Principal and Interest Account on or prior to such Monthly Remittance Date, (iv)
all Net Liquidation Proceeds actually collected by the Master Servicer with
respect to the Mortgage Loans in Group II during the related Remittance Period
(to the extent such Net Liquidation Proceeds related to principal) and (v) the
proceeds of any liquidation of the Trust Estate related to Group II.
"Group II Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all Group II Insured Payments previously received by the Trustee not
previously repaid to the Class A-8 and Class A-9 Certificate Insurer pursuant to
Section 7.5(g)(3) hereof plus (ii) interest accrued on each such Group II
Insured Payment not previously repaid calculated from the date the Trustee
received the related Group II Insured Payment at the Class A-8 Pass-Through Rate
or Class A-9 Pass-Through Rate applicable to such date and (y)(i) any amounts
then due and owing to the Class A-8 and Class A-9 Certificate Insurer relating
to the Class A-8 Certificates or the Class A-9 Certificates under the Insurance
Agreement plus (ii) interest on such amounts at the Late Payment Rate. The Class
A-8 and Class A-9 Certificate Insurer shall notify the Trustee and the Sponsor
of the amount of any Group II Reimbursement Amount.
"Group II Stepdown Date": The later to occur of (x) the 30th Payment
Date from the Startup Day and (y) the date on which principal received on the
Group II Certificates is equal to 50% of the aggregate principal balance of the
Mortgage Loans in Group II as of the Startup Day has been received by the Trust.
"Group II Targeted Overcollateralization Amount": As defined in the
Insurance Agreement.
"Group II Total Available Funds": As defined in Section 7.3(a) hereof.
"Group II Weighted Average Pass-Through Rate": As to the Group II
Certificates and any Payment Date, the weighted average of the Class A-8
Pass-Through Rate and the Class A-9 Pass-Through Rate, weighted by the Class A-8
Certificate Principal Balance and the Class A-9 Certificate Principal Balance as
of such Payment Date, and prior to taking into account any distributions to be
made on such Payment Date.
"Indemnification Agreement": The Indemnification Agreement dated as of
December 18, 1997 among the Class A-8 and Class A-9 Certificate Insurer and the
Representative as may be amended from time to time.
"Index": With respect to any adjustable rate Mortgage Note, the
applicable index set forth therein.
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<PAGE> 40
"Indirect Participant" shall mean any financial institution for whom
any Direct Participant holds an interest in a Class A Certificate.
"Initial Mortgage Loans" shall mean Mortgage Loans delivered by the
Sponsor on the Startup Day.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as
of December 18, 1997 between the Sponsor and the Class A-8 and Class A-9
Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage insurance
policy relating to a Mortgage Loan.
"Insured Payment": The Group II Insured Payment.
"Interest Advance": As defined in Section 7.10(b) hereof.
"Interest Determination Date": With respect to any Accrual Period for
the Group II Certificates and the Class A-1 Certificates, the second London
Business Day preceding the first day of such Accrual Period.
"Interest Rate Adjustment Date": The date on which an adjustment to the
Coupon Rate on a Mortgage Note becomes effective.
"IO Period": The period from the Startup Day through and including the
30th Payment Date.
"Late Payment Rate": For any Payment Date, means the lesser of (a) the
greater of (x) the per annum rate of interest publicly announced from time to
time by Citibank, N.A. as its prime or base lending rate (any change in such
rate of interest to be effective on the date such change is announced by
Citibank, N.A.), plus 2% per annum and (y) the then applicable highest rate of
interest on the Certificates and (b) the maximum rate permissible under
applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days.
"LIBOR": With respect to any Accrual Period for the Group II
Certificates and the Class A-1 Certificates, the rate determined by the Trustee
on the related Interest Determination Date on the basis of the offered rates of
the Reference Banks for one-month U.S. dollar deposits, as such rates appear on
Telerate Page 3750, as of 11:00 a.m. (London time) on such Interest
Determination Date. On each Interest Determination Date, LIBOR for the related
Accrual Period will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest 1/100,000 of 1%
(0.0000001) with five one-millionths of a percentage point rounded
upward, of all such quotations).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related
Interest Accrual Period shall be the arithmetic mean, rounded upward,
if necessary, to the nearest 1/100,000 of
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1% (0.0000001), with five one-millionths of a percentage point rounded
upward, of the offered per annum rates that one or more leading banks
in New York City, selected by the Indenture Trustee, are quoting as of
approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date to leading European Banks for United States dollar
deposits for the Index Maturity; provided, that if the banks selected
as aforesaid are not quoting as mentioned in this sentence, LIBOR in
effect for the applicable Interest Period will be LIBOR in effect for
the previous Interest Period.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A Mortgage
Loan which is purchased from the Trust pursuant to Section 3.3, 3.4, 3.6(b) or
8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the Master
Servicer or any Sub-servicer in connection with the liquidation of any defaulted
Mortgage Loan, such expenses, including, without limitation, legal fees and
expenses, and any unreimbursed Servicing Advances expended by the Master
Servicer or any Sub-servicer pursuant to Section 8.9 with respect to the related
Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan, any
amounts (including the proceeds of any Insurance Policy) recovered by the Master
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, the outstanding
principal balance thereof as of the Cut-Off Date or Subsequent Cut-Off-Date, as
the case may be, less any related Principal Remittance Amounts relating to such
Mortgage Loan included in previous related Monthly Remittance Amounts that were
transferred by the Master Servicer or any Sub-servicer to the Trustee for
deposit in the related Certificate Account; provided, however, (x) that the Loan
Balance for any Mortgage Loan which has become a Liquidated Loan shall be zero
as of the first day of the Remittance Period following the Remittance Period in
which such Mortgage Loan becomes a Liquidated Loan, and at all times thereafter
and (y) the Loan Balance "as of the Cut-Off Date" for any Mortgage Loan
originated during the period from the Cut-Off Date to the Startup Day shall be
the original Loan Balance thereof.
"Loan Purchase Price": With respect to any Mortgage Loan purchased from
the Trust on a Remittance Date pursuant to Section 3.3, 3.4, 3.6(b) or 8.10
hereof, an amount equal to the Loan Balance of such Mortgage Loan as of the date
of purchase, plus one month's interest on the outstanding Loan Balance thereof
as of the beginning of the preceding Remittance Period computed at the Coupon
Rate less the Servicing Fee (expressed as an annual percentage rate), if any,
together with, without duplication, the aggregate amount of (i) all delinquent
interest, all Delinquency Advances and Servicing Advances theretofore made with
respect to such Mortgage Loan and not subsequently recovered from the related
Mortgage Loan, (ii) all Delinquency Advances which the Master Servicer or any
Sub-servicer has theretofore failed to remit with respect to such Mortgage Loan
and (iii) any Group II Reimbursement Amount relating to such Mortgage Loan
relating to Group II.
"London Business Day": A day on which banks are open for dealing in
foreign currency, and exchange in London and New York City.
"Lower-Tier A-1 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-1
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immediately prior to such Payment Date during the related Accrual Period at the
Lower-Tier A-1 Pass-Through Rate.
"Lower-Tier A-1 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier A-2 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-2 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-2 Pass-Through Rate.
"Lower-Tier A-2 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier A-3 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-3 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-3 Pass-Through Rate.
"Lower-Tier A-3 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier A-4 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-4 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-4 Pass-Through Rate.
"Lower-Tier A-4 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier A-5 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-5 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-5 Pass-Through Rate.
"Lower-Tier A-5 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier A-6 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-6 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-6 Pass-Through Rate.
"Lower-Tier A-6 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier A-7 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-7 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-7 Pass-Through Rate.
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"Lower-Tier A-7/A-IO Pass-Through Rate": For any Payment Date during
the I-O Period, the sum of (i) the Group I Net Weighted Average Coupon Rate and
(ii) 5.00% per annum. For any Payment Date thereafter, the Group I Net Weighted
Average Coupon Rate.
"Lower-Tier A-8 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-8 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-8 Pass-Through Rate.
"Lower-Tier A-8 Pass-Through Rate": For any Payment Date, the Group II
Net Weighted Average Coupon Rate. "Lower-Tier A-9 Monthly Interest": With
respect to any Payment Date, the amount of interest accrued on the Lower-Tier
Balance of the Lower-Tier Interest A-9 immediately prior to such Payment Date
during the related Accrual Period at the Lower-Tier A-9 Pass-Through Rate.
"Lower-Tier A-9 Pass-Through Rate": For any Payment Date, the Group II
Net Weighted Average Coupon Rate.
"Lower-Tier A-IO Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-IO immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-IO Pass-Through Rate.
"Lower-Tier B-1 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest B-1 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier B-1 Pass-Through Rate.
"Lower-Tier B-1 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier Balance": As to each Class of Lower-Tier Interests and any
Payment Date, the Initial Lower-Tier Balance as set forth in Section 2.08(a)
minus all amounts distributed as principal of such Class on previous Payment
Dates pursuant to Section 7.5(d) or (e).
"Lower-Tier Group I Distribution Amount": With respect to any Payment
Date, the sum of the Lower-Tier A-1 Monthly Interest, the Lower-Tier A-2 Monthly
Interest, the Lower-Tier A-3 Monthly Interest, the Lower-Tier A-4 Monthly
Interest, the Lower-Tier A-5 Monthly Interest, the Lower-Tier A-6 Monthly
Interest, the Lower-Tier A-7 Monthly Interest, the Lower-Tier B-1 Monthly
Interest, the Lower-Tier M-1 Monthly Interest, the Lower-Tier M-2 Monthly
Interest, the Group I Class A Principal Distribution Amount, the Class M-1
Principal Distribution Amount, the Class M-2 Principal Distribution Amount and
the Class B-1 Principal Distribution Amount. Such Group I Class A Principal
Distribution Amount is allocated as follows: (a) to the Lower-Tier Interest A-7
an amount equal to the Class A-7 Lockout Distribution Amount and (b) the
remainder as follows, as a distribution on the Lower-Tier Interest A-1 until the
Lower-Tier Interest A-1 Termination Date, the Class A-1 Distribution Amount; as
a distribution on the Lower-Tier Interest A-2 until the Lower-Tier Interest A-2
Termination Date, the Class A-2 Distribution Amount; as a distribution on the
Lower-Tier
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Interest A-3 until the Lower-Tier Interest A-3 Termination Date, the Class A-3
Distribution Amount; as a distribution on the Lower-Tier Interest A-4 until the
Lower-Tier Interest A-4 Termination Date, the Class A-4 Distribution Amount; as
a distribution on the Lower-Tier Interest A-5 until the Lower-Tier Interest A-5
Termination Date and as a distribution on the Lower-Tier Interest A-6 until the
Lower-Tier Interest A-6 Termination Date.
"Lower-Tier Group II Distribution Amount": With respect to any Payment
Date, the sum of the Lower-Tier A-8 Monthly Interest, the Lower Tier A-9 Monthly
Interest and the Group II Principal Remittance Amount.
"Lower-Tier Interest A-1": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-2": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-3": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-4": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-5": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-6": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-7": The interest of that name established
pursuant to Section 2.08 hereof.
"Lower-Tier Interest A-8": The interest of that name established
pursuant to Section 2.08 hereof.
"Lower-Tier Interest A-9": The interest of that name established
pursuant to Section 2.09 hereof.
"Lower-Tier Interest B-1": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest M-1": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest M-2": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-1 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-1 is reduced to zero through the
distribution made in respect of Lower-Tier Interest A-1 on such Payment Date.
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"Lower-Tier Interest A-2 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-2 is reduced to zero through the
distribution made in respect of Lower-Tier Interest A-2 on such Payment Date.
"Lower-Tier Interest A-3 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-3 is reduced to zero through the
distribution made in respect of Lower-Tier Interest A-3 on such Payment Date.
"Lower-Tier Interest A-4 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-4 is reduced to zero through the
distribution made in respect of Lower-Tier Interest A-4 on such Payment Date.
"Lower-Tier Interest A-5 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-5 is reduced to zero through the
distribution made in respect of Lower-Tier Interest A-5 on such Payment Date.
"Lower-Tier Interest A-6 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-6 is reduced to zero through the
distribution made in respect of Lower-Tier Interest A-6 on such Payment Date.
"Lower-Tier Interest A-7 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-7 is reduced to zero through the
distribution made in respect of Lower-Tier Interest A-7 on such Payment Date.
"Lower-Tier Interest A-8 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-8 is reduced to zero through the
distribution made in respect of Lower-Tier A-8 on such Payment Date.
"Lower-Tier Interest A-9 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-9 is reduced to zero through the
distribution made in respect of Lower-Tier A-9 on such Payment Date.
"Lower-Tier Interest B-1 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest B-1 is reduced to zero through the
distribution made in respect of Lower-Tier Interest B-1 on such Payment Date.
"Lower-Tier Interest M-1 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest M-1 is reduced to zero through the
distribution made in respect of Lower-Tier Interest M-1 on such Payment Date.
"Lower-Tier Interest M-2 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest M-2 is reduced to zero through the
distribution made in respect of Lower-Tier Interest M-2 on such Payment Date.
"Lower-Tier M-1 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest M-1 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier M-1 Pass-Through Rate.
"Lower-Tier M-1 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
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"Lower-Tier M-2 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest M-2 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier M-2 Pass-Through Rate.
"Lower-Tier M-2 Pass-Through Rate": For any Payment Date, the Group I
Net Weighted Average Coupon Rate.
"Lower-Tier Pass-Through Rate": As to each of the respective Lower-Tier
Interests, the applicable "Lower-Tier Pass-Through Rate" set forth in Section
2.08 hereof.
"Lower-Tier REMIC": The segregated pool of assets referred to as the
Trust Estate, other than the Upper-Tier Group I Distribution Account and the
Upper-Tier Group II Distribution Account which are assets of the Upper-Tier
REMIC.
"Lower-Tier REMIC Residual Class": With respect to the Lower-Tier
REMIC, the interest therein designated as the "residual interest" therein for
purposes of the REMIC Provisions. The Lower-Tier REMIC Residual Class shall be
uncertificated, and shall be issuable only in Percentage Interest of 100% to
Advanta Conduit Receivables, Inc. as Tax Matters Person. Such interests shall be
non-transferable, except that Advanta Conduit Receivables, Inc. may assign such
interest to another person who accepts such assignment and the designation as
Tax Matters Person pursuant to Section 11.18 hereof. The Lower-Tier REMIC
Residual Class is entitled only to any amounts at any time held in the
Certificate Account and not required to be paid to the Upper-Tier REMIC, which
is expected to be zero at all times during the term of this Agreement.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware corporation,
and its permitted successors and assigns.
"Master Servicer's Trust Receipt": The Master Servicer's trust receipt
in the form set forth as Exhibit J hereto.
"Master Servicing Fee": As to any Payment Date the product of (x)
one-twelfth of 0.50% and (y) the aggregate Loan Balances of the Unaffiliated
Originator Loans as of the opening of business on the first day of the calendar
month preceding such Payment Date.
"Master Transfer Agreement": Any one of the Master Loan Transfer
Agreements among the Sponsor and/or the Conduit Acquisition Trust, the Trustee
and one or more Originators. For purposes of this Agreement the Master Loan
Transfer Agreements are (x) the Master Loan Transfer Agreement dated as of June
15, 1997 among the Sponsor, the Trustee and the Affiliated Originators named
therein and (y) any similar agreement with an Unaffiliated Originator designated
as a "Master Transfer Agreement" together, in either case, with any related
Conveyance Agreements (as defined therein).
"Mezzanine Certificates": Collectively, the Class M-1 Certificates and
the Class M-2 Certificates.
"Monthly Remittance Amount": With respect to Group I, the Group I
Monthly Remittance Amount, and with respect to Group II, the Group II Monthly
Remittance Amount.
"Moody's": Moody's Investors Service, Inc.
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"Mortgage": The mortgage, deed of trust or other instrument creating a
first or second or third lien on an estate in fee simple interest in real
property securing a Note.
"Mortgage Loan Group": Either Group I or Group II. References herein to
the related Class of Class A Certificates, when used with respect to a Mortgage
Loan Group, shall mean (A) in the case of Group I, the Group I Certificates, and
(B) in the case of Group II, the Group II Certificates.
"Mortgage Loans": Such of the mortgage loans transferred and assigned
to the Trust pursuant to Section 3.5(a) hereof, together with any Qualified
Replacement Mortgages substituted therefor in accordance with this Agreement, as
from time to time are held as a part of the Trust Estate, the Mortgage Loans
originally so held being identified in the Schedule of Mortgage Loans. The term
"Mortgage Loan" includes the terms "First Mortgage Loan", "Second Mortgage Loan"
and "Third Mortgage Loan". The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Property which is REO Property prior to such Property's disposition by the
Trust. Any mortgage loan which, although intended by the parties hereto to have
been, and which purportedly was, transferred and assigned to the Trust by the
Sponsor, in fact was not transferred and assigned to the Trust for any reason
whatsoever shall nevertheless be considered a "Mortgage Loan" for all purposes
of this Agreement. The term "Mortgage Loan" includes the terms "Initial Mortgage
Loan" and "Subsequent Mortgage Loan".
"Mortgagor": The obligor on a Note.
"Net Available Distribution Amount": The Group II Total Available
Funds.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of, without duplication, Liquidation Expenses and unreimbursed
Servicing Advances, unreimbursed Delinquency Advances and accrued and unpaid
Servicing Fees through the date of liquidation relating to such Liquidated Loan.
In no event shall Net Liquidation Proceeds with respect to any Liquidated Loan
be less than zero.
"Nonrecoverable Advances": With respect to any Mortgage Loan, (a) any
Delinquency Advance or Servicing Advance previously made and not reimbursed
pursuant to Sections 7.5 or 8.9, (b) a Delinquency Advance or Servicing Advance
proposed to be made in respect of a Mortgage Loan or REO Property either of
which, in the good faith business judgment of the Master Servicer, as evidenced
by an Officer's Certificate delivered no later than 1 Business Day prior to the
related Determination Date to the Class A-8 and Class A-9 Certificate Insurer
and the Trustee would not be ultimately recoverable pursuant to Sections 7.5 or
8.9 or (c) any other advance identified as a Nonrecoverable Advance in
subsection 8.9(d) or (e).
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
"Offered Certificates": Collectively, the Class A Certificates, the
Mezzanine Certificates and the Subordinate Certificates.
"Officer's Certificate": A certificate signed by any Authorized Officer
of any Person delivering such certificate and delivered to the Trustee.
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"Operative Documents": Collectively, this Agreement, the Master
Transfer Agreements, the Subsequent Transfer Agreements, the Certificate
Insurance policy, the Insurance Agreement, the Indemnification Agreement and
Certificates.
"Original Pre-Funded Amounts": The sum of the Group I Original
Pre-Funded Amount and the Group II Original Pre-Funded Amount.
"Original Principal Amount": With respect to each Note, the principal
amount of such Note or the mortgage note relating to a Senior Lien, as the case
may be, on the date of origination thereof.
"Originator": Any entity from which the Sponsor has purchased (or, in
the case of Subsequent Mortgage Loans, will purchase) Mortgage Loans, or Advanta
Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta Mortgage Corp.
Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage Corp. of New
Jersey, Advanta Mortgage Corp. Northeast, Advanta National Bank and Advanta
Finance Corp.
"Outstanding": With respect to all Certificates of a Class, as of any
date of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment money in the necessary amount has been theretofore deposited
with the Trustee in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this
Agreement, unless proof satisfactory to the Trustee is presented that
any such Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 5.5 hereof.
"Overcollateralization Release Amount": For any Payment Date, the sum
of the Group I Overcollateralization Release Amount and the Group II
Overcollateralization Release Amount.
"Owner": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.6.
"Pass-Through Rate": As to the each Class of Certificates, the related
Pass-Through Rate.
"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 25th day of each month,
commencing in the month following the Startup Day or if the 25th day is not a
Business Day, then the next succeeding Business Day.
"Percentage Interest": As to any Offered Certificate, that percentage,
expressed as a fraction, the numerator of which is the Certificate Principal
Balance of such Certificate as of the Cut-Off Date and the denominator of which
is the Certificate Principal Balance of all
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Certificates of the same Class; and as to any Class R Certificate, that
Percentage Interest set forth on such Class R Certificate.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Cumulative Realized Losses": With respect to any period, the sum
of all Realized Losses with respect to the Mortgage Loans in the related Group
experienced during such period.
"Pool Delinquency Rate": With respect to any Remittance Period, the
fraction, expressed as a percentage, equal to (x) the aggregate principal
balances of all Mortgage Loans 90 or more days Delinquent (including all
foreclosures and REO Properties) as of the close of business on the last day of
such Remittance Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Remittance Period.
"Pool Principal Balance": The aggregate principal balances of all
Mortgage Loans.
"Pool Rolling Six Month Delinquency Rate": As of any Payment Date
commencing with the seventh Payment Date, the fraction, expressed as a
percentage, equal to the average of the Pool Delinquency Rates for each of the
six immediately preceding Remittance Periods with respect to the Mortgage Loans.
"Pre-Funded Amounts": The sum of the Group I Pre-Funded Amount and the
Group II Pre-Funded Amount.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Premium Amount": As to any Payment Date, the product of (x)
one-twelfth of the Premium Percentage and (y) the Group II Certificate Principal
Balance on such Payment Date (after taking into account any distributions of the
Group II Principal Distribution Amount on such Payment Date).
"Premium Percentage": As defined in the Commitment.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan which is
received by the Master Servicer in advance of the scheduled due date for the
payment of such principal (other than the principal portion of any Prepaid
Installment), and the proceeds of any Insurance Policy which are to be applied
as a payment of principal on the related Mortgage Loan shall be deemed to be
Prepayments for all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Master Servicer or
any Sub-servicer in connection with a foreclosed Mortgage Loan prior to the
liquidation thereof,
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including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": Collectively, each principal and
interest account created by the Master Servicer or any Sub-servicer pursuant to
Section 8.8(a) hereof, or pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": As applicable, the Group I Principal
Remittance Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": "Prohibited transaction" shall have the
meaning set forth from time to time in the definition thereof at Section
860F(a)(2) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Property": The underlying property securing a Mortgage Loan.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": "Qualified liquidation" shall have the meaning
set forth from time to time in the definition thereof at Section 860F(a)(4) of
the Code (or any successor statute thereto) and applicable to the Trust and the
Tax Estates.
"Qualified Mortgage": "Qualified mortgage" shall have the meaning set
forth from time to time in the definition thereof at Section 860G(a)(3) of the
Code (or any successor statute thereto) and applicable to the Trust and the
Mortgage Loan Groups.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 3.3, 3.4 or 3.6(b) hereof, which (i) bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II or bears a fixed rate of interest if the Mortgage Loan to be substituted for
is in Group I, (ii) has a Coupon Rate at least equal to the Coupon Rate of the
Mortgage Loan being replaced, (which, in the case of a Mortgage Loan in Group
II, shall mean a Mortgage Loan having the same interest rate index, a margin
over such index and a maximum interest rate at least equal to those applicable
to the Mortgage Loan being replaced), (iii) is of the same or better property
type and the same or better occupancy status as the replaced Mortgage Loan, (iv)
shall be of the same or better credit quality classification (determined in
accordance with the Originators' credit underwriting guidelines) as the Mortgage
Loan being replaced, (v) shall mature no later than February 25, 2028, (vi) has
a Combined Loan-to-Value Ratio as of the Cut-Off Date or Subsequent Cut-Off Date
no higher than the Combined Loan-to-Value Ratio of the replaced Mortgage Loan at
such time, (vii) has a Loan Balance as of the related Replacement Cut-Off Date
equal to or less than the Loan Balance of the replaced Mortgage Loan as of such
Replacement Cut-Off Date, (viii) satisfies all of the representations and
warranties set forth in Section 3.3 and the criteria set forth from time to time
in the definition thereof at Section 860G(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust, all as evidenced by an Officer's
Certificate of the Sponsor delivered to the Class A-8 and Class A-9 Certificate
Insurer and the Trustee prior to any such substitution and (ix) is a valid First
Mortgage Loan if the Mortgage Loan to be substituted for is a valid First
Mortgage Loan or, Second Mortgage Loan if the Mortgage Loan to be substituted
for is a Second Mortgage Loan, or Third Mortgage Loan if the Mortgage Loan to be
substituted for is a Third Mortgage Loan. In the event that one or more mortgage
loans are proposed to be substituted for one or more mortgage loans, the Class
A-8 and Class A-9 Certificate Insurer may allow the foregoing tests to be met on
a weighted average basis with respect to the Mortgage Loans in Group II only or
other aggregate
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basis acceptable to the Class A-8 and Class A-9 Certificate Insurer, as
evidenced by a written consent delivered to the Trustee by the Class A-8 and
Class A-9 Certificate Insurer, except that the requirement of clauses (vi) and
(viii) hereof must be satisfied as to each Qualified Replacement Mortgage.
"Realized Loss": As to any Liquidated Loan, the amount, if any, by
which the Loan Balance thereof as of the date of liquidation is in excess of Net
Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs or, if such day is not a Business Day, the next preceding Business
Day.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The Bank
or Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Trustee which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Sponsor or any affiliate thereof, (iii) whose quotations
appear on the Telerate Page 3750 on the relevant Interest Determination Date and
(iv) which have been designated as such by the Trustee.
"Register": The register maintained by the Trustee in accordance with
Section 5.4 hereof, in which the names of the Owners are set forth. "Registrar":
The Trustee, acting in its capacity as Trustee appointed pursuant to Section 5.4
hereof, or any duly appointed and eligible successor thereto.
"Registration Statement": The Registration Statement filed by the
Sponsor with the Securities and Exchange Commission, including all amendments
thereto and including the Prospectus and Prospectus Supplement relating to the
Offered Certificates constituting a part thereof.
"REMIC": A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Sections 860A
through 860G of the Code, and related provisions, and regulations and rulings
promulgated thereunder, as the foregoing may be in effect from time to time.
"REMIC Trust": The segregated pool of assets consisting of the Trust
Estate, except for the Supplemental Interest Trust, the Supplemental Interest
Payment Account the Capitalized Interest Account and the Pre-Funding Account.
"Remittance Date": Any date on which the Master Servicer is required to
remit monies on deposit in the Principal and Interest Account to the Trustee,
which shall be no later than the 18th day of each month, or, if such day is not
a Business Day, the immediately preceding Business Day, commencing in the month
following the month in which the Startup Day occurs.
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"Remittance Period": The period (inclusive) beginning on the first day
of the calendar month immediately preceding the month in which a Remittance Date
occurs and ending on the last day of such immediately preceding calendar month.
"REO Property": A Property acquired by the Master Servicer or any
Sub-servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter" The letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Offered
Certificates registered in the Register under the nominee name of the
Depository.
"Representative": Lehman Brothers, Inc., as representative of the
Underwriters.
"Required Distributions": The Group II Insured Distribution Amount.
"Schedules of Mortgage Loans": The Schedules of Mortgage Loans,
attached hereto as Schedule I as they may be further supplemented in connection
with Subsequent Transfers. Such Schedules shall also contain one of the
following codes for each Mortgage Loan or Subsequent Mortgage Loan: "C" if such
Mortgage Loan is an Unaffiliated Originator Loan or "A" for all other Mortgage
Loans. The information contained on each Mortgage Loan Schedule shall be
delivered to the Trustee on a computer readable magnetic tape or disk.
"Second Mortgage Loan": A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien; and
with respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
"Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Master Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": As defined in Section 8.9(c) and Section 8.13
hereof.
"Servicing Fee": With respect to any Mortgage Loan which is an
Unaffiliated Originator Loan, the sum of any servicing fee relating to such
Unaffiliated Originator Loan and the Master Servicing Fee. With respect to any
Mortgage Loan other than an Unaffiliated Originator Loan, the Advanta Servicing
Fee. The Sponsor shall inform the Trustee as to the level of any servicing fee
relating to an Unaffiliated Originator Loan, which shall not be in excess of
0.50% per month, unless otherwise approved by the Control Party in writing.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware
corporation.
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"Standard & Poor's": Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies.
"Startup Day": December 18, 1997.
"Subordinate Certificates": The Class M-1 Certificates, the Class M-2
Certificates and the Class B-1 Certificates.
"Subsequent Cut-Off Date": With respect to any Subsequent Mortgage
Loans, the first day of the month in which such Subsequent Mortgage Loans are
transferred and assigned to the Trust.
"Subsequent Mortgage Loans": The Mortgage Loans sold to the Trust
pursuant to Section 3.8 hereof, which shall be listed on the Schedule of
Mortgage Loans attached to the Subsequent Transfer Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement
dated as of a Subsequent Transfer Date executed by the Trustee and the Sponsor
substantially in the form of Exhibit M hereto, by which Subsequent Mortgage
Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": The date specified in each Subsequent
Transfer Agreement.
"Substitution Amount": In connection with the delivery of any Qualified
Replacement Mortgage, if the outstanding principal amount of such Qualified
Replacement Mortgage as of the applicable Replacement Cut-Off Date is less than
the Loan Balance of the Mortgage Loan being replaced as of such Replacement
Cut-Off Date, an amount equal to such difference together with accrued and
unpaid interest on such amount calculated at the Coupon Rate net of the
Servicing Fee of the Mortgage Loan being replaced.
"Sub-Servicer": Any Person with whom the Master Servicer has entered
into a Sub-Servicing Agreement and who satisfies any requirements set forth in
Section 8.3 hereof in respect of the qualification of a Sub-Servicer .
"Sub-Servicing Agreement": The written contract between the Master
Servicer and any Sub-Servicer relating to servicing and/or administration of
certain Mortgage Loans as permitted by Section 8.3.
"Supplemental Interest Payment Account": The Supplemental Interest
Payment Account established in accordance with Section 7.10(a) hereof and
maintained by the Trustee.
"Supplemental Interest Payment Amount Available": As defined in Section
7.10(b) hereof.
"Supplemental Interest Trust": The Advanta Supplemental Interest Trust
1997-4 created pursuant to Section 7.10(a) hereof.
"Tax Matters Person": The Tax Matters Person appointed pursuant to
Section 11.17 hereof.
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"Tax Matters Person Residual Interest": The 100% interest in the Class
R Certificates and the Lower-Tier REMIC Residual Class, each of which shall be
issued to and held by Advanta Conduit Receivables, Inc. throughout the term
hereof unless another Person shall accept an assignment of such interest and the
designation of Tax Matters Person pursuant to Section 11.17 hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Third Mortgage Loan": A Mortgage Loan which constitutes a third
priority mortgage lien with respect to the related Property.
"Transaction Documents": Collectively this Agreement, the Insurance
Agreement, the Underwriting Agreement relating to the Offered Certificates, the
Master Transfer Agreements, any Sub-Servicing Agreement, any Subsequent Transfer
Agreement, the Indemnification Agreement, the Registration Statement relating to
the Offered Certificates and the Certificates.
"Trust": Advanta Mortgage Loan Trust 1997-4, the trust created under
this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts, (iii) any Property, the ownership of which
has been effected on behalf of the Trust as a result of foreclosure or
acceptance by the Master Servicer of a deed in lieu of foreclosure and that has
not been withdrawn from the Trust, (iv) any Insurance Policies relating to the
Mortgage Loans and any rights of the Sponsor under any Insurance Policies, (v)
Net Liquidation Proceeds with respect to any Liquidated Loan, (vi) the rights of
the Trustee under the Certificate Insurance Policy, and (vii) the rights of the
Sponsor against any Originator pursuant to the related Master Transfer
Agreement.
"Trustee": Bankers Trust Company of California, N.A., located on the
date of execution of this Agreement at Bankers Trust Company, 3 Park Plaza,
Irvine, California 92614, a national banking association, not in its individual
capacity but solely as Trustee under this Agreement, and any successor
hereunder.
"Trustee's Fees": With respect to any Payment Date and Mortgage Loan
Group, the product of (x) one-twelfth of 0.00875% and (y) the aggregate Loan
Balance of the Mortgage Loan in the related Mortgage Loan Group as of the
beginning of the related Remittance Period.
"Unaffiliated Originator Loan": Any Mortgage Loan purchased by the
Sponsor from an Unaffiliated Originator and sold to the Trust by the Sponsor.
"Unaffiliated Originators": Any Originator who is not affiliated with
the Sponsor.
"Uncertificated Interest": As defined in Section 2.8(b) hereof.
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"Underwriters": Lehman Brothers Inc., J.P. Morgan Securities, Inc.,
Morgan Stanley & Co. Incorporated and Prudential Securities Incorporated.
"Unpaid Realized Loss Amount": For any Class of the Subordinate
Certificates and as to any Payment Date, the excess of (x) the aggregate
cumulative amount of the related Applied Realized Loss Amounts with respect to
such Class for all prior Payment Dates over (y) the aggregate, cumulative amount
of the related Realized Loss Amortization Amounts with respect to such Class for
all prior Payment Dates.
"Upper-Tier Group I Distribution Account": The Upper-Tier Group I
Distribution Account established pursuant to Section 7.2 hereof.
"Upper-Tier Group II Distribution Account": The Upper-Tier Group II
Distribution Account established pursuant to Section 7.2 hereof.
"Upper-Tier REMIC": The REMIC established pursuant to Section 2.08
hereof with respect to the Offered Certificates. The assets of the Upper-Tier
REMIC shall include the Upper-Tier Group I Distribution Account, the Upper-Tier
Group II Distribution Account and the right to receive the distributions
deposited therein with respect to each Lower-Tier Interest.
SECTION 1.2. USE OF WORDS AND PHRASES . "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
SECTION 1.3. CAPTIONS; TABLE OF CONTENTS . The captions or headings in
this Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.
SECTION 1.4. OPINIONS . Each opinion with respect to the validity,
binding nature and enforceability of documents or Certificates may be qualified
to the extent that the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law) and may state that no
opinion is expressed on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy. Any opinion required to be
furnished by any Person hereunder must be delivered by counsel upon whose
opinion the addressee of such opinion may reasonably rely, and such opinion may
state that it is given in reasonable reliance upon an opinion of another, a copy
of which must be attached, concerning the laws of a foreign jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
SECTION 2.1. ESTABLISHMENT OF THE TRUST . The parties hereto do hereby
create and establish, pursuant to the laws of the State of New York and this
Agreement, the Trust, which, for convenience, shall be known as "Advanta
Mortgage Loan Trust 1997-4". Each Mortgage Loan Group shall constitute a
sub-trust of the Trust.
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SECTION 2.2. OFFICE. The office of the Trust shall be in care of the
Trustee, addressed to Bankers Trust Company of California, N.A., Three Park
Plaza, Irvine, California 92614, or at such other address as the Trustee may
designate by notice to the Sponsor, the Master Servicer, the Owners and the
Class A-8 and Class A-9 Certificate Insurer.
SECTION 2.3. PURPOSES AND POWERS. The purpose of the Trust is to
engage in the following activities, and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of Mortgage Loans and
the Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of monies in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing contained herein shall permit the Trustee to take any
action which would result in the loss of REMIC status for the REMIC Trust.
