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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 30, 1998
Advanta Mortgage Conduit Services, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 333-52351 23-2723382
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
</TABLE>
Attention: President 19477
Welsh & McKean Roads (Zip Code)
Spring House, Pennsylvania
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (215) 657-4000
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 Class A Notes and the Mortgage Loans
Advanta Mortgage Conduit Services, Inc. (the "Registrant")
registered an issuance of $3,595,000,000 in principal amount of Mortgage Loan
Asset-Backed Certificates on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Act"), by the Registration
Statement on Form S-3 (File No. 333-52351) (the "Registration Statement").
Pursuant to the Registration Statement, Advanta Home Equity Loan Trust 1998-B
(the "Trust") issued approximately $107,500,000 in aggregate principal amount of
its Home Equity Loan Asset-Backed Notes, Series 1998-B (the "Notes"), on
September 30, 1998 (the "Closing Date"). This Current Report on Form 8-K is
being filed to satisfy an undertaking to file copies of certain agreements
executed in connection with the issuance of the Notes, the forms of which were
filed as Exhibits to the Registration Statement.
The Notes were issued pursuant to an Indenture (the
"Indenture") attached hereto as Exhibit 4.1, dated as of September 1, 1998,
between the Trust and Bankers Trust Company of California, N.A., in its capacity
as Indenture Trustee (the "Trustee"). The Notes evidence indebtedness of the
Trust and consist of two classes, the Class A-1 Notes (the "Class A-1 Notes")
and the Class A-2 Notes (the "Class A-2 Notes"). Also issued, but not offered,
by the Trust are Certificates ("Certificates") evidencing the ownership interest
in the Trust. The Certificates will initially be retained by Advanta Holding
Trust.
The primary assets of the Trust are two pools of mortgage
loans referred to as the "HELOC Pool" and the "HLTV Pool." The HELOC Pool
consists solely of adjustable rate home equity revolving credit line loans
secured by first or junior mortgages or deeds of trust on residential property
made under certain home equity revolving credit line loan agreements and related
promissory notes and relates primarily to the Class A-1 Notes. The HLTV Pool
consists solely of fixed-rate closed-end high-loan-to-value mortgage loans
secured by junior mortgages or deeds of trust on residential property and
relates primarily to the Class A-2 Notes.
The Class A-1 Notes have an aggregate principal amount of
$67,500,000 and a variable interest rate. The Class A-2 Notes have an aggregate
principal amount of $40,000,000 and a fixed interest rate of 6.55% per annum.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
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(c) Exhibits:
1.1 Underwriting Agreement, dated September 25, 1998, among
Advanta National Bank and Advanta Finance Corp., as Originators, Advanta
Mortgage Conduit Services, Inc., as Sponsor, and Bear, Stearns & Co. Inc., as
Underwriter.
4.1 Indenture, dated as of September 1, 1998, between Advanta
Home Equity Loan Trust 1998-B and Bankers Trust Company of California, N.A., as
Indenture Trustee.
4.2.1 Trust Agreement, dated as of September 1, 1998, between
Advanta Mortgage Conduit Services, Inc., as Sponsor, and Wilmington Trust
Company, as Owner Trustee, relating to the formation of Advanta Holding Trust.
4.2.2 Trust Agreement, dated as of September 1, 1998, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta Holding Trust and
Wilmington Trust Company, as Owner Trustee, relating to the formation of Advanta
Home Equity Loan Trust 1998-B.
4.3 Sale and Servicing Agreement, dated as of September 1,
1998, among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, Advanta Holding Trust, Advanta Revolving
Home Equity Loan Trust 1998-B, as Issuer, and Bankers Trust Company of
California, N.A., as Indenture Trustee.
4.4 Note Guaranty Insurance Policies, each dated September 30,
1998, and issued and delivered by MBIA Insurance Corporation.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters,
dated as of September 30, 1998.
10.1 Purchase Agreement, dated as of September 1, 1998,
between Advanta National Bank and Advanta Finance Corp., as Originators, on one
hand, and Advanta Mortgage Conduit Services, Inc., as Purchaser, on the other
hand.
10.2 Indemnification Agreement, dated September 25, 1998,
among Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta National Bank
and Advanta Finance Corp., as Originators, Bear, Stearns & Co.
Inc., as Underwriter, and MBIA Insurance Corporation, as Insurer.
23.1 Consent of PricewaterhouseCoopers LLP regarding financial
statements of MBIA Insurance Corporation and their report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
ADVANTA MORTGAGE CONDUIT SERVICES, INC., as
Sponsor and on behalf of Advanta Home Equity
Loan Trust 1998-B
Registrant
By: /s/ Mark Dunsheath
----------------------
Name: Mark Dunsheath
Title: Vice President
Dated: October 15, 1998
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EXHIBIT INDEX
Exhibit No. Description
1.1 Underwriting Agreement, dated September 25, 1998, among
Advanta National Bank and Advanta Finance Corp., as
Originators, Advanta Mortgage Conduit Services, Inc., as
Sponsor, and Bear, Stearns & Co. Inc., as Underwriter.
4.1 Indenture, dated as of September 1, 1998, between Advanta Home
Equity Loan Trust 1998-B and Bankers Trust Company of
California, N.A., as Indenture Trustee.
4.2.1 Trust Agreement, dated as of September 1, 1998, between
Advanta Mortgage Conduit Services, Inc., as Sponsor, and
Wilmington Trust Company, as Owner Trustee, relating to the
formation of Advanta Holding Trust.
4.2.2 Trust Agreement, dated as of September 1, 1998, among Advanta
Mortgage Conduit Services, Inc., as Sponsor, Advanta Holding
Trust and Wilmington Trust Company, as Owner Trustee, relating
to the formation of Advanta Home Equity Loan Trust 1998-B.
4.3 Sale and Servicing Agreement, dated as of September 1, 1998,
among Advanta Mortgage Conduit Services, Inc., as Sponsor,
Advanta Mortgage Corp. USA, as Master Servicer, Advanta
Holding Trust, Advanta Revolving Home Equity Loan Trust
1998-B, as Issuer, and Bankers Trust Company of California,
N.A., as Indenture Trustee.
4.4 Note Guaranty Insurance Policies, each dated September 30,
1998, and issued and delivered by MBIA Insurance Corporation.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters, dated
as of September 30, 1998.
10.1 Purchase Agreement, dated as of September 1, 1998, between
Advanta National Bank and Advanta Finance Corp., as
Originators, on one hand, and Advanta Mortgage Conduit
Services, Inc., as Purchaser, on the other hand.
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10.2 Indemnification Agreement, dated September 25, 1998, among
Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
National Bank and Advanta Finance Corp., as Originators, Bear,
Stearns & Co. Inc., as Underwriter, and MBIA Insurance
Corporation, as Insurer.
23.1 Consent of PricewaterhouseCoopers LLP regarding financial
statements of MBIA Insurance Corporation and their report.
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EXHIBIT 1.1
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EXHIBIT 1.1
EXECUTION COPY
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
ADVANTA NATIONAL BANK
ADVANTA FINANCE CORP.
ADVANTA HOME EQUITY LOAN ASSET-BACKED NOTES,
SERIES 1998-B
VARIABLE RATE CLASS A-1 NOTES
6.55% CLASS A-2 NOTES
UNDERWRITING AGREEMENT
September 25, 1998
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Advanta Mortgage Conduit Services, Inc., as Sponsor (the "Sponsor"),
has authorized the issuance and sale of Advanta Home Equity Loan Asset-Backed
Notes, Series 1998-B, consisting of variable rate Class A-1 Notes (the "Class
A-1 Notes") and fixed rate Class A-2 Notes (the "Class A-2 Notes" and, together
with the Class A-1 Notes, the "Notes"). The Notes will be issued pursuant to an
indenture (the "Indenture"), dated as of September 1, 1998, between Advanta Home
Equity Loan Trust 1998-B (the "Trust") and Bankers Trust Company of California,
N.A., as Indenture Trustee (the "Indenture Trustee"). The Trust will be formed
pursuant to a trust agreement (the "Trust Agreement"), dated as of September 1,
1998, among the Sponsor, Advanta Holding Trust ("Holding") and Wilmington Trust
Company, as Owner Trustee. The Class A-1 Notes will be secured by certain
adjustable rate home equity revolving credit line loans (the "Credit Line
Loans") made pursuant to certain home equity revolving credit line loan
agreements (the "Credit Line Agreements") and the Class A-2 Notes will be
secured by certain fixed-rate closed-end high loan-to-value mortgage loans (the
"HLTV Loans" and, together with the Credit Line Loans, the "Mortgage Loans")
made pursuant to certain mortgage loan agreements or notes (the "HLTV
Agreements" and, together with the Credit Line Agreements, the "Mortgage Loan
Agreements") to be transferred by the Sponsor to Holding and by Holding to the
Trust pursuant to a sale and servicing agreement (the "Sale and Servicing
Agreement"), dated as of September 1, 1998, among the Sponsor, Holding, the
Trust, Advanta Mortgage Corp. USA, as Master Servicer (the "Master Servicer"),
and the Indenture Trustee. Holding, whose beneficial ownership
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interests will initially be held by Advanta National Bank (the "Bank"), Advanta
Finance Corp. ("AFC" and, together with the Bank, the "Originators") and the
Sponsor or their respective designees, will retain, initially, the remaining
undivided interest in the assets of the Trust (the "Residual Interest"), which
may be sold or pledged at any time, subject to certain conditions specified in
the Trust Agreement. The Class A-1 Notes and the Class A-2 Notes will be issued
on September 30, 1998 (the "Closing Date") in the aggregate original principal
amounts (approximately) of $67,500,000 and $40,000,000, respectively. The Notes
and the Residual Interest are more fully described in a registration statement
which the Sponsor has furnished or will furnish to Bear, Stearns & Co. Inc. (the
"Underwriter").
On or prior to the date of issuance of the Notes, the Sponsor will
obtain two guaranty insurance policies (the "Policies") issued by MBIA Insurance
Corporation (the "Insurer"), one of which will unconditionally and irrevocably
guarantee to the Indenture Trustee for the benefit of the Class A-1 Noteholders
the timely payment of interest on and ultimate payment of principal of the Class
A-1 Notes and the other of which will unconditionally and irrevocably guarantee
to the Indenture Trustee for the benefit of the Class A-2 Noteholders the timely
payment of interest on and ultimate payment of principal of the Class A-2 Notes.
Concurrently therewith, the Sponsor will enter into an Insurance Agreement (the
"Insurance Agreement"), dated as of September 1, 1998, with the Insurer, the
Master Servicer, the Originators, Holding, the Trust, the Indenture Trustee and
the Owner Trustee, governing certain matters relating to the issuance of the
Policies. The Sponsor will also enter into an Indemnification Agreement, dated
as of September 25, 1998 (the "Indemnification Agreement"), with the
Underwriter, the Insurer and the Originators, governing the liability of the
several parties with respect to the losses resulting from material misstatements
or omissions contained in the Prospectus Supplement.
As used herein, the "Documents" shall mean the Indenture, the Trust
Agreement, the Holding Trust Agreement, the Sale and Servicing Agreement, the
Underwriting Agreement, the Insurance Agreement and the Indemnification
Agreement. Capitalized terms used but not defined herein shall have the meanings
given to them in the Sale and Servicing Agreement.
SECTION 1. Representations and Warranties of the Sponsor and the
Originator. The Sponsor and the Originators each represent and warrant to, and
agree with the Underwriter that:
A. The Sponsor has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement (No. 333-52351)
on Form S-3 for the registration under the Securities Act of 1933, as
amended (the "Act"), of Mortgage Loan Asset Backed Certificates and
Notes (issuable in series), which registration statement, as amended at
the date hereof, has become effective. Such registration statement, as
amended to the date of this Agreement, meets the requirements set forth
in Rule 415(a)(1)(vii) under the Act and complies in all other material
respects with such Rule. The Sponsor proposes to file with the
Commission pursuant to Rule 424(b)(5) under the act a supplement dated
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September 25, 1998 to the prospectus dated September 15, 1998 relating
to the Notes and the method of distribution thereof and has previously
advised or will advise the Underwriter of all further information
(financial and other) with respect to the Notes to be set forth
therein. Such registration statement, including the exhibits thereto,
as amended at the date hereof, is hereinafter called the "Registration
Statement"; such prospectus dated September 15, 1998, in the form in
which it will be filed with the Commission pursuant to Rule 424(b)(5)
under the Act is hereinafter called the "Basic Prospectus"; such
supplement dated September 25, 1998 to the Basic Prospectus, in the
form in which it will be filed with the Commission pursuant to Rule
424(b)(5) of the Act, is hereinafter called the "Prospectus
Supplement"; and the Basic Prospectus and the Prospectus Supplement
together are hereinafter called the "Prospectus." The Sponsor will file
with the Commission (i) promptly after receipt from the Underwriter of
any Computational Materials (as defined herein) (and in any event no
later than the Business Day on which the Prospectus Supplement is made
available to the Underwriter), a Form 8-K incorporating such
Computational Materials and (ii) within fifteen days of the issuance of
the Notes a report on Form 8-K setting forth specific information
concerning the related Mortgage Loans (the "8-K").
B. The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder. The Registration Statement, as of the Effective Date
thereof and of any amendment thereto, did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Prospectus, as of its date and as amended or
supplemented as of the Closing Date (as hereinafter defined), does not
and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that no representation or warranty
is made as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity with
written information furnished to the Sponsor in writing by the
Underwriter expressly for use therein.
C. The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the
Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act or the Exchange Act,
as applicable, and the rules and
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regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
D. Since the respective dates as of which information is given in
the Prospectus, there has not been any material adverse change in the
general affairs, management, financial condition, or results of
operations of the Sponsor or any of the Originators, otherwise than as
set forth or contemplated in the Prospectus as supplemented or amended
as of the Closing Date.
E. Each of the Sponsor and the Originators has been duly
incorporated and is validly existing as a corporation or national
banking association, as the case may be, in good standing under the
laws of its jurisdiction of incorporation, is duly qualified to do
business and is in good standing as a foreign corporation or national
banking association in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires such
qualification, and has all power and authority necessary to own or hold
its properties, to conduct the business in which it is engaged and to
enter into and perform its obligations under the Documents to which it
is a party, and to cause the Notes to be issued.
F. There are no actions, proceedings or investigations pending
before or threatened by any court, administrative agency or other
tribunal to which the Sponsor or any Originator is a party or of which
any of its properties is the subject (a) which if determined adversely
to the Sponsor or such Originator would have a material adverse effect
on the business or financial condition of the Sponsor or such
Originator (as applicable), (b) which asserts the invalidity of the
Documents or the Notes, (c) which seeks to prevent the issuance of the
Notes or the consummation by the Sponsor or such Originator of any of
the transactions contemplated by the Documents to which it is a party
or (d) which might materially and adversely affect the performance by
the Sponsor or such Originator of its obligations under, or the
validity or enforceability of, the Documents to which it is a party or
the Notes.
G. The Documents, when executed and delivered as contemplated
hereby and thereby, will have been duly authorized, executed and
delivered by the Sponsor or any Originator, as the case may be, and
will constitute legal, valid and binding instruments enforceable
against the Sponsor or such Originator in accordance with their
respective terms, subject as to enforceability to (x) applicable
bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditors' rights generally, (y) general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law) and (z) with respect to rights of indemnity under
this Agreement, the Indemnification Agreement, the Insurance Agreement
and the limitations of public policy under applicable securities laws.
H. The execution, delivery and performance of the Documents by the
Sponsor and the Originators, as the case may be, and the consummation
of the
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transactions contemplated hereby and thereby, and the issuance and
delivery of the Notes do not and will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Sponsor or any of the
Originators is a party, by which the Sponsor or any of the Originators
is bound or to which any of the property or assets of the Sponsor, any
of the Originators or any of their respective subsidiaries are subject,
nor will such actions result in any violation of the provisions of the
articles of incorporation or by-laws of the Sponsor or any of the
Originators or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Sponsor or any of the Originators or any of their respective properties
or assets.
I. Arthur Andersen LLP are independent public accountants with
respect to the Sponsor and the Originators as required by the Act and
the Rules and Regulations.
J. The direction by the Sponsor to the Indenture Trustee to
execute, authenticate, issue and deliver the Notes has been or will be
duly authorized by the Sponsor, and assuming the Indenture Trustee has
been duly authorized to do so, when executed, authenticated, issued and
delivered by the Indenture Trustee in accordance with the Indenture,
the Notes will be validly issued and outstanding and will be entitled
to the benefits provided by the Indenture.
K. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of
the United States is required for the issuance of the Notes and the
sale of the Notes to the Underwriter, or the consummation by the
Sponsor or the Originators of the other transactions contemplated by
the Documents, except such consents, approvals, authorizations,
registrations or qualifications as may be required under State
securities or "blue sky" laws in connection with the purchase and
distribution of the Notes by the Underwriter or as have been obtained.
L. Each Originator possesses all material licenses, 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 such
Originator has not received notice of any proceedings relating to the
revocation or modification of any such license, certificate, authority
or permit which if decided adversely to such Originator would, singly
or in the aggregate, materially and adversely affect the conduct of its
business, operations or financial condition.
M. At the time of execution and delivery of the Sale and Servicing
Agreement, the Sponsor will: (i) have good title to the interest in the
Mortgage Loans and the other rights and properties to be conveyed by
the Sponsor thereunder, free and clear of any lien, mortgage, pledge,
charge, encumbrance, adverse claim or other security interest
(collectively, "Liens"); (ii) except as
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provided in the Documents, not have assigned to any person any of its
right, title or interest in the Mortgage Loans, in the Sale and
Servicing Agreement or in the Notes being issued pursuant thereto; and
(iii) have the power and authority to sell its interest in the Mortgage
Loans to Holding and to sell the Notes to the Underwriter. Upon
execution and delivery of the Sale and Servicing Agreement and the
Indenture by the respective parties thereto, the Indenture Trustee will
have acquired all of the Sponsor's right, title and interest in and to
the Mortgage Loans (excluding accrued interest due prior to the Cut-Off
Date). Upon delivery to the Underwriter of the Notes, the Underwriter
will have good title to the Notes, free of any Liens.
N. As of opening of business on September 1, 1998 (the "Cut-Off
Date"), each of the Mortgage Loans identified on the Closing Date will
meet the eligibility criteria described in the Prospectus Supplement
and will conform to the descriptions thereof contained in the
Prospectus Supplement.
O. None of the Sponsor, the Originators, Holding or the Trust is
an "investment company" within the meaning of such term under the
Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations of the Commission thereunder.
P. At the Closing Date, the Notes and the Indenture will conform
in all material respects to the descriptions thereof contained in the
Prospectus.
Q. At the Closing Date, the Notes shall have been rated in the
highest rating category by at least two nationally recognized rating
agencies.
R. Any applicable taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the Documents
and the Notes have been paid or will be paid at or prior to the Closing
Date.
S. At the Closing Date, each of the representations and warranties
of the Sponsor set forth in the Sale and Servicing Agreement, the
Insurance Agreement and the Indemnification Agreement will be true and
correct in all material respects.
Any certificate signed by an officer of the Sponsor or any of the
Originators and delivered to the Underwriter or counsel for the Underwriter in
connection with an offering of the Notes shall be deemed, and shall state that
it is, a representation and warranty as to the matters covered thereby to each
person to whom the representations and warranties in this Section 1 are made.
SECTION 2. Purchase and Sale. The commitment of the Underwriter to
purchase the Notes pursuant to this Agreement shall be deemed to have been made
on the basis of the representations and warranties herein contained and shall be
subject to the terms and conditions herein set forth. The Sponsor agrees to
instruct the Trust to issue and agrees to sell to the Underwriter, and the
Underwriter agrees (except as provided in Sections 6 and 10 hereof) to purchase
from the Sponsor, the Notes in the aggregate
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initial principal amount or amounts set forth on Schedule A at the purchase
price or prices set forth in Schedule A.
SECTION 3. Delivery and Payment. Delivery of and payment for the Notes
to be purchased by the Underwriter shall be made at the offices of Dewey
Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019, at 10:00
A.M. New York City time on the Closing Date or at such other time or date as
shall be agreed upon in writing by the Underwriter, the Sponsor and the
Originators. Payment shall be made to the Sponsor and the Originators (in such
proportions as they shall jointly advise the Underwriter in writing) by wire
transfer of same day funds payable to such accounts as they shall designate in
writing. Delivery of the Notes shall be made to the Underwriter against payment
of the purchase price thereof. The Notes shall be in such denominations and
registered in such names as the Underwriter may request in writing at least two
business days prior to the Closing Date. The Notes will be made available for
examination by the Underwriter no later than 4:00 P.M. New York City time on the
first business day prior to the Closing Date.
SECTION 4. Offering by the Underwriter. It is understood that, subject
to the terms and conditions hereof, the Underwriter proposes to offer the Notes
for sale to the public as set forth in the Prospectus.
SECTION 5. Covenants of the Sponsor and the Originators. The Sponsor
and the Originators agree as follows:
A. To prepare the Prospectus in a form approved by the Underwriter
and to file such Prospectus pursuant to Rule 424(b) under the Act not
later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement; to make no
further amendment or any supplement to the Registration Statement or to
the Prospectus prior to the Closing Date except as permitted herein; to
advise the Underwriter, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Underwriter with
copies thereof; to file promptly all reports and any definitive proxy
or information statements required to be filed by the Sponsor with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and, for so long
as the delivery of a prospectus is required in connection with the
offering or sale of the Notes, to promptly advise the Underwriter of
its receipt of notice of the issuance by the Commission of any stop
order or of: (i) any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus; (ii) the suspension of the
qualification of the Notes for offering or sale in any jurisdiction;
(iii) the initiation of or threat of any proceeding for any such
purpose; (iv) any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information. In the event of the issuance of any stop order
or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification, the
Sponsor
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promptly shall use its best efforts to obtain the withdrawal of such
order or suspension.
B. To furnish promptly to the Underwriter and to counsel for the
Underwriter a signed copy of the Registration Statement as originally
filed with the Commission, and of each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith.
C. To deliver promptly to the Underwriter such number of the
following documents as the Underwriter shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with
the Commission and each amendment thereto (in each case including
exhibits); (ii) each Preliminary Prospectus, the Prospectus and any
amended or supplemented Prospectus; and (iii) any document incorporated
by reference in the Prospectus (including exhibits thereto). If the
delivery of a prospectus is required at any time prior to the
expiration of nine months after the Effective Time in connection with
the offering or sale of the Notes, and if at such time any events shall
have occurred as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such same period to amend
or supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act or the Exchange Act, the Sponsor shall notify the
Underwriter and, upon the Underwriter's request, shall file such
document and prepare and furnish without charge to the Underwriter and
to any dealer in securities as many copies as the Underwriter may from
time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which corrects such statement or omission
or effects such compliance, and in case the Underwriter is required to
deliver a Prospectus in connection with sales of any of the Notes at
any time nine months or more after the Effective Time, upon the request
of the Underwriter but at the expense of the Underwriter, the Sponsor
shall prepare and deliver to the Underwriter as many copies as the
Underwriter may reasonably request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act.
D. To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Sponsor or the Underwriter,
be required by the Act or requested by the Commission.
E. Prior to filing with the Commission any (i) Preliminary
Prospectus, (ii) amendment to the Registration Statement or supplement
to the Prospectus, or document incorporated by reference in the
Prospectus or (iii) Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the Underwriter and counsel
for the Underwriter and obtain the consent of the Underwriter to the
filing.
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F. To make generally available to holders of the Notes as soon as
practicable, but in any event not later than 90 days after the close of
the period covered thereby, a statement of earnings of the Trust (which
need not be audited) complying with Section 11(a) of the Act and the
Rules and Regulations (including, at the option of the Sponsor, Rule
158) and covering a period of at least twelve consecutive months
beginning not later than the first day of the first fiscal quarter
following the Closing Date.
G. To use their best efforts, in cooperation with the Underwriter,
to qualify the Notes for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United
States as the Underwriter may designate, and maintain or cause to be
maintained such qualifications in effect for as long as may be required
for the distribution of the Notes. The Sponsor will file or cause the
filing of such statements and reports as may be required by the laws of
each jurisdiction in which the Notes have been so qualified.
H. Not, without the Underwriter's prior written consent, to
publicly offer or sell or contract to sell any mortgage pass-through
securities, collateralized mortgage obligations or other similar
securities representing interests in or secured by other
mortgage-related assets originated or owned by the Sponsor for a period
of 5 business days following the commencement of the offering of the
Notes to the public.
I. So long as the Notes shall be outstanding, to deliver to the
Underwriter as soon as such statements are furnished to the Indenture
Trustee the annual statement as to compliance delivered to the
Indenture Trustee pursuant to Section 3.9 of the Indenture.
J. To apply the net proceeds from the sale of the Notes in the
manner set forth in the Prospectus.
SECTION 6. Conditions to the Underwriter's Obligation. The obligation
of the Underwriter to purchase the Notes pursuant to this Agreement is subject
to: (i) the accuracy on and as of the Closing Date of the representations and
warranties on the part of the Sponsor and the Originators herein contained; (ii)
the performance by the Sponsor and the Originators of all of their respective
obligations hereunder; and (iii) the following conditions as of the Closing
Date:
A. The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission. Any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus shall have been complied with.
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B. The Underwriter shall not have discovered and disclosed to the
Sponsor on or prior to the Closing Date that the Registration Statement
or the Prospectus or any amendment or supplement thereto contains an
untrue statement of a fact or omits to state a fact which, in the
opinion of Dewey Ballantine LLP, counsel for the Underwriter, is
material and is required to be stated therein or is necessary to make
the statements therein not misleading.
C. All corporate proceedings and other legal matters relating to
the authorization, form and validity of the Documents, the Notes, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby
shall be satisfactory in all respects to counsel for the Underwriter,
and the Sponsor shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass
upon such matters.
D. The Underwriter shall have received the favorable opinion of
Dewey Ballantine LLP, special counsel to the Sponsor and the
Originators with respect to the following items, dated the Closing
Date, to the effect that:
1. Each of the Sponsor and the Originators has been duly organized
and is validly existing as a corporation or national banking
association, as the case may be, in good standing under the laws of its
jurisdiction of incorporation, and is qualified to do business in each
state necessary to enable it to perform its obligations as Sponsor or
Originator, as the case may be, under the Documents to which it is a
party. Each of the Sponsor and the Originators has the requisite power
and authority to execute and deliver, engage in the transactions
contemplated by, and perform and observe the conditions of the
Documents to which it is a party.
2. The Documents to which the Sponsor or any Originator is a party
have been duly and validly authorized, executed and delivered by the
Sponsor or such Originator, as the case may be, and all requisite
corporate action by the Sponsor or such Originator has been taken with
respect thereto, and the Notes constitute the valid, legal and binding
agreement of the Trust.
3. Neither the transfer of the Mortgage Loans to the Trust, the
issuance or sale of the Notes nor the execution, delivery or
performance by the Sponsor or such Originator of the Documents to which
it is a party (A) conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default
under, (i) any term or provision of the certificate of incorporation or
by-laws of the Sponsor or such Originator; (ii) any term or provision
of any material agreement, contract, instrument or indenture, to which
the Sponsor or such Originator is a party or is bound and known to such
counsel; or (iii) any order, judgment, writ, injunction or decree of
any court or governmental agency or body or other tribunal having
jurisdiction over the Sponsor or such Originator and known to such
counsel; or (B) results in, or will result in the creation or
imposition of any lien, charge or encumbrance upon any
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of the Trust's assets or upon the Notes, except as otherwise
contemplated by the Sale and Servicing Agreement.
4. The endorsement and delivery of each Mortgage Loan
Agreement, and the preparation, delivery and recording of an Assignment
with respect to each Mortgage is sufficient to fully transfer to the
Indenture Trustee for the benefit of the Noteholders all right, title
and interest of the Sponsor in the Mortgage Loan Agreement and
Mortgage, as noteholder and mortgagee or assignee thereof, subject to
any exceptions set forth in such opinion, and will be sufficient to
permit the Indenture Trustee to avail itself of all protection
available under applicable law against the claims of any present or
future creditors of the Sponsor and to prevent any other sale,
transfer, assignment, pledge or other encumbrance of the Mortgage Loans
by the Sponsor from being enforceable, subject to any exceptions set
forth in such opinion.
5. No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental agency
or body or other tribunal is required under the laws of the State of
New York, for the execution, delivery and performance of the Documents
or the offer, issuance, sale or delivery of the Notes or the
consummation of any other transaction contemplated thereby by the
Sponsor and the Originators, except such which have been obtained.
6. There are no actions, proceedings or investigations, to
such counsel's knowledge, pending or threatened against the Sponsor or
any Originator before any court, governmental agency or body or other
tribunal (i) asserting the invalidity of the Documents to which the
Sponsor or such Originator (as applicable) is a party or the Notes,
(ii) seeking to prevent the issuance of the Notes or the consummation
of any of the transactions contemplated by the Documents or (iii) which
would materially and adversely affect the performance by the Sponsor or
such Originator of obligations under, or the validity or enforceability
of, the Notes or the Documents to which the Sponsor or such Originator
(as applicable) is a party.
7. To the best knowledge of such counsel, the Commission has
not issued any stop order suspending the effectiveness of the
Registration Statement or any order directed to any prospectus relating
to the Notes (including the Prospectus), and has not initiated or
threatened any proceeding for that purpose.
8. The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which such
counsel need express no opinion), including the incorporated documents,
as of the date on which the Registration Statement was declared
effective and as of the date hereof, comply as to form in all material
respects with the requirements of the 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
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Registration Statement or required to be described in the Registration
Statement which has not been filed or described as required.
9. The Indenture, when executed and delivered, will have been
duly qualified under the Trust Indenture Act.
10. The statements in the Prospectus and Prospectus Supplement
set forth under the captions "ERISA CONSIDERATIONS," "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," and the statements in the Prospectus set
forth under the caption "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
AND RELATED MATTERS," to the extent that they constitute matters of
federal, New York or California law, or federal, New York or California
legal conclusions provide a fair and accurate summary of such law or
conclusions.
11. No information has come to such counsel's attention which
causes them to believe that the Prospectus (other than the financial
statement and other financial and statistical data contained therein,
as to which such counsel need express no opinion), as of the date
thereof, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
12. Such other matters as the Underwriter may reasonably
request.
In rendering its opinions, the counsel described above may
rely, as to matters of fact, on certificates of responsible officers of
the Sponsor and the Originators, the Indenture Trustee and public
officials. Such opinions may also assume the due authorization,
execution and delivery of the instruments and documents referred to
therein by the parties thereto other than the Sponsor and the
Originators.
E. The Underwriter shall have received letters, including
bring-down letters, from Arthur Andersen LLP, dated on or before the
Closing Date, in form and substance satisfactory to the Underwriter and
counsel for the Underwriter, to the effect that they have performed
certain specified procedures requested by the Underwriter with respect
to the information set forth in the Prospectus and certain matters
relating to the Originators.
F. The Notes shall have been rated in the highest rating category
by Standard & Poor's Ratings Group and by Moody's Investors Service,
Inc., and such ratings shall not have been rescinded or downgraded. The
Underwriter and counsel for the Underwriter shall have received copies
of any opinions of counsel supplied to the rating organizations
relating to any matters with respect to the Notes. Any such opinions
shall be dated the Closing Date and addressed to the Underwriter or
accompanied by reliance letters to the Underwriter or shall state that
the Underwriter may rely upon them.
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<PAGE> 14
G. The Underwriter shall have received from the Sponsor a
certificate, signed by the president, a senior vice president or a vice
president of the Sponsor, dated the Closing Date, to the effect that
the signer of such certificate has carefully examined the Registration
Statement, the Sale and Servicing Agreement, and this Agreement and
that, to the best of his or her knowledge based upon reasonable
investigation:
1. the representations and warranties of the Sponsor in this
Agreement, as of the Closing Date, and in the Sale and Servicing
Agreement, the Insurance Agreement, and in all related agreements, as
of the date specified in such agreements, are true and correct, and the
Sponsor has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
2. there are no actions, suits or proceedings pending, or to
the best of such officer's knowledge, threatened against or affecting
the Sponsor which if adversely determined, individually or in the
aggregate, would be reasonably likely to adversely affect the Sponsor's
obligations under the Documents to which it is a party in any material
way; and no merger, liquidation, dissolution or bankruptcy of the
Sponsor is pending or contemplated;
3. the information contained in the Registration Statement and
the Prospectus relating to the Sponsor, the Mortgage Loans or the
servicing procedures of it or its affiliates or subservicer is true and
accurate in all material respects and nothing has come to his or her
attention that would lead such officer to believe that the Registration
Statement or Prospectus includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein not misleading;
4. the information set forth in the Schedule of Mortgage Loans
required to be furnished pursuant to the Sale and Servicing Agreement
is true and correct in all material respects;
5. there has been no amendment or other document filed
affecting the articles of incorporation or by-laws of the Sponsor since
June 30, 1998, and no such amendment has been authorized. No event has
occurred since June 30, 1998, which has affected the good standing of
the Sponsor under the laws of the State of Delaware;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Sponsor and its subsidiaries, taken as a whole, from
June 30, 1998;
7. on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been
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indicated, in the rating, if any, accorded the Sponsor or in any rating
accorded any securities of the Sponsor, if any, by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of the Act; and
8. each person who, as an officer or representative of the
Sponsor, signed or signs the Registration Statement, the Documents or
any other document delivered pursuant hereto, on the date of such
execution, or on the Closing Date, as the case may be, in connection
with the transactions described in the Documents was, at the respective
times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and
the signatures of such persons appearing on such documents are their
genuine signatures.
The Sponsor shall attach to such certificate a true and
correct copy of its certificate or articles of incorporation, as
appropriate, and by-laws which are in full force and effect on the date
of such certificate and a certified true copy of the resolutions of its
Board of Directors with respect to the transactions contemplated
herein.
H. The Underwriter shall have received a favorable opinion of
counsel to the Indenture Trustee, dated the Closing Date and in form
and substance satisfactory to the Underwriter, to the effect that:
1. the Indenture Trustee is a national banking association
duly organized, validly existing and in good standing under the laws of
the United States and has the power and authority to enter into and to
take all actions required of it under the Documents to which it is a
party to;
2. the Documents to which the Indenture Trustee is a party
have been duly authorized, executed and delivered by the Indenture
Trustee and such Documents constitute the legal, valid and binding
obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms, except as enforceability thereof
may be limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally,
as such laws would apply in the event of a bankruptcy, insolvency or
reorganization or similar occurrence affecting the Indenture Trustee,
and (B) general principles of equity regardless of whether such
enforcement is sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part
of the Indenture Trustee in connection with its execution and delivery
of the Documents to which it is a party or the performance of its
obligations thereunder;
4. the Notes have been duly executed, authenticated and
delivered by the Indenture Trustee; and
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5. the execution and delivery of, and performance by the
Indenture Trustee of its obligations under, the Documents to which it
is a party do not conflict with or result in a violation of any statute
or regulation applicable to the Indenture Trustee, or the charter or
by-laws of the Indenture Trustee, or to the best knowledge of such
counsel, any governmental authority having jurisdiction over the
Indenture Trustee or the terms of any indenture or other agreement or
instrument to which the Indenture Trustee is a party or by which it is
bound.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Sponsor, the Indenture Trustee and public officials. Such opinion may
also assume the due authorization, execution and delivery of the
instruments and documents referred to therein by the parties thereto
other than the Indenture Trustee.
I. The Underwriter shall have received from the Indenture
Trustee a certificate, signed by the President, a senior vice president
or a vice president of the Indenture Trustee, dated the Closing Date,
to the effect that each person who, as an officer or representative of
the Indenture Trustee, signed or signs the Notes, the Sale and
Servicing Agreement, the Indenture or any other document delivered
pursuant hereto, on the date hereof or on the Closing Date, in
connection with the transactions described in the Sale and Servicing
Agreement and the Indenture was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified
and acting as such officer or representative, and the signatures of
such persons appearing on such documents are their genuine signatures.
J. The Policies relating to the Notes shall have been duly
executed and issued at or prior to the Closing Date and shall conform
in all material respects to the description thereof in the Prospectus.
K. The Underwriter shall have received a favorable opinion of
counsel to the Insurer, dated the Closing Date and in form and
substance satisfactory to counsel for the Underwriter, to the effect
that:
1. The Insurer is an insurance corporation, duly incorporated
and validly existing under the laws of its state of incorporation. The
Insurer is validly licensed to do business in New York and is
authorized to issue the Policies and perform its obligations under the
Policies in accordance with the terms thereof.
2. The execution and delivery by the Insurer of the Policies,
the Insurance Agreement and the Indemnification Agreement are within
the corporate power of the Insurer and have been authorized by all
necessary corporate action on the part of the Insurer; the Policies 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 Policies may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other
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similar laws affecting creditors' rights generally and by general
principles of equity.
3. The Insurer is authorized to deliver the Insurance
Agreement and the Indemnification Agreement, and such agreements have
been duly executed and delivered and constitute the legal, valid and
binding obligations of the Insurer enforceable in accordance with its
terms except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity and by public policy considerations relating to
indemnification for securities law violations.
4. No consent, approval, authorization or order of any state
or federal court or governmental agency or body is required on the part
of the Insurer, the lack of which would adversely affect the validity
or enforceability of the Policies; to the extent required by applicable
legal requirements that would adversely affect validity or
enforceability of the Policies, the form of the Policies has been filed
with, and approved by, all governmental authorities having jurisdiction
over the Insurer in connection with the Policies.
5. The Policies are not required to be registered under the
Act.
6. The information set forth under the caption "THE INSURER
AND THE POLICIES" in the Prospectus Supplement, insofar as such
statements constitute a description of the Policies, accurately
summarizes the Policies.
In rendering this opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Sponsor, the Originators, the Indenture Trustee, the Insurer and public
officials. Such opinion may assume the due authorization, execution and
delivery of the instruments and documents referred to therein by the
parties thereto other than the Insurer.
L. Except for the downgrading of Advanta National Bank on
March 17, 1997, on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating, if any,
accorded the Sponsor or any Originator or in any rating accorded any
securities of the Sponsor, if any, by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of the Act.
M. On or prior to the Closing Date, there shall not have
occurred any downgrading, nor shall any notice have been given of (A)
any intended or potential downgrading or (B) any review or possible
change in rating the direction of which has not been indicated, in the
rating accorded the Insurer's claims paying ability by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of the Act.
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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 June 30,
1998, of (A) the Sponsor, the Originators and any subsidiaries or (B)
the Insurer, that is in the Underwriter's judgment material and adverse
and that makes it in the Underwriter's judgment impracticable to market
the Notes on the terms and in the manner contemplated in the
Prospectus.
O. The Underwriter shall have received from the Insurer a
certificate, signed by the president, a senior vice president or a vice
president of the Insurer, dated the Closing Date, to the effect that
the signer of such certificate has carefully examined the Policies, the
Insurance Agreement, the Indemnification Agreement and the related
documents and that, to the best of his or her knowledge based on
reasonable investigation:
1. There are no actions, suits or proceedings pending or
threatened against or affecting the Insurer which, if adversely
determined, individually or in the aggregate, would adversely affect
the Insurer's performance under the Policies, the Indemnification
Agreement or the Insurance Agreement;
2. Each person who as an officer or representative of the
Insurer, signed or signs the Policies, the Insurance Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection with
the transactions described in this Agreement was, at the respective
times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and
the signatures of such persons appearing on such documents are their
genuine signatures;
3. The information contained in the Prospectus Supplement
under the caption "THE INSURER AND THE POLICIES" is true and correct in
all material respects and does not omit to state a material fact with
respect to the description of the Policies or the ability of the
Insurer to meet its payment obligations under the Policies;
4. The tables regarding the Insurer's capitalization set forth
under the heading "THE INSURER AND THE POLICIES" in the Prospectus
Supplement presents accurately and fairly the capitalization of the
Insurer as of June 30, 1998;
5. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating accorded
the claims paying ability of the Insurer by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of the Act;
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6. The audited balance sheet of the Insurer as of December 31,
1997 and the related statement of income and retained earnings for the
fiscal year then ended, and the accompanying footnotes, together with
the related opinion of an independent certificated public accountant,
copies of which are incorporated by reference in the Prospectus
Supplement, fairly present in all material respects the financial
condition of the Insurer as of such date and for the period covered by
such statements in accordance with generally accepted accounting
principles consistently applied; the unaudited balance sheet of the
Insurer as of June 30, 1998 and the related statement of income and
retained earnings for the three-month period then ended, copies of
which are included in the Prospectus Supplement, fairly present in all
material respects the financial condition of the Insurer as of such
date and for the period covered by such statements in accordance with
generally accepted accounting principles applied consistently with
those principles applied in preparing the December 31, 1997 audited
statements;
7. To the best knowledge of such officer, since June 30, 1998,
no material adverse change has occurred in the financial position of
the Insurer other than as set forth in the Prospectus Supplement.
The officer of the Insurer certifying to items 5-7 shall be an
officer in charge of a principal financial function.
The Insurer shall attach to such certificate a true and
correct copy of its certificate or articles of incorporation, as
appropriate, and its by-laws, all of which are in full force and effect
on the date of such certificate.
P. The Underwriter shall have received from Dewey Ballantine
LLP, special counsel to the Sponsor and the Originators, a survey in
form and substance satisfactory to the Underwriter, indicating the
requirements of applicable local law which must be complied with in
order to transfer and service the Mortgage Loans pursuant to the Sale
and Servicing Agreement and the Originators shall have complied with
all such requirements.
Q. The Underwriter shall have received from Dewey Ballantine
LLP, special counsel to the Underwriter, such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of the
Notes, the Prospectus and such other related matters as the Underwriter
shall reasonably require.
R. The Underwriter and counsel for the Underwriter shall have
received copies of any opinions of counsel to the Sponsor, the
Originators or the Insurer supplied to the Indenture Trustee relating
to matters with respect to the Notes or the Policies. Any such opinions
shall be dated the Closing Date and addressed to the Underwriter or
accompanied by reliance letters to the Underwriter or shall state the
Underwriter may rely thereon.
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S. The Underwriter shall have received such further information,
Notes and documents as the Underwriter may reasonably have requested
not fewer than three (3) full business days prior to the Closing Date.
T. There shall have been executed and delivered by Advanta
Mortgage Holding Company, the corporate parent of the Sponsor ("AMHC"),
a letter agreement with the Indenture Trustee and the Insurer, pursuant
to which AMHC agrees to become jointly and severally liable with the
Sponsor, the Originators and the Master Servicer for the payment of the
Joint and Several Obligations (as defined in such letter agreement).
U. There shall have been executed and delivered by AMHC, the
corporate parent of the Sponsor, a letter agreement with the
Underwriter and the Insurer substantially in the form of Exhibit A
hereto.
V. Prior to the Closing Date, counsel for the Underwriter shall
have been furnished with such documents and opinions as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Notes as herein contemplated and related
proceedings or in order to evidence the accuracy and completeness of
any of the representations and warranties, or the fulfillment of any of
the conditions, herein contained, and all proceedings taken by the
Originators in connection with the issuance and sale of the Notes as
herein contemplated shall be satisfactory in form and substance to the
Underwriter and counsel for the Underwriter.
W. Subsequent to the execution and delivery of this Agreement none
of the following shall have occurred: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange
or the over-the-counter market shall have been suspended or minimum
prices shall have been established on either of such exchanges or such
market by the Commission, by such exchange or by any other regulatory
body or governmental authority having jurisdiction; (i) a banking
moratorium shall have been declared by Federal or state authorities;
(iii) the United States shall have become engaged in hostilities, there
shall have been an escalation of hostilities involving the United
States or there shall have been a declaration of a national emergency
or war by the United States; or (iii) there shall have occurred such a
material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets of the United States shall be such) as to make it, in the
judgment of the Underwriter, impractical or inadvisable to proceed with
the public offering or delivery of the Notes on the terms and in the
manner contemplated in the Prospectus.
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriter by notice to the Sponsor and each of the Originators at any
time at or prior to the Closing Date, and such termination shall be without
liability of any party to any other party except as provided in Section 7.
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All opinions, letters, evidence and Notes mentioned above or elsewhere
in this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Underwriter.
SECTION 7. Payment of Expenses. The Sponsor and the Originators agree
to pay: (a) the costs incident to the authorization, issuance, sale and delivery
of the Notes and any taxes payable in connection therewith; (b) the costs
incident to the preparation, printing and filing under the Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), the Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus or any document incorporated by reference therein,
all as provided in this Agreement; (d) the costs of reproducing and distributing
this Agreement; (e) the fees and expenses of qualifying the Notes under the
securities laws of the several jurisdictions as provided in Section 5(G) hereof
and of preparing, printing and distributing any Blue Sky Memorandum or Legal
Investment Survey (including related fees and expenses of counsel to the
Underwriter); (f) any fees charged by securities rating services for rating the
Notes; (g) one-half of the costs and expenses of Dewey Ballantine LLP; and (h)
all other costs and expenses incident to the performance of the obligations of
the Sponsor and the Originators; provided, however, that, except as provided in
this Section 7, the Underwriter shall pay its own costs and expenses, including
one-half of the costs and expenses of Dewey Ballantine LLP, any transfer taxes
on the Notes which they may sell and the expenses of marketing any offering of
the Notes made by the Underwriter (including expenses incident to the
preparation, printing and distribution of Computational Materials and other
Derived Information).
If this Agreement is terminated by the Underwriter, in accordance with
the provisions of Section 6 or Section 10, the Sponsor and the Originators shall
reimburse the Underwriter for its respective reasonable out-of-pocket expenses,
including fees and disbursements of Dewey Ballantine LLP.
SECTION 8. Indemnification and Contribution.
A. The Sponsor and the Originators each agree to indemnify and
hold harmless the Underwriter and each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act from and
against any and all loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and
sales of the Notes), to which the Underwriter or any such controlling
person may become subject, under the Act or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (iii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or (iv) the omission or
alleged omission
20
<PAGE> 22
to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and shall
reimburse the Underwriter and each such controlling person promptly
upon demand for any legal or other expenses reasonably incurred by the
Underwriter or such controlling person in connection with investigating
or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided,
however, that neither the Sponsor nor any of the Originators shall be
liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission
made in the Prospectus or the Registration Statement in reliance upon
and in conformity with written information (including any Derived
Information) furnished to the Sponsor by the Underwriter specifically
for inclusion therein. For purposes of the last proviso to the
immediately preceding sentence, the term "Prospectus" shall not be
deemed to include the documents incorporated therein by reference, and
the Underwriter shall not be obligated to send or give any supplement
or amendment to any document incorporated therein by reference to any
person other than a person to whom the Underwriter had delivered such
incorporated document or documents in response to a written request
therefor. The foregoing indemnity agreement is in addition to any
liability which the Sponsor or any of the Originators may otherwise
have to the Underwriter or any controlling person of the Underwriter.
B. The Underwriter agrees to indemnify and hold harmless the
Sponsor, the Originators, each of their respective directors, each of
their respective officers who signed the Registration Statement, and
each person, if any, who controls the Sponsor or any of the Originators
within the meaning of Section 15 of the Act against any and all loss,
claim, damage or liability, or any action in respect thereof, to which
the Sponsor or such Originator or any such director, officer or
controlling person may become subject, under the Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of,
or is based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (iii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or (iv) the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information (excluding any Derived
Information which is covered in paragraph (E) below) furnished to the
Sponsor by or on behalf of the Underwriter specifically for inclusion
therein, and shall reimburse the Sponsor, such Originator and any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by the Sponsor or such Originator or any director,
officer or controlling person in connection with investigating or
defending or preparing to defend against any
21
<PAGE> 23
such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any
liability which the Underwriter may otherwise have to the Sponsor, the
Originators or any such director, officer or controlling person.
C. Promptly after receipt by any indemnified party under this
Section 8 of notice of any claim or the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure; and provided further, however, that the failure to
notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this
Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriter, if the indemnified
parties under this Section 8 consist of the Underwriter or any of its
controlling persons, or by the Sponsor or the Originators, as the case may be,
if the
22
<PAGE> 24
indemnified parties under this Section 8 consist of the Sponsor or the
Originators, as the case may be, or any of the Sponsor's directors, officers or
controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(A) and (B), shall use its best efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
D. The Underwriter agrees to deliver to the Sponsor a copy of
its Derived Information no later than one (1) business day prior to the
date such information is required to be filed, pursuant to the
No-Action Letters (as defined herein), with the Commission on Form 8-K.
E. The Underwriter agrees, assuming all Sponsor-Provided
Information (defined below) is accurate and complete in all material
respects, to indemnify and hold harmless the Sponsor, the Originators,
each of the Sponsor's and the Originators' respective officers and
directors and each person who controls the Sponsor or the Originators
within the meaning of Section 15 of the Act against any and all losses,
claims, damages or liabilities, joint or several, to which they may
become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement of a material fact
contained in the Derived Information provided by the Underwriter, or
arise out of or are based upon the omission or alleged omission to
state therein, a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made and when read in conjunction
with the Prospectus, not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred
by him, her or it in connection with investigating or defending or
preparing to defend any such loss, claim, damage, liability or action
as such expenses are incurred. The obligations of the Underwriter under
this Section 8(E) shall be in addition to any liability which the
Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally
applicable to this Section 8(E).
23
<PAGE> 25
F. For purposes of this Section 8, the term "Derived
Information" means such portion, if any, of the information delivered
to the Sponsor pursuant to Section 8(D) for filing with the Commission
on Form 8-K as:
(i) is not contained in the Prospectus without taking
into account information incorporated therein by reference;
(ii) does not constitute Sponsor-Provided
Information; and
(iii) is of the type of information defined as
Collateral term sheets, Structural term sheets or
Computational Materials (as such terms are interpreted in the
No-Action Letters).
"Sponsor-Provided Information" means any computer tape furnished to the
Underwriter by the Sponsor and the Originators concerning the Mortgage
Loans comprising the Trust.
The terms "Collateral term sheet" and "Structural term sheet"
shall have the respective meanings assigned to them in the February 13,
1995 letter (the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on
behalf of the Public Securities Association (which letter, and the SEC
staff's response thereto, were publicly available February 17, 1995).
The term "Collateral term sheet" as used herein includes any subsequent
Collateral term sheet that reflects a substantive change in the
information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder letter"
and together with the PSA Letter, the "No-Action Letters") of Brown &
Wood on behalf of Kidder, Peabody & Co., Inc. (which letter, and the
SEC staff's response thereto, were publicly available May 20, 1994).
G. If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(A) or (B) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, in such proportion as shall be
appropriate to reflect the relative benefits received by the Sponsor
and the Originators on the one hand and the Underwriter on the other
from the offering of the Notes or if the allocation provided by clause
(i) above is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 8(C), in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
Sponsor and the Originators on the one hand and the Underwriter on the
other with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations.
24
<PAGE> 26
The relative benefits of the Underwriter and the Sponsor and the
Originators shall be deemed to be in such proportion so that the Underwriter is
responsible for that portion represented by the percentage that the underwriting
discount (whether appearing on the cover page of the Prospectus or otherwise)
bears to the public offering price (whether appearing on the cover page of the
Prospectus or otherwise) and the Sponsor and the Originators are responsible for
the remainder.
The relative fault of the Underwriter and the Sponsor and the
Originators shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Sponsor and the Originators
or by the Underwriter, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission and other equitable considerations.
The Sponsor, the Originators and the Underwriter agree that it would
not be just and equitable if contributions pursuant to this Section 8(G) were to
be determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 8(G) shall be deemed to include, for purposes of this Section 8(G), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
In no case shall the Underwriter be responsible for any amount in
excess of the underwriting discount applicable to the Notes purchased by the
Underwriter hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
H. The Underwriter confirms that the information set forth (i)
in the Prospectus Supplement (on page S-2 thereof) relating to market
making and (ii) in the fourth and fifth paragraphs under the caption
"UNDERWRITING" in the Prospectus Supplement, together with the Derived
Information, is correct and constitutes the only information furnished
in writing to the Sponsor and the Originators by or on behalf of the
Underwriter specifically for inclusion in the Registration Statement
and the Prospectus.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Sponsor or any
Originator submitted pursuant hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Underwriter or controlling persons thereof, or by or on behalf of the Sponsor or
the Originator and shall survive delivery of any Notes to the Underwriter.
SECTION 10. Termination of Agreement. The Underwriter may terminate
this Agreement immediately upon notice to the Sponsor and the Originators, at
25
<PAGE> 27
any time at or prior to the Closing Date if any of the events or conditions
described in Section 6(W) of this Agreement shall occur and be continuing. In
the event of any such termination, the covenant set forth in Section 5(G), the
provisions of Section 7, the indemnity agreement set forth in Section 8, and the
provisions of Sections 9 and 13 shall remain in effect.
SECTION 11. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A. if to the Underwriter, shall be delivered or sent by mail,
telex or facsimile transmission to Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167, Attention: Asset Backed Securities
(Fax: 212-272-7294);
B. if to the Sponsor, shall be delivered or sent by mail,
telex or facsimile transmission to Advanta Mortgage Conduit Services,
Inc. 16875 West Bernardo Drive, San Diego, California 92127 Attention:
General Counsel (Fax: 619-674-3592); and
C. if to Advanta National Bank, shall be delivered or sent by
mail to Advanta National Bank, One Righter Parkway, Wilmington,
Delaware 19803 (Telephone: 302-266-5600); and
D. if to Advanta Finance Corp., 16875 West Bernardo Drive, San
Diego, CA 92127, Attention: Secretary.
SECTION 12. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriter, the
Sponsor, the Originators and their respective successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that the representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control the Underwriter within the meaning of
Section 15 of the Act, and for the benefit of directors of the Sponsor or any of
the Originators, officers of the Sponsor who have signed the Registration
Statement and any person controlling the Sponsor or any of the Originators
within the meaning of Section 15 of the Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 12, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
SECTION 13. Survival. The respective indemnities, representations,
warranties and agreements of the Sponsor, the Originators and the Underwriter
contained in this Agreement, or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Notes and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
26
<PAGE> 28
SECTION 14. Definition of the Term "Business Day". For purposes of this
Agreement, "Business Day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND SHALL BE
CONSTRUED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 16. Counterparts. This Agreement may be executed in
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
SECTION 17. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
[Signature Page Follows]
27
<PAGE> 29
If the foregoing correctly sets forth the agreement among the Sponsor,
the Originators and the Underwriter, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
ADVANTA MORTGAGE CONDUIT
SERVICES INC.
By:________________________
Name:
Title:
ADVANTA NATIONAL BANK
By:________________________
Name:
Title:
ADVANTA FINANCE CORP.
By:________________________
Name:
Title:
CONFIRMED AND ACCEPTED
as of the date first above written:
BEAR, STEARNS & CO. INC.
By:__________________________
Name:
Title:
[Signature Page to the Underwriting Agreement]
<PAGE> 30
<TABLE>
<CAPTION>
==================================================================================================================================
SCHEDULE A
- ----------------------------------------------------------------------------------------------------------------------------------
Class Initial Principal Amount of Notes Purchase Price
Purchased by the Underwriter to Underwriter
disregarding
accrued interest
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A-1 $67,500,000 99.750000%
==================================================================================================================================
Class A-2 $40,000,000 99.664574%
==================================================================================================================================
</TABLE>
S-1
<PAGE> 31
EXHIBIT A
As of September 25, 1998
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Underwriting Agreement dated September 25, 1998 (the
"Underwriting Agreement") among Advanta National Bank and
Advanta Finance Corp. (together, the "Originators"), Advanta
Mortgage Conduit Services, Inc. (the "Sponsor") and Bear,
Stearns & Co. (the "Underwriter"); Indemnification Agreement
dated September 25, 1998 (the "Indemnification Agreement")
among the Sponsor, the Originators, the Underwriter and MBIA
Insurance Corporation (the "Insurer"); and the Insurance
Agreement dated as of September 1, 1998 (the "Insurance
Agreement") among the Insurer, Advanta Mortgage Corp. USA, the
Sponsor, the Originators, Advanta Holding Trust, Advanta Home
Equity Loan Trust 1998-B, Bankers Trust Company of California,
N.A., as Indenture Trustee, and Wilmington Trust Company, as
Owner Trustee
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, the Indemnification Agreement
and the Insurance Agreement (collectively, the "Designated Agreements"), the
Sponsor and the Originators have undertaken certain financial obligations with
respect to the indemnification of the Underwriter and of the Insurer with
respect to the Registration Statement, the Prospectus and the Prospectus
Supplement described in the Designated Agreements. Any financial obligations of
the Sponsor and the Originators under the Designated Agreements, whether or not
specifically enumerated in this paragraph, are hereinafter referred to as the
"Joint and Several Obligations"; provided, however, that "Joint and Several
Obligations" shall mean only the financial obligations of the Sponsor and the
Originators under the Designated Agreements (including the payment of money
damages for a breach of any of the Sponsor's and the Originators' obligations
under the
A-1
<PAGE> 32
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 Designated
Agreements, the Underwriter and the Insurer have required the undersigned,
Advanta Mortgage Holding Company ("AMHC"), the parent corporation of the Sponsor
and the Originators, to acknowledge its joint-and-several liability with the
Sponsor and the Originators for the payment of the Joint and Several Obligations
under the Designated Agreements.
Now, therefore, the Underwriter, the Insurer and AMHC do hereby agree
that:
(i) AMHC hereby agrees to be absolutely and
unconditionally jointly and severally liable with the Sponsor
and the Originators to the Underwriter for the payment of the
Joint and Several Obligations under the Underwriting
Agreement.
(ii) AMHC may honor its obligations hereunder either
by direct payment of any Joint and Several Obligations or by
causing any Joint and Several Obligations to be paid to the
Underwriter or to the Insurer, as applicable, by the Sponsor
or another affiliate of AMHC.
This letter and the respective obligations and rights hereunder and
thereunder shall not be delegated or assigned by you without the prior written
consent of the Insurer. This letter may not be amended or otherwise modified
except pursuant to a writing signed by each of the parties hereto. This letter
may be executed by the signatories hereto in several counterparts, each of which
shall be deemed to be an original and all of which shall constitute one and the
same letter. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE UNDERSIGNED PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF OR IN
CONNECTION WITH, THIS LETTER, AND ANY OTHER COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THE
UNDERSIGNED PARTIES IN CONNECTION HEREWITH OR THEREWITH.
A-2
<PAGE> 33
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Underwriting Agreement.
Very truly yours,
ADVANTA MORTGAGE HOLDING
COMPANY
By: _______________________
Authorized Signatory
CONFIRMED AND ACCEPTED,
as of the date first above written:
MBIA INSURANCE CORPORATION
By:_________________________________
Authorized Signatory
BEAR, STEARNS & CO. INC.
By:_________________________________
Authorized Signatory
A-3
<PAGE> 1
EXHIBIT 4.1
<PAGE> 2
ADVANTA HOME EQUITY LOAN TRUST 1998-B
Class A Asset Backed Notes
INDENTURE
Dated as of September 1, 1998
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Indenture Trustee
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................2
SECTION 1.1. Definitions..............................................................................2
SECTION 1.2. Incorporation by Reference of the Trust Indenture Act...................................28
SECTION 1.3. Rules of Construction...................................................................28
SECTION 1.4. Action by or Consent of Noteholders.....................................................28
SECTION 1.5. Conflict with TIA.......................................................................29
ARTICLE II. THE NOTES ...........................................................................................29
SECTION 2.1. Form ...................................................................................29
SECTION 2.2. Execution, Authentication and Delivery..................................................29
SECTION 2.3. Registration; Registration of Transfer and Exchange.....................................30
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes..............................................31
SECTION 2.5. Persons Deemed Owners...................................................................32
SECTION 2.6. Payment of Principal and Interest; Defaulted Interest...................................32
SECTION 2.7. Cancellation............................................................................33
SECTION 2.8. Release of Collateral...................................................................33
SECTION 2.9. Book-Entry Notes........................................................................34
SECTION 2.10. Notices to Clearing Agency..............................................................34
SECTION 2.11. Definitive Notes........................................................................35
ARTICLE III. COVENANTS ..........................................................................................35
SECTION 3.1. Payment of Principal and Interest.......................................................35
SECTION 3.2. Maintenance of Office or Agency.........................................................35
SECTION 3.3. Money for Payments to be Held in Trust..................................................36
SECTION 3.4. Existence ..............................................................................37
SECTION 3.5. Protection of Trust Estate..............................................................37
SECTION 3.6. Opinions as to Trust Estate.............................................................37
SECTION 3.7. Performance of Obligations; Servicing of Mortgage Loans.................................38
SECTION 3.8. Negative Covenants......................................................................39
SECTION 3.9. Annual Statement as to Compliance.......................................................40
SECTION 3.10. Issuer May Not Consolidate or Transfer Assets...........................................40
SECTION 3.11. No Other Business.......................................................................40
SECTION 3.12. No Borrowing............................................................................40
SECTION 3.13. Guarantees, Loans, Advances and Other Liabilities.......................................40
SECTION 3.14. Capital Expenditures....................................................................41
SECTION 3.15. Compliance with Laws....................................................................41
SECTION 3.16. Restricted Payments.....................................................................41
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
SECTION 3.17. Notice of Events of Default and Events of Servicing Termination.........................41
SECTION 3.18. Further Instruments and Acts............................................................41
SECTION 3.19. Amendments of Sale and Servicing Agreement and Trust Agreement..........................41
SECTION 3.20. Income Tax Characterization.............................................................42
ARTICLE IV. SATISFACTION AND DISCHARGE...........................................................................43
SECTION 4.1. Satisfaction and Discharge of Indenture.................................................43
SECTION 4.2. Application of Trust Money..............................................................44
SECTION 4.3. Repayment of Monies Held by Note Paying Agent...........................................44
ARTICLE V. DEFAULTS AND REMEDIES.................................................................................44
SECTION 5.1. Event of Default........................................................................44
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment......................................46
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee...............47
SECTION 5.4. Remedies ...............................................................................47
SECTION 5.5. Indenture Trustee May File Proofs of Claim..............................................48
SECTION 5.6. Indenture Trustee May Enforce Claims Without Possession of Class A-2 Notes..............49
SECTION 5.7. Application of Money Collected..........................................................49
SECTION 5.8. Limitation of Suits.....................................................................50
SECTION 5.9. Unconditional Rights of Noteholders To Receive Principal and Interest...................51
SECTION 5.10. Restoration of Rights and Remedies......................................................51
SECTION 5.11. Rights and Remedies Cumulative..........................................................51
SECTION 5.12. Delay or Omission Not a Waiver..........................................................51
SECTION 5.13. Control by Noteholders..................................................................51
SECTION 5.14. Undertaking for Costs...................................................................52
SECTION 5.15. Waiver of Stay or Extension Laws........................................................52
SECTION 5.16. Action on Notes.........................................................................52
SECTION 5.17. Performance and Enforcement of Certain Obligations......................................52
SECTION 5.18. Subrogation.............................................................................53
SECTION 5.19. Preference Claims.......................................................................53
SECTION 5.20. Waiver of Past Defaults.................................................................54
ARTICLE VI. THE INDENTURE TRUSTEE................................................................................54
SECTION 6.1. Duties of Indenture Trustee.............................................................54
SECTION 6.2. Rights of Indenture Trustee.............................................................56
SECTION 6.3. Individual Rights of Indenture Trustee..................................................57
SECTION 6.4. Indenture Trustee's Disclaimer..........................................................57
SECTION 6.5. Notice of Defaults......................................................................58
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 6.6. Reports by Indenture Trustee to Holders.................................................58
SECTION 6.7. Compensation and Indemnity..............................................................58
SECTION 6.8. Replacement of Indenture Trustee........................................................58
SECTION 6.9. Successor Indenture Trustee by Merger...................................................60
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.......................60
SECTION 6.11. Eligibility: Disqualification...........................................................61
SECTION 6.12. Preferential Collection of Claims Against Issuer........................................62
SECTION 6.13. Appointment and Powers..................................................................62
SECTION 6.14. Performance of Duties...................................................................62
SECTION 6.15. Limitation on Liability.................................................................63
SECTION 6.16. Reliance Upon Documents.................................................................63
SECTION 6.17. Representations and Warranties of the Indenture Trustee.................................63
SECTION 6.18. Waiver of Setoffs.......................................................................64
SECTION 6.19. Control by the Controlling Party........................................................64
SECTION 6.20. Trustee May Enforce Claims Without Possession of Notes..................................64
SECTION 6.21. Suits for Enforcement...................................................................64
SECTION 6.22. Mortgagor Claims........................................................................64
ARTICLE VII. NOTEHOLDERS' LISTS AND REPORTS......................................................................65
SECTION 7.1. Issuer To Furnish To Indenture Trustee Names and Addresses of Noteholders...............65
SECTION 7.2. Preservation of Information; Communications to Noteholders..............................65
SECTION 7.3. Reports by Issuer.......................................................................66
SECTION 7.4. Reports by Indenture Trustee............................................................66
ARTICLE VIII. PAYMENTS AND STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS; ACCOUNTS,
DISBURSEMENTS AND RELEASES..............................................................66
SECTION 8.1. Collection of Money.....................................................................66
SECTION 8.2. Release of Trust Estate.................................................................67
SECTION 8.3. Establishment of Accounts...............................................................67
SECTION 8.4. The Policies............................................................................67
SECTION 8.5. Reserve Account.........................................................................68
SECTION 8.6. Flow of Funds...........................................................................70
SECTION 8.7. Investment of Accounts..................................................................72
SECTION 8.8. Eligible Investments....................................................................73
SECTION 8.9. Reports by Indenture Trustee............................................................74
SECTION 8.10. Additional Reports by Indenture Trustee.................................................76
SECTION 8.11. Opinion of Counsel......................................................................77
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ARTICLE IX. SUPPLEMENTAL INDENTURES..............................................................................77
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders..................................77
SECTION 9.2. Supplemental Indentures with Consent of Noteholders.....................................78
SECTION 9.3. Execution of Supplemental Indentures....................................................80
SECTION 9.4. Effect of Supplemental Indenture........................................................80
SECTION 9.5. Conformity With Trust Indenture Act.....................................................80
SECTION 9.6. Reference in Notes to Supplemental Indentures...........................................81
ARTICLE X. REDEMPTION OF NOTES...................................................................................81
SECTION 10.1. Redemption .............................................................................81
SECTION 10.2. Surrender of Notes......................................................................82
SECTION 10.3. Form of Redemption Notice...............................................................83
SECTION 10.4. Notes Payable on Redemption Date........................................................84
ARTICLE XI. MISCELLANEOUS........................................................................................84
SECTION 11.1. Compliance Certificates and Opinions, etc...............................................84
SECTION 11.2. Form of Documents Delivered to Indenture Trustee........................................85
SECTION 11.3. Acts of Noteholders.....................................................................85
SECTION 11.4. Notices, etc. to Indenture Trustee, Issuer and Rating Agencies..........................86
SECTION 11.5. Notices to Noteholders; Waiver..........................................................87
SECTION 11.6. Alternate Payment and Notice Provisions.................................................87
SECTION 11.7. Conflict with Trust Indenture Act.......................................................87
SECTION 11.8. Effect of Headings and Table of Contents................................................88
SECTION 11.9. Successors and Assigns..................................................................88
SECTION 11.10. Separability............................................................................88
SECTION 11.11. Benefits of Indenture...................................................................88
SECTION 11.12. Legal Holidays..........................................................................88
SECTION 11.13. Governing Law...........................................................................88
SECTION 11.14. Counterparts............................................................................88
SECTION 11.15. Recording of Indenture..................................................................89
SECTION 11.16. Trust Obligation........................................................................89
SECTION 11.17. No Petition.............................................................................89
SECTION 11.18. Inspection .............................................................................89
SECTION 11.19. Limitation of Liability.................................................................90
SECTION 11.20. Rights of the Note Insurer to Exercise Rights of Noteholders............................90
ARTICLE XII. RAPID AMORTIZATION EVENTS...........................................................................90
SECTION 12.1. Rapid Amortization Events...............................................................90
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SCHEDULE AND EXHIBITS
Schedule I Schedule of Mortgage Loans
Exhibit A Form of Class A-1 Note
Exhibit B Form of Class A-2 Note
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INDENTURE dated as of September 1, 1998, between ADVANTA HOME
EQUITY LOAN TRUST 1998-B, a Delaware business trust (the "Issuer"), and BANKERS
TRUST COMPANY OF CALIFORNIA, N.A., a national banking association, as trustee
(the "Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's Class
A-1 Asset Backed Notes (the "Class A-1 Notes") and the Issuer's Class A-2 Asset
Backed Notes (the "Class A-2 Notes" and, together with the Class A-1 Notes, the
"Class A Notes"):
As security for the payment and performance by the Issuer of
its obligations under this Indenture and the Class A Notes, the Issuer has
agreed to assign the Collateral (as defined below) to the Indenture Trustee on
behalf of the Noteholders and the Insurer.
MBIA Insurance Corporation (the "Insurer") has issued and
delivered the Class A-1 note guaranty insurance policy, dated as of the Closing
Date (the "Class A-1 Policy") and the Class A-2 note guaranty insurance policy,
dated as of the Closing Date (the "Class A-2 Policy" and, together with the
Class A-1 Policy, the "Policies"), pursuant to which the Insurer guarantees the
Insured Payment with respect to the related Policy (as defined below).
As an inducement to the Insurer to issue and deliver the
Policies, the Issuer and the Insurer have executed and delivered the Insurance
Agreement, dated as of September 30, 1998 (as amended from time to time, the
"Insurance Agreement"), among the Insurer, Advanta Holding Trust, the
Originators, Advanta Mortgage Corp. USA, the Owner Trustee, the Issuer, Advanta
Mortgage Conduit Services, Inc. and the Indenture Trustee.
As an additional inducement to the Insurer to issue the
Policies, and as security for the performance by the Issuer of the Insurer
Issuer Secured Obligations and as security for the performance by the Issuer of
the Indenture Trustee Issuer Secured Obligations, the Issuer has agreed to grant
and assign the Collateral (as defined below) to the Indenture Trustee for the
benefit of the Issuer Secured Parties, as their respective interests may appear.
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GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, for the benefit of the Issuer Secured Parties, all of the Issuer's
right, title and interest in and to the following (collectively, the
"Collateral"): (i) certain adjustable-rate home equity revolving credit line
loans (the "HELOC Mortgage Loans") (including any Additional Balances) made or
to be made under certain Credit Line Agreements and conveyed to the Issuer; (ii)
certain fixed-rate closed-end high-loan-to-value junior mortgage loans or deeds
of trust (the "HLTV Mortgage Loans" and, together with the HELOC Mortgage Loans,
the "Mortgage Loans") conveyed to the Issuer; (iii) all collections in respect
of the Mortgage Loans received after the related Cut-Off Date (excluding
payments in respect of accrued interest due prior to the Cut-Off Date); (iv)
property that secured a Mortgage Loan that has been acquired by foreclosure or
deed in lieu of foreclosure; (v) all rights of the Sponsor under any hazard
insurance policies covering the Mortgaged Properties; (vi) the Policies; (vii)
all amounts on deposit from time to time in the Note Account and the Reserve
Account; (viii) all amounts on deposit from time to time in the Principal and
Interest Account (excluding any investment earnings thereon); (ix) all rights of
the Sponsor under the Purchase Agreement assigned to the Issuer pursuant to the
Sale and Servicing Agreement (including all of the Sponsor's rights and remedies
in the event of certain breaches by the Originators of their respective
representations and warranties under the Purchase Agreement); (x) all rights of
the Issuer under the Sale and Servicing Agreement; (xi) all Mortgage Files and
other documents relating to the foregoing; and (xii) any and all proceeds of the
foregoing.
The foregoing Grant is made in trust to the Indenture Trustee,
for the benefit of the Holders of the Notes and of the Insurer. The Indenture
Trustee hereby acknowledges such Grant, accepts the trusts under this Indenture
in accordance with the provisions of this Indenture and agrees to perform the
duties required of it by this Indenture to the best of its ability to the end
that the interests of such parties, recognizing the priorities of their
respective interests, may be adequately and effectively protected.
ARTICLE I.
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Except as otherwise specified
herein, the following terms have the respective meanings set forth below for all
purposes of this Indenture. In addition, other capitalized terms used herein and
not defined herein shall have their respective meanings as set forth in the Sale
and Servicing Agreement.
"Accelerated Principal Payments": With respect to any Payment
Date, a payment received as a payment of principal by the Noteholders of each
Class of Class A Notes, for the purpose of increasing the related
Overcollateralization Amount to the related Specified Overcollateralization
Amount applicable to such Payment Date, and to be paid from the Excess
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Cashflow with respect to the related Pool, and equal to the lesser of (x) the
amount of such Excess Cashflow and (y) the Overcollateralization Deficiency
Amount for the related Pool;
"Account": Any account established in accordance with Section
8.3 hereof or Section 4.8 of the Sale and Servicing Agreement.
"Act": has the meaning specified in Section 11.3(a).
"Additional Balance": As to any HELOC Loan and day, the
aggregate amount of all Draws conveyed to the Trust with respect to the HELOC
Pool pursuant to Section 2.1 of the Sale and Servicing Agreement.
"Advanta Holding Trust": The Trust created pursuant to the
Holding Trust Agreement.
"Affiliate": means, with respect to any specified Person, any
other Person controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" means the power to direct
the management and policies of a Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AMHC": Advanta Mortgage Holding Company, a Delaware
corporation and the corporate parent of Advanta Mortgage Corp. USA, and the
indirect corporate parent of Advanta Mortgage Conduit Services, Inc.
"Authorized Newspapers": Any of the following, The Wall Street
Journal, the New York Times, the Washington Post, the Los Angeles Times or such
other newspaper determined by the Indenture Trustee in its sole judgment.
"Authorized Officer": With respect to any Person, any person
who is authorized to act for such Person in matters relating to this Indenture,
and whose action is binding upon such Person and, with respect to the Indenture
Trustee, the Master Servicer and the Sponsor, initially including those
individuals whose names appear on the lists of Authorized Officers delivered on
the Closing Date.
"Available Funds": The HELOC Available Funds or the HLTV
Available Funds.
"Billing Cycle": With respect to any Mortgage Loan and
Remittance Period, the billing period specified in the related Underlying
Mortgage Note and with respect to which amounts billed are received during such
Remittance Period.
"Book Entry Notes" means a beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.9.
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"Business Day": Any day that is not a Saturday, Sunday or
other day on which the Insurer or commercial banking institutions in the State
of New York or in the city in which the principal Corporate Trust Office of the
Indenture Trustee is located, are authorized or obligated by law or executive
order to be closed.
"Certificates": As defined in the Trust Agreement.
"Certificate of Trust": means the certificate of trust of the
Issuer substantially in the form of Exhibit B to the Trust Agreement.
"Certificateholders": The holders of the Certificates issued
pursuant to the Trust Agreement.
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
"Charged-Off Loan": An HLTV Mortgage Loan which is more than
180 consecutive days delinquent, or which has become a Liquidated Mortgage Loan.
"Class A Interest Distribution Amount": As applicable, the
Class A-1 Interest Distribution Amount or the Class A-2 Interest Distribution
Amount.
"Class A Interest Rate": As applicable, the Class A-1 Interest
Rate or the Class A-2 Interest Rate.
"Class A Note": Any of the Class A-1 Notes or the Class A-2
Notes.
"Class A Notes": Collectively, the Class A-1 Notes and the
Class A-2 Notes.
"Class A Note Balance": The Class A Principal Balance.
"Class A Principal Balance": As of any time of determination,
the Class A-1 Principal Balance and the Class A-2 Principal Balance.
"Class A Scheduled Principal Distribution Amount": As
applicable, the Class A-1 Scheduled Principal Distribution Amount or the Class
A-2 Scheduled Principal Distribution Amount.
"Class A-1 Deficiency Amount": (a) For any Payment Date, any
shortfalls in the HELOC Total Available Funds to pay, the sum of (i) the Class
A-1 Interest Distribution Amount (excluding any Class A-1 Net Funds Cap
Carry-Forward Amounts, any related Prepayment Interest Shortfalls and any
related Relief Act Shortfalls), and (ii) the HELOC Pool Overcollateralization
Deficit and (b) on the Class A-1 Final Scheduled Payment Date, any shortfall in
the HELOC Total Available Funds to pay the outstanding Class A-1 Principal
Balance.
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"Class A-1 Final Scheduled Payment Date": The Payment Date in
October 25, 2022 whereby the Class A-1 Noteholders shall be entitled to receive
a payment of principal in an amount equal to the outstanding Class A-1 Principal
Balance. The Class A-1 Final Scheduled Payment Date is the date which is one
year after the date which is the latest possible maturity date of a HELOC
Mortgage Loan which amortizes according to its terms.
"Class A-1 Formula Rate": For any Interest Accrual Period, (x)
with respect to any Payment Date which occurs on or prior to the Optional
Redemption Date for the Class A-1 Notes, LIBOR plus 0.28% per annum and (y) for
any Payment Date thereafter, LIBOR plus 0.56% per annum.
"Class A-1 Interest Distribution Amount": With respect to any
Payment Date, the product of (x) one-twelfth of the Class A-1 Interest Rate
applicable to such Payment Date and (y) the Class A-1 Principal Balance
immediately prior to such Payment Date (based on a 360-day year and the actual
number of days in the prior calendar month).
"Class A-1 Interest Rate": As to any Payment Date, the lesser
of (i) the Class A-1 Formula Rate and (ii) the Class A-1 Net Funds Cap Rate.
"Class A-1 Maximum Principal Payment": With respect to any
Payment Date, the Fixed Allocation Percentage for the Class A-1 Notes of the
Principal Collections with respect to the Class A-1 Notes relating to such
Payment Date.
"Class A-1 Net Funds Cap Carry-Forward Amount": In the event
that, on any Payment Date, the Class A-1 Net Funds Cap Rate is less than the
Class A-1 Formula Rate (i.e., the Class A-1 Interest Rate equals the Class A-1
Net Funds Cap Rate), the excess of the amount of interest due based on the Class
A-1 Formula Rate, over the interest due based on the Class A-1 Net Funds Cap
Rate, together with interest thereon at the then-applicable Class A-1 Formula
Rate.
"Class A-1 Net Funds Cap Rate": For any Interest Accrual
Period, (x) the fraction, expressed as an annual percentage rate, (i) the
numerator of which is twelve times the interest due on the HELOC Mortgage Loans
during the prior Remittance Period, net of the amount of related Prepayment
Interest Shortfalls, related Relief Act Shortfalls, the HELOC Servicing Fee, the
Indenture Trustee's Fee, the Owner Trustee's Fee and the Premium Amount for the
Class A-1 Notes for the related Remittance Period and (ii) the denominator of
which is the HELOC Pool Principal Balance as of the opening of such prior
Remittance Period (y) less, commencing on the seventh Payment Date, 0.50%.
"Class A-1 Net Principal Collections": The excess of (x)
Principal Collections with respect to the HELOC Pool over (y) the aggregate
amount of all Additional Balances arising during the related Remittance Period;
provided, however, that, in no event will Class A-1 Net Principal Collections be
less than zero with respect to any Payment Date.
"Class A-1 Note": Any Note designated as the "Class A-1 Asset
Backed Note" on the face thereof in substantially the form of Exhibit A hereto.
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"Class A-1 Noteholder(s)": means any Holder of a Class A-1
Note.
"Class A-1 Optional Redemption Date": The date on which the
Sponsor or the Insurer, as applicable, exercises its right of optional
redemption of the Class A-1 Notes pursuant to Section 10.1(b) herein.
"Class A-1 Policy": The note guaranty insurance policy with
respect to the Class A-1 Notes, dated September 30, 1998, issued by the Insurer
to the Indenture Trustee for the benefit of the Class A-1 Noteholders.
"Class A-1 Principal Balance": As of any time of
determination, the Original Class A-1 Principal Balance of the Class A-1 Notes,
less any amounts actually distributed therefore as principal thereon to the
Class A-1 Notes on all prior Payment Dates.
"Class A-1 Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all payments made pursuant to the Class A-1 Policy by the Insurer
and in each case not previously repaid to the Insurer pursuant to Section
8.6(c)(vi) hereof plus (ii) interest accrued on each such payment made pursuant
to the Class A-1 Policy not previously repaid calculated at the Late Payment
Rate from the date the Insurer made the related payment and (y)(i) any other
amounts then due and owing to the Insurer under the Insurance Agreement plus
(ii) interest on such amounts at the Late Payment Rate. The Insurer shall notify
the Indenture Trustee and the Sponsor of the amount of any Class A-1
Reimbursement Amount.
"Class A-1 Scheduled Principal Distribution Amount": On any
Payment Date during the Managed Amortization Period, the excess (but in no event
less than zero) of (x) the lesser of (i) the Class A-1 Maximum Principal Payment
and (ii) the Class A-1 Net Principal Collections over (y) the HELOC Pool
Overcollateralization Reduction Amount, if any, with respect to such Payment
Date. Beginning with the first Payment Date in the Rapid Amortization Period,
the excess of (x) the Class A-1 Maximum Principal Payment over (y) the HELOC
Pool Overcollateralization Reduction Amount, if any, with respect to such
Payment Date.
"Class A-2 Deficiency Amount": For any Payment Date, any
shortfalls in the HLTV Total Available Funds to pay the sum of (a) the Class A-2
Interest Distribution Amount (excluding any related Prepayment Interest
Shortfalls and any related Relief Act Shortfalls) and (b) the HLTV Pool
Overcollateralization Deficit.
"Class A-2 Final Scheduled Payment Date": The Payment Date in
October 25, 2024 whereby the Class A-2 Noteholders shall be entitled to receive
a payment of principal in an amount equal to the outstanding Class A-2 Principal
Balance. The Class A-2 Final Scheduled Payment Date is the date which is one
year after the date which is the latest possible maturity date of an HLTV
Mortgage Loan which amortizes according to its terms.
"Class A-2 Interest Distribution Amount": With respect to any
Payment Date, the product of (x) one-twelfth of the Class A-2 Interest Rate
applicable to such Payment Date and (y) the Class A-2 Principal Balance
immediately prior to such Payment Date (based on a 30-day month and a 360-day
year).
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"Class A-2 Interest Rate": As to any Payment Date which occurs
on or prior to the Class A-2 Optional Redemption Date, 6.55%, and 7.05% for any
Payment Date thereafter.
"Class A-2 Note": Any Note designated as the "Class A-2 Asset
Backed Note" on the face thereof in substantially the form of Exhibit B hereto.
"Class A-2 Noteholder(s)": Any Holder of a Class A-2 Note.
"Class A-2 Optional Redemption Date": The date on which the
Sponsor or the Insurer, as applicable, exercises its right of optional
redemption of the Class A-2 Notes pursuant to Section 10.1(c) herein.
"Class A-2 Policy": The note guaranty insurance policy with
respect to the Class A-2 Notes, dated September 30, 1998, issued by the Insurer
to the Indenture Trustee for the benefit of the Class A-2 Noteholders.
"Class A-2 Principal Balance": As of any time of
determination, the Original Class A-2 Principal Balance of the Class A-2 Notes,
less any amounts actually distributed theretofore as principal thereon to the
Class A-2 Notes on all prior Payment Dates.
"Class A-2 Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all payments made pursuant to the Class A-2 Policy by the Insurer
and in each case not previously repaid to the Insurer pursuant to Section
8.6(c)(vi) hereof plus (ii) interest accrued on each such payment made pursuant
to the Class A-2 Policy not previously repaid calculated at the Late Payment
Rate from the date the Insurer made the related payment made pursuant to the
Class A-2 Policy and (y)(i) any other amounts then due and owing to the Insurer
under the Insurance Agreement plus (ii) interest on such amounts at the Late
Payment Rate. The Insurer shall notify the Indenture Trustee and the Sponsor of
the amount of any Class A-2 Reimbursement Amount.
"Class A-2 Scheduled Principal Distribution Amount": On any
Payment Date, Principal Collections with respect to the Class A-2 Notes less the
HLTV Pool Overcollateralization Reduction Amount.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date": September 30, 1998.
"Code": The Internal Revenue Code of 1986, as amended, and any
successor statute.
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"Collateral": As defined in the Recitals hereof.
"Combined Loan-to-Value Ratio": (i) With respect to any HELOC
Mortgage Loan as of any date, the percentage equivalent of a fraction, the
numerator of which is the sum of (A) the Credit Limit and (B) the outstanding
principal balance as of the date of execution of the related Credit Line
Agreement (or as of any subsequent date, if any, as of which such outstanding
principal balance may be determined in connection with an increase in the Credit
Limit for such HELOC Mortgage Loan) of any mortgage loan or mortgage loans that
are senior in priority to the HELOC Mortgage Loan and which is secured by the
same Mortgaged Property and the denominator of which is the lesser of (C) the
Appraised Value of the related Mortgaged Property as set forth in the Mortgage
File on such date of execution or on such subsequent date, if any, or (D) in the
case of a Mortgaged Property purchased within one year of such date of
execution, the purchase price thereof. (ii) With respect to any HLTV Mortgage
Loan as of any date, the percentage equivalent of a fraction, the numerator of
which is the sum of (W) the Original Principal Balance of the HLTV Mortgage Loan
and (X) any outstanding principal balances of mortgage loans senior to such HLTV
Mortgage Loan (calculated at the date of origination of the HLTV Mortgage Loan)
and the denominator of which is the lesser of (Y) the Appraised Value of the
related Mortgaged Property as set forth in the loan files at such date of
origination and (Z) in the case of a Mortgaged Property purchased within one
year of the origination of the related HLTV Mortgage Loan, the purchase price of
such Mortgaged Property.
"Controlling Party" means the Insurer, so long as no Insurer
Default shall have occurred and be continuing, and the Indenture Trustee, for so
long as an Insurer Default shall have occurred and be continuing; provided,
however, that the Insurer's rights as Controlling Party shall be immediately
reinstated following the cure of any Insurer Default.
"Corporate Trust Office": The Indenture Trustee's office at 3
Park Plaza, 16th Floor, Irvine, California 92614.
"Credit Limit": As to any HELOC Mortgage Loan, the maximum
principal balance permitted under the terms of the related Credit Line
Agreement.
"Credit Limit Utilization Rate": As to any HELOC Mortgage
Loan, the percentage equivalent of a fraction the numerator of which is the
Principal Balance for such HELOC Mortgage Loan and the denominator of which is
the related Credit Limit.
"Credit Line Agreement": With respect to any HELOC Mortgage
Loan, the related home equity line of credit agreement and promissory note
executed by the related Mortgagor and any amendment or modification thereof.
"Crossover Amount": As defined in Section 8.6(c)(viii).
"Cut-Off Date": With respect to each Mortgage Loan, the
opening of business on September 1, 1998. With respect to each Qualified
Replacement Mortgage, the Replacement Cut-off Date related to such Qualified
Replacement Mortgage.
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"Cut-Off Date Pool Balance": The actual aggregate Principal
Balances (calculated as of the Cut-Off date or, if later, the date of
origination) of the HELOC Mortgage Loans included in the HELOC Pool as of the
Closing Date and of the HLTV Mortgage Loans included in the HLTV Pool as of the
Closing Date.
"Cut-Off Date Principal Balance": With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the related Cut-Off Date.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Minimum Monthly Payment
due on such Mortgage Loan.
"Default": means any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding Principal Balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the United
States Bankruptcy Code.
"Definitive Notes" has the meaning specified in Section 2.9.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the
Principal and Interest Account, an institution whose deposits are insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
long-term deposits of which shall be rated (x) A or better by S&P and (y) A2 or
better by Moody's and in one of the two highest short-term rating categories for
S&P and Moody's, unless otherwise approved in writing by the Insurer and each of
Moody's and S&P, and which is any of the following: (i) a federal savings and
loan association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a bank
holding company, or (v) approved in writing by the Insurer, Moody's and S&P and,
in each case acting or designated by the Master Servicer as the depository
institution for the Principal and Interest Account; provided, however, that any
such institution or association shall have combined
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capital, surplus and undivided profits of at least $100,000,000. Notwithstanding
the foregoing, the Principal and Interest Account may be held by an institution
otherwise meeting the preceding requirements except that the only applicable
rating requirement shall be that the unsecured and uncollateralized debt
obligations thereof shall be rated Baa3 or better by Moody's or BBB or better by
S&P and has a short-term rating of A-1 by S&P or better or if such institution
has trust powers and the Principal and Interest Account is held by such
institution in its trust capacity and not in its commercial capacity.
"Determination Date": As to each Payment Date, the third
Business Day next preceding such Payment Date or such earlier day as shall be
agreed to by the Insurer and Indenture Trustee.
"Direct Participant" or "DTC Participant": Any broker-dealer,
bank or other financial institution for which the Depository holds the Class A
Notes from time to time as a securities depository.
"Draw": With respect to any HELOC Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the related Cut-Off Date in accordance
with the related Credit Line Agreement.
"Draw Period": With respect to any HELOC Mortgage Loan, the
period of time specified in the related Credit Line Agreement whereby a
Mortgagor may make a Draw under the related Credit Line Agreement, not to exceed
three or five years (as applicable) unless extended pursuant to such Credit Line
Agreement and the Sale and Servicing Agreement, such extension to be limited by
the provisions set forth in Section 2.4 of the Sale and Servicing Agreement.
"Eligible Investments": Those investments so designated
pursuant to Section 8.8 hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excess Cashflow": With respect to any Pool and Payment Date,
the Available Funds with respect to such Pool for such Payment Date which remain
on deposit in the Note Account after taking into account the distributions
listed in clauses (i) through (vi) of Section 8.6(c) hereof with respect to such
Pool on such Payment Date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
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"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Mortgaged Property.
"Final Scheduled Payment Date": The Class A-1 Final Scheduled
Payment Date or the Class A-2 Final Scheduled Payment Date.
"Fixed Allocation Percentage": With respect to the HELOC
Mortgage Loans, 98%; with respect to the HLTV Mortgage Loans, 100%.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately- owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"Grant" means mortgage, pledge, bargain, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"HELOC Available Funds": With respect to any Payment Date, the
amount then on deposit in the Note Account with respect to the HELOC Pool, after
taking into account the deposits thereto made pursuant to Section 8.6(a) hereof
(exclusive of the amount of any related Insured Payment then on deposit in the
Note Account), less the sum of the amounts described in clauses (i) and (ii) of
Section 8.6(c) with respect to the HELOC Pool on such Payment Date.
"HELOC Cash O/C Amount": As defined in Section 8.5(a).
"HELOC Mortgage Loans": Those Mortgage Loans consisting solely
of adjustable-rate home equity revolving credit line loans under the Credit Line
Agreements.
"HELOC Pool": The pool of HELOC Mortgage Loans identified in
the related Schedules of Mortgage Loans as having been assigned to the HELOC
Pool, including any Qualified Replacement Mortgages delivered in replacement
thereof or Qualified Overcollateralization Mortgage.
"HELOC Pool Net Principal Collections": With respect to any
Payment Date, the excess of (x) the related Principal Collections with respect
to the related Remittance Period over (y) the aggregate principal amount of all
Additional Balances arising during such related Remittance Period; provided that
in no event will HELOC Pool Net Principal Collections be less than zero with
respect to any Payment Date.
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"HELOC Pool Overcollateralization Amount": As of any Payment
Date, the excess, if any, of (x) the HELOC Pool Principal Balance as of such
Payment Date over (y) the Class A-1 Principal Balance as of such Payment Date
(after taking into account reductions therein on such Payment Date).
"HELOC Pool Overcollateralization Deficiency Amount": With
respect to any Payment Date, the difference, if any, between (i) the HELOC Pool
Specified Overcollateralization Amount applicable to such Payment Date and (ii)
the HELOC Pool Overcollateralization Amount applicable to such Payment Date.
"HELOC Pool Overcollateralization Deficit": With respect to
any Payment Date, the amount, if any, by which (i) the aggregate Class A-1
Principal Balance, after taking into account the payment to the Class A-1
Noteholders of all principal from sources other than the Class A-1 Policy on
such Payment Date, exceeds (ii) the HELOC Pool Principal Balance as of such
Payment Date.
"HELOC Pool Overcollateralization Reduction Amount": As
defined in Section 8.5(d)(i) hereof.
"HELOC Pool Principal Balance": With respect to any date, the
aggregate Principal Balances of the HELOC Mortgage Loans as of such date.
"HELOC Pool Specified Overcollateralization Amount": As
specified in the Insurance Agreement.
"HELOC Principal Balance": As to any HELOC Mortgage Loan,
other than a Liquidated Mortgage Loan, and as of any date, the related Cut-Off
Date Principal Balance, plus (i) any Additional Balance in respect of such HELOC
Mortgage Loan, minus (ii) all collections credited as principal against the
HELOC Principal Balance of any such HELOC Mortgage Loan in accordance with the
related Credit Line Agreement prior to such day. For purposes of this
definition, a Liquidated Mortgage Loan shall be deemed to have a HELOC Principal
Balance of zero as of the first day of the Remittance Period following the
Remittance Period in which such HELOC Mortgage Loan becomes a Liquidated
Mortgage Loan and at all times thereafter.
"HELOC Servicing Fee": With respect to any Payment Date, the
product of (i) one-twelfth of the HELOC Servicing Fee Rate and (ii) the
aggregate Principal Balance of the HELOC Mortgage Loans on the first day of the
Remittance Period preceding such Payment Date (or at the Cut-Off Date with
respect to the first Payment Date).
"HELOC Servicing Fee Rate": 0.50% per annum.
"HELOC Total Available Funds": With respect to any Payment
Date, the sum of (i) the HELOC Available Funds, (ii) any Crossover Amount
available from the HLTV Pool, and (iii) the HELOC Cash O/C Amount, in each case
as of such Payment Date.
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"HLTV Available Funds": With respect to any Payment Date, the
amount then on deposit in the Note Account with respect to the HLTV Pool, after
taking into account the deposits thereto made pursuant to Section 8.6(b) hereof
(exclusive of the amount of any related Insured Payment then on deposit in the
Note Account), less the sum of the amounts described in clauses (i) and (ii) of
Section 8.6(c) with respect to the HLTV Pool on such Payment Date.
"HLTV Cash O/C Amount": As defined in Section 8.5(a).
"HLTV Mortgage Loans": Those Mortgage Loans consisting solely
of fixed-rate closed-end high-loan-to-value junior Mortgage Loans under the
Mortgage Notes.
"HLTV Pool": The pool of HLTV Mortgage Loans identified in the
related Schedules of Mortgage Loans as having been assigned to the HLTV Pool,
including any Qualified Replacement Mortgages delivered in replacement thereof
or Qualified Overcollateralization Mortgages.
"HLTV Pool Overcollateralization Amount": As of any Payment
Date, the excess, if any, of (x) the HLTV Pool Principal Balance as of such
Payment Date and (y) the Class A-2 Principal Balance as of such Payment Date
(after taking into account reductions therein on such Payment Date).
"HLTV Pool Overcollateralization Deficiency Amount": With
respect to any Payment Date, the difference, if any, between (i) the HLTV Pool
Specified Overcollateralization Amount applicable to such Payment Date and (ii)
the HLTV Pool Overcollateralization Amount applicable to such Payment Date.
"HLTV Pool Overcollateralization Deficit": With respect to any
Payment Date, the amount, if any, by which (i) the aggregate Class A-2 Principal
Balance, after taking into account the payment to the Class A-2 Noteholders of
the Class A-2 Notes of all principal from sources other than the Class A-2
Policy on such Payment Date, exceeds (ii) the HLTV Pool Principal Balance as of
such Payment Date.
"HLTV Pool Overcollateralization Reduction Amount": As defined
in Section 8.5(d)(ii) hereof.
"HLTV Pool Principal Balance": With respect to any date, the
aggregate Principal Balances of the HLTV Mortgage Loans as of such date.
"HLTV Pool Specified Overcollateralization Amount": As
specified in the Insurance Agreement.
"HLTV Principal Balance": As to any HLTV Mortgage Loan, other
than a Liquidated Mortgage Loan, and as of any date, the related Mortgage Loan
Cut-Off Date Principal Balance minus all collections credited as principal
against the HLTV Principal Balance of such HLTV Mortgage Loan in accordance with
the related Mortgage Note prior to such day. For purposes of this definition, a
Liquidated Mortgage Loan shall be deemed to have an HLTV
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Principal Balance of zero as of the first day of the Remittance Period following
the Remittance Period in which such HLTV Mortgage Loan becomes a Liquidated
Mortgage Loan and at all times thereafter.
"HLTV Servicing Fee": With respect to any Payment Date, the
product of (i) one-twelfth of the HLTV Servicing Fee Rate and (ii) the aggregate
Principal Balance of the HLTV Mortgage Loans on the first day of the Remittance
Period preceding such Payment Date (or at the Cut-Off Date with respect to the
first Payment Date).
"HLTV Servicing Fee Rate": 0.75% per annum.
"HLTV Total Available Funds": With respect to any Payment
Date, the sum of (i) the HLTV Available Funds, (ii) any Crossover Amount
available from the HELOC Pool, and (iii) the HLTV Cash O/C Amount, in each case
as of such Payment Date.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Note Register.
"Holding Trust Agreement": The Trust Agreement, dated as of
September 1, 1998, between the Sponsor and the Owner Trustee.
"Indebtedness": With respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Indemnification Agreement": The Indemnification Agreement
dated as of September 25, 1998 among the Sponsor, the Originators, the Insurer
and the Underwriter.
"Indenture" means this Indenture as amended and supplemented
from time to time.
"Indenture Trustee": Bankers Trust Company of California,
N.A., located on the date of execution of this Indenture at 3 Park Plaza, 16th
Floor, Irvine, California 92614, not in its individual capacity but solely as
Indenture Trustee under this Indenture, and any successor hereunder.
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"Indenture Trustee's Fee": With respect to any Payment Date,
the product of (x) one-twelfth of .015% and (y) the Pool Balance as of the end
of the immediately preceding Remittance Period.
"Indenture Trustee's Fee Rate": .015% per annum.
"Indenture Trustee Issuer Secured Obligations": All amounts
and obligations which the Issuer may at any time owe to the Indenture Trustee
for the benefit of the Noteholders under this Indenture or the Notes.
"Independent": When used with respect to any specified Person,
that the person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Sponsor and any Affiliate of any of the foregoing persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Sponsor or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Sponsor or any Affiliate of any of the foregoing Persons as
an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions.
"Independent Certificate": A certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1, prepared
by an Independent appraiser or other expert appointed pursuant to an Issuer
Order and approved by the Indenture Trustee in the exercise of reasonable care,
and such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is Independent
within the meaning thereof.
"Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in the Class A Notes.
"Initial Premiums": The two initial premiums as described in
the Insurance Agreement payable by AMHC to the Trust to the Insurer in
consideration of the delivery to the Indenture Trustee of each of the Policies.
"Initial Specified Overcollateralization Amount": The HELOC
Pool Initial Specified Overcollateralization Amount and the HLTV Pool Initial
Specified Overcollateralization Amount, as set forth in the Insurance Agreement.
"Insurance Agreement": As defined on page 1 of this Indenture.
"Insurance Policy": Any hazard, title or primary mortgage
insurance policy relating to a Mortgage Loan, but shall not include the
Policies.
"Insurance Proceeds": Proceeds paid by any insurer (other than
the Insurer) pursuant to any Insurance Policy covering a Mortgage Loan, or
amounts required to be paid by the Master Servicer pursuant to the last sentence
of the first paragraph of Section 4.11(b) of the Sale and Servicing Agreement,
or the penultimate sentence of Section 4.11(c) of the Sale and Servicing
Agreement, net of any component thereof (i) covering any expenses incurred by or
on
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behalf of the Master Servicer in connection with obtaining such proceeds, (ii)
that is applied to the restoration or repair of the related Mortgaged Property,
(iii) released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures, or (iv) required to be paid to any holder of a mortgage
senior to such Mortgage Loan.
"Insured Payment": With respect to the related Class of Notes
and as of any Payment Date, (i) any related Deficiency Amount and (ii) any
related Preference Amount.
"Insurer": MBIA Insurance Corporation, a New York stock
insurance company, or any successor thereto, as issuer of the Policy.
"Insurer Default" means the failure and continuance of such
failure by the Insurer to make a payment required under the Class A-1 Policy or
the Class A-2 Policy in accordance with the terms thereof.
"Insurer Issuer Secured Obligations" means all amounts and
obligations which the Issuer may at any time owe to or on behalf of the Insurer
under this Indenture, the Insurance Agreement or any other Operative Document.
"Interest Accrual Period": With respect to any Payment Date
for the Class A-1 Notes, the period from and including the prior Payment Date
(or, in the case of the October 1998 Payment Date, from and including the
Closing Date) to, but excluding, the current Payment Date, with interest being
computed on the basis of the actual number of days in such Interest Accrual
Period and a 360-day year. With respect to any Payment Date for the Class A-2
Notes, the period from and including the first day of the prior calendar month
to but excluding the first day of the calendar month in which such Payment Date
occurs, with interest being computed on the basis of a 30-day month and a
360-day year.
"Interest Collections": With respect to any Pool and for any
Payment Date, amounts collected during the related Remittance Period, including
the portion of Net Liquidation Proceeds allocated to interest pursuant to the
terms of the related Underlying Mortgage Notes, less the related Servicing Fee
for the related Remittance Period.
"Interest Determination Date": With respect to any Interest
Accrual Period for the Class A- 1 Notes (other than the initial Interest Accrual
Period), the second London Business Day preceding such first day of such
Interest Accrual Period.
"Interest Remittance Amount": With respect to the HELOC Pool,
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 HELOC Mortgage Loans (net of the HELOC Servicing Fee), except
that with respect to Prepaid Installments, interest shall be remitted in the
related Remittance Period and (ii) all Net Liquidation Proceeds actually
collected by the Master Servicer with respect to the HELOC Mortgage Loans during
the related Remittance Period (to the extent such Net Liquidation Proceeds
relate to interest). With respect to the HLTV Pool, 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 HLTV
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Mortgage Loans (net of the HLTV Servicing Fee), except that with respect to
Prepaid Installments, interest shall be remitted in the related Remittance
Period and (ii) all Net Liquidation Proceeds actually collected by the Master
Servicer with respect to the HLTV Mortgage Loans during the related Remittance
Period (to the extent such Net Liquidation Proceeds relate to interest).
"Issuer" means the party named as such in this Indenture until
a successor acceptable to the Insurer replaces it and, thereafter, means the
successor and, for purposes of any provision contained herein and required by
the TIA, each other obligor on the Notes.
"Issuer Order" and "Issuer Request" means a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"Issuer Secured Obligations" means the Insurer Issuer Secured
Obligations and the Indenture Trustee Issuer Secured Obligations.
"Issuer Secured Parties" means each of the Indenture Trustee
in respect of the Indenture Trustee Issuer Secured Obligations and the Insurer
in respect of the Insurer Issuer Secured Obligations.
"Late Payment Rate": For any Payment Date, the rate of
interest, as it is publicly announced by Citibank, N.A. or its successor at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date such change is announced by
Citibank, N.A. or its successor) plus 2%. The Late Payment Rate shall be
computed on the basis of a year of 365 days calculating the actual number of
days elapsed. In no event shall the Late Payment Rate exceed the maximum rate
permissible under any applicable law limiting interest rates.
"LIBOR": With respect to any Interest Accrual Period for the
Class A-1 Notes, the rate determined by the Indenture Trustee on the related
Interest Determination Date appearing on the Telerate Screen Page 3750, as of
11:00 AM, London Time, on the second LIBOR Business Day prior to the first day
of such Interest Accrual Period. If such rate does not appear on such page (or
such other page as may replace that page on that service, or if such service is
no longer offered, such other service for displaying LIBOR or comparable rates
as may be selected by the Sponsor after consultation with the Indenture
Trustee), the rate will be the Reference Bank Rate.
"LIBOR Business Day": Any day other than (i) a Saturday or a
Sunday or (ii) a day on which banking institutions in the State of New York or
in the city of London, England are required or authorized by law to be closed.
"Lifetime Rate Cap": With respect to each HELOC Mortgage Loan
for which the related Credit Line Agreement provides for a lifetime rate cap,
the maximum Loan Rate permitted over the life of such HELOC Mortgage Loan under
the terms of the related Credit Line Agreement.
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"Liquidated Mortgage Loan": As defined in the Sale and
Servicing Agreement.
"Liquidation Expenses": Expenses which are incurred by the
Master Servicer or any Sub- Servicer in connection with the liquidation of any
defaulted Mortgage Loan, such expenses, including, without limitation, legal
fees and expenses, and any unreimbursed Servicing Advances expended by the
Master Servicer or any Sub-Servicer pursuant to Section 4.9 of the Sale and
Servicing Agreement with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated
Mortgage Loan, any amounts (including the proceeds of any Insurance Policy but
excluding any amounts drawn on the related Policy) recovered by the Master
Servicer in connection with such Liquidated Mortgage Loan, whether through
trustee's sale, foreclosure sale or otherwise.
"Loan Rate": With respect to any HELOC Mortgage Loan and as of
any day, the per annum rate of interest applicable under the related Credit Line
Agreement to the calculation of interest for such day on the Principal Balance
of such HELOC Mortgage Loan. With respect to any HLTV Mortgage Loan and as of
any day, the per annum rate of interest borne by each HLTV Mortgage Loan
applicable to the calculation of interest for such day on the Principal Balance
of such HLTV Mortgage Loan.
"Loan Rate Cap": With respect to each HELOC Mortgage Loan, the
lesser of (i) the Lifetime Rate Cap, if any, or (ii) the applicable state usury
ceiling, if any.
"London Business Day": A day on which banks are open for
dealing in foreign currency, and exchange in London and New York City.
"Managed Amortization Period": The Period commencing on
October 26, 1998 and ending on the earlier to occur of (x) the October, 2001
Payment Date and (y) the Payment Date which immediately precedes the occurrence
of a Rapid Amortization Event.
"Margin": With respect to each HELOC Mortgage Loan with an
adjustable rate, the fixed percentage amount set forth in the related Credit
Line Agreement which amount is added to Prime in accordance with the terms of
the related Credit Line Agreement to determine, on each Interest Determination
Date, the Loan Rate for such HELOC Mortgage Loan, subject to any maximum.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Master Servicer Affiliate": A Person (i) controlling,
controlled by or under common control with the Master Servicer and (ii) which is
qualified to service residential mortgage loans.
"Minimum Monthly Payment": With respect to any Mortgage Loan
and any month, the minimum amount required to be paid by the related Mortgagor
in that month.
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"Monthly Remittance Amount": With respect to the HELOC Pool,
as of any Remittance Date, the sum of (i) the Interest Remittance Amount with
respect to the HELOC Pool for such Remittance Date and (ii) the Principal
Remittance Amount with respect to the HELOC Pool for such Remittance Date. With
respect to the HLTV Pool, as of any Remittance Date, the sum of (i) the Interest
Remittance Amount with respect to the HLTV Pool for such Remittance Date and
(ii) the Principal Remittance Amount with respect to the HLTV Pool for such
Remittance Date.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing an Underlying Mortgage Note.
"Mortgage Files": As defined in the Sale and Servicing
Agreement.
"Mortgage Loans": As defined in the Sale and Servicing
Agreement.
"Mortgage Note": The note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under an HLTV Mortgage Loan.
"Mortgagor": The obligor on an Underlying Mortgage Note.
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances and accrued and unpaid Servicing Fees through
the date of liquidation relating to such Liquidated Mortgage Loan. In no event
shall Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan be
less than zero.
"Note" means a Class A Note.
"Note Account": The Note Account established in accordance
with Section 8.3 hereof and maintained by the Indenture Trustee.
"Note Owner" means, with respect to a Book-Entry Note, the
person who is the owner of such Book-Entry Note or following the issuance of
Definitive Notes, the registered owner of the Notes.
"Note Paying Agent" means the Indenture Trustee or any other
Person that meets the eligibility standards for the Indenture Trustee specified
in Section 6.11 and is authorized by the Issuer to make payments to and
distributions from the Note Account, including payment of principal of or
interest on the Notes on behalf of the Issuer.
"Note Principal Balance": Either the Class A-1 Principal
Balance or the Class A-2 Principal Balance, as applicable.
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"Note Register" and "Note Registrar" have the respective
meanings specified in Section 2.3.
"Officer's Certificate": A certificate signed by any
Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 and TIA
Section 314, and delivered to the Indenture Trustee.
"Operative Documents": Collectively, this Indenture, the Trust
Agreement, the Holding Trust Agreement, the Sale and Servicing Agreement, the
Policies, the Class A Notes, the Purchase Agreement, the Indemnification
Agreement and the Insurance Agreement.
"Opinion of Counsel" means one or more opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and, if addressed to the Insurer, satisfactory to the
Insurer, and which shall comply with any applicable requirements of Section
11.1.
"Original Class A Principal Balance": $107,500.000.
"Original Class A-1 Principal Balance": $67,500,000.
"Original Class A-2 Principal Balance": $40,000,000.
"Original Principal Balance": With respect to each Credit Line
Agreement, the principal amount of such Credit Line Agreement or the mortgage
note relating to a Senior Lien, as the case may be, on the date of origination
thereof; and with respect to each Mortgage Note, the principal amount of such
Mortgage Note or the mortgage note relating to a Senior Lien, as the case may
be, on the date of origination thereof.
"Originators": Advanta National Bank and Advanta Finance Corp.
"Outstanding": With respect to all Notes, as of any date of
determination, all such Notes theretofore executed and delivered hereunder
except:
(i) Notes theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation;
(ii) Notes or portions thereof for which full and
final payment money in the necessary amount has been theretofore
deposited with the Indenture Trustee in trust for the Class A
Noteholders of such Notes;
(iii) Notes in exchange for or in lieu of which other
Notes have been executed and delivered pursuant to this Indenture,
unless proof satisfactory to the Indenture Trustee is presented that
any such Notes are held by a bona fide purchaser; and
(iv) Notes alleged to have been destroyed, lost or
stolen for which replacement Notes have been issued as provided for in
Section 2.4 hereof;
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provided, however, that to the extent of any payments made on the Notes by the
Insurer, such Notes shall be deemed to be "Outstanding" for purposes of
determining the Insurer's subrogation rights.
"Outstanding Amount": The aggregate principal amount of all
Notes that are Outstanding at the date of determination.
"Overcollateralization Amount": As applicable, the HELOC Pool
Overcollateralization Amount or the HLTV Pool Overcollateralization Amount.
"Overcollateralization Deficit": As applicable, the HELOC Pool
Overcollateralization Deficit or the HLTV Pool Overcollateralization Deficit.
"Overcollateralization Reduction Amount": As applicable, the
HELOC Pool Overcollateralization Reduction Amount or the HLTV Pool
Overcollateralization Reduction Amount.
"Owner Trustee": Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Owner Trustee's Fee": A fee which is separately agreed to
between the Sponsor and the Owner Trustee.
"Payment Date": Any date on which the Indenture Trustee is
required to make distributions to the Class A Noteholders, which shall be the
25th day of each month, commencing in the month following the Closing Date or,
if such day is not a Business Day, then on the next succeeding Business Day.
"Percentage Interest": As to any Class A Note that percentage,
expressed as a fraction, the numerator of which is the Class A Principal Balance
of such Class A Note as of the related Cut-Off Date and the denominator of which
is the Class A Principal Balance of the related Class A Notes; and as to any
Certificate, that Percentage Interest set forth on such Certificate.
"Person": Any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Policies": The Class A-1 Policy and the Class A-2 Policy.
"Policy Claim Amount": With respect to any Payment Date, an
amount equal to the related Deficiency Amount plus the related Preference
Amount.
"Pool": The HELOC Pool and the HLTV Pool.
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"Pool Balance": With respect to any date, the HELOC Pool
Principal Balance and the HLTV Pool Principal Balance, as applicable, as of such
date.
"Pool Factor": A seven-digit decimal which the Indenture
Trustee shall compute monthly expressing the related Class A Principal Balance
as of each Payment Date (after giving effect to any distribution of principal on
such Payment Date) as a proportion of the Original Class A Principal Balance for
the related Class. On the Closing Date, the Pool Factor for each Pool will be
1.0000000. Thereafter, the Pool Factor shall decline to reflect reductions in
the related Class A Principal Balance resulting from distributions of principal
to the related Class A Notes.
"Predecessor Note" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.4 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Preference Amount": As defined in the Policies.
"Premium Amount": With respect to the Class A-1 Notes and as
to any Payment Date, the product of (x) one-twelfth of the applicable Premium
Percentage and (y) the Class A-1 Principal Balance on such Payment Date (before
taking into account any distributions of the Class A-1 Scheduled Principal
Distribution Amount to be made on such Payment Date). With respect to the Class
A-2 Notes and as to any Payment Date, the product of (x) one-twelfth of the
applicable Premium Percentage and (y) the Class A-2 Principal Balance on such
Payment Date (before taking into account any distributions on the Class A-2
Scheduled Principal Distribution Amount to be made on such Payment Date.
"Premium Percentage": As defined in the Insurance Agreement.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan
which is received by the Master Servicer in advance of the scheduled due date
for the payment of such principal (other than the principal portion of any
Prepaid Installment), and the proceeds of any Insurance Policy which are to be
applied as a payment of principal on the related Mortgage Loan shall be deemed
to be Prepayments for all purposes of this Indenture.
"Prepayment Interest Shortfall": With respect to any
Remittance Period, for each Mortgage Loan that was the subject during the
related Remittance Period of a Prepayment, an amount equal to the excess, if
any, of (i) 30 days' interest on the Principal Balance of such Mortgage Loan as
of the first day of such Remittance Period at a per annum rate equal to the
applicable Loan Rate (or at such lower rate as may be in effect for such
Mortgage Loan pursuant
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to application of the Civil Relief Act, any Deficient Valuation and/or any Debt
Service Reduction) minus the applicable Servicing Fee over (ii) the amount of
interest actually remitted by the Mortgagor in connection with such Prepayment
less the applicable Servicing Fee for such Mortgage Loan in such month.
"Preservation Expenses": Expenditures made by the Master
Servicer or any Sub-Servicer in connection with a foreclosed Mortgage Loan prior
to the liquidation thereof, including, without limitation, expenditures for real
estate property taxes, hazard insurance premiums, property restoration or
preservation.
"Prime": The "prime" rate of interest charged from time to
time as set forth in the related Credit Line Agreement.
"Principal and Interest Account": Collectively, each principal
and interest account created by the Master Servicer or any Sub-Servicer pursuant
to Section 4.8(a) of the Sale and Servicing Agreement or pursuant to any
Sub-Servicing Agreement.
"Principal Balance": As of any date, the HELOC Principal
Balance and the HLTV Principal Balance.
"Principal Collections": With respect to a Pool and as to any
Payment Date, the sum of all payments by or on behalf of Mortgagors and any
other amounts constituting principal (including, but not limited to Substitution
Amounts and any portion of Insurance Proceeds or Net Liquidation Proceeds
allocable to principal of the applicable Mortgage Loan, but excluding
Foreclosure Profits) collected by the Master Servicer with respect to such Pool
under the related Mortgage Loans during the related Remittance Period. The terms
of the related Underlying Mortgage Notes shall determine the portion of each
payment in respect of a Mortgage Loan that constitutes principal or interest.
"Principal Remittance Amount": With respect to a Pool and as
of any Remittance Date, the sum, without duplication, of (i) the principal
actually collected by the Master Servicer with respect to the related Mortgage
Loans during the related Remittance Period, (ii) the related Principal Balance
of each such Mortgage Loan that either was repurchased by the relevant
Originator or purchased by the Master Servicer on such Remittance Date, to the
extent such related Principal Balance was actually deposited in the Principal
and Interest Account, (iii) any Substitution Amounts delivered by the related
Originator in connection with a substitution of a Mortgage Loan, to the extent
such Substitution Amounts were actually deposited in the Principal and Interest
Account on such Remittance Date, and (iv) all Net Liquidation Proceeds actually
collected by the Master Servicer with respect to the related Mortgage Loans
during the related Remittance Period (to the extent such Liquidation Proceeds
related to principal).
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"Prospectus": That certain Prospectus dated September 15, 1998
naming Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage Corp. USA as
registrants and describing
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certain mortgage loan asset-backed securities to be issued from time to time as
described in related Prospectus Supplements.
"Prospectus Supplement": That certain Prospectus Supplement
dated September 25, 1998, describing the Class A Notes issued by the Trust.
"Purchase Agreement" means the Purchase Agreement dated as of
September 1, 1998 between the Originators and the Sponsor with respect to the
Mortgage Loans.
"Rapid Amortization Commencement Date": The earlier of (i) the
Payment Date in October, 2001 and (ii) the Payment Date next succeeding the
Remittance Period in which a Rapid Amortization Event is deemed to occur
pursuant to Section 12.1.
"Rapid Amortization Event": As defined in Section 12.1.
"Rapid Amortization Period": The period which follows the
earlier to occur of (x) the end of the Managed Amortization Period and (y) the
occurrence of a Rapid Amortization Event.
"Rating Agency" means Moody's and Standard & Poor's. If such
agency or a successor is no longer in existence, "Rating Agency" shall be such
statistical credit rating agency, or other comparable Person, designated by the
Insurer, notice of which designation shall be given to the Indenture Trustee.
References herein to the highest short term unsecured rating category of a
Rating Agency shall mean A-1+ or better in the case of Standard & Poor's and P-1
or better in the case of Moody's, and in the case of any other Rating Agency
shall mean the ratings such other Rating Agency deems equivalent to the
foregoing ratings. References herein to the highest long-term rating category of
a Rating Agency shall mean "AAA" in the case of Standard & Poor's and "Aaa" in
the case of Moody's, and in the case of any other Rating Agency, the rating such
other Rating Agency deems equivalent to the foregoing ratings.
"Realized Loss": As to any Liquidated Mortgage Loan, the
amount, if any, by which the related Principal Balance thereof as of the date of
liquidation is in excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last
Business Day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs.
"Redemption Date" means, in the case of a redemption of the
Notes pursuant to Section 10.1(a), the Payment Date specified by the Master
Servicer or the Issuer pursuant to Section 10.2(a).
"Redemption Price" means, in the case of a redemption of the
Notes pursuant to Section 10.1(a), an amount equal to the unpaid principal
amount of the then outstanding principal amount of each class of Notes being
redeemed plus accrued and unpaid interest thereon to but excluding the
Redemption Date plus all amounts then due and owing to the Insurer.
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"Reference Bank Rate" shall be determined on the basis of the
rates at which deposits in U.S. Dollars are offered by the reference banks
(which shall be three major banks that are engaged in transactions in the London
interbank market, selected by the Sponsor after consultation with the Indenture
Trustee) as of 11:00 A.M., London time, on the day that is two LIBOR Business
Days prior to the immediately preceding Payment Date to prime banks in the
London interbank market for a period of one month in amounts approximately equal
to the principal amount of the Class A Notes then outstanding. The Indenture
Trustee will request the principal London office of each of the Reference Banks
to provide a quotation of its rate. If at least two such quotations are
provided, the rate will be the arithmetic mean of the quotations. If on such
date fewer than two quotations are provided as requested, the rate will be the
arithmetic mean of the rates quoted by one or more major banks in New York City,
selected by the Sponsor after consultation with the Indenture Trustee, as of
11:00 A.M., New York City time, on such date for loans in U.S. Dollars to
leading European banks for a period of one month in amounts approximately equal
to the principal amount of the Class A Notes then outstanding. If no such
quotations can be obtained, the rate will be LIBOR for the prior Payment Date.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Indenture Trustee which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London, (ii) not controlling, under the control
of or under common control with the Originators or any affiliate thereof, (iii)
whose quotations appear on the Telerate Screen Page 3750 on the relevant
Interest Determination Date and (iv) which have been designated as such by the
Indenture Trustee.
"Registration Statement": The Registration Statement filed by
the Sponsor with the Securities and Exchange Commission, including all
amendments thereto and including the Prospectus and the Prospectus Supplement
relating to the Class A Notes constituting a part thereof.
"Relief Act Shortfall": With respect to any Remittance Period,
for any Mortgage Loan as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended Remittance Period as a
result of the application of the Civil Relief Act, the amount, if any, by which
(i) interest collectible on such Mortgage Loan during the most recently ended
calendar month is less than (ii) one month's interest on the Principal Balance
of such Mortgage Loan at the rate equal to the sum of the applicable Class A
Interest Rate.