SECTION 2.4. APPOINTMENT OF THE TRUSTEE; DECLARATION OF TRUST. The
Sponsor hereby appoints the Trustee as trustee of the Trust effective as of the
Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners and the Class A-8 and Class A-9 Certificate Insurer, as their interests
may appear.
SECTION 2.5. EXPENSES OF THE TRUST . Any expenses of the Trust that
have been reviewed and approved by the Sponsor (which approval shall not be
unreasonably withheld), including the reasonable expenses of the Trustee shall
be paid by the Sponsor to the Trustee or to such other Person to whom such
amounts may be due. Failure by the Sponsor to pay any such fees or other
expenses shall not relieve the Trustee of its obligations hereunder. The Trustee
hereby covenants with the Owners that every material contract or other material
agreement entered into by the Trustee on behalf of the Trust shall expressly
state therein that no Owner shall be personally liable in connection with such
contract or agreement.
SECTION 2.6. OWNERSHIP OF THE TRUST . On the Startup Day the ownership
interests in the Trust and the subtrusts shall be transferred as set forth in
Section 4.2 hereof, such transfer to be evidenced by sale of the Certificates as
described therein. Thereafter, transfer of any ownership interest shall be
governed by Sections 5.4 and 5.8 hereof.
SECTION 2.7. SITUS OF THE TRUST . It is the intention of the parties
hereto that the Trust constitute a trust under the laws of the State of New
York. The Trust will be created in, and all Accounts maintained by the Trustee
on behalf of the Trust will be located in, the State of New York. The Trust will
not have any employees and will not have any real or personal property (other
than property acquired pursuant to Section 8.13 hereof) located in any state
other than in the State of New York and payments will be received by the Trust
only in the State of New York and payments from the Trust will be made only from
the State of New York. The Trust's only office will be at the office of the
Trustee as set forth in Section 2.2 hereof.
SECTION 2.8. MISCELLANEOUS REMIC PROVISIONS . (a) The beneficial
ownership interest in the Lower-Tier REMIC shall be evidenced by the interests
having the characteristics and terms as follows:
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<TABLE>
<CAPTION>
LOWER-TIER
INITIAL LOWER- PASS-THROUGH FINAL SCHEDULED
CLASS DESIGNATION TIER BALANCE RATE PAYMENT DATES
- ------------------------------- -------------- ------------ ---------------
<S> <C> <C> <C>
Lower-Tier Interest A-1 $146,039,000 (1) August 25, 2010
Lower-Tier Interest A-2 91,159,000 (6.61%) September 25, 2012
Lower-Tier Interest A-3 33,579,000 (6.69%) August 25, 2014
Lower-Tier Interest A-4 58,837,000 (6.87%) March 25, 2022
Lower-Tier Interest A-5 15,601,000 (6.97%) March 25, 2024
Lower-Tier Interest A-6 41,285,000 (2) January 25, 2029
Lower-Tier Interest A-7/A-IO 50,000,000 (3) January 25, 2029
Lower-Tier Interest A-8 98,000,000 (4) February 25, 2024
Lower-Tier Interest A-9 302,000,000 (4) December 25, 2027
Lower-Tier Interest M-1 17,500,000 (5) January 25, 2029
Lower-Tier Interest M-2 30,000,000 (6) January 25, 2029
Lower-Tier Interest B-1 15,000,000 (7) January 25, 2029
Lower-Tier REMIC Residual Class (4) (8) January 25, 2029
</TABLE>
(1) On any Payment Date, Libor plus 0.14%, subject to a cap of the Group I
Net Weighted Average Coupon Rate.
(2) On any Payment Date, the Group I Net Weighted Average Coupon Rate,
subject to a cap of [7.30%.]
(3) On any Payment Date, the Lower Tier A-7/A-IO Pass-Through Rate.
(4) On any Payment Date, the Group II Net Weighted Average Coupon Rate.
(5) On any Payment Date, the Group I Net Weighted Average Coupon Rate,
subject to a cap of [7.20%.]
(6) On any Payment Date, the Group I Net Weighted Average Coupon Rate,
subject to a cap of [7.37%.]
(7) On any Payment Date, the Group I Net Weighted Average Coupon Rate,
subject to a cap of [7.72%.]
(8) The Lower-Tier REMIC Residual Class is not issued with a Lower-Tier
Balance or a Lower-Tier Pass-Through Rate.
(b) The Lower-Tier Interests A-1, A-2, A-3, A-4, A-5, A-6,
A-7/A-IO, A-8, A-9, M-1, M-2 and B-1 Certificates shall be issued as
non-certificated interests. The Lower-Tier REMIC Residual Class shall be issued
from the Lower-Tier REMIC as a non-certificated interest.
(c) The Sponsor hereby designates Lower-Tier Interest A-1,
Lower-Tier Interest A-2, Lower-Tier Interest A-3, Lower-Tier Interest A-4,
Lower-Tier Interest A-5, Lower-Tier Interest A-6, Lower-Tier Interest A-7/A-IO,
Lower Tier Interest A-8, Lower-Tier Interest A-9, Lower-Tier Interest M-1,
Lower-Tier Interest M-2, Lower-Tier Interest B-1, as "regular interests" and the
Lower-Tier REMIC Residual Class as the single class of "residual interests" in
the Lower-Tier REMIC for purposes of the REMIC Provisions.
(d) The Sponsor hereby designates the Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9,
Class A-IO, Class M-1, Class M-2 and Class B-1 Certificates as "regular
interests," and the Class R Certificates as the single class of "residual
interests" in the Upper-Tier REMIC for purposes of the REMIC Provisions. The
Sponsor hereby designates the Lower-Tier Interest A-1, the Lower-Tier Interest
A-2, the Lower-Tier Interest A-3, the Lower-Tier Interest A-4, the Lower-Tier
Interest A-5, the Lower-Tier Interest A-6, the Lower-Tier Interest A-7/A-IO, the
Lower-Tier Interest A-8, the Lower-Tier Interest A-9, Lower-Tier Interest M-1,
Lower-Tier Interest M-2, Lower-Tier Interest B-1, the Upper-Tier Group I
Distribution Account and the Upper-Tier Group II Distribution
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Account as the only assets of the Upper-Tier REMIC. The Capitalized Interest
Account and the Pre-Funding Account are not part of the segregated pool of
assets which constitutes the REMIC.
(e) The Startup Day is hereby designated as the "startup day"
of the Upper-Tier REMIC and the Lower-Tier REMIC within the meaning of Section
860G(a)(9) of the Code.
(f) The Owner of the Tax Matters Person Residual Interests in
the Upper-Tier REMIC and the Lower-Tier REMIC is hereby designated as "tax
matters person" as defined in the REMIC Provisions with respect to each such
REMIC.
(g) The Trust and each REMIC shall, for federal income tax
purposes, maintain books on a calendar year basis and report income on an
accrual basis.
(h) The Trustee shall cause the Upper-Tier REMIC and the
Lower-Tier REMIC each to elect to be treated as a REMIC under Section 860D of
the Code. Any inconsistencies or ambiguities in this Agreement or in the
administration of the Trust shall be resolved in a manner that preserves the
validity of such election to be treated as a REMIC. The Trustee shall report all
expenses of the Trust Estate to the Lower-Tier REMIC.
(i) For all Federal tax law purposes amounts transferred by
the Trustee to the Owners of the Class R Certificates shall be treated as
distributions by the Upper-Tier REMIC and amounts, if any, distributed on the
Lower-Tier REMIC Residual Class, if any, shall be treated as distributions by
the Lower-Tier REMIC. It is expected that there shall not be any distributions
to the Lower-Tier REMIC Residual Class.
(j) The Trustee shall provide to the Internal Revenue Service
and to the person described in Section 860(E)(e)(3) and (6) of the Code the
information described in Treasury Regulation Section 1.860D-1(b)(5)(ii), or any
successor regulation thereto with respect to both the Lower-Tier REMIC and the
Upper-Tier REMIC. Such information will be provided in the manner described in
Treasury Regulation Section 1.860E-2(a)(5), or any successor regulation thereto.
(k) The final scheduled Payment Date for any Class of
Certificates is hereby established as follows:
CLASS FINAL SCHEDULE PAYMENT DATE
Class A-1 Certificates 08/25/2010
Class A-2 Certificates 09/25/2012
Class A-3 Certificates 08/25/2014
Class A-4 Certificates 03/25/2022
Class A-5 Certificates 03/25/2024
Class A-6 Certificates 01/25/2029
Class A-7 Certificates 01/25/2029
Class A-8 Certificates 02/25/2024
Class A-9 Certificates 12/25/2027
Class A-IO Certificates 06/25/2000
Class M-1 Certificates 01/25/2029
Class M-2 Certificates 01/25/2029
Class B-1 Certificates 01/25/2029
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR.
The Sponsor hereby represents, warrants and covenants to the Trustee, the Class
A-8 and Class A-9 Certificate Insurer and to the Owners as of the Startup Day
that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of its business, or the properties owned or leased by it make such qualification
necessary. The Sponsor has all requisite corporate power and authority to own
and operate its properties, to carry out its business as presently conducted and
as proposed to be conducted and to enter into and discharge its obligations
under this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Sponsor is a party by the Sponsor and its
performance and compliance with the terms of this Agreement and of the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Sponsor and will not violate the
Sponsor's Articles of Incorporation or Bylaws or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or other
instrument to which the Sponsor is a party or by which the Sponsor is bound, or
violate any statute or any order, rule or regulation of any court, 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.
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(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Sponsor contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement
which describe the Sponsor or matters or activities for which the Sponsor is
responsible in accordance with the Operative Documents or which are attributed
to the Sponsor therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Sponsor or omit to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
with respect to the Sponsor not misleading. To the best of the Sponsor's
knowledge and belief, the Registration Statement does not contain any untrue
statement of a material fact required to be stated therein or omit to state any
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Sponsor makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Sponsor of the Operative Documents to which it is a party, have been duly taken,
given or obtained, as the case may be, are in full force and effect on the date
hereof, are not subject to any pending proceedings or appeals (administrative,
judicial or otherwise) and either the time within which any appeal therefrom may
be taken or review thereof may be obtained has expired or no review thereof may
be obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents on the part of the Sponsor and the performance by the
Sponsor of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Sponsor.
(j) The Sponsor received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the Mortgage Loans
evidenced by the Certificates.
(k) The Sponsor did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any intent to hinder, delay or defraud any of
its respective creditors.
(l) The Sponsor is solvent and the Sponsor will not be
rendered insolvent as a result of the sale of the Mortgage Loans to the Trust or
the sale of the Certificates.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the Mortgage
Loans to the Trustee.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE MASTER
SERVICER. The Master Servicer hereby represents, warrants and covenants to the
Trustee, the Class A-8 and Class A-9 Certificate Insurer and to the Owners as of
the Startup Day that:
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(a) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is, and each Sub-Servicer is, in compliance with the laws of each state in which
any Property is located to the extent necessary to enable it to perform its
obligations hereunder and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business, or the properties owned or
leased by it make such qualification necessary. The Master Servicer and each
Sub-servicer has all requisite corporate power and authority to own and operate
its properties, to carry out its business as presently conducted and as proposed
to be conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party. The Master
Servicer has, on a consolidated basis with its parent, AMHC, equity of at least
$5,000,000, as determined in accordance with generally accepted accounting
principles.
(b) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this Agreement and
the other Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Master Servicer and will
not violate the Master Servicer's Articles of Incorporation or Bylaws or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument to which the Master Servicer is a party
or by which the Master Servicer is bound or violate any statute or any order,
rule or regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Master Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Master Servicer is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a valid,
legal and binding obligation of the Master Servicer, enforceable against it in
accordance with the terms hereof, except as the enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law).
(d) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Master Servicer or its properties or might have consequences
that would materially and adversely affect its performance hereunder and under
the other Operative Documents to which the Master Servicer is a party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which litigation
might have consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or that would materially and
adversely affect the condition (financial or otherwise) or operations of the
Master Servicer or its properties or might have consequences that would
materially and adversely affect its performance hereunder and under the other
Operative Documents to which the Master Servicer is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Master Servicer
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the certificate, statement or report not misleading.
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(g) The statements contained in the Registration Statement
which describe the Master Servicer or matters or activities for which the Master
Servicer is responsible in accordance with the Operative Documents or which are
attributed to the Master Servicer therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue statement
of a material fact with respect to the Master Servicer or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein with respect to the Master Servicer not misleading. To the
best of the Master Servicer's knowledge and belief, the Registration Statement
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(h) [Reserved.]
(i) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Master Servicer makes no
such representation or warranty), that are necessary or advisable in connection
with the execution and delivery by the Master Servicer of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of the Master Servicer and the performance by the Master Servicer of
its obligations under this Agreement and such of the other Operative Documents
to which it is a party.
(j) The collection practices used by the Master Servicer with
respect to the Mortgage Loans directly serviced by it have been, in all material
respects, legal, proper, prudent and customary in the mortgage loan servicing
business.
(k) The transactions contemplated by this Agreement are in the
ordinary course of business of the Master Servicer.
(l) The terms of each existing Sub-Servicing Agreement and
each designated Sub-servicer are acceptable to the Master Servicer and any new
Sub-Servicing Agreements or Sub-servicers will comply with the provisions of
Section 8.3.
It is understood and agreed that the representations and
warranties set forth in this Section 3.2 shall survive delivery of the Mortgage
Loans to the Trustee.
Upon discovery by any of the Originators, the Master Servicer,
the Sponsor, any Sub-Servicer, the Class A-8 and Class A-9 Certificate Insurer
or the Trustee of a breach of any of the representations and warranties set
forth in this Section 3.2 which materially and adversely affects the interests
of the Owners or of the Class A-8 and Class A-9 Certificate Insurer, the party
discovering such breach shall give prompt written notice to the other parties.
Within 30 days of its discovery or its receipt of notice of breach, the Master
Servicer shall cure such breach in all material respects and, upon the Master
Servicer's continued failure to cure such breach, may thereafter be removed by
the Trustee or the Class A-8 and Class A-9 Certificate Insurer pursuant
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to Section 8.20 hereof; provided, however, that if the Master Servicer can
demonstrate to the reasonable satisfaction of the Class A-8 and Class A-9
Certificate Insurer and the Trustee that it is diligently pursuing remedial
action, then the cure period may be extended with the written approval of the
Class A-8 and Class A-9 Certificate Insurer and the Trustee.
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR
WITH RESPECT TO THE MORTGAGE LOANS. (a) The Sponsor makes the following
representations and warranties as to the Mortgage Loans on which the Class A-8
and Class A-9 Certificate Insurer relies and the Trustee relies in accepting the
Mortgage Loans in trust and executing and authenticating the Certificates. Such
representations and warranties speak as of the Startup Day with respect to the
Initial Mortgage Loans, as of the related Subsequent Transfer Date with respect
to any Subsequent Mortgage Loan, or as of the date upon which any Qualified
Replacement Mortgage is added to the Trust, but shall survive the sale,
transfer, and assignment of the Mortgage Loans to the Trustee:
(i) The information with respect to each Mortgage
Loan set forth in the Schedules of Mortgage Loans is true and correct
as of the Cut-Off Date or the Subsequent Cut-Off Date, as the case may
be;
(ii) All of the original or certified documentation
set forth in Section 3.5 (including all material documents related
thereto) with respect to each Mortgage Loan has been or will be
delivered to the Trustee on the Startup Day or the related Subsequent
Transfer Date, as the case may be, or as otherwise provided in Section
3.5;
(iii) Except for any Unaffiliated Originator Loans
being serviced by a servicer other than the Master Servicer, each
Mortgage Loan is being serviced by the Master Servicer or a Person
controlling, controlled by or under common control with the Master
Servicer and qualified to service mortgage loans;
(iv) The Note related to each Mortgage Loan in Group
I bears a Coupon Rate of at least 7.0% per annum;
(v) As of the Cut-Off Date, no more than 0.62% of the
aggregate principal balances of the Initial Mortgage Loans are 30-59
days Delinquent and no Initial Mortgage Loan is 60 or more days'
Delinquent; as of the related Subsequent Cut-Off Date, no Subsequent
Mortgage Loan with respect to Group I shall be 30 or more days'
Delinquent and no Subsequent Mortgage Loan with respect to Group II
shall be 60 or more days Delinquent;
(vi) As of the Startup Day and any Subsequent
Transfer Date, no more than 1.00% of the aggregate principal balances
of the Initial Mortgage Loans or the Subsequent Mortgage Loans, as
applicable, is secured by Properties located within any single zip code
area;
(vii) Each Mortgage Loan conforms, and all such
Mortgage Loans in the aggregate conform, in all material respects to
the description thereof set forth in the Registration Statement; and
(viii) The credit underwriting guidelines applicable
to each Mortgage Loan conform in all material respects to the
description thereof set forth in the Prospectus.
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(b) The Sponsor hereby assigns to the Trustee for the benefit
of the Owners of the Certificates and the Class A-8 and Class A-9 Certificate
Insurer (so long as a Class A-8 and Class A-9 Certificate Insurer Default had
not occurred and is continuing) all of its right, title and interest in respect
of each Master Transfer Agreement applicable to the related Mortgage Loan.
Insofar as such Master Transfer Agreement provides for representations and
warranties made by the related Originator in respect of a Mortgage Loan and any
remedies provided thereunder for any breach of such representations and
warranties, such right, title and interest may be enforced by the Master
Servicer or by the Trustee on behalf of the Owners and the Class A-8 and Class
A-9 Certificate Insurer. Upon the discovery by the Sponsor, the Master Servicer,
the Class A-8 and Class A-9 Certificate Insurer or the Trustee of a breach of
any of the representations and warranties made in a Master Transfer Agreement in
respect of any Mortgage Loan which materially and adversely affects the
interests of the Owners or of the Class A-8 and Class A-9 Certificate Insurer in
such Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties. The Master Servicer shall promptly notify the
related Originator of such breach and request that such Originator cure such
breach or take the actions described in Section 3.4(b) hereof within the time
periods required thereby, and if such Originator does not cure such breach in
all material respects, the Sponsor shall cure such breach or take such actions.
The obligations of the Sponsor or Master Servicer, as the case may be, set forth
herein with respect to any Mortgage Loan as to which such a breach has occurred
and is continuing shall constitute the sole obligations of the Master Servicer
and of the Sponsor in respect of such breach.
SECTION 3.4. COVENANTS OF SPONSOR TO TAKE CERTAIN ACTIONS WITH
RESPECT TO THE MORTGAGE LOANS IN CERTAIN SITUATIONS. (a) With the provisos and
limitations as to remedies set forth in this Section 3.4, upon the discovery by
any Originator, the Sponsor, the Master Servicer, the Class A-8 and Class A-9
Certificate Insurer, any Sub-Servicer or the Trustee that the representations
and warranties set forth in Section 3.3 of this Agreement or in the Master
Transfer Agreement were untrue in any material respect as of the Startup Day (or
the Subsequent Transfer Date, as the case may be) and such breaches of the
representations and warranties materially and adversely affect the interests of
the Owners or of the Class A-8 and Class A-9 Certificate Insurer, the party
discovering such breach shall give prompt written notice to the other parties.
The Sponsor acknowledges that a breach of any representation
or warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan, (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Property or (z) set forth in
clause (viii) of Section 3.3 above constitutes breach of a representation or
warranty which "materially and adversely affects the interests of the Owners or
of the Class A-8 and Class A-9 Certificate Insurer in such Mortgage Loan.
(b) Upon the earliest to occur of the Sponsor's discovery, its
receipt of notice of breach from any one of the other parties hereto or from the
Class A-8 and Class A-9 Certificate Insurer or such time as a breach of any
representation and warranty materially and adversely affects the interests of
the Owners or of the Class A-8 and Class A-9 Certificate Insurer as set forth
above, the Sponsor hereby covenants and warrants that it shall promptly cure
such breach in all material respects or it shall (or shall cause an affiliate of
the Sponsor to or an Originator to), subject to the further requirements of this
paragraph, on the second Remittance Date next succeeding such discovery, receipt
of notice or such other time (i) substitute in lieu of each Mortgage Loan in the
related Mortgage Loan Group which has given rise to the requirement for action
by the Sponsor a Qualified Replacement Mortgage and deliver the Substitution
Amount applicable thereto, together with the aggregate amount of all Delinquency
Advances and
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Servicing Advances and Servicing Advances theretofore made with respect to such
Mortgage Loan, to the Master Servicer for deposit in the Principal and Interest
Account or (ii) purchase such Mortgage Loan from the REMIC Trust at a purchase
price equal to the Loan Purchase Price thereof, which purchase price shall be
delivered to the Master Servicer for deposit in the Principal and Interest
Account. In connection with any such proposed purchase or substitution, the
Sponsor at its expense, shall cause to be delivered to the Trustee and the Class
A-8 and Class A-9 Certificate Insurer an opinion of counsel experienced in
federal income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the REMIC Trust or
would jeopardize the status of the REMIC Trust as a REMIC, and the Sponsor shall
only be required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the REMIC Trust or would not jeopardize
the status of the REMIC Trust as a REMIC. Any required purchase or substitution,
if delayed by the absence of such opinion shall nonetheless occur upon the
earlier of (i) the occurrence of a default or imminent default with respect to
the Mortgage Loan, (ii) the delivery of such opinion or (iii) at the direction
of the Control Party. It is understood and agreed that the obligation of the
Sponsor to cure the defect, or substitute for, or purchase any Mortgage Loan as
to which a representation or warranty is untrue in any material respect and has
not been remedied shall constitute the sole remedy available to the Owners, the
Trustee and the Class A-8 and Class A-9 Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by an Originator or by the Sponsor (or by an affiliate of the Sponsor,
as the case may be) to the Trust pursuant to Section 3.3, Section 3.4 or Section
3.6 hereof, the related Originator and the Sponsor shall be obligated to take
the actions described in Section 3.4(b) with respect to such Qualified
Replacement Mortgage upon the discovery by any of the Owners, the Sponsor, the
Master Servicer, the Class A-8 and Class A-9 Certificate Insurer, any
Sub-Servicer or the Trustee that the representations and warranties set forth in
the related Master Transfer Agreement or in Section 3.3 above are untrue in any
material respect on the date such Qualified Replacement Mortgage is conveyed to
the Trust such that the interests of the Owners or the Class A-8 and Class A-9
Certificate Insurer in the related Qualified Replacement Mortgage are materially
and adversely affected; provided, however, that for the purposes of this
subsection (c) the representations and warranties in the related Master Transfer
Agreement or as set forth in Section 3.3 above referring to items "as of the
Cut-Off Date" or "as of the Subsequent Cut-Off Date" or "as of the Startup Day"
or "as of the Subsequent Transfer Date" shall be deemed to refer to such items
as of the date such Qualified Replacement Mortgage is conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth
in this Section 3.4 shall survive delivery of the respective Mortgage Loans
(including Qualified Replacement Mortgage Loans) to the Trustee.
SECTION 3.5. CONVEYANCE OF THE MORTGAGE LOANS. (a) The
Sponsor, concurrently with the execution and delivery hereof, and on behalf of
the Conduit Acquisition Trust, hereby transfers, sells, assigns, sets over and
otherwise conveys without recourse, to the Trustee, all right, title and
interest of the Conduit Acquisition Trust in and to each Initial Mortgage Loan
listed on the Schedule of Mortgage Loans delivered by the Sponsor on the Startup
Day, all its right, title and interest in and to principal collected and
interest accruing on each such Initial Mortgage Loan on and after the Cut-Off
Date and all its right, title and interest in and to all Insurance Policies and
any other assets included or to be included in the Trust for the benefit of
Owners and the Class A-8 and Class A-9 Certificate Insurer. The transfer by the
Conduit Acquisition Trust of the Initial Mortgage Loans set forth on the
Schedule of Initial Mortgage Loans to the Trustee is absolute and is intended by
the Owners and all parties hereto to be treated as a sale by the Conduit
Acquisition Trust.
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(b) The Sponsor agrees to take or cause to be taken such
actions and execute such documents (including, without limitation, the filing of
all necessary continuation statements for the UCC-1 financing statements filed
in the State of New York (which shall have been filed within 90 days of the
Startup Day or the Subsequent Transfer Date, as the case may be) describing the
Mortgage Loans and naming the Conduit Acquisition Trust as debtor and the
Trustee as the secured party and any amendments to UCC-1 financing statements
required to reflect a change in the name or corporate structure of the debtor or
the filing of any additional UCC-1 financing statements due to a change in the
principal officer of the debtor (within 90 days of any event necessitating such
filing) as are necessary to perfect and protect the Certificateholders' and the
Class A-8 and Class A-9 Certificate Insurer's interests in each Mortgage Loan
and the proceeds thereof.
(c) In connection with the transfer and assignment of the
Mortgage Loans, the Sponsor agrees to:
(i) cause to be delivered, on the Startup Day, or any
Subsequent Transfer Date, as applicable, without recourse, to the
Trustee the items listed in the definitions of "Advanta Mortgage Files"
and "Conduit Mortgage Files," as appropriate; provided that the
assignments of mortgage listed in clause (e) of Exhibit B hereto shall
be delivered to the Trustee with respect to the Designated Advanta
Mortgage Files within 75 Business Days of the Startup Day, or any
Subsequent Transfer Date, as applicable. Notwithstanding the foregoing,
with respect to the Initial Mortgage Loans, to the extent that the
above-described items required to be delivered have not been delivered,
to the Trustee by the Startup Date, the Sponsor agrees to deposit an
amount equal to the Loan Balance of each such Mortgage Loan (each, an
"Escrow Loan") into the Escrow Pre-Funding Account (the "Escrow
Amount"), and the Trustee shall hold such amount in trust until such
items have been received by the Trustee. Upon receipt of such items,
with respect to such Escrow Loan, the Trustee shall release the related
Escrow Amount to the Sponsor. It is understood by all parties that the
deposit of the Escrow Amount into the Pre-Funding Account is a matter
of convenience and (i) such monies shall not be construed to be part of
the Original Pre-Funded Amounts and (ii) the release of such funds and
delivery of the above-described items shall not be subject to the
conditions relating to the transfer of Subsequent Mortgage Loans. If,
by the end of the Funding Period, the missing items have not been
delivered by the Sponsor to the Trustee, (i) the aggregate remaining
Escrow Amount shall, on the January Payment Date, be transferred to the
Certificate Account and distributed to the Group I or Group II
Certificateholders, as applicable, as a prepayment of principal in
accordance with the payment priorities described in Section 7.5 and
(ii) the Master Servicer shall, on the January Remittance Date, make a
Nonrecoverable Advance pursuant to Subsection 8.9(e).
(ii) cause, within 75 Business Days following the
Startup Day, or any Subsequent Transfer Date, as applicable, the
assignments of Mortgage to be submitted for recording in the
appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof as against creditors of or purchasers from the
related Originator to the Trustee; provided, however, that, for
administrative convenience and facilitation of servicing and to reduce
closing costs, assignments of mortgage shall not be required to be
submitted for recording with respect to any Mortgage Loan which relates
to an Advanta Mortgage File only if the Trustee, the Class A-8 and
Class A-9 Certificate Insurer and each Rating Agency has received an
Opinion of Counsel, satisfactory in form and substance to the Class A-8
and Class A-9 Certificate Insurer and to each Rating
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Agency, to the effect that the recordation of such assignments in any
specific jurisdiction is not necessary to protect the Trustee's
interest in the related Mortgage.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Originators or of the Sponsor.
Notwithstanding anything to the contrary contained in this Section 3.5, in those
instances where the public recording office retains the original Mortgage, the
assignment of a Mortgage or the intervening assignments of the Mortgage after it
has been recorded, the Sponsor shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Trustee
shall be kept in the related file.
Such assignments of mortgage shall, in addition to the
requirements specified in Exhibit B, be in recordable form. On or before the
Startup Day, the Sponsor shall deliver to the Trustee original executed powers
of attorney, from the current recordholders of the related Mortgage
substantially in the form of Exhibit H, authorizing the Master Servicer on
behalf of the Trustee to record the assignments of mortgage as provided in
clause (ii) above. Pursuant to such power of attorney, the Trustee also may
execute a new assignment of mortgage for any Mortgage Loan if the original
assignment of mortgage delivered by the Sponsor to the Trustee is not in
recordable form at such time as the assignment of mortgage is to be recorded by
the Trustee.
(d) In the case of Mortgage Loans which have been prepaid in
full on or after the Cut-Off Date and prior to the Startup Day, or on or after
any Subsequent Cut-Off Date and prior to the related Subsequent Transfer Date,
as the case may be, the Sponsor, in lieu of the foregoing, will deliver within
15 Business Days after the Startup Day, to the Trustee a certification of an
Authorized Officer in the form set forth in Exhibit C.
(e) The Sponsor (or the Conduit Acquisition Trust or an
affiliate of the Sponsor) shall transfer, sell, assign, set over and otherwise
convey without recourse, to the Trustee all right, title and interest of the
Sponsor (or the Conduit Acquisition Trust or of such affiliate) in and to any
Qualified Replacement Mortgage delivered to the Trustee pursuant to Section 3.3,
Section 3.4 or Section 3.6 hereof and all its right, title and interest to
principal collected and interest accruing on such Qualified Replacement Mortgage
on and after the applicable Replacement Cut-Off Date; provided, however, that
the Sponsor (or the Conduit Acquisition or such affiliate) shall reserve and
retain all right, title and interest in and to payments of principal and
interest due on such Qualified Replacement Mortgage prior to the applicable
Replacement Cut-Off Date.
(f) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage therefor, the
Trustee will transfer, sell, assign, set over and otherwise convey without
recourse, on the Sponsor's order, all of its right, title and interest in and to
such released Mortgage Loan and all the Trust's right, title and interest to
principal collected and interest accruing on such released Mortgage Loan on and
after the applicable Replacement Cut-Off Date; provided, however, that the Trust
shall reserve and retain all right, title and interest in and to payments of
principal collected and interest accruing on such released Mortgage Loan prior
to the applicable Replacement Cut-Off Date.
(g) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Trustee on behalf of the Trust, the
Sponsor agrees to cause to be
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delivered to the Trustee the items described in Section 3.5(b) on the date of
such transfer and assignment or, if a later delivery time is permitted by
Section 3.5(b), then no later than such later delivery time.
(h) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the Trustee
shall deliver on the date of conveyance of such Qualified Replacement Mortgage
and on the order of the Sponsor (i) the original Note, or the certified copy,
relating thereto, endorsed without recourse, to the Sponsor and (ii) such other
documents as constituted the File with respect thereto.
(i) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Sponsor shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
(j) The Sponsor shall cause to be reflected on the records of
the Conduit Acquisition Trust that the Mortgage Loans have been sold to the
Trust.
(k) To the extent that the ratings, if any, then assigned to
the unsecured debt of the Sponsor or of the Sponsor's ultimate corporate parent
are satisfactory to the Control Party, Standard & Poor's and Moody's, then any
of the Document Delivery Requirements described above may be waived by an
instrument signed by the Control Party, Standard & Poor's, and Moody's (or any
documents theretofore delivered to the Trustee returned to the Sponsor) on such
terms and subject to such conditions as the Control Party, Moody's and Standard
& Poor's may permit.
SECTION 3.6. ACCEPTANCE BY TRUSTEE; CERTAIN SUBSTITUTIONS OF
MORTGAGE LOANS; CERTIFICATION BY TRUSTEE. (a) The Trustee agrees to execute and
deliver on the Startup Day and on any Subsequent Transfer Dates an
acknowledgment of receipt in the form attached as Exhibit D hereto of the Files
delivered by the Sponsor, and declares that it will hold such documents and any
amendments, replacement or supplements thereto, as well as any other assets
included in the definition of Trust Estate and delivered to the Trustee, as
Trustee in trust upon and subject to the conditions set forth herein for the
benefit of the Owners and the Class A-8 and Class A-9 Certificate Insurer. The
Trustee further agrees to review any documents delivered by the Sponsor within
90 days after the Startup Day (or within 90 days with respect to any Subsequent
Mortgage Loan or Qualified Replacement Mortgage after the assignment thereof)
and to deliver to the Sponsor, the Class A-8 and Class A-9 Certificate Insurer
and the Master Servicer a Certification in the form attached as Exhibit E
hereto. The Trustee shall be under no duty or obligation to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the represented
purpose or that they are other than what they purport to be on their face, nor
shall the Trustee be under any duty to determine independently whether there are
any intervening assignments or assumption or modification agreements with
respect to any Mortgage Loan.
(b) If the Trustee during such 90-day period finds any
document constituting a part of a File which is not properly executed, has not
been received within the specified period, or is unrelated to the Mortgage Loans
identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does
not conform in a material respect to the description thereof as set forth in the
Schedules of Mortgage Loans, the Trustee shall promptly so notify the Sponsor
and the Class A-8 and Class A-9 Certificate Insurer. In performing any such
review, the Trustee may conclusively rely on the Sponsor as to the purported
genuineness of any such
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document and any signature thereon. The Sponsor agrees to use reasonable efforts
to remedy a material defect in a document constituting part of a File of which
it is so notified by the Trustee. If, however, within 60 days after the
Trustee's notice to it respecting such defect the Sponsor has not remedied or
caused to be remedied the defect and the defect materially and adversely affects
the interest in the related Mortgage Loan of the Owners or of the Class A-8 and
Class A-9 Certificate Insurer, the Sponsor will (or will cause the related
Originator or an affiliate of the Sponsor to) on the next succeeding Remittance
Date (i) substitute in lieu of such Mortgage Loan a Qualified Replacement
Mortgage and, deliver the Substitution Amount applicable thereto to the Master
Servicer for deposit in the Principal and Interest Account or (ii) purchase such
Mortgage Loan at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be delivered to the Master Servicer for deposit in
the Principal and Interest Account. In connection with any such proposed
purchase or substitution the Sponsor shall cause at the Sponsor's expense to be
delivered to the Trustee and the Class A-8 and Class A-9 Certificate Insurer an
opinion of counsel experienced in federal income tax matters stating whether or
not such a proposed purchase or substitution would constitute a Prohibited
Transaction for the REMIC Trust or would jeopardize the status of the REMIC
Trust as a REMIC, and the Sponsor shall only be required to take either such
action to the extent such action would not constitute a Prohibited Transaction
for the REMIC Trust or would not jeopardize the status of the REMIC Trust as a
REMIC. Any required purchase or substitution, if delayed by the absence of such
opinion shall nonetheless occur upon the earlier of (i) the occurrence of a
default or imminent default with respect to the Mortgage Loan or (ii) the
delivery of such opinion or (iii) at the direction of the Control Party.
SECTION 3.7. COOPERATION PROCEDURES. (a) The Sponsor shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Trustee, provide the Trustee with the information set forth in the Schedules of
Mortgage Loans with respect to such Qualified Replacement Mortgage.