"Remittance Date": Any date on which the Master Servicer is
required to remit monies on deposit in the Principal and Interest Account to the
Indenture Trustee, which shall be the 18th day or, if such day is not a Business
Day, the next preceding Business Day, of each month, commencing in the month
following the month in which the Closing Date occurs.
"Remittance Period": As to any Payment Date, the calendar
month preceding the month of such Payment Date.
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"REO Property": A Mortgaged Property acquired by the Master
Servicer or any Sub-Servicer on behalf of the Trust through foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or agreements
with, the Depository to effectuate a book entry system with respect to the Class
A Notes registered in the Register under the nominee name of the Depository.
"Reserve Account": That certain account established pursuant
to Section 8.3 of the Indenture.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement dated as of September 1, 1998, among Advanta Holding Trust, the
Issuer, the Sponsor, the Master Servicer and the Indenture Trustee, as the same
may be amended or supplemented from time to time in accordance with the terms
thereof.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans,
attached hereto as Schedule I.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Mortgaged Property.
"Securities Act": The Securities Act of 1933, as amended.
"Servicing Advance": As defined in the Sale and Servicing
Agreement.
"Specified Overcollateralization Amount": As applicable, the
HELOC Pool Specified Overcollateralization Amount or the HLTV Pool Specified
Overcollateralization Amount.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware
Corporation.
"Standard & Poor's": Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, Inc.
"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 related Principal Balance of the Mortgage Loan being replaced as
of such Replacement Cut-Off Date, an amount equal to such difference together
with accrued and unpaid interest on such amount calculated at the Loan Rate net
of the related Servicing Fee, if any, of the Mortgage Loan being replaced.
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"Telerate Screen Page 3750": The display designated as page
3750 on the Telerate Service (or such other page as may replace page 3750 on
that service for the purpose of displaying London interbank offered rates of
major banks).
"Termination Date" means the latest of (i) the termination of
the Policies and the return of the Policies to the Insurer for cancellation,
(ii) the date on which the Insurer shall have received payment and performance
of all Insurer Issuer Secured Obligations and (iii) the date on which the
Indenture Trustee shall have received payment and performance of all Indenture
Trustee Issuer Secured Obligations.
"Trust": Advanta Home Equity Loan Trust 1998-B.
"Trust Agreement": The Trust Agreement, dated as of September
1, 1998, among the Sponsor, Advanta Holding Trust and the Owner Trustee.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Class A Noteholders and the Insurer, including all proceeds thereof including,
without limitation, the following: (i) the Mortgage Loans, including Qualified
Replacement Mortgages and Qualified Overcollateralization Mortgages; (ii) such
amounts, including Eligible Investments, as from time to time may be held in all
Accounts (except any investment earnings on the amounts from time to time held
in the Principal and Interest Account); (iii) any Mortgaged Property that has
been acquired on behalf of the Trust as a result of foreclosure or acceptance by
the Master Servicer or any Sub-Servicer of a deed in lieu of foreclosure and
that has not been withdrawn from the Trust; (iv) any Insurance Policies relating
to the Mortgage Loans and any rights of the Trust or the Sponsor under any
Insurance Policies; (v) Net Liquidation Proceeds with respect to any Liquidated
Mortgage Loan; and (vi) the Policies.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended and as in force on the date hereof, unless otherwise
specifically provided.
"UCC" means, unless the context otherwise requires, the
Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended
from time to time.
"Underlying Mortgage Notes": The Credit Line Agreements and
the Mortgage Notes.
"Underwriter": Bear Stearns & Co. Inc.
"Unpaid Class A-1 Note Interest Shortfall": As of any Payment
Date, the amount, if any, by which (x) the Class A-1 Interest Distribution
Amount for the prior Payment Date, plus the Unpaid Class A-1 Note Interest
Shortfall, if any, with respect to such prior Payment Date, exceeded (y) the
amount actually distributed to the Noteholders pursuant to Section 8.6(c)(iii)
on such prior Payment Date.
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"Unpaid Class A-2 Note Interest Shortfall": As of any Payment
Date, the amount, if any, by which (x) the Class A-2 Interest Distribution
Amount for the prior Payment Date, plus the Unpaid Class A-2 Note Interest
Shortfall, if any, with respect to such prior Payment Date, exceeded (y) the
amount actually distributed to the Noteholders pursuant to Section 8.6(c)(iii)
on such prior Payment Date.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Sale and Servicing Agreement or
the Trust Agreement.
SECTION 1.2. Incorporation by Reference of the Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by
the TIA, or defined by Commission rule have the meaning assigned to them by such
definitions.
SECTION 1.3. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time
to time;
(iii) "or" is not exclusive;
(iv) "including" means "including without limitation"; and
(v) words in the singular include the plural and words in
the plural include the singular.
SECTION 1.4. Action by or Consent of Noteholders. Whenever
any provision of this Indenture refers to action to be taken, or consented to,
by Noteholders, such provision shall be deemed to refer to the Noteholder of
record as of the Record Date immediately preceding the date on which such action
is to be taken, or consent given, by Noteholders.
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SECTION 1.5. Conflict with TIA. If any provision hereof
limits, qualifies or conflicts with a provision of the TIA that is required
under the TIA to be part of and govern this Indenture, the latter provision
shall control and all provisions required by the TIA are hereby incorporated by
reference. If any provision of this Indenture modifies or excludes any provision
of the TIA that may be so modified or excluded, the latter provisions shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
ARTICLE II.
The Notes
SECTION 2.1. Form. The Class A-1 Notes and the Class A-2
Notes, together with the Indenture Trustee's certificate of authentication,
shall be in substantially the forms set forth in Exhibit A and Exhibit B,
respectively, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The
terms of the Note set forth in Exhibit A and Exhibit B are part of the terms of
this Indenture.
SECTION 2.2. Execution, Authentication and Delivery. The
Notes shall be executed on behalf of the Issuer by any of its Authorized
Officers. The signature of any such Authorized Officer on the Notes may be
original or facsimile.
Notes bearing the original or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
The Indenture Trustee, upon receipt of a written Issuer Order,
shall authenticate and deliver the Class A-1 Notes and the Class A-2 Notes for
original issue in an aggregate principal amount of $107,500,000. The Class A
Notes outstanding at any time may not exceed such amounts except as provided in
Section 2.6.
Each Note shall be dated the date of its authentication. The
Notes shall be issuable as registered Notes in the minimum denomination of $1000
and in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears attached to such
Note a certificate of authentication substantially in the form provided for
herein executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate attached to any
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Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder. Subject to Section 2.11, the
Notes shall be Book-Entry Notes.
SECTION 2.3. Registration; Registration of Transfer and
Exchange. The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by
the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Indenture Trustee
shall have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof. The Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Authorized Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and number of such Notes.
Upon surrender for registration or transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.2, and
if the requirements of Section 8-401(1) of the UCC are met, the Issuer shall
execute or cause the Indenture Trustee to authenticate one or more new Notes, in
any authorized denominations, of the same class and a like aggregate principal
amount. A Noteholder may also obtain from the Indenture Trustee, in the name of
the designated transferee or transferees one or more new Notes, in any
authorized denominations, of the same class and a like aggregate principal
amount. Such requirements shall not be deemed to create a duty in the Indenture
Trustee to monitor the compliance by the Issuer with Section 8-401 of the UCC.
At the option of the Holder, Notes may be exchanged for other
Notes in any authorized denominations, of the same class and a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, and if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute
and upon its request the Indenture Trustee shall authenticate the Notes which
the Noteholder making the exchange is entitled to receive. Such requirements
shall not be deemed to create a duty in the Indenture Trustee to monitor the
compliance by the Issuer with Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be (i) duly endorsed by, or be accompanied by a
written instrument of transfer in the form
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attached to Exhibit A and Exhibit B, duly executed by the Holder thereof or such
Holder's attorney duly authorized in writing, with such signature guaranteed by
an "eligible guarantor institution" meeting the requirements of the Note
Registrar all in accordance with the Exchange Act, and (ii) accompanied by such
other documents as the Note Registrar may require.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Note Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.4 or 9.6 not
involving any transfer.
The Note Registrar shall not register the transfer of a Note
unless the transferee has delivered a representation letter in form and
substance satisfactory to the Note Registrar to the effect that either (i) the
transferee is not an employee benefit plan or other retirement plan or
arrangement subject to Title I of ERISA or Section 4975 of the Code and is not
acting on behalf of or investing the assets of any such plan or arrangement or
(ii) the transferee's acquisition and continued holding of the Note qualifies
for exemptive relief under a prohibited transaction class exemption issued by
the U.S. Department of Labor. Each transferee of a Book-Entry Note shall be
deemed to make one of the foregoing representations.
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes. If
(i) any mutilated Note is surrendered to the Note Registrar, or the Note
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee and the
Insurer such security or indemnity as may be required by it to hold the Issuer,
the Indenture Trustee and the Insurer harmless, then, in the absence of notice
to the Issuer, the Note Registrar or the Indenture Trustee that such Note has
been acquired by a bona fide purchaser, and provided that the requirements of
Section 8-405 of the UCC are met, the Issuer shall execute and upon its request
the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a replacement Note (such
requirement shall not be deemed to create a duty in the Indenture Trustee to
monitor the compliance by the Issuer with Section 8-405); provided, however,
that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall
have become or within seven days shall be due and payable, or shall have been
called for redemption, the Issuer may, instead of issuing a replacement Note,
direct the Indenture Trustee, in writing, to pay such destroyed, lost or stolen
Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer,
the Indenture Trustee and the Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
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Upon the issuance of any replacement Note under this Section,
the Issuer may require the payment by the Holder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.5. Persons Deemed Owners. Prior to due presentment
for registration of transfer of any Note, the Issuer, the Indenture Trustee and
the Insurer and any agent of the Issuer, the Indenture Trustee and the Insurer
may treat the Person in whose name any Note is registered (as of the related
Record Date) as the owner of such Note for the purpose of receiving payments of
principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Insurer, the Indenture Trustee nor any agent of the Issuer, the Insurer or the
Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.6. Payment of Principal and Interest; Defaulted
Interest. (a) The Notes shall accrue interest as provided herein, and such
amount shall be due and payable on each Payment Date as specified herein. Any
installment of interest or principal, if any, payable on any Note which is
punctually paid or duly provided for by the Issuer on the applicable Payment
Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered on the Record Date, by check mailed
first-class, postage prepaid, to such Person's address as it appears on the Note
Register on such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.11, with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a Payment
Date or on the related Final Scheduled Payment Date (and except for the
Redemption Price for any Note called for redemption pursuant to Section 10.1(a))
which shall be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.3.
(b) Upon written notice from the Issuer, the Indenture Trustee
shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Payment Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior to
such final Payment Date and shall specify that such final installment will be
payable only
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upon presentation and surrender of such Note and shall specify the place where
such Note may be presented and surrendered for payment of such installment.
Notices in connection with redemptions of Notes shall be mailed to Noteholders
as provided in Section 10.2.
(c) If the Issuer defaults in a payment of interest on any
Class of Class A Notes, the Issuer shall pay defaulted interest (plus interest
on such defaulted interest to the extent lawful) at the applicable Interest Rate
to the extent lawful. The Issuer may pay such defaulted interest to the Persons
who are related Noteholders on a subsequent special record date, which date
shall be at least five Business Days prior to the payment date. The Issuer shall
fix or cause to be fixed any such special record date and payment date, and, at
least 15 days before any such special record date, the Issuer shall mail to each
Noteholder and the Indenture Trustee a notice that states the special record
date, the payment date and the amount of defaulted interest to be paid.
(d) Promptly following the date on which all principal of and
interest on the Notes has been paid in full and the Notes have been surrendered
to the Indenture Trustee, the Indenture Trustee shall, upon written notice from
the Master Servicer of the amounts, if any, that the Insurer has paid in respect
of any Class of Class A Notes under the related Policy or otherwise which has
not been reimbursed to it, deliver such surrendered Notes to the Insurer to the
extent not previously cancelled or destroyed.
SECTION 2.7. Cancellation. Subject to Section 2.6(d), all
Notes surrendered for payment, registration of transfer, exchange or redemption
shall, if surrendered to any Person other than the Indenture Trustee, be
delivered to the Indenture Trustee and shall be promptly canceled by the
Indenture Trustee. Subject to Section 2.6(d), the Issuer may at any time deliver
to the Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly canceled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes canceled
as provided in this Section, except as expressly permitted by this Indenture.
Subject to Section 2.6(d), all canceled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it; provided that such Issuer Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.8. Release of Collateral. The Indenture Trustee
shall, on or after the Termination Date, release any remaining portion of the
Trust Estate from the lien created by this Indenture and deposit in the Note
Account any funds then on deposit in any other Account. The Indenture Trustee
shall release property from the lien created by this Indenture pursuant to this
Section 2.8 only upon receipt by it of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1.
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SECTION 2.9. Book-Entry Notes. The Notes, upon original
issuance, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company or its
custodian, the initial Clearing Agency, by, or on behalf of, the Issuer. Such
Notes shall initially be registered on the Note Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Note Owner will receive
a Definitive Note representing such Note Owner's interest in such Note, except
as provided in Section 2.11. Unless and until definitive, fully registered Notes
(the "Definitive Notes") have been issued to Note Owners pursuant to Section
2.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole Holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants. Unless and until Definitive Notes are
issued pursuant to Section 2.11, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect
from Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the
Indenture Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Indenture Trustee at the Corporate Trust Office.
SECTION 2.10. Notices to Clearing Agency. Whenever a notice
or other communication to the Noteholders is required under this Indenture,
unless and until Definitive Notes shall have been issued to Note Owners pursuant
to Section 2.11, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to the Note Owners.
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SECTION 2.11. Definitive Notes. If (i) the Master Servicer
advises the Indenture Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to the
Notes, and the Master Servicer is unable to locate a qualified successor, (ii)
the Master Servicer at its option advises the Indenture Trustee in writing that
it elects to terminate the book-entry system through the Clearing Agency or
(iii) after the occurrence of a Rapid Amortization Event, Note Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Indenture Trustee through the
Clearing Agency in writing that the continuation of a book entry system through
the Clearing Agency is no longer in the best interests of the Note Owners, then
the Clearing Agency shall notify all Note Owners and the Indenture Trustee of
the occurrence of any such event and of the availability of Definitive Notes to
Note Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Note or Notes representing the Book-Entry Notes by the Clearing
Agency, accompanied by registration instructions, the Issuer shall execute and
the Indenture Trustee shall authenticate the Definitive Notes in accordance with
the instructions of the Clearing Agency. None of the Issuer, the Note Registrar
or the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the Holders of the Definitive Notes as Noteholders.
ARTICLE III.
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer
will duly and punctually pay the principal of and interest on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, the Issuer will cause to be distributed all amounts on deposit in the
Note Account on a Payment Date deposited therein pursuant to the Sale and
Servicing Agreement for the benefit of the Class A-1 Notes, to Class A-1
Noteholders and for the benefit of the Class A-2 Notes, to Class A-2
Noteholders. Amounts properly withheld under the Code or any applicable state
tax laws by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer will
maintain in Irvine, California, an office or agency where Notes may be
surrendered for registration, transfer or exchange of the Notes, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
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SECTION 3.3. Money for Payments to be Held in Trust. The
Issuer will cause each Note Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee and the Insurer an instrument in
which such Note Paying Agent shall agree with the Indenture Trustee (and if the
Indenture Trustee acts as Note Paying Agent, it hereby so agrees), subject to
the provisions of this Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee written notice of any default by
the Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect
to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and forthwith pay
to the Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards required to be
met by a Note Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code and any applicable
state tax laws with respect to the withholding from any payments made
by it on any Notes of any applicable withholding taxes imposed thereon
and with respect to any applicable reporting requirements in connection
therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Note Paying Agent to pay to the Indenture Trustee all sums held
in trust by such Note Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such Note
Paying Agent; and upon such a payment by any Note Paying Agent to the Indenture
Trustee, such Note Paying Agent shall be released from all further liability
with respect to such money.
Subject to applicable laws with respect to the escheat of
funds, any money held by the Indenture Trustee or any Note Paying Agent in trust
for the payment of any amount due with respect to any Note and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request, and
shall be deposited by the Indenture Trustee in the Note Account; and the Holder
of such Note shall thereafter, as an unsecured general creditor, look only to
the Issuer for payment thereof (but only to the extent of the amounts so paid to
the Issuer), and all liability of the Indenture Trustee or such Note Paying
Agent with respect to such trust money shall thereupon cease.
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SECTION 3.4. Existence. Except as otherwise permitted by the
provisions of Section 3.10, the Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Trust Estate, the Notes, and each other
instrument or agreement included in the Trust Estate.
SECTION 3.5. Protection of Trust Estate. The Issuer intends
the security interest granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Estate,
and the Issuer shall take all actions necessary to obtain and maintain, in favor
of the Indenture Trustee, for the benefit of the Issuer Secured Parties, a first
lien on and a first priority, perfected security interest in the Trust Estate.
The Issuer will from time to time prepare (or shall cause to be prepared),
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Indenture Trustee for the benefit of
the Issuer Secured Parties created by this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee in such Trust Estate against the claims of all
persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee pursuant to this Section;
provided that, such designation shall not be deemed to create a duty in the
Indenture Trustee or the Indenture Trustee to monitor the compliance of the
Issuer with respect to its duties under this Section 3.5 or the adequacy of any
financing statement, continuation statement or other instrument prepared by the
Issuer.
SECTION 3.6. Opinions as to Trust Estate. (a) On the Closing
Date, the Issuer shall furnish to the Indenture Trustee and the Insurer an
Opinion of Counsel addressed to
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the Insurer stating that, in the opinion of such counsel, such actions have been
taken with respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the first priority lien and security
interest in favor of the Indenture Trustee, for the benefit of the Issuer
Secured Parties, created by this Indenture.
(b) Within 90 days after the beginning of each calendar year,
beginning with the first calendar year beginning more than six months after the
Closing Date, the Issuer shall furnish to the Indenture Trustee and the Insurer,
an Opinion of Counsel addressed to each either stating that, in the opinion of
such counsel, such actions have been taken with respect to the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and with respect to the execution and
filing of any financing statements and continuation statements as are necessary
to maintain the lien and security interest created by this Indenture and
reciting the details of such action or stating that in the opinion of such
counsel, no such action is necessary to maintain such lien and security
interest. Such Opinion of Counsel shall also describe the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to maintain the lien and security interest of this
Indenture.
SECTION 3.7. Performance of Obligations; Servicing of Mortgage
Loans.
(a) The Issuer will not take any action and will use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Operative Documents or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to
the Insurer to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Indenture Trustee and
the Insurer in an Officer's Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the Master
Servicer to assist the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Operative Documents
and in the instruments and agreements included in the Trust Estate, including,
but not limited to, preparing (or causing to be prepared) and filing (or causing
to be filed) all UCC financing statements and continuation statements required
to be filed by the terms of this Indenture and the Sale and Servicing Agreement
or any other Operative Document in accordance with and within the time periods
provided for herein and therein. Except as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify, supplement or terminate any Operative
Document or any provision
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thereof without the consent of the Insurer, the Holders of at least a majority
of the Outstanding Amount of the Notes or the Indenture Trustee (with the
consent of the Insurer).
(d) If an Authorized Officer of the Owner Trustee shall have actual
knowledge of the occurrence of an Event of Servicing Termination under the Sale
and Servicing Agreement, the Issuer shall promptly notify the Indenture Trustee,
the Insurer and the Rating Agencies thereof in accordance with Section 11.4, and
shall specify in such notice the action, if any, the Issuer is taking in respect
of such default. If an Event of Servicing Termination shall arise from the
failure of the Master Servicer to perform any of its duties or obligations under
the Sale and Servicing Agreement with respect to the Mortgage Loans, the Issuer
shall take all reasonable steps available to it to remedy (or cause to be
remedied) such failure.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Master Servicer or the Sponsor of their respective duties
under the Operative Documents (x) without the prior consent of the Insurer or
(y) the Insurer has consented to such waiver but the effect thereof would
adversely affect the Holders of the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Operative Documents, sell, transfer, exchange or otherwise dispose of
any of the properties or assets of the Issuer, including those included
in the Trust Estate, without the consent of the Insurer (provided, that
if an Insurer Default has occurred and is continuing, the Noteholders
representing 66-2/3% of the Noteholders may direct the Indenture
Trustee to sell or dispose of the Trust Estate if the Indenture Trustee
receives the Liquidation Price, as described in Section 12.1).
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any
claim against any present or former Noteholder or the Insurer by reason
of the payment of the taxes levied or assessed upon any part of the
Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien in favor of the Indenture Trustee
created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to
or otherwise arise upon or burden the Trust Estate or any part thereof
or any interest therein or the proceeds thereof (other than tax liens,
mechanics' liens and other liens that arise by operation of law, in
each case on a Mortgaged Property and arising solely as a result of an
action or omission of the related Mortgagor), (C) permit the lien of
this Indenture not to constitute a valid first priority (other than
with
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respect to any such tax, mechanics' or other lien) security interest in
the Trust Estate or (D) amend, modify or fail to comply with the
provisions of the Operative Documents without the prior written consent
of the Insurer, which consent may not be unreasonably withheld.
SECTION 3.9. Annual Statement as to Compliance. The Issuer
will deliver to the Indenture Trustee and the Insurer, within 90 days after the
end of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 1998), and otherwise in compliance with the requirements of TIA
Section 314(a)(4) an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in the compliance of any such condition or covenant, specifying
each such default known to such Authorized Officer and the nature and
status thereof.
SECTION 3.10. Issuer May Not Consolidate or Transfer Assets.
(a) The Issuer may not consolidate or merge with or into any other Person.
(b) Except as otherwise provided in the Sale and Servicing
Agreement, and unless the Insurer has otherwise consented, the Issuer shall not
convey or transfer all or substantially all of its properties or assets,
including those included in the Trust Estate, to any Person.
SECTION 3.11. No Other Business. The Issuer shall not engage
in any business other than purchasing, owning, selling and managing the Mortgage
Loans and other assets in the manner contemplated by this Indenture and the
Operative Documents and activities incidental thereto.
SECTION 3.12. No Borrowing. The Issuer shall not issue,
incur, assume, guarantee or otherwise become liable, directly or indirectly, for
any Indebtedness except for (i) the Notes, (ii) obligations owing from time to
time to the Insurer under the Insurance Agreement and (iii) any other
Indebtedness permitted by or arising under the Operative Documents except that
the Issuer shall not incur any Indebtedness that would cause it, or any portion
thereof, to be treated as a "taxable mortgage pool" under Section 7701(i) of the
Code. The proceeds of the Notes shall be used exclusively to fund the Issuer's
purchase of the Mortgage Loans and the other assets specified in the Sale and
Servicing Agreement and to pay the Issuer's organizational, transactional and
start-up expenses.
SECTION 3.13. Guarantees, Loans, Advances and Other
Liabilities. Except as contemplated by the Sale and Servicing Agreement or this
Indenture, the Issuer shall not make
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any loan or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuring another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
continently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.
SECTION 3.14. Capital Expenditures. The Issuer shall not make
any expenditure (by long-term or operating lease or otherwise) for capital
assets (either realty or personalty).
SECTION 3.15. Compliance with Laws. The Issuer shall comply
with the requirements of all applicable laws, the non-compliance with which
would, individually or in the aggregate, materially and adversely affect the
ability of the Issuer to perform its obligations under the Notes, this Indenture
or any Operative Document.
SECTION 3.16. Restricted Payments. The Issuer shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial interest
in the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Master Servicer, (ii) redeem, purchase,
retire or otherwise acquire for value any such ownership or equity interest or
security or (iii) set aside or otherwise segregate any amounts for any such
purpose; provided, however, that the Issuer may make, or cause to be made,
distributions to the Master Servicer, the Owner Trustee, the Indenture Trustee
and the Certificateholders as permitted by, and to the extent funds are
available for such purpose under, the Sale and Servicing Agreement, this
Indenture, or Trust Agreement. The Issuer will not, directly or indirectly, make
payments to or distributions from the Note Account or the Reserve Account except
in accordance with this Indenture and the Operative Documents.
SECTION 3.17. Notice of Events of Default and Events of
Servicing Termination. Upon a Responsible Officer of the Owner Trustee having
actual knowledge thereof, the Issuer agrees to give the Indenture Trustee, the
Insurer and the Rating Agencies prompt written notice of each Event of Default
hereunder or Event of Servicing Termination under the Sale and Servicing
Agreement.
SECTION 3.18. Further Instruments and Acts. Upon request of
the Indenture Trustee or the Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 3.19. Amendments of Sale and Servicing Agreement and
Trust Agreement. The Issuer shall not agree to any amendment to Section 9.01 of
the Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to
eliminate the requirements thereunder that the Indenture Trustee, the Insurer or
the Holders of the Notes consent to amendments thereto as provided therein.
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SECTION 3.20. Income Tax Characterization. For purposes of
federal income, state and local income and franchise and any other income taxes,
the Issuer will treat the Notes as indebtedness of Advanta Holding Trust and
hereby instructs the Indenture Trustee to treat the Notes as indebtedness of
Advanta Holding Trust for federal and state tax reporting purposes.
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ARTICLE IV.
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. Upon payment
in full of the Notes, this Indenture shall cease to be of further effect with
respect to the Notes except as to (i) rights of registration of transfer and
exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii)
rights of Noteholders to receive payments of principal thereof and interest
thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8, 3.10, 3.12, 3.13 and 3.20, (v) the
rights, obligations and immunities of the Indenture Trustee hereunder (including
the rights of the Indenture Trustee under Section 6.7 and the obligations of the
Indenture Trustee under Section 4.2) and (vi) the rights of Noteholders and the
Insurer as beneficiaries hereof with respect to the property so deposited with
the Indenture Trustee payable to all or any of them, and the Indenture Trustee,
on written demand in the form of an Issuer Order and at the expense of the
Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.4 and (ii) Notes for which
payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3) have been
delivered to the Indenture Trustee for cancellation and the Policy has
terminated and been returned to the Insurer for cancellation and all
amounts owing to the Insurer have been paid in full; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
(i) have become due and payable,
(ii) will become due and payable at their respective Final
Scheduled Payment Dates within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of
notice of redemption by the Indenture Trustee in the name, and at
the expense, of the Issuer,
and in the case of (i), (ii) or (iii) above
(A) the Issuer, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or direct obligations of
or obligations guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such Notes
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not theretofore delivered to the Indenture Trustee for cancellation when due at
their respective Final Scheduled Payment Dates or Redemption Date (if Notes
shall have been called for redemption pursuant to Section 10.1(a)), as the case
may be;
(B) the Issuer has paid or caused to be paid all Insurer Issuer
Secured Obligations and all Indenture Trustee Issuer Secured Obligations; and
(C) the Issuer has delivered to the Indenture Trustee and the
Insurer an Officer's Certificate, an Opinion of Counsel and if required by the
TIA, the Indenture Trustee or the Insurer an Independent Certificate from a firm
of certified public accountants, each meeting the applicable requirements of
Section 11.1(a) and each stating that all conditions precedent herein provided
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.2. Application of Trust Money. All monies deposited with
the Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Note Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest.
SECTION 4.3. Repayment of Monies Held by Note Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all monies then held by any Note Paying Agent other than the
Indenture Trustee under the provisions of this Indenture with respect to such
Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 3.3 and thereupon such Note Paying Agent
shall be released from all further liability with respect to such monies.
ARTICLE V.
Defaults and Remedies
SECTION 5.1. Event of Default. "Event of Default," wherever used
herein, means, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) With respect to the Class A-1 Notes issued hereunder, a Rapid
Amortization Event as described in Article XII hereof.
(b) With respect to the Class A-2 Notes issued hereunder,
(i) if the Issuer shall, with respect to a Payment Date,
default in the payment on any Payment Date of the Class A-2 Interest
Distribution Amount and the
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HLTV Pool Overcollateralization Deficit or fail to pay the Class A-2 Notes
in full on or before the Class A-2 Final Scheduled Payment Date (and in
the case of any such default, such default or failure shall continue for a
period of 5 days unremedied);
(ii) if the Issuer shall breach or default in the due
observance of any one or more of the covenants set forth in clauses (i)
through (iii) of Section 3.8;
(iii) if the Issuer shall breach, or default in the due
observance or performance of, any other of its covenants in this
Indenture, and such Default shall continue for a period of 30 days after
there shall have been given, by registered or certified mail, to the
Issuer and the Insurer by the Indenture Trustee at the direction of the
Insurer, or to the Issuer and the Indenture Trustee by the Holders of
Class A-2 Notes representing at least 25% of the Outstanding Amount of the
Class A-2 Notes, with the prior written consent of the Insurer, a written
notice specifying such Default and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder;
(iv) if any representation or warranty of the Issuer made in
this Indenture or any certificate or other writing, delivered by the
Issuer 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, within 30 days after there shall have been given, by
registered or certified mail, written notice thereof to the Issuer and the
Insurer by the Indenture Trustee at the direction of the Insurer, or to
the Issuer and the Indenture Trustee by the Holders of Class A-2 Notes
representing at least 25% of the Outstanding Amount of the Class A-2
Notes, with the prior written consent of the Insurer, the circumstance or
condition in respect of which such representation or warranty was
incorrect shall not have been eliminated or otherwise cured; provided,
however, that in the event that there exists a remedy of the Noteholders
with respect to any such breach that consists of a purchase obligation,
repurchase obligation or right to substitute under the Operative
Documents, then such purchase obligation, repurchase obligation or right
to substitute shall be the sole remedy of the Noteholders with respect to
such breach and shall not constitute an Event of Default hereunder;
(v) the entry of a decree or order for relief by a court
having jurisdiction in respect of the Issuer in an involuntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar law,
or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any substantial
part of its property, or ordering the winding up or liquidation of the
affairs of the Issuer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(vi) the commencement by the Issuer of a voluntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar law,
or the consent by the Issuer to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian,
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sequestrator or other similar official of the Issuer or of any substantial
part of its property or the making by the Issuer of an assignment for the
benefit of creditors or the failure by the Issuer generally to pay its
debts as such debts become due or the taking of corporate action by the
Issuer in furtherance of any of the foregoing.
The payment by the Insurer of any Insured Payment in an amount sufficient
to cover the related Deficiency Amount pursuant to the Class A-2 Policy in
respect of any Payment Date shall, at the option of the Insurer, constitute an
Event of Default with respect to the Class A-2 Notes.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default occurs with respect to the Class A-2 Notes and is
continuing, then and in every such case, but with the consent of the Insurer in
the absence of an Insurer Default, the Indenture Trustee may, and on request of
the Insurer or the Holders of Class A-2 Notes representing not less than 50% of
the Outstanding Amount of the Class A-2 Notes (with the consent of the Insurer),
shall, declare all the Class A-2 Notes to be immediately due and payable by a
notice in writing to the Issuer (and to the Indenture Trustee if given by Class
A-2 Noteholders), and upon any such declaration such Notes, in an amount equal
to the Outstanding Amount of the Class A-2 Notes, together with accrued and
unpaid interest thereon to the date of such acceleration, shall become
immediately due and payable, all subject to the prior written consent of the
Insurer in the absence of an Insurer Default.
At any time after such a declaration of acceleration of maturity of
the Class A-2 Notes has been made and before a judgment or decree for payment of
the money due has been obtained by the Indenture Trustee as hereinafter in this
Article provided the Insurer or the Holders of Class A-2 Notes representing more
than 50% of the Outstanding Amount of the Class A-2 Notes, with the prior
written consent of the Insurer, by written notice to the Issuer and the
Indenture Trustee, may rescind and annul such declaration and its consequences
if:
(1) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of, and interest on, all Class
A-2 Notes and all other amounts that would then be due hereunder or upon
such Class A-2 Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel; and
(2) all Events of Default with respect to the Class A-2 Notes, other
than the nonpayment of the principal of Class A-2 Notes that have become due
solely by such acceleration, have been cured or waived as provided in Section
5.20.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
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SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. Subject to the following sentence, if an Event of Default
with respect to the Class A-2 Notes occurs and is continuing, the Indenture
Trustee may, with the prior written consent of the Insurer and shall, at the
direction of the Insurer, proceed to protect and enforce its rights and the
rights of the Class A-2 Noteholders and the Insurer by any Proceedings the
Indenture Trustee deems appropriate to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or enforce any
other proper remedy. Any proceedings brought by the Indenture Trustee on behalf
of the Class A-2 Noteholders and the Insurer or any Class A-2 Noteholder against
the Issuer shall be limited to the preservation, enforcement and foreclosure of
the liens, assignments, rights and security interests under the Indenture and no
attachment, execution or other unit or process shall be sought, issued or levied
upon any assets, properties or funds of the Issuer, other than the Trust Estate
relative to the Class A-2 Notes in respect of which such Event of Default has
occurred. If there is a foreclosure of any such liens, assignments, rights and
security interests under this Indenture, by private power of sale or otherwise,
no judgment for any deficiency upon the indebtedness represented by the Class
A-2 Notes may be sought or obtained by the Indenture Trustee or any Class A-2
Noteholder against the Issuer. The Indenture Trustee shall be entitled to
recover the costs and expenses expended by it pursuant to this Article V
including reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel.
SECTION 5.4. Remedies. (a) With respect to the Class A-1 Notes, if a
Rapid Amortization Event as described in Article XII shall have occurred and be
continuing, the Rapid Amortization Period shall immediately commence and the
Class A-1 Noteholders shall be entitled on each Payment Date to an amount equal
to the Class A-1 Maximum Principal Payment. The rights contained in this Article
V are in addition to any rights which the Class A-1 Noteholders possess pursuant
to Article XII.
(a)
(b) If an Event of Default with respect to the Class A-2 Notes shall
have occurred and be continuing and the Class A-2 Notes have been declared due
and payable and such declaration and its consequences have not been rescinded
and annulled, the Indenture Trustee, at the direction of the Insurer may, for
the benefit of the Class A-2 Noteholders and the Insurer, do one or more of the
following:
(i) institute Proceedings for the collection of all amounts then
payable on the Class A-2 Notes, or under this Indenture, whether by
declaration or otherwise, enforce any judgment obtained, and collect from
the Issuer moneys adjudged due, subject in all cases to the provisions of
Sections 3.1 and 5.3;
(ii) sell the Trust Estate related to the HLTV Mortgage Loans or any
portion thereof or rights or interest therein, at one or more public or
private sales called and conducted in any manner permitted by law;
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(iii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate
related to the HLTV Mortgage Loans;
(iv) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee or the Holders of
the Class A-2 Notes and the Insurer hereunder; and
(v) refrain from selling the Trust Estate related to the HLTV
Mortgage Loans and apply all related Monthly Remittance Amounts pursuant
to Section 5.7.
SECTION 5.5. Indenture Trustee May File Proofs of Claim. In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, composition or other judicial Proceeding relative
to the Issuer or any other obligor upon any of the Class A-2 Notes or the
property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the Class A-2 Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand on the Issuer for
the payment of any overdue principal or interest) shall, at the direction of the
Insurer, be entitled and empowered, by intervention in such Proceeding or
otherwise to:
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Class A-2 Notes and file such
other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel) and of the Class A-2
Noteholders and the Insurer allowed in such Proceeding, and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, or sequestrator (or other similar
official) in any such Proceeding is hereby authorized by each Class A-2
Noteholder and the Insurer to make such payments to the Indenture Trustee
and, in the event that the Indenture Trustee shall consent to the making
of such payments directly to the Class A-2 Noteholders and the Insurer, to
pay to the Indenture Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any Class A-2
Noteholder or the Insurer any plan of reorganization, arrangement, adjustment or
composition affecting any of the Class A-2 Notes or the rights of any Holder
thereof, or the Insurer, or to authorize the Indenture Trustee to vote in
respect of the claim of any Class A-2 Noteholder or the Insurer in any such
Proceeding. Any plan of reorganization, arrangement, adjustment or composition
relative to the Issuer or any other obligor upon any of the Class A-2 Notes or
the property of the Issuer or of
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such obligor or their creditors and affecting the Class A-2 Notes or the rights
of the Insurer under this Indenture or the Insurance Agreement must be
acceptable to the Insurer and, as long as no Insurer Default exists and is
continuing, the Insurer shall be entitled to exercise the voting rights of the
Holders of the Class A-2 Notes regarding such plan, reorganization, arrangement,
adjustment or composition.
SECTION 5.6. Indenture Trustee May Enforce Claims Without Possession
of Class A-2 Notes. All rights of action and claims under this Indenture or any
of the Class A-2 Notes may be prosecuted and enforced by the Indenture Trustee
without the possession of any of the Class A-2 Notes or the production thereof
in any Proceeding relating thereto, and any such Proceeding instituted by the
Indenture Trustee, at the direction of the Insurer, shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall be for
the ratable benefit of the Holders of the Class A-2 Notes and the Insurer in
respect of which such judgment has been recovered after payment of amounts
required to be paid pursuant to clause (i) Section 5.7.
SECTION 5.7. Application of Money Collected. If the Class A-2 Notes
have been declared due and payable following an Event of Default with respect to
the Class A-2 Notes and such declaration and its consequences have not been
rescinded and annulled, any money collected by the Indenture Trustee with
respect to the Class A-2 Notes pursuant to this Article or otherwise and any
other monies that may then be held or thereafter received by the Indenture
Trustee as security for the Class A-2 Notes shall be applied in the following
order, at the date or dates fixed by the Indenture Trustee and, in case of the
payment of the entire amount due on account of principal of, and interest on,
the Notes, upon presentation and surrender thereof:
(i) first, to the Indenture Trustee any unpaid Indenture Trustee's
Fees related to the Class A-2 Notes then due and any other amounts payable
and due to the Indenture Trustee under this Indenture, including any costs
or expenses incurred by it in connection with the enforcement of the
remedies provided for in this Article;
(ii) second, to the Servicer, any amounts required to pay the
Servicer for any unpaid HLTV Servicing Fees related to the HLTV Mortgage
Loans then due and, upon the final liquidation of the related Mortgage
Loan or the final liquidation of the Trust Estate related to the HLTV
Mortgage Loans, Servicing Advances including Nonrecoverable Advances
related to the HLTV Mortgage Loans previously made by, and not previously
reimbursed or retained by, the Servicer;
(iii) third, to the payment of the Class A-2 Interest Distribution
Amount then due and unpaid upon the Outstanding Amount of the Class A-2
Notes through the day preceding the date on which such payment is made;
(iv) fourth, to the payment of the Class A-2 Principal Balance then
due and unpaid upon the Outstanding Amount of the Class A-2 Notes;
(v) fifth, to the payment of the Insurer, as subrogee to the rights
of the Noteholders, without duplication, the sum of (A) the Class A-2
Reimbursement Amount,
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if any, then due to it and (B) the amount of any unpaid Premium Amounts
related to the Class A-2 Notes then due, together with interest thereon at
the "Late Payment Rate" specified in the Insurance Agreement from the date
such amounts were due; and
(vi) sixth, to the Certificateholders, any amount remaining on
deposit in the Note Account with respect to the HLTV Pool.
SECTION 5.8. Limitation of Suits. No Holder of any Note shall have
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) with respect to the Class A-1 Notes, such Holder has previously
given written notice to the Indenture Trustee of a continuing Rapid
Amortization Event and with respect to the Class A-2 Notes, such Holder
has previously given notice to the Indenture Trustee and the Insurer of a
continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of
the related Notes have made written request to the Indenture Trustee to
institute such proceeding with respect to the Class A-1 Notes in respect
of such Rapid Amortization Event in its own name as Indenture Trustee
hereunder and with respect to the Class A-2 Notes, in respect of such
Event of Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
proceedings;
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
a majority of the Outstanding Amount of the related Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
related Notes, each representing less than a majority of the Outstanding Amount
of the related Notes, the Indenture Trustee in its sole discretion may determine
what action, if any, shall be taken, notwithstanding any other provisions of
this Indenture.
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SECTION 5.9. Unconditional Rights of Noteholders To Receive
Principal and Interest. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the respective due dates thereof expressed in such Note or
in this Indenture (or, in the case of redemption, on or after the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
SECTION 5.10. Restoration of Rights and Remedies. If the Controlling
Party or any Noteholder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, then and in every such case the Issuer, the Insurer,
the Indenture Trustee and the Noteholders shall, subject to any determination in
such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee, the Insurer and the Noteholders shall continue as though no such
proceeding had been instituted.
SECTION 5.11. Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Controlling Party or to the related
Noteholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.12. Delay or Omission Not a Waiver. No delay or omission
of the Indenture Trustee, Controlling Party or any Holder of any Note to
exercise any right or remedy accruing upon any 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 V or by law
to the Indenture Trustee, the Insurer or to the Noteholders may be exercised
from time to time, and as often as may be deemed expedient, by the Indenture
Trustee, the Insurer or by the Noteholders, as the case may be.
SECTION 5.13. Control by Noteholders. If the Indenture Trustee is
the Controlling Party, the Holders of a majority of the Outstanding Amount of
the related Notes, with the consent of the Insurer, shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee pursuant to Section 12.1 with respect to the
related Notes or exercising any trust or power conferred on the Indenture
Trustee; provided that
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) the Indenture Trustee may take any other action deemed proper
by the Indenture Trustee that is not inconsistent with such direction;
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provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any related Noteholders not consenting
to such action.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by the Insurer, any Noteholder, or
group of Noteholders with the prior written consent of the Insurer, in each case
holding in the aggregate more than 10% of the Outstanding Amount of the Notes or
(c) any suit instituted by any Noteholder for the enforcement of the payment of
principal of or interest on any Note on or after the respective due dates
expressed in such Note and in this Indenture (or, in the case of redemption, on
or after the Redemption Date).
SECTION 5.15. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.16. Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee, the Insurer or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee or the Insurer
against the Issuer or by the levy of any execution under such judgment upon any
portion of the Trust Estate or upon any of the assets of the Issuer.
SECTION 5.17. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee (at the direction of
the Insurer) to do so and at the Master Servicer's expense, the Issuer agrees to
take all such lawful action as the Indenture Trustee may request to compel or
secure the performance and observance by the Sponsor and the Master Servicer, as
applicable, of each of their obligations to the Issuer under or in connection
with the Sale and Servicing Agreement in accordance with the terms thereof, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and Servicing
Agreement to the extent and in the manner
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directed by the Indenture Trustee, including the transmission of notices of
default on the part of the Sponsor or the Master Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Sponsor or the Master Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If the Indenture Trustee is a Controlling Party and if an Event of
Default has occurred and is continuing, the Indenture Trustee may, and, at the
written direction of the Holders of 66-2/3% of the Outstanding Amount of the
related Class of Class A Notes shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Sponsor or the Master Servicer
under or in connection with the Sale and Servicing Agreement, including the
right or power to take any action to compel or secure performance or observance
by the Sponsor or the Master Servicer of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Sale and Servicing Agreement, and any right of the
Issuer to take such action shall be suspended.
SECTION 5.18. Subrogation. The Indenture Trustee shall receive as
attorney-in-fact of each Noteholder any Insured Payment from the Insurer
pursuant to the Class A-1 Policy or the Class A-2 Policy, as the case may be.
Any and all Insured Payments disbursed by the Indenture Trustee from claims made
under the related Policy shall not be considered payment by the Trust, and shall
not discharge the obligations of the Trust with respect thereto. The Insurer
shall, to the extent it makes any payment with respect to any Class of Class A
Notes, become subrogated to the rights of the recipient of such payments to the
extent of such payments. Subject to and conditioned upon any payment with
respect to any Class of Class A Notes by or on behalf of the Insurer, the
Indenture Trustee shall assign to the Insurer all rights to the payment of
interest or principal with respect to such Class of Class A Notes which are then
due for payment to the extent of all payments made by the Insurer. In addition
to the rights of the Insurer set forth in Section 11.20 hereof, the Insurer may
exercise any option, vote, right, power or the like with respect to such Class
of Class A Notes to the extent that it has made payment pursuant to the related
Policy.
SECTION 5.19. Preference Claims. (a) In the event that the Indenture
Trustee has received a certified copy of an order of the appropriate court that
any payment on a Note has been avoided in whole or in part as a preference
payment under applicable bankruptcy law, the Indenture Trustee shall so notify
the Insurer, shall comply with the provisions of the related Policy to obtain
payment by the Insurer of such avoided payment, and shall, at the time it
provides notice to the Insurer, notify Holders of the Notes by mail that, in the
event that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the related Policy. The Indenture
Trustee shall furnish to the Insurer at its written request, the requested
records it holds in its possession evidencing the payments of principal of and
interest on Notes, if any, which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made. Pursuant to the terms of the related Policy, the Insurer will make
such payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order (as
defined in the related Policy) and not to the Indenture Trustee or any
Noteholder directly.
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(b) The Indenture Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which the Indenture Trustee has
actual knowledge) seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership, rehabilitation or similar law
(a "Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Indenture Trustee hereby agree that so
long as an Insurer Default shall not have occurred and be continuing, the
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedes or performance
bond pending any such appeal at the expense of the Insurer, but subject to
reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 5.18, the Insurer shall be
subrogated to, and each Noteholder and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the Indenture
Trustee and each Noteholder in the conduct of any proceeding with respect to a
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Preference Claim.
SECTION 5.20. Waiver of Past Defaults. The Insurer or the Holders of
Notes representing more than 50% of the aggregate Class A Principal Balance of
the Outstanding Notes on the applicable Record Date may on behalf of the Holders
of all the Notes, and with the consent of the Insurer, waive any past Default
hereunder and its consequences, except a Default:
(a) in the payment of principal or any installment of interest on
any Note; or
(b) in respect of a covenant or provision hereof that under Section
9.2 cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture, but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
ARTICLE VI.
The Indenture Trustee
SECTION 6.1. Duties of Indenture Trustee. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and the Operative Documents and use
the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs; provided, however, that if the Indenture Trustee is acting as Master
Servicer, it shall use the same degree of care and skill as is required of the
Master Servicer under the Sale and Servicing Agreement.
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(b) Except during the continuance of an Event of Default:
(i) The Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture and
no implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform on their face to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Indenture Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.13; and
(iv) the Indenture Trustee shall not be charged with knowledge
of any failure by the Master Servicer to comply with the obligations of
the Master Servicer referred to in clauses (i) and (ii) of Section 5.1 of
the Sale and Servicing Agreement unless a Responsible Officer of the
Indenture Trustee at the Corporate Trust Office obtains actual knowledge
of such failure or occurrence or the Indenture Trustee receives written
notice of such failure or occurrence from the Master Servicer, the Insurer
or the Holders of Class A Notes evidencing Voting Rights aggregating not
less than 51%.
(d) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(e) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not reasonably assured to it.
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(f) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
(g) The Indenture Trustee shall, upon two Business Days' prior
written notice to the Indenture Trustee, permit any representative of the
Insurer, during the Indenture Trustee's normal business hours, to examine all
books of account, records, reports and other papers of the Indenture Trustee
relating to the Notes, to make copies and extracts therefrom and to discuss the
Indenture Trustee's affairs and actions, as such affairs and actions relate to
the Indenture Trustee's duties with respect to the Notes, with the Indenture
Trustee's officers and employees responsible for carrying out the Indenture
Trustee's duties with respect to the Notes.
(h) The Indenture Trustee shall, and hereby agrees that it will,
perform all of the obligations and duties required of it under the Sale and
Servicing Agreement.
(i) The Indenture Trustee shall, and hereby agrees that it will,
hold the Policies in trust, and will hold any proceeds of any claim on the
Policies in trust solely for the use and benefit of the Noteholders.
(j) In no event shall Bankers Trust Company of California, N.A., in
any of its capacities hereunder, be deemed to have assumed any duties of the
Owner Trustee under the Delaware Business Trust Statute, common law, or the
Trust Agreement.
SECTION 6.2. Rights of Indenture Trustee. (a) The Indenture Trustee
may rely on any document reasonably believed by it to be genuine and to have
been signed or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it
may require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that the Indenture Trustee's
conduct does not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice
or opinion of counsel selected by it with due care with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any
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action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes or
the Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Indenture
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; provided, however, that the
Indenture Trustee shall, upon the occurrence of a Rapid Amortization Event,
Event of Default or Event of Servicing Termination as defined in the Sale and
Servicing Agreement (that has not been cured or waived), exercise the rights and
powers vested in it by this Indenture or the Sale and Servicing Agreement with
reasonable care and skill.
(g) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing to do so
by the Insurer or by the Holders of Notes evidencing not less than 25% of the
Outstanding Amount thereof; provided, however, that if the payment within a
reasonable time to the Indenture Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Indenture Trustee, not reasonably assured to the Indenture
Trustee by the security afforded to it by the terms of this Indenture or the
Sale and Servicing Agreement, the Indenture Trustee may require indemnity
reasonably satisfactory to it against such cost, expense or liability as a
condition to so proceeding; the reasonable expense of every such examination
shall be paid by the Person making such request, or, if paid by the Indenture
Trustee shall be reimbursed by the Person making such request upon demand.
(h) The Indenture Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or omissions hereunder of
the Master Servicer until such time as, and only to the extent that, the
Indenture Trustee may be required to act as Master Servicer.
SECTION 6.3. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Note Paying Agent,
Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Trust Estate or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
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SECTION 6.5. Notice of Defaults. If an Event of Default, an Event of
Servicing Termination or any other Default occurs and is continuing and if it is
either known by, or written notice of the existence thereof has been delivered
to, a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
mail to each Noteholder and to the Insurer of such event within 10 days after
such knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 6.6. Reports by Indenture Trustee to Holders. Upon written
request, the Note Paying Agent or the Master Servicer shall on behalf of the
Issuer deliver to each Noteholder such information as may be reasonably required
to enable such Holder to prepare its Federal and state income tax returns
required by law.
SECTION 6.7. Compensation and Indemnity. Pursuant to Section
8.6(c)(i) and subject to Section 6.18 herein, the Issuer shall, or shall cause
the Master Servicer to, pay to the Indenture Trustee, on each Payment Date,
reasonable compensation for its services rendered hereunder. The Indenture
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Pursuant to Section 8.6(c)(xii) herein, the Issuer
shall cause the Master Servicer to reimburse the Indenture Trustee for all
reasonable out-of-pocket expenses incurred or made by it in accordance with any
provision of this Indenture (including the reasonable compensation and expenses
and disbursements of any of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct. The Indenture Trustee and any director, officer, employee or agent
of the Indenture Trustee shall be indemnified by the Master Servicer pursuant to
Section 4.5(b) of the Sale and Servicing Agreement and held harmless against any
loss, liability, or expense incurred or paid to third parties in connection with
the acceptance or administration of its trusts hereunder or the Notes, other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance of the Indenture Trustee's duties
hereunder or by reason of reckless disregard of the Indenture Trustee's
obligations and duties hereunder.
SECTION 6.8. Replacement of Indenture Trustee. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Insurer by written
notice. Upon receiving such notice of resignation, the Issuer shall promptly
appoint a successor Indenture Trustee (approved in writing by the Insurer, so
long as such approval is not unreasonably withheld) by written instrument, in
duplicate, one copy of such instrument shall be delivered to the resigning
Indenture Trustee (who shall deliver a copy to the Master Servicer) and one copy
to the successor Trustee. The Issuer may (with the prior written consent of the
Insurer) and, at the request of the Insurer shall, remove the Indenture Trustee,
if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of the
Indenture Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy
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laws, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law, shall have entered a
decree or order granting relief or appointing a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or similar
official) for the Indenture Trustee or for any substantial part of the
Indenture Trustee's property, or ordering the winding-up or liquidation of
the Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws, as now
or hereafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law is commenced with respect to the
Indenture Trustee and such case is not dismissed within 60 days;
(iv) the Indenture Trustee commences a voluntary case under any
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or other similar official) for the Indenture
Trustee or for any substantial part of the Indenture Trustee's property,
or makes any assignment for the benefit of creditors or fails generally to
pay its debts as such debts become due or takes any corporate action in
furtherance of any of the foregoing; or
(v) the Indenture Trustee otherwise becomes incapable or is
prohibited by law from, acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Insurer. If the Issuer fails to appoint such a successor Indenture Trustee, the
Insurer may appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee, to the Insurer and to the
Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee
shall become effective, and the successor Indenture Trustee shall have all the
rights, powers and duties of the retiring Indenture Trustee under this
Indenture. The successor Indenture Trustee shall mail a notice of its succession
to Noteholders. The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 30 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee acceptable to the Insurer.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee
acceptable to the Insurer.
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Any resignation or removal of the Indenture Trustee and appointment
of a successor Indenture Trustee pursuant to any of the provisions of this
Section shall not become effective until acceptance of appointment by the
successor Indenture Trustee pursuant to Section 6.8.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Master Servicer's indemnity obligations under
Section 6.7 shall continue for the benefit of the retiring Indenture Trustee and
the Master Servicer shall pay any amounts owing to the Indenture Trustee.
SECTION 6.9. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust may at the time be located, the
Indenture Trustee with the consent of the Insurer shall have the power and may
execute and deliver all instruments to appoint one or more Persons to act as a
co-trustee or co-trustees, or separate trustee or separate trustees, of all or
any part of the Trust (including, for purposes of this Section 6.10, all or any
part of the Trust Estate), and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders and the Insurer, such title to
the Trust, or any part hereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Indenture
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 6.11 and no notice to Noteholders of the appointment of
any co-trustee or separate trustee shall be required under Section 6.8 hereof.
The Indenture Trustee shall remain primarily liable for the actions of any
co-trustee.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
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(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee
or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder, including acts or
omissions of predecessor or successor trustees; and
(iii) the Indenture Trustee and the Master Servicer acting jointly
may at any time accept the resignation of or remove any separate trustee
or co-trustee except that following the occurrence of an Event of
Servicing Termination, the Indenture Trustee acting alone may accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute
the Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Indenture on its behalf and in its name. If any separate trustee
or co-trustee shall die, dissolve, become insolvent, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Indenture Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
(e) The Master Servicer shall be responsible for the fees of any
co-trustee or separate trustee appointed hereunder, and such fees shall not be a
responsibility of the Trust.
SECTION 6.11. Eligibility: Disqualification. 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
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exercise corporate trust powers, subject to supervision or examination by the
United States of America or any such State having a rating or ratings acceptable
to the Insurer or, in the event of an Insurer Default, the Sponsor and having
(x) short-term, unsecured debt rated at least A-1 by Moody's (or such lower
rating as may be acceptable to Moody's and the Insurer) and (y) a short-term
deposit rating of at least A-1 from S&P (or such lower rating as may be
acceptable to S&P and the Insurer). The Indenture Trustee shall at all times
satisfy the requirements of TIA Section 310(a). The Indenture Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Indenture Trustee shall provide
copies of such reports to the Insurer upon request. The Indenture Trustee shall
comply with TIA Section 310(b), including the optional provision permitted by
the second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 6.13. Appointment and Powers. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints Bankers
Trust Company of California, N.A. as the Indenture Trustee with respect to the
Collateral, and Bankers Trust Company of California, N.A. hereby accepts such
appointment and agrees to act as Indenture Trustee with respect to the Trust
Estate for the Issuer Secured Parties, to maintain custody and possession of
such Trust Estate (except as otherwise provided hereunder) and to perform the
other duties of the Indenture Trustee in accordance with the provisions of this
Indenture and the other Operative Documents. Each Issuer Secured Party hereby
authorizes the Indenture Trustee to take such action on its behalf, and to
exercise such rights, remedies, powers and privileges hereunder, as the
Controlling Party may direct and as are specifically authorized to be exercised
by the Indenture Trustee by the terms hereof, together with such actions,
rights, remedies, powers and privileges as are reasonably incidental thereto.
The Indenture Trustee shall act upon and in compliance with the written
instructions of the Controlling Party delivered pursuant to this Indenture
promptly following receipt of such written instructions; provided that the
Indenture Trustee shall not act in accordance with any instructions (i) which
are not authorized by, or in violation of the provisions of, this Indenture or
(ii) for which the Indenture Trustee has not received reasonable indemnity.
Receipt of such instructions shall not be a condition to the exercise by the
Indenture Trustee of its express duties hereunder, except where this Indenture
provides that the Indenture Trustee is permitted to act only following and in
accordance with such instructions.
SECTION 6.14. Performance of Duties. The Indenture Trustee shall
have no duties or responsibilities except those expressly set forth in this
Indenture and the other Operative Documents to which the Indenture Trustee is a
party or as directed by the Controlling Party in accordance with this Indenture.
The Indenture Trustee shall not be required to take any discretionary actions
hereunder except at the written direction of the Controlling Party and with
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the indemnification described in Section 6.7 hereof. The Indenture Trustee
shall, and hereby agrees that it will, perform all of the duties and obligations
required of it under the Sale and Servicing Agreement.
SECTION 6.15. Limitation on Liability. Neither the Indenture Trustee
nor any of its directors, officers, employees and agents shall be liable for any
action taken or omitted to be taken by it or them hereunder, or in connection
herewith, except that the Indenture Trustee shall be liable for its negligence,
bad faith or willful misconduct; nor shall the Indenture Trustee be responsible
for the validity, effectiveness, value, sufficiency or enforceability against
the Issuer of this Indenture or any of the Trust Estate (or any part thereof).
SECTION 6.16. Reliance Upon Documents. In the absence of negligence,
bad faith or willful misconduct on its part, the Indenture Trustee shall be
entitled to rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reasonable reliance
upon any statement or opinion contained in any such document or instrument.
SECTION 6.17. Representations and Warranties of the Indenture
Trustee. The Indenture Trustee represents and warrants to the Issuer and to each
Issuer Secured Party as follows:
(a) Due Organization. The Indenture Trustee is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States and is duly authorized and licensed under applicable
law to conduct its business as presently conducted.
(b) Corporate Power. The Indenture Trustee has all requisite right,
power and authority to execute and deliver this Indenture and to perform all of
its duties as the Indenture Trustee hereunder.
(c) Due Authorization. The execution and delivery by the Indenture
Trustee of this Indenture and the other Operative Documents to which it is a
party, and the performance by the Indenture Trustee of its duties hereunder and
thereunder, have been duly authorized by all necessary corporate proceedings,
are required for the valid execution and delivery by the Indenture Trustee, or
the performance by the Indenture Trustee, of this Indenture and such other
Operative Documents.
(d) Valid and Binding Indenture. The Indenture Trustee has duly
executed and delivered this Indenture and each other Operative Document to which
it is a party, and each of this Indenture and each such other Operative Document
constitutes the legal, valid and binding obligation of the Indenture Trustee,
enforceable against the Indenture Trustee in accordance with its terms, except
as (i) such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
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SECTION 6.18. Waiver of Setoffs. The Indenture Trustee hereby
expressly waives any and all rights of setoff that the Indenture Trustee may
otherwise at any time have under applicable law with respect to any Account and
agrees that amounts in the Accounts shall at all times be held and applied
solely in accordance with the provisions hereof.
SECTION 6.19. Control by the Controlling Party. The Indenture
Trustee shall comply with notices and instructions given by the Issuer or the
Noteholders only if accompanied by the written consent of the Controlling Party.
SECTION 6.20. Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Indenture Trustee without the possession of any
of the Notes or the production thereof in any proceeding relating thereto, and
such proceeding instituted by the Indenture Trustee shall be brought in its own
name or in its capacity as Indenture Trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursement and advances of the Indenture Trustee, its agents and counsel, be
for the ratable benefit of the Noteholders and the Insurer, in respect of which
such judgment has been recovered.
SECTION 6.21. Suits for Enforcement. In case an Event of Servicing
Termination or other default by the Master Servicer or the Sponsor hereunder or
under the Operative Documents shall occur and be continuing, the Indenture
Trustee, if the Controlling Party has given is prior written consent (and if not
the Controlling Party, with the consent of the Insurer), may proceed to protect
and enforce its rights and the rights of the Noteholders and the Insurer, under
this Indenture by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Indenture or in aid of the execution of any power granted in this Indenture
or for the enforcement of any other legal, equitable or other remedy, as the
Indenture Trustee, being advised by counsel selected by it with due care, shall
deem most effectual to protect and enforce any of the rights of the Indenture
Trustee, the Insurer and the Noteholders.
SECTION 6.22. Mortgagor Claims. In connection with any offset
defenses, or affirmative claim for recovery, asserted in legal actions brought
by Mortgagors under one or more Mortgage Loans based upon provisions therein or
upon other rights or remedies arising from any requirements of law applicable to
the Mortgage Loans:
(a) The Indenture Trustee is the holder of the Mortgage Loans only
as trustee on behalf of the holders of the Notes, and not as a principal or in
any individual or personal capacity.