(b) The Sponsor, the Master Servicer and the Trustee covenant
to provide each other and to the Class A-8 and Class A-9 Certificate Insurer
with all data and information required to be provided by them hereunder at the
times required hereunder, and additionally covenant reasonably to cooperate with
each other in providing any additional information required by any of them in
connection with their respective duties hereunder.
SECTION 3.8. CONVEYANCE OF THE SUBSEQUENT MORTGAGE LOANS. (a)
Subject to the conditions set forth in paragraph (b) below in consideration of
the Trustee's delivery on the related Subsequent Transfer Dates to or upon the
order of the Sponsor of all or a portion of the balance of funds in the
Pre-Funding Account, the Sponsor shall on any Subsequent Transfer Date cause the
Conduit Acquisition Trust to sell, transfer, assign, set over and otherwise
convey without recourse, to the Trust for assignment to Group I or Group II, as
applicable, all right, title and interest of the Conduit Acquisition Trust in
and to each Subsequent Mortgage Loan listed on the Schedule of Mortgage Loans
delivered by the Sponsor to the Trustee on such Subsequent Transfer Date, all
its right, title and interest in and to principal collected and interest
accruing on each such Subsequent Mortgage Loan on and after the related
Subsequent Cut-Off Date and all its right, title and interest in and to all
Insurance Policies; provided, however, that the Conduit Acquisition Trust
reserves and retains all its right, title and interest in and to principal
collected and interest accruing on each such Subsequent Mortgage Loan prior to
the related Subsequent Cut-Off Date. The transfer to the Trust by the Conduit
Acquisition Trust of the Subsequent Mortgage Loans set forth on the Schedule of
Mortgage Loans shall be absolute and shall be intended by the Owners and all
parties hereto to be treated as a sale by the Conduit Acquisition Trust.
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The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Loan Balances of the Subsequent
Mortgage Loans so transferred.
(b) The Sponsor shall transfer to the Trust the Subsequent
Mortgage Loans and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date.
(i) the Sponsor shall have provided the Trustee,
Moody's and Standard & Poor's with a timely Addition Notice and shall
have provided any information in an electronic data file form as
reasonably requested by any of the foregoing with respect to the
Subsequent Mortgage Loans;
(ii) the Sponsor shall have delivered to the Trustee
a duly executed written assignment (including an acceptance by the
Trustee) in substantially the form of Exhibit K (the "Subsequent
Transfer Agreement"), which shall include Schedules of Mortgage Loans,
listing the Subsequent Mortgage Loans and any other exhibits listed
thereon;
(iii) the Sponsor shall have deposited in the
Principal and Interest Account all collections in respect of the
Subsequent Mortgage Loans received on or after the related Subsequent
Cut-Off Date;
(iv) as of each Subsequent Transfer Date, none of the
related Originator, the Master Servicer or the Sponsor was insolvent
nor will any of them have been made insolvent by such transfer nor is
any of them aware of any pending insolvency;
(v) such addition will not result in a material
adverse tax consequent to the Trust or the Owners of the Certificates;
(vi) the Funding Period shall not have terminated;
(vii) the Sponsor shall have delivered to the Trustee
an Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and paragraphs (c) and (d)
below, and in the related Subsequent Transfer Agreement;
(viii) the Sponsor shall have delivered to the Rating
Agencies and the Trustee Opinions of Counsel with respect to the
transfer of the Subsequent Mortgage Loans substantially in the form of
the Opinions of Counsel delivered to the Trustee on the Startup Day
(bankruptcy, corporate and tax opinions);
(ix) an independent accountant retained by the
Sponsor provides the Sponsor with a letter (with copies provided to the
Rating Agencies, the Underwriter and the Trustee) stating whether or
not the characteristics of the Subsequent Mortgage Loans conform to the
characteristics described in the Pooling and Servicing Agreement. In
preparing such letter, the independent accountant must use the same
type of procedures as were applicable to the Initial Mortgage Loans
which were transferred to the Trust as of the Startup Date; and
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(x) Standard & Poor's shall have provided
confirmation that the rating of the Certificates will not be adversely
affected by such transfer of Subsequent Mortgage Loans.
(c) The obligation of the Trust to purchase a Subsequent
Mortgage Loan for assignment to Group I on any Subsequent Transfer Date is
subject to the following requirements: (i) such Subsequent Mortgage Loan may not
be 29 or more days contractually delinquent as of the related Subsequent Cut-Off
Date; (ii) the remaining term to maturity of such Subsequent Mortgage Loan may
not exceed 30 years; (iii) such Subsequent Mortgage Loan has a Coupon Rate of at
least 7.0%; (iv) such Subsequent Mortgage Loans may not have a combined
loan-to-value ratio ("CLTV") in excess of 100%; (v) such Subsequent Mortgage
Loan may not have a Loan Balance in excess of $600,000; (vi) such Subsequent
Mortgage Loan may not have a final maturity date later than the Payment Date in
February 2028; (vii) such Subsequent Mortgage Loan may not have a debt-to-income
ratio in excess of 60%; (viii) no more than 1% of the Subsequent Mortgage Loans,
by aggregate principal balance, shall be concentrated in any single zip code;
(ix) following the purchase of Subsequent Mortgage Loans for Group I by the
Trust, the Mortgage Loans in Group I (including the Subsequent Mortgage Loans)
(a) will have a weighted average CLTV of not more than 75.0%, (b) will have a
weighted average Coupon Rate of at least 10.7%; (c) will have not less than 87%,
by aggregate principal balance, Mortgage Loans that are related to single family
residences; (d) will have not more than 7.5%, by aggregate principal balance,
Second Mortgage Loans; and (e) will have a weighted average remaining term to
stated maturity of not more than 30 years and (f) will not have more than 12%
and 4%, by aggregate principal balance, of C grade loans and D grade loans,
respectively.
(d) The obligation of the Trust to purchase a Subsequent
Mortgage Loan for assignment to Group II on any Subsequent Transfer Date is
subject to the following requirements: (i) such Subsequent Mortgage Loan may not
be 59 or more days contractually delinquent as of the related Subsequent Cut-Off
Date; (ii) the remaining term to maturity of such Subsequent Mortgage Loans may
not exceed 30 years; (iii) such Subsequent Mortgage Loan has a Coupon Rate of at
least 7.0%; (iv) such Subsequent Mortgage Loans may not have a combined
loan-to-value ratio ("CLTV") in excess of 100%; (v) such Subsequent Mortgage
Loan may not have a Loan Balance in excess of $1,000,000; (vi) such Subsequent
Mortgage Loan may not have a final maturity date later than the Payment Date in
February 2028; (vii) such Subsequent Mortgage Loan may not have a debt-to-income
ratio in excess of 60%; (viii) no more than 1% of the Subsequent Mortgage Loans,
by aggregate principal balance, shall be concentrated in any single zip code;
(ix) no Subsequent Mortgage Loan may have a margin less than 3.0%; (x) following
the purchase of Subsequent Mortgage Loans for Group II by the Trust, the
Mortgage Loans in Group II (including the Subsequent Mortgage Loans) (a) will
have a weighted average CLTV of not more than 78.0%, (b) will have a weighted
average Coupon Rate of at least 10.4%; (c) will have a weighted average margin
of at least 6.2%; (d) will have not less than 87%, by aggregate principal
balance, Mortgage Loans that are related to single family residences; (e) will
have not more than 1.0%, by aggregate principal balance, Second Mortgage Loans;
and (f) will have a weighted average remaining term to stated maturity of not
more than 30 years.
(e) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Sponsor agrees to satisfy the conditions set
forth in Sections 3.5(b)-(j), 3.6, 3.7 and 3.8(b)-(d).
(f) In connection with each Subsequent Transfer Date and on
the Payment Dates occurring in January of 1998 the Sponsor and the Trustee shall
co-operate in determining (i) the amount and correct dispositions of both
Capitalized Interest Requirements and the amount
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then on deposit in the Pre-Funding Account, and (ii) any other necessary matters
in connection with the administration of the Pre-Funding Account and of the
Capitalized Interest Account. In the event that any amounts are incorrectly
released to the Owners of the Class R Certificates from either of the
Pre-Funding Account or the Capitalized Interest Account, such Owners or the
Sponsor shall immediately repay such amounts to the Trustee.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
SECTION 4.1. ISSUANCE OF CERTIFICATES. On the Startup Day,
upon the Trustee's receipt from the Sponsor of an executed Delivery Order in the
form set forth as Exhibit F hereto, the Trustee shall execute, authenticate and
deliver the Certificates on behalf of the Trust in accordance with the
directions set forth in such Delivery Order.
SECTION 4.2. SALE OF CERTIFICATES. At 11 a.m. New York City
time on the Startup Date, at the offices of Dewey Ballantine, 1301 Sixth Avenue,
New York, New York, the Sponsor will sell and convey the Mortgage Loans and the
money, instruments and other property related thereto to the Trustee, and the
Trustee will (i) deliver to the Representative, the Offered Certificates with an
aggregate Percentage Interest in each Class equal to 100%, registered in the
name of Cede & Co. or in such other names as the Representative shall direct,
against payment of the purchase price thereof by wire transfer of immediately
available funds to the Trustee and (ii) deliver to the Sponsor, the Class R
Certificates, with an aggregate Percentage Interest equal to 100%, registered as
the Sponsor shall request. Upon receipt of the proceeds of the sale of the
Certificates, the Trustee shall, from the proceeds of the sale of the
Certificates, pay other fees and expenses identified by the Sponsor, and pay to
the Sponsor the balance after deducting such amounts.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 5.1. TERMS. (a) The Certificates are pass-through
securities having the rights described therein and herein. Notwithstanding
references herein or therein with respect to the Certificates as to "principal"
and "interest" no debt of any Person is represented thereby, nor are the
Certificates or the underlying Notes guaranteed by any Person (except that the
Notes may be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the Certificate
Insurance Policy). Distributions on the Certificates are payable solely from
payments received on or with respect to the Mortgage Loans (other than the
Servicing Fees), monies in the Principal and Interest Account, the Pre-Funding
Account, the Capitalized Interest Account and the supplemental Interest Payment
Account, except as otherwise provided herein, from earnings on monies and the
proceeds of property held as a part of the Trust Estate and, with respect to the
Class A-8 Certificates and the Class A-9 Certificates upon the occurrence of
certain events, from Group II Insured Payments. Each Certificate entitles the
Owner thereof to receive monthly, on each Payment Date, in order of priority of
distributions with respect to such Class of Certificates, a specified portion of
such payments with respect to the Mortgage Loans in the related Mortgage Loan
Group and, with respect to the Class A-8 Certificates and the Class A-9
Certificates, (i) the Group II Insured Payments, pro rata in
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accordance with such Owner's Percentage Interest and (ii) certain amounts
payable from the Supplemental Interest Payment Account.
(b) Each Owner is required, and hereby agrees, to return to
the Trustee any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
SECTION 5.2. FORMS. The Certificates shall be in substantially
the forms set forth in Exhibit A hereof with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Agreement or as may in the Sponsor's judgment be necessary, appropriate or
convenient to comply, or facilitate compliance, with applicable laws, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
applicable securities laws or as may, consistently herewith, be determined by
the Authorized Officer of the Sponsor executing such Delivery Order, as
evidenced by his execution thereof.
SECTION 5.3. EXECUTION, AUTHENTICATION AND DELIVERY. Each
Certificate shall be executed on behalf of the Trust, by the manual signature of
one of the Trustee's Authorized Officers and shall be authenticated by the
manual signature of one of the Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who
were at any time the proper officers of the Trustee shall, upon proper
authentication by the Trustee, bind the Trust, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
execution and delivery of such Certificates or did not hold such offices at the
date of authentication of such Certificates.
The initial Certificates shall be dated as of the Startup Day
and delivered at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated
as set forth above.
SECTION 5.4. REGISTRATION AND TRANSFER OF CERTIFICATES. (a)
The Trustee, as registrar, shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby appointed registrar for the
purpose of registering Certificates and transfers of Certificates as herein
provided. The Owners and the Class A-8 and Class A-9 Certificate Insurer shall
have the right to inspect the Register at all reasonable times and to obtain
copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon
surrender for registration of transfer of any Certificate at the office
designated as the location of the Register, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the aggregate
principal amount of the Certificate so surrendered.
(c) the option of any Owner, Certificates of any Class owned
by such Owner may be exchanged for other Certificates authorized of like Class,
tenor and a like aggregate original principal amount and bearing numbers not
contemporaneously outstanding,
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upon surrender of the Certificates to be exchanged at the office designated as
the location of the Register. Whenever any Certificate is so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the Certificate or
Certificates which the Owner making the exchange is entitled to receive.
(d) Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
(e) Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Owner thereof or his attorney duly authorized in writing.
(f) service charge shall be made to an Owner for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(g) is intended that the Offered Certificates be registered so
as to participate in a global book-entry system with the Depository, as set
forth herein. Each Class of Offered Certificates shall, except as otherwise
provided in the next paragraph, be initially issued in the form of a single
fully registered Offered Certificate with a denomination equal to the Aggregate
Certificate Principal Balance. Upon initial issuance, the ownership of each such
Offered Certificate shall be registered in the Register in the name of Cede &
Co., or any successor thereto, as nominee for the Depository.
The Sponsor and the Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Offered Certificates registered in the
Register in the name of Cede & Co., as nominee of the Depository, the Sponsor,
the Master Servicer, the Class A-8 and Class A-9 Certificate Insurer and the
Trustee shall have no responsibility or obligation to Direct or Indirect
Participants or beneficial owners for which the Depository holds Offered
Certificates from time to time as a Depository. Without limiting the immediately
preceding sentence, the Sponsor, the Master Servicer, the Class A-8 and Class
A-9 Certificate Insurer and the Trustee shall have no responsibility or
obligation with respect to (i) the accuracy of the records of the Depository,
Cede & Co., or any Direct or Indirect Participant with respect to the ownership
interest in the Offered Certificates, (ii) the delivery to any Direct or
Indirect Participant or any other Person, other than a registered Owner of a
Offered Certificate as shown in the Register, of any notice with respect to the
Offered Certificates or (iii) the payment to any Direct or Indirect Participant
or any other Person, other than a registered Owner of a Offered Certificate as
shown in the Register, of any amount with respect to any distribution of
principal or interest on the Offered Certificates. No Person other than a
registered Owner of a Offered Certificate as shown in the Register shall receive
a certificate evidencing such Offered Certificate.
Upon delivery by the Depository to the Trustee of written
notice to the effect that the Depository has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of interest by the mailing of checks or drafts to
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Every new Certificate issued pursuant to this Section in exchange
for or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
SECTION 5.6. PERSONS DEEMED OWNERS. The Trustee and any agent of the
Trustee may treat the Person in whose name any Certificate is registered as the
Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
SECTION 5.7. CANCELLATION. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate cancelled as provided in this Section, except as expressly permitted
by this Agreement. All cancelled Certificates may be held by the Trustee in
accordance with its standard retention policy.
SECTION 5.8. LIMITATION ON TRANSFER OF OWNERSHIP Rights. (a) No sale
or other transfer of any Offered Certificate shall be made to the Sponsor, any
Originator or any of their respective affiliates.
(b) No sale or other transfer of record or beneficial ownership of a
Class R Certificate or assignment of an interest in the Lower-Tier REMIC
Residual Class (whether pursuant to a purchase, a transfer resulting from a
default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or an agent of a Disqualified Organization. The
transfer, sale or other disposition of a Class R Certificate or assignment of an
interest in the Lower-Tier REMIC Residual Class (whether pursuant to a purchase,
a transfer resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Class R Certificate or Lower-Tier REMIC Residual Class.
Furthermore, in no event shall the Trustee accept surrender for transfer,
registration of transfer, or register the transfer, of any Class R Certificate
nor authenticate and make available any new Class R Certificate unless the
Trustee has received an affidavit from the proposed transferee in the form
attached hereto as Exhibit I. Each holder of a Class R Certificate by his
acceptance thereof, shall be deemed for all purposes to have consented to the
provisions of this Section 5.08(b). The Lower-Tier REMIC Residual Class is not
transferable except that the Owner of the Tax Matters Person Residual Interest
in the Lower-Tier REMIC may assign its interest to another Person who accepts
such assignment and the designation as Tax Matters Person pursuant to Section
11.17 hereof.
(c) No other sale or other transfer of record or beneficial
ownership of a Class R Certificate shall be made unless such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made in accordance with said Act
and laws. In the event such a transfer is to be made within
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three years from the Startup Day, (i) the Trustee or the Sponsor shall require a
written opinion of counsel acceptable to and in form and substance satisfactory
to the Sponsor that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from said Act and
laws or is being made pursuant to said Act and laws, which opinion of counsel
shall not be an expense of the Trustee or the Sponsor, and (ii) the Trustee
shall require the Transferee to execute an investment letter acceptable to and
in form and substance satisfactory to the Sponsor certifying to the Trustee and
the Sponsor the facts surrounding such transfer, which investment letter shall
not be an expense of the Trustee or the Sponsor. The Owner of a Class R
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee and the Sponsor against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws. No Class R Certificate shall be acquired by or transferred to (i) an
employee benefit plan (as defined in section 3(3) of the Employee Retirement
Security Act of 1974, as amended ("ERISA")) subject to the provisions of Title I
of ERISA, (ii) a plan (as defined in Section 4975(e)(1) of the Code) subject to
Section 4975 of the Code, or (iii) an entity whose underlying assets are deemed
to be assets of a plan described in (i) or (ii) above by reason of such plan's
investment in the entity (each, a "Benefit Plan Entity"). Any transferee of a
Class R Certificate shall (x) certify that it is not any of the above and (y)
deliver an opinion of counsel to that effect.
(d) No Subordinate Certificate shall be acquired by or transferred
to a Benefit Plan Entity other than an insurance company using the assets of its
general account under circumstances whereby the exemptive relief granted in
Prohibited Transaction Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) ("PTE
95-60") is available with respect to the purchase and holding of such
Subordinate Certificate. Each transferee of a Subordinate Certificate shall
represent (or, in the case of any transfer of beneficial ownership in a
book-entry certificate, shall be deemed to represent) that either (i) it is not
a Benefit Plan Entity or (ii) it is an insurance company using the assets of its
general account and that the exemptive relief granted in PTE 95-60 is available
with respect to the transferee's purchase and holding of the Subordinate
Certificate.
SECTION 5.9. ASSIGNMENT OF RIGHTS. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute a transfer of an ownership interest sufficient to render the
transferee an Owner of the Trust without compliance with the provisions of
Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
SECTION 6.1. DISTRIBUTIONS. The Trustee will duly and punctually pay
distributions with respect to the Certificates in accordance with the terms of
the Certificates and this Agreement. Such distributions shall be made (i) by
check mailed on each Payment Date or (ii) if requested by any Owner, to such
Owner by wire transfer to an account within the United States designated no
later than five Business Days prior to the related Record Date, made on each
Payment Date, in each case to each Owner of record on the immediately preceding
Record Date; provided, however, that an Owner of a Offered Certificate shall
only be entitled to payment by wire transfer if such Owner owns Offered
Certificates in the aggregate denomination of at least $5,000,000.
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SECTION 6.2. MONEY FOR DISTRIBUTIONS TO BE HELD IN TRUST;
WITHHOLDING. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or, with respect to the Class A-8
Certificates and the Class A-9 Certificates, from Group II Insured Payments
shall be made by and on behalf of the Trustee, and no amounts so withdrawn from
the Certificate Account for payments of the Certificates and no Group II Insured
Payment shall be paid over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of any
amount due with respect to any Offered Certificate and remaining unclaimed by
the Owner of such Offered Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first, to the Class A-8
and Class A-9 Certificate Insurer on account of any Group II Reimbursement
Amount, and second to the Owners of the Class R Certificates; and the Owner of
such Offered Certificate shall thereafter, as an unsecured general creditor,
look only to the Owners of the Class R Certificates, or in the case of the Class
A-8 Certificates and the Class A-9 Certificates, the Class A-8 and Class A-9
Certificate Insurer for payment thereof (but only to the extent of the amounts
so paid to the Class A-8 and Class A-9 Certificate Insurer or the Owners of the
Class R Certificates), and all liability of the Trustee with respect to such
trust money shall thereupon cease; provided, however, that the Trustee, before
being required to make any such payment, shall at the expense of the Sponsor
cause to be published once, in the eastern edition of The Wall Street Journal,
notice that such money remains unclaimed and that, after a date specified
therein, which shall be not fewer than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be paid to
the Class A-8 and Class A-9 Certificate Insurer or the Owners of the Class R
Certificates as provided above. The Trustee shall, at the direction of the
Sponsor, also adopt and employ, at the expense of the Sponsor, any other
reasonable means of notification of such payment (including but not limited to
mailing notice of such payment to Owners whose right to or interest in monies
due and payable but not claimed is determinable from the Register at the last
address of record for each such Owner).
SECTION 6.3. PROTECTION OF TRUST ESTATE. (a) The Trustee will hold
the Trust Estate in trust for the benefit of the Owners and the Class A-8 and
Class A-9 Certificate Insurer as their interests may appear, and, upon request
of the Class A-8 and Class A-9 Certificate Insurer, or with the Consent of the
Class A-8 and Class A-9 Certificate Insurer, at the request and expense of the
Sponsor, will from time to time execute and deliver all such supplements and
amendments hereto pursuant to Section 11.14 hereof and all instruments of
further assurance and other instruments, and will take such other action upon
such request as it deems reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any portion of the
Trust Estate;
(ii) perfect, publish notice of, or protect the validity of
any grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
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(iv) preserve and defend title to the Trust Estate and the
rights of the Trustee, and the ownership interests of the Owners
represented thereby, in such Trust Estate against the claims of all
Persons and parties.
The Trustee shall send copies of any request received from the Class
A-8 and Class A-9 Certificate Insurer or the Sponsor to take any action pursuant
to this Section 6.3 to the other party.
(b) The Trustee shall have the power to enforce, and shall enforce
the obligations of the other parties to this Agreement and of the Class A-8 and
Class A-9 Certificate Insurer by action, suit or proceeding at law or equity,
and shall also have the power to enjoin, by action or suit in equity, any acts
or occurrences which may be unlawful or in violation of the rights of the
Owners; provided, however, that nothing in this Section shall require any action
by the Trustee unless the Trustee shall first (i) have been furnished indemnity
satisfactory to it and (ii) when required by this Agreement, have been requested
to take such action by a majority of the Percentage Interests represented by the
affected Class or Classes of Offered Certificates then Outstanding or, if there
are no longer any affected Offered Certificates then outstanding, by such
majority of the Percentage Interests represented by the Class R Certificates.
(c) The Trustee shall execute any instrument required pursuant to
this Section so long as such instrument does not conflict with this Agreement or
with the Trustee's fiduciary duties.
SECTION 6.4. PERFORMANCE OF OBLIGATIONS. (a) The Trustee will not
take any action that would release the Sponsor or the Class A-8 and Class A-9
Certificate Insurer from any of their respective covenants or obligations under
any instrument or document relating to the Trust Estate or the Certificates or
which would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of, any such instrument
or document, except as expressly provided in this Agreement or such other
instrument or document.
The Trustee may contract with other Persons to assist it in
performing its duties hereunder.
SECTION 6.5. NEGATIVE COVENANTS. The Trustee will not, to the extent
within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of
the Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Owner by reason of the payment of any taxes
levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in
part, except pursuant to Article IX hereof; or
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(v) (A) impair the validity or effectiveness of this
Agreement, or release any Person from any covenants or obligations with
respect to the Trust or to the Certificates under this Agreement, except
as may be expressly permitted hereby or (B) create or extend any lien,
charge, adverse claim, security interest, mortgage or other encumbrance to
or upon the Trust Estate or any part thereof or any interest therein or
the proceeds thereof.
SECTION 6.6. NO OTHER POWERS. The Trustee will not, to the extent
within the control of the Trustee, permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.3
hereof.
SECTION 6.7. LIMITATION OF SUITS. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Certificate Insurance Policy or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to
the Sponsor and the Trustee of such Owner's intention to institute
such proceeding;
(2) the Owners of not less than 25% of the Percentage
Interests represented by the affected Class or Classes of
Certificates then Outstanding or, if there are no affected Classes
of Offered Certificates then Outstanding, by such percentage of the
Percentage Interests represented by the Class R Certificates, shall
have made written request to the Trustee to institute such
proceeding in respect of such Event of Default;
(3) such Owner or Owners have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
proceeding;
(5) as long as any Class A-8 Certificates, Class A-9
Certificates, or any Group II Reimbursement Amount are outstanding,
the Class A-8 and Class A-9 Certificate Insurer consented in writing
thereto; and
(6) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the Class
A-8 and Class A-9 Certificate Insurer or by the Owners of a majority
of the Percentage Interests represented by the Offered Certificates
or, if there are no Offered Certificates then Outstanding, by such
majority of the Percentage Interests represented by the Class R
Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
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In the event the Trustee shall receive conflicting or inconsistent requests and
indemnity from two or more groups of Owners, each representing less than a
majority of the applicable Class of Certificates, the Trustee shall act at the
direction of the Class A-8 and Class A-9 Certificate Insurer, notwithstanding
any other provision of this Agreement.
SECTION 6.8. UNCONDITIONAL RIGHTS OF OWNERS TO RECEIVE
DISTRIBUTIONS. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
SECTION 6.9. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided herein, no right or remedy herein conferred upon or reserved to the
Trustee, the Class A-8 and Class A-9 Certificate Insurer or to the Owners is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. Except as otherwise provided herein, the assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 6.10. DELAY OR OMISSION NOT WAIVER. No delay of the Trustee,
the Class A-8 and Class A-9 Certificate Insurer or any Owner of any Certificate
to exercise any right or remedy under this Agreement to any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article VI or by law to the Trustee, the Class A-8 and Class A-9 Certificate
Insurer or to the Owners may be exercised from time to time, and as often as may
be deemed expedient, by the Trustee, the Class A-8 and Class A-9 Certificate
Insurer or by the Owners, as the case may be.
SECTION 6.11. CONTROL BY OWNERS. The Class A-8 and Class A-9
Certificate Insurer (so long as a Class A-8 and Class A-9 Insurer Default has
not occurred and is continuing) or the Owners of a majority of the Percentage
Interests represented by the Offered Certificates then Outstanding, with the
consent of the Control Party (which may not be unreasonably withheld) or, if
there are no longer any Offered Certificates then Outstanding, by such majority
of the Percentage Interests represented by the Class R Certificates then
Outstanding, with the consent of the Control Party (which may not be
unreasonably withheld) may direct the time, method and place of conducting any
proceeding for any remedy available to the Control Party with respect to the
Certificates or exercising any trust or power conferred on the Control Party
with respect to the Certificates or the Trust Estate, including, but not limited
to, those powers set forth in Section 6.3 and Section 8.20 hereof; provided
that:
(1) such direction shall not be in conflict with any
rule of law or with this Agreement;
(2) the Control Party shall have been provided with
indemnity satisfactory to it; and
(3) the Trustee may take any other action deemed proper
by the Trustee, which is not inconsistent with such direction;
provided, however, that the Trustee need not take any action which
it determines might involve it in liability or may be unjustly
prejudicial to the Owners not so directing; provided,
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further, that in the event that any directions provided by the
Trustee and the Class A-8 and Class A-9 Certificate Insurer conflict
with each other, the Class A-8 and Class A-9 Certificate Insurer's
direction shall prevail.
So long as a Class A-8 and Class A-9 Certificate Insurer Default has
not occurred and is continuing, the Class A-8 and Class A-9 Certificate Insurer
shall act as the Control Party until all Group II Reimbursement Amounts have
been paid.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 7.1. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement, including all payments due on the Mortgage Loans in accordance with
the respective terms and conditions of such Mortgage Loans and required to be
paid over to the Trustee by the Master Servicer or by any Sub-Servicer. The
Trustee shall hold all such money and property received by it, other than
pursuant to or as contemplated by Section 6.2(b) hereof, as part of the Trust
Estate and shall apply it as provided in this Agreement.
SECTION 7.2. ESTABLISHMENT OF CERTIFICATE ACCOUNT. The Sponsor shall
cause to be established, and the Trustee shall maintain, at the corporate trust
office of the Trustee, a Certificate Account, a Pre-Funding Account, a
Capitalized Interest Account, the Upper-Tier Group I Distribution Account and
the Upper Tier Group II Distribution Account each of which is to be held by the
Trustee in the name of the Trust for the benefit of the Owners of the
Certificates and the Class A-8 and Class A-9 Certificate Insurer, as their
interests may appear.
SECTION 7.3. THE CERTIFICATE INSURANCE POLICY. (a) With respect to
the Group II Certificates only, on each Determination Date the Trustee shall
determine with respect to the immediately following Payment Date: the Group II
Monthly Remittance Amount on deposit in the Certificate Account on such Payment
Date (disregarding the amounts of any Group II Insured Payment) and equal to the
sum of (x) such amounts excluding the amount of any Group II Monthly Excess
Cashflow amounts included in such amounts and excluding an amount equal to the
Premium Amount together with any Trustee's Fees described in 7.5(c)(i) for the
related Payment Date but including, with respect to the January 1998 Payment
Date any amounts to be transferred to the Certificate Account from either of the
Pre-Funding Account or the Capitalized Interest Account with respect to such
Payment Date in accordance with Section 7.4 hereof, plus (y) any amounts of
Group II Monthly Excess Cashflow to be applied on such Payment Date and any
amounts available from Group I Monthly Excess Cashflow pursuant to Section
7.5(f)(9); the amounts described in the preceding clause (x) with respect to
each Group II and Payment Date, after taking into account the portion of the
Group II Principal Distribution Amount to be actually distributed on such
Payment Date and without regard to any Group II Insured Payment to be made with
respect to such Payment Date, are the "Group II Available Funds"; the sum of the
amounts described in the preceding clauses (x) and (y) are the "Group II Total
Available Funds".
(b) If the Group II Insured Distribution Amount for any, Payment
Date exceeds the Group II Total Available Funds for such Payment Date (after
taking into account the portion of the Group II Principal Distribution Amount to
be actually distributed on such Payment
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Date without regard to any Group II Insured Payment to be made with respect to
such Payment Date) (such amount being a "Group II Deficiency Amount"), the
Trustee shall complete a Notice in the form of Exhibit A to the Certificate
Insurance Policy and submit such notice to the Class A-8 and Class A-9
Certificate Insurer no later than 12:00 noon New York City time on the third
Business Day preceding such Payment Date as a claim for a Group II Insured
Payment in an amount equal to such Group II Deficiency Amount. Upon receipt of
Group II Insured Payments from the Class A-8 and Class A-9 Certificate Insurer
under the Certificate Insurance Policy, the Trustee shall deposit such Group II
Insured Payments in the Certificate Account.
(c) The Trustee shall distribute all Group II Insured Payments
received, or the proceeds thereof, in accordance with Section 7.5(c) to the
Owners of the Class A-8 Certificates and the Class A-9 Certificates.
(d) The Trustee shall (i) receive Group II Insured Payments as
attorney-in-fact of each Owner of the Class A-8 Certificates and the Class A-9
Certificates of the related Class receiving any Group II Insured Payment from
the Class A-8 and Class A-9 Certificate Insurer and (ii) disburse such Group II
Insured Payment to the Owners of the Class A-8 Certificates and the Class A-9
Certificates as set forth in Section 7.5(c). The Class A-8 and Class A-9
Certificate Insurer shall be entitled to receive the related Group II
Reimbursement Amount pursuant to Sections 7.5(g)(3) hereof with respect to each
Group II Insured Payment made by the Class A-8 and Class A-9 Certificate
Insurer. The Trustee hereby agrees on behalf of each Owner of Class A-8
Certificates and Class A-9 Certificates and the Trust for the benefit of the
Certificate Insurer that it recognizes that to the extent the Class A-8 and
Class A-9 Certificate Insurer makes Group II Insured Payments, either directly
or indirectly (as by paying through the Trustee), to the Owners of such Class
A-8 Certificates and the Class A-9 Certificates, the Class A-8 and Class A-9
Certificate Insurer will be entitled to receive the Group II Reimbursement
Amount pursuant to Sections 7.5(g)(3).
(e) The Trustee shall receive, as attorney-in-fact of each Owner of
a Class A-8 Certificate and Class A-9 Certificate, any Group II Insured Payment
from the Class A-8 and Class A-9 Certificate Insurer and disburse the same to
each Owner of a Class A-8 Certificate and Class A-9 Certificate in accordance
with the provisions of Section 7.3. Group II Insured Payments disbursed by the
Trustee from proceeds of the Certificate Insurance Policy shall not be
considered payment by the Trust Fund nor shall such payments discharge the
obligation of the Trust Fund with respect to the Class A-8 Certificate and Class
A-9 Certificate, and the Class A-8 and Class A-9 Certificate Insurer shall
become the owner of such unpaid amounts due from the Trust Fund in respect of
the Class A-8 Certificates and the Class A-9 Certificates. The Trustee hereby
agrees on behalf of each Owner of a Class A-8 Certificate and Class A-9
Certificate for the benefit of the Class A-8 and Class A-9 Certificate Insurer
that it recognizes that to the extent the Class A-8 and Class A-9 Certificate
Insurer makes any Group II Insured Payment, either directly or indirectly (as by
paying through the Trustee), to the Class A-8 Certificateholders or the Class
A-9 Certificateholder, the Class A-8 and Class A-9 Certificate Insurer will be
subrogated to the rights of the Class A-8 Certificateholder and the Class A-9
Certificateholder with respect to such Group II Insured Payment, shall be deemed
to the extent of payments so made to be a registered Class A-8 Certificateholder
and Class A-9 Certificateholder and shall receive all future distributions until
all such Group II Insured Payments by the Class A-8 and Class A-9 Certificate
Insurer, together with interest thereon at the interest rate borne by the Class
A-8 Certificates and Class A-9 Certificates applicable of such date (including
any interest on such amounts at the Late Payment Rate), have been fully
reimbursed. To evidence such subrogation, the Trustee shall, or shall cause the
Certificate Registrar to, note the Class A-8 and Class A-9 Certificate Insurer's
rights as subrogee on the registration books
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maintained by the Trustee or the Certificate Registrar upon receipt from the
Class A-8 and Class A-9 Certificate Insurer of proof of payment of any Group II
Insured Payment. The effect of the foregoing provisions is that, to the extent
of Group II Insured Payments made by it, the Class A-8 and Class A-9 Certificate
Insurer shall be paid before payment of the balance of the distributions are
made to the other Owners of the Class A-8 Certificates and Class A-9
Certificates.
SECTION 7.4. PRE-FUNDING ACCOUNT AND CAPITALIZED INTEREST ACCOUNT.
(a) On the Startup Day, the Trustee will deposit, upon receipt thereof, on
behalf of the Owners of the Certificates, the Original Pre-Funded Amounts in the
Pre-Funding Account from the proceeds of the sale of the Offered Certificates.