(b) The Indenture Trustee shall not be personally liable for, or
obligated to pay Mortgagors, any affirmative claims asserted thereby, or
responsible to holders of the Notes for any offset defense amounts applied
against Mortgage Loan payments, pursuant to such legal actions.
(c) The Indenture Trustee will pay, solely from available Trust
money, affirmative claims for recovery by Mortgagors only pursuant to final
judicial orders or
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judgments, or judicially-approved settlement agreements, resulting from such
legal actions against the Trust.
(d) The Indenture Trustee will comply with judicial orders and
judgments which require its actions or cooperation in connection with
Mortgagors' legal actions to recover affirmative claims against holders of the
Notes.
(e) The Indenture Trustee will cooperate with and assist the Master
Servicer, the Insurer, the Sponsor, or holders of the Notes in their defense of
legal actions by Mortgagors to recover affirmative claims if such cooperation
and assistance is not contrary to the interests of the Indenture Trustee as a
party to such legal actions and if the Indenture Trustee is satisfactorily
indemnified for all liability, costs and expenses arising therefrom.
(f) The Issuer hereby agrees to cause the Master Servicer to
indemnify, hold harmless and defend the Indenture Trustee from and against any
and all liability, loss, costs and expenses of the Indenture Trustee resulting
from any affirmative claims for recovery asserted or collected by Mortgagors
under the Mortgage Loans and such amounts shall not be a responsibility of the
Trust.
ARTICLE VII.
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish To Indenture Trustee Names and
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
the Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Holders as of such Record Date, (b) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
10 days prior to the time such list is furnished; provided, however, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished. The Indenture Trustee or, if the Indenture Trustee is
not the Note Registrar, the Issuer shall furnish to the Insurer or the Issuer in
writing upon their written request and at such other times as the Insurer or the
Issuer may request a copy of the list.
SECTION 7.2. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.1 and the names and addresses of Holders received by the Indenture Trustee in
its capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.1 upon receipt of a new list so
furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
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(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA Section 312(c).
SECTION 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer
is required to file the same with the Commission, copies of the annual
reports and copies of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may be
required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect
to compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section 313(c))
such summaries of any information, documents and reports required to be
filed by the Issuer pursuant to clauses (i) and (ii) of this Section
7.3(a) as may be required by rules and regulations prescribed from time to
time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.4. Reports by Indenture Trustee. If required by TIA
Section 313(a), within 60 days after each December 31, beginning with December
31, 1998, the Indenture Trustee shall mail to each Noteholder as required by TIA
Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders
shall be filed by the Indenture Trustee with the Commission and each stock
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII.
Payments and Statements to Noteholders and Certificateholders;
Accounts, Disbursements and Releases
SECTION 8.1. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect,
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directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant to this Indenture and the Sale and Servicing
Agreement. The Indenture Trustee shall apply all such money received by it as
provided in this Indenture and the Sale and Servicing Agreement. Except as
otherwise expressly provided in this Indenture or in the Sale and Servicing
Agreement, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Trust Estate, the
Indenture Trustee may, with the consent of the Insurer, and shall, at the
direction of the Insurer, take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings.
SECTION 8.2. Release of Trust Estate. (a) Subject to Section 8.11
and the payment of its fees and expenses pursuant to Section 6.7, the Indenture
Trustee may, and when required by the Issuer and the provisions of this
Indenture shall (in each case, with the prior written consent of the Insurer),
execute instruments to release property from the lien of this Indenture, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture or the Sale and Servicing Agreement. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
monies.
(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding and all sums due the Indenture Trustee pursuant to Section 6.7 and
all Reimbursement Amounts due to the Insurer pursuant to the Insurance Agreement
have been paid, release any remaining portion of the Trust Estate that secured
the Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Accounts. The Indenture
Trustee shall release property from the lien of this Indenture pursuant to this
Section 8.2(b) only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1, and the prior
written consent of the Insurer.
SECTION 8.3. Establishment of Accounts. The Sponsor shall cause to
be established, and the Indenture Trustee shall maintain, at the corporate trust
office of the Indenture Trustee, a Note Account and a Reserve Account to be held
by the Indenture Trustee in the name of the Trust for the benefit of the
respective Class A Noteholders and the Insurer, as their interests may appear.
SECTION 8.4. The Policies (a) On each Determination Date the
Indenture Trustee shall calculate with respect to the immediately following
Payment Date, the Class A-1 Deficiency Amount, if any, and the Class A-2
Deficiency Amount, if any.
(a)
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(b) If the Indenture Trustee determines pursuant to paragraph (a)
above that a Class A- 1 Deficiency Amount would exist, the Indenture Trustee
shall complete a Notice in the form of Exhibit A to the Class A-1 Policy and
submit such notice to the 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 payment in
an amount equal to the Class A-1 Deficiency Amount.
(c) If the Indenture Trustee determines pursuant to paragraph (a)
above that a Class A-2 Deficiency Amount would exist, the Indenture Trustee
shall complete a Notice in the form of Exhibit A to the Class A-2 Policy and
submit such notice to the 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 payment in
an amount equal to the Class A-2 Deficiency Amount.
(d) Upon receipt of payments made pursuant to the related Policy
from the Insurer on behalf of the related Class A Noteholders, the Indenture
Trustee shall deposit such payments in the Note Account and shall distribute
such payments, or the proceeds thereof, in accordance with Section 8.6(c) hereof
to the related Class A Noteholders.
(e) The Indenture Trustee shall (i) receive payments made pursuant
to the Policy as attorney-in-fact of each related Class A Noteholder receiving
any Insured Payment from the Insurer and (ii) disburse such Insured Payment to
the related Class A Noteholders as set forth in Section 8.6(c) hereof. The
Insurer shall be entitled to receive the related Reimbursement Amount pursuant
to Section 8.6(c)(vi) hereof with respect to each Insured Payment made by the
Insurer. The Indenture Trustee hereby agrees on behalf of each Class A
Noteholder and the Trust for the benefit of the Insurer that it recognizes that
to the extent the Insurer makes payments made pursuant to either Policy, either
directly or indirectly (as by paying through the Indenture Trustee), to the
related Class A Noteholders, the Insurer will be subrogated to the Class A
Noteholders and will be entitled to receive such related Reimbursement Amount.
SECTION 8.5. Reserve Account. (a) On each Payment Date the Indenture
Trustee shall deposit to the Reserve Account the amounts, if any, described in
Section 8.6(c)(ix) hereof. The amount so deposited from HELOC Available Funds
shall be the "HLTV Cash O/C Amount," and the amount so deposited from the HLTV
Available Funds shall be the "HELOC Cash O/C Amount."
(b)(i) If, on any Payment Date, and after taking into account the
application of the HELOC Available Funds plus any Crossover Amount available
from the HLTV Pool (but not the proceeds of any Insured Payment) to the items
listed in clauses (i) through (vi) of Section 8.6(c) hereof with respect to the
HELOC Pool on such Payment Date, the full amount of the Class A-1 Interest
Distribution Amount (excluding any Class A-1 Net Funds Cap Carry-Forward
Amounts, any related Prepayment Interest Shortfalls and any related Relief Act
Shortfalls) has not been paid, and (or a HELOC Overcollateralization Deficit
would result, the Indenture Trustee shall withdraw from the HELOC Cash O/C
Amount then on deposit in the Reserve Account and deposit in the Note Account an
amount with respect to the Class A-1 Notes equal to the lesser of (x) the HELOC
Cash O/C Amount then on deposit in the Reserve Account and (y) the amount of
such shortfall in the amount of the Class A-1 Interest Distribution Amount
(excluding any Class
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A-1 Net Funds Cap Carry-Forward Amounts, any related Prepayment Interest
Shortfalls and any related Relief Act Shortfalls and the amount of such HELOC
Pool Overcollateralization Deficit.
(ii) If, on any Payment Date, and after taking into account, the
application of the HLTV Available Funds plus any Crossover Amount available from
the HELOC Pool (but not the proceeds of any Insured Payment) to the items listed
in clauses (i) through (vi) of Section 8.6(c) hereof with respect to the HLTV
Pool on such Payment Date, the full amount of the Class A-2 Interest
Distribution Amount (excluding any related Prepayment Interest Shortfalls and
any Relief Act Shortfalls) has not been paid, and/or an HLTV
Overcollateralization Deficit would result, the Indenture Trustee shall withdraw
from the HLTV Cash O/C Amount then on deposit in the Reserve Account and deposit
in the Note Account an amount with respect to the Class A-2 Notes equal to the
lesser of (x) the HLTV Cash Amount then on deposit in the Reserve Account and
(y) the amount of such shortfall in the amount of the Class A-2 Interest
Distribution Amount (excluding any related Prepayment Interest Shortfalls and
any related Relief Act Shortfalls) and the amount of such HLTV Pool
Overcollateralization Deficit.
(c)(i) If, on any Payment Date, (A) the sum of (x) the HELOC
Overcollateralization Amount, after taking into account all distributions on
such Payment Date other than any distribution of any HELOC Pool
Overcollateralization Reduction Amount, plus (y) the HELOC Cash O/C Amount on
deposit in the Reserve Account, after taking into account any withdrawals
therefrom pursuant to clause (b)(i) above, exceeds (B) the HELOC Pool Specified
Overcollateralization Amount for such Payment Date (such excess being a "HELOC
Pool Aggregate O/C Surplus Amount"), the lesser of (I) such HELOC Pool Aggregate
O/C Surplus Amount and (II) the HELOC Cash O/C Amount shall be released from the
Reserve Account and distributed to the Certificateholders as a distribution with
respect to the HLTV Pool.
(ii) If, on any Payment Date, (A) the sum of (x) the HLTV
Overcollateralization Amount, after taking into account all distributions on
such Payment Date other than any distribution of any HLTV Pool
Overcollateralization Reduction Amount plus (y) the HLTV Cash O/C Amount on
deposit in the Reserve Account after taking into account any withdrawals
therefrom pursuant to clause (b)(ii) above exceeds (B) the HLTV Pool Specified
Overcollateralization Amount for such Payment Date (such excess being a "HLTV
Pool Aggregate O/C Surplus Amount"), the lesser of (I) such HLTV Pool Aggregate
O/C Surplus Amount and (II) the HLTV Cash O/C Amount shall be released from the
Reserve Account and distributed to the Certificateholders as a distribution with
respect to the HELOC Pool.
(d)(i) As of any Payment Date, the lesser of (A) the excess of (I) the
HELOC Pool Aggregate O/C Surplus Amount over (II) the amount of the HELOC Cash
O/C Amount released from the Reserve Account pursuant to clause (c)(i) above and
(B) the Class A-1 Maximum Principal Payment or the Class A-1 Net Principal
Payment or the Class A-1 Net Principal Collections, as applicable to such
Payment Date is the "HELOC Pool Overcollateralization Reduction Amount" for such
Payment Date.
(ii) As of any Payment Date, the lesser of (A) the excess of (I) the HLTV
Pool Aggregate O/C Surplus Amount over (II) the amount of the HLTV Cash O/C
Amount released
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from the Reserve Account pursuant to clause (c)(ii) above and (B) the Principal
Collections with respect to the HLTV Pool for such Payment Date is the "HLTV
Pool Overcollateralization Reduction Amount" for such Payment Date.
SECTION 8.6. Flow of Funds (a) The Indenture Trustee shall deposit
to the Note Account, with respect to the HELOC Pool, without duplication, upon
receipt, (i) any payments made pursuant to the Class A-1 Policy and (ii) the
proceeds of any liquidation of the assets of the Trust, the related Monthly
Remittance Amount remitted by the Master Servicer or any Sub-Servicer, together
with any Substitution Amounts, and any Loan Purchase Price amounts received by
the Indenture Trustee.
(a)
(b) The Indenture Trustee shall deposit to the Note Account, with
respect to the HLTV Pool, without duplication, upon receipt, (i) any payments
made pursuant to the Class A-2 Policy and (ii) the proceeds of any liquidation
of the assets of the Trust, the related Monthly Remittance Amount remitted by
the Master Servicer or any Sub-Servicer, together with any Substitution Amounts,
and any Loan Purchase Price Amounts received by the Indenture Trustee.
(c) With respect to the Note Account, on each Payment Date, the
Indenture Trustee shall make the following allocations, disbursements and
transfers in the following order of priority, and each such allocation, transfer
and disbursement shall be treated as having occurred only after all preceding
allocations, transfers and disbursements have occurred:
(i) first, to the Indenture Trustee, the Indenture Trustee's Fee
then due and to the Owner Trustee, the Owner Trustee's Fee then due on
account of each Class of Class A Notes;
(ii) second, from amounts then on deposit in the Note Account, (x)
from amounts on deposit therein with respect to the HELOC Pool, the
Premium Amounts with respect to the Class A-1 Notes to the Insurer for
such Payment Date and (y) from amounts on deposit therein with respect to
the HLTV Pool, the Premium Amounts with respect to the Class A-2 Notes to
the Insurer for such Payment Date.
(iii) third, (x) from amounts then on deposit therein with respect
to the HELOC Pool, to the Class A-1 Noteholders, the Class A-1 Interest
Distribution Amount and the Unpaid Class A-1 Note Interest Shortfall, if
any, for such Payment Date and (y) from amounts then on deposit therein
with respect to the HLTV Pool, to the Class A-2 Noteholders, the Class A-2
Interest Distribution Amount and the Unpaid Class A-2 Note Interest
Shortfall, if any, for such Payment Date;
(iv) fourth, (x) from amounts then on deposit therein with respect
to the HELOC Pool, to the Class A-1 Noteholders as a distribution of
principal, the Class A-1 Scheduled Principal Distribution Amount for such
Payment Date and (y) from amounts then on deposit therein with respect to
the HLTV Pool, to the Class A-2 Noteholders, as a
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distribution of principal, the Class A-2 Scheduled Principal Distribution
Amount for such Payment Date;
(v) fifth, (x) from amounts then on deposit therein with respect to
the HELOC Pool, to the Class A-1 Noteholders, as a distribution of
principal, the HELOC Pool Overcollateralization Deficit for such Payment
Date and (y) from amounts then on deposit therein with respect to the HLTV
Pool, to the Class A-2 Noteholders, as a distribution of principal, the
HLTV Pool Overcollateralization Deficit for such Payment Date;
(vi) sixth, (x) from amounts then on deposit therein with respect to
the HELOC Pool, to the Insurer, the Reimbursement Amount related to the
Class A-1 Notes, if any, then due to it and (y) from amounts then on
deposit therein with respect to the HLTV Pool, the Reimbursement Amount
related to the Class A-2 Notes, if any, then due to it;
(vii) seventh, (x) from amounts then on deposit therein with respect
to the HELOC Pool, the Excess Cashflow with respect to the Class A-1 Notes
shall be applied to the extent necessary to fund the full amount of the
Accelerated Principal Payment with respect to the Class A-1 Notes and (y)
from amounts then on deposit therein with respect to the HLTV Pool, Excess
Cashflow with respect to the Class A-2 Notes shall be applied to the
extent necessary to fund the full amount of the Accelerated Principal
Payment with respect to the Class A-2 Notes;
(viii) eighth, any portion of the Available Funds with respect to a
Pool remaining after the application described in items (i) through (vii)
above on a Payment Date shall be used to fund any deficiency in items
(iii), (v) and (vi) above with respect to the other Pool on such Payment
Date (such amount which is allocated with respect to the other Pool on
such Payment Date is a "Crossover Amount");
(ix) ninth, to the Reserve Account for application pursuant to this
Indenture, to the extent that the sum of the HELOC Pool
Overcollateralization Amount plus the HLTV Pool Overcollateralization
Amount (after taking into account the reductions in each Class' Note
Principal Balance on such Payment Date due to the application of the
amounts described in clauses (iv), (v) and (vii) above) is less than the
sum of the HELOC Pool Specified Overcollateralization Amount and the HLTV
Pool Specified Overcollateralization Amount as of such Payment Date;
(x) tenth, (x) from amounts then on deposit therein with respect to
the HELOC Pool, to the Class A-1 Noteholders, the amount of any Class A-1
Net Funds Cap Carry-Forward Amount then due;
(xi) eleventh, (x) from amounts then on deposit therein with respect
to the HELOC Pool, to the Master Servicer, reimbursement for Servicing
Advances with respect to the Class A-1 Notes to the extent not previously
reimbursed and reimbursement for Servicing Advances which have been deemed
Nonrecoverable
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Advances with respect to such Notes and (y) from amounts then on deposit
therein with respect to the HLTV Pool, to the Master Servicer,
reimbursement for Servicing Advances with respect to the Class A-2 Notes,
to the extent not previously reimbursed and reimbursement for Servicing
Advances which have been deemed Nonrecoverable Advances with respect to
such Notes;
(xii) twelfth, to the Indenture Trustee and the Owner Trustee, for
the reimbursement of expenses of the Indenture Trustee and the Owner
Trustee not reimbursed pursuant to (c)(i) above which expenses were
incurred in connection with its duties and obligations hereunder; and
(xiii) thirteenth, to the Certificateholders, any amount remaining
on deposit in the Note Account.
SECTION 8.7. Investment of Accounts. (a) So long as no event
described in Section 5.1(a) of the Sale and Servicing Agreement shall have
occurred and be continuing, and consistent with any requirements of the Code,
all or a portion of the Accounts held by the Indenture Trustee shall be invested
and reinvested by the Indenture Trustee in the name of the Indenture Trustee for
the benefit of the Class A Noteholders and the Insurer, as directed in writing
by the Master Servicer, in one or more Eligible Investments bearing interest or
sold at a discount. During the continuance of an event described in Section
5.1(a) of the Sale and Servicing Agreement and following any removal of the
Master Servicer, the Insurer may direct such investments. No investment in any
Account shall mature later than the Business Day immediately preceding the next
Payment Date.
(b) If any amounts are needed for disbursement from any Account held
by the Indenture Trustee and sufficient uninvested funds are not available to
make such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Account. No investments will be liquidated prior to maturity unless the proceeds
thereof are needed for disbursement.
(c) The Indenture Trustee shall not in any way be held liable by
reason of any insufficiency in any Account held by the Indenture Trustee
resulting from any loss on any Eligible Investment included therein.
(d) The Indenture Trustee shall hold funds in the Accounts held by
the Indenture Trustee uninvested upon the occurrence of either of the following
events:
(i) the Master Servicer or the Insurer shall have failed to
give investment directions to the Indenture Trustee; or
(ii) the Master Servicer or the Insurer shall have failed to
give investment directions to the Indenture Trustee by 11:15 a.m. New York
time (or such other time as may be agreed by the Master Servicer and the
Indenture Trustee) on any Business Day (any such investment by the
Indenture Trustee pursuant to this clause (ii) to mature on the next
Business Day after the date of such investment).
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SECTION 8.8. Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(b) Federal Housing Administration debentures.
(c) FHLMC participation certificates and senior debt obligations.
(d) Federal Home Loan Banks' consolidated senior debt obligations.
(e) FNMA mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid principal)
and senior debt obligations.
(f) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated A-1 or better by S&P and P-1 by Moody's.
(g) Investment agreements approved by the Insurer provided:
1. The agreement is with a bank or insurance company which has
an unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by S&P, or is the
lead bank of a parent bank holding company with an uninsured, unsecured
and unguaranteed obligation meeting such rating requirements, and
2. Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice (provided
such notice may be amended or canceled at any time prior to the withdrawal
date), and
3. The agreement is not subordinated to any other obligations
of such insurance company or bank, and
4. The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
5. The Indenture Trustee and the Insurer receive an opinion of
counsel that such agreement is an enforceable obligation of such insurance
company or bank.
(h) Commercial paper (having original maturities of not more than
365 days) rated A-1 or better by S&P and P-1 or better by Moody's.
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(i) Investments in money market funds rated AAAm or AAAm-G by S&P
and AAA or P-1 by Moody's.
(j) Investments approved in writing by the Insurer and acceptable to
Moody's and S&P.
Provided that no instrument described above is permitted to evidence
either the right to receive (a) only interest with respect to obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provided a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations;
and provided, further, that no instrument described above may be purchased at a
price greater than par if such instrument may be prepaid or called at a price
less than its purchase price prior to stated maturity.
SECTION 8.9. Reports by Indenture Trustee. (a) On each Payment Date,
to the extent that the related report described in Section 4.8(d)(ii) of the
Sale and Servicing Agreement has been received by the Indenture Trustee, the
Indenture Trustee shall provide to each Class A Noteholder, to the Master
Servicer, to the Insurer, to each Underwriter, to the Sponsor, to S&P and to
Moody's a written report setting forth, among other things, the following
information:
(i) the total amount of the distribution with respect to the related
Class of Class A Notes and the Certificates;
(ii) the amount of such distributions allocable to principal;
(iii) the amount of such distributions allocable to interest;
(iv) the amount of any Unpaid Class A Note Interest Shortfall in
such distribution with respect to each Class of Class A Notes;
(v) the amount of any Insured Payment included in the amounts
distributed to a Class of the Class A Notes on such Payment Date;
(vi) information furnished by the Sponsor pursuant to Section
6049(d)(7)(C) of the Code and the regulations promulgated thereunder to
assist the Class A Noteholders in computing their market discount;
(vii) the total of any Substitution Amounts and any Loan Purchase
Price amounts included in such distribution;
(viii) the amounts, if any, of any Realized Losses for the related
Remittance Period;
(ix) the HELOC Cash O/C Amount and the HLTV Cash O/C Amount;
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(x) the Servicing Fee for each Pool for such Payment Date;
(xi) the Principal Balance for each Class of Notes and the Pool
Factor, each after giving effect to such distribution;
(xii) the Pool Balance for each Pool as of the end of the preceding
Remittance Period and the Pool Balance for each Pool at the close of
business on the last day of the related Remittance Period;
(xiii) the number and aggregate Principal Balances of Mortgage Loans
for each Pool as to which the Minimum Monthly Payment is Delinquent for
30-59 days, 60-89 days and 90 or more days, respectively, as of the end of
the preceding Remittance Period;
(xiv) the book value (within the meaning of 12 C.F.R. Section 571.13
or comparable provision) of any REO Property;
(xv) the Interest Rate with respect to each Class of Class A Notes
applicable to the distribution on the following Payment Date;
(xvi) the number and principal balances of any Mortgage Loans
retransferred to the Sponsor pursuant to (a) Section 2.2 and (b) Section
2.5 of the Sale and Servicing Agreement;
(xvii) the Overcollateralization Deficit with respect to each Pool;
(xviii) the amount of the Accelerated Principal Payment, if any, for
each Class of Class A Notes for the related Payment Date;
(xix) the amount of any Class A-1 Net Funds Cap Carry-Forward
Amount;
(xx) the amount of any HELOC Pool Overcollateralization Reduction
Amount and any HLTV Pool Overcollateralization Reduction Amount;
(xxi) the amount of any Cross Over Amount from the other Pool;
(xxii) the current level of the Overcollateralization Amount with
respect to each Pool; and
(xxiii) any modifications made to any Mortgage Loan pursuant to the
Sale and Servicing Agreement.
Items (i) through (iii) above shall, with respect to each Note, be
presented on the basis of a Note having a $1,000 denomination. In addition, by
January 31 of each calendar year following any year during which the Notes are
outstanding, the Indenture Trustee shall furnish a report to each holder of
record at any time during each calendar year as to the aggregate of amounts
reported pursuant to (i), (ii) and (iii) with respect to the Notes for such
calendar year.
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(b) In addition, on each Payment Date the Indenture Trustee will
distribute to each Holder, to the Insurer, to the Underwriter, to the Master
Servicer, to the Sponsors, to S&P and to Moody's, together with the information
described in Subsection (a) preceding, the following information as of the close
of business on the last Business Day of the prior calendar month, which is
hereby required to be prepared by the Master Servicer and furnished to the
Indenture Trustee for such purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each Pool and the
Principal Balances thereof, together with the number, aggregate Principal
Balances of such Mortgage Loans and the percentage (based on the aggregate
Principal Balances of the Mortgage Loans) (a) 30-59 days Delinquent, (b)
60- 89 days Delinquent and (c) 90 or more days Delinquent;
(ii) the number, aggregate Principal Balances of all Mortgage Loans
in each Pool and percentage (based on the aggregate Principal Balances of
the Mortgage Loans in such Pool) in foreclosure proceedings (and whether
any such Mortgage Loans in such Pool are also included in any of the
statistics described in the foregoing clause (i));
(iii) the number, aggregate Principal Balances of all Mortgage Loans
in each Pool and percentage (based on the aggregate Principal Balances of
the Mortgage Loans in such Pool) relating to Mortgagors in bankruptcy
proceedings (and whether any such Mortgage Loans are also included in any
of the statistics described in the foregoing clause (i));
(iv) the number, aggregate Principal Balances of all Mortgage Loans
in each Pool and percentage (based on the aggregate Principal Balance of
the Mortgage Loans in such Pool) relating to REO Properties (and whether
any such Mortgage Loans in such Pool are also included in any of the
statistics described in the foregoing clause (i));
(v) the book value of any REO Property;
(vi) the number and dollar amount of Mortgage Loans in each Pool
repurchased pursuant to Section 4.10; and
(vii) the aggregate dollar amount of Mortgage Loans in each Pool
modified as to Combined Loan-to-Value Ratio in excess of the original
values and the aggregate dollar amount of Mortgage Loans in each Pool
modified as to margins below the Cut-Off Date margins.
(c) The foregoing reports shall be sent be to a Class A Noteholder
only insofar as such holder owns a Note.
SECTION 8.10. Additional Reports by Indenture Trustee. (a) The
Indenture Trustee shall report to the Sponsor, the Master Servicer and the
Insurer with respect to the amount then held in each Account (including
investment earnings accrued or scheduled to accrue) held by the Indenture
Trustee and the identity of the investments included therein, as the
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Sponsor, the Master Servicer or the Insurer may from time to time request.
Without limiting the generality of the foregoing, the Indenture Trustee shall,
at the request of the Sponsor, the Master Servicer or the Insurer, transmit
promptly to the Sponsor, the Master Servicer and the Insurer copies of all
accounting of aggregate receipts in respect of the Mortgage Loans furnished to
it by the Master Servicer pursuant to Section 4.8(d)(ii) of the Sale and
Servicing Agreement and shall notify the Sponsor, the Master Servicer and the
Insurer if any such receipts have not been received by the Indenture Trustee.
(b) From time to time, at the request of the Insurer, the Indenture
Trustee shall report to the Insurer with respect to its actual knowledge,
without independent investigation, of any breach of any of the representations
or warranties relating to individual Mortgage Loans set forth in Section 3.3(a)
of the Sale and Servicing Agreement. On the date that is eighteen months after
the Closing Date, the Indenture Trustee shall provide the Insurer with a written
report of all of such inaccuracies to such date of which it has actual
knowledge, without independent investigation, and of the action taken by the
Sponsors under Section 3.4(b) of the Sale and Servicing Agreement with respect
thereto.
SECTION 8.11. Opinion of Counsel. The Indenture Trustee shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.2(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require as a condition to such
action, an Opinion of Counsel, stating the legal effect of any such action,
outlining the steps required to complete the same, and concluding that all
conditions precedent to the taking of such action have been complied with and
such action will not materially and adversely impair the security for the Notes
or the rights of the Noteholders or the Insurer in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the Trust
Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX.
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with the consent of the
Insurer, as evidenced to the Indenture Trustee, the Issuer and the Indenture
Trustee, when authorized by an Issuer Order, at any time and from time to time,
may enter into one or more indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee and the
Insurer, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture
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Trustee any property subject or required to be subjected to the lien of
this Indenture, or to subject to the lien of this Indenture additional
property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes and the Insurer, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that such action
shall not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to
or change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under the TIA or under any similar federal statute
hereafter enacted and to add to this Indenture such other provisions as
may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution
of any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an
Issuer Order, may, also without the consent of any of the Holders of the Notes
but with the prior written consent of the Insurer and with prior notice to the
Rating Agencies by the Issuer, as evidenced to the Indenture Trustee, enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that such action shall not,
as evidenced by an Opinion of Counsel addressed to the Insurer and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder.
SECTION 9.2. Supplemental Indentures with Consent of Noteholders.
The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also
may, with prior notice
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to the Rating Agencies, with the consent of the Insurer and with the consent of
the Holders of not less than a majority of the Outstanding Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that, subject to the express
rights of the Insurer under the Operative Documents, no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Price with respect thereto, change the
provision of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Trust Estate to payment of principal
of or interest on the Notes, or change any place of payment where, or the
coin or currency in which, any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such amount due
on the Notes on or after the respective due dates thereof (or, in the case
of redemption, on or after the Redemption Date);
(iii) reduce the percentage of the Outstanding Amount of the Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 12.1;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Operative Documents cannot be modified
or waived without the consent of the Holder of each Note affected thereby;
(vii) modify any of the provisions of this Indenture in such manner
as to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Payment Date (including the calculation
of any of the individual components of such calculation); or
(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise
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permitted or contemplated herein or in any of the Operative Documents,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Note of the security provided by the
lien of this Indenture.
The Indenture Trustee may determine whether or not any Notes would
be adversely affected by any supplemental indenture upon receipt of an Opinion
of Counsel to that effect and any such determination shall be conclusive upon
the Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee
of any supplemental indenture pursuant to this Section, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel (and, if requested, an Officer's Certificate) stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
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SECTION 9.6. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for the Notes.
ARTICLE X.
Redemption of Notes
SECTION 10.1. Redemption. (a) The Notes are subject to redemption
following the later of (A) the Payment Date following payment in full of all
amounts owing to the Insurer and (B) the earliest of (i) the transfer, under the
conditions specified in Section 10.1(b), to the Master Servicer of the
Noteholders' security interest in each Mortgage Loan and all property acquired
in respect of any Mortgage Loan remaining in the Trust for an amount equal to
the sum of (x) the Class A Principal Balance, (y) the sum of accrued and unpaid
Class A Interest Distribution Amount through the day preceding the final Payment
Date, (ii) the day following the Payment Date on which the distribution made to
Class A Noteholders has reduced the Class A Principal Balance to zero and no
other amounts are owed to the Class A Noteholders, (iii) the final payment or
other liquidation of the last Mortgage Loan remaining in the Trust (including,
without limitation, the disposition of the Mortgage Loan pursuant to Section
12.1 hereof) or the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Mortgage Loan and (iv) the Payment Date in
October, 2024; provided, however, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the date of death of the
last surviving descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James, living on the date hereof. Upon
termination in accordance with clause (B)(i) of this Section 10.1(a), the
Indenture Trustee shall execute such documents and instruments of transfer
presented by the Sponsor, in each case without recourse, representation or
warranty, and take such other actions as the Sponsor may reasonably request to
effect the transfer of the Mortgage Loan to the Sponsor.
(b) The Class A-1 Notes shall be subject to optional transfer to the
Sponsor or, if the Sponsor fails to exercise such option, to the Insurer at the
Insurer's option, or the second Payment Date following the end of the calendar
month in which the Class A-1 Principal Balance has been reduced to an amount
less than or equal to $6,750,000 (10% of the Original Class A-1 Principal
Balance) and all amounts due and owing to the Insurer as a Reimbursement Amount
have been paid. Such transfer shall only be permitted if the Sponsor delivers to
the Indenture Trustee an amount equal to the sum of the outstanding Class A-1
Principal Balance and accrued and unpaid interest thereon at the Class A-1
Interest Rate through the day preceding the final Payment Date plus all related
Reimbursement Amounts (such amount, the "Class A-1 Redemption Price"). In
connection with such purchase, the Master Servicer shall remit to the Indenture
Trustee all amounts then on deposit in the Principal and Interest Account for
deposit to
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the Note Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(c) The Class A-2 Notes shall be subject to optional transfer to the
Sponsor, or if the Sponsor fails to exercise such option, to the Insurer at the
Insurer's option, on the second Payment Date following the end of the calendar
month in which the Class A-2 Principal Balance has been reduced to an amount
less than or equal to $4,000,000 (10% of the Original Class A-2 Principal
Balance) and all amounts due and owing to the Insurer as a Reimbursement Amount
have been paid. Such transfer shall only be permitted if the Sponsor delivers to
the Indenture Trustee an amount equal to the sum of the outstanding Class A-2
Principal Balance and accrued and unpaid interest thereon at the Class A-2
Interest Rate through the day preceding the final Payment Date plus all related
Reimbursement Amounts (such amount, the "Class A-2 Redemption Price"). In
connection with such purchase, the Master Servicer shall remit to the Indenture
Trustee all amounts then on deposit in the Principal and Interest Account for
deposit to the Note Account, which deposit shall be deemed to have occurred
immediately preceding such purchase.
(d) Promptly following any such purchase, the Indenture Trustee will
release the Mortgage Files to the Master Servicer, or otherwise upon their
order, in a manner similar to that described in Section 4.14 of the Sale and
Servicing Agreement.
(e) The Originators may not participate in any purchase described in
this Section 10.1(b) or (c), or fund any portion of the purchase price, unless
the then-outstanding Principal Balances of the Mortgage Loans in the Trust
Estate is less than or equal to five percent of the sum of the aggregate Loan
Balances of all Mortgage Loans in the Trust Estate as of the Cut-Off Date.
(f) If the Notes are to be redeemed pursuant to this Section
10.1(a), the Master Servicer or the Issuer shall furnish notice of such election
to the Indenture Trustee not later than 45 days prior to the Redemption Date and
the Issuer shall deposit with the Indenture Trustee in the Note Account the
Redemption Price of the Notes not less than five Business Days prior to the
Redemption Date whereupon all such Notes shall be due and payable on the
Redemption Date upon the furnishing of a notice complying with Section 10.2.
SECTION 10.2. Surrender of Notes. (a) Notice of any termination,
specifying the Payment Date (which shall be a date that would otherwise be a
Payment Date) upon which the Noteholders may surrender their Notes to the
Indenture Trustee for payment of the final distribution and cancellation, shall
be given promptly by the Indenture Trustee (upon receipt of written directions
from the Sponsor, if the Sponsor is exercising its right to transfer of the
Mortgage Loans, given not later than the first day of the month preceding the
month of such final distribution) to the Insurer and to the Master Servicer and
by letter to Noteholders mailed not earlier than the 15th day and not later than
the 25th day of the month next preceding the month of such final distribution
specifying (i) the Payment Date upon which final distribution of the Notes will
be made upon presentation and surrender of Notes at the office or agency of the
Indenture Trustee therein designated, (ii) the amount of any such final
distribution and (iii) that
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the Record Date otherwise applicable to such Payment Date is not applicable,
distributions being made only upon presentation and surrender of the Notes at
the office or agency of the Indenture Trustee therein specified.
(b) Any money held by the Indenture Trustee in trust for the payment
of any amount due with respect to any Class A Note and remaining unclaimed by
the related Class A Noteholder for the period then specified in the escheat laws
of the State of New York after such amount has become due and payable shall be
discharged from such trust and be paid first, to the Insurer on account of any
Reimbursement Amounts, and second, to the Certificateholders; and such Class A
Noteholder shall thereafter, as an unsecured general creditor, look only to the
Certificateholders for payment thereof (but only to the extent of the amounts so
paid to the Insurer or the Certificateholders), and all liability of the
Indenture Trustee with respect to such trust money shall thereupon cease;
provided, however, that the Indenture Trustee, before being required to make any
such payment, shall at the expense of the Trust cause to be published once, in
the eastern edition of The Wall Street Journal, notice that such money remains
unclaimed and that, after a date specified therein, which shall be not fewer
than 30 days from the date of such publication, any unclaimed balance of such
money then remaining will be paid to the Insurer or the Certificateholders. The
Indenture Trustee shall, at the direction of the Sponsor, also adopt and employ,
at the expense of the Trust, any other reasonable means of notification of such
payment (including, but not limited to, mailing notice of such payment to Class
A Noteholders whose right to or interest in monies due and payable but not
claimed is determinable from the Note Register at the last address of record for
each such Class A Noteholder).
SECTION 10.3. Form of Redemption Notice. Notice of redemption
supplied to the Indenture Trustee by the Master Servicer under Section 10.1(a)
shall be given by the Indenture Trustee by facsimile or by first-class mail,
postage prepaid, transmitted or mailed prior to the applicable Redemption Date
to each Holder of Notes of record, as of the close of business on the date which
is not less than 5 days prior to the applicable Redemption Date, at such
Holder's address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the applicable Redemption Price;
(iii) that the Record Date otherwise applicable to such Redemption
Date is not applicable and that payments shall be made only upon
presentation and surrender of such Notes at the place where such Notes are
to be surrendered for payment of the Redemption Price (which shall be the
office or agency of the Issuer to be maintained as provided in Section
3.2); and
(iv) that interest on the Notes shall cease to accrue on the
Redemption Date.
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect
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therein, to any Holder of any Note shall not impair or affect the validity of
the redemption of any other Note.
SECTION 10.4. Notes Payable on Redemption Date. The Notes to be
redeemed shall, following notice of redemption as required by Section 10.2, on
the Redemption Date become due and payable at the related Redemption Price and
(unless the Issuer shall default in the payment of the related Redemption Price)
no interest shall accrue on such Redemption Price for any period after the date
to which accrued interest is calculated for purposes of calculating such
Redemption Price.
ARTICLE XI.
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and to the Insurer if the application or request is made to the
Indenture Trustee (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel addressed to the
Indenture Trustee and the Insurer stating that in the opinion of such counsel
all such conditions precedent, if any, have been complied with and (iii) (if
required by the TIA) an Independent Certificate from a firm of certified public
accountants meeting the applicable requirements of this Section, except that, in
the case of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
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SECTION 11.2. Form of Documents Delivered to Indenture Trustee. In
any case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Master Servicer, the Sponsor or the Issuer, stating that the information
with respect to such factual matters is in the possession of the Master
Servicer, the Sponsor or the Issuer, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to conclusively rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.
SECTION 11.3. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to
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Section 6.1) conclusive in favor of the Indenture Trustee and the Issuer, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any customary manner of the Indenture
Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.4. Notices, etc. to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the Issuer shall
be sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed first-class and shall be deemed to have been duly
given upon receipt to the Indenture Trustee at its Corporate Trust Office and
any notice delivered by facsimile shall be addressed to the Corporate Trust
Office, telecopy number (949) 253-7577.
(b) The Issuer by the Indenture Trustee or by any Noteholder shall
be in writing and shall be sufficient for every purpose hereunder if personally
delivered, delivered by facsimile or overnight courier or mailed first class,
and shall deemed to have been duly given upon receipt to the Issuer addressed
to: Advanta Home Equity Loan Trust 1998-B, in care of Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at any other address previously
furnished in writing to the Indenture Trustee by Issuer. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
(c) The Insurer by the Issuer or the Indenture Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by first-class
mail, personally delivered, or telecopied to the recipient as follows:
To the Insurer: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management-SF
Telecopy: (914) 765-3810
Notices required to be given to the Rating Agencies by the Issuer,
the Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered, delivered by overnight
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courier or first class or via facsimile to (i) in the case of Moody's, at the
following address: Moody's Investors Service, Inc., 99 Church Street, New York,
New York 10004, Fax No: (212) 533-0355, and (ii) in the case of S&P, at the
following address: Standard & Poor's Ratings Group, 26 Broadway (10th Floor),
New York, New York 10004, Attention: Asset Backed Surveillance Department, Fax
No: (212) 412-0224; or as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
SECTION 11.5. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder.
SECTION 11.6. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Note Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such methods
are reasonable and consented to by the Indenture Trustee (which consent shall
not be unreasonably withheld). The Issuer will furnish to the Indenture Trustee
a copy of each such agreement and the Indenture Trustee will cause payments to
be made and notices to be given in accordance with such agreements.
SECTION 11.7. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this
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indenture by any of the provisions of the Trust Indenture Act, such required
provision shall control.
The provisions of TIA Sections 310 through 317 that impose
duties on any person (including the provisions automatically deemed included
herein unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
SECTION 11.8. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.9. Successors and Assigns. All covenants and agreements
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors.
SECTION 11.10. Separability. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. The Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture. Nothing in this Indenture or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the Insurer and the Noteholders, and any other party
secured hereunder, and any other person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture (in which case the Indenture Trustee may exercise
such right or power hereunder), but not its duties and obligations under the
Policy, upon delivery of a written notice to the Indenture Trustee.
SECTION 11.12. Legal Holidays. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
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SECTION 11.15. Recording of Indenture. If this Indenture is subject
to recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Trust or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Sponsor, the
Originators, the Master Servicer, the Owner Trustee or the Indenture Trustee on
the Notes or under this Indenture or any certificate or other writing delivered
in connection herewith or therewith, against (i) the Sponsor, the Originators,
the Master Servicer, the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Sponsor, the Originators, the Master Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Sponsor, the Originators, the Master
Servicer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Sponsor, the Originators, the Master Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture Trustee
and the Owner Trustee have no such obligations in their individual capacity) and
except that any such owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Sponsor, the Issuer,
or any Certificateholder or join in any institution against the Sponsor, the
Issuer or any Certificateholder of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Operative
Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable
prior notice, it will permit any representative of the Indenture Trustee or of
the Insurer, during the Issuer's normal business hours, to examine all the books
of account, records, reports, and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall and shall cause its representatives to
hold in confidence all such information except to the extent disclosure may be
required by law (and all reasonable applications for confidential
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treatment are unavailing) and except to the extent that the Indenture Trustee
may reasonably determine that such disclosure is consistent with its Obligations
hereunder.
SECTION 11.19. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that (a) this Indenture is executed and
delivered by Wilmington Trust Company, not individually or personally but solely
as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the
powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Indenture and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaking by the
Issuer under this Indenture or any related documents.
SECTION 11.20. Rights of the Note Insurer to Exercise Rights of
Noteholders. By accepting its Notes, each Noteholder agrees that unless an
Insurer Default exists, the Insurer shall have the right to exercise all rights
of the Noteholders under this Indenture without any further consent of the
Noteholders, including, without limitation:
(i) the right to direct the actions of the Indenture Trustee during
the continuance of an Event of Default; and
(ii) the right to vote on proposed amendments to this Indenture.
In addition, each Noteholder agrees that, unless an Insurer Default
exists, any rights may be exercised by the Noteholders only with the prior
written consent of the Insurer.
Notwithstanding any provision in this Indenture to the contrary, so long
as an Insurer Default has occurred and is continuing, the Insurer shall have no
rights to exercise any voting rights of the Noteholders hereunder, nor shall the
Indenture Trustee be required to obtain the consent of, or act at the direction
of, the Insurer.
ARTICLE XII.
Rapid Amortization Events
SECTION 12.1. Rapid Amortization Events. The following shall
constitute Rapid Amortization Events:
(a) failure on the part of Sponsor (i) to make a payment or deposit
required under the Sale and Servicing Agreement within four Business Days after
the date such payment
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or deposit is required to be made or (ii) to observe or perform in any material
respect any other covenants or agreements of the Sponsor set forth in the Sale
and Servicing Agreement, which failure continues unremedied for a period of 60
days after written notice;
(b) any representation or warranty made by the Sponsor in the Sale
and Servicing Agreement proves to have been incorrect in any material respect
when made and continues to be incorrect in any material respect for a period of
60 days after written notice and as a result of which the interests of the
Holders of the Class A-1 Notes or the Insurer are materially and adversely
affected: provided, however, that a Rapid Amortization Event shall not be deemed
to occur if the Sponsor has purchased or made a substitution for the related
Mortgage Loan or Mortgage Loans if applicable during such period (or within an
additional 60 days with the consent of the Indenture Trustee and the Insurer) in
accordance with the provisions of the Sale and Servicing Agreement;
(c) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the Originators or the Sponsor;
(d) the Trust becomes subject to regulation by the Securities and
Exchange Commission as an investment company within the meaning of the
Investment Company Act of 1940, as amended;
(e) the occurrence of an event permitting the removal of the Master
Servicer;
(f) a draw is made under the Class A-1 Policy; and
(g) default in the payment of any interest, principal or any
installment of principal on any Class A-1 Note when the same becomes due and
payable, and such default continues for a period of five Business Days.
In the case of any event described in clause (a) through (f), a
Rapid Amortization Event will be deemed to have occurred only if, after the
applicable grace period, if any, described herein or in the Indenture or the
Sale and Servicing Agreement either (i) the Indenture Trustee or Holders holding
Class A-1 Notes evidencing more than 50% of the aggregate principal amount of
the Class A-1 Principal Balance, in each case, with the prior written consent of
the Insurer (so long as there is no continuing default by the Insurer in the
performance of its obligations under the Class A-1 Policy) or the Insurer (so
long as there is no continuing default by the Insurer in the performance of its
obligations under the Class A-1 Policy), by written notice to the Insurer, the
Sponsor, the Originators, the Rating Agencies, and the Master Servicer (and to
the Indenture Trustee, if given by the Holders or the Insurer) declare that a
Rapid Amortization Event has occurred as of the date of such notice, or in the
case of any event described in clause (g), the Indenture Trustee or Holders
holding Class A-1 Notes evidencing more than 50% of the Class A-1 Note Balance
by such written notice declare that a Class A-1 Rapid Amortization Event has
occurred as of the date of such notice. Following the occurrence of a Class A-1
Rapid Amortization Event described in clauses (a) through (f), the Insurer (so
long as there is no continuing default by the Insurer in the performance of its
obligations under the Class A-1 Policy) shall have the right to direct the
Indenture Trustee to sell the HELOC Mortgage Loans.
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Following the occurrence of a Class A-1 Rapid Amortization Event described in
clause (g), the Holders of the Class A-1 Notes evidencing more than 50% of the
Class A-1 Principal Balance shall have the right to so direct the Indenture
Trustee. If the Insurer has directed such sale, the Class A-1 Policy will cover
any amounts by which such remaining net proceeds are insufficient to pay the
Class A-1 Principal Balance, together with all accrued and unpaid interest
thereon.
In addition to the consequences of a Rapid Amortization Event
discussed above, if any one of the Originators voluntarily files a bankruptcy
petition or goes into liquidation or any person is appointed a receiver or
bankruptcy trustee of such Originator, on the day of any such filing or
appointment no further Additional Balances will be transferred to the Trust, and
such Originator will promptly give notice to the Indenture Trustee and the
Insurer of any such filing or appointment. Within 15 days, the Indenture Trustee
will publish a notice of the occurrence of such event. If so directed by the
Insurer, so long as no Insurer Default shall have occurred and be continuing,
the Indenture Trustee will sell, dispose of or otherwise liquidate the Trust
Estate with respect to the HELOC Mortgage Loans in a commercially reasonable
manner and on commercially reasonable terms. So long as no Event of Servicing
Termination has occurred and is continuing, any such sale, disposal or
liquidation and such sale, disposal or liquidation will be "servicing retained"
by the Master Servicer. The net proceeds of such sale will first be paid to the
Insurer to the extent of unreimbursed draws under the Class A-1 Policy and other
amounts owing to the Insurer (but only if an Insurer Default shall not have
occurred and be continuing). The remainder of such net proceeds will then be
distributed to the Holders of the Class A-1 Notes insofar as may be necessary to
required to reduce the Class A-1 Principal Balance, together with all accrued
and unpaid interest due thereon, to zero. If the Insurer has directed the
Indenture Trustee to undertake such sale or liquidation, the Policy will cover
any amount by which such remaining net proceeds are insufficient to pay the
Class A-1 Principal Balance in full.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, hereunto duly
authorized, all as of the day and year first above written.
ADVANTA HOME EQUITY LOAN TRUST 1998-B,
as Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee,
By: ___________________________________
Name:
Title:
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., not in
its individual capacity but solely as
Indenture Trustee
By: _______________________________________
Name:
Title:
[Signature Page of Indenture]
<PAGE> 101
EXHIBIT A
[Form of Note]
REGISTERED $67,500,000
No. A-1-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 007950 AT5
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
ADVANTA HOME EQUITY LOAN TRUST 1998-B
CLASS A-1 ASSET BACKED NOTES
Advanta Home Equity Loan Trust 1998-B, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of SIXTY-SEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($67,500,000), such amount payable on each Payment Date in an
amount equal to the result obtained by multiplying (i) a fraction the numerator
of which is $67,500,000 and the denominator of which is $67,500,000 by (ii) the
aggregate amount, if any, payable from the Note Account in respect of principal
on the Class A-1 Notes pursuant to Section 8.6 of the Indenture; provided,
however, that the entire unpaid principal amount of this Note shall be due and
payable on the October 2022 Payment Date (the "Class A-1 Final Scheduled Payment
Date"). The Issuer will pay interest on this Note at the rate per annum provided
in the Indenture on each Payment Date until the principal of this Note is paid
or made available for payment, on the principal amount of this Note outstanding
on the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date). Interest on this Note will accrue for each
Payment Date during the period from and including the preceding Payment Date
(or, if no interest has yet been paid, from
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<PAGE> 102
and including September 30, 1998) to but excluding the current Payment Date.
Interest will be computed on the basis of the actual number of days elapsed and
a 360-day year. Such principal of and interest on this Note shall be paid in the
manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Class A-1 Policy") issued by MBIA Insurance Corporation
(the "Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments on each Payment Date, all as more fully set
forth in the Indenture.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and hereby instructs the Indenture Trustee to treat
the Notes as indebtedness of the Issuer for federal and state tax reporting
purposes.
Each Noteholder or Note Owner, by acceptance of this Note or,
in the case of a Note Owner, a beneficial interest in a Note, covenants and
agrees (1) to treat the Notes as indebtedness of the Advanta Holding Trust for
purposes of federal income, state and local income and franchise and any other
income taxes and (2) that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Sponsor, the Originators, the
Master Servicer, the Indenture Trustee, or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Originators, the Master Servicer, the Indenture Trustee, or the Owner Trustee in
its individual capacity, any holder of a beneficial interest in the Issuer, the
Sponsor, the Originators, the Master Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Sponsor, the Originators,
the Master Servicer, the Indenture Trustee, or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any
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<PAGE> 103
benefit under the Indenture referred to on the reverse hereof, or be valid or
obligatory for any purpose.
The Note Registrar shall not register the transfer of this
Note unless the transferee has delivered a representation letter in form and
substance satisfactory to the Note Registrar to the effect that either (i) the
transferee is not an employee benefit plan or other retirement plan or
arrangement subject to Title I of ERISA or Section 4975 of the Code and is not
acting on behalf of or investing the assets of any such plan or arrangement or
(ii) the transferee's acquisition and continued holding of this Note or a
beneficial interest herein qualifies for exemptive relief under a prohibited
transaction class exemption issued by the U.S. Department of Labor. Each Note
Owner, by acceptance of a beneficial interest in this Note, shall be deemed to
make one of the foregoing representations.
A-3
<PAGE> 104
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: September 30, 1998 ADVANTA HOME EQUITY LOAN TRUST 1998-B
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but solely as Owner
Trustee under the Trust Agreement
By:___________________________________________
Name:
Title:
A-4
<PAGE> 105
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: September 30, 1998 BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely
as Indenture Trustee,
By:_______________________________________
Name:
Title:
A-5
<PAGE> 106
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its Class A-1 Asset Backed Notes (herein called the "Class
A-1 Notes"), all issued under an Indenture dated as of September 1, 1998 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Bankers Trust Company of California, N.A., as trustee
(the "Indenture Trustee," which term includes any successor Indenture Trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.
The Class A-1 Notes are and will be secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each
Payment Date in an amount described on the face hereof. "Payment Date" means the
twenty-fifth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing October 26, 1998. The term "Payment
Date" shall be deemed to include the Class A-1 Final Scheduled Payment Date.
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Class A-1 Final Scheduled
Payment Date and the Redemption Date, if any, pursuant to Section 10.1(a) of the
Indenture. Notwithstanding the foregoing, if (i) a default in the payment of the
Class A-1 Interest Distribution Amount occurs on any Payment Date and continues
for a period of five days or (ii) any one of the Originators voluntarily files a
bankruptcy petition or goes into liquidation or any person is appointed a
receiver or bankruptcy trustee of such Originator, then (x) the Indenture
Trustee will publish a notice of the occurrence of such event and (y) unless
otherwise instructed within 60 days by either the Insurer or, with the consent
of the Insurer (so long as no Insurer Default shall have occurred and be
continuing), the Holders of the Class A-1 Notes representing more than 50% of
the Outstanding Amount of the Notes, the Indenture Trustee shall sell or
liquidate the Trust Estate with respect to the HELOC Mortgage Loans and (after
payment of certain amounts, if any, owing to the Insurer) shall distribute the
net proceeds therefrom to the Class A-1 Noteholders as provided in Section 12.1
of the Indenture. All principal payments on the Class A-1 Notes shall be made
pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such
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<PAGE> 107
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) effected by any payments made on any Payment Date shall be binding upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Payment Date, then the Indenture Trustee, in the name of and on behalf of the
Issuer, will notify the Person who was the Holder hereof as of the Record Date
preceding such Payment Date by notice mailed prior to such Payment Date and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of
interest at the Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed
pursuant to Section 10.1(b) of the Indenture, in whole, but not in part, at the
option of the Sponsor (or, if the Sponsor fails to exercise such option, the
Insurer), on the second or any subsequent Payment Date following the end of the
calendar month in which the Class A-1 Note Principal Balance has been reduced to
less than or equal to 10% of the Original Class A-1 Note Principal Balance.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, (i)
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the Note Registrar
which requirements include membership or participation in Securities Transfer
Agents Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Exchange Act, and (ii) accompanied by
such other documents as the Indenture Trustee may require, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Originators, the Master
Servicer,
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the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any owner, beneficiary,
agent, officer, director or employee of the Sponsor, the Originators, the Master
Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity,
any holder of a beneficial interest in the Issuer, the Sponsor, the Originators,
the Master Servicer, the Owner Trustee or the Indenture Trustee or of any
successor or assign of the Sponsor, the Originators, the Master Servicer, the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such owner or beneficiary shall be fully liable,
to the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, or the Issuer or join in any institution
against the Sponsor, or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings, under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the Operative Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Holders of the Notes under the
Indenture at any time by the Issuer with the consent of the Insurer and of the
Holders of Notes representing a majority of the Outstanding Amount of all Notes
at the time Outstanding. Any such consent or waiver by the Holder of this Note
(or any one of more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder but with the consent of the Insurer.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
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This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Operative Documents, neither
Wilmington Trust Company in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Issuer for the sole purposes of binding
the interests of the Issuer in the assets of the Issuer. The Holder of this Note
by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Operative Documents, in the case of an Rapid Amortization Event
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
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<PAGE> 110
STATEMENT OF INSURANCE
OBLIGATIONS: Advanta Home Equity Loan Trust 1998-B
$67,500,000 Advanta Home Equity Loan Asset Backed Notes
Series 1998-B
Class A-1 Notes, Variable Interest Rate
MBIA Insurance Corporation (the "Insurer") has issued a Note
Guaranty Insurance Policy (the "Policy") related to the Class A-1 Notes
containing the following provisions, the Policy being on file at the Corporate
Trust Office of Bankers Trust Company of California, N.A. or its successors, as
Indenture Trustee (the "Indenture Trustee").
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Policy, thereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Insured
Payment will be received from the Insurer by the Indenture Trustee for the
Owners, on behalf of the Owners, for distribution by the Indenture Trustee to
each Owner of each Owner's proportionate share of the Insured Payment. The
Insurer's obligations under the Policy with respect to a particular Insured
Payment shall be discharged to the extent funds equal to the applicable Insured
Payment are received by the Indenture Trustee, whether or not such funds are
properly applied by the Indenture Trustee. Insured Payments shall be made only
at the time set forth in the Policy and no accelerated Insured Payments shall be
made regardless of any acceleration of the Obligations (as defined above),
unless such acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust or the
Indenture Trustee for withholding taxes, if any (including interest and
penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference
Amount on the Business Day following receipt on a Business Day by the Fiscal
Agent (as described below) of (i) a certified copy of the order requiring the
return of such a preference payment, (ii) an opinion of counsel satisfactory to
the Insurer that such order is final and not subject to appeal, (iii) an
assignment in such form as is reasonably required by the Insurer, irrevocably
assigning to the Insurer all rights and claims of the Owner relating to or
arising under the Obligations against the debtor which made such preference
payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or Indenture Trustee in bankruptcy named in
the final order of the court exercising jurisdiction on behalf of the Owner and
not to any Owner directly unless such Owner has returned principal or interest
paid on the Obligations to such receiver or trustee in bankruptcy, in which case
such payment shall be disbursed to such Owner.
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The Insurer will pay any other amount payable under the Policy
no later than 12:00 noon New York City time on the later of the Payment Date on
which the related amounts are due or the third Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer or any successor fiscal agent appointed by
the Insurer (the "Fiscal Agent") of a Notice (as described below); provided that
if such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim under the Policy it shall be deemed
not have been received by the Fiscal Agent for purposes of this paragraph, and
the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Indenture Trustee and the Indenture Trustee may submit an amended Notice.
Insured Payments due under the Policy unless otherwise stated
therein will be disbursed by the Fiscal Agent to the Indenture Trustee on behalf
of the Owners by wire transfer of immediately available funds in the amount of
the Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Indenture Trustee for the payment of such
Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the
Fiscal Agent shall in no event be liable to Owners for any acts of the Fiscal
Agent or any failure of the Insurer to deposit or cause to be deposited,
sufficient funds to make payments due under the Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Obligations
to the extent of any payment by the Insurer hereunder.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Indenture, dated as of September 1,
1998, between the Advanta Home Equity Loan Trust 1998-B and the Indenture
Trustee, as Indenture Trustee, without regard to any amendment or supplement
thereto unless such amendment or supplement has been approved by the Insurer.
"Business Day" means the day other than (i) a Saturday or
Sunday or (ii) a day on which the Insurer or banking institutions in the State
of New York or in the city in which the principal corporate trust office of the
Indenture Trustee is located, are authorized or obligated by law or executive
order to be closed.
"Deficiency Amount" means, with respect to the Obligations (a)
for any Payment Date, any shortfalls in the Total Available Funds to pay the sum
of (i) the Class A-1 Interest Distribution Amount (excluding any Class A-1 Net
Funds Cap Carry-Forward Amounts, any Prepayment Interest Shortfalls and any
Relief Act Shortfalls) and (ii) the HELOC Pool Overcollateralization Deficit and
(b) on the Class A-1 Final Scheduled Payment Date, any shortfall in the Total
Available Funds to pay the outstanding Class A-1 Principal Balance.
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"Insured Payment" means (i) as of any Payment Date, any
Deficiency Amount and (ii) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by facsimile substantially in the form of Exhibit A
attached to the Policy, the original of which is subsequently delivered by
registered or certified mail, from the Indenture Trustee specifying the Insured
Payment which shall be due and owing on the applicable Payment Date.
"Owner" means each Holder (as defined in the Agreement) (other
than the Indenture Trustee, the Originators or the Master Servicer) who, on the
applicable Payment Date, is entitled under the terms of the applicable Class A-1
Notes to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a Indenture Trustee in bankruptcy pursuant to the United
States Bankruptcy Code (11 U.S.C.), as a amended from time to time, in
accordance with a final nonappealable order of a court having competent
jurisdiction.
"Total Available Funds" means, with respect to the Obligations
and any Payment Date, the sum of (i) the Available Funds then available in the
Note Account, reduced by the amounts paid pursuant to Section 8.6(c)(i) and (ii)
of the Indenture; (ii) the Crossover Amount, if any, available from the HLTV
Pool related to the Class A-2 Notes pursuant to the crosscollateralization
provisions of the Trust; and (iii) amounts available from the Reserve Account
with respect to the Obligations on such Payment Date.
Capitalized terms used in the Policy and not otherwise defined
therein shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment to or modification of the Agreement unless such amendment or
modification has been approved in writing by the Insurer.
Any notice under the Policy or service of process on the
Fiscal Agent of the Insurer may be made at the address listed below for the
Fiscal Agent of the Insurer or such other address as the Insurer shall specify
in writing to the Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61
Broadway, New York, New York 10006, Attention: Municipal Registrar and Paying
Agency or such other address as the Fiscal Agent shall specify to the Indenture
Trustee in writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
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The Policy is not cancelable for any reason. The premium on
the Policy is not refundable for any reason including payment, or provision
being made for payment, prior to maturity of the Obligations.