(b) On any Subsequent Transfer Date, the Sponsor shall instruct the
Trustee in writing to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Loan Balances of the Subsequent Mortgage Loans sold to the
Trust and assigned to the applicable Group on such Subsequent Transfer Date and
pay such amount to or upon the order of the Sponsor upon satisfaction of the
conditions set forth in Section 3.8 hereof with respect to such transfer.
(c) If (x) the Pre-Funded Amount with respect to the related
Mortgage Loan Group has not been reduced to zero by January 16, 1998 or (y) each
of the Pre-Funded Amounts has been reduced to $100,000 or less before January
16, 1998, the Sponsor shall instruct the Trustee to withdraw from the
Pre-Funding Account on January 16, 1998 and deposit in the Certificate Account
with respect to each Group, the difference, if any, between (A) the applicable
Original Pre-Funded Amount and (B) all amounts theretofore withdrawn from the
Pre-Funding Account with respect to Subsequent Mortgage Loans for the particular
Group. Upon such withdrawal and deposit, the Pre-Funding Account shall be
closed.
(d) On the Payment Date occurring in January 1998 the Trustee shall
transfer the respective Pre-Funding Earnings, if any, from the Pre-Funding
Account to the Certificate Account and shall distribute directly to the Owners
of the Class R Certificates such Pre-Funding Earnings.
(e) On the Payment Date occurring in January 1998, the Trustee shall
transfer from the Capitalized Interest Account to the Certificate Account the
applicable Capitalized Interest Requirement, if any, for such Payment Date.
(f) On the January 1998 Payment Date, any amounts remaining in the
Capitalized Interest Account after taking into account the transfers on such
Payment Date described in clause (e) above shall be paid to the Owners of the
Class R Certificates, and the Capitalized Interest Account shall be closed.
SECTION 7.5. FLOW OF FUNDS.
(a) (i) The Trustee shall deposit to the Certificate Account with
respect to each Mortgage Loan Group, without duplication, (i) upon receipt, the
proceeds of any liquidation of the assets of the Trust, all remittances made to
the Trustee pursuant to Section 8.08(d)(ii) and the Monthly Remittance Amount
remitted by the Master Servicer and (ii) on the January 1998 Payment Date, (x)
the Pre-Funding Earnings transferred by the Trustee pursuant to Section 7.4(d)
hereof, (y) the Capitalized Interest Requirements to be transferred from the
respective Capitalized
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Interest Accounts and (z) any amounts to be transferred from the respective
Pre-Funding Accounts pursuant to Section 7.4(c) hereof.
(ii) On each Payment Date, the Trustee shall transfer the
Lower-Tier Group I Distribution Amount from the Certificate Account to the
Upper-Tier Group I Distribution Account.
(iii) On each Payment Date, the Trustee shall transfer the
Lower-Tier Group II Distribution Amount from the Certificate Account to
the Upper-Tier Group II Distribution Account.
(b) With respect to the Upper-Tier Group I Distribution Account on
each Payment Date, the Trustee shall make the following disbursements from the
Group I Interest Remittance Amount transferred thereto pursuant to subsection
(a), in the following order of priority, and each such disbursement shall be
treated as having occurred only after all preceding disbursements have occurred:
(i) First, to the Trustee, the portion of the Trustee's Fee
relating to Group I;
(ii) Second, to the Owners of the Class A Certificates related
to Group I, the related Class A Current Interest plus the related Class A
Interest Carry Forward Amount with respect to each such Class of Class A
Certificates without any priority among such Class A Certificates;
provided, that if the Group I Interest Amount Available is not sufficient
to make a full distribution of interest with respect to all Classes of the
Class A Certificates related to Group I, the Group I Interest Amount
Available will be distributed among the outstanding Classes of Class A
Certificates related to Group I pro rata based on the aggregate amount of
interest due on each such Class, and the amount of the shortfall will be
carried forward;
(iii) Third, to the extent of the Group I Interest Amount
Available remaining, to the Owners of the Class M-1 Certificates, the
Class M-1 Current Interest;
(iv) Fourth, to the extent of the Group I Interest Amount
Available then remaining, to the Owners of the Class M-2 Certificates, the
Class M-2 Current Interest;
(v) Fifth, to the extent of the Group I Interest Amount
Available then remaining, to the Owners of the Class B-1 Certificates, the
Class B-1 Current Interest; and
(vi) Sixth, the Group I Monthly Excess Interest Amount shall
be applied or distributed as provided in subsection (f) of this Section
7.5.
(c) With respect to the Upper Tier Group II Distribution Account on
each Payment Date, the Trustee shall make the following disbursements from the
Group II Interest Remittance Amount transferred thereto pursuant to subsection
(a), in the following order of priority, and each such disbursement shall be
treated as having occurred only after all preceding disbursements have occurred:
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(i) First, to the Trustee, the portion of the Trustee's Fee
relating to Group II;
(ii) Second, to the Class A-8 and Class A-9 Certificate
Insurer, the Premium Amount;
(iii) Third, to the Owners of the Class A-8 Certificates, the
Class A-8 Interest Distribution Amount and to the Owners of the Class A-9
Certificates, the Class A-9 Interest Distribution Amount; and
(iv) Fourth, the Group II Monthly Excess Interest Amount shall
be applied or distributed as provided in subsection (g) of this Section
7.5.
(d) With respect to the Upper Tier Group I Distribution Account, on
each Payment Date, the Trustee shall make the following disbursements from
amounts relating to principal transferred to the Certificate Account pursuant to
subsection (a), in the following order of priority, and each such disbursement
shall be treated as having occurred only after all preceding disbursements have
occurred:
(i) On each Payment Date (a) before the Stepdown Date or (b)
with respect to which a Group I Delinquency Trigger Event is in effect,
Owners of the Class A Certificates (other than the Class A-IO
Certificates) related to Group I will be entitled to receive payment of
100% of the Group I Principal Distribution Amount as follows: (I) to the
Owners of the Class A-7 Certificates, the Class A-7 Lockout Distribution
Amount and (II) to the Owners of the Class A Certificates related to Group
I, as follows: first, to the Owners of the Class A-1 Certificates, until
the Class A-1 Certificate Principal Balance is reduced to zero; second, to
the Owners of the Class A-2 Certificates, until the Class A-2 Certificate
Principal Balance is reduced to zero; third, to the Owners of the Class
A-3 Certificates, until the Class A-3 Certificate Principal Balance is
reduced to zero; fourth, to the Owners of the Class A-4 Certificates,
until the Class A-4 Certificate Principal Balance is reduced to zero;
fifth, to the Owners of the Class A-5 Certificates, until the Class A-5
Certificate Principal Balance is reduced to zero; sixth, to the Owners of
the Class A-6 Certificates, until the Class A-6 Certificate Principal
Balance is reduced to zero; seventh, to the Owners of the Class A-7
Certificates, until the Class A-7 Certificate Principal Balance is reduced
to zero; provided, however, that on any Payment Date on which the sum of
the Certificate Principal Balance of the Subordinate Certificates and the
Group I Overcollateralization Amount is zero, any amounts of principal
payable to the Owners of the Class A Certificates related to Group I on
such Payment Date shall be distributed pro rata and not sequentially.
(ii) On each Payment Date (a) on or after the Group I Stepdown
Date and (b) as long as a Group I Delinquency Trigger Event is not in
effect, the Owners of the Group I Certificates will be entitled to receive
payments of principal, in the order of priority, in the amounts set forth
below and to the extent of the Group I Principal Distribution Amount as
follows:
(A) First, the lesser of (x) the Group I Principal
Distribution Amount and (y) the Group I Class A Principal Distribution
Amount shall be distributed (I) to the Owners of the Class A-7
Certificates, in an amount equal to the Class A-7 Lockout Distribution
Amount and (II) the remainder paid to the Owners of the Class A
Certificates (other than the Class A-IO Certificates) related to Group I
as follows: first, to
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the Owners of the Class A-l Certificates, until the Class A-1 Certificate
Principal Balance is reduced to zero; second, to the Owners of the Class
A-2 Certificates, until the Class A-2 Certificate Principal Balance is
reduced to zero; third, to the Owners of the Class A-3 Certificates, until
the Class A-3 Certificate Principal Balance is reduced to zero; fourth, to
the Owners of the Class A-4 Certificates, until the Class A-4 Certificate
Principal Balance is reduced to zero; fifth, to the Owners of the Class
A-5 Certificates, until the Class A-5 Certificate Principal Balance is
reduced to zero; sixth, to the Owners of the Class A-6 Certificates, until
the Class A-6 Certificate Principal Balance is reduced to zero; seventh,
to the Owners of the Class A-7 Certificates, until the Class A-7
Certificate Principal Balance is reduced to zero; provided, however, that
on any Payment Date on which the sum of the Certificate Principal Balance
of the Subordinate Certificates and the Group I Overcollateralization
Amount is zero, any amounts of principal payable to the Owners of the
Class A Certificates related to Group I on such Payment Date shall be
distributed pro rata and not sequentially.
(B) Second, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the amount distributed to the
Owners of the Class A Certificates related to Group I in clause (A) above
and (y) the Class M-1 Principal Distribution Amount shall be distributed
to the Owners of the Class M-1 Certificates, until the Class M-1
Certificate Principal Balance has been reduced to zero;
(C) Third, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the sum of the amount distributed
to the Owners of the Class A Certificates related to Group I in clause (A)
above and the amount distributed to the Owners of the Class M-1
Certificates in clause (B) above and (y) the Class M-2 Principal
Distribution Amount shall be distributed to the Owners of the Class M-2
Certificates, until the Class M-2 Certificate Principal Balance has been
reduced to zero;
(D) Fourth, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the sum of the amount distributed
to the Owners of the Class A Certificates related to Group I pursuant to
clause (A) above, the amount distributed to the Owners of the Class M-1
Certificates pursuant to clause (B) above and the amount distributed to
the Owners of the Class M-2 Certificates pursuant to clause (C) above and
(y) the Class B-1 Principal Distribution Amount shall be delivered to the
Owners of the Class B-1 Certificates, until the Class B-1 Certificate
Principal Balance has been reduced to zero;
(E) Fifth, the lesser of (x) any amount of the Group I
Principal Distribution Amount remaining after making all of the
distributions in clauses First, Second, Third and Fourth above and (y) (1)
if no Group I Cumulative Realized Loss Trigger Event is in effect, the
positive difference, if any, of (A) $2,500,000 minus (B) the Targeted
Overcollateralization Amount (disregarding clause (y)(a)(ii) of the
definition of Targeted Overcollateralization Amount relating to Group I)
for Group I for such Payment Date or (2) if a Group I Cumulative Realized
Loss Trigger Event is in effect, the positive difference, if any, of (A)
the Targeted Overcollateralization Amount for Group I for the immediately
preceding Payment Date minus (B) the Targeted Overcollateralization Amount
(disregarding clause (y)(c) of the definition of Targeted
Overcollateralization Amount for Group I) for Group I for such Payment
Date shall be, in either case (1) or (2), applied as a payment of
principal with respect to the Subordinate Certificates in reverse order of
seniority (ie., first to the Class B-1 Certificates, second to the Class
M-2 Certificates, third to the Class M-1 Certificates and fourth, to the
Class A Group I
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Certificates) until their respective Certificate Principal Balances have
been reduced to zero; and.
(F) Sixth, any amount of the Group I Principal Distribution
Amount remaining after making all of the distributions in clauses (A),
(B), (C), (D) and (E) above shall be distributed as provided in subsection
(f) of this Section 7.5.
(iii) Notwithstanding the foregoing, (x) in the event that the
Certificate Principal Balance of all of the Class A Certificates relating
to Group I have been reduced to zero, all amounts of principal that would
have been distributed to such Class A Certificates will be distributed to
the related Subordinate Certificates of such Group sequentially in the
following order: Class M-1, Class M-2 and Class B. Similarly, if the
Certificate Principal Balance of the Class M-1 Certificates has been
reduced to zero, all amounts of principal that would have been distributed
to such Class M-1 Certificates will be distributed to the related Class
M-2 and Class B Certificates in that order. Finally, if the Certificate
Principal Balance of the Class M-2 Certificates has been reduced to zero,
all amounts of principal that would have been distributed on such Class
M-2 Certificates will be distributed to the related Class B; and (y) on
any Payment Date on which the sum of the Certificate Principal Balance of
the Subordinate Certificates and the Group I Overcollateralization Amount
is zero, any amounts of principal payable to the Owners of the Group I
Class A Certificates on such Payment Date shall be distributed pro rata
and not sequentially.
(e) With respect to the Upper-Tier Group II Distribution Account, on
each Payment Date, the Trustee shall make the following disbursements in the
following amounts:
(i) to the Class A-8 Certificates, the Class A-8 Principal
Distribution Amount;
(ii) to the Class A-9 Certificates, the Class A-9 Principal
Distribution Amount;
provided, however, that on any Payment Date on which the Group II
Overcollateralization Amounts is zero and the Class A-8 and Class A-9 Insurance
Policy is not in effect, any amounts of principal payable to the Owners of the
Group II Certificates on such Payment Date shall be distributed pro rata and not
in accordance with the allocations set forth in the foregoing clauses (e)(i) and
(ii).
(f) On any Payment Date, the Group I Monthly Excess Cashflow Amount
is required to be applied in the following order of priority on such Payment
Date:
(1) to fund any remaining Class A Interest Carry Forward
Amount, if any, with respect to Group I;
(2) to fund the Overcollateralization Deficiency, if
any;
(3) to fund the Class M-1 Interest Carry Forward Amount,
if any;
(4) to fund the Class M-1 Realized Loss Amortization
Amount for such Payment Date;
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(5) to fund the Class M-2 Interest Carry Forward Amount,
if any;
(6) to fund the Class M-2 Realized Loss Amortization
Amount for such Payment Date;
(7) to fund the Class B-1 Interest Carry Forward Amount,
if any;
(8) to fund the Class B-1 Realized Loss Amortization
Amount for such Payment Date;
(9) to fund any amounts listed in clauses (1), (2) and
(3) of Section 7.5(g) to the extent such amounts have not been
funded in full through the application of Group II Monthly Excess
Cashflow Amounts; and
(10) as provided in Section 7.5(h) hereof.
(g) On any Payment Date, the Group II Monthly Excess Cashflow Amount
is required to be applied in the following order of priority on such Payment
Date:
(1) to fund any remaining Class A Interest Carry Forward
Amount, if any, with respect to Group II;
(2) to fund the Overcollateralization Deficiency, if
any, for such Payment Date;
(3) to the Class A-8 and Class A-9 Certificate Insurer,
any Group II Reimbursement Amount;
(4) [RESERVED]
(5) to fund any amounts listed in clauses (1) through
(8) of Section 7.5(f) to the extent such amounts have not been
funded in full through the application of Group I Monthly Excess
Cashflow Amounts; and
(6) as provided in Section 7.5(h) hereof.
(h) (i) On any Payment Date, any Group I Monthly Excess Cashflow
Amount remaining after the application of Section 7.5(f)(1)-(9) shall be
distributed as follows:
(1) to the Master Servicer to the extent of any
unreimbursed or unrecoverable Delinquency Advances or Servicing
Advances (including Nonrecoverable Advances); and
(2) to fund a distribution to the Owners of the Class R
Certificates.
(ii) On any Payment Date, any Group II Monthly Excess Cashflow
Amount remaining after the application of Section 7.5(g)(1)-(4) shall be
distributed as follows:
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(1) to the Master Servicer to the extent of any
unreimbursed or unrecoverable Delinquency Advances or Servicing
Advances (including Nonrecoverable Advances); and
(2) to the Supplemental Interest Payment Account, the
Supplemental Interest Amount then due to the Owners of the Class A-8
Certificates or the Class A-9 Certificates or otherwise to fund a
distribution to the Owners of the Class R Certificates.
(iii) On each Payment Date, the Trustee shall allocate the
excess of the Group I Certificate Principal Balance over the Loan Balance
of the Mortgage Loans in Group I to reduce the Certificate Principal
Balances of the Subordinate Certificates related to Group I in the
following order of
priority:
(1) to the Class B-1 Certificates until the Class B-1
Certificate Principal Balance is reduced to zero;
(2) to the Class M-2 Certificates until the Class M-2
Certificate Principal Balance is reduced to zero; and
(3) to the Class M-1 Certificates until the Class M-1
Certificate Principal Balance is reduced to zero.
(i) [reserved].
(j) Notwithstanding anything above, the aggregate amounts
distributed on all Payment Dates to the Owners of the Certificates on account of
principal pursuant to clauses (d) and (e) shall not exceed the original
Certificate Principal Balance of the related Certificates.
(k) The rights of the Owners to receive distributions from the
proceeds of the Trust Estate and all ownership interests of the Owners in such
distributions, shall be as set forth in this Agreement. In this regard, all
rights of the Owners of the Class R Certificates to receive distributions in
respect of the Class R Certificates, and all ownership interests of the Owners
of the Class R Certificates in and to such distributions, shall be subject and
subordinate to the preferential rights of the holders of the Offered
Certificates to receive distributions thereon and the ownership interests of
such Owners in such distributions, as described herein. In accordance with the
foregoing, the ownership interests of the Owners of the Class R Certificates in
amounts deposited in the Accounts from time to time shall not vest unless and
until such amounts are distributed in respect of the Class R Certificates in
accordance with the terms of this Agreement. Notwithstanding anything contained
in this Agreement to the contrary, the Owners of the Class R Certificates shall
not be required to refund any amount properly distributed on the Class R
Certificates pursuant to this Section 7.5.
SECTION 7.6. INVESTMENT OF ACCOUNTS. (a) So long as no event
described in Sections 8.20(a) or (b) hereof shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of the Accounts held by the Trustee shall be invested and reinvested by the
Trustee in the name of the Trustee for the benefit of the Owners and the Class
A-8 and Class A-9 Certificate Insurer, as their interests may appear, as
directed in writing by the Master Servicer, in one or more Eligible Investments
bearing interest or sold at a discount. During the continuance of an event
described in Sections 8.20(a) or (b) hereof and following any removal of the
Master Servicer, the Control Party shall direct such investments. No investment
in
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any Account shall mature later than the Business Day immediately preceding the
next Payment Date.
(b) If any amounts are needed for disbursement from any Account held
by the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. No investments will be
liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any loss on any Eligible Investment included therein (except and
only to the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held by the Trustee
uninvested upon the occurrence of either of the following events:
(i) the Master Servicer or the Control Party, as the case may
be, shall have failed to give investment directions to the Trustee within
ten days after receipt of a written request for such directions from the
Trustee; or
(ii) the Master Servicer or the Control Party, as the case may
be, shall have failed to give investment directions to the Trustee during
the ten-day period described in clause (i) preceding, by 11:15 a.m. New
York time (or such other time as may be agreed by the Master Servicer and
the Trustee) on any Business Day (any such investment by the Trustee
pursuant to this clause (ii) to mature on the next Business Day after the
date of such investment).
(e) For purposes of investment, the Trustee shall aggregate all
amounts on deposit in the Accounts. All income or other gain from investments in
the Accounts shall be deposited, pro rata, in the Accounts immediately on
receipt, and any loss resulting from such investments shall be charged, pro
rata, to the Accounts.
SECTION 7.7. ELIGIBLE INVESTMENTS. The following are Eligible Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(b) Federal Housing Administration debentures and rated Aa2 or
higher by Moody's and AA or better by Standard & Poor's.
(c) Freddie Mac senior debt obligations and rated Aa2 or higher by
Moody's and AA or better by Standard & Poor's.
(d) Federal Home Loan Banks' consolidated senior debt obligations
and rated Aa2 or higher by Moody's and AA or better by Standard & Poor's.
(e) FNMA senior debt obligations and rated Aa2 or higher by Moody's.
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(f) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated A-1 or better by Standard & Poor's and P-1 by Moody's.
(g) Investment agreements approved by the Control Party provided:
1. The agreement is with a bank or insurance company which has
an unsecured, uninsured and unguaranteed obligation (or
claims-paying ability) rated Aa2 or better by Moody's and AA or
better by Standard & Poor's, and
2. Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice
(provided such notice may be amended or canceled at any time prior
to the withdrawal date), and
3. The agreement is not subordinated to any other obligations
of such insurance company or bank, and
4. The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
5. The Trustee and the Class A-8 and Class A-9 Certificate
Insurer receive an opinion of counsel that such agreement is an
enforceable obligation of such insurance company or bank.
(h) Commercial paper (having original maturities of not more than
365 days) rated A-1 or better by Standard & Poor's and P-1 or better by Moody's.
(i) Investments in money market funds rated AAAm or AAAM-G by
Standard & Poor's and Aaa or P-1 by Moody's.
(j) Investments approved in writing by the Control Party and
acceptable to Moody's and Standard & Poor's;
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
SECTION 7.8. REPORTS BY TRUSTEE. (a) On each Payment Date the
Trustee shall provide to each Owner, to the Master Servicer, to the Class A-8
and Class A-9 Certificate Insurer, to each Underwriter, to the Sponsor, to
Standard & Poor's, and to Moody's a written report in substantially the form set
forth as Exhibit I hereto with respect to each Mortgage Loan Group, as such form
may be revised by the Trustee, the Master Servicer, Moody's and Standard &
Poor's from time to time, but in every case setting forth the information
requested on Exhibit I hereto and the following information:
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(i) the amount of the distribution with respect to the related
Class of Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein;
(iii) the amount of such distributions allocable to interest;
(iv) the Interest Carry Forward Amount for each Class;
(v) the Certificate Principal Balance for each Class of
Offered Certificates (other than the Class A-IO Certificates) and the
Class A-IO Notional Principal Balance of the Class A-IO Certificates as of
such Payment Date, together with the principal amount of such Class of
Offered Certificates (other than the Class A-IO Certificates) (based on a
Certificate in an original principal amount of $1,000) then outstanding,
in each case after giving effect to any payment of principal on such
Payment Date;
(vi) with respect to the Group II Certificates, the amount of
any Group II Insured Payment included in the amounts distributed in
respect of the Group II Certificates;
(vii) the aggregate Loan Balance of all Mortgage Loans after
giving effect to any payment of principal on such Payment Date both in the
aggregate and in each of the Mortgage Loan Groups;
(viii) information furnished by the Sponsor pursuant to
Section 6049(d)(7)(C) of the Code and the regulations promulgated
thereunder to assist the Owners in computing their market discount;
(ix) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(x) the weighted average Coupon Rate of the Mortgage Loans
with respect to each Group;
(xi) whether a Group I Delinquency Trigger Event has occurred;
(xii) the amount of any Supplemental Interest Payment, Group I
Extra Principal Distribution Amount or any Group II Extra Principal
Distribution Amount;
(xiii) the Group I Senior Enhancement Percentage;
(xiv) the Group I Overcollateralization Amount, the Group II
Overcollateralization Amount after giving effect to any payment of
principal on such Payment Date;
(xv) the amount of any Group I or Group II Applied Realized
Loss Amount, Group I or Group II Realized Loss Amortization Amount and
Unpaid Realized Loss Amount for each Class As of the close of such Payment
Date;
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(xvi) the aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group that were repurchased during the related
Remittance Period and any repurchases pursuant to Section 8.10;
(xvii) the amounts, if any, of any Realized Losses in each
Mortgage Loan Group for the related Remittance Period;
(xviii) the Pool Rolling Six-Month Delinquency Rate and the
Pool Cumulative Realized Losses (x) as a percentage of the average Pool
Principal Balance as of the close of business on the last day of each of
the twelve preceding Remittance Periods and (y) as a percentage of the sum
of the aggregate Loan Balances of the Initial Mortgage Loans as of the
related Cut-Off Date and the Original Pre-Funded Amounts;
(xix) a number with respect to each Class (the "Pool Factor"
for such Class) computed by dividing the Certificate Principal Balance for
such Class (after giving effect to any distribution of principal to be
made on such Payment Date) by the Certificate Principal Balance for such
Class on the Startup Day;
(xx) whether a Group I Cumulative Realized Loss Trigger Event
has occurred;
(xxi) for Payment Dates during the Funding Period, the
remaining Pre-Funded Amount;
(xxii) 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
Owners of the related class of certificates as principal, if any, on the
immediately following Payment Date; and
(xxiii) whether a Servicer Termination Delinquency Rate
Trigger or a Servicer Termination Loss Trigger has occurred, as such terms
are defined in the Insurance Agreement.
Items (i) through (iii) above shall, with respect to each Class of
Offered Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to
the Certificates for such calendar year.
(b) In addition, on each Payment Date the Trustee will distribute to
each Owner, to the Class A-8 and Class A-9 Certificate Insurer, to each
Underwriter, to the Master Servicer, to the Sponsor, to Standard & Poor's, and
to Moody's, together with the information described in Subsection (a) preceding,
the following information with respect to each Mortgage Loan Group as of the
close of business on the last Business Day of the prior calendar month, which is
hereby required to be prepared by the Master Servicer and furnished to the
Trustee for such purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each Mortgage Loan
Group and the aggregate Loan Balances thereof, together with the number,
aggregate principal balances of such Mortgage Loans in such Mortgage Loan
Group and the
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percentage (based on the aggregate Loan Balances of the Mortgage Loans in
such Mortgage Loan Group) of the aggregate Loan Balances of such Mortgage
Loans to the aggregate Loan Balance of all Mortgage Loans in the related
Mortgage Loan Group (a) 30-59 days Delinquent, (b) 60-89 days Delinquent
and (c) 90 or more days Delinquent;
(ii) the number, aggregate Loan Balances of all Mortgage Loans
in each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group In
foreclosure proceedings (and whether any such Mortgage Loans are also
included in any of the statistics described in the foregoing clause (i));
(iii) the number, aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the aggregate
Loan Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group relating
to Mortgagors in bankruptcy proceedings (and whether any such Mortgage
Loans are also included in any of the statistics described in the
foregoing clause (i));
(iv) the number, aggregate Loan Balances of all Mortgage Loans
in each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group relating
to REO Properties (and whether any such Mortgage Loans are also included
in any of the statistics described in the foregoing clause (i));
(v) the loan number of the related Mortgage Loan and the book
value of any REO Property in each Mortgage Loan Group;
(vi) the amount of Group I Cumulative Realized Losses and
Group II Cumulative Realized Losses; and
(vii) the aggregate Loan Balance of 60+ Day Delinquent
Mortgage Loans with respect to each Group.
(c) The foregoing reports shall be sent be to an Owner only insofar
as such Owner owns a Certificate with respect to the related Mortgage Loan
Group.
(d) The Sponsor and the Master Servicer, on behalf of
Certificateholders and the Trust (the "Trust Parties") hereby authorize the
Trustee to include the loan level information with respect to the Mortgage
Loans, excluding any information relating to the fees or amounts due to the
Class A-8 and Class A-9 Certificate Insurer, contained in reports provided to
the Class A-8 and Class A-9 Certificate Insurer or the Trustee by the Master
Servicer hereunder and, if so directed by an Authorized Officer of the Sponsor
in writing to the Trustee, the monthly report to the Owners prepared by the
Trustee (the "Information") on The Bloomberg, an on-line computer based on-line
information network maintained by Bloomberg L.P. ("Bloomberg") or on any other
on-line computer based on-line information network or service ("Information
Network"), or in other electronic or print information services deemed
acceptable by the Sponsor or the Master Servicer as designated in writing to the
Trustee by an Authorized Officer of the
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Master Servicer. The Trust Parties agree not to commence any actions or
proceedings, or otherwise assert any claims, against the Trustee or its
affiliates or any of the Trustee's or its affiliates' respective agents,
representatives, directors, officers or employees (collectively, the "Designated
Parties"), arising out of, or related to or in connection with the dissemination
and/or use of any Information by the Trustee, including, but not limited to,
claims based on allegations of inaccurate or incomplete information by the
Trustee to Bloomberg or to any Information Network or otherwise (other than in
connection with the Trustee's negligence or willful misconduct). The Trust
Parties waive their rights to assert any such claims against the Designated
Parties and fully and finally release the Designated Parties from any and all
such claims, demands, obligations, actions and liabilities (other than in
connection with such Designated Parties' negligence or willful misconduct). The
Trustee makes no representations or warranties, expressed or implied, of any
kind whatsoever with respect to the accuracy, adequacy, timeliness,
completeness, merchantability or fitness for any particular purpose of any
Information in any form or manner. The authorizations, covenants and obligations
of the Trust Parties under this section shall be irrevocable and shall survive
the termination of this Agreement.
SECTION 7.9. ADDITIONAL REPORTS BY TRUSTEE. (a) The Trustee shall
report to the Sponsor, the Class A-8 and Class A-9 Certificate Insurer and the
Master Servicer with respect to the amount then held in each Account (including
investment earnings accrued or scheduled to accrue) held by the Trustee and the
identity of the investments included therein, as the Sponsor, the Master
Servicer or the Class A-8 and Class A-9 Certificate Insurer may from time to
time request. Without limiting the generality of the foregoing, the Trustee
shall, at the request of the Sponsor, the Master Servicer or the Class A-8 and
Class A-9 Certificate Insurer, transmit promptly to the Sponsor, the Class A-8
and Class A-9 Certificate Insurer and the Master Servicer copies of all
accounting of receipts in respect of the Mortgage Loans furnished to it by the
Master Servicer and shall notify the Sponsor, the Class A-8 and Class A-9
Certificate Insurer and the Master Servicer if any such receipts have not been
received by the Trustee.
(b) The Trustee shall immediately report to the Class A-8 and Class
A-9 Certificate Insurer, Sponsor and Master Servicer with respect to its actual
knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
any Master Transfer Agreement or in Section 3.3(a) hereof.
SECTION 7.10. SUPPLEMENTAL INTEREST PAYMENT ACCOUNT, SUPPLEMENT
INTEREST PAYMENTS AND CLASS R DISTRIBUTION ACCOUNT. (a) The parties hereto do
hereby create and establish a trust, the "Advanta Supplemental Interest Trust
1997-4" (the "Supplemental Interest Trust"). The Supplemental Interest Trust
shall hold a trust account, the "Supplemental Interest Payment Account" to be
held by the Trustee in its name on behalf of the Supplemental Interest Trust.
None of the assets of the Supplemental Interest Trust shall be considered assets
of the REMIC, and any amounts transferred from the REMIC to the Supplemental
Interest Trust shall be treated as distributions with respect to the Class R
Certificates.
(b) The amount, if any, on deposit in the Supplemental Interest
Payment Account on any Payment Date is the "Supplemental Interest Payment Amount
Available" on such Payment Date.
If, on any Determination Date the Trustee determines that the
Supplemental Interest Payment Amount Available to be available on the next
Payment Date is less than the excess of (x) the excess of (i) the Full Interest
Distribution Amount over (ii) the sum of the Class A-8 Current Interest and the
Class A-9 Current Interest over (y) the Supplemental Interest
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Payment Amount Available as of such Payment Date (the "Formula Interest
Shortfall"), the Trustee shall demand that the Designated Residual Owner fund
the Formula Interest Shortfall on the related Payment Date.
The amount so funded by the Designated Residual Owner on any such
Payment Date is the "Interest Advance" for such Payment Date.
On each Payment Date, the Trustee shall withdraw from the
Supplemental Interest Payment Account and pay (i) to the Owners of the Class A-8
Certificates which are not receiving the Class A-8 Full Interest Distribution
Amount with respect to such Class on such Distribution Date the amount by which
such Class A-8 Full Interest Distribution Amount exceeds the Class A-8 Current
Interest on such Payment Date (the "Class A-8 Interest Shortfall") and (ii) to
the Owners of the Class A-9 Certificates which are not receiving the Class A-9
Full Interest Distribution Amount with respect to such Class on such
Distribution Date the amount by which such Class A-9 Full Interest Distribution
Amount exceeds the Class A-9 Current Interest on such Payment Date (the "Class
A-9 Interest Shortfall.") To the extent that the Supplemental Interest Payment
Amount Available is less than the Formula Interest Shortfall, the Supplemental
Interest Payment Amount Available shall be applied on a pro rata basis (x) to
the Class A-8 Certificates, an amount equal to the product of (a) a fraction,
the numerator of which is the Class A-8 Interest Shortfall and the denominator
of which is the Formula Interest Shortfall and (b) the Supplemental Interest
Payment Amount Available and (y) to the Class A-9 Certificates, an amount equal
to the product of (a) a fraction, the numerator of which is the Class A-9
Interest Shortfall and the denominator of which is the Formula Interest
Shortfall and (b) the Supplemental Interest Payment Amount Available.
(c) Any portion of the Supplemental Interest Payment Amount
Available after application of clause (b) above shall be applied in the
following order of priority:
(i) first, to the Designated Residual Owner, as reimbursement
for unpaid Interest Advances, together with interest thereon, with the
earliest Interest Advances being deemed to be paid first;
(ii) second, to the owners of the Class R Certificates the
remainder pro rata in accordance with their Percentage Interests.
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
SECTION 8.1. MASTER SERVICER AND SUB-SERVICERS. (a) Acting directly
or through one or more Sub-Servicers as provided in Section 8.3, the Master
Servicer, as master servicer, shall service and administer the Mortgage Loans in
accordance with this Agreement and on behalf of the Trustee and the Class A-8
and Class A-9 Certificate Insurer and with reasonable care, and using that
degree of skill and attention that the Master exercises with respect to
comparable mortgage loans that it services for itself or others, and shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable.
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(b) The duties of the Master Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Trustee and the Class A-8 and
Class A-9 Certificate Insurer, as applicable, with respect to distributions,
paying Compensating Interest and making Delinquency Advances and Servicing
Advances pursuant hereto. The Master Servicer shall follow its customary
standards, policies and procedures in performing its duties as Master Servicer.
The Master Servicer shall cooperate with the Trustee and furnish to the Trustee
with reasonable promptness information in its possession as may be necessary or
appropriate to enable the Trustee to perform its tax reporting duties hereunder.
The Trustee shall furnish the Master Servicer or any Sub-servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer or any Sub-servicer to carry out its servicing and
administrative duties hereunder.
(c) Without limiting the generality of the foregoing, the Master
Servicer (i) shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Owners, the Class A-8
and Class A-9 Certificate Insurer and the Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of full release or discharge and
all other comparable instruments, with respect to the Mortgage Loans and with
respect to the related Properties; (ii) may consent to any modification of the
terms of any Note not expressly prohibited hereby if the effect of any such
modification (x) will not be to affect materially and adversely the security
afforded by the related Property, the timing of receipt of any payments required
hereby or the interests of the Class A-8 and Class A-9 Certificate Insurer and
(y) will not cause the REMIC Trust to fail to qualify as a REMIC.
(d) The Master Servicer shall have the right using that degree of
skill and attention that the Master Servicer exercises with respect to
comparable mortgage loans that it services for itself or others, to approve
applications of Mortgagors for consent to (i) partial releases of Mortgages,
(ii) alterations to Properties and (iii) removal, demolition or division of
Properties. No application for approval shall be considered by the Master
Servicer unless: (x) the provisions of the related Note and Mortgage have been
complied with; (y) the Combined Loan-to-Value Ratio (which may, for this
purpose, be determined at the time of any such action in a manner reasonably
acceptable to the Trustee) and the Mortgagor's debt-to-income ratio after any
release does not exceed the Combined Loan-to-Value Ratio and debt-to-income
ratio applicable to such Mortgage Loan at origination and (z) the lien priority
of the related Mortgage is not adversely affected; provided, however, that the
foregoing requirements (x), (y) and (z) shall not apply to any such situation
described in this paragraph if such situation results from any condemnation or
easement activity by a governmental entity.
(e) The parties intend that the REMIC Trust shall constitute, and
that the affairs of REMIC Trust shall be conducted so as to qualify it as a
REMIC. In furtherance of such intention, the Master Servicer covenants and
agrees that it shall act as agent (and the Master Servicer is hereby appointed
to act as agent) on behalf of the REMIC Trust and that in such capacity it
shall: (i) use its best efforts to conduct the affairs of the REMIC Trust at all
times that any Class of Certificates are outstanding so as to maintain the
status of the REMIC Trust as a REMIC under the REMIC Provisions; (ii) not
knowingly or intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of REMIC Trust or that would subject
the Trust to tax and (iii) exercise reasonable care not to allow the REMIC Trust
to receive income from the performance of services or from assets not permitted
under the REMIC Provisions to be held by a REMIC.
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(f) The Master Servicer may, and is hereby authorized to, perform
any of its servicing responsibilities with respect to all or certain of the
Mortgage Loans through a Sub-Servicer as it may from time to time designate, but
no such designation of a Sub-Servicer shall serve to release the Master Servicer
from any of its obligations under this Agreement. Such Sub-Servicer shall have
all the rights and powers of the Master Servicer with respect to such Mortgage
Loans under this Agreement.
(g) Without limiting the generality of the foregoing, but subject to
Sections 8.13 and 8.14, the Master Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Trustee to execute and deliver, and may be
authorized and empowered by the Trustee, to execute and deliver, on behalf of
itself, the Owners, the Class A-8 and Class A-9 Certificate Insurer and the
Trustee or any of them, (i) any and all instruments of satisfaction or
cancellation or of partial or full release or discharge and all other comparable
instruments with respect to the Mortgage Loans and with respect to the
Properties, (ii) and to institute foreclosure proceedings or obtain a deed in
lieu of foreclosure so as to effect ownership of any Property on behalf of the
Trustee, and (iii) to hold title to any Property upon such foreclosure or deed
in lieu of foreclosure on behalf of the Trustee; provided, however, that Section
8.14(a) shall constitute a power of attorney from the Trustee to the Master
Servicer or any Sub-servicer to execute an instrument of satisfaction (or
assignment of mortgage without recourse) with respect to any Mortgage Loan paid
in full (or with respect to which payment in full has been escrowed). Subject to
Sections 8.13 and 8.14, the Trustee shall furnish the Master Servicer and any
Sub-servicer with any powers of attorney and other documents as the Master
Servicer or such Sub-Servicer shall reasonably request to enable the Master
Servicer and such Sub-Servicer to carry out their respective servicing and
administrative duties hereunder.
(h) The Master Servicer shall give prompt notice to the Trustee of
any action, of which the Master Servicer has actual knowledge, to (i) assert a
claim against the Trust or (ii) assert jurisdiction over the Trust.
(i) Servicing Advances incurred by the Master Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Property shall be recoverable by the Master Servicer or
such Sub-Servicer to the extent described in Section 8.9(c) and in Section
7.5(h)(1) hereof.
SECTION 8.2. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS. (a) The
Master Servicer shall, to the extent such procedures shall be consistent with
this Agreement and the terms and provisions of any applicable Insurance
Policies, follow Accepted Servicing Practices. Consistent with the foregoing,
the Master Servicer may in its discretion (i) waive any assumption fees, late
payment charges, charges for checks returned for insufficient funds, prepayment
fees, if any, or other fees which may be collected in the ordinary course of
servicing the Mortgage Loans, (ii) if a Mortgagor is in default or about to be
in default because of a Mortgagor's financial condition, arrange with the
Mortgagor a schedule for the payment of delinquent payments due on the related
Mortgage Loan; provided, however, the Master Servicer shall not reschedule the
payment of delinquent payments more than one time in any twelve consecutive
months with respect to any Mortgagor.
(b) The Master Servicer shall hold in escrow on behalf of the
related Mortgagor all Prepaid Installments received by it, and shall apply such
Prepaid Installments as directed by such Mortgagor and as set forth in the
related Note.
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SECTION 8.3. SUB-SERVICING AGREEMENTS BETWEEN MASTER SERVICER AND
SUB-SERVICERS. The Master Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution which is
in compliance with the laws of each state necessary to enable it to perform its
obligations under such Sub-Servicing Agreement. The Master Servicer shall give
notice to the Class A-8 and Class A-9 Certificate Insurer and the Trustee of the
appointment of any Sub-Servicer and shall furnish to the Class A-8 and Class A-9
Certificate Insurer and the Trustee a copy of the Subservicing Agreement. For
purposes of this Agreement, the Master shall be deemed to have received payments
on Mortgage Loans when any Sub-Servicer has received such payments. Any such
Sub-Servicing Agreement shall be consistent with and not violate the provisions
of this Agreement.
SECTION 8.4. SUCCESSOR SUB-SERVICERS. The Master Servicer may
terminate any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement and to either itself directly service
the related Mortgage Loans itself or enter into a Sub-Servicing Agreement with a
successor Sub-Servicers that qualifies under Section 8.3.
SECTION 8.5. LIABILITY OF MASTER SERVICER. The Master Servicer shall
not be relieved of its obligations under this Agreement notwithstanding any
Sub-Servicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a Sub-Servicer or
otherwise, and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master by such
Sub-Servicer and nothing contained in such Sub-Servicing Agreement shall be
deemed to limit or modify this Agreement. The Trust shall not indemnify the
Master Servicer for any losses due to the Master Servicer's negligence.
SECTION 8.6. NO CONTRACTUAL RELATIONSHIP BETWEEN SUB-SERVICER AND
TRUSTEE OR THE OWNERS. Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Master Servicer alone and the Class A-8
and Class A-9 Certificate Insurer, the Trustee and the Owners shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Sub-Servicer except as set forth in Section 8.7.
SECTION 8.7. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENT BY
TRUSTEE. In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Master Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Master Servicer and a Sub-Servicer may be
assumed or terminated by the Trustee at its option. Any termination fee due
under any such Sub-servicing agreement shall be paid by the preceding Master
Servicer but in no event shall the Trustee be liable for any such fee.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party, without the payment of any fee by the Trustee, notwithstanding
any contrary provision in any Sub-Servicing Agreement.
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SECTION 8.8. PRINCIPAL AND INTEREST ACCOUNT. (a) The Master Servicer
and/or each Sub-servicer, as applicable, shall establish in the name of the
Trust for the benefit of the Owners of the Certificates and the Class A-8 and
Class A-9 Certificate Insurer, as their interests may appear, and maintain at
one or more Designated Depository Institutions the Principal and Interest
Account.
Subject to Subsections (c) and (e) below, the Master Servicer and
any Sub-servicer shall deposit all receipts related to the Mortgage Loans to the
Principal and Interest Account on a daily basis (but no later than the first
Business Day after receipt).
On the Startup Day, on each Subsequent Transfer Date and each day
thereafter, as applicable, the Sponsor and/or the Master Servicer shall deposit
to the Principal and Interest Account all receipts related to the Mortgage Loans
which relate to or are received on or after the Cut-Off Date or the Subsequent
Cut-Off Date, as the case may be.
(b) All funds in the Principal and Interest Account may only be held
(i) uninvested, up to the limits insured by the FDIC or (ii) invested in
Eligible Investments. The Principal and Interest Account shall be held in trust
in the name of the Trust and for the benefit of the Owners of the Certificates
and the Class A-8 and Class A-9 Certificate Insurer. Any investment earnings on
funds held in the Principal and Interest Account shall be for the account of the
Master Servicer and may only be withdrawn from the Principal and Interest
Account by the Master Servicer immediately following the remittance of the
Monthly Remittance Amounts by the Master Servicer. Any references herein to
amounts on deposit in the Principal and Interest Account shall refer to amounts
net of such investment earnings. Any investment losses are at the expense of the
Master Servicer and shall be replaced on or prior to the Remittance Date.
(c) Subject to Subsection (e) below, the Master Servicer shall
deposit to the Principal and Interest Account all principal and interest
collections on the Mortgage Loans received on or after the Cut-Off Date or
related Subsequent Cut-Off Date including any Prepaid Installments, Prepayments
and Net Liquidation Proceeds, all Loan Purchase Prices and Substitution Amounts
received or paid by the Master Servicer with respect to the Mortgage Loans,
other recoveries or amounts related to the Mortgage Loans received by the Master
Servicer, Compensating Interest and Delinquency Advances together with any
amounts which are reimbursable from the Principal and Interest Account, but net
of (i) the Servicing Fee with respect to each Mortgage Loan and other servicing
compensation to the Master Servicer as permitted by Section 8.15 hereof, (ii)
principal (including Prepayments) collected on the related Mortgage Loans prior
to the Cut-Off Date or related Subsequent Cut-Off Date, (iii) interest accruing
on the related Mortgage Loans prior to the Cut-Off Date or related Subsequent
Cut-Off Date and (iv) Net Liquidation Proceeds to the extent such Net
Liquidation Proceeds exceed the Loan Balance of the related Mortgage Loan.
(d) (i) The Master Servicer may make withdrawals from the Principal
and Interest Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of the
Monthly Remittance Amounts due on the Remittance Date;
(B) to reimburse itself pursuant to Section 8.9(a) hereof for
unreimbursed Delinquency Advances and Servicing Advances and
Nonrecoverable Advances;
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(C) to withdraw investment earnings on amounts on deposit in
the Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest Account
following the termination of the Trust Estate pursuant to Article X.
(ii) On the tenth day of each month, the Master Servicer shall
send to the Trustee a report, in the form of a computer tape, detailing
the payments on the Mortgage Loans during the prior Remittance Period.
Such tape shall be in the form and have the specifications as may be
agreed to between the Master Servicer and the Trustee from time to time.
The Class A-8 and Class A-9 Certificate Insurer shall have the right to
request this computer tape upon providing 3 Business Days written notice
to the Master Servicer.
(iii) On each Remittance Date the Master Servicer shall remit
to the Trustee by wire transfer, or otherwise make funds available in
immediately available funds for deposit in the Certificate Account
pursuant to Section 7.5 of this Agreement, (x) for Group I, the Group I
Interest Remittance Amount and the Group I Principal Remittance Amount and
(y) for Group II, the Group II Interest Remittance Amount and the Group II
Principal Remittance Amount.
(e) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are satisfactory to the Class A-8 and Class A-9 Certificate
Insurer, the Trustee, Moody's and Standard & Poor's, then the requirement to
maintain the Principal and Interest Account may be waived by an instrument
signed by the Class A-8 and Class A-9 Certificate Insurer, Standard & Poor's,
Trustee, and Moody's, and the Master Servicer may be allowed to co-mingle with
its general funds the amounts otherwise required to be deposited to the
Principal and Interest Account, on such terms and subject to such conditions as
the Class A-8 and Class A-9 Certificate Insurer, the Trustee, Moody's and
Standard & Poor's may permit.
SECTION 8.9. DELINQUENCY ADVANCES, COMPENSATING INTEREST AND
SERVICING ADVANCES. (a) The Master Servicer is required, not later than each
Remittance Date, to deposit into the Principal and Interest Account an amount
equal to the sum of the interest portions (net of the Servicing Fees) due, but
not collected, with respect to Delinquent Mortgage Loans during the prior
Remittance Period, but only if, in its good faith business judgment, the Master
Servicer reasonably believes that such amount will ultimately be recovered from
the related Mortgage Loan. Such amounts are "Delinquency Advances".
The Master Servicer shall be permitted to fund its payment of
Delinquency Advances on any Remittance Date and to reimburse itself for any
Delinquency Advances paid from the Master Servicer's own funds, from collections
on the related Mortgage Loan. The Master Servicer may use funds deposited to the
Principal and Interest Account subsequent to the related Remittance Period and
shall deposit into the Principal and Interest Account with respect thereto (i)
late collections from the Mortgagor whose Delinquency gave rise to the shortfall
which resulted in such Delinquency Advance and (ii) Net Liquidation Proceeds
recovered on account of the related Mortgage Loan to the extent of the amount of
aggregate Delinquency Advances related thereto or (iii) from its own funds. If
not therefore recovered from the related Mortgagor
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or the related Net Liquidation Proceeds, Delinquency Advances constituting
Nonrecoverable Advances shall be recoverable pursuant to Section 7.5(h)(1)
hereof.
(b) On or prior to each Remittance Date, the Master Servicer shall
deposit in the Principal and Interest Account with respect to any full
Prepayment received on a Mortgage Loan during the related Remittance Period out
of its own funds without any right of reimbursement therefor, an amount equal to
the difference between (x) 30 days' interest at the Mortgage Loan's Coupon Rate
(less the Servicing Fee) on the Loan Balance of such Mortgage Loan as of the
first day of the related Remittance Period and (y) to the extent not previously
advanced, the interest (less the Servicing Fee) paid by the Mortgagor with
respect to the Mortgage Loan during such Remittance Period (any such amount paid
by the Master Servicer, "Compensating Interest"). The Master Servicer shall in
no event be required to pay Compensating Interest with respect to any Remittance
Period in an amount in excess of the aggregate Servicing Fee received by the
Master Servicer with respect to all Mortgage Loans for such Remittance Period.
(c) The Master Servicer will pay all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations, including,
but not limited to, the cost of (i) Preservation Expenses, (ii) any enforcement
or judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Master Servicer reasonably believes such costs and expenses
will increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
amount so paid will constitute a "Servicing Advance". The Master Servicer may
recover Servicing Advances (x) from the Mortgagors to the extent permitted by
the Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of
the related Mortgage Loan and (y) as provided in Section 7.5(h)(1) hereof. In no
case may the Master Servicer recover Servicing Advances from principal and
interest payments on any Mortgage Loan or from any amounts relating to any other
Mortgage Loan except as provided pursuant to Section 7.5(h)(1) hereof.
(d) On the Remittance Dates in January and February of 1998, the
Master Servicer shall make two special, Nonrecoverable Advances, one with
respect to Group I and one with respect to Group II equal to the sum of (x)
one-month's interest, calculated at the weighted average Pass-Through Rate
(applicable to the January and February 1998 Payment Dates for the classes of
Offered Certificates related to such Group) with respect to (i) in the case of
the January 1998 Remittance Date, all Mortgage Loans not having a payment due
during December, 1997, and (ii) in the case of the February 1998 Remittance
Date, with respect to Mortgage Loans not having a payment due during January,
1998 and (y) with respect to Group II, the Premium Amount with respect to the
January 1998 Payment Date; the amounts of such advances shall be included in the
related Interest Remittance Amount.
(e) On the Remittance Date in January of 1998, the Master Servicer
shall make two special, Nonrecoverable Advances, as necessary, one with respect
to Group I and one with respect to Group II, equal to the sum of (x) one-month's
interest calculated at the weighted average Pass-Through Rate (applicable to the
January 1998 Payment Date) for the classes of Offered Certificates related to
such Group with respect to all Escrow Loans (as defined in subsection 3.5(c)(i))
not ultimately delivered pursuant to Section 3.5(c)(i) and (y) with respect to
Group II, the Premium Amount with respect to the January 1998 Payment Date; the
amounts of such advances shall be included in the related Interest Remittance
Amount.
SECTION 8.10. PURCHASE OF MORTGAGE LOANS. The Master Servicer may,
but is not obligated to, purchase for its own account any Mortgage Loan which
becomes Delinquent, in
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whole or in part, as to four consecutive monthly installments or any Mortgage
Loan as to which enforcement proceedings have been brought by the Master
Servicer or by any Sub-servicer pursuant to Section 8.13. Any such Loan so
purchased shall be purchased by the Master Servicer on a Remittance Date at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Principal and Interest Account. Notwithstanding the
foregoing, the Master Servicer may not purchase any such Mortgage Loan unless
the Master Servicer has delivered to the Trustee an opinion of counsel
experienced in federal income tax matters acceptable to the Trustee to the
effect that such a purchase would not constitute a Prohibited Transaction for
the Trust or otherwise subject the Trust to tax and would not jeopardize the
status of either the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC.
SECTION 8.11. MAINTENANCE OF INSURANCE. (a) The Master Servicer
shall cause to be maintained with respect to each Mortgage Loan a hazard
insurance policy with a generally acceptable carrier that provides for fire and
extended coverage, and which provides for a recovery by the Master Servicer on
behalf of the Trust of insurance proceeds relating to such Mortgage Loan in an
amount not less than the least of (i) the outstanding principal balance of the
Mortgage Loan, (ii) the minimum amount required to compensate for damage or loss
on a replacement cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to a
Property in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Master Servicer will
cause to be maintained with respect thereto a flood insurance policy in a form
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier in an amount representing
coverage, and which provides for a recovery by the Master Servicer on behalf of
the Trust of insurance proceeds relating to such Mortgage Loan of not less than
the least of (i) the outstanding principal balance of the Mortgage Loan, (ii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify the
Trust and the Class A-8 and Class A-9 Certificate Insurer out of the Master
Servicer's own funds for any loss to the Trust and the Class A-8 and Class A-9
Certificate Insurer resulting from the Master Servicer's failure to maintain the
insurance required by this Section.
(c) In the event that the Master Servicer shall obtain and maintain
a blanket policy insuring against fire, flood and hazards of extended coverage
on all of the Mortgage Loans, then, to the extent such policy names the Master
Servicer as loss payee and provides coverage in an amount equal to the aggregate
unpaid principal balance on the Mortgage Loans without co-insurance, and
otherwise complies with the requirements of this Section 8.11, the Master
Servicer shall be deemed conclusively to have satisfied its obligations with
respect to fire and hazard insurance coverage under this Section 8.11, it being
understood and agreed that such blanket policy may contain a deductible clause,
in which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Property a policy complying with the preceding
paragraphs of this Section 8.11, and there shall have been a loss which would
have been covered by such policy, deposit in the Principal and Interest Account
from the Master Servicer's own funds the difference, if any, between the amount
that would have been payable under a policy complying with the preceding
paragraphs of this Section 8.11 and the amount paid under such blanket policy.
Upon the request of the Trustee or the Class A-8 and Class A-9 Certificate
Insurer, the Master Servicer shall cause to be delivered to the Trustee and the
Class A-8 and Class A-9 Certificate Insurer, a certified true copy of such
policy.
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SECTION 8.12. DUE-ON-SALE CLAUSES; ASSUMPTION AND SUBSTITUTION
AGREEMENTS. When a Property has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Note; provided, however, that the Master Servicer
shall not exercise any such right if (i) the "due-on-sale" clause, in the
reasonable belief of the Master Servicer, is not enforceable under applicable
law or (ii) the Master Servicer reasonably believes that to permit an assumption
of the Mortgage Loan would not materially and adversely affect the interest of
the Owners or of the Class A-8 and Class A-9 Certificate Insurer. In such event,
the Master Servicer shall enter into an assumption and modification agreement
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Note and, unless
prohibited by applicable law or the Mortgage Documents, the Mortgagor remains
liable thereon. If the foregoing is not permitted under applicable law, the
Master Servicer is authorized to enter into a substitution of liability
agreement with such person, pursuant to which the original Mortgagor is released
from liability and such person is substituted as Mortgagor and becomes liable
under the Note; provided, however, that to the extent any such substitution of
liability agreement would be delivered by the Master Servicer outside of its
usual procedures for mortgage loans held in its own portfolio the Master
Servicer shall, prior to executing and delivering such agreement, obtain the
prior written consent of the Control Party. The Mortgage Loan, as assumed, shall
conform in all respects to the requirements, representations and warranties of
this Agreement. The Master Servicer shall notify the Trustee that any such
assumption or substitution agreement has been completed by forwarding to the
Trustee the original copy of such assumption or substitution agreement, which
copy shall be added by the Trustee to the related File and which shall, for all
purposes, be considered a part of such File to the same extent as all other
documents and instruments constituting a part thereof. The Master Servicer shall
be responsible for recording or causing the recordation any such assumption or
substitution agreements. In connection with any such assumption or substitution
agreement, the required monthly payment on the related Mortgage Loan shall not
be changed but shall remain as in effect immediately prior to the assumption or
substitution, the stated maturity or outstanding principal amount of such
Mortgage Loan shall not be changed nor shall any required monthly payments of
principal or interest be deferred or forgiven. Any fee collected by the Master
Servicer or the Sub-Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to the
Master Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or any assumption which the Master
Servicer may be restricted by law from preventing, for any reason whatsoever.
SECTION 8.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The
Master Servicer shall foreclose upon or otherwise comparably effect the
ownership on behalf of the Trust of Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Master Servicer has not purchased pursuant to
Section 8.10. In connection with such foreclosure or other conversion, the
Master Servicer shall exercise such of the rights and powers vested in it
hereunder, and use the same degree of care and skill in their exercise or use,
as prudent mortgage lenders would exercise or use under the circumstances in the
conduct of their own affairs, including, but not limited to, advancing funds for
the payment of taxes, amounts due with respect to Senior Liens, and insurance
premiums. Any amounts so advanced shall constitute "Servicing Advances" within
the
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meaning of Section 8.9(c) hereof. The Master Servicer shall sell any REO
Property within 23 months of its acquisition by the Trust, unless the Master
Servicer obtains for the Trustee an opinion of counsel experienced in federal
income tax matters, addressed to the Trustee, the Class A-8 and Class A-9
Certificate Insurer and the Master Servicer, to the effect that the holding by
the Trust of such REO Property for any greater period will not result in the
imposition of taxes on "Prohibited Transactions" of the Trust or any REMIC
therein as defined in Section 860F of the Code or cause either the Lower-Tier
REMIC or the Upper-Tier REMIC to fail to qualify as a REMIC under the REMIC
Provisions at any time that any Certificates are outstanding. Notwithstanding
the generality of the foregoing provisions, the Master Servicer shall manage,
conserve, protect and operate each REO Property for the Owners and the Class A-8
and Class A-9 Certificate Insurer solely for the purpose of its prompt
disposition and sale in a manner which does not cause such REO Property to fail
to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code or result in the receipt by the Lower-Tier REMIC or the Upper Tier
REMIC of any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code or any "net income from foreclosure property" which is
subject to taxation under the REMIC Provisions. Pursuant to its efforts to sell
such REO Property, the Master Servicer shall either itself or through an agent
selected by the Master Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Owners, rent the same, or any part thereof, as the Master
Servicer deems to be in the best interest of the Owners for the period prior to
the sale of such REO Property. The Master Servicer shall take into account the
existence of any hazardous substances, hazardous wastes or solid wastes, as such
terms are defined in the Comprehensive Environmental Response Compensation and
Liability Act, the Resource Conservation and Recovery Act of 1976, or other
federal, state or local environmental legislation, on a REO Property in
determining whether to foreclose upon or otherwise comparably convert the
ownership of such REO Property. With respect to any Mortgage Loan secured by a
mixed use REO Property, the Master Servicer shall, prior to foreclosing upon or
otherwise comparably effecting the ownership in the name of the Master Servicer
on behalf of the Trust, either (x) perform a "phase one environmental study" of
such REO Property or (y) repurchase such REO Property at the Loan Purchase
Price.
Notwithstanding the generality of the foregoing provisions, the
Master Servicer shall manage, conserve, protect and operate each REO Property
for the Owners solely for the purpose of its prompt disposition and sale in a
manner which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the Trust of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from foreclosure
property" which is subject to taxation under the REMIC Provisions. Pursuant to
its efforts to sell such REO Property, the Master Servicer shall either itself
or through an agent selected by the Master Servicer protect and conserve such
REO Property in the same manner and to such extent as is customary in the
locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Owners, rent the same, or
any part thereof, as the Master Servicer deems to be in the best interest of the
Owners for the period prior to the sale of such REO Property. The Master
Servicer shall take into account the existence of any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation, on a Property in determining whether to foreclose upon or otherwise
comparably convert the ownership of such Property.
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(b) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan" and shall promptly deliver to the Class A-8 and Class
A-9 Certificate Insurer a related liquidation report with respect to such
Liquidated Loan.
SECTION 8.14. TRUSTEE TO COOPERATE; RELEASE OF FILES. (a) Upon
the payment in full of any Mortgage Loan (including the repurchase of any
Mortgage Loan or any liquidation of such Mortgage Loan through foreclosure or
otherwise), or the receipt by the Master Servicer or any Sub-servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Master Servicer or any Sub-servicer shall deliver to the
Trustee a Master Servicer's Trust Receipt. Upon receipt of such Master
Servicer's Trust Receipt, the Trustee shall promptly release the related File,
in trust to (i) the Master Servicer, (ii) an escrow agent or (iii) any employee,
agent or attorney of the Trustee, in each case pending its release by the Master
Servicer, such escrow agent or such employee, agent or attorney of the Trustee,
as the case may be. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Master Servicer or
any Sub-servicer is authorized to give, as attorney-in-fact for the Trustee and
the mortgagee under the Mortgage which secured the Note, an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account. In lieu of executing any such satisfaction or assignment, as
the case may be, the Master Servicer or any Sub-servicer may prepare and submit
to the Trustee, a satisfaction (or assignment without recourse, if requested by
the Person or Persons entitled thereto) in form for execution by the Trustee
with all requisite information completed by the Master Servicer or any
Sub-servicer; in such event, the Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy, the Trustee shall (except in the case of the payment or
liquidation pursuant to which the related File is released to an escrow agent or
an employee, agent or attorney of the Trustee), upon request of the Master
Servicer or any Sub-servicer and delivery to the Trustee of a Master Servicer's
Trust Receipt, release the related File to the Master Servicer and shall execute
such documents as shall be necessary to the prosecution of any such proceedings,
including, without limitation, an assignment without recourse of the related
Mortgage to the Master Servicer; provided that the Master Servicer shall not
have received and not returned at any one time more than 10% of the entire
number of Files. The Trustee shall complete in the name of the Trustee any
endorsement in blank on any Note prior to releasing such Note to the Master
Servicer or any Sub-servicer. Such receipt shall obligate the Master Servicer or
any Sub-servicer to return the File to the Trustee when the need therefor by the
Master Servicer or any Sub-servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of the liquidation information,
in physical or electronic form, the Master Servicer's Trust Receipt shall be
released by the Trustee to the Master Servicer or any Sub-servicer.
(c) No costs associated with the procedures described in this
Section 8.14 shall be an expense of the Trust.
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(d) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given by
the Class A-8 and Class A-9 Certificate Insurer, Moody's and Standard & Poor's
pursuant to Section 3.5(j) hereof.
(e) Each Master Servicer's Trust Receipt may be delivered to
the Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such other
means, including, without limitation, electronic or computer readable medium, as
the Master Servicer and the Trustee shall mutually agree. The Trustee shall
promptly release the related File(s) within five (5) to seven (7) business days
of receipt of a properly completed Master Servicer's Trust Receipt pursuant to
clauses (i), (ii) or (iii) above or such shorter period as may be agreed upon by
the Master Servicer and the Trustee. Receipt of a Master Servicer's Trust
Receipt pursuant to clauses (i), (ii) or (iii) above shall be authorization to
the Trustee to release such Files, provided the Trustee has determined that such
Master Servicer's Trust Receipt has been executed, with respect to clauses (i)
or (ii) above, or approved, with respect to clause (iii) above, by an Authorized
Officer of the Master Servicer or any Sub-servicer, and so long as the Trustee
complies with its duties and obligations under this Agreement. If the Trustee is
unable to release the Files within the time frames previously specified, the
Trustee shall immediately notify the Master Servicer or any Sub-servicer
indicating the reason for such delay, but in no event shall such notification be
later than five business days after receipt of a Master Servicer's Trust
Receipt. If the Master Servicer is required to pay penalties or damages due
solely to the Trustee's negligent failure to release the related File or the
Trustee's negligent failure to execute and release documents in a timely manner,
the Trustee shall be liable for such penalties or damages.
On each day that the Master Servicer remits to the Trustee
Master Servicer's Trust Receipts pursuant to clauses (ii) or (iii) above, the
Master Servicer or any Sub-servicer shall also submit to the Trustee a summary
of the total amount of such Master Servicer's Trust Receipts requested on such
day by the same method as described in such clauses (ii) or (iii) above.
SECTION 8.15. SERVICING COMPENSATION. As compensation for its
activities hereunder, the Master Servicer shall be entitled to retain the amount
of the Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad check charges,
assumption fees, late payment charges, or any other servicing-related fees, Net
Liquidation Proceeds not required to be deposited in the Principal and Interest
Account pursuant to Section 8.8(c)(v) and similar items may, to the extent
collected from Mortgagors, be retained by the Master Servicer.
SECTION 8.16. ANNUAL STATEMENT AS TO COMPLIANCE. The Master
Servicer, at its own expense, will deliver to the Trustee, the Class A-8 and
Class A-9 Certificate Insurer, Standard & Poor's, and Moody's, on or before the
last day of March of each year, commencing in 1998, an Officer's Certificate
stating, as to each signer thereof, that (i) a review of the activities of the
Master Servicer during such preceding calendar year and of performance under
this Agreement has been made under such officers' supervision, and (ii) to the
best of such officers' knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Agreement for such year, or, if there
has been a default in the fulfillment of all such obligations, specifying each
such default known to such officers and the nature and status thereof including
the steps being taken by the Master Servicer to remedy such defaults.
SECTION 8.17. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'
REPORTS. On or before the last day of March of each year, commencing in 1998,
the Master Servicer, at its own expense, shall cause to be delivered to the
Trustee, the Class A-8 and Class A-9 Certificate
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Insurer, Standard & Poor's and Moody's a letter or letters of a firm of
independent, nationally recognized certified public accountants reasonably
acceptable to the Control Party stating that such firm has, with respect to the
Master Servicer's overall servicing operations (i) performed applicable tests in
accordance with the compliance testing procedures as set forth in Appendix 3 of
the Audit Guide for Audits of HUD Approved Nonsupervised Mortgagees or (ii)
examined such operations in accordance with the requirements of the Uniform
Single Audit Program for Mortgage Bankers, and in either case stating such
firm's conclusions relating thereto.
SECTION 8.18. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE MORTGAGE LOANS. The Master Servicer shall provide to the Trustee,
the Class A-8 and Class A-9 Certificate Insurer, the FDIC and the supervisory
agents and examiners of each of the foregoing access to the documentation
regarding the Mortgage Loans required by applicable state and federal
regulations, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Master Servicer
designated by it.
Upon any change in the format of the computer tape maintained
by the Master Servicer in respect of the Mortgage Loans, the Master Servicer
shall deliver a copy of such computer tape to the Trustee and in addition shall
provide a copy of such computer tape to the Trustee at such other times as the
Trustee may reasonably request. The Class A-8 and Class A-9 Certificate Insurer
may request a copy of this computer tape upon 3 Business Days prior written
notice to the Master Servicer.
SECTION 8.19. ASSIGNMENT OF AGREEMENT. The Master Servicer may
not assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Trustee and the Class A-8
and Class A-9 Certificate Insurer, which such consent shall not be unreasonably
withheld; provided, however, that any assignee must meet the eligibility
requirements set forth in Section 8.20(g) hereof for a successor servicer.
Notice of any such assignment shall be given by the Master Servicer to the
Trustee, the Class A-8 and Class A-9 Certificate Insurer and Moody's.
SECTION 8.20. REMOVAL OF MASTER SERVICER; RESIGNATION OF
MASTER SERVICER. (a) The Trustee, with the consent of the Class A-8 and Class
A-9 Certificate Insurer (or the Owners pursuant to Section 6.11 hereof) may
remove the Master Servicer upon the occurrence of any of the following events:
(i) The Master Servicer shall fail to deliver to the
Trustee any proceeds or required payment, which failure
continues unremedied for five Business Days following written
notice to an Authorized Officer of the Master Servicer from
the Trustee or from any Owner.
(ii) The Master Servicer shall (I) apply for or
consent to the appointment of a receiver, trustee, liquidator
or custodian or similar entity with respect to itself or its
property, (II) admit in writing its inability to pay its debts
generally as they become due, (III) make a general assignment
for the benefit of creditors, (IV) be adjudicated a bankrupt
or insolvent, (V) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a
voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking
to take advantage of any insolvency law or file an answer
admitting the material allegations of a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding
or (VI) take corporate action for the purpose of effecting any
of the foregoing;
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(iii) If without the application, approval or consent
of the Master Servicer, a proceeding shall be instituted in
any court of competent jurisdiction, under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors,
seeking in respect of the Master Servicer an order for relief
or an adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or similar entity
with respect to the Master Servicer or of all or any
substantial part of its assets, or other like relief in
respect thereof under any bankruptcy or insolvency law, and,
if such proceeding is being contested by the Master Servicer
in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or
(B) continue undismissed or pending and unstayed for any
period of seventy-five (75) consecutive days; or
(iv) The Master Servicer shall fail to perform any one
or more of its obligations hereunder other than the
obligations contemplated by Subsection 8.20(i) above, and
shall continue in default thereof for a period of sixty (60)
days after notice by the Trustee or the Class A-8 and Class
A-9 Certificate Insurer of said failure; provided, however,
that if the Master Servicer can demonstrate to the reasonable
satisfaction of the Control Party that it is diligently
pursuing remedial action, then the cure period may be extended
with the written approval of the Control Party; or
(v) The Master Servicer shall fail to cure any breach
of any of its representations and warranties set forth in
Section 3.2 which materially and adversely affects the
interests of the Owners or the Class A-8 and Class A-9
Certificate Insurer for a period of thirty (30) days after the
Master Servicer's discovery or receipt of notice thereof;
provided, however, that if the Master Servicer can demonstrate
to the reasonable satisfaction of the Control Party that it is
diligently pursuing remedial action, then the cure period may
be extended with the written approval of the Control Party.