MBIA INSURANCE CORPORATION
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<PAGE> 114
ASSIGNMENT
Social Security or Taxpayer I.D. or other identifying number of
assignee: __________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints __________________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: ________________ ___________________________________*
Signature Guaranteed:
Dated: ________________ ___________________________________
*NOTICE: The signature to this assignment must correspond with
the name of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever.
<PAGE> 115
EXHIBIT B
[Form of Note]
REGISTERED $40,000,000
No. A-2-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 007950 AU2
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
ADVANTA HOME EQUITY LOAN TRUST 1998-B
CLASS A-2 6.55% ASSET BACKED NOTES
Advanta Home Equity Loan Trust 1998-B, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of FORTY MILLION DOLLARS ($40,000,000),
such amount payable on each Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $40,000,000 and
the denominator of which is $40,000,000 by (ii) the aggregate amount, if any,
payable from the Note Account in respect of principal on the Class A-2 Notes
pursuant to Section 8.6 of the Indenture; provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the October 25,
2024 Payment Date (the "Class A-2 Final Scheduled Payment Date"). The Issuer
will pay interest on this Note at the rate per annum shown above (the "Class A-2
Interest Rate"). Interest on this Note shall be paid as provided in the
Indenture on each Payment Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date). Interest on this Note will accrue for each Payment
Date during the period from and including the first day of the prior
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calendar month to but excluding the first day of the current calendar month,
with such interest being computed on the basis of a 30-day month and a 360-day
year. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Class A-2 Policy") issued by MBIA Insurance Corporation
(the "Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments on each Payment Date, all as more fully set
forth in the Indenture.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and hereby instructs the Indenture Trustee to treat
the Notes as indebtedness of the Issuer for federal and state tax reporting
purposes.
Each Noteholder or Note Owner, by acceptance of this Note or,
in the case of a Note Owner, a beneficial interest in a Note, covenants and
agrees (1) to treat the Notes as indebtedness of the Advanta Holding Trust for
purposes of federal income, state and local income and franchise and any other
income taxes and (2) that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Sponsor, the Originators, the
Master Servicer, the Indenture Trustee, or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Originators, the Master Servicer, the Indenture Trustee, or the Owner Trustee in
its individual capacity, any holder of a beneficial interest in the Issuer, the
Sponsor, the Originators, the Master Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Sponsor, the Originators,
the Master Servicer, the Indenture Trustee, or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any
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benefit under the Indenture referred to on the reverse hereof, or be valid or
obligatory for any purpose.
The Note Registrar shall not register the transfer of this
Note unless the transferee has delivered a representation letter in form and
substance satisfactory to the Note Registrar to the effect that either (i) the
transferee is not an employee benefit plan or other retirement plan or
arrangement subject to Title I of ERISA or Section 4975 of the Code and is not
acting on behalf of or investing the assets of any such plan or arrangement or
(ii) the transferee's acquisition and continued holding of this Note or a
beneficial interest herein qualifies for exemptive relief under a prohibited
transaction class exemption issued by the U.S. Department of Labor. Each Note
Owner, by acceptance of a beneficial interest in this Note, shall be deemed to
make one of the foregoing representations.
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<PAGE> 118
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: September 30, 1998 ADVANTA HOME EQUITY LOAN TRUST 1998-B
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but solely as Owner
Trustee under the Trust Agreement
By:________________________________
Name:
Title:
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<PAGE> 119
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: September 30, 1998 BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as
Indenture Trustee,
By: ______________________________________
Name:
Title:
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<PAGE> 120
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its Class A-2 Asset Backed Notes (herein called the "Class
A-2 Notes"), all issued under an Indenture dated as of September 1, 1998 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Bankers Trust Company of California, N.A., as trustee
(the "Indenture Trustee," which term includes any successor Indenture Trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.
The Class A-2 Notes are and will be secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each
Payment Date in an amount described on the face hereof. "Payment Date" means the
twenty-fifth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing October 26, 1998. The term "Payment
Date" shall be deemed to include the Class A-2 Final Scheduled Payment Date.
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Class A-2 Final Scheduled
Payment Date and the Redemption Date, if any, pursuant to Section 10.1(a) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing if the Indenture Trustee, at the direction
or upon the prior written consent of the Insurer in the absence of an Insurer
Default, or the Holders of the Notes representing not less than 50% of the
Principal Balance of the Outstanding Notes (with the prior written consent of
the Insurer in the absence of a Insurer Default), shall have declared the Notes
to be immediately due and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Notes shall be made pro rata to the
Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be
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<PAGE> 121
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Indenture Trustee, in the name of and on
behalf of the Issuer, will notify the Person who was the Holder hereof as of the
Record Date preceding such Payment Date by notice mailed prior to such Payment
Date and the amount then due and payable shall be payable only upon presentation
and surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of
interest at the Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed
pursuant to Section 10.1(c) of the Indenture, in whole, but not in part, at the
option of the Sponsor (or, if the Sponsor fails to exercise such option, the
Insurer), on the second or any subsequent Payment Date following the end of the
calendar month in which the HLTV Pool Balance has been reduced to less than or
equal to 10% of the HLTV Pool Balance as of the Cut-Off Date.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, (i)
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the Note Registrar
which requirements include membership or participation in Securities Transfer
Agents Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Exchange Act, and (ii) accompanied by
such other documents as the Indenture Trustee may require, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Originators, the Master
Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity,
(ii) any owner of a beneficial interest in the Issuer or (iii) any owner,
beneficiary, agent, officer, director or employee of the Sponsor, the
Originators, the Master Servicer, the Indenture Trustee or the Owner Trustee in
its individual capacity, any holder of a beneficial interest in the Issuer, the
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<PAGE> 122
Sponsor, the Originators, the Master Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Sponsor, the Originators,
the Master Servicer, the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, or the Issuer or join in any institution
against the Sponsor, or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings, under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the Operative Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Holders of the Notes under the
Indenture at any time by the Issuer with the consent of the Insurer and of the
Holders of Notes representing a majority of the Outstanding Amount of all Notes
at the time Outstanding. Any such consent or waiver by the Holder of this Note
(or any one of more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder but with the consent of the Insurer.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
B-8
<PAGE> 123
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Operative Documents, neither
Wilmington Trust Company in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Issuer for the sole purposes of binding
the interests of the Issuer in the assets of the Issuer. The Holder of this Note
by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Operative Documents, in the case of an Rapid Amortization Event
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
B-9
<PAGE> 124
STATEMENT OF INSURANCE
OBLIGATIONS: Advanta Home Equity Loan Trust 1998-B
$40,000,000 Advanta Home Equity Loan Asset Backed Notes
Series 1998-B
Class A-2 Notes, 6.55% Interest Rate
MBIA Insurance Corporation (the "Insurer") has issued a Note
Guaranty Insurance Policy (the "Policy") related to the Class A-2 Notes
containing the following provisions, the Policy being on file at the Corporate
Trust Office of Bankers Trust Company of California, N.A. or its successors, as
Indenture Trustee for the Owners (the "Indenture Trustee").
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Policy, thereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Insured
Payment will be received from the Insurer by the Indenture Trustee for the
Owners, on behalf of the Owners, for distribution by the Indenture Trustee to
each Owner of each Owner's proportionate share of the Insured Payment. The
Insurer's obligations under the Policy with respect to a particular Insured
Payment shall be discharged to the extent funds equal to the applicable Insured
Payment are received by the Indenture Trustee, whether or not such funds are
properly applied by the Indenture Trustee. Insured Payments shall be made only
at the time set forth in the Policy and no accelerated Insured Payments shall be
made regardless of any acceleration of the Obligations, unless such acceleration
is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust or the
Indenture Trustee for withholding taxes, if any (including interest and
penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference
Amount on the Business Day following receipt on a Business Day by the Fiscal
Agent (as described below) of (i) a certified copy of the order requiring the
return of such a preference payment, (ii) an opinion of counsel satisfactory to
the Insurer that such order is final and not subject to appeal, (iii) an
assignment in such form as is reasonably required by the Insurer, irrevocably
assigning to the Insurer all rights and claims of the Owner relating to or
arising under the Obligations against the debtor which made such preference
payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or Indenture Trustee in bankruptcy named in
the final order of the court exercising jurisdiction on behalf of the Owner and
not to any Owner directly unless such Owner has returned principal or interest
paid on the Obligations to such receiver or trustee in bankruptcy, in which case
such payment shall be disbursed to such Owner.
B-10
<PAGE> 125
The Insurer will pay any other amount payable under the Policy
no later than 12:00 noon New York City time on the later of the Payment Date on
which the related amounts are due or the third Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer or any successor fiscal agent appointed by
the Insurer (the "Fiscal Agent") of a Notice (as described below); provided that
if such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim under the Policy it shall be deemed
not have been received by the Fiscal Agent for purposes of this paragraph, and
the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Indenture Trustee and the Indenture Trustee may submit an amended Notice.
Insured Payments due under the Policy unless otherwise stated
therein will be disbursed by the Fiscal Agent to the Indenture Trustee on behalf
of the Owners by wire transfer of immediately available funds in the amount of
the Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Indenture Trustee for the payment of such
Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the
Fiscal Agent shall in no event be liable to Owners for any acts of the Fiscal
Agent or any failure of the Insurer to deposit or cause to be deposited,
sufficient funds to make payments due under the Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Obligations
to the extent of any payment by the Insurer hereunder.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Indenture, dated as of September 1,
1998, between the Advanta Home Equity Loan Trust 1998-B and the Indenture
Trustee, as Indenture Trustee, without regard to any amendment or supplement
thereto unless such amendment or supplement has been approved by the Insurer.
"Business Day" means the day other than (i) a Saturday or
Sunday or (ii) a day on which the Insurer or banking institutions in the State
of New York or in the city in which the principal corporate trust office of the
Indenture Trustee is located, are authorized or obligated by law or executive
order to be closed.
"Deficiency Amount" means, with respect to the Obligations and
for any Payment Date, any shortfalls in the Total Available Funds to pay the sum
of (i) the Class A-2 Interest Distribution Amount (excluding any Prepayment
Interest Shortfalls and any Relief Act Shortfalls) and (ii) the HLTV Pool
Overcollateralization Deficit.
"Insured Payment" means (i) as of any Payment Date, any
Deficiency Amount and (ii) any Preference Amount.
B-11
<PAGE> 126
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by facsimile substantially in the form of Exhibit A
attached to the Policy, the original of which is subsequently delivered by
registered or certified mail, from the Indenture Trustee specifying the Insured
Payment which shall be due and owing on the applicable Payment Date.
"Owner" means each Holder (as defined in the Agreement) (other
than the Indenture Trustee, the Originators or the Master Servicer) who, on the
applicable Payment Date, is entitled under the terms of the applicable Class A-1
Notes to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as a amended from time to time, in accordance with
a final nonappealable order of a court having competent jurisdiction.
"Total Available Funds" means, with respect to the Obligations
and any Payment Date, the sum of (i) the Available Funds then available in the
Note Account, reduced by the amounts paid pursuant to Section 8.6(c)(i) and (ii)
of the Indenture; (ii) the Crossover Amount, if any, available from the HELOC
Pool related to the Class A-1 Notes pursuant to the crosscollateralization
provisions of the Trust; and (iii) amounts available from the Reserve Account
with respect to the Obligations on such Payment Date.
Capitalized terms used in the Policy and not otherwise defined
therein shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment to or modification of the Agreement unless such amendment or
modification has been approved in writing by the Insurer.
Any notice under the Policy or service of process on the
Fiscal Agent of the Insurer may be made at the address listed below for the
Fiscal Agent of the Insurer or such other address as the Insurer shall specify
in writing to the Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61
Broadway, New York, New York 10006, Attention: Municipal Registrar and Paying
Agency or such other address as the Fiscal Agent shall specify to the Indenture
Trustee in writing.
The Policy is being issued under and pursuant to, and shall be
constructed under, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
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 is not cancelable for any reason. The premium on
the Policy is not refundable for any reason including payment, or provision
being made for payment, prior to maturity of the Obligations.
B-12
<PAGE> 127
MBIA INSURANCE CORPORATION
B-13
<PAGE> 128
ASSIGNMENT
Social Security or Taxpayer I.D. or other identifying number of
assignee: __________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_______________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints __________________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: ________________ ___________________________________*
Signature Guaranteed:
Dated: ________________ ___________________________________
*NOTICE: The signature to this assignment must correspond with
the name of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever.
B-14
<PAGE> 1
EXHIBIT 4.2.1
<PAGE> 2
Exhibit 4.2.1
EXECUTION COPY
TRUST AGREEMENT
between
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Sponsor
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of September 1, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. Definitions........................................................................................ 1
SECTION 1.1 Capitalized Terms................................................................ 1
SECTION 1.2 Other Definitional Provisions.................................................... 3
SECTION 1.3 Action by or Consent of Noteholders and Certificateholders....................... 4
ARTICLE II. Organization...................................................................................... 4
SECTION 2.1 Names............................................................................ 4
SECTION 2.2 Office........................................................................... 4
SECTION 2.3 Purposes and Powers.............................................................. 4
SECTION 2.4 Appointment of Owner Trustee..................................................... 5
SECTION 2.5 Initial Capital Contribution of Trust Estate..................................... 5
SECTION 2.6 Declaration of Trust............................................................. 5
SECTION 2.7 Liability........................................................................ 5
SECTION 2.8 Title to Trust Property.......................................................... 5
SECTION 2.9 Situs of Trust................................................................... 6
SECTION 2.10 Representations and Warranties of the Sponsor.................................... 6
SECTION 2.11 Covenants of the Sponsor......................................................... 7
SECTION 2.12 Covenants of the Certificateholders.............................................. 8
SECTION 2.13 Investment Company............................................................... 8
ARTICLE III. Certificates and Transfer of Interests........................................................... 8
SECTION 3.1 Initial Ownership................................................................ 8
SECTION 3.2 The Certificates................................................................. 9
SECTION 3.3 Authentication of Certificates................................................... 9
SECTION 3.4 Registration of Transfer and Exchange of Certificates............................ 9
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates................................ 9
SECTION 3.6 Persons Deemed Certificateholders................................................ 9
SECTION 3.7 Access to List of Certificateholders' Names and Addresses........................ 10
SECTION 3.8 Maintenance of Office or Agency.................................................. 10
SECTION 3.9 ERISA............................................................................ 10
SECTION 3.10 Restrictions on Transfer of Certificates......................................... 10
SECTION 3.11 Acceptance of Obligations........................................................ 12
SECTION 3.12 Payments on Certificates......................................................... 12
ARTICLE IV. Voting Rights and Other Actions................................................................... 12
SECTION 4.1 Prior Notice to Holders with Respect to Certain Matters.......................... 12
SECTION 4.2 Action by Certificateholders with Respect to Certain Matters..................... 13
SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy.......................... 13
SECTION 4.4 Restrictions on Certificateholders' Power........................................ 14
SECTION 4.5 Majority Control................................................................. 14
SECTION 4.6 Rights of Insurer................................................................ 14
SECTION 4.7 Separateness..................................................................... 14
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V. Certain Duties..................................................................................... 15
SECTION 5.1 Accounting and Records to the Noteholders, Certificateholders, the
Internal Revenue Service and Others.............................................. 15
SECTION 5.2 [Reserved.]...................................................................... 15
ARTICLE VI. Authority and Duties of Owner Trustee............................................................. 15
SECTION 6.1 General Authority................................................................ 15
SECTION 6.2 General Duties................................................................... 16
SECTION 6.3 Action upon Instruction.......................................................... 16
SECTION 6.4 No Duties Except as Specified in this Agreement or in Instructions............... 17
SECTION 6.5 No Action Except under Specified Documents or Instructions....................... 17
SECTION 6.6 Restrictions..................................................................... 17
ARTICLE VII. Concerning the Owner Trustee..................................................................... 17
SECTION 7.1 Acceptance of Trust and Duties................................................... 17
SECTION 7.2 Furnishing of Documents.......................................................... 18
SECTION 7.3 Representations and Warranties................................................... 18
SECTION 7.4 Reliance; Advice of Counsel...................................................... 19
SECTION 7.5 Not Acting in Individual Capacity................................................ 19
SECTION 7.6 Owner Trustee Not Liable for Certificates or Mortgage Loans...................... 19
SECTION 7.7 Owner Trustee May Own Certificates and Notes..................................... 20
SECTION 7.8 Payments from Owner Trust Estate................................................. 20
SECTION 7.9 Doing Business in Other Jurisdictions............................................ 20
ARTICLE VIII. Compensation of Owner Trustee................................................................... 20
SECTION 8.1 Owner Trustee's Fees and Expenses................................................ 20
SECTION 8.2 Indemnification.................................................................. 21
SECTION 8.3 Payments to the Owner Trustee.................................................... 21
SECTION 8.4 Non-recourse Obligations......................................................... 21
ARTICLE IX. Termination of Trust Agreement.................................................................... 21
SECTION 9.1 Termination of Trust Agreement................................................... 21
ARTICLE X. Successor Owner Trustees and Additional Owner Trustees............................................. 22
SECTION 10.1 Eligibility Requirements for Owner Trustee....................................... 22
SECTION 10.2 Resignation or Removal of Owner Trustee.......................................... 23
SECTION 10.3 Successor Owner Trustee.......................................................... 23
SECTION 10.4 Merger or Consolidation of Owner Trustee......................................... 24
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee........................ 24
ARTICLE XI. Miscellaneous..................................................................................... 25
SECTION 11.1 Supplements and Amendments....................................................... 25
SECTION 11.2 No Legal Title to Owner Trust Estate in Certificateholders....................... 26
SECTION 11.3 Limitations on Rights of Others.................................................. 26
SECTION 11.4 Notices.......................................................................... 27
SECTION 11.5 Severability..................................................................... 27
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 11.6 Separate Counterparts............................................................ 27
SECTION 11.7 Assignments; Insurer............................................................. 27
SECTION 11.8 No Petition...................................................................... 27
SECTION 11.9 No Recourse...................................................................... 28
SECTION 11.10 Headings......................................................................... 30
SECTION 11.11 Governing Law.................................................................... 30
SECTION 11.12 Master Servicer.................................................................. 30
</TABLE>
EXHIBITS
Exhibit A.........Form of Certificate
Exhibit B.........Form of Certificate of Trust
iii
<PAGE> 6
TRUST AGREEMENT dated as of September 1, 1998 between ADVANTA
MORTGAGE CONDUIT SERVICES, INC., a Delaware corporation (the "Sponsor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation as Owner Trustee.
ARTICLE I.
Definitions
SECTION 1.1 Capitalized Terms. For the purposes of this
Agreement, the following terms shall have the meanings set forth below. All
other capitalized terms used herein but not defined shall have the meanings set
forth in the Sale and Servicing Agreement.
"Affiliate" shall mean with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, or owns, directly or
indirectly, 50% or more of, the Person specified.
"Agreement" shall mean this Trust Agreement, as the same may
be amended and supplemented from time to time.
"Benefit Plan Investor" shall have the meaning assigned to
such term in Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of
the Delaware Code, 12 Del. Code Section 3801 et. seq. as the same may be amended
from time to time.
"Certificate" means a trust certificate evidencing the
beneficial ownership interest of a Certificateholder in the Trust, substantially
in the form of Exhibit A hereto.
"Certificate Account" shall mean the account designated as
such as established and maintained pursuant to the Indenture.
"Certificate of Trust" shall mean the Certificate of Trust in
the form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of
the Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean
the register maintained and the registrar appointed pursuant to Section 3.4.
"Class A-1 Policy" shall mean the note guaranty insurance
policy with respect to the Class A-1 Notes, dated September 30, 1998, issued by
the Insurer to the Indenture Trustee for the benefit of the Class A-1
Noteholders.
"Class A-2 Policy" shall mean the note guaranty insurance
policy with respect to the Class A-2 Notes, dated September 30, 1998, issued by
the Insurer to the Indenture Trustee for the benefit of the Class A-2
Noteholders.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at such other address as the Owner
Trustee may designate by notice to the Certificateholders, the Insurer and the
Sponsor, or
<PAGE> 7
the principal corporate trust office of any successor Owner Trustee (the address
of which the successor owner trustee will notify the Certificateholders, the
Insurer and the Sponsor).
"Definitive Certificates" shall mean Certificates issued in
certificated, fully registered form.
"ERISA" shall have the meaning assigned to such term in
Section 3.9.
"Expenses" shall have the meaning assigned to such term in
Section 8.2.
"Holder" or "Certificateholder" shall mean the Person in whose
name a Certificate is registered on the Certificate Register.
"Indemnification Agreement" shall mean the Indemnification
Agreement dated as of September 25, 1998 among the Insurer, the Sponsor, the
Originators and Bear Stearns & Co. Inc.
"Indemnified Parties" shall have the meaning assigned to such
term in Section 8.2.
"Indenture" shall mean the Indenture dated as of September,
1998, between the Issuer and Bankers Trust Company of California, N.A., as
Indenture Trustee, as the same may be amended and supplemented from time to
time.
"Indenture Trustee" shall mean, initially Bankers Trust
Company of California, N.A., in its capacity as indenture trustee, including its
successors in interest, until and unless a successor Person shall have become
the Indenture Trustee pursuant to the Sale and Servicing Agreement and
thereafter "Indenture Trustee" shall mean such successor Person.
"Instructing Party" shall have the meaning assigned to such
term in Section 6.3.
"Insurance Agreement" shall mean the Insurance Agreement dated
as of September 1, 1998 among the Insurer, the Sponsor, the Originators, the
Issuer, Advanta Holding Trust, the Master Servicer, the Owner Trustee and the
Indenture Trustee.
"Insurer" shall mean MBIA Insurance Corporation, or its
successor in interest.
"Issuer" shall mean Advanta Home Equity Loan Trust 1998-B.
"Majority Certificateholder" shall mean more than 50% by
principal amount of the Certificateholders.
"Master Servicer" shall mean Advanta Mortgage Corp. USA.
"Notes" shall mean any one of the Class A-1 Notes or the Class
A-2 Notes issued pursuant to the Indenture.
"Noteholders" shall mean the Holder of a Class A-1 Note or a
Class A-2 Note.
"Operative Documents" shall mean this Agreement, the
Certificate of Trust, the Sale and Servicing Agreement, the Indemnification
Agreement, the Insurance Agreement, the Indenture, the AMHC Guaranty to the
Underwriter and the Issuer, the AMHC Guaranty to the Insurer and the Issuer, the
Purchase Agreement and the other documents and certificates delivered in
connection therewith.
2
<PAGE> 8
"Originators" shall mean Advanta National Bank and Advanta
Finance Corp.
"Owner Trust Estate" shall mean all right, title and interest
of the Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Account and all other property
of the Trust from time to time, including any rights of the Owner Trustee and
the Trust pursuant to the Sale and Servicing Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor Owner Trustee hereunder.
"Policies" shall mean the Class A-1 Policy and the Class A-2
Policy.
"Record Date" shall mean with respect to any Payment Date, the
close of business on the last Business Day immediately preceding such Payment
Date.
"Sale and Servicing Agreement" shall mean the Sale and
Servicing Agreement among Advanta Holding Trust, Advanta Home Equity Loan Trust
1998-B, as Issuer, the Sponsor, Advanta Mortgage Corp. USA, as Master Servicer,
and the Indenture Trustee, dated as of September 1, 1998, as the same may be
amended and supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Security Majority" means a majority by principal amount of
the Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Sponsor" shall mean Advanta Mortgage Conduit Services, Inc.
in its capacity as Sponsor hereunder.
"Treasury Regulations" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein
to specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Accounts" shall have the meaning ascribed thereto in
the Sale and Servicing Agreement.
SECTION 1.2 Other Definitional Provisions. (a) Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Sale and Servicing Agreement or, if not defined therein, in the
Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles as in effect on the
date of this Agreement or any such certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such
3
<PAGE> 9
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
SECTION 1.3 Action by or Consent of Noteholders and
Certificateholders. Whenever any provision of this Agreement refers to action to
be taken, or consented to, by Noteholders or Certificateholders, such provision
shall be deemed to refer to the Certificateholder or Noteholder, as the case may
be, of record as of the Record Date immediately preceding the date on which such
action is to be taken, or consent given, by Noteholders or Certificateholders.
Solely for the purposes of any action to be taken, or consented to, by
Noteholders or Certificateholders, any Note or Certificate registered in the
name of the Sponsor or any Affiliate thereof shall be deemed not to be
outstanding; provided, however that, solely for the purpose of determining
whether the Indenture Trustee is entitled to rely upon any such action or
consent, only Notes or Certificates which the Owner Trustee, or the Indenture
Trustee, respectively, knows to be so owned shall be so disregarded.
ARTICLE II.
Organization
SECTION 2.1 Names. There is hereby formed a trust to be known
as "Advanta Holding Trust," in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care
of the Owner Trustee at the Corporate Trust Office or at such other address as
the Owner Trustee may designate by written notice to the Certificateholders, the
Insurer and the Sponsor.
SECTION 2.3 Purposes and Powers. The purpose of the Trust is,
and the Trust shall have the power and authority, to engage in the following
activities:
(i) to issue the Certificates pursuant to this
Agreement;
(ii) with the proceeds of the sale of the Notes by
Advanta Home Equity Loan Trust 1998-B, to pay the
organizational, start-up and transactional expenses of the
Trust;
(iii) to assign, grant, transfer and convey the Owner
Trust Estate to the Advanta Home Equity Loan Trust 1998-B and
to hold, manage and distribute to the Certificateholders
pursuant to the terms of this Agreement such distributions as
the
4
<PAGE> 10
Trust may receive pursuant to its beneficial interest in
Advanta Home Equity Loan Trust 1998-B;
(iv) to enter into and perform its obligations under
the Operative Documents to which it is a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or
connected therewith; and
(vi) subject to compliance with the Operative
Documents, to engage in such other activities as may be
required in connection with conservation of the Owner Trust
Estate and the making of distributions to the
Certificateholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the
Operative Documents.
SECTION 2.4 Appointment of Owner Trustee. The Sponsor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein and in the
Business Trust Statute.
SECTION 2.5 Initial Capital Contribution of Trust Estate. The
Sponsor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Sponsor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited Certificate Account. On or prior to the Closing Date, the
Owner Trustee will also, upon receipt thereof, acknowledge on behalf of the
Trust receipt of the Mortgage Loans pursuant to the Sale and Servicing
Agreement. The Sponsor shall pay organizational expenses of the Trust as they
may arise.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject to
the conditions set forth herein for the use and benefit of the
Certificateholders, subject to the obligations of the Trust under the Operative
Documents. It is the intention of the parties hereto that the Trust constitute a
business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. It is the intention
of the parties hereto that, solely for tax purposes, the Trust shall elect on
Internal Revenue Service Form 8832 within 75 days of its formation to be
classified as an association (and thus as a corporation pursuant to Section
301.7701-2(b)(2) of the regulations promulgated under the Code). The Trust shall
file or cause to be filed any additional forms or documents as may be required
to make such election under applicable federal, state and local law. Effective
as of the date hereof, the Owner Trustee shall have all rights, powers and
duties set forth herein and to the extent not inconsistent herewith, in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
The Owner Trustee shall file the Certificate of Trust with the Secretary of
State.
SECTION 2.7 Liability. No Holder shall have any personal
liability for any liability or obligation of the Trust.
SECTION 2.8 Title to Trust Property. (a) Legal title to all of
the Owner Trust Estate shall be vested at all times in the Trust as a separate
legal entity except where applicable law in any jurisdiction requires title to
any part of the Owner Trust Estate to be vested in a trustee or trustees,
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in which case title shall be deemed to be vested in the Owner Trustee, a
co-trustee and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the
Trust Property. The Holders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Article IX. No transfer, by operation of law or otherwise, of any right, title
or interest by any Certificateholder of its ownership interest in the Owner
Trust Estate shall operate to terminate this Agreement or the trusts hereunder
or entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Trust Property.
SECTION 2.9 Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. Payments will be received by the Trust only in Delaware or
New York and payments will be made by the Trust only from Delaware or New York.
The Trust shall not have any employees in any state other than Delaware;
provided, however, that nothing herein shall restrict or prohibit the Owner
Trustee, the Master Servicer or any agent of the Trust from having employees
within or without the State of Delaware. The only office of the Trust will be at
the Corporate Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Sponsor.
The Sponsor makes the following representations and warranties on which the
Owner Trustee relies in accepting the Owner Trust Estate in trust and issuing
the Certificates and upon which the Insurer relies in issuing the Policies.
(a) The Sponsor is duly organized and validly existing as a
Delaware corporation with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted and is proposed to be conducted pursuant to this Agreement
and the Operative Documents;
(b) It is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of its property,
the conduct of its business and the performance of its obligations under this
Agreement and the Operative Documents requires such qualification;
(c) The Sponsor has the corporate power and authority to
execute and deliver this Agreement and to carry out its terms; the Sponsor has
full power and authority to sell and assign the property to be sold and assigned
to and deposited with the Trust and the Sponsor has duly authorized such sale
and assignment and deposit to the Trust by all necessary corporate action; and
the execution, delivery and performance of this Agreement has been duly
authorized by the Sponsor by all necessary corporate action. The Sponsor has
duly executed this Agreement and this Agreement constitutes a legal, valid and
binding obligation of the Sponsor enforceable against the Sponsor, in accordance
with its terms.
(d) To the best knowledge of the Sponsor, no consent, license,
approval or authorization or registration or declaration with, any Person or
with any governmental authority, bureau or agency is required in connection with
the execution, delivery or performance of this Agreement and the Operative
Documents, except for such as have been obtained, effected or made;
(e) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the certificate of
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incorporation or by-laws of the Sponsor, or any material indenture, agreement or
other instrument to which the Sponsor is a party or by which it is bound; nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Operative Documents); nor violate any law or, to the
best of the Sponsor's knowledge, any order, rule or regulation applicable to the
Sponsor of any court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Sponsor or its properties; and
(f) There are no proceedings or investigations pending or, to
its knowledge threatened against it before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over it or its properties (A) asserting the invalidity of this
Agreement or any of the Operative Documents, (B) seeking to prevent the issuance
of the Certificates or the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Documents, (C) seeking
any determination or ruling that might materially and adversely affect its
performance of its obligations under, or the validity or enforceability of, this
Agreement or any of the Operative Documents, or (D) seeking to adversely affect
the federal income tax or other federal, state or local tax attributes of the
Notes or the Certificates.
SECTION 2.11 Covenants of the Sponsor. The Sponsor agrees and
covenants for the benefit of each Certificateholder, the Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
(a) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as permitted by
its certificate of incorporation and the Operative Documents;
(b) it shall not, for any reason, institute proceedings for
the Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of the property of the
Trust or cause or permit the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Operative
Document to which it or the Trust is a party and each other agreement entered
into on or after the date hereof to which it or the Trust is a party, an
agreement by each such counterparty that prior to the occurrence of the event
specified in Section 9.1(e) such counterparty shall not institute against, or
join any other Person in instituting against, it or the Trust, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States; and
(d) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against it, or file a petition seeking or consenting
to reorganization or relief under any applicable federal or state law relating
to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of it or a
substantial part of its property, or make any assignment for the benefit of
creditors, or admit in writing its inability to pay its debts generally as they
become due, or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
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SECTION 2.12 Covenants of the Certificateholders. Each
Certificateholder agrees:
(a) to be bound by the terms and conditions of the
Certificates and of this Agreement, including any supplements or amendments
hereto and to perform the obligations of a Certificateholder as set forth
therein or herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee, the Insurer
and all other Certificateholders present and future;
(b) to hereby appoint the Sponsor as such Certificateholder's
agent and attorney-in-fact to sign all corporate, federal, state and local
income or franchise tax returns filed on behalf of the Trust, and agree that, if
requested by the Trust, it will sign such tax returns on behalf of the Trust.
Each Certificateholder also hereby agrees that in its tax returns it will not
take any position inconsistent with those taken in any tax returns that may be
filed by the Trust;
(c) if such Certificateholder is other than an individual or
other entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of a
Certificate in a taxable sale or exchange, within 30 days of the date of the
transfer; and
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or the
Sponsor to be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Sponsor or the Trust or a substantial part of its property, or
cause or permit the Sponsor or the Trust to make any assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts generally
as they become due, or declare or effect a moratorium on its debt or take any
action in furtherance of any such action.
Except as provided in Section 2.13, and notwithstanding any
other provision to the contrary in this Agreement, no Certificateholder shall be
deemed to have adopted, be bound by, or succeed in any way to any representation
by, or duty of indemnification by or any other duty of, the Sponsor, including
those contained in Sections 2.10, 2.12, 3.6, 8.2 or elsewhere herein.
SECTION 2.13 Investment Company. Neither the Sponsor nor any
Holders shall take any action that would cause the Trust to become an
"investment company" required to register under the Investment Company Act of
1940, as amended.
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1 Initial Ownership. Upon the formation of the Trust
by the contribution by the Sponsor pursuant to Section 2.5, the Owner Trustee,
contemporaneously therewith, having full power, authority, and authorization to
do so, has executed, authenticated, dated, issued, and delivered, in the name
and on behalf of the Trust, to the Originators, one or more Certificates,
representing in the aggregate a 100% interest in the Trust, and has registered
such Certificates on the Certificate Register in the names of Advanta National
Bank and Advanta Finance Corp. The Originators shall be the sole beneficiaries
of the Trust. Such Certificates are duly authorized, validly issued, and
entitled to the benefits of this Agreement. For so long as the Originators shall
own such
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100% interest in the Trust, the Originators shall be the sole beneficial owners
of the Trust. For so long as any Notes remain outstanding, the Originators shall
not transfer their ownership interest in the Trust, in whole or in part, without
the Insurer's prior written consent.
SECTION 3.2 The Certificates. The Certificates shall be issued
in denominations of $1,000 and integral multiples of $1000 in excess thereof.
The Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of authentication and delivery of such
Certificates. A transferee of a Certificate shall become a Certificateholder,
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder, upon due registration of such Certificate in such
transferee's name pursuant to Section 3.4.
SECTION 3.3 Authentication of Certificates. Concurrently with
the initial sale of the Mortgage Loans to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause each Certificate to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Sponsor, signed by its chairman of the board, its president
or any vice president, its treasurer or any assistant treasurer without further
corporate action by the Sponsor, in authorized denominations. No Certificate
shall entitle its holder to any benefit under this Agreement, or shall be valid
for any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee, by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication. The Trust shall not issue any other Certificates without the
prior written consent of the Insurer.
SECTION 3.4 Registration of Transfer and Exchange of
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Owner Trustee shall be the
initial Certificate Registrar.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
shall be delivered to the Certificate Registrar, the Owner Trustee and the
Insurer such security or indemnity as may be required by them to save each of
them harmless, then in the absence of notice that such Certificate shall have
been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like class, tenor and denomination. In connection with the
issuance of any new Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
SECTION 3.6 Persons Deemed Certificateholders. Every Person by
virtue of becoming a Certificateholder in accordance with this Agreement and the
rules and regulations of the Certificate Registrar shall be deemed to be bound
by the terms of this Agreement. Prior to due
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presentation of a Certificate for registration of transfer, the Owner Trustee,
the Certificate Registrar and the Insurer and any agent of the Owner Trustee,
the Certificate Registrar and the Insurer, may treat the Person in whose name
any Certificate shall be registered in the Certificate Register as the owner of
such Certificate for the purpose of receiving distributions pursuant to the Sale
and Servicing Agreement and the Indenture and for all other purposes whatsoever,
and none of the Owner Trustee, the Certificate Registrar or the Insurer nor any
agent of the Owner Trustee, the Certificate Registrar or the Insurer shall be
bound by any notice to the contrary.
SECTION 3.7 Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Master Servicer, the Sponsor or the Insurer, within 15 days after receipt by the
Owner Trustee of a request therefor from such Person in writing, a list, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Holders of Certificates or one or more Holders of Certificates
evidencing not less than 25% by Percentage Interest apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application is accompanied by
a copy of the communication that such applicants propose to transmit, then the
Owner Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Sponsor, the
Master Servicer, the Owner Trustee or the Insurer or any agent thereof
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee
shall maintain in Wilmington, Delaware an office or offices or agency or
agencies where Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee in respect
of the Certificates and the Operative Documents may be served. The Owner Trustee
initially designates its Corporate Trust Office for such purposes. The Owner
Trustee shall give prompt written notice to the Sponsor, the Certificateholders
and the Insurer of any change in the location of the Certificate Register or any
such office or agency.
SECTION 3.9 ERISA. The Certificates may not be acquired by or
for the account of (i) an employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is subject to the provisions of Title I of ERISA, (ii) a plan (as defined in
Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code, or
(iii) any person acting on behalf of or using the assets of a plan described in
(i) or (ii) above (each, a "Benefit Plan Investor"). By accepting and holding
its beneficial ownership interest in its Certificate, the Holder thereof shall
be deemed to have represented and warranted that it is not a Benefit Plan
Investor.
SECTION 3.10 Restrictions on Transfer of Certificates. (a) The
Certificates shall be assigned, transferred, exchanged, pledged, financed,
hypothecated or otherwise conveyed (collectively, for purposes of this Section
3.10 and any other Section referring to the Certificates, "transferred" or a
"transfer") only in accordance with this Section 3.10.
(b) No transfer of a Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. Except for the initial issuance of the
Certificates to the Originators, the Owner Trustee shall require (i) the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Owner Trustee and the Insurer certifying to the
Owner Trustee and the Insurer the facts surrounding such transfer, which
investment letter shall not be an expense of the Owner Trustee or the Insurer,
or (ii) if the investment
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letter is not delivered, a written Opinion of Counsel acceptable to and in form
and substance satisfactory to the Owner Trustee, the Insurer and the Sponsor
that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor from said Act or is being made
pursuant to said Act, which Opinion of Counsel shall not be an expense of the
Owner Trustee, the Insurer or the Sponsor. The Holder of a Certificate desiring
to effect such transfer shall, and does hereby agree to, indemnify the Sponsor,
the Owner Trustee and the Insurer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
(c) The Certificates and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Certificate shall (A) be organized and existing under
the laws of the United States of America or any state thereof or the District of
Columbia; (B) expressly assume, by an agreement supplemental hereto, executed
and delivered to the Owner Trustee, the performance of every covenant and
obligation of the Sponsor hereunder except for the covenants and obligations
contained in Sections 2.1, 2.2, 2.3, 2.4, 3.3 and 3.4 of the Sale and Servicing
Agreement, Section 7.1 of the Indenture and under the Credit Line Agreements and
the Mortgage Notes; (ii) the person that acquires a Certificate shall deliver to
the Owner Trustee and the Insurer an Officer's Certificate stating that such
transfer and such supplemental agreement comply with this Section 3.10 and that
all conditions precedent provided by this subsection 3.10 have been complied
with and an Opinion of Counsel stating that such transfer and such supplemental
agreement comply with this Section 3.10 and that all conditions precedent
provided by this Section 3.10 have been complied with, and the Owner Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set forth therein and shall incur no
liability in so relying; (iii) the person that acquires a Certificate shall
deliver to the Owner Trustee and the Insurer a letter from each Rating Agency
confirming that its rating of the Class A Notes, after giving effect to such
transfer, will not be reduced or withdrawn without regard to the Policies; (iv)
the person that acquires a Certificate shall deliver to the Owner Trustee and
the Insurer an Opinion of Counsel to the effect that (a) such transfer will not
adversely affect the treatment of the Class A Notes after such transfer as debt
for federal and applicable state income tax purposes, (b) such transfer will not
result in the Advanta Home Equity Loan Trust 1998-B being subject to tax at the
entity level for federal or applicable state tax purposes, (c) such transfer
will not have any material adverse impact on the federal or applicable state
income taxation of a Class A Noteholder and (d) such transfer will not result in
the arrangement created by this Agreement or any "portion" of the Advanta Home
Equity Loan Trust 1998-B, being treated as a taxable mortgage pool as defined in
Section 7701(i) of the Code; (v) all filings and other actions necessary to
continue the perfection of the interest of the Trust in the Mortgage Loans and
the other property conveyed hereunder shall have been taken or made and (vi) the
prior written consent of Insurer has been obtained. Notwithstanding the
foregoing, the requirement set forth in subclause (i)(A) of this Section 3.10
shall not apply in the event the Owner Trustee and the Insurer shall have
received a letter from each Rating Agency confirming that its rating of the
Class A Notes, after giving effect to a proposed transfer to a Person that does
not meet the requirement set forth in subclause (i)(A), shall not be reduced or
withdrawn without regard to the related Policy. Notwithstanding the foregoing,
the requirements set forth in this paragraph ( c) shall not apply to the initial
issuance of the Certificates to the Originators.
(d) Except for the initial issuance of the Certificates to the
Originators, no transfer of a Certificate shall be made unless the Owner Trustee
and the Insurer shall have received a representation letter from the transferee
of such Certificate, acceptable to and in form and substance satisfactory to the
Owner Trustee and the Insurer, to the effect that such transferee is not a
Benefit Plan Investor, which representation letter shall not be an expense of
the Owner Trustee.
(e) No transfer or pledge of the Certificates shall result in
more than 98 other holders of Certificates.
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SECTION 3.11 Acceptance of Obligations. The Sponsor agrees to
be bound by and to perform all the duties of the Sponsor set forth in this
Agreement.
SECTION 3.12 Payments on Certificates. The Holders of the
Certificates will be entitled to distributions on each Payment Date, as provided
in the Indenture.
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1 Prior Notice to Holders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders and the Insurer in writing of
the proposed action and (i) the Insurer shall have consented in writing thereto
and (ii) the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or, with the written consent of the
Insurer, provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute or unless such amendment would not materially and
adversely affect the interests of the Holders);
(b) the amendment of any Operative Document;
(c) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent or Indenture Trustee or, pursuant to this Trust
Agreement, of a successor Certificate Registrar or the consent to the assignment
of the Note Registrar, Paying Agent, Indenture Trustee or Certificate Registrar
of its obligations under the Indenture or this Trust Agreement, as applicable;
(d) the consent to the calling or waiver of any default under
any Operative Document;
(e) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Operative Document;
(f) perform any act that conflicts with any other Operative
Document;
(g) perform any act which would make it impossible to carry on
the ordinary business of the Trust described in Section 2.3 hereof;
(h) confess a judgment against the Trust;
(i) possess Trust assets or assign the Trust's right to
property for other than a Trust purpose;
(j) cause the Trust to lend any funds to any entity; or
(k) change the Trust's purpose and powers from those
enumerated in this Trust Agreement.
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The Owner Trustee shall notify the Certificateholders and the Insurer in writing
of any appointment of a successor Note Registrar, or Certificate Registrar
within five Business Days thereof.
In addition, the Owner Trustee shall not (i) cause the Trust
to merge or consolidate with or into any other entity, or convey or transfer all
or substantially all of the Trust's assets to any other entity; (ii) cause the
Trust to incur, assume or guaranty any indebtedness other than as set forth in
this Trust Agreement; or (iii) except as provided in Article IX hereof,
dissolve, terminate or liquidate the Trust in whole or in part.
SECTION 4.2 Action by Certificateholders with Respect to
Certain Matters. (a) The Owner Trustee shall not have the power, except upon the
written direction of the Insurer or in the event that an Insurer Default shall
have occurred and is continuing, the Security Majority in accordance with the
Operative Documents, to (i) remove the Master Servicer under the Sale and
Servicing Agreement; (ii) except as expressly provided in the Operative
Documents, sell the Mortgage Loans after the termination of the Indenture; (iii)
institute proceedings to have the Trust declared or adjudicated to be bankrupt
or insolvent, (iv) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (v) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Trust under any applicable
federal or state law relating to bankruptcy, (vi) consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or any similar
official) of the Trust or a substantial portion of the property of the Trust,
(vii) make any assignment for the benefit of the Trust's creditors, (viii) cause
the Trust to admit in writing its inability to pay its debts generally as they
become due, (ix) take any action or cause the Trust to take any action, in
furtherance of any of the foregoing clauses (iii) through (ix) (any of such
clauses, a "Bankruptcy Action"). So long as the Indenture and the Insurance
Agreement remain in effect, no Certificateholder shall have the power to take,
and shall not take, any Bankruptcy Action with respect to the Trust or direct
the Owner Trustee to take any Bankruptcy Action with respect to the Trust. The
Owner Trustee shall take the actions referred to in the preceding sentence only
upon written instructions signed by the Insurer or the Securityholders, as the
case may be, and the furnishing of indemnification satisfactory to the Owner
Trustee by the Certificateholders.
(b) Upon the written request of any Certificateholder (a
"Proposer"), the Owner Trustee shall distribute promptly to all
Certificateholders any request for action or consent of Certificateholders
submitted by such Proposer. The Owner Trustee shall provide a reasonable method
for collecting responses to such request and shall tabulate and report the
results thereof to the Certificateholders and the Sponsor. The Owner Trustee
shall have no responsibility or duty to determine if any such proposed action or
consent is permitted under the terms of this Agreement or applicable law.
SECTION 4.3 Action by Certificateholders with Respect to
Bankruptcy. Until one year and one day following the day on which the Notes have
been paid in full, the Owner Trustee shall not have the power to, and shall not
commence any proceeding or other actions contemplated by Section 2.12(b)
relating to the Trust without the prior written consent of the Insurer (unless
an Insurer Default shall have occurred and is continuing) or the Security
Majority upon an Insurer Default. Until one year and one day following the day
on which the Notes have been paid in full, all amounts due to the Insurer under
the Insurance Agreement have been paid in full, the Policies have terminated and
the Indenture Trustee has surrendered the Policies to the Insurer, the Owner
Trustee shall not have the power to, and shall not, commence any proceeding or
other actions contemplated by Section 2.12(b) relating to the Trust without the
prior written consent of all of the Certificateholders and the delivery to the
Owner Trustee by each such Certificateholder of a certificate certifying that
such Certificateholder reasonably believes that the Trust is insolvent.
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SECTION 4.4 Restrictions on Certificateholders' Power. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Operative
Documents or would be contrary to Section 2.3 or otherwise contrary to law nor
shall the Owner Trustee be obligated to follow any such direction, if given.
(b) No Certificateholder (other than the Originators) shall
have any right by virtue or by availing itself of any provisions of this
Agreement to institute any suit, action, or proceeding in equity or at law upon
or under or with respect to this Agreement or any Operative Document, unless the
Certificateholders are the Instructing Party pursuant to Section 6.3 and unless
a Certificateholder previously shall have given to the Owner Trustee a written
notice of default and of the continuance thereof, as provided in this Agreement,
and also unless Certificateholders evidencing not less than 25% by Percentage
Interest shall have made written request upon the Owner Trustee to institute
such action, suit or proceeding in its own name as Owner Trustee under this
Agreement and shall have offered to the Owner Trustee such reasonable indemnity
as it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Owner Trustee, for 30 days after its receipt of such
notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit, or proceeding, and during such 30-day period no
request or waiver inconsistent with such written request has been given to the
Owner Trustee pursuant to and in compliance with this Section or Section 6.3; it
being understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Owner Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb, or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 4.4, each and every
Certificateholder and the Owner Trustee shall be entitled to such relief as can
be given either at law or in equity.
SECTION 4.5 Majority Control. No Certificateholder shall have
any right to vote or in any manner otherwise control the operation and
management of the Trust except as expressly provided in this Agreement. Except
as expressly provided herein, any action that may be taken by the
Certificateholders under this Agreement may be taken by the Holders of
Certificates evidencing not less than a majority interest in the Trust. Except
as expressly provided herein, any written notice of the Certificateholders
delivered pursuant to this Agreement shall be effective if signed by
Certificateholders evidencing not less than a majority interest in the Trust at
the time of the delivery of such notice.
SECTION 4.6 Rights of Insurer. Notwithstanding anything to the
contrary in the Operative Documents, without the prior written consent of the
Insurer (or if an Insurer Default shall have occurred and is continuing, the
Security Majority) the Owner Trustee shall not (i) remove the Master Servicer,
(ii) initiate any claim, suit or proceeding by the Trust or compromise any
claim, suit or proceeding brought by or against the Trust, other than with
respect to the enforcement of any Mortgage Loan or any rights of the Trust
thereunder, (iii) authorize the merger or consolidation of the Trust with or
into any other business trust or other entity (other than in accordance with
Section 3.10 of the Indenture), (iv) amend the Certificate of Trust or (v) amend
this Agreement in accordance with Section 11.1 of this Agreement.
SECTION 4.7 Separateness. The Trust shall (i) not commingle
its assets with those of any other entity; (ii) maintain its financial and
accounting books and records separate from those of any other entity; (iii)
maintain appropriate minutes or other records of all appropriate actions and
maintain books and records separate from any other entity; (iv) conduct its own
business in its own
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name; (v) except as expressly set forth herein, pay its indebtedness, operating
expenses and liabilities from its own funds; (vi) enter into transactions with
affiliates only on terms that are commercially reasonable and on the same terms
as would be available in an arm's length transaction; (vii) not pay the
indebtedness, operating expenses and liabilities of any other entity; (viii) not
hold out its credit as being available to satisfy the obligation of any other
entity; (ix) not make loans to any other entity or buy or hold evidence of
indebtedness issued by any other entity (except for cash and investment-grade
securities); (x) use separate stationery, invoices, and checks bearing its own
name; (xi) allocate fairly and reasonably any overhead expenses that are shared
with an affiliate, including paying for office space and services performed by
any employee of any affiliate; (xii) not identify itself as a division of any
other entity; (xiii) hold itself out as a separate identity; and (xiv) maintain
adequate capital in light of its contemplated business operation.
ARTICLE V.
Certain Duties
SECTION 5.1 Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to Sections
5.1(b)(iii) and 5.1(c) of the Sale and Servicing Agreement, the Sponsor shall
(a) maintain (or cause to be maintained) the books of the Trust on a calendar
year basis on the accrual method of accounting, (b) deliver (or cause to be
delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required to enable
each Certificateholder to prepare its Federal and state income tax returns, (c)
file or cause to be filed such tax returns relating to the Trust (including a
corporate return, Form 1120), and direct the Owner Trustee or the Master
Servicer, as the case may be, to make such elections and file such forms as may
from time to time be required or appropriate under any applicable state or
Federal statute or rule or regulation thereunder given the Trust's
characterization as a corporation, or if applicable, as a partnership, for
Federal income tax purposes and (d) collect or cause to be collected any
withholding tax as described in and in accordance with Section 5.1(b)(ii) of the
Sale and Servicing Agreement with respect to income or distributions to
Certificateholders and the appropriate forms relating thereto. The Owner Trustee
or the Master Servicer, as the case may be, shall make all elections pursuant to
this Section as directed in writing by the Sponsor. The Owner Trustee shall sign
all tax information returns presented to it in final execution form, if any,
filed pursuant to this Section 5.1 and any other returns as may be required by
law, and in doing so shall rely entirely upon, and shall have no liability for
information provided by, or calculations provided by, the Sponsor or the Master
Servicer. The Owner Trustee shall elect under Section 1278 of the Code on behalf
of the Trust to include in income currently any market discount that accrues
with respect to the Mortgage Loans.
SECTION 5.2 [Reserved.]
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1 General Authority. The Owner Trustee is authorized
and directed to execute and deliver the Operative Documents to which the Trust
is named as a party and each certificate or other document attached as an
exhibit to or contemplated by the Operative Documents to which the Trust is
named as a party and any amendment thereto, in each case, in such form as the
Sponsor shall approve as evidenced conclusively by the Owner Trustee's execution
thereof, and on behalf of the Trust, to direct the Indenture Trustee to
authenticate and deliver Class A Notes in the
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aggregate principal amount of $100,000,000. In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust pursuant to the Operative Documents. The Owner Trustee is
further authorized from time to time to take such action as the Instructing
Party recommends with respect to the Operative Documents so long as such
activities are consistent with the terms of the Operative Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and to administer the Trust in the
interest of the Holders, subject to the Operative Documents and in accordance
with the provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Operative Documents to the extent the Master Servicer
has agreed in the Sale and Servicing Agreement to perform any act or to
discharge any duty of the Trust or the Owner Trustee hereunder or under any
Operative Document, and the Owner Trustee shall not be liable for the default or
failure of the Master Servicer to carry out its obligations under the Sale and
Servicing Agreement.
SECTION 6.3 Action upon Instruction. (a) Subject to Article
IV, the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) or the Certificateholders (if an Insurer Default shall have occurred
and be continuing) (the "Instructing Party") shall have the exclusive right to
direct the actions of the Owner Trustee in the management of the Trust, so long
as such instructions are not inconsistent with the express terms set forth
herein or in any Operative Document. The Instructing Party shall not instruct
the Owner Trustee in a manner inconsistent with this Agreement or the Operative
Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Operative Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is contrary
to the terms hereof or of any Operative Document or is otherwise contrary to
law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Operative Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Instructing Party received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten days of
such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Operative Documents, as it shall deem to
be in the best interests of the Certificateholders, and shall have no liability
to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Operative Document or any
such provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Instructing
Party requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as
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reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the Operative
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement or
in Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Operative Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Operative Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any Liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee (solely in its
individual capacity) and that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.5 No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Operative
Documents and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
action that is inconsistent with the purposes of the Trust set forth in Section
2.3. The Certificateholders shall not direct the Owner Trustee to take action
that would violate the provisions of this Section.
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1 Acceptance of Trust and Duties. The Owner Trustee
accepts the trust hereby created and agrees to perform its duties hereunder with
respect to such trust but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it constituting
part of the Owner Trust Estate upon the terms of the Operative Documents and
this Agreement. The Owner Trustee shall not be answerable or accountable
hereunder or under any Operative Document under any circumstances, except (i)
for its own willful misconduct, bad faith or gross negligence, (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 7.3
expressly made by the Owner Trustee in its individual capacity, (iii) for
liabilities arising from the failure of the Owner Trustee to perform obligations
expressly undertaken by it in the last sentence of Section 6.4 hereof, (iv) for
any investments issued by the Owner Trustee or any branch or affiliate thereof
in its commercial capacity or (v) for taxes, fees or other charges on, based on
or measured by, any fees, commissions or compensation received by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
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(a) the Owner Trustee shall not be liable for any error of
judgment, not constituting gross negligence, made by a Responsible Officer of
the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it if such action or omission is in
accordance with the instructions of the Instructing Party, the Sponsor, the
Master Servicer or any Certificateholder pursuant to the terms hereof;
(c) no provision of this Agreement or any Operative Document
shall require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Operative Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Operative Documents,
including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Sponsor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Operative Documents, other than
the certificate of authentication on the Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty or obligation to the
Sponsor, the Insurer, Indenture Trustee, any Certificateholder, other than as
expressly provided for herein and in the Operative Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Sponsor, the Insurer, the Indenture Trustee, or the Master
Servicer under any of the Operative Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations under this
Agreement or the Operative Documents that are required to be performed by the
Sponsor under this Agreement, by the Indenture Trustee under the Indenture or
the Master Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Operative Document, at the request, order or
direction of the Instructing Party or any of the Certificateholders, unless such
Instructing Party or Certificateholders have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Operative Document shall not be construed as a duty, and the
Owner Trustee shall not be answerable for other than its negligence, bad faith
or willful misconduct in the performance of any such act.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall
furnish to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Operative Documents.
SECTION 7.3 Representations and Warranties. The Owner Trustee
hereby represents and warrants, in its individual capacity, to the Sponsor and
the Holders (which shall have relied on such representations and warranties in
issuing the Policy), that:
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(a) It is a Delaware banking corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware state law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order binding on
it, or constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel. (a) The Owner Trustee
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of the determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer,
secretary or other authorized officers of the relevant party, as to such fact or
matter, and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
Operative Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
(ii) may consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it. The Owner Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or other
such persons and according to such opinion not contrary to this Agreement or any
Operative Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as
provided in this Agreement, in accepting the trusts hereby created Wilmington
Trust Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Operative Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Sponsor and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Operative Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) or the Notes (other
than the signature of the Owner Trustee on the Notes), or of any Mortgage Loan
or related documents. The Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority
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of any security interest created by any Mortgage Loan or the maintenance of any
such perfection and priority, or for or with respect to the sufficiency of the
Owner Trust Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
including, without limitation: the existence, condition and ownership of any
Mortgage Loan; the existence and enforceability of any insurance thereon; the
existence and contents of any Mortgage Loan on any computer or other record
thereof; the validity of the assignment of any Mortgage Loan to the Trust or of
any intervening assignment; the completeness of any Mortgage Loan; the
performance or enforcement of any Mortgage Loan; the compliance by the Sponsor,
the Master Servicer or any other Person with any warranty or representation made
under any Operative Document or in any related document or the accuracy of any
such warranty or representation or any action of the Indenture Trustee or the
Master Servicer or any SubMaster Servicer taken in the name of the Owner
Trustee.
SECTION 7.7 Owner Trustee May Own Certificates and Notes.
Subject to the provisions of Section 3.1 hereof, the Owner Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
or Notes and may deal with the Sponsor, the Indenture Trustee and the Master
Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8 Payments from Owner Trust Estate. All payments to
be made by the Owner Trustee under this Agreement or any of the Operative
Documents to which the Trust or the Owner Trustee is a party shall be made only
from the income and proceeds of the Owner Trust Estate and only to the extent
that the Owner Trust shall have received income or proceeds from the Owner Trust
Estate to make such payments in accordance with the terms hereof. Wilmington
Trust Company, or any successor thereto, in its individual capacity, shall not
be liable for any amounts payable under this Agreement or any of the Operative
Documents to which the Trust or the Owner Trustee is a party.
SECTION 7.9 Doing Business in Other Jurisdictions.
Notwithstanding anything contained to the contrary, neither Wilmington Trust
Company or any successor thereto, nor the Owner Trustee shall be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 10.5 hereof, (i) require the consent
or approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the State
of Delaware ; (ii) result in any fee, tax or other governmental charge under the
laws of the State of Delaware becoming payable by Wilmington Trust Company (or
any successor thereto); or (iii) subject Wilmington Trust Company (or any
successor thereto) to personal jurisdiction in any jurisdiction other than the
State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company (or any successor
thereto) or the Owner Trustee, as the case may be, contemplated hereby.
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner
Trustee shall receive as compensation for its services hereunder such fees as
have been separately agreed upon before the date hereof between the Sponsor and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Sponsor for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the
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Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder and under the Operative Documents.
SECTION 8.2 Indemnification. The Sponsor shall be liable as
primary obligor for, and shall indemnify the Owner Trustee (in its individual
and trust capacities) and its officers, directors, successors, assigns, agents
and servants (collectively, the "Indemnified Parties") from and against, any and
all liabilities, obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may (in its trust or individual capacities) at
any time be imposed on, incurred by, or asserted against the Owner Trustee or
any Indemnified Party in any way relating to or arising out of this Agreement,
the Operative Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee hereunder, except
only that the Sponsor shall not be liable for or required to indemnify the Owner
Trustee from and against Expenses arising or resulting from any of the matters
described in the third sentence of Section 7.1. The indemnities contained in
this Section and the rights under Section 8.1 shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Sponsor which approval shall not be unreasonably
withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to
the Owner Trustee pursuant to this Article VIII shall be deemed not to be a part
of the Owner Trust Estate immediately after such payment.
SECTION 8.4 Non-recourse Obligations. Notwithstanding anything
in this Agreement or any Operative Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that all
obligations of the Trust to the Owner Trustee individually or as Owner Trustee
for the Trust shall be recourse to the Owner Trust Estate only and specifically
shall not be recourse to the assets of any Certificateholder.
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1 Termination of Trust Agreement. (a) This Agreement
and the Trust shall terminate and be of no further force or effect upon the
later of (i) the maturity or other liquidation of the last Mortgage Loan
(including the redemption by the Sponsor at its option of the corpus of the
Trust as described in Section 10.1(b) of the Indenture) and the subsequent
distribution of amounts in respect of such Mortgage Loans as provided in the
Operative Documents, (ii) the payment to Certificateholders of all amounts
required to be paid to them pursuant to this Agreement and the payment to the
Insurer of all amounts payable or reimbursable to it pursuant to the Sale and
Servicing Agreement and the Insurance Agreement and (iii) the termination of the
Indenture and the Insurance Agreement; provided, however, that the rights to
indemnification under Section 8.2 and the rights under Section 8.1 shall survive
the termination of the Trust. The Master Servicer shall promptly notify the
Owner Trustee and the Insurer of any prospective termination pursuant to this
Section 9.1. The bankruptcy, liquidation, dissolution, death or incapacity of
any Certificateholder shall not (x) operate to terminate this Agreement or the
Trust, nor (y) entitle such Certificateholder's legal representatives or heirs
to claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
nor (z) otherwise affect the rights, obligations and liabilities of the parties
hereto.
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(b) Except as provided in clause (a), neither the Sponsor, any
Originator nor any other Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which the Certificateholders shall surrender their
Certificates to the Indenture Trustee for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders mailed within five Business Days of receipt of notice of such
redemption from the Master Servicer given pursuant to Section 10.1 of the Sale
and Servicing Agreement, stating (i) the Payment Date upon or with respect to
which final payment of the Certificates shall be made upon presentation and
surrender of the Certificates at the office of the Indenture Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Payment Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Indenture Trustee therein specified. The Owner Trustee shall give such
notice to the Certificate Registrar (if other than the Owner Trustee) and the
Indenture Trustee at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Indenture Trustee shall
cause to be distributed to Certificateholders amounts distributable on such
Payment Date pursuant to Section 8.6(b)(xi) of the Indenture.
In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to applicable escheat
laws, by the Owner Trustee to the Sponsor and Holders shall look solely to the
Sponsor for payment.
(d) Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution shall be
distributed by the Owner Trustee to the Sponsor.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
(f) The Sponsor shall take all necessary steps to qualify the
termination of the Trust as a liquidation under Section 332 of the Code, if
applicable, including the adoption of a plan of liquidation.
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1 Eligibility Requirements for Owner Trustee. The
Owner Trustee shall at all times be a corporation (i) satisfying the provisions
of Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; (iv) having (or having a parent which has) a rating of at least
Baa3 by Moody's or A-1 by Standard & Poors or being otherwise acceptable to the
Rating Agencies; and (v) acceptable to the Insurer in its sole
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discretion. If such corporation shall publish reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The
Owner Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Sponsor, the Insurer and the
Master Servicer. Upon receiving such notice of resignation, the Sponsor shall
promptly appoint a successor Owner Trustee, meeting the qualifications set forth
in Section 10.1 herein, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee, provided that the Sponsor shall have received written
confirmation from each of the Rating Agencies that the proposed appointment will
not result in an increased capital charge to the Insurer by either of the Rating
Agencies. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee or the Insurer may petition any court
of competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Sponsor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then a majority of the Certificateholders with the consent of the
Insurer (so long as no Insurer Default shall have occurred and is continuing)
may remove the Owner Trustee. If a majority of the Certificateholders shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Sponsor shall promptly appoint a successor Owner Trustee
acceptable to the Insurer, meeting the qualifications set forth in Section 10.1
herein, by written instrument, in duplicate, one copy of which instrument shall
be delivered to the outgoing Owner Trustee so removed, one copy to the Insurer
and one copy to the successor Owner Trustee and the Sponsor shall pay all fees
owed to the outgoing Owner Trustee, if not previously paid by the Trust.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 10.3 and payment of all reasonable
fees and expenses owed to the outgoing Owner Trustee. The Servicer shall provide
notice of such resignation or removal of the Owner Trustee to each of the Rating
Agencies and the Insurer.
Notwithstanding any other provision of this Agreement, and in
addition to any other method of removal of the Owner Trustee contained herein,
upon a proposal made pursuant to Section 4.2(b) and the subsequent consent of
Certificateholders representing no less than a 66-2/3% interest in the Trust,
the Owner Trustee may be removed as Owner Trustee, subject to the consent of the
Insurer (so long as no Insurer Default shall have occurred and is continuing),
which consent is not to be unreasonably withheld. In the event the Owner Trustee
is removed pursuant to this paragraph, the provisions of this Agreement,
including Article X herein, shall apply as if the Owner Trustee had resigned
hereunder.
SECTION 10.3 Successor Owner Trustee. Any successor Owner
Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and
deliver to the Sponsor, the Master Servicer, the Insurer and to its predecessor
Owner Trustee an instrument accepting such appointment
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<PAGE> 29
under this Agreement, and thereupon the resignation or removal of the
predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and monies held by it
under this Agreement; and the Sponsor and the predecessor Owner Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Master Servicer shall mail notice of the successor
of such Owner Trustee to all Certificateholders, the Indenture Trustee, the
Insurer and the Noteholders. If the Master Servicer shall fail to mail such
notice within 10 days after acceptance of appointment by the successor Owner
Trustee, the successor Owner Trustee shall cause such notice to be mailed at the
expense of the Master Servicer.
The successor Owner Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State reflecting the name and
principal place of business of such successor Owner Trustee in the State of
Delaware.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided further that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies and the Insurer.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Owner Trust Estate or any Mortgaged Property may at the time be
located, the Master Servicer and the Owner Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Owner Trustee and the Insurer to act as co-trustee,
jointly with the Owner Trustee, or separate trustee or separate trustees, of all
or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Owner Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Owner Trustee
subject to the approval of the Insurer (which approval shall not be unreasonably
withheld) shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 10.1 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.3, except that notice to and written consent of, the Insurer shall be
required for the appointment of a co-trustee.
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Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred upon
and exercised or performed by the Owner Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Owner Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be
personally liable by reason of any act or omission of any other
trustee under this Agreement; and
(iii) the Master Servicer and the Owner Trustee
acting jointly may at any time accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Owner
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Master Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the
Owner Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
ARTICLE XI.
Miscellaneous
SECTION 11.1 Supplements and Amendments. (a) This Agreement
may be amended by the Sponsor and the Owner Trustee, with the prior written
consent of the Insurer and prior written notice to the Rating Agencies (so long
as no Insurer Default shall have occurred and is continuing), without the
consent of any of the Noteholders (i) to cure any ambiguity or defect or (ii) to
correct, supplement or modify any provisions in this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel which
may be based upon a certificate of the Master Servicer, adversely affect in any
material respect the interests of any Noteholder or Certificateholder.
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<PAGE> 31
(b) This Agreement may also be amended from time to time, with
the prior written consent of the Insurer (so long as no Insurer Default shall
have occurred and is continuing) by the Sponsor and the Owner Trustee, with
prior written notice to the Rating Agencies, and, to the extent such amendment
materially and adversely affects the interests of the Noteholders, with the
consent of the Noteholders evidencing not less than a majority of the
Outstanding Amount of the Notes and, the consent of the Certificateholders
evidencing not less than a majority interest in the Trust (which consent of any
Holder of a Certificate or Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate or Note and of any
Certificate or Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the
Certificate or Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that, subject to the express rights of the Insurer under the
Operative Documents, no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Mortgage Loans or distributions that shall be required to be made
for the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the
Certificates, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes and
Holders of all outstanding Certificates.
Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to the Insurer, to each Certificateholder and the Indenture
Trustee.
It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Operative Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe. Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or
the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise. The Owner Trustee shall furnish copies of any such
amendments to the Rating Agencies.
SECTION 11.2 No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their ownership interest therein only in
accordance with Article IX. No transfer, by operation of law or otherwise, of
any right, title or interest of the Certificateholders to and in their ownership
interest in the Owner Trust Estate shall operate to terminate this Agreement or
the trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of legal title to any part of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. Except for
Section 11.7, the provisions of this Agreement are solely for the benefit of the
Owner Trustee, the Sponsor, the
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Certificateholders, the Master Servicer and, to the extent expressly provided
herein, the Insurer, the Indenture Trustee and the Noteholders, and nothing in
this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Owner Trust
Estate or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified
or permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed first class mail or certified mail, in each case return receipt
requested, and shall be deemed to have been duly given upon receipt, if to the
Owner Trustee, addressed to the Corporate Trust Office; if to the Sponsor,
addressed to Advanta Mortgage Conduit Services, Inc., 500 Office Center Drive,
Suite 400, Fort Washington, Pennsylvania 19034; if to the Insurer, addressed to
Insurer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management Structured Finance (IPM-SF) (Advanta
Home Equity Loan Asset Backed Notes, Series 1998-B, Class A-1 Notes, Class A-2
Notes), Telecopy No.: (914) 765-3810, Confirmation No.: (914) 765-3781; or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
SECTION 11.5 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdictional shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.7 Assignments; Insurer. (a) This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. This Agreement shall also inure to
the benefit of the Insurer for so long as an Insurer Default shall not have
occurred and be continuing. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement which confer rights upon the
Insurer shall be for the benefit of and run directly to the Insurer, and the
Insurer shall be entitled to rely on and enforce such covenants, subject,
however, to the limitations on such rights provided in this Agreement and the
Operative Documents. The Insurer may disclaim any of its rights and powers under
this Agreement (but not its duties and obligations under the Policy) upon
delivery of a written notice to the Owner Trustee.
SECTION 11.8 No Petition. The Owner Trustee (in its individual
capacity and as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee, the
Originators, and each Noteholder by accepting the benefits of this Agreement,
hereby covenants and agrees that they will not at any time institute against the
Sponsor or the Trust, or join in any institution against the Sponsor or the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law.
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SECTION 11.9 No Recourse. Each Certificateholder by accepting
a Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Master Servicer, the Sponsor, the Owner Trustee, the
Indenture Trustee, the Insurer or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Certificates or the Operative Documents.
SECTION 11.10 Headings. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 11.11 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12 Master Servicer. The Master Servicer is
authorized to prepare, or cause to be prepared, execute and deliver on behalf of
the Trust all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Trust or Owner Trustee to prepare, file
or deliver pursuant to the Operative Documents. Upon written request, the Owner
Trustee shall execute and deliver to the Master Servicer a limited power of
attorney appointing the Master Servicer the Trust's agent and attorney-in-fact
to prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.
[Signature Page Follows]
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
WILMINGTON TRUST COMPANY, as
Owner Trustee
By:________________________________
Name:
Title:
ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Sponsor
By:________________________________
Name:
Title:
[Signature Page of Trust Agreement]
<PAGE> 35
Exhibit A
CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE REPRESENTS CERTAIN RESIDUAL RIGHTS TO PAYMENT TO THE
EXTENT DESCRIBED HEREIN AND IN THE TRUST AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED
STATES PERSON.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A
TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION
AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3.10 OF THE TRUST
AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS THE TRANSFEREE
PROVIDES A REPRESENTATION LETTER FROM THE TRANSFEREE OF SUCH
CERTIFICATE, ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO
THE OWNER TRUSTEE AND THE INSURER, TO THE EFFECT THAT SUCH TRANSFEREE
IS NOT (i) AN EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, (ii) A PLAN SUBJECT
TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR
(iii) A PERSON ACTING ON BEHALF OF OR USING THE ASSETS OF ANY SUCH
PLAN, WHICH REPRESENTATION LETTER SHALL NOT BE AN EXPENSE OF THE OWNER
TRUSTEE OR THE INSURER.
NO TRANSFER OF A CERTIFICATE SHALL BE MADE UNLESS SUCH TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE
IN ACCORDANCE WITH SAID ACT AND LAWS. EXCEPT FOR THE INITIAL ISSUANCE
OF THE CERTIFICATE TO THE ORIGINATORS, THE OWNER TRUSTEE SHALL REQUIRE
(i) THE TRANSFEREE TO EXECUTE AN INVESTMENT LETTER ACCEPTABLE TO AND IN
FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND THE INSURER
CERTIFYING TO THE OWNER TRUSTEE AND THE INSURER THE FACTS SURROUNDING
SUCH TRANSFER, WHICH INVESTMENT LETTER SHALL NOT BE AN EXPENSE OF THE
OWNER TRUSTEE OR THE INSURER OR (ii) IF THE INVESTMENT LETTER IS NOT
DELIVERED, A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO AND IN FORM AND
SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE, THE INSURER AND THE
SPONSOR THAT SUCH TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION,
DESCRIBING THE APPLICABLE EXEMPTION AND THE BASIS THEREFOR, FROM SAID
ACT OR IS BEING MADE PURSUANT TO SAID ACT, WHICH OPINION OF COUNSEL
SHALL NOT BE AN EXPENSE OF THE OWNER TRUSTEE, THE INSURER OR THE
SPONSOR. THE HOLDER OF A CERTIFICATE DESIRING TO EFFECT SUCH TRANSFER
SHALL, AND DOES HEREBY AGREE TO, INDEMNIFY THE SPONSOR AND THE INSURER
AGAINST ANY
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<PAGE> 36
LIABILITY THAT MAY RESULT IF THE TRANSFER IS NOT SO EXEMPT OR IS NOT
MADE IN ACCORDANCE WITH SUCH FEDERAL AND STATE LAWS.
THE CERTIFICATES AND ANY INTEREST THEREIN SHALL NOT BE TRANSFERRED
EXCEPT UPON SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT: (I) THE
PERSON THAT ACQUIRES A CERTIFICATE SHALL (A) BE ORGANIZED AND EXISTING
UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE OR THE
DISTRICT OF COLUMBIA THEREOF, (B) EXPRESSLY ASSUME, BY AN AGREEMENT
SUPPLEMENTAL HERETO, EXECUTED AND DELIVERED TO THE OWNER TRUSTEE, THE
PERFORMANCE OF EVERY COVENANT AND OBLIGATION OF THE SPONSOR UNDER THE
TRUST AGREEMENT, EXCEPT FOR THE COVENANTS AND OBLIGATIONS CONTAINED IN
SECTIONS 2.1, 2.2, 2.3, 2.4, 3.3 AND 3.4 OF THE SALE AND SERVICING
AGREEMENT, SECTION 7.1 OF THE INDENTURE AND UNDER THE CREDIT LINE
AGREEMENTS AND THE MORTGAGE NOTES; (II) THE PERSON THAT ACQUIRES A
CERTIFICATE SHALL DELIVER TO THE OWNER TRUSTEE AND THE INSURER AN
OFFICER'S CERTIFICATE STATING THAT SUCH TRANSFER AND SUCH SUPPLEMENTAL
AGREEMENT COMPLY WITH SECTION 3.10 OF THE TRUST AGREEMENT AND THAT ALL
CONDITIONS PRECEDENT PROVIDED BY SECTION 3.10 OF THE TRUST AGREEMENT
HAVE BEEN COMPLIED WITH AND AN OPINION OF COUNSEL STATING THAT SUCH
TRANSFER AND SUCH SUPPLEMENTAL AGREEMENT COMPLY WITH SECTION 3.10 AND
THAT ALL CONDITIONS PRECEDENT PROVIDED BY SECTION 3.10 HAVE BEEN
COMPLIED WITH, AND THE OWNER TRUSTEE MAY CONCLUSIVELY RELY ON SUCH
OFFICER'S CERTIFICATE, SHALL HAVE NO DUTY TO MAKE INQUIRIES WITH REGARD
TO THE MATTERS SET FORTH THEREIN AND SHALL INCUR NO LIABILITY IN SO
RELYING; (III) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER TO
THE OWNER TRUSTEE AND THE INSURER A LETTER FROM EACH RATING AGENCY
CONFIRMING THAT ITS RATING OF THE CLASS A NOTES, AFTER GIVING EFFECT TO
SUCH TRANSFER, WILL NOT BE REDUCED OR WITHDRAWN WITHOUT REGARD TO THE
POLICIES; (IV) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER TO
THE OWNER TRUSTEE AND THE INSURER AN OPINION OF COUNSEL TO THE EFFECT
THAT (A) SUCH TRANSFER WILL NOT ADVERSELY AFFECT THE TREATMENT OF THE
CLASS A NOTES AFTER SUCH TRANSFER AS DEBT FOR FEDERAL AND APPLICABLE
STATE INCOME TAX PURPOSES, (B) SUCH TRANSFER WILL NOT RESULT IN THE
ADVANTA HOME EQUITY LOAN TRUST 1998-B BEING SUBJECT TO TAX AT THE
ENTITY LEVEL FOR FEDERAL OR APPLICABLE STATE TAX PURPOSES, (C) SUCH
TRANSFER WILL NOT HAVE ANY MATERIAL ADVERSE IMPACT ON THE FEDERAL OR
APPLICABLE STATE INCOME TAXATION OF A NOTEHOLDER AND (D) SUCH TRANSFER
WILL NOT RESULT IN THE ARRANGEMENT CREATED BY THE ADVANTA HOME EQUITY
LOAN TRUST 1998-B AGREEMENT OR ANY "PORTION" OF THE ADVANTA HOME EQUITY
LOAN TRUST 1998-B, BEING TREATED AS A TAXABLE MORTGAGE POOL AS DEFINED
IN SECTION 7701(i) OF THE CODE; (V) ALL FILINGS AND OTHER ACTIONS
NECESSARY TO CONTINUE THE PERFECTION OF THE INTEREST OF THE TRUST IN
THE MORTGAGE LOANS AND THE OTHER PROPERTY CONVEYED UNDER THE TRUST
AGREEMENT SHALL HAVE BEEN TAKEN OR MADE.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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<PAGE> 37
ADVANTA HOME EQUITY LOAN TRUST 1998-B
ASSET BACKED CERTIFICATE
Percentage Interest:_____%
Date of Cut-Off Date:
September 1, 1998
First Payment Date: Issue Date: September 30, 1998
October 26, 1998
No. R-__
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY
not in its individual capacity but
solely as Owner Trustee
By:___________________________
Authenticating Agent
The Trust was created pursuant to a Trust Agreement dated as
of September 1, 1998 (the "Trust Agreement"), between the Sponsor and Wilmington
Trust Company, as owner trustee (the "Owner Trustee"), a summary of certain of
the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as Advanta Home Equity Loan "Asset Backed Certificates." Also issued
under the Indenture dated as of September 1, 1998 (the "Indenture") between the
Trust and Bankers Trust Company of California, N.A., as indenture trustee (the
"Indenture Trustee") are the Class A-1 Notes and the Class A-2 Notes (together,
the "Class A Notes"). These Certificates are issued under and are subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust includes a
pool of adjustable-rate home equity revolving credit line loans secured by first
or junior deeds of trust or Mortgages on primarily one-to-four family
residential properties and a pool of fixed-rate closed-end high-
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<PAGE> 38
loan-to-value junior mortgage loans secured by junior deeds of trust or
Mortgages on primarily one-to-four family residential properties.
Under the Trust Agreement, there will be distributed on the
25th day of each month or, if such 25th day is not a Business Day, the next
Business Day (the "Payment Date"), commencing on October 26, 1998, to the Person
in whose name this Certificate is registered at the close of business on the
Business Day preceding such Payment Date (the "Record Date") such
Certificateholder's Percentage Interest in the amount to be distributed to
Certificateholders on such Payment Date.
The holder of this Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.
It is the intent of the Sponsor, the Master Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a corporation. The Sponsor and any other Certificateholders, by
acceptance of a Certificate, agree to treat, and to take no action inconsistent
with the treatment of, the Certificates for such tax purposes as equity
interests in a corporation. Each Certificateholder, by its acceptance of a
Certificate, covenants and agrees that such Certificateholder will not at any
time institute against the Trust or the Sponsor, or join in any institution
against the Trust or the Sponsor of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, the Trust Agreement or
any of the Operative Documents.
Distributions on this Certificate will be made as provided in
the Sale and Servicing Agreement and the Indenture by the Indenture Trustee by
wire transfer or check mailed to the Certificateholder of record in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
A-4
<PAGE> 39
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
Date:September 30, 1998 ADVANTA HOLDING TRUST
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as Owner Trustee
By: _______________________________________
Name:
Title:
A-5
<PAGE> 40
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an
interest in, the Originators, the Sponsor, the Master Servicer, the Insurer, the
Owner Trustee or any Affiliates of any of them and no recourse may be had
against such parties or their assets, except as may be expressly set forth or
contemplated herein or in the Trust Agreement, the Indenture or the Operative
Documents. In addition, this Certificate is not guaranteed by any governmental
agency or instrumentality and is limited in right of payment to certain
collections with respect to the Mortgage Loans, as more specifically set forth
herein, in the Sale and Servicing Agreement and in the Indenture. A copy of each
of the Sale and Servicing Agreement and the Trust Agreement may be examined
during normal business hours at the principal office of the Sponsor, and at such
other places, if any, designated by the Sponsor, by any Certificateholder upon
written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Sponsor and the rights of the Certificateholders under the
Trust Agreement at any time by the Sponsor and the Owner Trustee with the prior
written consent of the Insurer and with the consent of the holders of the Notes
and the Certificates evidencing not less than a majority of the outstanding
Notes and the Certificates. Any such consent by the holder of this Certificate
shall be conclusive and binding on such holder and on all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the holders of
any of the Certificates (other than the Sponsor or the Insurer).
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Corporate Trust Office, accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate Registrar
appointed under the Trust Agreement is Wilmington Trust Company.
Except for Certificates issued to the Sponsor, the
Certificates are issuable only as registered Certificates without coupons in
denominations of $1,000 or integral multiples of $1,000 in excess thereof. As
provided in the Trust Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates in authorized
denominations evidencing the same aggregate denomination, as requested by the
holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and
any agent of the Owner Trustee, the Certificate Registrar or the Insurer may
treat the person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Owner Trustee, the Certificate
Registrar, the Insurer nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Sale and Servicing Agreement and the disposition of all
property
A-6
<PAGE> 41
held as part of the Trust. The Majority Certificateholder may at its option
elect to liquidate the corpus of the Trust related to the HELOC Mortgage Loans
or the HLTV Mortgage Loans, as applicable, at a price specified in the Sale and
Servicing Agreement, and after such liquidation of the related Mortgage Loans
and other property of the Trust, all proceeds will be distributed to the Holders
of the Certificates; however, the Majority Certificateholders' right to elect to
liquidate is exercisable, subject to certain restrictions, only on any Payment
Date on or after the Payment Date immediately prior to which, with respect to
the Class A-1 Notes, the Class A-1 Principal Balance is less than 10% of the
Original Class A-1 Principal Balance and, with respect to the Class A-2 Notes,
the Class A-2 Principal Balance is less than 10% of the Original Class A-2
Principal Balance and, with respect to each Class of Class A Notes, all amounts
due and owing to the Insurer for unpaid premiums and unreimbursed draws on the
related Policy and all other amounts due and owing to the Insurer pursuant to
the Insurance Agreement, together with interest thereon as provided under the
Insurance Agreement, have been paid.
The recitals contained herein shall be taken as the statements
of the Sponsor or the Master Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Certificate or of
any Mortgage Loan or related document.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual or
facsimile signature, this Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
A-7
<PAGE> 42
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- -------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- -------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate
- -----------------------------------------
on the books of the Certificate Registrar, with full power of substitution in
the premises.
Dated:
*
--------------------------
Signature Guaranteed:
*
--------------------------
- -----------------------------
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
A-8
<PAGE> 43
EXHIBIT B
CERTIFICATE OF TRUST OF
ADVANTA HOME EQUITY LOAN TRUST 1998-B
This Certificate of Trust of Advanta Revolving Home Equity
Loan Trust 1998-A (the "Trust") is being duly executed and filed by the
undersigned, as trustee, to form a business trust under the Delaware Business
Trust Act (12 Del. Code Section 3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is
Advanta Holding Trust.
2. Delaware Trust. The name and business address of the Owner
Trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attn: Corporate Trust Administration.
3. This Certificate of Trust will be effective September ___,
1998.
IN WITNESS WHEREOF, the undersigned, in accordance with
Section 3811(a) of the Act, has duly executed this Certificate of Trust.
WILMINGTON TRUST COMPANY
not in its individual capacity but solely
as Owner Trustee of the Trust
By:_________________________________
Name:
Title:
B-1
<PAGE> 1
EXHIBIT 4.2.2
<PAGE> 2
Exhibit 4.2.2
EXECUTION COPY
TRUST AGREEMENT
between
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
Sponsor
ADVANTA HOLDING TRUST,
Depositor
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of September 1, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. Definitions.........................................................................................1
SECTION 1.1 Capitalized Terms.................................................................1
SECTION 1.2 Other Definitional Provisions.....................................................3
SECTION 1.3 Action by or Consent of Noteholders and Certificateholders........................4
ARTICLE II. Organization.......................................................................................4
SECTION 2.1 Names.............................................................................4
SECTION 2.2 Office............................................................................4
SECTION 2.3 Purposes and Powers...............................................................4
SECTION 2.4 Appointment of Owner Trustee......................................................5
SECTION 2.5 Initial Capital Contribution of Trust Estate......................................5
SECTION 2.6 Declaration of Trust..............................................................5
SECTION 2.7 Liability.........................................................................6
SECTION 2.8 Title to Trust Property...........................................................6
SECTION 2.9 Situs of Trust....................................................................6
SECTION 2.10 Representations and Warranties of the Sponsor and the Depositor...................6
SECTION 2.11 Federal Income Tax Allocations....................................................8
SECTION 2.12 Covenants of the Sponsor..........................................................9
SECTION 2.13 Covenants of the Certificateholders...............................................9
SECTION 2.14 Investment Company...............................................................10
ARTICLE III. Certificates and Transfer of Interests...........................................................10
SECTION 3.1 Initial Ownership................................................................10
SECTION 3.2 The Certificates.................................................................10
SECTION 3.3 Authentication of Certificates...................................................11
SECTION 3.4 Registration of Transfer and Exchange of Certificates............................11
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates................................11
SECTION 3.6 Persons Deemed Certificateholders................................................11
SECTION 3.7 Access to List of Certificateholders' Names and Addresses........................12
SECTION 3.8 Maintenance of Office or Agency..................................................12
SECTION 3.9 ERISA............................................................................12
SECTION 3.10 Restrictions on Transfer of Certificates.........................................12
SECTION 3.11 Acceptance of Obligations........................................................14
SECTION 3.12 Payments on Certificates.........................................................14
ARTICLE IV. Voting Rights and Other Actions...................................................................14
SECTION 4.1 Prior Notice to Holders with Respect to Certain Matters..........................14
SECTION 4.2 Action by Certificateholders with Respect to Certain Matters.....................15
SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy..........................15
SECTION 4.4 Restrictions on Certificateholders' Power........................................16
SECTION 4.5 Majority Control.................................................................16
SECTION 4.6 Rights of Insurer................................................................17
SECTION 4.7 Separateness.....................................................................17
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE V. Certain Duties.....................................................................................17
SECTION 5.1 Accounting and Records to the Noteholders, Certificateholders, the
Internal Revenue Service and Others..............................................17
SECTION 5.2 Signature on Returns; Tax Matters Partner........................................18
ARTICLE VI. Authority and Duties of Owner Trustee.............................................................18
SECTION 6.1 General Authority................................................................18
SECTION 6.2 General Duties...................................................................18
SECTION 6.3 Action upon Instruction..........................................................18
SECTION 6.4 No Duties Except as Specified in this Agreement or in Instructions...............19
SECTION 6.5 No Action Except under Specified Documents or Instructions.......................20
SECTION 6.6 Restrictions.....................................................................20
ARTICLE VII. Concerning the Owner Trustee.....................................................................20
SECTION 7.1 Acceptance of Trust and Duties...................................................20
SECTION 7.2 Furnishing of Documents..........................................................21
SECTION 7.3 Representations and Warranties...................................................21
SECTION 7.4 Reliance; Advice of Counsel......................................................22
SECTION 7.5 Not Acting in Individual Capacity................................................22
SECTION 7.6 Owner Trustee Not Liable for Certificates or Mortgage Loans......................22
SECTION 7.7 Owner Trustee May Own Certificates and Notes.....................................23
SECTION 7.8 Payments from Owner Trust Estate.................................................23
SECTION 7.9 Doing Business in Other Jurisdictions............................................23
ARTICLE VIII. Compensation of Owner Trustee...................................................................23
SECTION 8.1 Owner Trustee's Fees and Expenses................................................23
SECTION 8.2 Indemnification..................................................................24
SECTION 8.3 Payments to the Owner Trustee....................................................24
SECTION 8.4 Non-recourse Obligations.........................................................24
ARTICLE IX. Termination of Trust Agreement....................................................................24
SECTION 9.1 Termination of Trust Agreement...................................................24
ARTICLE X. Successor Owner Trustees and Additional Owner Trustees.............................................25
SECTION 10.1 Eligibility Requirements for Owner Trustee.......................................25
SECTION 10.2 Resignation or Removal of Owner Trustee..........................................26
SECTION 10.3 Successor Owner Trustee..........................................................27
SECTION 10.4 Merger or Consolidation of Owner Trustee.........................................27
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee........................27
ARTICLE XI. Miscellaneous.....................................................................................28
SECTION 11.1 Supplements and Amendments.......................................................28
SECTION 11.2 No Legal Title to Owner Trust Estate in Certificateholders.......................29
SECTION 11.3 Limitations on Rights of Others..................................................30
SECTION 11.4 Notices..........................................................................30
SECTION 11.5 Severability.....................................................................30
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 11.6 Separate Counterparts............................................................30
SECTION 11.7 Assignments; Insurer.............................................................30
SECTION 11.8 No Petition......................................................................31
SECTION 11.9 No Recourse......................................................................31
SECTION 11.10 Headings.........................................................................31
SECTION 11.11 Governing Law....................................................................31
SECTION 11.12 Master Servicer..................................................................31
</TABLE>
EXHIBITS
Exhibit A.........Form of Certificate
Exhibit B.........Form of Certificate of Trust
iii
<PAGE> 6
TRUST AGREEMENT dated as of September 1, 1998 between ADVANTA
MORTGAGE CONDUIT SERVICES, INC., a Delaware corporation (the "Sponsor"), ADVANTA
HOLDING TRUST, as depositor (the "Depositor") and WILMINGTON TRUST COMPANY, a
Delaware banking corporation as Owner Trustee (the "Owner Trustee").
ARTICLE I.
Definitions
SECTION 1.1 Capitalized Terms. For the purposes of this
Agreement, the following terms shall have the meanings set forth below. All
other capitalized terms used herein but not defined shall have the meanings set
forth in the Indenture.
"Affiliate" shall mean with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, or owns, directly or
indirectly, 50% or more of, the Person specified.
"Agreement" shall mean this Trust Agreement, as the same may
be amended and supplemented from time to time.
"Benefit Plan Investor" shall have the meaning assigned to
such term in Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of
the Delaware Code, 12 Del. Code Section 3801 et. seq. as the same may be amended
from time to time.
"Certificate" means a trust certificate evidencing the
beneficial ownership interest of a Certificateholder in the Trust, substantially
in the form of Exhibit A hereto
"Certificate Account" shall mean the account designated as
such as established and maintained pursuant to the Indenture.
"Certificate of Trust" shall mean the Certificate of Trust in
the form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of
the Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean
the register maintained and the registrar appointed pursuant to Section 3.4.
"Class A-1 Policy" shall mean the note guaranty insurance
policy with respect to the Class A-1 Notes, dated September 30, 1998, issued by
the Insurer to the Indenture Trustee for the benefit of the Class A-1
Noteholders.
"Class A-2 Policy" shall mean the note guaranty insurance
policy with respect to the Class A-2 Notes, dated September 30, 1998, issued by
the Insurer to the Indenture Trustee for the benefit of the Class A-2
Noteholders.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at such other address as the Owner
Trustee may designate by notice to the Certificateholders, the Insurer, the
Depositor and
<PAGE> 7
the Sponsor, or the principal corporate trust office of any successor Owner
Trustee (the address of which the successor owner trustee will notify the
Certificateholders, the Insurer, the Depositor and the Sponsor).
"Definitive Certificates" shall mean Certificates issued in
certificated, fully registered form.
"Depositor" shall mean Advanta Holding Trust in its capacity
as Depositor hereunder.
"ERISA" shall have the meaning assigned to such term in
Section 3.9.
"Expenses" shall have the meaning assigned to such term in
Section 8.2.
"Holder" or "Certificateholder" shall mean the Person in whose
name a Certificate is registered on the Certificate Register.
"Indemnification Agreement" shall mean the Indemnification
Agreement dated as of September 25, 1998 among the Insurer, the Sponsor, the
Originators and Bear Stearns & Co. Inc.
"Indemnified Parties" shall have the meaning assigned to such
term in Section 8.2.
"Indenture" shall mean the Indenture dated as of September 1,
1998, between the Issuer and Bankers Trust Company of California, N.A., as
Indenture Trustee, as the same may be amended and supplemented from time to
time.
"Indenture Trustee" shall mean, initially Bankers Trust
Company of California, N.A., in its capacity as indenture trustee, including its
successors in interest, until and unless a successor Person shall have become
the Indenture Trustee pursuant to the Sale and Servicing Agreement and
thereafter "Indenture Trustee" shall mean such successor Person.
"Instructing Party" shall have the meaning assigned to such
term in Section 6.3.
"Insurance Agreement" shall mean the Insurance Agreement dated
as of September 1, 1998 among the Insurer, the Sponsor, the Originators, the
Trust, Advanta Holding Trust, the Master Servicer, the Owner Trustee and the
Indenture Trustee.
"Insurer" shall mean MBIA Insurance Corporation, or its
successor in interest.
"Master Servicer" shall mean Advanta Mortgage Corp. USA.
"Notes" shall mean any of the Class A-1 Notes or the Class A-2
Notes issued pursuant to the Indenture.
"Noteholder" shall mean the holder of a Class A-1 Note or a
Class A-2 Note.
"Operative Documents" shall mean this Agreement, the
Certificate of Trust, the Sale and Servicing Agreement, the Indemnification
Agreement, the Insurance Agreement, the Indenture, the Purchase Agreement, the
AMHC Guaranty to the Underwriter and the Trust, the AMHC Guaranty to the Insurer
and the Trust and the other documents and certificates delivered in connection
therewith.
"Originators" shall mean Advanta National Bank and Advanta
Finance Corp.
2
<PAGE> 8
"Owner Trust Estate" shall mean all right, title and interest
of the Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Account and all other property
of the Trust from time to time, including any rights of the Owner Trustee and
the Trust pursuant to the Sale and Servicing Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor Owner Trustee hereunder.
"Policies" shall mean the Class A-1 Policy and the Class A-2
Policy.
"Record Date" shall mean with respect to any Payment Date, the
close of business on the last Business Day immediately preceding such Payment
Date.
"Sale and Servicing Agreement" shall mean the Sale and
Servicing Agreement among Advanta Holding Trust, Advanta Home Equity Loan Trust
1998-B, as Issuer, Advanta Mortgage Conduit Services, Inc., as Sponsor, Advanta
Mortgage Corp. USA, as Master Servicer, and the Indenture Trustee, dated as of
September 1, 1998, as the same may be amended and supplemented from time to
time.
"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Security Majority" means a majority by principal amount of
the Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Sponsor" shall mean Advanta Mortgage Conduit Services, Inc.
in its capacity as Sponsor hereunder.
"Treasury Regulations" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein
to specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" or "Issuer" shall mean the trust established by this
Agreement.
"Trust Accounts" shall have the meaning ascribed thereto in
the Sale and Servicing Agreement.
SECTION 1.2 Other Definitional Provisions. (a) Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Sale and Servicing Agreement or, if not defined therein, in the
Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles as in effect on the
date of this Agreement or any such certificate or other document, as applicable.
To the extent that the definitions of accounting terms in
3
<PAGE> 9
this Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under generally accepted accounting principles,
the definitions contained in this Agreement or in any such certificate or other
document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
SECTION 1.3 Action by or Consent of Noteholders and
Certificateholders. Whenever any provision of this Agreement refers to action to
be taken, or consented to, by Noteholders or Certificateholders, such provision
shall be deemed to refer to the Certificateholder or Noteholder, as the case may
be, of record as of the Record Date immediately preceding the date on which such
action is to be taken, or consent given, by Noteholders or Certificateholders.
Solely for the purposes of any action to be taken, or consented to, by
Noteholders or Certificateholders, any Note or Certificate registered in the
name of the Sponsor or any Affiliate thereof shall be deemed not to be
outstanding; provided, however that, solely for the purpose of determining
whether the Indenture Trustee is entitled to rely upon any such action or
consent, only Notes or Certificates which the Owner Trustee, or the Indenture
Trustee, respectively, knows to be so owned shall be so disregarded.
ARTICLE II.
Organization
SECTION 2.1 Names. There is hereby formed a trust to be known
as "Advanta Home Equity Loan Trust 1998-B," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care
of the Owner Trustee at the Corporate Trust Office or at such other address as
the Owner Trustee may designate by written notice to the Certificateholders ,
the Insurer and the Sponsor.
SECTION 2.3 Purposes and Powers. The purpose of the Trust is,
and the Trust shall have the power and authority, to engage in the following
activities:
(i) to issue the Notes pursuant to the Indenture and
the Certificates pursuant to this Agreement, and to sell the
Notes;
(ii) with the proceeds of the sale of the Notes, to
pay the organizational, start-up and transactional expenses of
the Trust and to pay the balance to the Sponsor pursuant to
the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage
and convey the Owner Trust Estate to the Indenture Trustee on
behalf of the Noteholders and for the benefit of the Insurer
and to hold, manage and distribute to the Certificateholders
pursuant to the
4
<PAGE> 10
terms of this Agreement any portion of the Owner Trust Estate
released from the Lien of, and remitted to the Trust pursuant
to, the Indenture;
(iv) to enter into and perform its obligations under
the Operative Documents to which it is a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or
connected therewith; and
(vi) subject to compliance with the Operative
Documents, to engage in such other activities as may be
required in connection with conservation of the Owner Trust
Estate and the making of distributions to the
Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the
Operative Documents.
SECTION 2.4 Appointment of Owner Trustee. The Sponsor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein and in the
Business Trust Statute.
SECTION 2.5 Initial Capital Contribution of Trust Estate. The
Depositor hereby assigns, transfers, conveys and sets over to the Owner Trustee,
as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall be
deposited in the Certificate Account. On or prior to the Closing Date, the Owner
Trustee will also, upon receipt thereof, acknowledge on behalf of the Trust
receipt of the Mortgage Loans pursuant to the Sale and Servicing Agreement. The
Sponsor shall pay organizational expenses of the Trust as they may arise.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject to
the conditions set forth herein for the use and benefit of the
Certificateholders, subject to the obligations of the Trust under the Operative
Documents. It is the intention of the parties hereto that the Trust constitute a
business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. It is the intention
of the parties hereto that, solely for income tax purposes, the Trust shall be
treated as a branch; provided, however, that in the event Certificates are owned
by more than one Certificateholder, it is the intention of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall then be
treated as a partnership and that, unless otherwise required by appropriate tax
authorities, only after such time the Trust will file or cause to be filed
annual or other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes. Effective
as of the date hereof, the Owner Trustee shall have all rights, powers and
duties set forth herein and to the extent not inconsistent herewith, in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
The Owner Trustee shall file the Certificate of Trust with the Secretary of
State.
SECTION 2.7 Liability. No Holder shall have any personal
liability for any liability or obligation of the Trust.
SECTION 2.8 Title to Trust Property. (a) Legal title to all of
the Owner Trust Estate shall be vested at all times in the Trust as a separate
legal entity except where applicable law in
5
<PAGE> 11
any jurisdiction requires title to any part of the Owner Trust Estate to be
vested in a trustee or trustees, in which case title shall be deemed to be
vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case
may be.
(b) The Holders shall not have legal title to any part of the
Trust Property. The Holders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Article IX. No transfer, by operation of law or otherwise, of any right, title
or interest by any Certificateholder of its ownership interest in the Owner
Trust Estate shall operate to terminate this Agreement or the trusts hereunder
or entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Trust Property.
SECTION 2.9 Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. Payments will be received by the Trust only in Delaware or
New York and payments will be made by the Trust only from Delaware or New York.
The Trust shall not have any employees in any state other than Delaware;
provided, however, that nothing herein shall restrict or prohibit the Owner
Trustee, the Master Servicer or any agent of the Trust from having employees
within or without the State of Delaware. The only office of the Trust will be at
the Corporate Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Sponsor and
the Depositor.
(a) The Sponsor makes the following representations and
warranties on which the Owner Trustee relies in accepting the Owner Trust Estate
in trust and issuing the Certificates and upon which the Insurer relies in
issuing the Policies.
(i) The Sponsor is duly organized and validly
existing as a Delaware corporation with power and authority to
own its properties and to conduct its business as such
properties are currently owned and such business is presently
conducted and is proposed to be conducted pursuant to this
Agreement and the Operative Documents;
(ii) It is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the
ownership or lease of its property, the conduct of its
business and the performance of its obligations under this
Agreement and the Operative Documents requires such
qualification;
(iii) The Sponsor has the corporate power and
authority to execute and deliver this Agreement and to carry
out its terms; and the execution, delivery and performance of
this Agreement has been duly authorized by the Sponsor by all
necessary corporate action. The Sponsor has duly executed this
Agreement and this Agreement constitutes a legal, valid and
binding obligation of the Sponsor enforceable against the
Sponsor, in accordance with its terms.
(iv) To the best knowledge of the Sponsor, no
consent, license, approval or authorization or registration or
declaration with, any Person or with any governmental
authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement and the
Operative Documents, except for such as have been obtained,
effected or made;
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(v) The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or
lapse of time) a default under, the certificate of
incorporation or by-laws of the Sponsor, or any material
indenture, agreement or other instrument to which the Sponsor
is a party or by which it is bound; nor result in the creation
or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Operative Documents);
nor violate any law or, to the best of the Sponsor's
knowledge, any order, rule or regulation applicable to the
Sponsor of any court or of any Federal or state regulatory
body, administrative agency or other governmental
instrumentality having jurisdiction over the Sponsor or its
properties; and
(vi) There are no proceedings or investigations
pending or, to its knowledge threatened against it before any
court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction
over it or its properties (A) asserting the invalidity of this
Agreement or any of the Operative Documents, (B) seeking to
prevent the issuance of the Certificates or the Notes or the
consummation of any of the transactions contemplated by this
Agreement or any of the Operative Documents, (C) seeking any
determination or ruling that might materially and adversely
affect its performance of its obligations under, or the
validity or enforceability of, this Agreement or any of the
Operative Documents, or (D) seeking to adversely affect the
federal income tax or other federal, state or local tax
attributes of the Notes or the Certificates.
(b) The Depositor makes the following representations and
warranties on which the Owner Trustee relies in accepting the Owner Trust Estate
in trust and issuing the Certificates and upon which the Insurer relies in
issuing the Policies.
(i) The Depositor is duly organized and validly
existing as a Delaware business trust with power and authority
to own its properties and to conduct its business as such
properties are currently owned and such business is presently
conducted and is proposed to be conducted pursuant to this
Agreement and the Operative Documents;
(ii) It is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the
ownership or lease of its property, the conduct of its
business and the performance of its obligations under this
Agreement and the Operative Documents requires such
qualification;
(iii) The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry
out its terms; the Depositor has full power and authority to
convey and assign the property to be conveyed and assigned to
and deposited with the Trust and the Depositor has duly
authorized such conveyance and assignment and deposit to the
Trust by all necessary corporate action; and the execution,
delivery and performance of this Agreement has been duly
authorized by the Depositor by all necessary corporate action.
The Depositor has duly executed this Agreement and this
Agreement constitutes a legal, valid and binding obligation of
the Depositor enforceable against the Depositor, in accordance
with its terms.
(iv) To the best knowledge of the Depositor, no
consent, license, approval or authorization or registration or
declaration with, any Person or with any
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governmental authority, bureau or agency is required in
connection with the execution, delivery or performance of this
Agreement and the Operative Documents, except for such as have
been obtained, effected or made;
(v) The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or
lapse of time) a default under, the certificate of trust of
the Depositor, or any material indenture, agreement or other
instrument to which the Depositor is a party or by which it is
bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant
to the Operative Documents); nor violate any law or, to the
best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any
Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over
the Depositor or its properties; and
(vi) There are no proceedings or investigations
pending or, to its knowledge threatened against it before any
court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction
over it or its properties (A) asserting the invalidity of this
Agreement or any of the Operative Documents, (B) seeking to
prevent the issuance of the Certificates or the Notes or the
consummation of any of the transactions contemplated by this
Agreement or any of the Operative Documents, (C) seeking any
determination or ruling that might materially and adversely
affect its performance of its obligations under, or the
validity or enforceability of, this Agreement or any of the
Operative Documents, or (D) seeking to adversely affect the
federal income tax or other federal, state or local tax
attributes of the Notes or the Certificates.
SECTION 2.11 Federal Income Tax Allocations. In the event that
the Trust is treated as a partnership for Federal income tax purposes, net
income of the Trust for any month as determined for Federal income tax purposes
(and each item of income, gain, loss, credit and deduction entering into the
computation thereof) shall be allocated to the extent of available net income,
among the Certificateholders as of the first Record Date following the end of
such month, in proportion to their ownership percentage of principal amount of
Certificates on such date.
Net losses of the Trust, if any, for any month as determined
for Federal income tax purposes (and each item of income, gain, loss, credit and
deduction entering into the computation thereof) shall be allocated among the
Certificateholders as of the Record Date in proportion to their ownership
percentage of principal amount of Certificates on such Record Date until the
principal balance of the Certificates is reduced to zero. The Sponsor, as agent
on behalf of the Originators, is authorized to modify the allocations in this
paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the
Certificateholders, or as otherwise required by the Code.
SECTION 2.12 Covenants of the Sponsor. The Sponsor agrees and
covenants for the benefit of each Certificateholder, the Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
(a) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as permitted by
its certificate of incorporation and the Operative Documents;
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(b) it shall not, for any reason, institute proceedings for
the Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of the property of the
Trust or cause or permit the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Operative
Document to which it or the Trust is a party and each other agreement entered
into on or after the date hereof to which it or the Trust is a party, an
agreement by each such counterparty that prior to the occurrence of the event
specified in Section 9.1(e) such counterparty shall not institute against, or
join any other Person in instituting against, it or the Trust, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States; and
(d) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against it, or file a petition seeking or consenting
to reorganization or relief under any applicable federal or state law relating
to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of it or a
substantial part of its property, or make any assignment for the benefit of
creditors, or admit in writing its inability to pay its debts generally as they
become due, or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
SECTION 2.13 Covenants of the Certificateholders. Each
Certificateholder agrees:
(a) to be bound by the terms and conditions of the
Certificates and of this Agreement, including any supplements or amendments
hereto and to perform the obligations of a Certificateholder as set forth
therein or herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee, the Insurer
and all other Certificateholders present and future;
(b) to hereby appoint the Sponsor as such Certificateholder's
agent and attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust, if any, and agree that, if requested by the Trust,
it will sign such federal income tax information return in its capacity as
holder of an interest in the Trust. Each Certificateholder also hereby agrees
that in its tax returns it will not take any position inconsistent with those
taken in any tax returns that may be filed by the Trust;
(c) if such Certificateholder is other than an individual or
other entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of a
Certificate in a taxable sale or exchange, within 30 days of the date of the
transfer; and
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or the
Sponsor to be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or
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other similar official) of the Sponsor or the Trust or a substantial part of its
property, or cause or permit the Sponsor or the Trust to make any assignment for
the benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt or
take any action in furtherance of any such action.
Except as provided in Section 2.13, and notwithstanding any
other provision to the contrary in this Agreement, no Certificateholder shall be
deemed to have adopted, be bound by, or succeed in any way to any representation
by, or duty of indemnification by or any other duty of, the Sponsor, including
those contained in Sections 2.10, 2.12, 3.6, 8.2 or elsewhere herein.
SECTION 2.14 Investment Company. Neither the Sponsor, the
Depositor nor any Holder shall take any action that would cause the Trust to
become an "investment company" required to register under the Investment Company
Act of 1940, as amended.
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1 Initial Ownership. Upon the formation of the Trust
by the contribution by the Depositor pursuant to Section 2.5, the Owner Trustee,
contemporaneously therewith, having full power, authority, and authorization to
do so, has executed, authenticated, dated, issued, and delivered, in the name
and on behalf of the Trust, to the Depositor, one or more Certificates
representing in the aggregate a 100% interest in the Trust, and has registered
such Certificates on the Certificate Register in the name of the Depositor. The
Depositor shall be the sole beneficiary of the Trust. Such Certificates are duly
authorized, validly issued, and entitled to the benefits of this Agreement. For
so long as the Depositor shall own such 100% interest in the Trust, the
Depositor shall be the sole beneficial owner of the Trust. For so long as any
Notes remaining outstanding, the Depositor shall not transfer its ownership
interest in the Trust, in whole or in part, without the Insurer's prior written
consent.
SECTION 3.2 The Certificates. The Certificates shall be issued
in denominations of $1,000 and integral multiples of $1000 in excess thereof.
The Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of authentication and delivery of such
Certificates. A transferee of a Certificate shall become a Certificateholder,
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder, upon due registration of such Certificate in such
transferee's name pursuant to Section 3.4.
SECTION 3.3 Authentication of Certificates. Concurrently with
the initial sale of the Mortgage Loans to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause each Certificate to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Sponsor, signed by its chairman of the board, its president
or any vice president, its treasurer or any assistant treasurer without further
corporate action by the Sponsor, in authorized denominations. No Certificate
shall entitle its holder to any benefit under this Agreement, or shall be valid
for any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee, by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly
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authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. The Trust shall not issue any other Certificate without
the prior written consent of the Insurer.
SECTION 3.4 Registration of Transfer and Exchange of
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Owner Trustee shall be the
initial Certificate Registrar.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
shall be delivered to the Certificate Registrar, the Owner Trustee and the
Insurer such security or indemnity as may be required by them to save each of
them harmless, then in the absence of notice that such Certificate shall have
been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like class, tenor and denomination. In connection with the
issuance of any new Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
SECTION 3.6 Persons Deemed Certificateholders. Every Person by
virtue of becoming a Certificateholder in accordance with this Agreement and the
rules and regulations of the Certificate Registrar shall be deemed to be bound
by the terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee, the Certificate Registrar and the
Insurer and any agent of the Owner Trustee, the Certificate Registrar and the
Insurer, may treat the Person in whose name any Certificate shall be registered
in the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to the Sale and Servicing Agreement and the
Indenture and for all other purposes whatsoever, and none of the Owner Trustee,
the Certificate Registrar or the Insurer nor any agent of the Owner Trustee, the
Certificate Registrar or the Insurer shall be bound by any notice to the
contrary.
SECTION 3.7 Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Master Servicer, the Sponsor or the Insurer, within 15 days after receipt by the
Owner Trustee of a request therefor from such Person in writing, a list, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Holders of Certificates or one or more Holders of Certificates
evidencing not less than 25% by Percentage Interest apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application is accompanied by
a copy of the communication that such applicants propose to transmit, then the
Owner Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Sponsor, the
Master Servicer, the Owner Trustee or the Insurer or any agent thereof
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee
shall maintain in Wilmington, Delaware an office or offices or agency or
agencies where Certificates may be
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surrendered for registration of transfer or exchange and where notices and
demands to or upon the Owner Trustee in respect of the Certificates and the
Operative Documents may be served. The Owner Trustee initially designates its
Corporate Trust Office for such purposes. The Owner Trustee shall give prompt
written notice to the Sponsor, the Certificateholders and the Insurer of any
change in the location of the Certificate Register or any such office or agency.
SECTION 3.9 ERISA. The Certificates may not be acquired by or
for the account of (i) an employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is subject to the provisions of Title I of ERISA, (ii) a plan as (as defined in
Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code, or
(iii) any person acting on behalf of or using the assets of a plan described in
(i) or (ii) (each, a "Benefit Plan Investor") above. By accepting and holding
its beneficial ownership interest in its Certificate, the Holder thereof shall
be deemed to have represented and warranted that it is not a Benefit Plan
Investor.
SECTION 3.10 Restrictions on Transfer of Certificates. (a) The
Certificates shall be assigned, transferred, exchanged, pledged, financed,
hypothecated or otherwise conveyed (collectively, for purposes of this Section
3.10 and any other Section referring to the Certificates, "transferred" or a
"transfer") only in accordance with this Section 3.10.
(b) No transfer of a Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. Except for the initial issuance of the
Certificates to the Depositor, the Owner Trustee shall require (i) the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Owner Trustee and the Insurer certifying to the
Owner Trustee and the Insurer the facts surrounding such transfer, which
investment letter shall not be an expense of the Owner Trustee or the Insurer,
or (ii) if the investment letter is not delivered, a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Owner Trustee, the
Insurer and the Sponsor that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor from said Act or is
being made pursuant to said Act, which Opinion of Counsel shall not be an
expense of the Owner Trustee, the Insurer or the Sponsor. The Holder of a
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Sponsor, the Owner Trustee and the Insurer against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
(c) The Certificates and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Certificate shall (A) be organized and existing under
the laws of the United States of America or any state thereof or the District of
Columbia; (B) expressly assume, by an agreement supplemental hereto, executed
and delivered to the Owner Trustee, the performance of every covenant and
obligation of the Sponsor hereunder except for the covenants and obligations
contained in Sections 2.1, 2.2, 2.3, 2.4, 3.3 and 3.4 of the Sale and Servicing
Agreement, Section 7.1 of the Indenture and under the Credit Line Agreements and
the Mortgage Notes; (ii) the person that acquires a Certificate shall deliver to
the Owner Trustee and the Insurer an Officer's Certificate stating that such
transfer and such supplemental agreement comply with this Section 3.10 and that
all conditions precedent provided by this subsection 3.10 have been complied
with and an Opinion of Counsel stating that such transfer and such supplemental
agreement comply with this Section 3.10 and that all conditions precedent
provided by this Section 3.10 have been complied with, and the Owner Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set forth therein and shall incur no
liability in so relying; (iii) the person that acquires a Certificate shall
deliver to the Owner Trustee and the Insurer a letter from each Rating Agency
confirming that its rating of the Class A Notes, after giving effect to such
transfer, will not be reduced or withdrawn without regard to the Policies; (iv)
the person that
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acquires a Certificate shall deliver to the Owner Trustee and the Insurer an
Opinion of Counsel to the effect that (a) such transfer will not adversely
affect the treatment of the Class A Notes after such transfer as debt for
federal and applicable state income tax purposes, (b) such transfer will not
result in the Trust being subject to tax at the entity level for federal or
applicable state tax purposes, (c) such transfer will not have any material
adverse impact on the federal or applicable state income taxation of a Class A
Noteholder and (d) such transfer will not result in the arrangement created by
this Agreement or any "portion" of the Trust, being treated as a taxable
mortgage pool as defined in Section 7701(i) of the Code; (v) all filings and
other actions necessary to continue the perfection of the interest of the Trust
in the Mortgage Loans and the other property conveyed hereunder shall have been
taken or made and (vi) the prior written consent of the Insurer has been
obtained, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, the requirement set forth in subclause (i)(A) of this Section 3.10
shall not apply in the event the Owner Trustee and the Insurer shall have
received a letter from each Rating Agency confirming that its rating of the
Class A Notes, after giving effect to a proposed transfer to a Person that does
not meet the requirement set forth in subclause (i)(A), shall not be reduced or
withdrawn without regard to the Policy. Notwithstanding the foregoing, the
requirements set forth in this paragraph ( c) shall not apply to the initial
issuance of the Certificates to the Depositor.
(d) Except for the initial issuance of the Certificates to the
Depositor, no transfer of a Certificate shall be made unless the Owner Trustee
and the Insurer shall have received a representation letter from the transferee
of such Certificate, acceptable to and in form and substance satisfactory to the
Owner Trustee and the Insurer, to the effect that such transferee is not a
Benefit Plan Investor, which representation letter shall not be an expense of
the Owner Trustee.
(e) No transfer or pledge of the Certificates shall result in
more than 98 other holders of Certificates.
SECTION 3.11 Acceptance of Obligations. The Sponsor agrees to
be bound by and to perform all the duties of the Sponsor set forth in this
Agreement.
SECTION 3.12 Payments on Certificates. The Holders of the
Certificates will be entitled to distributions on each Payment Date, as provided
in the Indenture.
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1 Prior Notice to Holders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders and the Insurer in writing of
the proposed action and (i) the Insurer shall have consented in writing thereto
and (ii) the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or, with the written consent of the
Insurer, provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute or unless such amendment would not materially and
adversely affect the interests of the Holders);
(b) the amendment of any Operative Document;
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(c) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent or Indenture Trustee or, pursuant to this Trust
Agreement, of a successor Certificate Registrar or the consent to the assignment
by the Note Registrar, Paying Agent, Indenture Trustee or Certificate Registrar
of its obligations under the Indenture or this Trust Agreement, as applicable;
(d) the consent to the calling or waiver of any default under
any Operative Document;
(e) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Operative Document;
(f) perform any act that conflicts with any other Operative
Document;
(g) perform any act which would make it impossible to carry on
the ordinary business of the Trust as described in Section 2.3 hereof;
(h) confess a judgment against the Trust;
(i) possess Trust assets or assign the Trust's right to
property for other than a Trust purpose;
(j) cause the Trust to lend any funds to any entity; or
(k) change the Trust's purpose and powers from those
enumerated in this Trust Agreement.
The Owner Trustee shall notify the Certificateholders and the Insurer in writing
of any appointment of a successor Note Registrar, or Certificate Registrar
within five Business Days thereof.
In addition, the Owner Trustee shall not (i) cause the Trust
to merge or consolidate with or into any other entity, or convey or transfer all
or substantially all of the Trust's assets to any other entity; (ii) cause the
Trust to incur, assume or guaranty any indebtedness other than as set forth in
this Trust Agreement or (iii) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part.
SECTION 4.2 Action by Certificateholders with Respect to
Certain Matters. (a) The Owner Trustee shall not have the power, except upon the
written direction of the Insurer or in the event that an Insurer Default shall
have occurred and is continuing, the Security Majority in accordance with the
Operative Documents, to (i) remove the Master Servicer under the Sale and
Servicing Agreement; (ii) except as expressly provided in the Operative
Documents, sell the Mortgage Loans after the termination of the Indenture; (iii)
institute proceedings to have the Trust declared or adjudicated to be bankrupt
or insolvent, (iv) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (v) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Trust under any applicable
federal or state law relating to bankruptcy, (vi) consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or any similar
official) of the Trust or a substantial portion of the property of the Trust,
(vii) make any assignment for the benefit of the Trust's creditors, (viii) cause
the Trust to admit in writing its inability to pay its debts generally as they
become due, (ix) take any action or cause the Trust to take any action, in
furtherance of any of the foregoing clauses (iii) through (ix) (any of such
clauses, a "Bankruptcy Action"). So long as the Indenture and the Insurance
Agreement remain in effect, no Certificateholder shall have the power to take,
and shall not take, any Bankruptcy Action with respect to the Trust or direct
the Owner Trustee to take any Bankruptcy Action with respect to the Trust. The
Owner Trustee shall take the actions referred
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to in the preceding sentence only upon written instructions signed by the
Insurer or the Securityholders, as the case may be, and the furnishing of
indemnification satisfactory to the Owner Trustee by the Certificateholders.
(b) Upon the written request of any Certificateholder (a
"Proposer"), the Owner Trustee shall distribute promptly to all
Certificateholders any request for action or consent of Certificateholders
submitted by such Proposer. The Owner Trustee shall provide a reasonable method
for collecting responses to such request and shall tabulate and report the
results thereof to the Certificateholders and the Sponsor. The Owner Trustee
shall have no responsibility or duty to determine if any such proposed action or
consent is permitted under the terms of this Agreement or applicable law.
SECTION 4.3 Action by Certificateholders with Respect to
Bankruptcy. Until one year and one day following the day on which the Notes have
been paid in full, the Owner Trustee shall not have the power to, and shall not
commence any proceeding or other actions contemplated by Section 2.12(b)
relating to the Trust without the prior written consent of the Insurer (unless
an Insurer Default shall have occurred and is continuing) or the Security
Majority upon an Insurer Default. Until one year and one day following the day
on which the Notes have been paid in full, all amounts due to the Insurer under
the Insurance Agreement have been paid in full, the Policies have terminated and
the Indenture Trustee has surrendered the Policies to the Insurer, the Owner
Trustee shall not have the power to, and shall not, commence any proceeding or
other actions contemplated by Section 2.12(b) relating to the Trust without the
prior written consent of all of the Certificateholders and the delivery to the
Owner Trustee by each such Certificateholder of a certificate certifying that
such Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.4 Restrictions on Certificateholders' Power. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Operative
Documents or would be contrary to Section 2.3 or otherwise contrary to law nor
shall the Owner Trustee be obligated to follow any such direction, if given.