(b) The Control Party also may remove the Master Servicer upon
the occurrence of any of the following events:
(i) a Group II Deficiency Amount; provided, however,
that the Class A-8 and Class A-9 Certificate Insurer shall
have no right to remove the Master Servicer under this clause
(i) if the Master Servicer can demonstrate to the reasonable
satisfaction of the Class A-8 and Class A-9 Certificate
Insurer that such event was due to circumstances beyond the
control of the Master Servicer; or
(ii) the failure by the Master Servicer to make any
required Servicing Advance; or
(iii) the failure by the Master Servicer to perform
any one or more of its obligations hereunder or under the
Insurance Agreement, which failure materially and adversely
affects the interests of the Class A-8 and Class A-9
Certificate Insurer and the Trustee; or
(iv) the failure by the Master Servicer to make any
required Delinquency Advance or to pay any Compensating
Interest; or
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(v) the occurrence of a Servicer Termination
Delinquency Rate Trigger or a Servicer Termination Loss
Trigger, as such terms are defined in the Insurance Agreement;
or
(vi) the enactment of any law by a legislative body
that declares, or any finding or ruling by a court of
competent jurisdiction, that the Insurance Agreement or this
Agreement is not valid and binding on the Sponsor or the
Master Servicer;
provided, however, with respect to clause (iv), if the Master Servicer can
demonstrate to the reasonable satisfaction of the Control Party that any such
event was due to circumstances beyond the control of the Master Servicer, such
event shall not be considered an event of termination of the Master Servicer;
provided, however, that (x) prior to any removal of the Master Servicer by the
Control Party pursuant to clauses (i) or (ii) of this Section 8.20(b), the
Master Servicer shall first have been given by the Control Party and by
registered or certified mail, notice of the occurrence of one or more of the
events set forth in clauses (i), (ii) or (iii) above and the Master Servicer
shall not have remedied, or shall not have taken actions satisfactory to the
Control Party to remedy, such event or events within 30 days (60 days with
respect to clause (iii)) after the Master Servicer's receipt of such notice
(provided, however, that if the Master Servicer can demonstrate to the
reasonable satisfaction of the Control Party that it is diligently pursuing
remedial action, then the cure period in each case may be extended with the
written approval of the Control Party) and (y) in the event of the refusal or
inability of the Master Servicer to make any required Delinquency Advance or to
pay any Compensating Interest or Monthly Remittance, such removal shall be
effective (without the requirement of any action on the part of the Class A-8
and Class A-9 Certificate Insurer or of the Trustee) at 4 p.m. on the second
Business Day following the day on which the Trustee or the Class A-8 and Class
A-9 Certificate Insurer notifies an Authorized Officer of the Master Servicer
that a required Delinquency Advance has not been received by the Trustee. Upon
the Trustee's determination that a required Delinquency Advance or payment of
Compensating Interest has not been made by the Master Servicer, the Trustee
shall so notify in writing an Authorized Officer of the Master Servicer and the
Class A-8 and Class A-9 Certificate Insurer as soon as is reasonably practical.
(c) The Master Servicer shall not resign from the obligations
and duties hereby imposed on it, except upon determination that its duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it,
the other activities of the Master Servicer so causing such a conflict being of
a type and nature carried on by the Master Servicer at the date of this
Agreement. Any such determination permitting the resignation of the Master
Servicer shall be evidenced by an opinion of counsel to such effect which shall
be delivered to the Trustee and the Class A-8 and Class A-9 Certificate Insurer.
(d) No removal or resignation of the Master Servicer shall
become effective until the Trustee or a successor servicer shall have assumed
the Master Servicer's responsibilities and obligations in accordance with this
Section. If no successor servicer is available, the Trustee shall act as
successor servicer and perform all of the obligations of this Section,
including, without limitation, making Delinquency Advances and paying
Compensating Interest; provided, however, that the Trustee will not be obligated
to act as successor servicer if it is legally unable to perform its duties
hereunder.
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(e) Upon removal or resignation of the Master Servicer, the
Master Servicer also shall promptly deliver or cause to be delivered to a
successor servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Master Servicer has
maintained for the Mortgage Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Master Servicer's possession.
(f) Any collections received by the Master Servicer after
removal or resignation shall be endorsed by it to the Trustee and remitted
directly and immediately to the Trustee or the successor Master Servicer.
(g) Upon removal or resignation of the Master Servicer, the
Trustee (x) may solicit bids for a successor servicer as described below, and
(y) pending the appointment of a successor Master Servicer as a result of
soliciting such bids, shall serve as Master Servicer. The Trustee shall, if it
is unable to obtain a qualifying bid and is prevented by law from acting as
Master Servicer, appoint, or petition a court of competent jurisdiction to
appoint, any housing and home finance institution, bank or mortgage servicing
institution which has shareholders' equity of not less than $10,000,000, as
determined in accordance with generally accepted accounting principles, and
acceptable to the Class A-8 and Class A-9 Certificate Insurer as the successor
to the Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder. The
compensation of any successor servicer (including, without limitation, the
Trustee) so appointed shall be the aggregate Servicing Fees, together with the
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in Sections 8.8 and 8.15; provided, however,
that if the Trustee acts as successor Master Servicer then the Sponsor agrees to
pay to the Trustee at such time that the Trustee becomes such successor Master
Servicer a fee of twenty-five dollars ($25.00) for each Mortgage Loan then
included in the Trust Estate. The Trustee shall be obligated to serve as
successor Master Servicer whether or not the $25.00 fee described in the
preceding sentence is paid by the Sponsor, but shall in any event be entitled to
receive, and to enforce payment of, such fee from the Sponsor.
(h) In the event the Trustee solicits bids as provided above,
the Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid. The Trustee shall
deduct from any sum received by the Trustee from the successor to the Master
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities hereunder. After such deductions, the
remainder of such sum shall be paid by the Trustee to the Master Servicer at the
time of such sale, transfer and assignment to the Master Servicer's successor.
(i) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Master Servicer agrees to cooperate with the Trustee and any
successor Master Servicer in effecting the termination of the Master Servicer's
servicing responsibilities and rights hereunder and shall promptly provide the
Trustee or such successor Master Servicer, as applicable, all documents and
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records reasonably requested by it to enable it to assume the Master Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor Master Servicer, as applicable, all amounts which then have been or
should have been deposited in the Principal and Interest Account by the Master
Servicer or which are thereafter received with respect to the Mortgage Loans.
Neither the Trustee nor any other successor Master Servicer shall be held liable
by reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Master
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Master Servicer or (iii) any breaches of a predecessor Master Servicer.
(j) The Trustee or any other successor Master Servicer, upon
assuming the duties of Master Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the Master Servicer
has theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Trustee is acting as successor Master Servicer, the Trustee
shall only be required to make Delinquency Advances (including the Delinquency
Advances described in this clause (j)) if, in the Trustee's reasonable good
faith judgment, such Delinquency Advances will ultimately be recoverable from
the related Mortgage Loans.
(k) The Master Servicer which is being removed or is resigning
shall give notice to the Mortgagors and to Moody's and Standard and & Poor's of
the transfer of the servicing to the successor.
(l) The Trustee shall give notice to the Class A-8 and Class
A-9 Certificate Insurer, Moody's, Standard & Poor's and to the Owners of the
occurrence of any event specified in Section 8.20(a) of which the Trustee has
knowledge.
(m) Notwithstanding anything herein to the contrary, upon
termination of the Master Servicer hereunder, any liabilities of the Master
Servicer which accrued prior to such termination shall survive such termination.
SECTION 8.21. INSPECTIONS BY THE CLASS A-8 AND CLASS A-9
CERTIFICATE INSURER AND THE TRUSTEE; ERRORS AND OMISSIONS INSURANCE. (a) At any
reasonable time and from time to time upon reasonable notice, the Class A-8 and
Class A-9 Certificate Insurer, the Trustee, or any agents or representatives
thereof may inspect the Master Servicer's servicing operations and discuss the
servicing operations of the Master Servicer with any of its officers or
directors. The costs and expenses incurred by the Master Servicer or its agents
or representatives in connection with any such examinations or discussions shall
be paid by the Master Servicer.
(b) The Master Servicer agrees to maintain errors and
omissions coverage and a fidelity bond, each at least to the extent generally
maintained by prudent mortgage loan servicers having servicing portfolios of a
similar size.
SECTION 8.22. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS OF MASTER SERVICER. Any corporation into which the Master Servicer
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer shall be a party, or any corporation succeeding to all or
substantially all of the business of the Master Servicer, shall be the successor
of the Master Servicer hereunder, without the execution or filing of any paper
or any further act
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on the part of any of the parties hereto provided that such corporation meets
the qualifications set forth in Section 8.20(g).
SECTION 8.23. NOTICES OF MATERIAL EVENTS. The Master Servicer
shall give prompt notice to the Class A-8 and Class A-9 Certificate Insurer, the
Trustee, Moody's and Standard & Poor's of the occurrence of any of the following
events:
(a) Any default or any fact or event which results, or which
with notice or the passage of time, or both, would result in the occurrence of a
default by the Sponsor, any Originator or the Master Servicer under any
Transaction Document or would constitute a material breach of a representation,
warranty or covenant under any Transaction Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Sponsor, the Master Servicer or AMHC in any federal, state or local court or
before any governmental body or agency, or before any arbitration board, or any
such proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse effect upon any the Sponsor's, the
Master Servicer's or AMHC's ability to perform its obligations under any
Transaction Document;
(c) The commencement of any proceedings by or against the
Sponsor, the Master Servicer or AMHC under any applicable bankruptcy,
reorganization, liquidation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator, trustee or other
similar official shall have been, or may be, appointed or requested for the
Sponsor, the Master Servicer or AMHC; and
(d) The receipt of notice from any agency or governmental body
having authority over the conduct of any of the Sponsor's the Master Servicer's
or the AMHC's business that the Sponsor, the Master Servicer or AMHC is to cease
and desist, or to undertake any practice, program, procedure or policy employed
by the Sponsor, the Master Servicer or AMHC in the conduct of the business of
any of them, and such cessation or undertaking will materially adversely affect
the conduct of the Sponsor's, the Master Servicer's or AMHC's business or its
ability to perform under the Transaction Documents or materially adversely
affect the financial affairs of the Sponsor, the Master Servicer or AMHC.
ARTICLE IX
TERMINATION OF TRUST
SECTION 9.1. TERMINATION OF TRUST. The Trust created hereunder
and all obligations created by this Agreement will terminate upon the earlier of
(i) the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policy of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
the REMIC Trust is effected as described below or (iii) as described in Section
9.2 or 9.3 hereof. To effect a termination of this Agreement pursuant to clause
(ii) above, the Owners of all Certificates then Outstanding shall (x)
unanimously direct the Trustee on behalf of the Lower-Tier REMIC and the
Upper-Tier REMIC to adopt a plan of complete liquidation with respect to each of
the Mortgage Loan Groups as contemplated by
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Section 860F(a)(4) of the Code and (y) provide to the Trustee an opinion of
counsel experienced in federal income tax matters to the effect that such
liquidation constitutes a Qualified Liquidation, and the Trustee either shall
sell the Mortgage Loans and distribute the proceeds of the liquidation of the
Trust Estate, or shall distribute equitably in kind all of the assets of the
Trust Estate to the remaining Owners of the Certificates based on their
interests in the Trust, each in accordance with such plan, so that the
liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of this Agreement occur no later
than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation. In no
event, however, will the Trust created by this Agreement continue beyond the
expiration of twenty-one (21) years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the United Kingdom, living on the date hereof. The Trustee shall give written
notice of termination of the Agreement to each Owner in the manner set forth in
Section 11.5.
SECTION 9.2. TERMINATION UPON OPTION OF MASTER SERVICER. (a)
On any Remittance Date on or after the Clean-Up Call Date, the Master Servicer
acting directly or through one or more affiliates may determine to purchase and
may cause the purchase from the Trust of all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired in respect of
any such Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise
then remaining in the Trust Estate at a price equal to the sum of (v) the
greater of (i) 100% of the aggregate Loan Balances of the related Mortgage Loans
as of the day of purchase minus (a) the amount actually remitted by the Master
Servicer representing the related Monthly Principal Remittance Amount on such
Remittance Date for the related Remittance Period and (b) any unreimbursed
Delinquency Advances, Servicing Advances and Nonrecoverable Advances and (ii)
the fair market value of such Mortgage Loans (disregarding accrued interest),
(w) the amount of any difference between the related Monthly Interest Remittance
Amount actually remitted by the Master Servicer on such Remittance Date and the
related Monthly Interest Remittance Amount due on such Remittance Date, (x) the
related Group II Reimbursement Amount, if any, and (y) the aggregate amount of
any Delinquency Advances and Servicing Advances remaining unreimbursed, together
with any accrued and unpaid Servicing Fees, as of such Remittance Date (such
amount, the "Termination Price"). In connection with such purchase, the Master
Servicer shall remit to the Trustee all amounts then on deposit in the Principal
and Interest Account for deposit to the Certificate Account, which deposit shall
be deemed to have occurred immediately preceding such purchase. Notwithstanding
the foregoing, the Master Servicer or its affiliate may not terminate the Trust
pursuant to this Section 9.2 without the consent of the Class A-8 and Class A-9
Certificate Insurer, if termination would result in a draw on the Certificate
Insurance Policy.
(b) In connection with any such purchase, the Master Servicer
shall provide to the Trustee an opinion of counsel experienced in federal income
tax matters to the effect that such purchase constitutes a Qualified Liquidation
of the REMIC Trust.
(c) Promptly following any such purchase, the Trustee will
release the Files to the Master Servicer, or otherwise upon their order, in a
manner similar to that described in Section 8.14 hereof.
(d) Upon such purchase, the Certificate Insurance Policy will
terminate.
SECTION 9.3. TERMINATION UPON LOSS OF REMIC STATUS. (a)
Following a (x) final determination by the Internal Revenue Service, or by a
court of competent jurisdiction, in either case from which no appeal is taken
within the permitted time for such appeal, or (y) if
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any appeal is taken, following a final determination of such appeal from which
no further appeal can be taken, to the effect that the REMIC Trust does not and
will no longer qualify as a "REMIC" pursuant to Section 860D of the Code (the
"Final Determination") or (z) following the delivery of an opinion of counsel
("REMIC Opinion") to the effect that the effect of the Final Determination is to
increase substantially the probability that the REMIC Trust will no longer
qualify as a "REMIC" pursuant to Section 860D of the Code, on any Remittance
Date on or after the date which is 30 calendar days following such Final
Determination, the Owners of a majority in Percentage Interest represented by
the Offered Certificates then Outstanding may direct the Trustee to adopt a plan
of complete liquidation with respect to the Trust Estate. In connection with
such purchase, the Master Servicer shall remit to the Trustee all amounts then
on deposit in the Principal and Interest Account for deposit in the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase.
(b) Upon receipt of such direction from the Owners of such
Offered Certificates or such notice from the Class A-8 and Class A-9 Certificate
Insurer, the Trustee shall notify the holders of the Class R Certificates of
such election to liquidate or such determination to purchase, as the case may
be, (the "Termination Notice"). The Owner of a majority of the Percentage
Interest of the Class R Certificates then Outstanding may, on any Remittance
Date, within 60 days from the date of receipt of the Termination Notice (the
"Purchase Option Period"), at their option, purchase from the Trust all (but not
fewer than all) Mortgage Loans in the Trust Estate, and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise in respect of
any Mortgage Loan then remaining in the Trust Estate at a purchase price equal
to the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the
Class R Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period in
the event that the Owners of the Offered Certificates have given the Trustee the
direction described in clause (a)(i) above, the Trustee shall sell the Mortgage
Loans and distribute the proceeds of the liquidation of the Trust Estate, such
that, if so directed, the liquidation of the Trust Estate, the distribution of
the proceeds of such liquidation occur no later than the close of the 60th day,
or such later day as the Owners of the Offered Certificates shall permit or
direct in writing, after the expiration of the Purchase Option Period.
(d) Following a Final Determination, the Owners of a majority
of the Percentage Interest of the Class R Certificates then Outstanding may, at
their option on any Remittance Date and upon delivery to the Owners of the
Offered Certificates and the Trustee of an opinion of counsel experienced in
federal income tax matters selected by the Owners of such Class R Certificates
which opinion shall be reasonably satisfactory in form and substance to a
majority of the Percentage Interests represented by the Offered Certificates
then Outstanding and the Trustee, to the effect that the effect of the Final
Determination is to increase substantially the probability that the gross income
of the REMIC Trust will be subject to federal taxation, purchase from the Trust
all (but not fewer than all) Mortgage Loans in the Trust Estate, and all
property theretofore acquired by foreclosure, deed in lieu of foreclosure, or
otherwise in respect of any Mortgage Loan then remaining in the Trust Estate at
a purchase price equal to the Termination Price. In connection with such
purchase, the Master Servicer shall remit to the Trustee all amounts then on
deposit in the Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase. The foregoing opinion shall be deemed satisfactory unless the
Owners of a majority of the Percentage Interest represented by the Offered
Certificates then Outstanding or the Trustee give
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the Owners of a majority of the Percentage Interest of the Class R Certificates
notice that such opinion is not satisfactory within thirty days after receipt of
such opinion.
SECTION 9.4. DISPOSITION OF PROCEEDS. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article IX to the Certificate Account; provided, however, that
any amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Master Servicer from
the Master Servicer's own funds shall be paid by the Trustee to the Master
Servicer.
SECTION 9.5. NETTING OF AMOUNTS. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
SECTION 10.1. CERTAIN DUTIES AND RESPONSIBILITIES. (a) The
Trustee (i) undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.
(b) Notwithstanding the appointment of the Master Servicer
hereunder, the Trustee is hereby empowered to perform the duties of the Master
Servicer hereunder whether following the failure of the Master Servicer to
perform, pursuant to Section 8.20 hereof or otherwise. Specifically, and not in
limitation of the foregoing, the Trustee shall have the power:
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into
assumption and substitution agreements as permitted by Section
8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant
to Section 8.14;
(v) to make Delinquency Advances and Servicing
Advances and to pay Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
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(i) his subsection shall not be construed to limit the
effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Class A-8 and Class A-9
Certificate Insurer or of the Owners of a majority in
Percentage Interest of the Certificates of the affected Class
or Classes and the Class A-8 and Class A-9 Certificate Insurer
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under this Agreement relating to such Certificates.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
(e) No provision of this Agreement shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The permissive right of the Trustee to take actions
enumerated in this Agreement shall not be construed as a duty and the Trustee
shall not be answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Agreement, or to take any
steps in the execution of the trusts hereby created or in the enforcement of any
rights and powers hereunder until it shall be indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees and other
reasonable disbursements and against all liability, except liability which is
adjudicated to have resulted from its negligence or willful misconduct, in
connection with any action so taken. The Trustee shall receive from the Sponsor
promptly upon demand therefor, reimbursement of expenses as are described in the
fee quote letter, dated August 28, 1997 and executed by the Sponsor.
SECTION 10.2. REMOVAL OF TRUSTEE FOR CAUSE. (a) The Trustee
may be removed pursuant to paragraph (b) hereof upon the occurrence of any of
the following events (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners
entitled thereto on any Payment Date amounts available for
distribution in accordance with the terms hereof; or
(2) the Trustee shall fail in the performance of, or
breach, any covenant or agreement of the Trustee in this
Agreement, or if any
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representation or warranty of the Trustee made in this
Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall prove to be
incorrect in any material respect as of the time when the same
shall have been made, and such failure or breach shall
continue or not be cured for a period of 30 days after there
shall have been given, by registered or certified mail, to the
Trustee by the Sponsor, the Class A-8 and Class A-9
Certificate Insurer or by the Owners of at least 25% of the
aggregate Percentage Interests represented by the Offered
Certificates then Outstanding, or, if there are no Offered
Certificates then Outstanding, by such Percentage Interests
represented by any Class B Certificates, a written notice
specifying such failure or breach and requiring it to be
remedied; or
(3) a decree or order of a court or agency or
supervisory authority having jurisdiction for the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Trustee, and
such decree or order shall have remained in force undischarged
or unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or
sequestrator or custodian of the property of the Trustee is
appointed in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or
relating to the Trustee or relating to all or substantially
all of its property; or
(5) the Trustee shall become insolvent (however
insolvency is evidenced), generally fail to pay its debts as
they come due, file or consent to the filing of a petition to
take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
voluntarily suspend payment of its obligations, or take
corporate action for the purpose of any of the foregoing.
The Sponsor shall give to the Class A-8 and Class A-9
Certificate Insurer and Moody's and Standard & Poor's notice of the occurrence
of any such event of which the Sponsor is aware.
(b) If any event described in Paragraph (a) occurs and is
continuing, then and in every such case (i) the Class A-8 and Class A-9
Certificate Insurer or (ii) with the prior written consent (which shall not be
unreasonably withheld) of the Class A-8 and Class A-9 Certificate Insurer (x)
the Sponsor or (y) the Owners of a majority of the Percentage Interests
represented by the Offered Certificates, or, if there are no Offered
Certificates then Outstanding, by such Percentage Interest represented by any
Class of Class R Certificates then Outstanding may, whether or not the Trustee
resigns pursuant to Section 10.9 hereof, immediately, concurrently with the
giving of notice to the Trustee, and without delaying the 30 days required for
notice therein, appoint a successor Trustee pursuant to the terms of Section
10.9 hereof.
SECTION 10.3. CERTAIN RIGHTS OF THE TRUSTEE. Except as
otherwise provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request,
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direction, consent, order, bond, note or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Sponsor, the Class A-8 and
Class A-9 Certificate Insurer or the Owners of any Class of Certificates
mentioned herein shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request or
direction of any of the Owners pursuant to this Agreement, unless such Owners
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document, but the Trustee in its discretion may make such
further inquiry or investigation into such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed and supervised with
due care by it hereunder; and
(h) the Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication of the
Certificates.
SECTION 10.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
CERTIFICATES. The recitals contained herein and in the Certificates, except any
such recitals relating to the Trustee, shall be taken as the statements of the
Sponsor and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representation as to the validity or sufficiency of this
Agreement or of the Certificates other than as to validity and sufficiency of
its authentication of the Certificates.
SECTION 10.5. MAY HOLD CERTIFICATES. The Trustee or any agent
of the Trust, in its individual or any other capacity, may become an Owner or
pledgee of Certificates and may otherwise deal with the Trust with the same
rights it would have if it were not Trustee or such agent.
SECTION 10.6. MONEY HELD IN TRUST. Money held by the Trustee
in trust hereunder need not be segregated from other trust funds except to the
extent required herein or
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required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Sponsor and
except to the extent of income or other gain on investments which are deposits
in or certificates of deposit of the Trustee in its commercial capacity and
income or other gain actually received by the Trustee on Eligible Investments.
SECTION 10.7. NO LIEN FOR FEES. The Trustee shall have no lien
on the Trust Estate for the payment of any fees and expenses.
SECTION 10.8. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There
shall at all times be a Trustee hereunder which shall be a corporation or
association organized and doing business under the laws of the United States of
America or of any State authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $100,000,000, subject
to supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Class A-8 and Class A-9 Certificate
Insurer or, if the last sentence of Section 11.18 hereof is applicable, the
Sponsor and having (x) long-term, unsecured debt rated at least A-1 by Moody's
(or such lower rating as may be acceptable to Moody's) and (y) a short-term
deposit rating of at least A-1 from Standard & Poor's (or such lower rating as
may be acceptable to Standard & Poor's). If such Trustee publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall, upon
the request of the Sponsor (with the consent of the Class A-8 and Class A-9
Certificate Insurer) (which consent shall not be unreasonably withheld) or of
the Class A-8 and Class A-9 Certificate Insurer, resign immediately in the
manner and with the effect hereinafter specified in this Article X.
SECTION 10.9. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice of resignation to the
Sponsor and by mailing notice of resignation by first-class Mail, postage
prepaid, to the Class A-8 and Class A-9 Certificate Insurer and the Owners at
their addresses appearing on the Register. A copy of such notice shall be sent
by the resigning Trustee to Moody's and Standard & Poor's. Upon receiving notice
of resignation, the Sponsor shall promptly appoint a successor trustee or
trustees by written instrument, in duplicate, executed on behalf of the Trust by
an Authorized Officer of the Sponsor, one copy of which instrument shall be
delivered to the Trustee so resigning and one copy to the successor trustee or
trustees. If no successor trustee shall have been appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Owner may, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible
under Section 10.8 hereof and shall fail to resign after written request
therefor by the Sponsor or by the Class A-8 and Class A-9 Certificate Insurer,
the Class A-8 and Class A-9 Certificate Insurer or the Sponsor
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(with the written consent of the Class A-8 and Class A-9 Certificate Insurer)
may remove the Trustee and appoint a successor trustee by written instrument, in
duplicate, executed on behalf of the Trust by an Authorized Officer of the
Sponsor, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests
represented by the Offered Certificates, or, if there are no Offered
Certificates then Outstanding, by such majority of the Percentage Interests
represented by Class R Certificates then Outstanding may at any time, with the
prior written consent of the Class A-8 and Class A-9 Certificate Insurer, remove
the Trustee and appoint a successor trustee by delivering to the Trustee to be
removed, to the successor trustee so appointed, to the Sponsor and to the Class
A-8 and Class A-9 Certificate Insurer, copies of the record of the act taken by
the Owners, as provided for in Section 11.3 hereof.
(e) If the Trustee fails to perform its duties in accordance
with the terms of this Agreement or becomes ineligible to serve as Trustee, the
Class A-8 and Class A-9 Certificate Insurer or, if the last sentence of Section
11.18 hereof is applicable, the Sponsor may remove the Trustee and appoint a
successor trustee by written instrument, in triplicate, signed by the Class A-8
and Class A-9 Certificate Insurer and the Sponsor duly authorized, one complete
set of which instruments shall be delivered to the Sponsor, one complete set to
the Class A-8 and Class A-9 Certificate Insurer, one complete set to the Trustee
so removed and one complete set to the successor Trustee so appointed.
(f) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Sponsor shall promptly appoint a successor Trustee acceptable
to the Class A-8 and Class A-9 Certificate Insurer. If within one year after
such resignation, removal or incapability or the occurrence of such vacancy, a
successor Trustee shall be appointed by act of the Owners of a majority of the
Percentage Interests represented by the Offered Certificates then Outstanding
or, if there are no Offered Certificates then Outstanding, by such majority of
the Percentage Interest of the Class R Certificates delivered to the Sponsor and
the retiring Trustee, the successor Trustee so appointed shall forthwith upon
its acceptance of such appointment become the successor Trustee and supersede
the successor Trustee appointed by the Sponsor. If no successor Trustee shall
have been so appointed by the Sponsor or the Owners and shall have accepted
appointment in the manner hereinafter provided, any Owner may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
(g) The Sponsor shall give notice of any removal of the
Trustee by mailing notice of such event by first-class mail, postage prepaid, to
the Class A-8 and Class A-9 Certificate Insurer and to the Owners as their names
and addresses appear in the Register. Each notice shall include the name of the
successor Trustee and the address of its corporate trust office.
SECTION 10.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Sponsor on behalf of the Trust and to its predecessor Trustee an
instrument accepting such appointment hereunder and stating its eligibility to
serve as Trustee hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts, duties and obligations of its predecessor hereunder; but, on
request of the Sponsor or the successor
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Trustee, such predecessor Trustee shall, upon payment of its charges then
unpaid, execute and deliver an instrument transferring to such successor Trustee
all of the rights, powers and trusts of the Trustee so ceasing to act, and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such Trustee so ceasing to act hereunder. Upon request of any such
successor Trustee, the Sponsor on behalf of the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as
provided in this Section, the Sponsor shall mail notice thereof by first-class
mail, postage prepaid, to the Owners at their last addresses appearing upon the
Register. The Sponsor shall send a copy of such notice to Moody's, Standard &
Poor's and the Class A-8 and Class A-9 Certificate Insurer. If the Sponsor fails
to mail such notice within ten days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Trust.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor shall be qualified and eligible under
this Article X.
SECTION 10.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS OF THE TRUSTEE. Any corporation or association into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation or
association shall be otherwise qualified and eligible under this Article X. In
case any Certificates have been executed, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such Trustee
may adopt such execution and deliver the Certificates so executed with the same
effect as if such successor Trustee had itself executed such Certificates.
SECTION 10.12. REPORTING; WITHHOLDING. The Trustee shall
timely provide to the Owners the Internal Revenue Service's Form 1099 and any
other statement required by applicable Treasury regulations as determined by the
Sponsor, and shall withhold, as required by applicable law, federal, state or
local taxes, if any, applicable to distributions to the Owners, including, but
not limited to, backup withholding under Section 3406 of the Code and the
withholding tax on distributions to foreign investors under Sections 1441 and
1442 of the Code.
SECTION 10.13. LIABILITY OF THE TRUSTEE. The Trustee shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Sponsor, the
Master Servicer or any Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Trustee
or any such Person against any liability which would otherwise be imposed by
reason of negligent action, negligent failure to act or bad faith in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Subject to the foregoing sentence, the Trustee shall not be
liable for losses on investments of amounts in any Account (except for any
losses on obligations on which the bank serving as Trustee is the obligor). In
addition, the Sponsor and Master
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Servicer covenant and agree to indemnify the Trustee, and its officers,
directors, employees and agents, including, without limitation, when the Trustee
is acting as Master Servicer, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses (including legal fees and expenses)
other than those resulting from the negligence or bad faith of the Trustee. The
indemnification provided in this Section 10.13 shall survive the termination of
this Agreement or the resignation or removal of the Trustee hereunder. The
Trustee and any director, officer, employee or agent of the Trustee may rely and
shall be protected in acting or refraining from acting in good faith on any
certificate, notice or other document of any kind prima facie properly executed
and submitted by the Authorized Officer of any Person respecting any matters
arising hereunder.
SECTION 10.14. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the Master Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
and the Class A-8 and Class A-9 Certificate Insurer to act as co-Trustee or
co-Trustees, jointly with the Trustee, of all or any part of the Trust Estate or
separate Trustee or separate Trustees of any part of the Trust Estate, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Owners, such title to the Trust Estate, or any part thereof, and, subject to the
other provisions of this Section 10.14, such powers, duties, obligations, rights
and trusts as the Master Servicer and the Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, or in the case any
event indicated in Sections 8.20(a) or 8.20(b) shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment with
the consent of the Class A-8 and Class A-9 Certificate Insurer. No co-Trustee or
separate Trustee hereunder shall be required to meet the terms of eligibility as
a successor Trustee under Section 10.8 and no notice to Owner of the appointment
of any co-Trustee or separate Trustee shall be required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate Trustee or
co-Trustee jointly (it being understood that such separate Trustee or
co-Trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Trustee or co-Trustee, but solely at
the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally liable
by reason of any act or omission of any other co-Trustee hereunder; and
(iii) The Master Servicer and the Trustee acting jointly may
at any time accept the resignation of or remove any separate Trustee or
co-Trustee.
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Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate Trustees and
co-Trustees, as effectively as if given to each of them. Every instrument
appointing any separate Trustee or co-Trustee shall refer to this Agreement and
the conditions of this Section 10.14. Each separate Trustee and co-Trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Master Servicer.
Any separate Trustee or co-Trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate Trustee
or co-Trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
The Trustee shall give to Moody's, the Sponsor and the Class
A-8 and Class A-9 Certificate Insurer notice of the appointment of any
Co-Trustee or separate Trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any
application or request by the Sponsor, the Class A-8 and Class A-9 Certificate
Insurer or the Owners to the Trustee to take any action under any provision of
this Agreement, the Sponsor, the Class A-8 and Class A-9 Certificate Insurer or
the Owners, as the case may be, shall furnish to the Trustee a certificate
stating that all conditions precedent, if any, provided for in this Agreement
relating to the proposed action have been complied with, except that in the case
of any such application or request as to which the furnishing of any documents
is specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 11.2. FORM OF DOCUMENTS DELIVERED TO THE TRUSTEE. In
any case where several matters are required to be certified by, or covered by an
opinion of, any specified
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Person, it is not necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate of an Authorized Officer of the Trustee may be
based, insofar as it relates to legal matters, upon an opinion of counsel,
unless such Authorized Officer knows, or in the exercise of reasonable care
should know, that the opinion is erroneous. Any such certificate of an
Authorized Officer of the Trustee or any opinion of counsel may be based,
insofar as it relates to factual matter upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Sponsor or of the
Master Servicer, stating that the information with respect to such factual
matters is in the possession of the Sponsor or of the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any opinion of counsel may also be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Trustee, stating that the
information with respect to such matters is in the possession of the Trustee,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may be based on the written opinion of
other counsel, in which event such opinion of counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee may reasonably rely
upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
SECTION 11.3. ACTS OF OWNERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Sponsor and/or the Class A-8 and Class A-9
Certificate Insurer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "act" of
the Owners signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement and conclusive in favor of the Trustee and the
Trust, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the
Register.
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(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Owner of any Certificate shall bind the
Owner of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
SECTION 11.4. NOTICES, ETC., TO TRUSTEE. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with the Trustee by any Owner, the Class A-8 and Class
A-9 Certificate Insurer or by the Sponsor shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with and received
by the Trustee at its corporate trust office as set forth in Section 2.2 hereof.
SECTION 11.5. NOTICES AND REPORTS TO OWNERS; WAIVER OF
NOTICES. Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless otherwise herein expressly provided) if mailed, first-class
postage prepaid, to each Owner affected by such event or to whom such report is
required to be mailed, at the address of such Owner as it appears on the
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice or the mailing of such report. In
any case where a notice or report to Owners is mailed in the manner provided
above, neither the failure to mail such notice or report nor any defect in any
notice or report so mailed to any particular Owner shall affect the sufficiency
of such notice or report with respect to other Owners, and any notice or report
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given or provided.
Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Owners shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Owners when such notice is required
to be given pursuant to any provision of this Agreement, then any manner of
giving such notice as shall be satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency
that rated any Certificates, failure to give such notice shall not affect any
other rights or obligations created hereunder.
SECTION 11.6. RULES BY TRUSTEE AND SPONSOR. The Trustee may
make reasonable rules for any meeting of Owners. The Sponsor may make reasonable
rules and set reasonable requirements for its functions.
SECTION 11.7. SUCCESSORS AND ASSIGNS. All covenants and
agreements in this Agreement by any party hereto shall bind its successors and
assigns, whether so expressed or not.
SECTION 11.8. SEVERABILITY. In case any provision in this
Agreement or in the Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
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SECTION 11.9. BENEFITS OF AGREEMENT. Nothing in this Agreement
or in the Certificates, expressed or implied, shall give to any Person, other
than the Owners, the Class A-8 and Class A-9 Certificate Insurer and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
SECTION 11.10. LEGAL HOLIDAYS. In any case where the date of
any Payment Date, any other date on which any distribution to any Owner is
proposed to be paid, or any date on which a notice is required to be sent to any
Person pursuant to the terms of this Agreement shall not be a Business Day, then
(notwithstanding any other provision of the Certificates or this Agreement)
payment or mailing need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made or mailed on
the nominal date of any such Payment Date, or such other date for the payment of
any distribution to any Owner or the mailing of such notice, as the case may be,
and no interest shall accrue for the period from and after any such nominal
date, provided such payment is made in full on such next succeeding Business
Day.