(b) No Certificateholder (other than the Originators) shall
have any right by virtue or by availing itself of any provisions of this
Agreement to institute any suit, action, or proceeding in equity or at law upon
or under or with respect to this Agreement or any Operative Document, unless the
Certificateholders are the Instructing Party pursuant to Section 6.3 and unless
a Certificateholder previously shall have given to the Owner Trustee a written
notice of default and of the continuance thereof, as provided in this Agreement,
and also unless Certificateholders evidencing not less than 25% by Percentage
Interest shall have made written request upon the Owner Trustee to institute
such action, suit or proceeding in its own name as Owner Trustee under this
Agreement and shall have offered to the Owner Trustee such reasonable indemnity
as it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Owner Trustee, for 30 days after its receipt of such
notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit, or proceeding, and during such 30-day period no
request or waiver inconsistent with such written request has been given to the
Owner Trustee pursuant to and in compliance with this Section or Section 6.3; it
being understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Owner Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb, or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this
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Section 4.4, each and every Certificateholder and the Owner Trustee shall be
entitled to such relief as can be given either at law or in equity.
SECTION 4.5 Majority Control. No Certificateholder shall have
any right to vote or in any manner otherwise control the operation and
management of the Trust except as expressly provided in this Agreement. Except
as expressly provided herein, any action that may be taken by the
Certificateholders under this Agreement may be taken by the Holders of
Certificates evidencing not less than a majority interest in the Trust. Except
as expressly provided herein, any written notice of the Certificateholders
delivered pursuant to this Agreement shall be effective if signed by
Certificateholders evidencing not less than a majority interest in the Trust at
the time of the delivery of such notice.
SECTION 4.6 Rights of Insurer. Notwithstanding anything to the
contrary in the Operative Documents, without the prior written consent of the
Insurer (or if an Insurer Default shall have occurred and is continuing, the
Security Majority) the Owner Trustee shall not (i) remove the Master Servicer,
(ii) initiate any claim, suit or proceeding by the Trust or compromise any
claim, suit or proceeding brought by or against the Trust, other than with
respect to the enforcement of any Mortgage Loan or any rights of the Trust
thereunder, (iii) authorize the merger or consolidation of the Trust with or
into any other business trust or other entity (other than in accordance with
Section 3.10 of the Indenture), (iv) amend the Certificate of Trust or (v) amend
this Agreement in accordance with Section 11.1 of this Agreement.
SECTION 4.7 Separateness. The Trust shall (i) not commingle
its assets with those of any other entity; (ii) maintain its financial and
accounting books and records separate from those of any other entity; (iii)
maintain appropriate minutes or other records of all appropriate actions and
maintain books and records separate from any other entity; (iv) conduct its own
business in its own name; (v) except as expressly set forth herein, pay its
indebtedness, operating expenses and liabilities from its own funds; (vi) enter
into transactions with affiliates only on terms that are commercially reasonable
and on the same terms as would be available in an arm's length transaction;
(vii) not pay the indebtedness, operating expenses and liabilities of any other
entity; (viii) not hold out its credit as being available to satisfy the
obligation of any other entity; (ix) not make loans to any other entity or buy
or hold evidence of indebtedness issued by any other entity (except for cash and
investment-grade securities); (x) use separate stationery, invoices, and checks
bearing its own name; (xi) allocate fairly and reasonably any overhead expenses
that are shared with an affiliate, including paying for office space and
services performed by any employee of any affiliate; (xii) not identify itself
as a division of any other entity; (xiii) hold itself out as a separate
identity; and (xiv) maintain adequate capital in light of its contemplated
business operation.
ARTICLE V.
Certain Duties
SECTION 5.1 Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to Sections
5.1(b)(iii) and 5.1(c) of the Sale and Servicing Agreement, the Sponsor shall
(a) maintain (or cause to be maintained) the books of the Trust on a calendar
year basis on the accrual method of accounting, including, without limitation,
the allocations of net income under Section 2.11 hereof, (b) deliver (or cause
to be delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1, if applicable) to enable each Certificateholder to prepare its
Federal and state income tax returns, (c) file or cause to be filed, if
necessary, such tax returns relating to the Trust (including a partnership
information return, Form 1065), and direct the
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Owner Trustee or the Master Servicer, as the case may be, to make such elections
as may from time to time be required or appropriate under any applicable state
or Federal statute or rule or regulation thereunder so as to maintain the
Trust's characterization as a branch, or if applicable, as a partnership, for
Federal income tax purposes and (d) collect or cause to be collected any
withholding tax as described in and in accordance with Section 5.1(b)(ii) of the
Sale and Servicing Agreement with respect to income or distributions to
Certificateholders and the appropriate forms relating thereto. The Owner Trustee
or the Master Servicer, as the case may be, shall make all elections pursuant to
this Section as directed in writing by the Sponsor. The Owner Trustee shall sign
all tax information returns presented to it in final execution form, if any,
filed pursuant to this Section 5.1 and any other returns as may be required by
law, and in doing so shall rely entirely upon, and shall have no liability for
information provided by, or calculations provided by, the Sponsor or the Master
Servicer. The Owner Trustee shall elect under Section 1278 of the Code to
include in income currently any market discount that accrues with respect to the
Mortgage Loans. The Owner Trustee shall not make the election provided under
Section 754 of the Code.
SECTION 5.2 Signature on Returns; Tax Matters Partner. (a)
Notwithstanding the provisions of Section 5.1 and in the event that the Trust is
characterized as a partnership, the Owner Trustee shall sign on behalf of the
Trust the tax returns of the Trust presented to it in final execution form,
unless applicable law requires a Certificateholder to sign such documents, in
which case such documents shall be signed by the Sponsor, as agent, on behalf of
the Certificateholders.
(b) In the event that the Trust is characterized as a
partnership, the Depositor shall be the "tax matters partner" of the Trust
pursuant to the Code.
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1 General Authority. The Owner Trustee is authorized
and directed to execute and deliver the Operative Documents to which the Trust
is named as a party and each certificate or other document attached as an
exhibit to or contemplated by the Operative Documents to which the Trust is
named as a party and any amendment thereto, in each case, in such form as the
Sponsor shall approve as evidenced conclusively by the Owner Trustee's execution
thereof, and on behalf of the Trust, to direct the Indenture Trustee to
authenticate and deliver Class A Notes in the aggregate principal amount of
$107,500,000. In addition to the foregoing, the Owner Trustee is authorized, but
shall not be obligated, to take all actions required of the Trust pursuant to
the Operative Documents. The Owner Trustee is further authorized from time to
time to take such action as the Instructing Party recommends with respect to the
Operative Documents so long as such activities are consistent with the terms of
the Operative Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and to administer the Trust in the
interest of the Holders, subject to the Operative Documents and in accordance
with the provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Operative Documents to the extent the Master Servicer
has agreed in the Sale and Servicing Agreement to perform any act or to
discharge any duty of the Trust or the Owner Trustee hereunder or under any
Operative Document, and the Owner Trustee shall not be liable for the default or
failure of the Master Servicer to carry out its obligations under the Sale and
Servicing Agreement.
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SECTION 6.3 Action upon Instruction. (a) Subject to Article
IV, the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) or the Certificateholders (if an Insurer Default shall have occurred
and be continuing) (the "Instructing Party") shall have the exclusive right to
direct the actions of the Owner Trustee in the management of the Trust, so long
as such instructions are not inconsistent with the express terms set forth
herein or in any Operative Document. The Instructing Party shall not instruct
the Owner Trustee in a manner inconsistent with this Agreement or the Operative
Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Operative Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is contrary
to the terms hereof or of any Operative Document or is otherwise contrary to
law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Operative Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Instructing Party requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Instructing Party received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten days of
such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Operative Documents, as it shall deem to
be in the best interests of the Certificateholders, and shall have no liability
to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Operative Document or any
such provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Instructing
Party requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Operative
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement or
in Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Operative Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Operative Document. The Owner Trustee nevertheless
agrees that it
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will, at its own cost and expense, promptly take all action as may be necessary
to discharge any Liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee (solely in its individual
capacity) and that are not related to the ownership or the administration of the
Owner Trust Estate.
SECTION 6.5 No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Operative
Documents and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation or a publicly traded
partnership for Federal income tax purposes. The Certificateholders shall not
direct the Owner Trustee to take action that would violate the provisions of
this Section.
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1 Acceptance of Trust and Duties. The Owner Trustee
accepts the trust hereby created and agrees to perform its duties hereunder with
respect to such trust but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it constituting
part of the Owner Trust Estate upon the terms of the Operative Documents and
this Agreement. The Owner Trustee shall not be answerable or accountable
hereunder or under any Operative Document under any circumstances, except (i)
for its own willful misconduct, bad faith or gross negligence, (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 7.3
expressly made by the Owner Trustee in its individual capacity, (iii) for
liabilities arising from the failure of the Owner Trustee to perform obligations
expressly undertaken by it in the last sentence of Section 6.4 hereof, (iv) for
any investments issued by the Owner Trustee or any branch or affiliate thereof
in its commercial capacity or (v) for taxes, fees or other charges on, based on
or measured by, any fees, commissions or compensation received by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment, not constituting gross negligence, made by a Responsible Officer of
the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it if such action or omission is in
accordance with the instructions of the Instructing Party, the Sponsor, the
Master Servicer or any Certificateholder pursuant to the terms hereof;
(c) no provision of this Agreement or any Operative Document
shall require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Operative Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
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(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Operative Documents,
including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Sponsor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Operative Documents, other than
the certificate of authentication on the Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty or obligation to the
Sponsor, the Insurer, Indenture Trustee, any Certificateholder, other than as
expressly provided for herein and in the Operative Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Sponsor, the Insurer, the Indenture Trustee, or the Master
Servicer under any of the Operative Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations under this
Agreement or the Operative Documents that are required to be performed by the
Sponsor under this Agreement, by the Indenture Trustee under the Indenture or
the Master Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Operative Document, at the request, order or
direction of the Instructing Party or any of the Certificateholders, unless such
Instructing Party or Certificateholders have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Operative Document shall not be construed as a duty, and the
Owner Trustee shall not be answerable for other than its negligence, bad faith
or willful misconduct in the performance of any such act.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall
furnish to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Operative Documents.
SECTION 7.3 Representations and Warranties. The Owner Trustee
hereby represents and warrants, in its individual capacity, to the Sponsor and
the Holders (which shall have relied on such representations and warranties in
issuing the Policy), that:
(a) It is a Delaware banking corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware state law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order binding on
it, or
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constitute any default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel. (a) The Owner Trustee
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of the determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer,
secretary or other authorized officers of the relevant party, as to such fact or
matter, and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
Operative Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
(ii) may consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it. The Owner Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or other
such persons and according to such opinion not contrary to this Agreement or any
Operative Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as
provided in this Agreement, in accepting the trusts hereby created Wilmington
Trust Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Operative Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Sponsor and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Operative Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) or the Notes (other
than the signature of the Owner Trustee on the Notes), or of any Mortgage Loan
or related documents. The Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority of any security interest
created by any Mortgage Loan or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to Certificateholders
under this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Mortgage Loan; the
existence and enforceability of any insurance thereon; the existence and
contents of any Mortgage Loan on any computer or other record thereof; the
validity of the assignment of any Mortgage Loan to the Trust or of any
intervening assignment; the completeness of any Mortgage Loan; the performance
or enforcement of any Mortgage Loan; the compliance by the Sponsor, the Master
Servicer or any other Person with any warranty or representation made under any
Operative Document or in any related document or the accuracy of any such
warranty or representation or any action of the Indenture Trustee or the Master
Servicer or any SubMaster Servicer taken in the name of the Owner Trustee.
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SECTION 7.7 Owner Trustee May Own Certificates and Notes.
Subject to the provisions of Section 3.1 hereof, the Owner Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
or Notes and may deal with the Sponsor, the Indenture Trustee and the Master
Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8 Payments from Owner Trust Estate. All payments to
be made by the Owner Trustee under this Agreement or any of the Operative
Documents to which the Trust or the Owner Trustee is a party shall be made only
from the income and proceeds of the Owner Trust Estate and only to the extent
that the Owner Trust shall have received income or proceeds from the Owner Trust
Estate to make such payments in accordance with the terms hereof. Wilmington
Trust Company, or any successor thereto, in its individual capacity, shall not
be liable for any amounts payable under this Agreement or any of the Operative
Documents to which the Trust or the Owner Trustee is a party.
SECTION 7.9 Doing Business in Other Jurisdictions.
Notwithstanding anything contained to the contrary, neither Wilmington Trust
Company or any successor thereto, nor the Owner Trustee shall be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 10.5 hereof, (i) require the consent
or approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the State
of Delaware ; (ii) result in any fee, tax or other governmental charge under the
laws of the State of Delaware becoming payable by Wilmington Trust Company (or
any successor thereto); or (iii) subject Wilmington Trust Company (or any
successor thereto) to personal jurisdiction in any jurisdiction other than the
State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company (or any successor
thereto) or the Owner Trustee, as the case may be, contemplated hereby.
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner
Trustee shall receive as compensation for its services hereunder such fees as
have been separately agreed upon before the date hereof between the Sponsor and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Sponsor for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder and under the Operative Documents.
SECTION 8.2 Indemnification. The Sponsor shall be liable as
primary obligor for, and shall indemnify the Owner Trustee (in its individual
and trust capacities) and its officers, directors, successors, assigns, agents
and servants (collectively, the "Indemnified Parties") from and against, any and
all liabilities, obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may (in its trust or individual capacities) at
any time be imposed on, incurred by, or asserted against the Owner Trustee or
any Indemnified Party in any way relating to or arising out of this Agreement,
the Operative Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee hereunder, except
only that the Sponsor shall not be liable for or required to indemnify the Owner
Trustee from and
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against Expenses arising or resulting from any of the matters described in the
third sentence of Section 7.1. The indemnities contained in this Section and the
rights under Section 8.1 shall survive the resignation or termination of the
Owner Trustee or the termination of this Agreement. In any event of any claim,
action or proceeding for which indemnity will be sought pursuant to this
Section, the Owner Trustee's choice of legal counsel shall be subject to the
approval of the Sponsor which approval shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to
the Owner Trustee pursuant to this Article VIII shall be deemed not to be a part
of the Owner Trust Estate immediately after such payment.
SECTION 8.4 Non-recourse Obligations. Notwithstanding anything
in this Agreement or any Operative Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that all
obligations of the Trust to the Owner Trustee individually or as Owner Trustee
for the Trust shall be recourse to the Owner Trust Estate only and specifically
shall not be recourse to the assets of any Certificateholder.
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1 Termination of Trust Agreement. (a) This Agreement
and the Trust shall terminate and be of no further force or effect upon the
later of (i) the maturity or other liquidation of the last Mortgage Loan
(including the redemption by the Sponsor at its option of the corpus of the
Trust as described in Section 10.1(b) and Section 10.1(c) of the Indenture) and
the subsequent distribution of amounts in respect of such Mortgage Loans as
provided in the Operative Documents, (ii) the payment to Certificateholders of
all amounts required to be paid to them pursuant to this Agreement and the
payment to the Insurer of all amounts payable or reimbursable to it pursuant to
the Sale and Servicing Agreement and the Insurance Agreement and (iii) the
termination of the Indenture and the Insurance Agreement; provided, however,
that the rights to indemnification under Section 8.2 and the rights under
Section 8.1 shall survive the termination of the Trust. The Master Servicer
shall promptly notify the Owner Trustee and the Insurer of any prospective
termination pursuant to this Section 9.1. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder shall not (x) operate
to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Sponsor, the
Depositor nor any other Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which the Certificateholders shall surrender their
Certificates to the Indenture Trustee for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders mailed within five Business Days of receipt of notice of such
redemption from the Master Servicer given pursuant to Section 10.1 of the Sale
and Servicing Agreement, stating (i) the Payment Date upon or with respect to
which final payment of the Certificates shall be made upon presentation and
surrender of the Certificates at the office of the Indenture Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Payment Date is not applicable, payments being
made only upon presentation and surrender of the
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Certificates at the office of the Indenture Trustee therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Indenture Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Payment Date pursuant to Section 8.6(b)(xi) of the
Indenture.
In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to applicable escheat
laws, by the Owner Trustee to the Sponsor and Holders shall look solely to the
Sponsor for payment.
(d) Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution shall be
distributed by the Owner Trustee to the Depositor.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1 Eligibility Requirements for Owner Trustee. The
Owner Trustee shall at all times be a corporation (i) satisfying the provisions
of Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; (iv) having (or having a parent which has) a rating of at least
Baa3 by Moody's or A-1 by Standard & Poors or being otherwise acceptable to the
Rating Agencies; and (v) acceptable to the Insurer in its sole discretion. If
such corporation shall publish reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The
Owner Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Sponsor, the Insurer and the
Master Servicer. Upon receiving such notice of resignation, the Sponsor shall
promptly appoint a successor Owner Trustee, meeting the qualifications set forth
in Section 10.1 herein, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee, provided that the Sponsor shall have received written
confirmation from each of the Rating Agencies that the proposed appointment will
not result in an increased capital charge to the Insurer by either of the Rating
Agencies. If no successor Owner Trustee shall have been so appointed and have
accepted appointment
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within 30 days after the giving of such notice of resignation, the resigning
Owner Trustee or the Insurer may petition any court of competent jurisdiction
for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Sponsor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then a majority of the Certificateholders with the consent of the
Insurer (so long as no Insurer Default shall have occurred and is continuing)
may remove the Owner Trustee. If a majority of the Certificateholders shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Sponsor shall promptly appoint a successor Owner Trustee
acceptable to the Insurer, meeting the qualifications set forth in Section 10.1
herein, by written instrument, in duplicate, one copy of which instrument shall
be delivered to the outgoing Owner Trustee so removed, one copy to the Insurer
and one copy to the successor Owner Trustee and the Sponsor shall pay all fees
owed to the outgoing Owner Trustee, if not previously paid by the Trust.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 10.3 and payment of all reasonable
fees and expenses owed to the outgoing Owner Trustee. The Servicer shall provide
written notice of such resignation or removal of the Owner Trustee to each of
the Rating Agencies and the Insurer.
Notwithstanding any other provision of this Agreement, and in
addition to any other method of removal of the Owner Trustee contained herein,
upon a proposal made pursuant to Section 4.2(b) and the subsequent consent of
Certificateholders representing no less than a 66-2/3% interest in the Trust,
the Owner Trustee may be removed as Owner Trustee, subject to the consent of the
Insurer (so long as no Insurer Default shall have occurred and is continuing),
which consent is not to be unreasonably withheld. In the event the Owner Trustee
is removed pursuant to this paragraph, the provisions of this Agreement,
including Article X herein, shall apply as if the Owner Trustee had resigned
hereunder.
SECTION 10.3 Successor Owner Trustee. Any successor Owner
Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and
deliver to the Sponsor, the Master Servicer, the Insurer and to its predecessor
Owner Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee. The predecessor Owner Trustee shall upon
payment of its fees and expenses deliver to the successor Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
Sponsor and the predecessor Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Owner Trustee all such rights,
powers, duties and obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Master Servicer shall mail notice of the successor
of such Owner Trustee to all
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Certificateholders, the Indenture Trustee, the Insurer, and the Noteholders. If
the Master Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the Master
Servicer.
The successor Owner Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State reflecting the name and
principal place of business of such successor Owner Trustee in the State of
Delaware.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided further that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies and the Insurer.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Owner Trust Estate or any Mortgaged Property may at the time be
located, the Master Servicer and the Owner Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Owner Trustee and the Insurer to act as co-trustee,
jointly with the Owner Trustee, or separate trustee or separate trustees, of all
or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Owner Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Owner Trustee
subject to the approval of the Insurer (which approval shall not be unreasonably
withheld) shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 10.1 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.3, except that notice to and written consent of, the Insurer shall be
required for the appointment of a co-trustee.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred upon
and exercised or performed by the Owner Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Owner Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be
personally liable by reason of any act or omission of any other
trustee under this Agreement; and
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(iii) the Master Servicer and the Owner Trustee
acting jointly may at any time accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Owner
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Master Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the
Owner Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
ARTICLE XI.
Miscellaneous
SECTION 11.1 Supplements and Amendments. (a) This Agreement
and prior written notice to the Rating Agencies may be amended by the Sponsor
and the Owner Trustee, with the prior written consent of the Insurer (so long as
no Insurer Default shall have occurred and is continuing), without the consent
of any of the Noteholders (i) to cure any ambiguity or defect or (ii) to
correct, supplement or modify any provisions in this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel which
may be based upon a certificate of the Master Servicer, adversely affect in any
material respect the interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time, with
the prior written consent of the Insurer (so long as no Insurer Default shall
have occurred and is continuing) by the Sponsor and the Owner Trustee, with
prior written notice to the Rating Agencies, and, to the extent such amendment
materially and adversely affects the interests of the Noteholders, with the
consent of the Noteholders evidencing not less than a majority of the
Outstanding Amount of the Notes and, the consent of the Certificateholders
evidencing not less than a majority interest in the Trust (which consent of any
Holder of a Certificate or Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate or Note and of any
Certificate or Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the
Certificate or Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that, subject to the express rights of the Insurer under the
Operative Documents, no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Mortgage Loans or distributions that shall be required to be made
for the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the
Certificates, the Holders of which are required to consent to
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any such amendment, without the consent of the Holders of all the outstanding
Notes and Holders of all outstanding Certificates.
Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to the Insurer, to each Certificateholder and the Indenture
Trustee.
It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Operative Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe. Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or
the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise. The Owner Trustee shall furnish copies of any such
amendments to the Rating Agencies.
SECTION 11.2 No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their ownership interest therein only in
accordance with Article IX. No transfer, by operation of law or otherwise, of
any right, title or interest of the Certificateholders to and in their ownership
interest in the Owner Trust Estate shall operate to terminate this Agreement or
the trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of legal title to any part of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. Except for
Section 11.7, the provisions of this Agreement are solely for the benefit of the
Owner Trustee, the Sponsor, the Certificateholders, the Master Servicer and, to
the extent expressly provided herein, the Insurer, the Indenture Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified
or permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed first class mail or certified mail, in each case return receipt
requested, and shall be deemed to have been duly given upon receipt, if to the
Owner Trustee, addressed to the Corporate Trust Office; if to the Sponsor,
addressed to Advanta Mortgage Conduit Services, Inc., 500 Office Center Drive,
Suite 400, Fort Washington, Pennsylvania 19034; if to the Insurer, addressed to
Insurer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management Structured Finance (IPM-SF) (Advanta
Home Equity Loan Asset Backed Notes, Series 1998-B, Class A-1 Notes, Class A-2
Notes), Telecopy No.: (914) 765-3810, Confirmation No.: (914) 765-3781, if to
the Depositor, Advanta Holding Trust, c/o Wilmington Trust Company, as Owner
Trustee, Rodney Square North, 1100 North Market Street, Wilmington,
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Delaware 19890; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
SECTION 11.5 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdictional shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.7 Assignments; Insurer. (a) This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. This Agreement shall also inure to
the benefit of the Insurer for so long as an Insurer Default shall not have
occurred and be continuing. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement which confer rights upon the
Insurer shall be for the benefit of and run directly to the Insurer, and the
Insurer shall be entitled to rely on and enforce such covenants, subject,
however, to the limitations on such rights provided in this Agreement and the
Operative Documents. The Insurer may disclaim any of its rights and powers under
this Agreement (but not its duties and obligations under the Policy) upon
delivery of a written notice to the Owner Trustee.
SECTION 11.8 No Petition. The Owner Trustee (in its individual
capacity and as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee, the
Originators and each Noteholder by accepting the benefits of this Agreement,
hereby covenants and agrees that they will not at any time institute against the
Sponsor, or the Trust or join in any institution against the Sponsor or the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law.
SECTION 11.9 No Recourse. Each Certificateholder by accepting
a Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Master Servicer, the Sponsor, the Owner Trustee, the
Indenture Trustee, the Insurer or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Certificates or the Operative Documents.
SECTION 11.10 Headings. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 11.11 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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SECTION 11.12 Master Servicer. The Master Servicer is
authorized to prepare, or cause to be prepared, execute and deliver on behalf of
the Trust all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Trust or Owner Trustee to prepare, file
or deliver pursuant to the Operative Documents. Upon written request, the Owner
Trustee shall execute and deliver to the Master Servicer a limited power of
attorney appointing the Master Servicer the Trust's agent and attorney-in-fact
to prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.
[Signature Page Follows]
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<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
WILMINGTON TRUST COMPANY, as
Owner Trustee
By:________________________________
Name:
Title:
ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Sponsor
By:________________________________
Name:
Title:
ADVANTA HOLDING TRUST, as Depositor
By: WILMINGTON TRUST COMPANY, in its
capacity as Owner Trustee
By:___________________________
Name:
Title:
[Signature Page of Trust Agreement]
<PAGE> 37
Exhibit A
CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE REPRESENTS CERTAIN RESIDUAL RIGHTS TO PAYMENT TO THE
EXTENT DESCRIBED HEREIN AND IN THE TRUST AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED
STATES PERSON.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A
TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION
AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3.10 OF THE TRUST
AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS THE TRANSFEREE
PROVIDES A REPRESENTATION LETTER FROM THE TRANSFEREE OF SUCH
CERTIFICATE, ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO
THE OWNER TRUSTEE AND THE INSURER, TO THE EFFECT THAT SUCH TRANSFEREE
IS NOT (i) AN EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, (ii) A PLAN SUBJECT
TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR
(iii) A PERSON ACTING ON BEHALF OF OR USING THE ASSETS OF ANY SUCH
PLAN, WHICH REPRESENTATION LETTER SHALL NOT BE AN EXPENSE OF THE OWNER
TRUSTEE OR THE INSURER.
NO TRANSFER OF A CERTIFICATE SHALL BE MADE UNLESS SUCH TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE
IN ACCORDANCE WITH SAID ACT AND LAWS. EXCEPT FOR THE INITIAL ISSUANCE
OF THE CERTIFICATE TO THE ORIGINATORS, THE OWNER TRUSTEE SHALL REQUIRE
(i) THE TRANSFEREE TO EXECUTE AN INVESTMENT LETTER ACCEPTABLE TO AND IN
FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND THE INSURER
CERTIFYING TO THE OWNER TRUSTEE AND THE INSURER THE FACTS SURROUNDING
SUCH TRANSFER, WHICH INVESTMENT LETTER SHALL NOT BE AN EXPENSE OF THE
OWNER TRUSTEE OR THE INSURER OR (ii) IF THE INVESTMENT LETTER IS NOT
DELIVERED, A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO AND IN FORM AND
SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE, THE INSURER AND THE
SPONSOR THAT SUCH TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION,
DESCRIBING THE APPLICABLE EXEMPTION AND THE BASIS THEREFOR, FROM SAID
ACT OR IS BEING MADE PURSUANT TO SAID ACT, WHICH OPINION OF COUNSEL
SHALL NOT BE AN EXPENSE OF THE OWNER TRUSTEE, THE INSURER, THE
DEPOSITOR OR THE SPONSOR. THE HOLDER OF A CERTIFICATE DESIRING TO
EFFECT SUCH TRANSFER SHALL, AND DOES HEREBY AGREE TO, INDEMNIFY THE
SPONSOR, THE
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<PAGE> 38
DEPOSITOR AND THE INSURER AGAINST ANY LIABILITY THAT MAY RESULT IF THE
TRANSFER IS NOT SO EXEMPT OR IS NOT MADE IN ACCORDANCE WITH SUCH
FEDERAL AND STATE LAWS.
THE CERTIFICATES AND ANY INTEREST THEREIN SHALL NOT BE TRANSFERRED
EXCEPT UPON SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT: (I) THE
PERSON THAT ACQUIRES A CERTIFICATE SHALL (A) BE ORGANIZED AND EXISTING
UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE OR THE
DISTRICT OF COLUMBIA THEREOF, (B) EXPRESSLY ASSUME, BY AN AGREEMENT
SUPPLEMENTAL HERETO, EXECUTED AND DELIVERED TO THE OWNER TRUSTEE, THE
PERFORMANCE OF EVERY COVENANT AND OBLIGATION OF THE SPONSOR UNDER THE
TRUST AGREEMENT, EXCEPT FOR THE COVENANTS AND OBLIGATIONS CONTAINED IN
SECTIONS 2.1, 2.2, 2.3, 2.4, 3.3 AND 3.4 OF THE SALE AND SERVICING
AGREEMENT, SECTION 7.1 OF THE INDENTURE AND UNDER THE CREDIT LINE
AGREEMENTS AND THE MORTGAGE NOTES; (II) THE PERSON THAT ACQUIRES A
CERTIFICATE SHALL DELIVER TO THE OWNER TRUSTEE AND THE INSURER AN
OFFICER'S CERTIFICATE STATING THAT SUCH TRANSFER AND SUCH SUPPLEMENTAL
AGREEMENT COMPLY WITH SECTION 3.10 OF THE TRUST AGREEMENT AND THAT ALL
CONDITIONS PRECEDENT PROVIDED BY SECTION 3.10 OF THE TRUST AGREEMENT
HAVE BEEN COMPLIED WITH AND AN OPINION OF COUNSEL STATING THAT SUCH
TRANSFER AND SUCH SUPPLEMENTAL AGREEMENT COMPLY WITH SECTION 3.10 AND
THAT ALL CONDITIONS PRECEDENT PROVIDED BY SECTION 3.10 HAVE BEEN
COMPLIED WITH, AND THE OWNER TRUSTEE MAY CONCLUSIVELY RELY ON SUCH
OFFICER'S CERTIFICATE, SHALL HAVE NO DUTY TO MAKE INQUIRIES WITH REGARD
TO THE MATTERS SET FORTH THEREIN AND SHALL INCUR NO LIABILITY IN SO
RELYING; (III) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER TO
THE OWNER TRUSTEE AND THE INSURER A LETTER FROM EACH RATING AGENCY
CONFIRMING THAT ITS RATING OF THE CLASS A NOTES, AFTER GIVING EFFECT TO
SUCH TRANSFER, WILL NOT BE REDUCED OR WITHDRAWN WITHOUT REGARD TO THE
POLICIES; (IV) THE PERSON THAT ACQUIRES A CERTIFICATE SHALL DELIVER TO
THE OWNER TRUSTEE AND THE INSURER AN OPINION OF COUNSEL TO THE EFFECT
THAT (A) SUCH TRANSFER WILL NOT ADVERSELY AFFECT THE TREATMENT OF THE
CLASS A NOTES AFTER SUCH TRANSFER AS DEBT FOR FEDERAL AND APPLICABLE
STATE INCOME TAX PURPOSES, (B) SUCH TRANSFER WILL NOT RESULT IN THE
TRUST BEING SUBJECT TO TAX AT THE ENTITY LEVEL FOR FEDERAL OR
APPLICABLE STATE TAX PURPOSES, (C) SUCH TRANSFER WILL NOT HAVE ANY
MATERIAL ADVERSE IMPACT ON THE FEDERAL OR APPLICABLE STATE INCOME
TAXATION OF A NOTEHOLDER AND (D) SUCH TRANSFER WILL NOT RESULT IN THE
ARRANGEMENT CREATED BY THE TRUST AGREEMENT OR ANY "PORTION" OF THE
TRUST, BEING TREATED AS A TAXABLE MORTGAGE POOL AS DEFINED IN SECTION
7701(i) OF THE CODE; (V) ALL FILINGS AND OTHER ACTIONS NECESSARY TO
CONTINUE THE PERFECTION OF THE INTEREST OF THE TRUST IN THE MORTGAGE
LOANS AND THE OTHER PROPERTY CONVEYED UNDER THE TRUST AGREEMENT SHALL
HAVE BEEN TAKEN OR MADE.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-2
<PAGE> 39
ADVANTA HOME EQUITY LOAN TRUST 1998-B
ASSET BACKED CERTIFICATE
Percentage Interest:____%
Date of Cut-Off Date:
September 1, 1998
First Payment Date: Issue Date: September 30, 1998
October 26, 1998
No. A-1-__
___________________________________
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY
not in its individual capacity but
solely as Owner Trustee
By:_____________________________
Authenticating Agent
The Trust was created pursuant to a Trust Agreement dated as
of September 1, 1998 (the "Trust Agreement"), between the Sponsor, the Depositor
and Wilmington Trust Company, as owner trustee (the "Owner Trustee"), a summary
of certain of the pertinent provisions of which is set forth below. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as Advanta Home Equity Loan "Asset Backed Certificates." Also issued
under the Indenture dated as of September 1, 1998 (the "Indenture") between the
Trust and Bankers Trust Company of California, N.A., as indenture trustee (the
"Indenture Trustee") are the Class A-1 Notes and the Class A-2 Notes (together,
the "Class A Notes"). These Certificates are issued under and are subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust includes a
pool of adjustable- adjustable-rate home equity revolving credit line loans
secured by first or second deeds of trust or Mortgages on primarily one-to-four
family residential properties and a pool of closed-end fixed-
A-3
<PAGE> 40
rate high-loan-to-value junior mortgage loans secured by junior deeds of trust
or Mortgages on primarily one-to-four family residential properties.
Under the Trust Agreement, there will be distributed on the
25th day of each month or, if such 25th day is not a Business Day, the next
Business Day (the "Payment Date"), commencing on October 26, 1998, to the Person
in whose name this Certificate is registered at the close of business on the
Business Day preceding such Payment Date (the "Record Date") such
Certificateholder's Percentage Interest in the amount to be distributed to
Certificateholders on such Payment Date.
The holder of this Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.
It is the intent of the Sponsor, the Master Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a branch. In the event that the Certificates are held by more than
one Holder, it is the intent of the Sponsor, the Master Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a partnership and the Certificateholders will be treated as partners
in that partnership. The Sponsor and any other Certificateholders, by acceptance
of a Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates for such tax purposes as partnership interests in
the Trust. Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Trust or the Sponsor, or join in any institution against the Trust or the
Sponsor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, the Trust Agreement or any of the Operative
Documents.
Distributions on this Certificate will be made as provided in
the Sale and Servicing Agreement and the Indenture by the Indenture Trustee by
wire transfer or check mailed to the Certificateholder of record in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
A-4
<PAGE> 41
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
Date: September 30, 1998 ADVANTA HOME EQUITY LOAN
TRUST 1998-B
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as Owner Trustee
By: _______________________________________
Name:
Title:
A-5
<PAGE> 42
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an
interest in, the Originators, the Sponsor, the Master Servicer, the Insurer, the
Depositor, the Owner Trustee or any Affiliates of any of them and no recourse
may be had against such parties or their assets, except as may be expressly set
forth or contemplated herein or in the Trust Agreement, the Indenture or the
Operative Documents. In addition, this Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections with respect to the Mortgage Loans, as more specifically set
forth herein, in the Sale and Servicing Agreement and in the Indenture. A copy
of each of the Sale and Servicing Agreement and the Trust Agreement may be
examined during normal business hours at the principal office of the Sponsor,
and at such other places, if any, designated by the Sponsor, by any
Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Sponsor and the rights of the Certificateholders under the
Trust Agreement at any time by the Sponsor and the Owner Trustee with the prior
written consent of the Insurer and with the consent of the holders of the Notes
and the Certificates evidencing not less than a majority of the outstanding
Notes and the Certificates. Any such consent by the holder of this Certificate
shall be conclusive and binding on such holder and on all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the holders of
any of the Certificates (other than the Sponsor or the Insurer).
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Corporate Trust Office, accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate Registrar
appointed under the Trust Agreement is Wilmington Trust Company.
Except for Certificates issued to the Sponsor, the
Certificates are issuable only as registered Certificates without coupons in
denominations of $1,000 or integral multiples of $1,000 in excess thereof. As
provided in the Trust Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates in authorized
denominations evidencing the same aggregate denomination, as requested by the
holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and
any agent of the Owner Trustee, the Certificate Registrar, the Insurer or the
Insurer may treat the person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Owner Trustee, the Certificate
Registrar, the Insurer nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Sale and Servicing Agreement and the disposition of all
property
A-6
<PAGE> 43
held as part of the Trust. The Sponsor may at its option redeem the corpus of
the Trust related to the HELOC Mortgage Loans or the HLTV Mortgage Loans, as
applicable, at a price specified in the Sale and Servicing Agreement, and
liquidate the related Mortgage Loans and other related property of the Trust and
distribute any proceeds to the Holders of the Certificates; however, such right
to liquidate is exercisable, subject to certain restrictions, only on any
Payment Date on or after the Payment Date immediately prior to which, with
respect to the Class A-1 Notes, the Class A-1 Principal Balance is less than 10%
of the Original Class A-1 Principal Balance and, with respect to the Class A-2
Principal Balance is less than 10% of the Original Class A-2 Principal Balance
and, with respect to each Class of Class A Notes, all amounts due and owing to
the Insurer for unpaid premiums and unreimbursed draws on the related Policy and
all other amounts due and owing to the Insurer pursuant to the Insurance
Agreement, together with interest thereon as provided under the Insurance
Agreement, have been paid.
The recitals contained herein shall be taken as the statements
of the Sponsor or the Master Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Certificate or of
any Mortgage Loan or related document.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual or
facsimile signature, this Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
A-7
<PAGE> 44
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the
Certificate Registrar, with full power of substitution in the premises.
Dated:
*
Signature Guaranteed:
*
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
A-8
<PAGE> 45
EXHIBIT B
CERTIFICATE OF TRUST OF
ADVANTA HOME EQUITY LOAN TRUST 1998-B
This Certificate of Trust of Advanta Home Equity Loan Trust
1998-B (the "Trust") is being duly executed and filed by the undersigned, as
trustee, to form a business trust under the Delaware Business Trust Act (12 Del.
Code Section 3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is
Advanta Home Equity Loan Trust 1998-B.
2. Delaware Trust. The name and business address of the Owner
Trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attn: Corporate Trust Administration.
3. This Certificate of Trust will be effective September ___,
1998.
IN WITNESS WHEREOF, the undersigned, in accordance with
Section 3811(a) of the Act, has duly executed this Certificate of Trust.
WILMINGTON TRUST COMPANY
not in its individual capacity but solely
as Owner Trustee of the Trust
By:_________________________________
Name:
Title:
B-1
<PAGE> 1
EXHIBIT 4.3
<PAGE> 2
EXHIBIT 4.3
SALE AND SERVICING AGREEMENT
Among
ADVANTA HOME EQUITY LOAN TRUST 1998-B,
as Issuer,
ADVANTA HOLDING TRUST,
as Holding Trust,
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
ADVANTA MORTGAGE CORP. USA,
as Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Indenture Trustee
Dated as of September 1, 1998
<PAGE> 3
TABLE OF CONTENTS
(Not a Part of this Agreement)
Page
Parties........................................................................1
Recitals.......................................................................1
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION...................................1
Section 1.1. Definitions..............................................1
"Accepted Servicing Practices"...........................................1
"Account"................................................................2
"Additional Balance".....................................................2
"AMHC"...................................................................2
"Appraised Value"........................................................2
"Assignee"...............................................................2
"Assignment of Mortgage".................................................2
"Assignor"...............................................................2
"Authorized Officer".....................................................3
"Business Day"...........................................................3
"Certificates"...........................................................3
"Civil Relief Act".......................................................3
"Class A Note"...........................................................3
"Class A-1 Note".........................................................3
"Class A-2 Note".........................................................3
"Class A Principal Balance"..............................................3
"Closing Date"...........................................................4
"Code"...................................................................4
"Combined Loan-to-Value Ratio"...........................................4
"Credit Limit"...........................................................4
"Credit Limit Utilization Rate"..........................................4
"Credit Line Agreement"..................................................4
"Cut-Off Date"...........................................................5
"Cut-Off Date HELOC Pool Balance"........................................5
"Cut-Off Date HLTV Balance"..............................................5
"Cut-Off Date Principal Balance".........................................5
"Date-of-Payment Loans"..................................................5
"Debt Service Reduction".................................................5
"Defective Mortgage Loan"................................................5
"Deficient Valuation"....................................................5
"Delinquent".............................................................5
"Depository".............................................................6
"Designated Depository Institution"......................................6
"Determination Date".....................................................6
"Direct Participant" or "DTC Participant"................................6
"Document Delivery Requirements".........................................7
<PAGE> 4
"Draw"...................................................................7
"Draw Period"............................................................7
"Event of Servicing Termination".........................................7
"FDIC"...................................................................7
"FHLMC"..................................................................7
"First Mortgage Loan"....................................................7
"Foreclosure Profit".....................................................7
"FNMA"...................................................................8
"HELOC Pool Balance".....................................................8
"Highest Lawful Rate"....................................................8
"HLTV Pool Balance"......................................................8
"Holder" or "Noteholder".................................................8
"Holding"................................................................8
"Holding Trust Agreement"................................................8
"Indemnification Agreement"..............................................8
"Indenture":.............................................................8
"Indenture Trustee"......................................................9
"Indenture Trustee's Fee"................................................9
"Indirect Participant":..................................................9
"Initial Mortgage Loans".................................................9
"Initial Premium"........................................................9
"Insurance Agreement"....................................................9
"Insurance Policy".......................................................9
"Insurance Proceeds".....................................................9
"Insurer"...............................................................10
"Interest Collections"..................................................10
"Interest Remittance Amount"............................................10
"Issuer" or "Trust"....................................................10
"Late Payment Rate".....................................................10
"Lifetime Rate Cap".....................................................11
"Liquidated Mortgage Loan"..............................................11
"Liquidation Expenses"..................................................11
"Liquidation Proceeds"..................................................11
"Liquidation Report"....................................................11
"Loan Purchase Price"...................................................11
"Loan Rate".............................................................11
"Loan Rate Cap".........................................................12
"Margin"................................................................12
"Master Servicer".......................................................12
"Master Servicer Affiliate".............................................12
"Master Servicer's Trust Receipt".......................................12
"Minimum Monthly Payment"...............................................12
"Monthly Remittance Amount".............................................12
"Moody's"...............................................................12
"Mortgage"..............................................................12
"Mortgage Files"........................................................13
<PAGE> 5
"Mortgage Loans"........................................................13
"Mortgage Note".........................................................13
"Mortgaged Property"....................................................13
"Mortgagor".............................................................13
"Net Liquidation Proceeds"..............................................13
"Nonrecoverable Advance"................................................14
"Note Account"..........................................................14
"Officer's Certificate".................................................14
"Operative Documents"...................................................14
"Original Class A-1 Principal Balance"..................................14
"Original Class A-2 Principal Balance"..................................14
"Original Principal Amount".............................................14
"Original Principal Balance"............................................14
"Originator"............................................................14
"Outstanding"...........................................................15
"Owner Trustee".........................................................15
"Payment Date"..........................................................15
"Percentage Interest"...................................................15
"Person"................................................................15
"Policies"..............................................................16
"Pool Certification"....................................................16
"Pool Factor"...........................................................16
"Prepaid Installment"...................................................16
"Preference Amount".....................................................16
"Prepayment"............................................................16
"Preservation Expenses".................................................16
"Prime".................................................................17
"Principal and Interest Account"........................................17
"Principal Balance".....................................................17
"Principal Collections".................................................17
"Principal Remittance Amount"...........................................17
"Prospectus"............................................................18
"Prospectus Supplement".................................................18
"Qualified Overcollateralization Mortgage"..............................18
"Qualified Replacement Mortgage"........................................18
"Realized Loss".........................................................19
"Record Date"...........................................................19
"Register"..............................................................19
"Registrar".............................................................19
"Registration Statement"................................................19
"Reimbursement Amount"..................................................19
"REO Property"..........................................................20
"Remittance Date".......................................................20
"Remittance Period".....................................................20
"Replacement Cut-Off Date"..............................................20
"Representation Letter".................................................20
<PAGE> 6
"Schedule of Mortgage Loans"............................................20
"Second Mortgage Loan"..................................................21
"Securities Act"........................................................21
"Senior Lien"...........................................................21
"Servicing Advance".....................................................21
"Servicing Fee".........................................................21
"Servicing Fee Rate"....................................................21
"Sponsor"...............................................................21
"Standard & Poor's".....................................................21
"Substitution Amount"...................................................21
"Sub-Servicer"..........................................................22
"Sub-Servicing Agreement"...............................................22
"Telerate Screen Page 3750".............................................22
"Termination Fees"......................................................22
"Transfer Date".........................................................22
"Transfer Notice Date"..................................................22
"Trust Agreement".......................................................22
"Trust Estate"..........................................................22
"Underwriter"...........................................................23
Section 1.2. Use of Words and Phrases................................23
Section 1.3. Captions; Table of Contents.............................23
Section 1.4. Opinions................................................23
ARTICLE II CONVEYANCE OF MORTGAGE LOANS.......................................24
Section 2.1. Conveyance of the Mortgage Loans........................24
Section 2.2. Acceptance by Indenture Trustee; Certain Substitutions
of Mortgage Loans; Certification by
Indenture Trustee..................................31
Section 2.3. Cooperation Procedures..................................34
Section 2.4. [Reserved]..............................................34
Section 2.5. Retransfers of HELOC Loans at Election of Sponsor.......34
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR AND
THE MASTER SERVICER..................................................36
Section 3.1. Representations and Warranties of the Sponsor...........36
Section 3.2. Representations and Warranties of the Master Servicer...38
Section 3.3. Representations and Warranties of the Sponsor with
Respect to the Mortgage Loans; Retransfer of
Certain Mortgage Loans.............................40
Section 3.4. Covenants of Sponsor to Take Certain Actions with
Respect to the Mortgage Loans In
Certain Situations.................................56
ARTICLE IV SERVICING AND ADMINISTRATION OF MORTGAGE LOANS.....................57
Section 4.1. Master Servicer and Sub-Servicers.......................57
<PAGE> 7
Section 4.2. Collection of Certain Mortgage Loan Payments............61
Section 4.3. Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers......................................61
Section 4.4. Successor Sub-Servicers.................................62
Section 4.5. Liability of Master Servicer............................62
Section 4.6. No Contractual Relationship Between Sub-Servicer
and Indenture Trustee or the Class A Noteholders...63
Section 4.7. Assumption or Termination of Sub-Servicing Agreement
by Indenture Trustee...............................63
Section 4.8. Principal and Interest Account..........................63
Section 4.9. Servicing Advances......................................65
Section 4.10. Purchase of Mortgage Loans..............................66
Section 4.11. Maintenance of Insurance................................66
Section 4.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements.........................................68
Section 4.13. Realization Upon Defaulted Mortgage Loans...............69
Section 4.14. Indenture Trustee to Cooperate; Release of
Mortgage Files.....................................70
Section 4.15. Servicing Compensation..................................72
Section 4.16. Annual Statement as to Compliance.......................72
Section 4.17. Annual Independent Certified Public Accountants'
Reports............................................73
Section 4.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans.......................73
Section 4.19. Assignment of Agreement.................................73
ARTICLE V SERVICING TERMINATION...............................................74
Section 5.1. Events of Servicing Termination.........................74
Section 5.2. Inspections by Insurer; Errors and Omissions Insurance..78
Section 5.3. Merger, Conversion, Consolidation or Succession to
Business of Master Servicer........................78
Section 5.4. Notification to Noteholders.............................78
Section 5.5. Notices of Material Events..............................78
ARTICLE VI ADMINISTRATIVE DUTIES OF THE MASTER SERVICER.......................79
Section 6.1. Administrative Duties with Respect to the Indenture.....79
Section 6.2. Records.................................................81
Section 6.3. Additional Information to be Furnished to the Issuer....81
ARTICLE VII MISCELLANEOUS.....................................................81
Section 7.1. Compliance Certificates and Opinions....................81
Section 7.2. Form of Documents Delivered to the Indenture Trustee....82
Section 7.3. Acts of Class A Noteholders.............................83
Section 7.4. Notices, etc. to Indenture Trustee......................83
<PAGE> 8
Section 7.5. Notices and Reports to Class A Noteholders; Waiver
of Notices.........................................84
Section 7.6. Rules by Indenture Trustee..............................84
Section 7.7. Successors and Assigns..................................84
Section 7.8. Severability............................................84
Section 7.9. Benefits of Agreement...................................85
Section 7.10. Legal Holidays..........................................85
Section 7.11. Governing Law...........................................85
Section 7.12. Counterparts............................................85
Section 7.13. Usury...................................................85
Section 7.14. Amendment...............................................86
Section 7.15. The Insurer.............................................87
Section 7.16. Notices.................................................87
Section 7.17. Limitation of Liability.................................88
SCHEDULE I -- Schedule of Mortgage Loans
EXHIBIT A -- Form of Contents of Mortgage Loan File
EXHIBIT B -- Form of Underlying Mortgage Note
EXHIBIT C -- Form of Certificate Regarding Prepaid Loans
EXHIBIT D -- Form of Trustee's Acknowledgement of Receipt
EXHIBIT E -- Form of Certification
EXHIBIT F -- Form of Master Servicer's Trust Receipt
<PAGE> 9
SALE AND SERVICING AGREEMENT, dated as of September 1, 1998, by and
among ADVANTA HOME EQUITY LOAN TRUST 1998-B (the "Trust" or the "Issuer"),
ADVANTA HOLDING TRUST, a Delaware business trust ("Holding"), ADVANTA MORTGAGE
CONDUIT SERVICES, INC., a Delaware corporation, in its capacity as Sponsor of
the Trust (the "Sponsor"), ADVANTA MORTGAGE CORP. USA, a Delaware corporation,
in its capacity as master servicer (the "Master Servicer"), and BANKERS TRUST
COMPANY OF CALIFORNIA, N.A., a national banking association, in its capacity as
Indenture Trustee (the "Indenture Trustee").
WHEREAS, the Sponsor owns a portfolio of Mortgage Loans originated by
it, or purchased by it from certain other parties, including Affiliates of the
Sponsor;
WHEREAS, the Sponsor desires to sell such portfolio of Mortgage Loans
to Holding and Holding desires to purchase such Mortgage Loans from the Sponsor;
WHEREAS, Holding desires to transfer such Mortgage Loans to the Issuer
and the Issuer desires to acquire such Mortgage Loans from Holding;
WHEREAS, such Mortgage Loans consist of certain home equity loan
revolving lines of credit (the "HELOC Loans") and certain high loan-to-value
mortgage loans (the "HLTV Loans");
WHEREAS, the Master Servicer has agreed to service such Mortgage Loans,
which constitute the principal assets of the Trust Estate;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Sponsor, the Master Servicer, the Issuer,
Holding and the Indenture Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise. In addition, capitalized terms used herein and not
defined herein shall have their respective meanings as set forth in the
Indenture.
"Accepted Servicing Practices": The Master Servicer's normal servicing
practices in servicing and administering mortgage loans for its own account,
which in general will conform to the mortgage servicing practices of prudent
mortgage lending institutions which service for their own account mortgage loans
of the same type as the Mortgage Loans in the jurisdictions in which the related
Mortgaged Properties are located and will give due consideration to the
Insurer's and the Noteholders' reliance on the Master Servicer. The "Accepted
Servicing Practices" may be different for HELOC Loans and HLTV Loans.
<PAGE> 10
"Account": Any account established in accordance with Section 4.8
hereof and Section 8.3 of the Indenture.
"Additional Balance": As to any HELOC Loan and day, the aggregate
amount of all Draws conveyed to the Trust with respect to the HELOC Pool
pursuant to Section 2.1, it being understood that the Trust shall not be
required to fund any Additional Balances.
"Agreement": This Sale and Servicing Agreement, as it may be amended
from time to time in accordance with the terms hereof, and including the
Exhibits hereto.
"AMHC": Advanta Mortgage Holding Company, a Delaware corporation and
the corporate parent of Advanta Mortgage Corp. USA, and the indirect corporate
parent of Advanta Mortgage Conduit Services, Inc.
"Appraised Value": As to any Mortgaged Property, the value established
by a drive-by inspection or a full appraisal of such Mortgaged Property in order
to establish compliance with the underwriting criteria then in effect in
connection with the application for the Mortgage Loan secured by such Mortgaged
Property.
"Assignee": With respect to any Person, any immediate or mediate
assignee, pledgee or other transferee of such Person.
"Assignment of Mortgage": With respect to each Mortgage Loan, an
assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect the recordation of the pledge
of the Mortgage Loans to the Indenture Trustee for the benefit of the Class A
Noteholders and the Insurer.
"Assignor": With respect to any Person, any immediate or mediate
assignor, pledgor or other transferor to such Person of any right, title or
interest in or to any property of any kind whatsoever.
"Authorized Officer": With respect to any Person, any person who is
authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Indenture
Trustee, the Master Servicer and the Sponsor, initially including those
individuals whose names appear on the lists of Authorized Officers delivered on
the Closing Date.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the State of New York or the State of
California or in the city in which the principal corporate trust office of the
Indenture Trustee is located, are authorized or obligated by law or executive
order to be closed.
"Certificates": The trust certificates evidencing the beneficial
ownership interests in Holding or the Trust, as applicable.
2
<PAGE> 11
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Class A Note": Any Class A-1 Note or any Class A-2 Note.
"Class A-1 Note": Any Note designated as a "Class A-1 Note" on the
face thereof, in the form of Exhibit A-1 to the Indenture. The Class A-1 Notes
shall be issued with an initial aggregate Class A-1 Principal Balance equal to
the Original Class A-1 Principal Balance therefor. The Class A-1 Notes relate to
the HELOC Pool.
"Class A-2 Note": Any Note designated as a "Class A-2 Note" on the
face thereof, in the form of Exhibit A-2 to the Indenture. The Class A-2 Notes
shall be issued with an initial aggregate Class A-2 Principal Balance equal to
the Original Class A-2 Principal Balance therefor. The Class A-2 Notes relate to
the HLTV Pool.
"Class A Principal Balance": As of any time of determination and with
respect to a Class of Class A Notes, the Original Class A Principal Balance of
such Class less any amounts actually distributed theretofore as principal
thereon on all prior Payment Dates.
"Closing Date": September 30, 1998.
"Code": The Internal Revenue Code of 1986, as amended, and any
successor statute.
"Combined Loan-to-Value Ratio": (i) With respect to any HELOC Loan as
of any date, the percentage equivalent of a fraction, the numerator of which is
the sum of (A) the Credit Limit and (B) the outstanding principal balance as of
the date of execution of the related Credit Line Agreement (or as of any
subsequent date, if any, as of which such outstanding principal balance may be
determined in connection with an increase in the Credit Limit for such Mortgage
Loan) of any mortgage loan or mortgage loans that are senior in priority to the
Mortgage Loan and which is secured by the same Mortgaged Property and the
denominator of which is the lesser of (C) the Appraised Value of the related
Mortgaged Property as set forth in the Mortgage File on such date of execution
or on such subsequent date, if any, or (D) in the case of a Mortgaged Property
purchased within one year of such date of execution, the purchase price thereof.
(ii) With respect to any HLTV Loan as of any date, the percentage equivalent of
a fraction, the numerator of which is the sum of (W) the original principal
balance of the HLTV Loan and (X) any outstanding principal balances of mortgage
loans senior to the HLTV Loan (calculated at the date of origination of the
related Mortgage Loan) and the denominator of which is the lesser of (Y) the
Appraised Value of the related Mortgaged Property as set forth in Mortgage File
at such date of origination and (Z) in the case of a Mortgaged Property
purchased within one year of the origination of the related Mortgage Loan, the
purchase price thereof.
"Credit Limit": As to any HELOC Loan, the maximum principal balance
permitted under the terms of the related Credit Line Agreement.
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"Credit Limit Utilization Rate": As to any HELOC Loan, the percentage
equivalent of a fraction, the numerator of which is the Principal Balance for
such HELOC Loan and the denominator of which is the related Credit Limit.
"Credit Line Agreement": With respect to any HELOC Loan, the related
home equity line of credit agreement and promissory note executed by the related
Mortgagor and any amendment or modification thereof in accordance with the terms
herein.
"Cut-Off Date": The opening of business on September 1, 1998. With
respect to each Qualified Replacement Mortgage, the Replacement Cut-off Date
related to such Qualified Replacement Mortgage.
"Cut-Off Date Pool Balance": The actual aggregate Principal Balances
(calculated as of the Cut-Off Date or, if later, the date of origination) of the
HELOC Loans included in the HELOC Pool as of the Closing Date and of the HLTV
Loans included in the HLTV Pool as of the Closing Date.
"Cut-Off Date Principal Balance": With respect to any Mortgage Loan,
the unpaid principal balance thereof as of the related Cut-Off Date.
"Date-of-Payment Loans": Any Mortgage Loan as to which, pursuant to
the Underlying Mortgage Note relating thereto, interest is computed and charged
to the Mortgagor at the rate on the outstanding principal balance of such
Underlying Mortgage 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.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Minimum Monthly Payment
due on such Mortgage Loan.
"Defective Mortgage Loan": A Mortgage Loan determined not to satisfy
the criteria set forth in this Agreement.
"Deficient Valuation": With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding Principal Balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the United States
Bankruptcy Code.
"Delinquent": A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month), then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
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"Depository": The Depository Trust Company, 7 Hanover Square, New
York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the Principal and
Interest Account, an institution whose deposits are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
long-term deposits of which shall be rated (x) A or better by Standard & Poor's
and (y) A2 or better by Moody's and in one of the two highest short-term rating
categories for Standard & Poor's and Moody's, unless otherwise approved in
writing by the Insurer and each of Moody's and Standard & Poor's, and which is
any of the following: (i) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (ii) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(iv) a principal subsidiary of a bank holding company, or (v) approved in
writing by the Insurer, Moody's and Standard & Poor's and, in each case acting
or designated by the Master Servicer as the depository institution for the
Principal and Interest Account; provided, however, that any such institution or
association shall have combined capital, surplus and undivided profits of at
least $100,000,000. Notwithstanding the foregoing, the Principal and Interest
Account may be held by an institution otherwise meeting the preceding
requirements except that the only applicable rating requirement shall be that
the unsecured and uncollateralized debt obligations thereof shall be rated Baa3
or better by Moody's or BBB or better by Standard & Poor's and has a short-term
rating of A-1 or better by Standard & Poor's if such institution has trust
powers and the Principal and Interest Account is held by such institution in its
trust capacity and not in its commercial capacity.
"Determination Date": As to each Payment Date, the fourth Business Day
next preceding such Payment Date or such earlier day as shall be agreed to by
the Insurer and Indenture Trustee.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or
other financial institution for which the Depository holds the Class A Notes
from time to time as a securities depository.
"Document Delivery Requirements": The Sponsor's obligations to deliver
certain legal documents, to prepare and record certain Assignments of Mortgage
or to deliver certain opinions relating to Assignments of Mortgage, in each case
with respect to the Mortgage Loans upon certain conditions as set forth in
Section 2.1 hereof.
"Draw": With respect to any HELOC Loan, an additional borrowing by the
Mortgagor subsequent to the related Cut-Off Date in accordance with the related
Credit Line Agreement.
"Draw Period": With respect to any HELOC Loan, the period of time
whereby a Mortgagor may make a Draw under the related Credit Line Agreement;
such period not to exceed three or five years (as applicable), unless extended
at the option of
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the related Originator and/or the Master Servicer pursuant to the terms hereof
and the Credit Line Agreement (provided that any such extension shall be in
accordance with the provisions set forth herein with respect to Mortgage Loan
modifications)..
"Event of Servicing Termination": As defined in Section 5.1 hereof.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Mortgaged Property.
"Foreclosure Profit": With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid through
the date of receipt of the final Liquidation Proceeds) of such Liquidated
Mortgage Loan immediately prior to the final recovery of its Liquidation
Proceeds.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"HELOC Pool Balance": With respect to any date, the Principal Balances
of the HELOC Loans as of such date.
"Highest Lawful Rate": As defined in Section 7.13.
"HLTV Pool Balance": With respect to any date, the Principal Balances
of the HLTV Loans as of such date.
"Holder" or "Noteholder": means the Person in whose name a Note is
registered on the Note Register.
"Holding": Advanta Holding Trust, a Delaware business trust.
"Holding Trust Agreement": The trust agreement dated as of September
1, 1998 between the Sponsor and Wilmington Trust Company, as Owner Trustee,
relating to the formation of Holding.
"Indemnification Agreement": The Indemnification Agreement dated as of
September 25, 1998 among the Sponsor, the Originators, the Insurer and the
Underwriter.
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"Indenture": The Indenture dated as of September 1, 1998 between the
Issuer and the Indenture Trustee, as the same may be amended and supplemented
from time to time in accordance with the terms thereof.
"Indenture Trustee": Bankers Trust Company of California, N.A.,
located on the date of execution of this Agreement at 3 Park Plaza, 16th Floor,
Irvine, California 92614, not in its individual capacity but solely as Indenture
Trustee under this Agreement, and any successor hereunder.