SECTION 11.11. GOVERNING LAW. In view of the fact that Owners
are expected to reside in many states and outside the United States and the
desire to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Certificate shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
SECTION 11.12. COUNTERPARTS. This instrument may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.13. USURY. The amount of interest payable or paid
on any Certificate under the terms of this Agreement shall be limited to an
amount which shall not exceed the maximum nonusurious rate of interest allowed
by the applicable laws of the State of New York or any applicable law of the
United States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error on the part of the Trustee acting on behalf of the Trust
and the Owner receiving such excess payment shall promptly, upon discovery of
such error or upon notice thereof from the Trustee on behalf of the Trust,
refund the amount of such excess or, at the option of such Owner, apply the
excess to the payment of principal of such Certificate, if any, remaining
unpaid. In addition, all sums paid or agreed to be paid to the Trustee for the
benefit of Owners of Certificates for the use, forbearance or detention of money
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Certificates.
SECTION 11.14. AMENDMENT. (a) The Trustee, the Sponsor and the
Master Servicer, may at any time and from time to time, with the prior written
consent of the Class A-8 and Class A-9 Certificate Insurer but without the
giving of notice to or the receipt of the consent of the Owners, amend this
Agreement, and the Trustee shall consent to such amendment, for the purpose of
(i) curing any ambiguity, or correcting or supplementing any provision hereof
which may be inconsistent with any other provision hereof, or to add provisions
hereto which are not inconsistent with the provisions hereof, (ii) upon receipt
of an opinion of counsel experienced in
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federal income tax matters to the effect that no entity-level tax will be
imposed on the REMIC Trust or upon the transferor of a Class R Certificate as a
result of the ownership of any Class R Certificate by a Disqualified
Organization, removing the restriction on transfer set forth in Section 5.8(b)
hereof or (iii) complying with the requirements of the Code and the regulations
proposed or promulgated thereunder; provided, however, that any such action
shall not, as evidenced by an opinion of counsel delivered to the Trustee,
materially and adversely affect the interests of any Owner (without its written
consent).
(b) The Trustee, the Sponsor and the Master Servicer may, at
any time and from time to time, with the prior written consent of the Class A-8
and Class A-9 Certificate Insurer but without the giving of notice to or the
receipt of the consent of the Owners, amend this Agreement, and the Trustee
shall consent to such amendment, for the purpose of changing the definitions of
"Group I Targeted Overcollateralization Amount" and "Group II Targeted
Overcollateralization Amount"; provided, however, that no such change shall
affect the weighted average life of the related Class of Offered Certificates
(assuming an appropriate prepayment speed as determined by the Representative)
by more than five percent, as determined by the Representative.
(c) This Agreement may also be amended by the Trustee, the
Sponsor, and the Master Servicer at any time and from time to time, with the
prior written approval of the Class A-8 and Class A-9 Certificate Insurer and
not less than a majority of the Percentage Interest represented by each affected
Class of Certificates then Outstanding, for the purpose of adding any provisions
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Owners hereunder; provided,
however, that no such amendment shall (a) change in any manner the amount of, or
change the timing of, payments which are required to be distributed to any Owner
without the consent of the Owner of such Certificate, (b) reduce the aforesaid
percentages of Percentage Interests which are required to consent to any such
amendments or (c) result in a down-rating or withdrawal of any ratings then
assigned to the Offered Certificates, without the consent of the Owners of all
Certificates of the Class or Classes affected then Outstanding.
(d) Each proposed amendment to this Agreement shall be
accompanied by an opinion of counsel nationally recognized in federal income tax
matters addressed to the Trustee and to the Class A-8 and Class A-9 Certificate
Insurer to the effect that such amendment would not adversely affect the status
of the REMIC Trust as a REMIC. Neither such opinion of counsel nor any expense
of any such proposed amendment shall be at the Trustee's expense.
(e) The Class A-8 and Class A-9 Certificate Insurer, the
Owners, Moody's and Standard & Poor's shall be provided with copies of any
amendments to this Agreement, together with copies of any opinions or other
documents or instruments executed in connection therewith.
SECTION 11.15. REMIC STATUS; TAXES. (a) The Tax Matters Person
shall prepare and file or cause to be filed with the Internal Revenue Service
Federal tax or information returns with respect to the REMIC Trust and the
Certificates containing such information and at the times and in such manner as
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the Code or applicable Treasury regulations may prescribe. The Trustee, as Tax
Matters Person appointed pursuant to Section 11.17 hereof shall sign all tax
information returns filed pursuant to this Section 11.15. The Tax Matters Person
shall provide information necessary for the computation of tax imposed on the
transfer of a Class R Certificate to a Disqualified Organization, or an agent of
a Disqualified Organization, or a pass-through entity in which a Disqualified
Organization is the record holder of an interest. The Tax Matters Person shall
provide the Trustee with copies of any Federal tax or information returns filed,
or caused to be filed, by the Tax Matters Person with respect to the REMIC Trust
or the Certificates.
(b) The Tax Matters Person shall timely file all reports
required to be filed by the Trust with any federal, state or local governmental
authority having jurisdiction over the Trust, including other reports that must
be filed with the Owners, such as the Internal Revenue Service's Form 1066 and
Schedule Q and the form required under Section 6050K of the Code, if applicable
to REMICs. Furthermore, the Tax Matters Person shall report to Owners, if
required, with respect to the allocation of expenses pursuant to Section 212 of
the Code in accordance with the specific instructions to the Tax Matters Person
by the Sponsor with respect to such allocation of expenses. The Tax Matters
Person shall collect any forms or reports from the Owners determined by the
Sponsor to be required under applicable federal, state and local tax laws.
(c) The Tax Matters Person shall provide to the Internal
Revenue Service and to persons described in Section 860E(e)(3) and (6) of the
Code the information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Sponsor covenants and agrees that within ten Business
Days after receiving a written request from the Trustee it shall provide to the
Trustee any information necessary to enable the Trustee to meet its obligations
under subsections (b) and (c) above.
(e) The Trustee, the Sponsor and the Master Servicer each
covenants and agrees for the benefit of the Owners (i) to take no action which
would result in the termination of "REMIC" status for the REMIC Trust, (ii) not
to engage in any "prohibited transaction", as such term is defined in Section
860F(a)(2) of the Code and (iii) not to engage in any other action which may
result in the imposition on the REMIC Trust of any other taxes under the Code.
(f) The REMIC Trust shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b), no
Eligible Investment shall be sold prior to its stated maturity (unless sold
pursuant to a plan of liquidation in accordance with Article IX hereof).
(h) Neither the Sponsor nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the
Trustee or the Sponsor may engage in any of the transactions prohibited by such
clauses, provided that the Trustee shall have received the prior written consent
of the Class A-8 and Class A-9 Certificate Insurer and an opinion of counsel
experienced in federal income tax matters to the effect that such
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transaction does not result in a tax imposed on the Trustee or cause a
termination of REMIC status for the REMIC Trust; provided, however, that such
transaction is otherwise permitted under this Agreement.
SECTION 11.16. ADDITIONAL LIMITATION ON ACTION AND IMPOSITION
OF TAX. (a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained, and delivered to the Class A-8 and
Class A-9 Certificate Insurer, an opinion of counsel experienced in federal
income tax matters (which opinion shall be at the expense of the Sponsor) to the
effect that such transaction does not result in a tax imposed on the Trust or
cause a termination of REMIC status for the REMIC Trust, (i) sell any assets in
the Trust Estate, (ii) accept any contribution of assets after the Startup Day
or (iii) agree to any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust as defined in Section 860F(a)(2) of the Code,
on the "net income from foreclosure property" as defined in Section 860G(c) of
the Code, on any contribution to the REMIC Trust after the Startup Day pursuant
to Section 860G(d) of the Code, or any other tax (other than any minimum tax
imposed by Sections 23151(a) or 23153(a) of the California Revenue and Taxation
Code) is imposed, such tax shall be paid by (i) the Trustee, if such tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement, (ii) the Master Servicer, if such tax arises out of or results
from a breach by the Master Servicer of any of its obligations under this
Agreement, or otherwise (iii) the Owners of the Class R Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the Owners of the Class R Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Owners of the Class R Certificates on any
Payment Date sufficient funds to reimburse the Trustee for the payment of such
tax (to the extent that the Trustee has not been previously reimbursed or
indemnified therefor).
SECTION 11.17. APPOINTMENT OF TAX MATTERS PERSON. The Owners
of the Class R Certificates hereby appoint the Trustee as their agent to act as
the Tax Matters Person for REMIC Trust for all purposes of the Code and such Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the Code.
SECTION 11.18. THE CLASS A-8 AND CLASS A-9 CERTIFICATE
INSURER. The Class A-8 and Class A-9 Certificate Insurer is a third-party
beneficiary of this Agreement. Any right conferred to the Class A-8 and Class
A-9 Certificate Insurer shall be suspended during any period in which the Class
A-8 and Class A-9 Certificate Insurer is in default in its payment obligations
under the Certificate Insurance Policy, except with respect to amendments to
this Agreement pursuant to Section 11.14. During the continuance of a Class A-8
and Class A-9 Certificate Insurer Default, the Class A-8 and Class A-9
Certificate Insurer's rights hereunder shall vest in the Trustee on behalf of
the Owners of the Group II Certificates and shall be exercisable by the Owners
of at least a majority in Percentage Interest of the Group II Certificates then
Outstanding or, if there are no Group II Certificates then Outstanding and the
Certificate Insurance Policy has expired or a Class A-8 and Class A-9
Certificate Insurer Default has occurred and is continuing, by at least a
majority of the Subordinate Certificates then Outstanding or if there are no
Group II Certificates or Subordinate Certificates outstanding and any and all
amounts due and owing the Class A-8 and Class A-9 Certificate Insurer under the
Insurance Agreement have been paid in full, and the Certificate Insurance Policy
has expired or is unavailable due to a Class A-8 and Class A-9 Certificate
Insurer Default, by at least a majority of
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the Class R Certificates then Outstanding. At such time as the Group II
Certificates are no longer Outstanding hereunder and the Class A-8 and Class A-9
Certificate Insurer has been reimbursed for all Group II Reimbursement Amounts
to which it is entitled hereunder and the Certificate Insurance Policy has
expired, the Class A-8 and Class A-9 Certificate Insurer's rights hereunder
shall terminate.
SECTION 11.19. MAINTENANCE OF RECORDS. Each Originator and Owner of a
Class R Certificate shall each continuously keep an original executed
counterpart of this Agreement in its official records.
SECTION 11.20. NOTICES. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
The Trustee: Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92614
Attention: Advanta 1997-4
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: Advanta Mortgage Conduit Services Inc.
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Attention: Structured Finance
The Master Servicer: Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, California 92127
Tel: (619) 674-3317
Fax: (619) 674-3592
The Certificate
Insurer: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department-MBS
Telecopy No.: (212) 363-1459
Confirmation: (212) 208-3491
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Mortgage Monitoring Department
Standard & Poor's: Standard & Poor's Ratings Group
26 Broadway, 15th Floor
New York, New York 10004
Attention: Manager, Structured Finance
Operations Group
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Underwriters: Lehman Brothers, Inc.
as Representative of the Underwriters
3 World Financial Center
New York, New York 10285
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<PAGE> 133
IN WITNESS WHEREOF, the Sponsor, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
ADVANTA MORTGAGE CONDUIT SERVICES,
INC.
as Sponsor
By:_____________________________________
Mark T. Dunsheath
Vice President
ADVANTA MORTGAGE CORP. USA
as Master Servicer
By:_____________________________________
Mark T. Dunsheath
Vice President
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:_____________________________________
[POOLING AND SERVICING AGREEMENT]
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STATE OF CALIFORNIA )
: ss.:
COUNTY OF )
On the ____ day of _________, 1997, before me personally came
___________ to me known, who, being by me duly sworn did depose and say that
his/her office is located at Three Park Plaza, Irvine, California 92714; that
s/he is ________________ of Bankers Trust Company of California, N.A., the
national banking corporation described in and that executed the above instrument
as Trustee; and that s/he signed his/her name thereto under authority granted by
the Board of Directors of said national banking association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
___________________________________
Notary Public
<PAGE> 1
Exhibit 4.2
EXECUTION COPY
MASTER LOAN TRANSFER AGREEMENT
Dated as of June 15, 1997
by and among
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK
ADVANTA FINANCE CORP.
as Affiliated Originators
ADVANTA CONDUIT RECEIVABLES, INC.
as an Affiliate
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
and
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions............................. 1
Section 2. Interest Calculations................... 4
Section 3. Transfers of Mortgage Loans............. 4
Section 4. Representations, Warranties and
Covenants Regarding the Affiliated
Originators and the Sponsor............. 4
Section 5. Representations and Warranties of the
Affiliated Originators Regarding the
Mortgage Loans.......................... 9
Section 6. Authorized Representatives.............. 16
Section 7. Notices................................. 16
Section 8. Governing Law........................... 17
Section 9. Assignment.............................. 17
Section 10. Counterparts............................ 17
Section 11. Amendment............................... 17
Section 12. Severability of Provisions.............. 17
Section 13. No Agency; No Partnership or Joint
Venture................................. 18
Section 14. Further Assurances...................... 18
Section 15. The Certificate Insurer................. 18
Section 16. Maintenance of Records.................. 18
</TABLE>
<PAGE> 3
THIS MASTER LOAN TRANSFER AGREEMENT, dated as of June 15, 1997,
between Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta
Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage
Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Mortgage Conduit
Services, Inc., Advanta Finance Corp. and Advanta National Bank, each a seller
(each an "Affiliated Originator" and collectively, the "Affiliated
Originators"), Advanta Conduit Receivables, Inc. (the "Affiliate"), Bankers
Trust Company of California, N.A., as trustee ("Trustee") and Advanta Mortgage
Conduit Services, Inc., as sponsor ("Sponsor");
I. BACKGROUND
A. Each Affiliated Originator is an originator or purchaser of mortgage
loans which such Affiliated Originator may, from time to time, convey to the
Conduit Acquisition Trust, or cause the Conduit Acquisition Trust to acquire;
B. The Affiliated Originators and the Sponsor expect, from time to time,
to cause that such mortgage loans to be conveyed to an Advanta Trust in
connection with a securitization transaction sponsored by the Sponsor.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
Section 1. Definitions. Whenever used in this Agreement or in any
Conveyance Agreement, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this Article; provided,
however, that any capitalized terms used herein or in any conveyance Agreement
and not defined herein shall have their respective meanings as set forth in the
related Advanta Pooling Agreement.
Advanta Pooling Agreement: Any Pooling and Servicing Agreement
entered into by Advanta Mortgage Conduit Services, Inc. as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer and a trustee, as it may be amended and
supplemented from time to time by the parties thereto.
Advanta Trust: A securitization trust created by the Sponsor into
which Mortgage Loans described in this Agreement and the Conveyance Agreements
are deposited.
Agreement: This Master Loan Transfer Agreement as it may be amended
from time to time, including the exhibits and supplements hereto.
<PAGE> 4
Bulk Acquisition Loan: Any Mortgage Loan purchased by an Affiliated
Originator from another Originator (other than other Affiliated Originator) as
part of a bulk portfolio acquisition.
Conduit Acquisition P&S: The Pooling and Servicing Agreement dated as of
May 1, 1997 by and between the Sponsor and the Trustee relating to the Conduit
Acquisition Trust.
Conduit Acquisition Trust: The trust created pursuant to the Conduit
Acquisition P&S.
Conveyance Agreement: Any Conveyance Agreement relating to a Pool, in
substantially the form set forth as Exhibit A hereto.
Coupon Rate: The rate of interest borne by each Note.
Cut-off Date: With respect to any Pool, as defined in the related
Conveyance Agreement.
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
File: The documents delivered to the Trustee pursuant to the document
delivery provisions of the Conduit Acquisition P&S pertaining to a particular
Mortgage Loan, together with any additional documents required to be added to
the File pursuant to the Conduit Acquisition P&S.
First Mortgage Loan: A Mortgage Loan which constitutes a first priority
mortgage lien with respect to any Property.
FNMA: The Federal National Mortgage Association, a federally-chartered and
privately-owned corporation existing under the Federal National Mortgage
Association Charter Act, as amended, or any successor thereof.
Loan Balance: With respect to each Mortgage Loan, the outstanding principal
balance thereof on the related Cut-Off Date, less any related Principal
Remittance Amounts relating to such Mortgage Loan included in previous related
Monthly Remittance Amounts that were transferred by the Master Servicer or any
Sub-Servicer to the Trustee for deposit in the related Certificate Account.
<PAGE> 5
MASTER SERVICER: Advanta Mortgage Corp. USA, a Delaware corporation, and
its permitted successors and assigns.
MORTGAGE LOANS: Each of the mortgage loans subject hereto, together with
any Qualified Replacement Mortgages substituted therefor in accordance with the
related Advanta Pooling Agreement.
NOTE: The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
OFFERED CERTIFICATES: Any securities issued by an Advanta Trust which are
not retained by the Sponsor or any Originator.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
POOL: Any group of Mortgage Loans transferred to the Sponsor pursuant to a
specific Conveyance Agreement.
PROPERTY: The underlying property securing a Mortgage Loan.
QUALIFIED MORTGAGE: "Qualified Mortgage" shall have the meaning set forth
from time to time in the definition thereof at Section 860G(a)(3) of the Code
(or any successor statute thereto) and applicable to the related Advanta Trust.
SCHEDULES OF MORTGAGE LOANS: The Schedules of Mortgage Loans required to
be delivered pursuant to the related Advanta Pooling Agreement.
SECOND MORTGAGE LOAN: A Mortgage Loan which constitutes a second priority
mortgage lien with respect to the related Property.
SENIOR LIEN: With respect to any Second Mortgage Loan, the mortgage loan
relating to the corresponding Property having a first priority lien; and with
respect to any Third Mortgage Loan, the mortgage loans relating to the
corresponding Property having first and second priority liens.
THIRD MORTGAGE LOAN: A Mortgage Loan which constitutes a third priority
mortgage lien with respect to the related Property.
TRUSTEE: Bankers Trust Company of California, N.A., located on the date of
execution of this Agreement at 3 Park
<PAGE> 6
Plaza, Irvine, California 92714, a national banking association, not in its
individual capacity but solely as Trustee, and any successor hereunder.
Unaffiliated Originator Loan: Any Mortgage Loan purchased by an
Affiliated Originator from an Unaffiliated Originator.
Unaffiliated Originators: Any Originator (X) not affiliated with the
Sponsor and (y) approved in writing by the Certificate Insurer.
Section 2. Interest Calculations. Calculations of interest hereunder,
including, without limitation, calculations of interest at the Coupon Rate,
which are made in respect of the Loan Balance of a Mortgage Loan shall be made
on a daily basis using either (i) a 360-day year comprised of twelve 30-day
months or (ii) a 360-day year and the actual number of days elapsed in the
applicable interest period, as required by the related Note.
Section 3. Transfers of Mortgage Loans. From time to time in
connection with the establishment of Advanta Trusts the Affiliated Originators
and the Sponsor, intend to transfer Mortgage Loans from the Conduit Acquisition
Trust to the related Advanta Trust. Each such transfer will be evidenced by a
Conveyance Agreement in substantially the form of Exhibit A hereto.
Section 4. Representations, Warranties and Covenants Regarding the
Affiliated Originators and the Sponsor. (a) Each Affiliated Originator hereby
represents and warrants to the Sponsor, the Trustee and their respective
successors and assigns that, as of the date hereof;
(i) Such Affiliated Originator is a corporation (or, in the case of
Advanta National Bank USA, a national banking association) duly organized,
validly existing and in good standing under the laws governing its
creation and existence and is in good standing as a foreign corporation in
each jurisdiction in which the nature of its business, or the properties
owned or leased by it make such qualification necessary. Such Affiliated
Originator has all requisite corporate power and authority to own and
operate its properties, to carry out its business as presently conducted
and as proposed to be conducted, to enter into and discharge its
obligations under this Agreement and the Conveyance Agreements.
(ii) The execution and delivery of this Agreement by such Affiliated
Originator and its performance and compliance with the terms of this
Agreement and the Conveyance Agreements to which it is a party have been
<PAGE> 7
duly authorized by all necessary corporate action on the part of such Affiliated
Originator and will not violate such Affiliated Originator's Articles of
Incorporation, Articles of Association or Bylaws or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or result in a breach of, any material contract, agreement or other
instrument to which such Affiliated Originator or its properties is a party or
by which such Affiliated Originator is bound or violate any statute or any
order, rule or regulation of any court, governmental agency or body or other
tribunal having jurisdiction over such Affiliated Originator or any of its
properties.
(iii) This Agreement and the Conveyance Agreements to which such Affiliated
Originator is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of such Affiliated Originator, enforceable against it in accordance
with the terms hereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(iv) Such Affiliated Originator is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of such Affiliated Originator or its properties, or might have consequences that
would materially and adversely affect its performance hereunder and under the
other Conveyance Agreements to which such Affiliated Originator is a party, or
which would draw into question the validity of this Agreement or the Mortgage
Loans taken as a whole or of any action taken or to be taken in connection with
the obligations of the Affiliated Originator contemplated herein.
(v) No litigation is pending or, to the best of such Affiliated
Originator's knowledge, threatened against such Affiliated Originator which
litigation might have consequences that would prohibit its entering into this
Agreement or any Conveyance Agreements to which it is a party or that would
materially and adversely affect the condition (financial or otherwise) or
operations of such Affiliated Originator or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the Conveyance
<PAGE> 8
Agreements to which such Affiliated Originator is a party.
(vi) Neither this Agreement nor any certificate of an officer, statement
furnished in writing or report delivered pursuant to the terms hereof by such
Affiliated Originator contains any untrue statement of a material fact or omits
to state any material fact necessary to make the certificate, statement or
report not misleading.
(vii) Upon the receipt of each Mortgage Loan and other items of the
Mortgage by the Trustee under this Agreement, the related Advanta Trust will
have good and marketable title to such Mortgage Loan and such other items of the
related Trust Estate free and clear of any lien (other than liens which will be
simultaneously released).
(viii) Neither such Affiliated Originator nor any affiliate thereof will
report on any financial statement any part of the Servicing Fee as an adjustment
to the sales price of the Mortgage Loans.
(ix) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc., under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which such Affiliated Originator makes no such representation or
warranty), that are necessary or advisable in connection with the sale of the
Mortgage Loans and the execution and delivery by such Affiliated Originator of
this Agreement and the Conveyance Agreements to which it is a party, have been
duly taken, given or obtained, as the case may be, are in full force and effect
on the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement
and the conveyance Agreements on the part of such Affiliated Originator and the
performance by such Affiliated Originator of its obligations under this
Agreement and such of the Conveyance Agreements to which it is a party.
(x) The origination practices used by such Affiliated Originator with
respect to the Mortgage Loans originated by such Affiliated Originator have
been, (i)
<PAGE> 9
in all material respects, legal, proper, prudent and customary in the
mortgage loan lending business and (ii) in compliance with the Servicer's
underwriting criteria as described in the Prospectus.
(xi) The transactions contemplated by this Agreement are in the
ordinary course of business of such Affiliated Originator. The transfer,
assignment and conveyance of the Mortgage Notes and the Mortgages by the
Servicer pursuant to this Agreement are not subject to the bulk transfer
laws or any similar statutory provisions in effect in any applicable
jurisdiction.
(xii) Such Affiliated Originator received fair consideration and
reasonably equivalent value in exchange for the sale of the interests in
the Mortgage Loans.
(xiii) Such Affiliated Originator did not sell any interest in any
Mortgage Loan with any intent to hinder, delay or defraud any of its
respective creditors.
(xiv) Such Affiliated Originator is solvent, and such Affiliated
Originator will not be rendered insolvent as a result of the sale of the
Mortgage Loans to the related Advanta Trust.
The representations and warranties set forth in this paragraph (a) shall
survive the sale and assignment of the Mortgage Loans to the Sponsor.
In addition, each Affiliated Originator hereby covenants to perform
the obligations, if any, imposed upon it by the related Advanta Pooling
Agreement.
(b) The Sponsor hereby represents and warrants to each Affiliated
Originator and the Trustee that, as of the date hereof:
(i) The Sponsor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
licenses and qualifications necessary to carry on its business as now being
conducted and to perform its obligations hereunder; the Sponsor has the
power and authority to execute and deliver this Agreement and to perform
its obligations in accordance herewith; the execution, delivery and
performance of this Agreement (including any Conveyance Agreement and any
other instruments of transfer to be delivered pursuant to this Agreement)
by the Sponsor and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and
do not violate the organization documents of the Sponsor, contravene or
violate any law,
<PAGE> 10
regulation, rule, order, judgement or decree to which the Sponsor or its
properties are subject to contravene, violate or result in any breach of any
provision of, or constitute a default under, or result in the imposition of any
lien on any assets of the Sponsor pursuant to the provisions of, any mortgage,
indenture, contract, agreement or other undertaking to which the Sponsor is a
party or which purports to be binding upon Sponsor or any of Sponsor's assets;
this Agreement evidences the valid and binding obligation of the Sponsor
enforceable against the Sponsor in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditor's rights generally or the application of
equitable principles in any proceeding, whether at law or in equity;
(ii) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency, that are necessary in connection with
the execution and delivery by the Sponsor of this Agreement, have been duly
taken, given or obtained, as the case may be, are in full force and effect, are
not subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement on the part of the Sponsor and the
performance by the Sponsor of its obligations under this Agreement; and
(iii) There is no action, suit, proceeding or investigation pending or, to
the best of the Sponsor's knowledge, threatened against the Sponsor which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Sponsor or in any material impairment of the right or ability of
the Sponsor to carry on its business substantially as now conducted, or in any
material liability on the part of the Sponsor or which would draw into question
the validity of this Agreement or of any action taken or to be taken in
connection with the obligations of the Sponsor contemplated herein, or which
would be likely to impair the ability of the Sponsor to perform under the terms
of this Agreement.
<PAGE> 11
The representations and warranties set forth in this paragraph (b) shall survive
the sale and assignment of the Mortgage Loans to the Sponsor. Upon discovery of
a breach of any of the foregoing representations and warranties which materially
and adversely affects the interests of the Affiliated Originator, the Affiliated
Originator shall give prompt written notice to the Sponsor. Within 30 days of
its receipt of notice of breach, the Sponsor shall cure such breach in all
material respects.
Section 5. Representations and Warranties of the Affiliated
Originators Regarding the Mortgage Loans. (a) Set forth in paragraph (b) below
is a listing of representations and warranties which will be deemed to have been
made by each Affiliated Originator in connection with each conveyance of a Pool
from the Conduit Acquisition Trust to the related Advanta Trust. In addition, a
Conveyance Agreement may, with respect to the Mortgage Loans in the related
Pool, delete or modify any of such representations and warranties, or may add
additional representations and warranties ("Additional Representations and
Warranties"). The representations and warranties listed in paragraph (b) below,
together with any Additional Representations and Warranties, are the
"Representations and Warranties". Reference to the Cut-Off Date are as of the
Cut-Off Date set forth in the related Conveyance Agreement with respect to a
Mortgage Loan.
(b) With respect to each Mortgage Loan, each Affiliated Originator
hereby represents, warrants and covenants to the Sponsor and the Trustee, as of
the related Cut-Off Date, as follows, on which representations, warranties and
covenants the Trustee relies in accepting the Mortgage Loans:
(i) The information with respect to each Mortgage Loan set
forth in the Schedules of Mortgage Loans is true and correct as of the
Cut-Off Date;
(ii) All of the original or certified documentation required
to be delivered to the Trustee pursuant to the related Advanta Pooling
Agreement (including all material documents related thereto) with respect
to each Mortgage Loan has been or will be delivered to the Trustee in
accordance with the terms of such Advanta Pooling Agreement. Each of the
documents and instruments specified to be included therein has been duly
executed and in due and proper form, and each such document or instrument
is in a form generally acceptable to prudent mortgage lenders that
regularly originate or purchase mortgage loans comparable to the Mortgage
Loans for sale to prudent investors in the secondary market that invest
in mortgage loans such as the Mortgage Loans.
<PAGE> 12
(iii) Each Mortgage Loan being transferred to the Sponsor is a Qualified
Mortgage and is a Mortgage;
(iv) Each Property is improved by a single (one-to-four) family residential
dwelling, which may include manufactured homes which qualify as eligible for
inclusion in a REMIC, condominiums and townhouses but shall not include
cooperatives;
(v) No Mortgage Loan had a Combined Loan-to-Value Ratio in excess of 100%;
(vi) Each Mortgage is either a valid and subsisting first, second or third
lien of record on the Property (subject in the case of any Second Mortgage Loan
or Third Mortgage Loan only to a Senior Lien on such Property) and subject in
all cases to the exceptions to title set forth in the title insurance policy,
with respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular mortgage
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Mortgage;
(vii) Immediately prior to the transfer and assignment herein contemplated,
each Affiliated Originator held good and indefeasible title to, and was the sole
owner of, each Mortgage Loan conveyed by such Affiliated Originator subject to
no liens, charges, mortgages, encumbrances or rights or others except liens
which will be released simultaneously upon the transfer and assignment herein
contemplated, the Trustee will hold good and indefeasible title to, and be the
sole owner of, each Mortgage Loan subject to no liens, charges, mortgages,
encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment;
(viii) As of the related Cut-Off Date, no Mortgage Loan is 30 or more days
Delinquent, except for any portion of the Mortgage Loans which the related
Advanta Pooling Agreement permits to be more than 30 days Delinquent;
(ix) There is no delinquent tax or assessment lien or mechanic's lien on
any Property, and each Property is free of substantial damage and is in good
repair;
<PAGE> 13
(x) There is no valid and enforceable right of rescission offset, defense
or counterclaim to any Note or Mortgage, including the obligation of the related
Mortgagor to pay the unpaid principal of or interest on such Note or the defense
of usury, nor will the operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render either the Mortgage
Note or the Mortgage unenforceable in whole or in part, or subject to any right
of rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(xi) There is no mechanics' lien or claim for work, labor or material
affecting any Property which is or may be a lien prior to, or equal with, the
lien of the related Mortgage except those which are insured against by any title
insurance policy referred to in paragraph (xiii) below;
(xii) Each Mortgage Loan at the time it was made complied in all material
respects with all applicable state and federal laws and regulations, including,
without limitation, the federal Truth-in-Lending Act and other consumer
protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
(xiii) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard California Land Title Association form or American
Land Title Association form, or other form acceptable in a particular
jurisdiction by a title insurance company authorized to transact business in the
state in which the related Property is situated, in an amount at least equal to
the Original Principal Amount of such Mortgage Loan insuring the mortgagee's
interest under the related Mortgage Loan as the holder of a valid first, second
or third mortgage lien of record on the real property described in the related
Mortgage, as the case may be, subject only to exceptions of the character
referred to in paragraph (vi) above, was effective on the date of the Date such
policy will be valid and thereafter such policy shall continue in full force and
effect;
(xiv) The improvements upon each Property are covered by a valid and
existing hazard insurance policy (which may be a blanket policy of the type
described in the related Advanta Pooling Agreement) with a generally acceptable
carrier that provides for fire and extended coverage representing coverage not
less than the least of
<PAGE> 14
(A) the outstanding principal balance of the related Mortgage Loan (together,
in the case of a Second Mortgage Loan, with the outstanding principal balance
of the Senior Lien), (B) the minimum amount required to compensate for damage
or loss on a replacement cost basis or (C) the full insurable value of the
Property;
(xv) If the Mortgage Loan at the time of origination relates to a Property
in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, (which may be a blanket
policy of the type described in the related Advanta Pooling Agreement) a flood
insurance policy in a form meeting the requirements of the current guidelines of
the Federal Insurance Administration with a generally acceptable carrier is in
effect with respect to such Property in an amount representing coverage, and
which provides for a recovery by the Master Servicer of insurance proceeds
relating to such Mortgage Loan of not less than the least of (i) the outstanding
principal balance of the Mortgage Loan, (ii) the minimum amount required to
compensate for damage or loss on a replacement costs basis and (iii) the maximum
amount of insurance that is available under the Flood Disaster Protection Act of
1973;
(xvi) Each Mortgage and Note is the legal, valid and binding obligation of
the maker thereof and is enforceable in accordance with its terms, except only
as such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in a
proceeding or action in equity or at law), and all parties to each Mortgage Loan
had full legal capacity to execute all documents relating to such Mortgage Loan
and convey the estate therein purported to be conveyed;
(xvii) Each Affiliated Originator has caused and will cause to be performed
any and all acts required to be performed to preserve the rights and remedies of
the servicer in any Insurance Policies applicable to any Mortgage Loans
delivered by such Affiliated Originator including, to the extent such Mortgage
Loan is not covered by a blanket policy described in the Advanta Pooling
Agreement, any necessary notifications of insurers, assignments of policies or
interests therein, and establishments of co-insured, joint loss payee and
mortgagee rights in favor of the servicer;
(xviii) Each original Mortgage was recorded or is in the process of being
recorded, and all subsequent
<PAGE> 15
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
for the benefit of the applicable Affiliated Originator, subject to the
provisions of Section 3.5(b) of the Advanta Pooling Agreement, (or are in the
process of being recorded);
(xix) The terms of each Note and each Mortgage have not been impaired,
altered or modified in any respect, except by a written instrument which has
been recorded, if necessary, to protect the interest of the owners and which
has been delivered to the Trustee. The substance of any such alteration or
modification is reflected on the related Schedule of Mortgage Loans and has
been approved by the primary mortgage guaranty insurer, if any;
(xx) the proceeds of each Mortgage Loan have been fully disbursed, and there
is no obligation on the part of the mortgagee to make future advances
thereunder. Any and all requirements as to the completion of any on-site or
off-site improvements and as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making or closing
or recording such Mortgage Loans were paid;
(xxi) Except as otherwise required by law or pursuant to the statute under
which the related Mortgage Loan was made, the related Note is not and has not
been secured by any collateral, pledged account or other security except the
lien of the corresponding Mortgage;
(xxii) No Mortgage Loan was originated under a buydown plan;
(xxiii) No Mortgage Loan provides for negative amortization, has a shared
appreciation feature, or other contingent interest feature;
(xxiv) Each Property is located in the state identified in the Schedule of
Mortgage Loans and consists of one or more parcels of real property with a
residential dwelling erected thereon;
(xxv) Each Mortgage contains a provision for the acceleration of the payment
of the unpaid principal balance of the related Mortgage Loan in the event the
related Property is sold without the prior consent of the mortgagee thereunder;
(xxvi) Any advances made after the date of origination of a Mortgage Loan
but prior to the Cut-Off Date, have been consolidated with the outstanding
<PAGE> 16
principal amount secured by the related Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term
reflected on the Schedule of Mortgage Loans. The consolidated principal amount
does not exceed the original principal amount of the related Mortgage Loan. No
Note permits or obligates the Master Servicer, the Sub-Servicer or the Sponsor
to make future advances to the related Mortgagor at the option of the Mortgagor;
(xxvii) There is no proceeding pending or threatened for the total or
partial condemnation of any Property, nor is such a proceeding currently
occurring, and each Property is undamaged by waste, fire, earthquake or earth
movement, flood, tornado or other casualty, so as to affect adversely the value
of the Property as security for the Mortgage Loan or the use for which the
premises were intended;
(xxviii) All of the improvements which were included for the purposes of
determining the Appraised Value of any Property lie wholly within the
boundaries and building restriction lines of such Property, and no improvements
on adjoining properties encroach upon such Property, and, if a title insurance
policy exists with respect to such Property, are stated in such title insurance
policy and affirmatively insured;
(xxix) No improvement located on or being part of any Property is in
violation of any applicable zoning law or regulation. All inspections, licenses
and certificates required to be made or issued with respect to all occupied
portions of each Property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities and such Property is lawfully occupied under the applicable law;
(xxx) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Sponsor or the related
Trust to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the related Mortgagor;
(xxxi) With respect to each Second Mortgage Loan and each Third
Mortgage Loan, either (A) no consent for such Mortgage Loan was required by the
holder of the related Senior Lien (and, in the case of a Third Mortgage Loan,
the holder of the related second lien) prior to the
<PAGE> 17
making of such Mortgage Loan or (B) such consent has been obtained and is
contained in the related File;
(xxxii) Each Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the related Property of the benefits of the security,
including (A) in the case of a Mortgage designated as a deed of trust, by
trustee's sale and (B) otherwise by judicial foreclosure. There is no homestead
or other exemption available which materially interferes with the right to sell
the related Property at a trustee's sale or the right to foreclose the related
Mortgage;
(xxxiii) Except as provided by clause (viii) of this Section, there is no
default, breach, violation or event of acceleration existing under any Mortgage
or the related Note and no event which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration; and the applicable Affiliated
Originator has not waived any default, breach, violation or event of
acceleration;
(xxxiv) Except for any Bulk Acquisition Loan, no instrument of release or
waiver has been executed in connection with any Mortgage Loan, and no Mortgagor
has been released, in whole or in part, except in connection with an assumption
agreement which has been approved by the primary mortgage guaranty insurer, if
any, and which has been delivered to the Trustee;
(xxxv) Except for any Bulk Acquisition Loan, the maturity date of each
Mortgage Loan which is a Second Mortgage Loan or a Third Mortgage Loan is at
least twelve months prior to the maturity date of the related first mortgage
loan if such first mortgage loan provides for a balloon payment;
(xxxvi) The credit underwriting guidelines applicable to each Mortgage Loan
which is not a Bulk Acquisition Loan or an Unaffiliated Originator Loan conform
in all material respects to the Sponsor's underwriting guidelines;
(xxxvii) All parties to the Note and the Mortgage had legal capacity to
execute the Note and the Mortgage and each Note and Mortgage have been duly and
properly executed by such parties; and
<PAGE> 18
(xxxviii) The related Affiliated Originator has no actual knowledge that
there exist on any Property any hazardous substances, hazardous wastes or solid
wastes, as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation.
(c) No Originator Payment Obligations. There is no obligation on
the part of the Servicer or any other party to make payments in addition to
those made by the Mortgagor except for delinquency.
The Representations and Warranties shall survive the transfer and
assignment of the Mortgage Loans to the related Advanta Trust. Upon discovery by
the Affiliated Originator or the Sponsor of a breach of any of the
Representations and Warranties, without regard to any limitation set forth in
such Representation or Warranty concerning the knowledge of the Affiliated
Originator as to the facts stated therein, which breach, in the opinion of the
Sponsor, materially and adversely affects the interests of the Sponsor, the
Owners or of the Certificate Insurer in the related Mortgage Loan or Mortgage
Loans, the party discovering such breach shall give prompt written notice to the
other party, and the related Affiliated Originator shall be required to take the
remedial actions required by the related Advanta Pooling Agreement Originator
hereby acknowledges that a breach of any of the Representations and Warranties
listed in clauses (iii), (x), (xvi) and (xxsviii) above a priori materially and
adversely affects the interests of the related Advanta Trust, the related Owners
and the Certificate Insurer.
Section 6. Authorized Representatives. The names of the officers of
the Affiliated Originators and of the Sponsor who are authorized to give and
receive notices, requests and instructions and to deliver certificates and
documents in connection with this Agreement on behalf of the Affiliated
Originator and of the Sponsor ("Authorized Representatives") are set forth on
Exhibit B. From time to time, the Affiliated Originator and the Sponsor may, by
delivering to the Trustee a revised exhibit, change the information previously
given, but the Trustee shall be entitled to rely conclusively on the last
exhibit until receipt of a superseding exhibit.
Section 7. Notices. All demands, notices and communications relating
to this Agreement shall be in writing and shall be deemed to have been duly
given when received by the other party or parties at the address shown below, or
such other address as may hereafter be furnished to the other party or parties
by like notice. Any such demand, notice or
<PAGE> 19
communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee.
If to the Trustee:
Bankers Trust Company of California, N.A.
3 Park Plaza
Irvine, CA 92714
Telecopy: (714) 253-7577
Telephone: (714) 253-7575
If to the Affiliated Originators or the Sponsor:
Advanta Mortgage Corp. USA
500 Office Center Drive
Suite 400
Ft. Washington, PA 19034
Attention: Treasurer
Telecopy: (215) 283-4745
Telephone: (215) 283-4376
Section 8. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to conflict of laws rules applied in the State of New York.
Section 9. Assignment. No party to this Agreement may assign its
rights or delegate its obligations under this Agreement without the express
written consent of the other parties, except as otherwise set forth in this
Agreement.
Section 10. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which shall be
deemed to be an original, and together shall constitute and be one and the same
instrument.
Section 11. Amendment. This Agreement may be amended from time to
time by the Affiliated Originators, the Sponsor and the Trustee only by a
written instrument executed by such parties and with the prior written consent
of the Certificate Insurer.
Section 12. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way effect the validity or
enforceability of the other provisions of this Agreement.
<PAGE> 20
Section 13. No Agency; No Partnership or Joint Venture. Neither the
Affiliated Originators nor the Sponsor is the agent or representative of the
other, and nothing in this Agreement shall be construed to make either the
Affiliated Originator nor the Sponsor liable to any third party for services
performed by it or for debts or claims accruing to it against the other party.
Nothing contained herein nor the acts of the parties hereto shall be construed
to create a partnership or joint venture between the Sponsor and the Affiliated
Originator.
Section 14. Further Assurances. The Affiliated Originators and Sponsor
agree to cooperate reasonably and in good faith with one another in the
performance of this Agreement.
Section 15. The Certificate Insurer. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligation's under the related
Certificate Insurance Policies. During any period of suspension, the
Certificate Insurer's rights hereunder shall vest in the Owners of the related
Offered Certificates and shall be exercisable by the owners of at least a
majority in Percentage Interest of the related Offered Certificates then
outstanding. At such time as the related Offered Certificates are no longer
Outstanding under the related Advanta Pooling Agreement and the Certificate
Insurer has been reimbursed for all Insured Payments to which it is entitled
under the related Advanta Pooling Agreement, the Certificate Insurer's rights
hereunder shall terminate.
Section 16. Maintenance of Records. Each Affiliated Originator shall each
continuously keep an original executed counterpart of this Agreement in its
official records.
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK
The Sellers and
ADVANTA CONDUIT RECEIVABLES, INC.
An Affiliate
By: /s/ Mark Dunsheath
-------------------------------
Name: Mark Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee and not in its
individual capacity
By:
-------------------------------
Name:
Title:
ADVANTA MORTGAGE CONDUIT SERVICES,
INC. as Sponsor
By: /s/ Mark Dunsheath
-------------------------------
Name: Mark Dunsheath
Title: Vice President
ADVANTA FINANCE CORP.
By:
-------------------------------
Name: Charles G. Dahl
Title: Vice President
(MASTER LOAN TRANSFER AGREEMENT)
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK
The Sellers and
ADVANTA CONDUIT RECEIVABLES, INC.
An Affiliate
By:
---------------------------------
Name: Mark Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee and not in its
individual capacity
By: /s/ David M. Arnold
--------------------------------
Name: David M. Arnold
Title: Assistant Secretary
ADVANTA MORTGAGE CONDUIT SERVICES,
INC. as Sponsor
By:
--------------------------------
Name: Mark Dunsheath
Title: Vice President
ADVANTA FINANCE CORP.
By:
--------------------------------
Name: Charles G. Dahl
Title: Vice President
[MASTER LOAN TRANSFER AGREEMENT]
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers, all as of the day and year first
above written.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK
The Sellers and
ADVANTA CONDUIT RECEIVABLES, INC.
An Affiliate
By:____________________________________
Name: Mark Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee and not in its
individual capacity
By:____________________________________
Name:
Title:
ADVANTA MORTGAGE CONDUIT SERVICES,
INC. as Sponsor
By:____________________________________
Name: Mark Dunsheath
Title: Vice President
ADVANTA FINANCE CORP.
By:/s/ CHARLES G. DAHL
____________________________________
Name: Charles G. Dahl
Title: Vice President
[MASTER LOAN TRANSFER AGREEMENT]
<PAGE> 24
EXHIBIT 4.2
EXHIBIT A
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA, Advanta Mortgage Corp. Midatlantic, Advanta
Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta Mortgage
Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Finance Corp.
and Advanta National Bank, as Affiliated Originators, Advanta Conduit
Receivables, Inc., as an Affiliate, and Advanta Mortgage Conduit Services,
Inc., as Sponsor, pursuant to the Master Loan Transfer Agreement dated as of
June 15, 1997 among themselves and Bankers Trust Company of California, N.A. as
Trustee (the "Mortgage Transfer Agreement"), hereby confirm their understanding
with respect to the conveyance by each Affiliated Originator, the Affiliate and
the Sponsor of those Mortgage Loans listed on the attached Schedule of Mortgage
Loans (the "Transferred Mortgage Loans") from the Conduit Acquisition Trust to
the Advanta Mortgage Loan Trust ______-__.
Convenance of Transferred Mortgage Loans. Each Affiliated Originator, the
Affiliate and the Sponsor, concurrently with the execution and delivery of this
Conveyance Agreement, does hereby irrevocably transfer, assign, set over and
otherwise convey, and does direct the Trustee to convey from the Conduit
Acquisition Trust to the Advanta Mortgage Loan Trust _____-__, without recourse
(except as otherwise explicitly provided for herein) all of its right, title
and interest in and to the Transferred Mortgage Loans being conveyed by it,
including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling Agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes,
including all interest and principal received by such Affiliated Originator on
or with respect to such Transferred Mortgage Loans on or after the related
Cut-off Date, together with all of its right, title and interest in and to the
proceeds received on or after the related Cut-off Date of any related insurance
policies.
If an Affiliated Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, such Affiliated originator shall
promptly deliver to the Trustee such original Mortgage or mortgage assignment
with evidence of recording indicated thereon upon receipt thereof from the
public recording official.
<PAGE> 25
The costs relating to the delivery of the documents specified in this
Conveyance Agreement shall be borne by each Affiliated Originator.
The Affiliated Originators hereby make the Representations and Warranties
set forth in Section 5(b) of the Master Transfer Agreement with respect to the
Transferred Mortgage Loans.
The "Cut-Off Date" with respect to such Transferred Mortgage Loans shall be
________, _____.
All terms and conditions of the Mortgage Transfer Agreement are hereby
incorporated herein, provided that in the event of any conflict the provisions
of this Conveyance Agreement shall control over the conflicting provisions of
the Mortgage Transfer Agreement.
For purposes of this Conveyance Agreement, the "related Advanta Pooling
Agreement" is the Pooling and Servicing Agreement dated as of _________, ____
relating to Advanta Mortgage Loan Trust _____-__.
<PAGE> 26
Terms capitalized herein and not defined herein shall have their respective
meanings as set forth in the Mortgage Transfer Agreement.
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK,
as Affiliated Originators
and
ADVANTA CONDUIT RECEIVABLES, INC.
as an Affiliate
By:______________________________
Mark Dunsheath
Vice President
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
as Sponsor
By:_______________________________
Mark Dunsheath
Vice President
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.,
as Trustee
By:_______________________________
Name:
Title:
ADVANTA FINANCE CORP.
By:_______________________________
Name:
Title:
Dated:
<PAGE> 27
EXHIBIT B
AUTHORIZED REPRESENTATIVES
Reference is hereby made to the Master Loan Transfer Agreement, dated
as of June 15, 1997 (the "Agreement"), among Advanta Mortgage Corp. USA, Advanta
Mortgage Corp. Midatlantic, Advanta Mortgage Corp. Midatlantic IT, Advanta
Mortgage Corp. Midwest, Advanta Mortgage Corp. of New Jersey, Advanta Mortgage
Corp. Northeast, Advanta Finance Corp. and Advanta National Bank, as Affiliated
Originators, Advanta Conduit Receivables, Inc., as an Affiliate, Advanta,
Mortgage Conduit Services, Inc., as Sponsor and Bankers Trust Company of
California, N.A., as Trustee:
The following are the Affiliated Originators' Authorized
Representatives for purposes of the Agreement:
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
[Annette Aguirre] [Senior Vice President, General Counsel and Secretary]
[Mark Dunsheath] [Treasurer]
</TABLE>
The following are the Sponsor's Authorized Representatives for purposes
of the Agreement:
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
[Annette Aguirre] [Senior Vice President, General Counsel and Secretary]
[Mark Dunsheath] [Treasurer]
</TABLE>
<PAGE> 1
Exhibit 4.3
CONVEYANCE AGREEMENT
Advanta Mortgage Corp. USA ("USA"), Advanta Mortgage Corp. Midatlantic,
Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta
Mortgage Corp. of New Jersey, Advanta Mortgage Corp. Northeast, Advanta Finance
Corp. and Advanta National Bank, as Affiliated Originators, Advanta Conduit
Receivables, Inc., as an Affiliate, Advanta Mortgage Conduit Services, Inc. as
Sponsor (the "Sponsor"), pursuant to the Master Loan Transfer Agreement dated
as of June 15, 1997 (the "Mortgage Transfer Agreement") among themselves and
Bankers Trust Company of California, N.A. as conduit trustee (the "Conduit
Trustee"), hereby confirm their understanding with respect to the conveyance by
each Affiliated Originator, the Affiliate and the Sponsor of those Mortgage
Loans listed on the Schedule of Mortgage Loans (the "Transferred Mortgage
Loans") (attached as Schedule I to the Pooling and Servicing Agreement date as
of December 1, 1997 among the Sponsor, USA and Bankers Trust Company of
California, N.A., as Trustee) from the Conduit Acquisition Trust to the Advanta
Mortgage Loan Trust 1997-4 (the "Trust").
CONVEYANCE OF TRANSFERRED MORTGAGE LOANS. Each Affiliated Originator, the
Affiliate and the Sponsor, concurrently with the execution and delivery of this
Conveyance Agreement, does hereby irrevocably transfer, assign, set over and
otherwise convey, and does direct the Conduit Trustee:
(i) to convey to Advanta Conduit Receivables, Inc., without recourse
(except as otherwise explicitly provided for herein) all of its right, title
and interest in and to the Transferred Mortgage Loans being conveyed by it,
including specifically, without limitation, the Mortgages (as such term is
defined in the "related Advanta Pooling Agreement"), the Files and all other
documents, materials and properties appurtenant thereto and the Notes,
including all interest and principal received by such Affiliated Originator on
or with respect to such Transferred Mortgage Loans on or after the related
Cut-Off Date, together with all of its right, title and interest in and to the
proceeds received on or after the related Cut-off Date of any related insurance
policies; and (ii) to convey, from Advanta Conduit Receivables, Inc. to the
Trust, without recourse (except as otherwise explicitly provided for herein)
all of its right, title and interest in and to the Transferred Mortgage Loans
being conveyed by it, including specifically, without limitation, the Mortgages
(as such term is defined in the "related Advanta Pooling agreement"), the Files
and all other documents, materials and properties appurtenant thereto and the
Notes, including all interest and principal received by Advanta Conduit
Receivables, Inc. on or with respect to such Transferred Mortgage Loans on or
after the related Cut-Off Date, together with all of its right, title and
interest in and to the proceeds received on or after the related Cut-off Date
of any related insurance policies.
If an Affiliated Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, such Affiliated Originator shall
promptly deliver to Bankers Trust Company of California, N.A., in its capacity
as Trustee (the "Trustee") such original Mortgage or mortgage assignment with
evidence of recording indicated thereon upon receipt thereof from the public
recording official.
The costs relating to the delivery of the documents specified in this
Conveyance Agreement shall be borne by each Affiliated Originator.
<PAGE> 2
The Affiliated Originators hereby make the representations and Warranties
set forth in Section 5(b) of the Master Transfer Agreement with respect to the
Transferred Mortgage Loans, together with the following additional
representation and warranty.
As of the Startup Day, no Mortgage is currently a debtor in a cases under
Title 11 of the United States Code, or any similar state insolvency proceeding.
The Trustee and the trust are intended beneficiaries of this Agreement and
of the foregoing representations, warranties and agreements.
The "Cut-Off Date" with respect to such Transferred Mortgage Loans shall
be December 1, 1997.
All terms and conditions of the Master Transfer Agreement are hereby
incorporated herein; provided that in the event of any conflict the provisions
of this Conveyance Agreement shall control over the conflicting provisions of
the Master Transfer Agreement.
For purposes of this Conveyance Agreement, the "related Advanta Pooling
Agreement" with respect to the Transferred Mortgage Loans is the Pooling and
Servicing Agreement dated as of December 1, 1997 by and among the Sponsor, USA
and the Trustee.
Terms capitalized herein and not defined herein shall have their respective
meanings as set forth in the Mortgage Transfer Agreement.
<PAGE> 3
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK,
as Affiliated Originators
and
ADVANTA CONDUIT RECEIVABLES, INC.,
as an Affiliate
By:/s/ Mark T. Dunsheath
___________________________________
Name: Mark T. Dunsheath
Title: Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC., as Sponsor
By:/s/ Mark T. Dunsheath
___________________________________
Name: Mark T. Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee
By:
___________________________________
Name:
Title:
ADVANTA FINANCE CORP.
By:/s/ Mark T. Dunsheath
___________________________________
Name: Mark T. Dunsheath
Title: Vice President
Dated: December 18, 1997
[Conveyance Agreement]
<PAGE> 4
ADVANTA MORTGAGE CORP. USA
ADVANTA MORTGAGE CORP. MIDATLANTIC
ADVANTA MORTGAGE CORP. MIDATLANTIC II
ADVANTA MORTGAGE CORP. MIDWEST
ADVANTA MORTGAGE CORP. OF NEW JERSEY
ADVANTA MORTGAGE CORP. NORTHEAST
ADVANTA NATIONAL BANK,
as Affiliated Originators
and
ADVANTA CONDUIT RECEIVABLES, INC.,
as an Affiliate
By:
___________________________________
Name: Mark T. Dunsheath
Title: Vice President
ADVANTA MORTGAGE CONDUIT SERVICES,
INC., as Sponsor
By:
___________________________________
Name: Mark T. Dunsheath
Title: Vice President
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee
By:/s/ Stephen Hessler
___________________________________
Name: Stephen Hessler
Title: Assistant Vice President
ADVANTA FINANCE CORP.
By:
___________________________________
Name: Mark T. Dunsheath
Title: Vice President
Dated: December 18, 1997
[Conveyance Agreement]
<PAGE> 1
EXHIBIT 4.4
[AMBAC LETTERHEAD]
Insured Obligations: Advanta Mortgage Policy Number: AB0143BE
Loan Trust 1997-4, $98,000,000
Adjustable Rate Class A-8 Group II
Certificates and $302,000,000
Adjustable Rate Class A-9
Group II Certificates
Premium:
Calculated as set forth in the
Certificate Guaranty Insurance
Endorsement attached hereto
Ambac Assurance Corporation (Ambac) a Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by
reason of Nonpayment.
Ambac will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification to Ambac of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such
payments of principal or interest shall be made only upon presentation of an
instrument of assignment in form and substance satisfactory to Ambac,
transferring to Ambac all rights under such Insured Obligations to receive the
principal of and interest on the Insured Obligation. Ambac shall be subrogated
to all the Holders' rights to payment on the Insured Obligations to the extent
of the insurance disbursements so made. Once payments of the Insured Amounts
have been made to the Trustee, Ambac shall have no further obligation hereunder
in respect of such Insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any payment
of principal or interest on an Insured Obligation which has become Due for
Payment and which is made to a Holder by or on behalf of the Trustee has been
deemed a preferential transfer and theretofore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
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.
/s/ P. Lassiter [SEAL] /s/ Stephen D. Cooke
________________________ __________________________
President Secretary
/s/ Kim J.Doyle
__________________________
Effective Date: December 17, 1997 Authorized Representative
<PAGE> 2
CERTIFICATE GUARANTY INSURANCE ENDORSEMENT
Attached to and forming Effective Date of Endorsement:
part of Policy # AB0143BE December 18, 1997
issued to:
Bankers Trust Company
of California, N.A.
as Trustee for the Holders of
Advanta Mortgage Loan Asset-Backed Certificates
Series 1997-4, Class A-8 and Class A-9
For all purposes of this Policy, the following terms shall have the
following meanings:
"Agreement" shall mean the Pooling and Servicing Agreement dated as of
December 1, 1997 among Advanta Mortgage Conduit Services, Inc., as Sponsor,
Advanta Mortgage Corp. USA, as Master Servicer, and Bankers Trust Company of
California, N.A. as Trustee, as such Agreement may be amended, modified or
supplemented from time to time as set forth in the Agreement.
"Certificate Account" shall mean the account created and maintained with
the Trustee for the benefit of the Certificateholders and the Insurer pursuant
to Section 7.2 of the Agreement.
"Certificates" shall mean any one of the Class A-8 Certificates or Class
A-9 Certificates substantially in the form set forth in Exhibit A to the
Agreement.
"Certificate Insurance Policy" or "Policy" shall mean this Certificate
Guaranty Insurance Policy together with each and every endorsement hereto.
"Deficiency Amount" means the excess, if any, of Required Distributions
over the Net Available Distribution Amount for such Payment Date.
"Due for Payment" shall mean the Business Day immediately preceding the
Payment Date on which Insured Amounts are due.
<PAGE> 3
-2-
"First Payment Date" shall mean January 26, 1997.
"Holder" shall mean any person who is the registered owner or beneficial
owner of any Class A-8 Certificate or Class A-9 Certificate.
"Insurance Agreement" shall mean the Insurance and Indemnity Agreement,
dated as of December 18, 1997, among Advanta Mortgage Conduit Services, Inc.,
as Sponsor, Advanta Mortgage Corp. USA, as Master Servicer, Bankers Trust
Company of California, N.A., as Trustee, Ambac Assurance Corporation, as
Insurer, and the Advanta Mortgage Loan Trust 1997-4, as Issuer as such
Agreement may be amended, modified or supplemented from time to time.
"Insured Amounts" shall mean, with respect to any Payment Date, the
Deficiency Amount for such Payment Date.
"Insured Payments" shall mean, with respect to any Payment Date, the
aggregate amount actually paid by the Insurer to the Trustee in respect of (i)
Insured Amounts for such Payment Date and (ii) Preference Amounts for any given
Business Day.
"Insurer" shall mean Ambac Assurance Corporation, or any successor
thereto, as issuer of the Certificate Insurance Policy.
"Late Payment Rate" shall mean for any Payment Date, the greater of (i)
the rate of interest, as it is publicly announced by Citibank, N.A. at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date such change is announced by
Citibank, N.A.) plus 2% and (ii) the then applicable highest rate of interest
on the Certificates. The Late Payment Rate shall be computed on the basis of a
year of 360 days and the actual number of days elapsed. In no event shall the
Late Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"Net Available Distribution Amount" means, with respect to any Payment
Date,the sum of (i) the amount on deposit in the Certificate Account on such
Payment Date minus the Trustee's Fee, and the Premium Amount.
"Nonpayment" shall mean, with respect to any Payment Date, a Deficiency
Amount, owing in respect of such Payment Date.
"Notice" shall mean the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A to the
Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Amount which shall be
due and owing on the applicable Payment Date.
"Payment Date" shall mean the 25th day of any month (or if such 25th day
is not a Business Day, the first Business Day immediately following) beginning
with the First Payment Date.
<PAGE> 4
-3-
"Preference Amount" means any payment of principal or interest on a Class
A-8 Certificate or Class A-9 Certificate which has become Due for Payment and
which is made to a Holder by or on behalf of the Trustee which has been deemed
a preferential transfer and theretofore recovered from its Holder pursuant to
the United States Bankruptcy Code in accordance with a final, nonappealable
order of a court of competent jurisdiction.
"Premium Percentage" shall have the meaning set forth in the Insurance
Agreement.
"Reimbursement Amount" shall mean, as to any Payment Date, the sum of
(x)(i) all Insured Payments paid by the Insurer, but for which the Insurer has
not been reimbursed prior to such Payment Date pursuant to Section 7.5(g)(3) of
the Agreement, plus (ii) interest accrued thereon, calculated at the Late
Payment Rate from the date the Trustee received the related Insured Payments,
and (y) without duplication (i) any amounts then due and owing to the Insurer
under the Insurance Agreement plus (ii) interest on such amounts at the Late
Payment Rate.
"Required Distributions" means, the Class A-8 Distribution Amount and the
Class A-9 Distribution Amount, as applicable.
Capitalized used herein and not otherwise defined shall have the meaning
assigned to them in the Agreement.
As provided by the Policy, the Insurer will pay any amount payable
hereunder no later than 12:00 noon, New York City time, on the later of the
Payment Date on which the related Insured Amount is due or the Business Day
following receipt in New York, New York on a Business Day by the Insurer of a
Notice; provided that, if such Notice is received after 12:00 noon, New York
City time, on such Business Day, it will be deemed to be received on the
following Business Day. If any such Notice is not in proper form or is
otherwise insufficient for the purpose of making a claim under the Policy, it
shall be deemed not to have been received for purposes of this paragraph, and
the Insurer shall promptly so advise the Trustee and the Trustee may submit an
amended Notice.
The Insurer hereby agrees that if it shall be subrogated to the rights of
Holders by virtue of any previous payment under this Policy, no recovery of
such payment will occur unless the full amount of the Holders' allocable
distributions for such Payment Date can be made. In so doing, the Insurer does
not waive its rights to seek full payment of all Reimbursement Amounts owed to
it under the Agreement.
The terms and provisions of the Agreement constitute the instrument of
assignment referred to in the second paragraph of the face of this Policy.
A premium will be payable on this Policy on each Payment Date as provided
in Section 7.5(c)(ii) of the Agreement, beginning with the First Payment Date,
in an amount equal to the Premium Amount.
<PAGE> 5
-4-
Claims arising under the Policy would be excluded from coverage by the
California Guaranty Association established pursuant to the laws of California.
The insurance provided by the Policy is not covered by the Property/
Casualty Insurance Security Fund specified in Article 76 of the New York
Insurance Law.
The Policy to which this Endorsement is attached and of which it forms a
part is hereby amended to provide that there shall be no acceleration payment
due under the Policy unless such acceleration is at the sole option of the
Insurer.
Nothing herein contained shall be held to vary, alter, waive or extend
any of the terms, conditions, provisions, agreements or limitations of the
above mentioned Policy other than as above stated.
This Policy is issued under and pursuant to, and shall be construed
under, the laws of the State of California.
<PAGE> 6
IN WITNESS WHEREOF, the Insurer has caused this Endorsement to the Policy
to be signed by its duly authorized officers.
/s/ ??? /s/ Ann J. Doyle
- ---------------------------- -------------------------------
Vice President Secretary
<PAGE> 7
Exhibit 4.4
A-1
EXHIBIT A
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
Policy No. _______________
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED AMOUNTS
Date: [ ]
AMBAC ASSURANCE CORPORATION
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. ______
(the "Policy") issued by Ambac Assurance Corporation ("AMBAC"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Indenture, as the case may be, unless the context
otherwise requires.
The Trustee hereby certifies as follows:
1. The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
2. The relevant Payment Date is [date].
3. Payment on the Certificates in respect of the Payment Date is due
to be received on __________________________________ under the
Pooling and Servicing Agreement in an amount equal to
$_____________________.
4. There is an Insured Amount of $__________________ in respect of
the Certificates, which amount is an Insured Amount pursuant to
the terms of the Pooling and Servicing Agreement.
5. The sum of $___________________ is the Insured Amount that is Due
For Payment.
6. The Trustee has not heretofore made a demand for the Insured
Amount in respect of the Payment Date.
<PAGE> 8
A-2
7. The Trustee hereby requests the payment of the Insured Amount
that is Due For Payment be made by AMBAC under the Policy and
directs that payment under the Policy be made to the following
account by bank wire transfer of federal or other immediately
available funds in accordance with the terms of the Policy to:
___________________________________Trustee's account number.
8. The Trustee hereby agrees that, following receipt of the Insured
Amount from AMBAC, it shall (a) hold such amounts in trust and
apply the same directly to the distribution of payment on the
Certificates when due; (b) not apply such funds for any other
purpose; (c) deposit such funds to the Certificate Account and
not commingle such funds with other funds held by Trustee and (d)
maintain an accurate record of such payments with respect to each
certificate and the corresponding claim on the Policy and
proceeds thereof.
By:______________________________
Trustee
Title:___________________________
(Officer)
<PAGE> 1
Exhibit 4.5
December 18, 1997
Lehman Brothers Inc.
3 World Financial Center
200 Vessey Street
New York, New York 10285
Re: Underwriting Agreement dated December 4, 1997 (the
"Underwriting Agreement") between Advanta Mortgage
Conduit Services, Inc. ("Advanta") and Lehman Brothers
Inc. (as Representative of the Underwriters the
"Representative")
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, Advanta has undertaken certain
financial obligations with respect to the indemnification of the Underwriter
with respect to the Registration Statement, the Prospectus and the Prospectus
Supplement described in the Designated Agreements. Any financial obligations of
Advanta under the Underwriting Agreement, whether or not specifically enumerated
in this paragraph, are hereinafter referred to as the "Joint and Several
Obligations"; provided, however, that "Joint and Several Obligations" shall mean
only the financial obligations of Advanta under the Underwriting Agreement
(including the payment of money damages for a breach of any of Advanta's
obligations under the Underwriting Agreement, whether financial or otherwise)
but shall not include any obligations not relating to the payment of money.
As a condition of their respective executions of the Underwriting
Agreement, the Representative has required the undersigned, Advanta Mortgage
Holding Company ("AMHC"), the parent corporation of Advanta, to acknowledge its
joint-and-several liability with Advanta for the payment of the Joint and
Several Obligations under the Underwriting Agreement.
Now, therefore, the Underwriter and AMHC do hereby agree that:
(i) AMHC hereby agrees to be absolutely and unconditionally jointly
and severally liable with Advanta to the Representative 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 Representative
by Advanta or another affiliate of AMHC.
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
<PAGE> 2
Very truly yours,
ADVANTA MORTGAGE HOLDING
COMPANY
By: /s/ Mark T. Dunsheath
-----------------------
Name: Mark T. Dunsheath
Title: Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
LEHMAN BROTHERS INC.
as Representative of the Underwriters
By:
-----------------------------
Name:
Title:
[AMHC Guaranty - Underwriter]
<PAGE> 3
Very truly yours,
ADVANTA MORTGAGE HOLDING
COMPANY
By:
-----------------------
Name: Mark T. Dunsheath
Title: Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
LEHMAN BROTHERS INC.
as Representative of the Underwriters
By: /s/ William E. Lighten
-----------------------------
Name: William E. Lighten
Title: Managing Director
[AMHC Guaranty - Underwriter]
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
AMBAC ASSURANCE CORPORATION,
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
and
PRUDENTIAL SECURITIES INCORPORATED
INDEMNIFICATION AGREEMENT
ADVANTA MORTGAGE LOAN TRUST 1997-4
Dated as of December 18, 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 Underwriters.................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
<PAGE> 3
INDEMNIFICATION AGREEMENT dated as of December 18, 1997 (the "Indemnity
Agreement"), by and among AMBAC ASSURANCE CORPORATION, as Insurer, and LEHMAN
BROTHERS INC., J.P. MORGAN SECURITIES INC., MORGAN STANLEY & CO. INCORPORATED
and PRUDENTIAL SECURITIES INCORPORATED (the "Underwriters").
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 Pooling 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 December
18, 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 December 4,
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.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of December 1, 1997, relating to the Advanta Mortgage Loan
Asset-Backed Certificates, Series 1997-4, 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.
"Underwriters" means Lehman Brothers Inc., J.P. Morgan Securities Inc.,
Morgan Stanley & Co. Incorporated and Prudential Securities Incorporated,
severally.
"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
<PAGE> 4
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."
Section 3. Representations and Warranties of the Underwriters. Each
Underwriter severally represent and warrant as of the Closing Date as follows.
(a) Compliance With Laws. Such Underwriter will comply in all
material respects with all legal requirements in connection with offers and
sales of the Certificates and will make such offers and sales in the manner
to be provided in the Offering Document.
(b) Offering Document. Such Underwriter will not use, or distribute
to other broker-dealers for use, any Offering Document in connection with
the offer and sale of the Certificates 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's Information. All material provided by such
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 regarding such Underwriter
contained under the heading "Underwriting" in the Offering Document.
Section 4. Representations and Warranties of the Insurer. The Insurer
represents and warrants to each 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 executes 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
<PAGE> 5
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.
(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 September 30, 1996 and September 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
September 30, 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 captions "THE CLASS A-8 AND CLASS A-9 INSURER" and "THE
CLASS A-8 AND CLASS A-9 INSURANCE POLICY" (together, 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, government 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) Each Underwriter hereby severally 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,
<PAGE> 6
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 breach of any of the
representations and warranties of such Underwriter contained in Section 3.
(b) The Insurer agrees to pay, and to protect, indemnify and save harmless,
each 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
<PAGE> 7
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 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 has 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:
<PAGE> 8
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - MBS
Telecopy No.: 212-363-1459
Confirmation: 212-668-0340
(b) To the Representative of the Underwriters:
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10260-0060
Attention: Asset-Backed Securities
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 J. Adams
---------------------------
Name: Thomas J. Adams
Title: Vice President
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
By: LEHMAN BROTHERS INC.,
As Underwriter and as Representative for
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
By:
----------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement, all as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION,
as Insurer
By:_________________________________________
Name:____________________________________
Title:___________________________________
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
By: LEHMAN BROTHERS INC.,
As Underwriter and as Representative for
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
By: /s/ Sanir Tabet
----------------------------------------
Name: Sanir Tabet
Title: Senior Vice President
<PAGE> 1
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 Loan Trust 1997-4 (the "Registrant") and in the
Prospectus Supplement of the Registrant (the "Prospectus Supplement"), included
in the Form 8-K of the Registrant dated December 15, 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.
KPMG Peat Marwick LLP
New York, New York
December 15, 1997