"Indenture Trustee's Fee": With respect to any Payment Date and each
Pool, the product of (x) one-twelfth of .015% and (y) the Pool Balance of such
Pool as of the end of the immediately preceding Remittance Period.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in the Class A Notes.
"Initial Mortgage Loans": Mortgage Loans delivered by the Sponsor to
the Trust on the Closing Date.
"Initial Premium": With respect to each Pool, the initial premium
payable by AMHC to the Insurer in consideration of the delivery to the Indenture
Trustee of the Policy relating to such Pool.
"Insurance Agreement": The Insurance Agreement dated as of September
30, 1998 among the Sponsor, the Originators, the Master Servicer, Holding, the
Issuer, the Owner Trustee, the Indenture Trustee and the Insurer, as it may be
amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage insurance
policy relating to a Mortgage Loan. The term "Insurance Policy" shall not
include the Policies.
"Insurance Proceeds": Proceeds paid by any insurer (other than the
Insurer) pursuant to any Insurance Policy covering a Mortgage Loan, or amounts
required to be paid by the Master Servicer pursuant to the last sentence of the
first paragraph of Section 4.11(b), or the penultimate sentence of Section
4.11(c), net of any component thereof (i) covering any expenses incurred by or
on behalf of the Master Servicer in connection with obtaining such proceeds,
(ii) that is applied to the restoration or repair of the related Mortgaged
Property, (iii) released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures, or (iv) required to be paid to any
holder of a mortgage senior to such Mortgage Loan.
"Insurer": MBIA Insurance Corporation, a New York stock insurance
company, or any successor thereto, as issuer of the Policies.
"Interest Collections": For any Payment Date and with respect to
either Pool, amounts collected during the related Remittance Period, including
the portion of
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Net Liquidation Proceeds allocated to interest pursuant to the terms of the
Underlying Mortgage Notes, less the Servicing Fee for the related Remittance
Period.
"Interest Remittance Amount": With respect to the HELOC Pool, 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
HELOC Loans (net of the HELOC Servicing Fee), except that with respect to
Prepaid Installments, interest shall be remitted in the related Remittance
Period and (ii) all Net Liquidation Proceeds actually collected by the Master
Servicer with respect to the HELOC Loans during the related Remittance Period
(to the extent such Net Liquidation Proceeds relate to interest). With respect
to the HLTV Pool, 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 HLTV Loans (net of the HLTV Servicing Fee), except
that with respect to Prepaid Installments, interest shall be remitted in the
related Remittance Period and (ii) all Net Liquidation Proceeds actually
collected by the Master Servicer with respect to the HLTV Loans during the
related Remittance Period (to the extent such Net Liquidation Proceeds relate to
interest).
"Issuer" or "Trust": Advanta Home Equity Loan Trust 1998-B created by
the Trust Agreement.
"Late Payment Rate": For any Payment Date, the rate of interest, as it
is publicly announced by Citibank, N.A. or its successor at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.
or its successor) plus 2%. The Late Payment Rate shall be computed on the basis
of a year of 365 days calculating the actual number of days elapsed. In no event
shall the Late Payment Rate exceed the maximum rate permissible under any
applicable law limiting interest rates.
"Lifetime Rate Cap": With respect to each HELOC Loan for which the
related Credit Line Agreement provides for a lifetime rate cap, the maximum Loan
Rate permitted over the life of such HELOC Loan under the terms of the related
Credit Line Agreement, a form of which is set forth in Exhibit B hereto.
"Liquidated Mortgage Loan": As defined in Section 4.13(b) hereof. A
Mortgage Loan which is purchased from the Trust pursuant to Section 3.3, 3.4,
3.6(b) or 4.10 hereof is not a "Liquidated Mortgage Loan."
"Liquidation Expenses": Expenses which are incurred by the Master
Servicer or any Sub-Servicer in connection with the liquidation of any defaulted
Mortgage Loan, such expenses, including, without limitation, legal fees and
expenses, and any unreimbursed Servicing Advances expended by the Master
Servicer or any Sub-Servicer pursuant to Section 4.9 with respect to the related
Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Mortgage Loan,
any amounts
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(including the proceeds of any Insurance Policy but excluding any amounts drawn
on the related Policy) recovered by the Master Servicer in connection with such
Liquidated Mortgage Loan, whether through trustee's sale, foreclosure sale or
otherwise.
"Liquidation Report": As defined in Section 4.13(b).
"Loan Purchase Price": With respect to any Mortgage Loan purchased
from the Trust on a Remittance Date pursuant to Section 2.2(b), 3.3, 3.4, or
4.10 hereof, an amount equal to the Principal Balance of such Mortgage Loan as
of the date of purchase, plus one month's interest on the outstanding Principal
Balance thereof as of the beginning of the preceding Remittance Period computed
at the Loan Rate, if any, together with, without duplication, the aggregate
amount of (i) all delinquent interest, all Servicing Advances theretofore made
with respect to such Mortgage Loan and not subsequently recovered from the
related Mortgage Loan and (ii) any Reimbursement Amount relating to such
Mortgage Loan.
"Loan Rate": With respect to any HELOC Loan and as of any day, the per
annum rate of interest applicable under the related Credit Line Agreement to the
calculation of interest for such day on the Principal Balance of such HELOC
Loan. With respect to any HLTV Loan and as of any day, the per annum rate of
interest borne by each HLTV Loan applicable to the calculation of interest for
such day on the Principal Balance of such HLTV Loan.
"Loan Rate Cap": With respect to each HELOC Loan, the lesser of (i)
the Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling, if
any.
"Margin": With respect to each HELOC Loan with an adjustable rate, the
fixed percentage amount set forth in the related Credit Line Agreement which
amount is added to Prime in accordance with the terms of the related Credit Line
Agreement to determine the Loan Rate for such HELOC Loan, subject to any
maximum.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware corporation,
and its permitted successors and assigns.
"Master Servicer Affiliate": A Person (i) controlling, controlled by
or under common control with the Master Servicer and (ii) which is qualified to
service residential mortgage loans.
"Master Servicer's Trust Receipt": The Master Servicer's trust receipt
in the form set forth as Exhibit F hereto.
"Minimum Monthly Payment": With respect to any Mortgage Loan and any
month, the minimum amount required to be paid by the related Mortgagor in that
month.
"Monthly Remittance Amount": With respect to each Pool, the sum of the
Principal Remittance Amount and the Interest Remittance Amount for such Pool.
"Moody's": Moody's Investors Service, Inc.
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"Mortgage": The mortgage, deed of trust or other instrument creating a
first or junior lien on an estate in fee simple interest in real property
securing an Underlying Mortgage Note.
"Mortgage Files": For each Mortgage Loan, the items listed on Exhibit
A hereto.
"Mortgage Loans": Such of the mortgage loans transferred and assigned
to the Trust pursuant to Section 2.1 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. Each
Mortgage Loan shall be assigned to the HELOC Pool (if such Mortgage Loan is a
HELOC Loan) or to the HLTV Pool (if such Mortgage Loan is an HLTV Loan). The
term "Mortgage Loan" includes the terms "HELOC Loan," HLTV Loan," "First
Mortgage Loan" and "Second Mortgage Loan." The term "Mortgage Loan" includes any
Mortgage Loan which is Delinquent, which relates to a foreclosure or which
relates to a Mortgaged Property that is REO Property prior to such Mortgaged
Property's disposition by the Trust and any Mortgage Loan the related Mortgagor
of which is in bankruptcy. 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.
"Mortgage Note": The promissory note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under an HLTV Loan.
"Mortgaged Property": The underlying property securing a Mortgage
Loan.
"Mortgagor": The obligor on an Underlying Mortgage Note.
"Net Liquidation Proceeds": As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances and accrued and unpaid Servicing Fees through
the date of liquidation relating to such Liquidated Mortgage Loan. In no event
shall Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan be
less than zero.
"Nonrecoverable Advance" shall mean, with respect to any Mortgage Loan,
any Servicing Advance previously made and not reimbursed pursuant to Section 4.9
or any Servicing Advance proposed to be made in respect of a Mortgage Loan,
either of which, in the good faith business judgment of the Master Servicer, as
evidenced by an Officer's Certificate delivered to the Insurer and the Indenture
Trustee on or prior to the related Remittance Date, would not be ultimately
recoverable.
"Note Account": The Note Account established in accordance with
Section 8.3 of the Indenture and maintained by the Indenture Trustee.
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"Officer's Certificate": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the Indenture
Trustee.
"Operative Documents": Collectively, this Agreement, the Indenture,
the Trust Agreement, the Holding Trust Agreement, the Purchase Agreement, the
Policies, the Class A Notes, the Indemnification Agreement and the Insurance
Agreement.
"Original Class A-1 Principal Balance": $67,500,000.
"Original Class A-2 Principal Balance": $40,000,000.
"Original Principal Amount": With respect to any particular Class A
Note, an amount equal to the product of (i) the Percentage Interest of such
Class A Note and (ii) the Original Class A Principal Balance of the related
Class.
"Original Principal Balance": With respect to each Underlying Mortgage
Note, the principal amount of such Underlying Mortgage Note or the mortgage note
relating to a Senior Lien, as the case may be, on the date of origination
thereof.
"Originator": Each of Advanta National Bank, a national banking
association, and Advanta Finance Corp., a Nevada corporation.
"Outstanding": With respect to Class A Notes, as of any date of
determination, all such Class A Notes theretofore executed and delivered
hereunder except:
(i) Class A Notes theretofore cancelled by the
Indenture Trustee or delivered to the Indenture Trustee for
cancellation;
(ii) Class A Notes or portions thereof for which full
and final payment money in the necessary amount has been theretofore
deposited with the Indenture Trustee in trust for the Class A
Noteholders;
(iii) Class A Notes in exchange for or in lieu of
which other Class A Notes have been executed and delivered pursuant to
the Indenture, unless proof satisfactory to the Indenture Trustee is
presented that any such Class A Notes are held by a bona fide
purchaser; and
(iv) Class A Notes alleged to have been mutilated,
destroyed, lost or stolen for which replacement Class A Notes have been
issued as provided for in Section 2.4 of the Indenture;
provided, however, that to the extent of any payments made on the Notes by the
Insurer, such Notes shall be deemed to be "Outstanding" for purposes of
determining the Insurer's subrogation rights.
"Owner Trustee": Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement or the Holding
Trust
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Agreement (as applicable), its successors in interest or any successor Owner
Trustee under the Trust Agreement or the Holding Trust Agreement (as
applicable).
"Payment Date": Any date on which the Indenture Trustee is required to
make distributions to the Class A Noteholders, which shall be the 25th day of
each month, commencing in the month following the Closing Date or, if such day
is not a Business Day, then on the next succeeding Business Day.
"Percentage Interest": As to any Class A Note that amount, expressed
as a percentage, equal to a fraction, the numerator of which is the Class A
Principal Balance of such Class A Note as of the related Cut-Off Date and the
denominator of which is the Original Class A Principal Balance of all Class A
Notes of the same Class; and as to any Certificate, the Percentage Interest set
forth on such Certificate.
"Person": Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Policies": The note guaranty insurance policies, each dated September
30, 1998, issued by the Insurer to the Indenture Trustee for the benefit of the
related Noteholders.
"Pool Balance": Means the HELOC Pool Balance or the HLTV Pool Balance,
as applicable.
"Pool Certification": As defined in Exhibit F attached hereto.
"Pool Factor": With respect to each Pool, a seven-digit decimal which
the Indenture Trustee shall compute monthly expressing the related Class A
Principal Balance as of each Payment Date (after giving effect to any
distribution of principal on such Payment Date) as a proportion of the Original
Class A Principal Balance for the related Class. On the Closing Date, the Pool
Factor for each Pool will be 1.0000000. Thereafter, the Pool Factor shall
decline to reflect reductions in the related Class A Principal Balance resulting
from distributions of principal to the Class A Notes.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
"Preference Amount": As defined in each Policy.
"Prepayment": Any payment of principal of a Mortgage Loan which is
received by the Master Servicer in advance of the scheduled due date for the
payment of such principal (other than the principal portion of any Prepaid
Installment), and the proceeds of any Insurance Policy which are to be applied
as a payment of principal on the related Mortgage Loan shall be deemed to be
Prepayments for all purposes of this Agreement.
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"Preservation Expenses": Expenditures made by the Master Servicer or
any Sub-Servicer in connection with a foreclosed Mortgage Loan prior to the
liquidation thereof, including, without limitation, expenditures for real estate
property taxes, hazard insurance premiums, property restoration or preservation.
"Prime": The "prime" rate of interest charged from time to time as set
forth in the related Credit Line Agreement.
"Principal and Interest Account": Collectively, each principal and
interest account created by the Master Servicer or any Sub-Servicer pursuant to
Section 4.8(a) hereof, or pursuant to any Sub-Servicing Agreement.
"Principal Balance": As to any Mortgage Loan, other than a Liquidated
Mortgage Loan, and as of any date, the related Cut-Off Date Principal Balance,
plus (i) if such Mortgage Loan is a HELOC Loan any Additional Balance in respect
of such Mortgage Loan, minus (ii) all collections credited as principal against
the Principal Balance of any such Mortgage Loan in accordance with the related
Underlying Mortgage Note prior to such day. For purposes of this definition, a
Liquidated Mortgage Loan shall be deemed to have a Principal Balance of zero as
of the first day of the Remittance Period following the Remittance Period in
which such Mortgage Loan becomes a Liquidated Mortgage Loan and at all times
thereafter.
"Principal Collections": As to any Payment Date and with respect to
either Pool, the sum of all payments by or on behalf of Mortgagors and any other
amounts constituting principal (including, but not limited to, any Substitution
Amounts, any portion of Insurance Proceeds or Net Liquidation Proceeds allocable
to principal of the applicable Mortgage Loan, but excluding Foreclosure Profits)
collected by the Master Servicer with respect to such Pool under the related
Mortgage Loans during the related Remittance Period. The terms of the related
Underlying Mortgage Note shall determine the portion of each payment in respect
of a Mortgage Loan that constitutes principal or interest.
"Principal Remittance Amount": As of any Remittance Date and with
respect to either Pool, the sum, without duplication, of (i) the principal
actually collected by the Master Servicer with respect to such Pool under the
related Mortgage Loans during the related Remittance Period, (ii) the Principal
Balance of each such Mortgage Loan that either was repurchased by the Sponsor or
purchased by the Master Servicer, to the extent such Principal Balance was
actually deposited in the Principal and Interest Account on such Remittance
Date, (iii) any Substitution Amounts delivered by the Sponsor in connection with
a substitution of a Mortgage Loan, to the extent such Substitution Amounts were
actually deposited in the Principal and Interest Account on such Remittance
Date, and (iv) all Net Liquidation Proceeds actually collected by the Master
Servicer with respect to such Mortgage Loans during the related Remittance
Period (to the extent such Liquidation Proceeds related to principal).
"Prospectus": That certain Prospectus dated September 15, 1998, naming
Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage Corp. USA as
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registrants and describing certain mortgage loan asset-backed securities to be
issued from time to time as described in related Prospectus Supplements.
"Prospectus Supplement": That certain Prospectus Supplement dated
September 25, 1998, describing the Class A Notes issued by the Trust.
"Qualified Overcollateralization Mortgage": A HELOC Loan added to the
HELOC Pool by the Master Servicer pursuant to Section ___ of the Indenture, for
the purpose of maintaining the HELOC Pool Specified Overcollateralization
Requirement, which (i) satisfies all of the requirements set forth in the
definition of "Qualified Replacement Mortgage" herein; (ii) complies with each
of the representations and warranties set forth in Section 3.3(a) have been met
(but only to the extent that such representations and warranties relate to the
characteristics or attributes of each individual HELOC Loan as opposed to the
HELOC Pool as a whole); (iii) has a FICO score of 640 or higher; (iv) has a
Combined Loan-to-Value Ratio no higher than 90% based on a current appraisal of
the related Mortgaged Property; (v) was underwritten in accordance with the
related Originator's full documentation underwriting program; (vi) has a
debt-to-income ratio of no higher than 45% and (vii) has a full and final
maturity date of no later than October 19, 2021.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 2.2(b), 3.3 or 3.4 hereof, which (i) is a HELOC
Loan, if the replaced Mortgage Loan is HELOC Loan, or is an HLTV Loan, if the
replaced Mortgage Loan is an HLTV Loan, (ii) bears a variable rate of interest
if a HELOC Loan and bears a fixed rate of interest if an HLTV Loan, (iii) has a
Loan Rate at least equal to the Loan Rate of the Mortgage Loan being replaced
(which, in the case of a HELOC Loan, 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), (iv) is of
the same or better property type and the same or better occupancy status as the
replaced Mortgage Loan, (v) is of the same or better credit quality
classification (determined in accordance with the relevant Originator's credit
underwriting guidelines) as the Mortgage Loan being replaced, (vi) shall mature
no later than the Payment Date occurring in October 2021 if a HELOC Loan or
October 2023 if an HLTV Loan, (vii) has a Combined Loan-to-Value Ratio as of the
Replacement Cut-Off Date no higher than the Combined Loan-to-Value Ratio of the
replaced Mortgage Loan at such time, (viii) has a Principal Balance as of the
related Replacement Cut-Off Date equal to or less than the Principal Balance of
the replaced Mortgage Loan as of such Replacement Cut-Off Date, (ix) is in the
same lien position or better, (x) is not then Delinquent as of the Transfer
Date, and (xi) complies with the representations and warranties set forth in
Section 3.3(a) in the case of the HELOC Loan or Section 3.3(b) in the case of an
HLTV Loan (but only to the extent that such representations and warranties, as
applicable, relate to the characteristics or attributes of individual HELOC or
HLTV Loans as opposed to the HELOC or HLTV Pool as a whole). Except with respect
to clause (vii) above, in the event that one or more mortgage loans are proposed
to be substituted for one or more Mortgage Loans, the Insurer may allow the
foregoing tests to be met on a weighted average basis or other aggregate basis
acceptable to the
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Insurer, as evidenced by a written approval delivered to the Indenture Trustee
by the Insurer.
"Realized Loss": As to any Liquidated Mortgage Loan, the amount, if
any, by which the Principal Balance thereof as of the date of liquidation is in
excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs.
"Register": The register maintained by the Indenture Trustee in
accordance with Section 2.3 of the Indenture, in which the names of the Class A
Noteholders are set forth.
"Registrar": The Indenture Trustee, acting in its capacity as
Indenture Trustee appointed pursuant to Section 2.3 of the Indenture, or any
duly appointed and eligible successor thereto.
"Registration Statement": The Registration Statement filed by the
Sponsor with the Securities and Exchange Commission, including all amendments
thereto and including the Prospectus and the Prospectus Supplement relating to
the Class A Notes constituting a part thereof.
"Reimbursement Amount": As of any Payment Date and with respect to
either Policy, the sum of (x)(i) all payments made pursuant to such Policy
previously received by the Indenture Trustee and all Preference Amounts
previously paid to the Indenture Trustee by the Insurer and in each case not
previously repaid to the Insurer pursuant to Section 8.6(b)(vi) of the Indenture
plus (ii) interest accrued on each such payment made pursuant to and with
respect to such Policy not previously repaid calculated at the Late Payment Rate
from the date the Indenture Trustee received the related payment made pursuant
to such Policy and (y)(i) any other amounts then due and owing to the Insurer
under the Insurance Agreement plus (ii) interest on such amounts at the Late
Payment Rate. The Insurer shall notify the Indenture Trustee and the Sponsor of
the amount of any Reimbursement Amount.
"REO Property": A Mortgaged Property acquired by the Master Servicer
or any Sub-Servicer on behalf of the Trust through foreclosure or deed-in-lieu
of foreclosure in connection with a defaulted Mortgage Loan.
"Remittance Date": Any date on which the Master Servicer is required
to remit monies on deposit in the Principal and Interest Account to the
Indenture Trustee for deposit in the Note Account, which shall be the 18th day
or, if such day is not a Business Day, the next preceding Business Day, of each
month, commencing in the month following the month in which the Closing Date
occurs.
"Remittance Period": As to any Payment Date, the calendar month
preceding the month of such Payment Date.
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"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A Notes
registered in the Register under the nominee name of the Depository.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans attached
hereto as Schedule I, as the same may be revised or amended from time to time in
connection with substitutions of Qualified Replacement Mortgages or additions of
Qualified Overcollateralization Mortgages. In the Schedule of Mortgage Loans,
the Mortgage Loans that relate to the HELOC Pool will be listed separately from
the Mortgage Loans that relate to the HLTV Pool.
"Second Mortgage Loan": A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Mortgaged Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Mortgaged Property having a first priority
lien.
"Servicing Advance": As defined in Section 4.9 and Section 4.13
hereof.
"Servicing Fee": With respect to any Payment Date and each Pool, the
product of (i) one-twelfth of the related Servicing Fee Rate and (ii) the
aggregate Principal Balance of the Mortgage Loans in such Pool as of the opening
of business on the first day of the Remittance Period preceding such Payment
Date (or as of the Cut-Off Date with respect to the first Payment Date).
"Servicing Fee Rate": 0.50% per annum for the HELOC Loans and 0.75%
per annum for the HLTV Loans.
"Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware
Corporation.
"Standard & Poor's": Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Principal Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Loan Rate net of
the Servicing Fee, if any, of the Mortgage Loan being replaced.
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"Sub-Servicer": Any Person with whom the Master Servicer has entered
into a Sub-Servicing Agreement and who satisfies any requirements set forth in
Section 4.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract reasonably acceptable
to the Insurer between the Master Servicer and any Sub-Servicer relating to the
servicing and/or administration of certain Mortgage Loans as permitted by
Section 4.3.
"Telerate Screen Page 3750": The display designated as page 3750 on
the Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates of major
banks).
"Termination Fees": With respect to HELOC Loans which prepay in full
or in part and are secured by Mortgaged Properties in certain jurisdictions, an
account termination fee generally not exceeding $500 may be charged by the
Master Servicer and retained as additional servicing compensation pursuant to
Section 4.15. Such Termination Fees may not be applicable to accounts terminated
subsequent to a date designated in the related Credit Line Agreement which
depending on the jurisdiction may be during the Draw Period.
"Transfer Date": With respect to a Qualified Replacement Mortgage or a
Qualified Overcollateralization Mortgage, the date that such Mortgage Loan is
delivered to the Indenture Trustee on behalf of the Trust, and with respect to a
HELOC Loan that is reassigned to the Sponsor pursuant to Section 2.5, the date
that is specified therein.
"Transfer Notice Date": As defined in Section 2.5 herein.
"Trust Agreement": The Trust Agreement dated as of September 1, 1998
among the Owner Trustee, the Sponsor and Holding relating to the formation of
the Trust.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, for the benefit of the Class A Noteholders and
the Insurer (including all proceeds thereof), including the following: (i) the
Mortgage Loans, including Qualified Replacement Mortgages and Qualified
Overcollateralization Mortgages; (ii) such amounts, including Eligible
Investments, as from time to time may be held in all Accounts (except any
investment earnings on the amounts from time to time held in the Principal and
Interest Account); (iii) any Mortgaged Property that has been acquired on behalf
of the Trust as a result of foreclosure or acceptance by the Master Servicer or
any Sub-Servicer of a deed in lieu of foreclosure and that has not been
withdrawn from the Trust; (iv) any Insurance Policies relating to the Mortgage
Loans and any rights of the Trust or the Sponsor under any Insurance Policies;
(v) Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan; and
(vi) the Policies.
"UCC": Unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
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"Underlying Mortgage Note": The Mortgage Note evidencing an HLTV Loan
or the Credit Line Agreement pursuant to which a HELOC Loan is issued.
"Underwriter": Bear, Stearns & Co. Incorporated.
Section 1.2. Use of Words and Phrases. "Herein," "hereby,"
"hereunder," "hereof," "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders. As used herein, any form of the word "include" shall
be deemed to be followed by the words "without limitation.".
Section 1.3. Captions; Table of Contents. The captions or headings in
this Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.
Section 1.4. Opinions. Each opinion with respect to the validity,
binding nature and enforceability of documents or Notes may be qualified to the
extent that the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law) and may state that no
opinion is expressed on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy. Any opinion required to be
furnished by any Person hereunder must be delivered by counsel upon whose
opinion the addressee of such opinion may reasonably rely, and such opinion may
state that it is given in reasonable reliance upon an opinion of another, a copy
of which must be attached, concerning the laws of a foreign jurisdiction.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.1. Conveyance of the Mortgage Loans. (a) The Sponsor,
concurrently with the execution and delivery hereof, hereby sells, assigns,
transfers, sets over and otherwise conveys to Holding, and Holding hereby
purchases and acquires, without recourse (subject to the Sponsor's obligations
herein), all right, title and interest of the Sponsor in and to: (i) all
Mortgage Loans listed on the Schedule of Mortgage Loans, including their
respective Principal Balances (including, if such Mortgage Loans are HELOC
Loans, all Additional Balances) and all collections in respect thereof received
on or after the Cut-Off Date (excluding payments in respect of accrued interest
due prior to the Cut-Off Date); (ii) all Mortgaged Properties that are acquired
by foreclosure or deed in lieu of foreclosure; (iii) all of the Sponsor's rights
under any Insurance Policies covering the Mortgaged Properties; (iv) all of the
Sponsor's rights and benefits, but none of its obligations or burdens, under
Sections 2.03, 2.05, 4.01, 4.02 and 4.04 (other than the fourth paragraph
thereof) of the Purchase Agreement, including all of
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the Sponsor's rights and remedies in the event of certain breaches by the
Originators of their respective representations and warranties under Sections
4.01 and 4.02 of the Purchase Agreement; (v) all Mortgage Files and other
documents relating to the foregoing; (vi) all amounts held in the Principal and
Interest Account, the Note Account and the Reserve Account; (vii) all proceeds
with respect to the foregoing; and (viii) all other assets included or to be
included in the Trust Estate created under the Indenture for the benefit of
Class A Noteholders and the Insurer; provided, however, that neither Holding nor
any of its Assignees (including the Trust and the Indenture Trustee) shall
assume any obligation under any Underlying Mortgage Note that provides for the
funding of future advances to the Mortgagor thereunder, it being understood that
neither Holding nor any of its Assignees (including the Trust and the Indenture
Trustee) shall be required or permitted to fund any such future advances. In
addition, on or before the Closing Date, the Sponsor will cause the Insurer to
deliver the Policies to the Indenture Trustee for the benefit of the related
Class A Noteholders of the related Class A Notes. As full consideration for the
Sponsor's sale, assignment, transfer, set-over and conveyance to Holding of all
of its right, title and interest in and to the Mortgage Loans and the other
rights and properties specified above, Holding shall (A) pay to or upon the
order of the Sponsor that amount in immediately available funds equal to the
proceeds of the sale of the Notes, net of any underwriting discounts and other
transaction costs (including the cost of obtaining the Policies as described
above and the expenses referred to in Section 9.01 of the Purchase Agreement),
and (B) direct the issuance of the Certificates to or upon the order of the
Sponsor or its designees, all in such amounts as the Sponsor shall determine on
or before the Closing Date.
(b) It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans (including the related Mortgage Files and the other rights
and properties described in Section 2.1(a) above) by the Sponsor to Holding as
contemplated by Section 2.1(a) be construed as a sale of the Mortgage Loans by
the Sponsor to Holding. It is, further, not the intent of the parties that such
conveyance be deemed a pledge of the Mortgage Loans by the Sponsor to Holding or
any of Holding's Assignees (including the Indenture Trustee) to secure a debt or
other obligation of the Sponsor or any Assignor of the Sponsor. However, in the
event and to the extent that, notwithstanding the intent of the parties hereto,
any or all of the Mortgage Loans (including the related Mortgage Files and the
other rights and properties described in Section 2.1(a) above) are held to be
property of the Sponsor or any of its Assignors, then (i) this Agreement shall
also be deemed to be a security agreement within the meaning of Article 9 of the
New York Uniform Commercial Code; (ii) the conveyance provided for herein shall
be deemed to be a grant by the Sponsor to Holding of a first priority security
interest in all of the Sponsor' right, title and interest in and to the Mortgage
Loans (including the related Mortgage Files and the other rights and properties
described in Section 2.1 hereof) and all amounts payable to the holder of the
Mortgage Loans and/or such rights or properties in accordance with the terms
thereof and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including all
amounts from time to time held or invested in the Note Account, the Reserve
Account or the Principal and Interest Account, whether in the form of cash,
instruments, securities or other property; (iii) the possession by Holding or
any of its Assignees or their respective agents of items of property that
constitute instruments,
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money, negotiable documents or chattel paper shall be deemed to be "possession
by the secured party" for purposes of perfecting the security interest pursuant
to Section 9-305 of the New York Uniform Commercial Code; (iv) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of Holding for the purpose of perfecting such
security interest under applicable law; and (v) the obligations secured by the
first priority security interest described in clause (iii) above shall be deemed
to include any and all obligations of Holding or any of its Assignees (including
the Issuer) to pay the principal of and interest on the Notes to the Noteholders
and to pay the fees, expenses and other amounts required to be paid to the
Master Servicer, the Indenture Trustee, the Owner Trustee, the Note Insurer and
the Certificateholders, all in accordance with and otherwise subject to the
Operative Documents (including the Indenture). Any assignment or other transfer
of the interest of Holding under any provision hereof shall also be deemed to be
an assignment of any security interest created hereby. Each of the Sponsor and
Holding shall, to the extent consistent with this Agreement, take such actions
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
would be maintained as such throughout the terms of this Agreement and the
Indenture. The Sponsor also covenants not to pledge, assign or grant any
security interest to any third party in any Mortgage Loan conveyed to Holding
hereunder.
(c) Upon Holding's request, the Sponsor shall perform (or cause to be
performed) such further acts and execute, acknowledge and deliver (or cause to
be executed, acknowledged and delivered) to Holding such further documents as
Holding shall deem necessary or advisable in order to evidence, establish,
maintain, protect, enforce or defend its rights in and to the Mortgage Loans and
other rights and properties transferred hereunder or otherwise to carry out the
intent and accomplish the purposes of this Agreement (including UCC-1 financing
statements naming the Sponsor as debtor and Holding as secured party and any
continuation statements relating thereto).
(d) Holding, immediately after the purchase and sale described in
Section 2.1(a) above but otherwise concurrently with the execution and delivery
hereof, hereby sells, assigns, transfers, sets over and otherwise conveys, to
the Trust, and the Trust hereby purchases and acquires, without recourse
(subject to Holding's obligations herein), all right, title and interest of
Holding in and to: (i) all Mortgage Loans listed on the Schedule of Mortgage
Loans, including their respective Principal Balances (including, if such
Mortgage Loans are HELOC Loans, all Additional Balances) and all collections in
respect thereof received on or after the Cut-Off Date (excluding payments in
respect of accrued interest due prior to the Cut-Off Date); (ii) all Mortgaged
Properties that are acquired by foreclosure or deed in lieu of foreclosure;
(iii) all of Holding's rights under any Insurance Policies covering the
Mortgaged Properties; (iv) all of the Sponsor's rights and benefits, but none of
its obligations or burdens, under Sections 2.03, 2.05, 4.01, 4.02 and 4.04
(other that the fourth paragraph thereof) of the Purchase Agreement, including
all of the Sponsor's rights and remedies in the event of certain breaches by the
Originators of their respective representations and warranties under Sections
4.01 and 4.02 of the
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Purchase Agreement (all of which rights and benefits were assigned to Holding
pursuant to Section 2.1(a) above); (v) all Mortgage Files and other documents
relating to the foregoing; (vi) all amounts held in the Principal and Interest
Account, the Note Account and the Reserve Account; (vii) all proceeds with
respect to the foregoing; and (viii) all other assets included or to be included
in the Trust Estate created under the Indenture for the benefit of Class A
Noteholders and the Insurer; provided, however, that neither the Trust nor any
of its Assignees (including the Indenture Trustee) shall assume any obligation
under any Underlying Mortgage Note that provides for the funding of future
advances to the Mortgagor thereunder, it being understood that neither the Trust
nor any of its Assignees (including the Indenture Trustee) shall be required or
permitted to fund any such future advances. In addition, on or before the
Closing Date, Holding will cause the Policies to be delivered to the Indenture
Trustee for the benefit of the related Class A Noteholders of the related Class
A Notes. As full consideration for Holding's sale, assignment, transfer,
set-over and conveyance to the Trust of all of its right, title and interest in
and to the Mortgage Loans and the other rights and properties specified above,
the Trust shall (x) pay to or upon the order of Holding that amount in
immediately available funds equal to the proceeds of the sale of the Notes, net
of any underwriting discounts and other transaction costs (including the cost of
obtaining the Policies as described above and the expenses referred to in
Section 9.01 of the Purchase Agreement), and (y) issue to Holding one or more
Certificates evidencing in the aggregate 100% of the beneficial ownership
interest in the Trust.
(e) It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans (including the related Mortgage Files and the other rights
and properties described in Section 2.1(d) above) by Holding to the Trust as
contemplated by Section 2.1(d) be construed as a sale of the Mortgage Loans by
Holding to the Trust. It is, further, not the intent of the parties that such
conveyance be deemed a pledge of the Mortgage Loans by Holding to the Trust or
any of the Trust's Assignees (including the Indenture Trustee) to secure a debt
or other obligation of Holding or any Assignor of Holding. However, in the event
and to the extent that, notwithstanding the intent of the parties hereto, any or
all of the Mortgage Loans (including the related Mortgage Files and the other
rights and properties described in Section 2.1(d) hereof) are held to be
property of Holding or any of its Assignors, then (i) this Agreement shall also
be deemed to be a security agreement within the meaning of Article 9 of the New
York Uniform Commercial Code; (ii) the conveyance provided for herein shall be
deemed to be a grant by Holding to the Trust of a first priority security
interest in all of Holding' right, title and interest in and to the Mortgage
Loans (including the related Mortgage Files and the other rights and properties
described in Section 2.1 hereof) and all amounts payable to the holder of the
Mortgage Loans and/or such rights or properties in accordance with the terms
thereof and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including all
amounts from time to time held or invested in the Note Account, the Reserve
Account or the Principal and Interest Account, whether in the form of cash,
instruments, securities or other property; (iii) the possession by the Trust or
any of its Assignees or their respective agents of items of property that
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to Section 9-305 of the New York Uniform
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Commercial Code; (iv) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trust
for the purpose of perfecting such security interest under applicable law; and
(v) the obligations secured by the first priority security interest described in
clause (iii) above shall be deemed to include any and all obligations of the
Trust or any of its Assignees to pay the principal of and interest on the Notes
to the Noteholders and to pay the fees, expenses and other amounts required to
be paid to the Master Servicer, the Indenture Trustee, the Owner Trustee, the
Note Insurer and the Certificateholders, all in accordance with and otherwise
subject to the Operative Documents (including the Indenture). Any assignment or
other transfer of the interest of the Trust under any provision hereof shall
also be deemed to be an assignment of any security interest created hereby. Each
of Holding and the Trust shall, to the extent consistent with this Agreement,
take such actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and would be maintained as such throughout the terms of
this Agreement and the Indenture. Holding also covenants not to pledge, assign
or grant any security interest to any third party in any Mortgage Loan conveyed
to the Trust hereunder.
(f) Upon the Trust's request, Holding shall perform (or cause to be
performed), such further acts and execute, acknowledge and deliver (or cause to
be executed, acknowledged and delivered) to the Trust such further documents as
the Trust shall deem necessary or advisable in order to evidence, establish,
maintain, protect, enforce or defend its rights in and to the Mortgage Loans and
other rights and properties transferred hereunder or otherwise to carry out the
intent and accomplish the purposes of this Agreement (including UCC-1 financing
statements naming Holding as debtor and the Trust as secured party and any
continuation statements relating thereto).
(g) In connection with the transfer and assignment of the Mortgage
Loans, the Sponsor agrees to:
(i) cause to be delivered without recourse to the
Indenture Trustee, on the Closing Date with respect to the Initial
Mortgage Loans or on the Transfer Date with respect to any Qualified
Replacement Mortgage or Qualified Overcollateralization Mortgage, the
items listed as items (a) through (f) in Exhibit A hereto;
(ii) cause, within 75 Business Days following the
Closing Date or Transfer Date (as applicable), Assignments of Mortgage
to be submitted for recording in the appropriate jurisdictions wherein
such recordation is necessary to perfect the lien thereof as against
creditors of or purchasers from the Sponsor to the Indenture Trustee;
provided, however, that Assignments of Mortgage shall not be required
to be submitted for recording with respect to any Mortgage Loan as to
which the recordholder is an Originator (under, with respect to Advanta
National Bank, either its current name, "Advanta National Bank" or its
prior name, "Advanta National Bank USA"), unless (A) the related
Mortgaged
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Property is not located in a jurisdiction in which, as evidenced by an
Opinion of Counsel acceptable to the Rating Agencies and the Insurer
and delivered to the Indenture Trustee and the Insurer within 30
Business Days following the Closing Date, recordation of such
Assignment of Mortgage is not necessary to perfect the lien of the
Indenture Trustee in the related Mortgage Loan or (B) provided that an
Event of Servicing Termination or a Rapid Amortization Event shall have
occurred or the long-term unsecured debt of the related Originator
shall have been assigned a rating of less than BBB by Standard & Poor's
or less than Baa2 by Moody's, the Insurer otherwise directs the Sponsor
in writing; and
(iii) cause, within one year after the Closing Date
or the Transfer Date (as applicable), to be delivered to the Indenture
Trustee and the Insurer evidence of the recording of such Assignments
of Mortgage.
All recording, if required pursuant to this Section 2.1, shall be
accomplished at the expense of the Sponsor. Notwithstanding anything to the
contrary contained in this Section 2.1, in those instances where the public
recording office retains the original Mortgage, the assignment of a Mortgage or
the intervening assignments of the Mortgage after it has been recorded, the
Sponsor shall be deemed to have satisfied its obligations hereunder upon
delivery to the Indenture Trustee of a copy of such Mortgage, such assignment or
assignments of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
Copies of all Mortgage assignments and any Assignment of Mortgage in
recordable form received by the Indenture Trustee shall be kept in the related
Mortgage File.
(h) In the case of Mortgage Loans which have been prepaid in full on or
after the Cut-Off Date and prior to the Closing Date, the Sponsor, in lieu of
the foregoing, will deliver within 15 Business Days after the Closing Date, to
the Indenture Trustee a certification of an Authorized Officer in the form set
forth in Exhibit C hereto.
(i) The Sponsor shall sell, assign, transfer, set over and otherwise
convey without recourse to the Indenture Trustee all right, title and interest
of the Sponsor in and to any Qualified Replacement Mortgage delivered to the
Indenture Trustee on behalf of the Trust by the Sponsor pursuant to Section 2.2,
Section 3.3 or Section 3.4 hereof and all its right, title and interest to
principal collected and interest accruing on such Qualified Replacement Mortgage
on and after the applicable Replacement Cut-Off Date; provided, however, that
the Sponsor shall reserve and retain all right, title and interest in and to
payments of interest due on such Qualified Replacement Mortgage prior to the
applicable Replacement Cut-Off Date, provided further, however, that the
Indenture Trustee shall not be obligated to fund any future advances to the
related Mortgagor under such Qualified Replacement Mortgage.
(j) The Sponsor shall sell, assign, transfer, set over and otherwise
convey, without recourse, to the Indenture Trustee all right, title and interest
of the Sponsor in and to any Qualified Overcollateralization Mortgage delivered
to the Indenture Trustee on
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behalf of the Trust by the Sponsor pursuant to Section ___ of the Indenture and
all its right, title and interest to principal collected and interest accruing
on such Qualified Overcollateralization Mortgage on and after the opening of
business on the first day of the calendar month in which such Qualified
Overcollateralization Mortgage is delivered to the Indenture Trustee (the
"Overcollateralization Cut-Off Date"); provided, however, that the Sponsor shall
reserve and retain all right, title and interest in and to payments of interest
due on such Qualified Overcollateralization Mortgage prior to the applicable
Overcollateralization Cut-Off Date; provided further, however, that the
Indenture Trustee shall not be obligated to fund any future advances to the
related Mortgagor under such Qualified Overcollateralization Mortgage.
(k) In connection with any transfer and assignment of a Qualified
Replacement Mortgage or a Qualified Overcollaterization Mortgage to the
Indenture Trustee on behalf of the Trust, the Sponsor agrees to cause to be
delivered to the Indenture Trustee the items described in Section 2.1(g) on the
date of such transfer and assignment or, if a later delivery time is permitted
by Section 2.1(g), then no later than such later delivery time.
(l) Each Defective Mortgage Loan that is required to be repurchased or
substituted pursuant to the provisions this Agreement or the Purchase Agreement
shall, upon such repurchase or substitution, be released from the Trust and from
the lien created by the Indenture. As to each Mortgage Loan released from the
Trust in connection with the repurchase thereof or the conveyance of a Qualified
Replacement Mortgage therefor, the Indenture Trustee will transfer, assign, set
over and otherwise convey without recourse, to or upon the order of the Sponsor,
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 first day of the
calendar month in which such Mortgage Loan is released; the applicable;
provided, however, that the Trust shall reserve and retain all right, title and
interest in and to payments of principal interest collected on such released
Mortgage Loan prior to such date.
(m) As to each Mortgage Loan released from the Trust in connection with
the conveyance of a Qualified Replacement Mortgage the Indenture Trustee shall
deliver on the date of conveyance of such Qualified Replacement Mortgage and on
the order of the Sponsor (i) the original Underlying Mortgage Note, or the
certified copy, relating thereto, endorsed without recourse, to the Sponsor and
(ii) such other documents as constituted the Mortgage File with respect thereto.
(n) If an Assignment of Mortgage 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.
(o) The Sponsor shall reflect on its records that the Mortgage Loans
have been sold to Holding.
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(p) If the Master Servicer's shareholders' equity (on a consolidated
basis with AMHC) calculated pursuant to generally accepted accounting
principles, as evidenced by the Financial Statements (as defined in the
Insurance Agreement, and which the Master Servicer hereby agrees to provide to
the Insurer on a quarterly basis promptly after the same are available), falls
below $5,000,000, then the Sponsor shall promptly prepare and deliver to the
Indenture Trustee Assignments of Mortgage. Upon the direction of the Insurer,
the Indenture Trustee shall submit such Assignments for recording in the
appropriate jurisdictions. The Master Servicer shall pay the anticipated
recording costs to the Indenture Trustee on the date of delivery of such
Assignments to the Indenture Trustee, and if the Master Servicer fails to do so
or the actual recording costs exceed the anticipated recording costs then the
Indenture Trustee shall pay such costs and shall be entitled to reimbursement
therefor from amounts otherwise distributable to the Certificateholders.
(q) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Advanta National Bank or of its ultimate corporate parent
are satisfactory to the Insurer, Moody's and Standard & Poor's, then any of the
Document Delivery Requirements described above may be waived by an instrument
signed by the Insurer, Standard & Poor's and Moody's (or any documents
theretofore delivered to the Indenture Trustee returned to Advanta National
Bank) on such terms and subject to such conditions as the Insurer, Moody's and
Standard & Poor's may permit.
Section 2.2. Acceptance by Indenture Trustee; Certain Substitutions of
Mortgage Loans; Certification by Indenture Trustee. (a) The Indenture Trustee
hereby acknowledges its receipt of the Policies and agrees to execute and
deliver on the Closing Date and each Transfer Date an acknowledgment of receipt
of the Underlying Mortgage Notes delivered by the Sponsor in the form attached
as Exhibit D hereto, and declares that it will hold such documents and any
amendments, replacement or supplements thereto, as well as any other assets
included in the definition of Trust Estate and delivered to the Indenture
Trustee, as Indenture Trustee in trust upon and subject to the conditions set
forth herein for the benefit of the Class A Noteholders and the Insurer. The
Indenture Trustee further agrees to review any other documents delivered by the
Sponsor within 90 days after the Closing Date (or within 90 days with respect to
any Qualified Replacement Mortgage after the assignment thereof) and to deliver
to the Sponsor, the Master Servicer and the Insurer a Pool Certification in the
form attached hereto as Exhibit E to the effect that, as to each Mortgage Loan
listed in the Schedule of Mortgage Loans (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in such Pool Certification as
not covered by such Pool Certification), (i) all documents required to be
delivered to it pursuant to this Agreement are in its possession and (ii) such
documents have been reviewed by it and have not been damaged, torn or physically
altered and on their face appear to relate to such Mortgage Loan; provided,
however, that such Pool Certification shall not be required to be delivered
prior to 90 days after the Closing Date. The Indenture Trustee shall be under no
duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to verify the validity, legality,
enforceability, sufficiency, due authorization, recordability or genuineness of
same or to determine that they are genuine, enforceable, or appropriate for the
represented purpose or that they are other than what they purport to be on their
face, nor
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shall the Indenture Trustee be under any duty to determine independently whether
there are any intervening assignments or assumption or modification agreements
with respect to any Mortgage Loan.
(b) If the Indenture Trustee during such 90-day period finds any
document constituting a part of a Mortgage File which is not properly executed,
has not been received within the specified period, or is unrelated to the
Mortgage Loans identified in the Schedule of Mortgage Loans, or that any
Mortgage Loan does not conform in a material respect to the description thereof
as set forth in the Schedule of Mortgage Loans, the Indenture Trustee shall
promptly so notify the Sponsor and the Insurer. In performing any such review,
the Indenture Trustee may conclusively rely on the Sponsor as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the Indenture Trustee's review of the items delivered by the
Sponsor pursuant to Section 2.1(g)(i) is limited solely to confirming that the
documents listed in Section 2.1(g)(i) have been executed and received, on their
face, appear to relate to the Mortgage Files identified in the Schedule of
Mortgage Loans and conform materially to the description thereof in the Schedule
of Mortgage Loans. The Sponsor agrees to use reasonable efforts to remedy a
material defect in a document constituting part of a Mortgage File of which it
is so notified by the Indenture Trustee. If, however, within 60 days after the
Indenture Trustee's notice to it respecting such defect the Sponsor has not
remedied or caused to be remedied the defect and the defect materially and
adversely affects the interest in the related Mortgage Loan of the Class A
Noteholders or of the Insurer, the Sponsor will then on the next succeeding
Business Day (i) substitute in lieu of such Mortgage Loan a Qualified
Replacement Mortgage and, deliver the Substitution Amount applicable thereto to
the Master Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Mortgage Loan at a purchase price equal to the Loan Purchase Price
thereof, which purchase price shall be delivered to the Master Servicer for
deposit in the Principal and Interest Account. Upon receipt of any Qualified
Replacement Mortgage or of written notification signed by a Servicing Officer to
the effect that the Loan Purchase Price in respect of a Defective Mortgage Loan
has been deposited into the Principal and Interest Account, then as promptly as
practicable, the Indenture Trustee shall execute such documents and instruments
of transfer presented by the Sponsor, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Sponsor to effect such transfer by the Trust of such Defective
Mortgage Loan pursuant to this Section. It is understood and agreed that the
obligation of the Sponsor to accept a transfer of a Defective Mortgage Loan and
to either convey a Qualified Replacement Mortgage or to make a deposit of any
related Loan Purchase Price into the Principal and Interest Account shall
constitute the sole remedy respecting such defect available to Class A
Noteholders, the Indenture Trustee against the Sponsor.
The Sponsor, promptly following the transfer of a Defective Mortgage
Loan from the Trust pursuant to this Section, shall deliver an amended Schedule
of Mortgage Loans to the Indenture Trustee and the Insurer and shall make
appropriate entries in its general account records to reflect such transfer. The
Master Servicer shall, following such retransfer, appropriately mark its records
to indicate that it is no longer servicing such Mortgage Loan on behalf of the
Trust. The Sponsor, promptly following
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such transfer, shall appropriately mark its electronic ledger and make
appropriate entries in its general account records to reflect such transfer.
(c) As to any Qualified Replacement Mortgage, the Sponsor shall, if
required to deliver any such Qualified Replacement Mortgage, deliver to the
Indenture Trustee with respect to such Qualified Replacement Mortgage such
documents and agreements as are required to be held by the Indenture Trustee in
accordance with Section 2.2. For any Remittance Period during which the Sponsor
substitutes one or more Qualified Replacement Mortgages, the Master Servicer
shall determine the Substitution Amount which amount shall be deposited by the
Sponsor in the Principal and Interest Account at the time of substitution. All
amounts received in respect of the Qualified Replacement Mortgage during the
Remittance Period in which the circumstances giving rise to such substitution
occur shall not be a part of the Trust Estate and shall not be deposited by the
Master Servicer in the Principal and Interest Account. All amounts received by
the Master Servicer during the Remittance Period in which the circumstances
giving rise to such substitution occur in respect of any Defective Mortgage Loan
so removed by the Trust Estate shall be deposited by the Master Servicer in the
Principal and Interest Account. Upon such substitution, the Qualified
Replacement Mortgage shall be subject to the terms of this Agreement in all
respects, and the Sponsor shall be deemed (i) to have made with respect to such
Qualified Replacement Mortgage or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 3.3 and (ii) to
have certified that such Mortgage Loan(s) is/are Qualified Replacement Loan(s).
The procedures applied by the Sponsor in selecting each Qualified Replacement
Mortgage shall not be materially adverse to the interests of the Indenture
Trustee, the Class A Noteholders or the Insurer.
(d) The Master Servicer may consent to the placing of a lien senior to
that of any Mortgage on the related Mortgaged Property, provided that
(i) such Mortgage succeeded to a first lien position after the related
Mortgage Loan was conveyed to the Trust and, immediately following the
placement of such senior lien, such Mortgage is in a second lien position
and the outstanding principal amount of the mortgage loan secured by such
subsequent senior lien is no greater than the outstanding principal amount
of the senior mortgage loan secured by the Mortgaged Property as of the date
the related Mortgage Loan was originated; or
(ii) the Mortgage relating to such Mortgage Loan was in a second lien
position as of the related Cut-Off Date and the new senior lien secures a
mortgage loan that refinances an existing first mortgage loan and the
outstanding principal amount and interest rate of the replacement first
mortgage loan immediately following such refinancing is not greater than the
outstanding principal amount and interest rate of such existing first
mortgage loan at the date of origination of such Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Master Servicer
may consent to the
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placing of liens senior to that of a Mortgage on the related Mortgaged Property
only if the Combined Loan-to-Value Ratio is less than or equal to the original
Combined Loan-to-Value Ratio; provided, however, the Master Servicer may consent
to the placing of a senior lien (subject to the 5% and 3% limitations described
below with respect to the HELOC Pool and the HLTV Pool, respectively) if the
Combined Loan-to-Value Ratios of any such Mortgage Loan will not increase to
greater than 100%; provided, further, that the Master Servicer may only approve
modifications if the related Mortgagor is not then delinquent, the current
characteristics of the related Mortgagor meet the applicable Originator's
underwriting guidelines used at the time of origination and the Master Servicer
receive verbal verification of employment of the related Mortgagor.
The Master Servicer or the relevant Originator may also, without prior
approval from the Rating Agencies or the Insurer (but subject to the 5%
limitation described below), increase the Credit Limits on HELOC Loans provided
that (i) new appraisals are obtained and the Combined Loan-to-Value Ratios of
the Mortgage Loans after giving effect to such increase are less than or equal
to the Combined Loan-to-Value Ratios of the HELOC Loans as of the Cut-Off Date,
(ii) such increases are consistent with the applicable Originator's underwriting
policies, (iii) the related Mortgagor has used the Credit Line Agreement in the
past twelve months and has made timely payments and (iv) the Master Servicer
receives verbal verification of employment of the related Mortgagor. In
addition, the Master Servicer may increase the Credit Limits on HELOC Loans
without obtaining new appraisals provided that (i) the increase in the Credit
Limit does not cause the Combined Loan-to-Value Ratios of the HELOC Loans to
exceed 80%, (ii) the increase is consistent with the applicable Originator's
underwriting policies, (iii) the related Mortgagor has used the Credit Line
Agreement in the past twelve months and has made timely payments, (iv) the
Master Servicer receives verbal verification of employment of the related
Mortgagor and (v) the 5% limitation described below is satisfied.
Furthermore, the Master Servicer may not, without prior approval from
the Insurer, solicit Mortgagors for a reduction in Loan Rates, forgive any
Mortgage Loan payments, impair any lien position on the Mortgage Loans or extend
the maturity of any Mortgage Loan.
Subject to the above limitations, the Master Servicer, may agree to
changes in the terms of a Mortgage Loan at the request of the Mortgagor;
provided that such changes (i) unless otherwise waived by the Insurer in its
sole discretion, do not, in the aggregate, with respect to the HELOC Pool,
exceed 5% of the related Cut-Off Date Pool Balance, and do not, in the
aggregate, with respect to the HLTV Pool, exceed 3% of the related Cut-Off Date
Pool Balance, (ii) do not materially and adversely affect the interests of
Holders or the Insurer (unless the Insurer otherwise consents in writing), and
(iii) are consistent with Accepted Servicing Practices.
Section 2.3. Cooperation Procedures. (a) The Sponsor shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Indenture Trustee, provide the Indenture Trustee with the information set forth
in the Schedule of Mortgage Loans with respect to such Qualified Replacement
Mortgage.
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(b) The Sponsor, the Master Servicer and the Indenture Trustee covenant
to provide each other with all data and information required to be provided by
them hereunder at the times required hereunder, and additionally covenant
reasonably to cooperate with each other in providing any additional information
required by any of them in connection with their respective duties hereunder.
Section 2.4. [Reserved]
Section 2.5. Retransfers of HELOC Loans at Election of Sponsor.
Subject to the conditions set forth below, the Sponsor may, but shall not be
obligated to (except the Sponsor shall be obligated upon a breach of a
representation or warranty), accept the reassignment of HELOC Loans from the
HELOC Pool held by the Trust as of the close of business on a Payment Date (the
"Transfer Date"). On the fifth Business Day (the "Transfer Notice Date") prior
to the Transfer Date designated in such notice, the Sponsor shall give the
Indenture Trustee, the Insurer and the Master Servicer a notice of the proposed
reassignment that contains a list of the HELOC Loans to be reassigned. Such
reassignment of HELOC Loans shall be permitted upon satisfaction of the
following conditions:
(i) No Rapid Amortization Event has occurred or will occur as
a result of such removal;
(ii) On the Transfer Notice Date the HELOC Pool
Overcollateralization Amount (after giving effect to the removal from
the Trust of the HELOC Loans proposed to be retransferred) is at least
equal to the HELOC Pool Specified Overcollateralization Amount;
(iii) The HELOC Pool Overcollateralization Amount as of such
Payment Date (after giving effect to the removal as described in
Section 2.5(ii) above) equals or exceeds the then HELOC Pool Specified
Overcollateralization Amount;
(iv) The transfer of any HELOC Loans on any Transfer Date
during the Managed Amortization Period shall not, in the reasonable
belief of the Sponsor, cause a Rapid Amortization Event to occur or an
event which with notice or lapse of time or both would constitute a
Rapid Amortization Event;
(v) On or before the Transfer Date, the Sponsor shall have
delivered to the Indenture Trustee, the Insurer and the Rating Agencies
a revised Schedule of Mortgage Loans, reflecting the proposed transfer
(including any Qualified Replacement Mortgages proposed to be
transferred) and the Transfer Date, and the Master Servicer shall have
marked its servicing records to show that the HELOC Loans reassigned to
the Sponsor are no longer owned by the Trust;
(vi) The Sponsor shall represent and warrant that random
selection procedures were used in selecting the HELOC Loans and no
other selection procedures were used which are adverse to the interests
of the Sponsor
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of the Class A Noteholders or the Insurer were utilized in selecting
the HELOC Loans to be removed from the Trust; and
(vii) The Sponsor shall have delivered to the Indenture
Trustee and the Insurer an Officer's Certificate certifying that the
items set forth in subparagraphs (i) through (vi), inclusive, have been
performed or are true and correct, as the case may be. The Indenture
Trustee may conclusively rely on such Officer's Certificate, shall have
no duty to make inquiries with regard to the matters set forth therein
and shall incur no liability in so relying.
Upon receiving the requisite information from the Sponsor, the Master Servicer
shall perform in a timely manner those acts required of it, as specified above.
Upon satisfaction of the above conditions, on the Transfer Date the Indenture
Trustee shall deliver, or cause to be delivered, to the Sponsor the Mortgage
File for each HELOC Loan being so reassigned, and the Indenture Trustee shall
execute and deliver to the Sponsor such other documents prepared by the Sponsor
as shall be reasonably necessary to reassign such HELOC Loans to the Sponsor.
Any such transfer of the Trust's right, title and interest in and to HELOC Loans
shall be without recourse, representation or warranty by or of the Indenture
Trustee or the Trust to the Sponsor.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER
Section 3.1. Representations and Warranties of the Sponsor. The
Sponsor hereby represents, warrants and covenants to the Indenture Trustee, the
Master Servicer, the Insurer and to the Class A Noteholders as of the Closing
Date that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its respective business, or the properties owned
or leased by it make such qualification necessary. The Sponsor has all
requisite corporate power and authority to own and operate its
respective properties, to carry out its respective business as
presently conducted and as proposed to be conducted and to enter into
and discharge its respective obligations under this Agreement and the
other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Sponsor is a party by the Sponsor and
its respective performance and compliance with the terms of this
Agreement and of the other Operative Documents to which it is a party
have been duly authorized by 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
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which the Sponsor is a party or by which the Sponsor is bound, or
violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over
the Sponsor or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Sponsor is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Sponsor enforceable against
it in accordance with the terms hereof and thereof, except as the
enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Sponsor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which might have consequences
that would materially and adversely affect the condition (financial or
other) or operations of the Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a
party.
(e) No litigation is pending or, to the best of the Sponsor's
knowledge, threatened against the Sponsor which litigation might have
consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or that would
materially and adversely affect the condition (financial or otherwise)
or operations of the Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a
party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Sponsor
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report
not misleading.
(g) The statements contained in the Registration Statement
which describe the Sponsor, or matters or activities for which the
Sponsor is responsible in accordance with the Operative Documents or
which are attributed to the Sponsor therein are true and correct in all
material respects, and the Registration Statement does not contain any
untrue statement of a material fact with respect to the Sponsor or omit
to state a material fact required to be stated therein or necessary in
order to make the statements contained therein with respect to the
Sponsor not misleading. To the best of the Sponsor's knowledge 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.
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(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Sponsor make no such representation or warranty), that are
necessary or advisable in connection with the purchase and sale of the
Notes and the execution and delivery by the Sponsor of the Operative
Documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date
hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative
Documents on the part of the Sponsor and the performance by the Sponsor
of its respective obligations under this Agreement and such of the
other Operative Documents to which it is a party.
It is understood and agreed that the representations and warranties set
forth in this Section 3.1 shall survive delivery of the Mortgage Loans to the
Indenture Trustee.
Section 3.2. Representations and Warranties of the Master Servicer.
The Master Servicer hereby represents, warrants and covenants to the Indenture
Trustee, the Sponsor, the Insurer and to the Class A Noteholders as of the
Closing Date that:
(a) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, is, in compliance with the laws of each state in which any
Mortgaged Property is located to the extent necessary to enable it to
perform its obligations hereunder and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business,
or the properties owned or leased by it make such qualification
necessary. The Master Servicer has all requisite corporate power and
authority to own and operate its properties, to carry out its business
as presently conducted and as proposed to be conducted and to enter
into and discharge its obligations under this Agreement and the other
Operative Documents to which it is a party. The Master Servicer has, on
a consolidated basis with its parent, AMHC, equity of at least
$5,000,000, as determined in accordance with generally accepted
accounting principles.
(b) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this
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
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contract, agreement or other instrument to which the Master Servicer is
a party or by which the Master Servicer is bound or violate any statute
or any order, rule or regulation of any court, governmental agency or
body or other tribunal having jurisdiction over the Master Servicer or
any of its properties.
(c) This Agreement and the other Operative Documents to which
the Master Servicer is a party, assuming due authorization, execution
and delivery by the other parties hereto and thereto, each constitutes
a valid, legal and binding obligation of the Master Servicer,
enforceable against it in accordance with the terms hereof, except as
the enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Master Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other
Operative Documents to which the Master Servicer is a party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
litigation might have consequences that would prohibit its entering
into this Agreement or any other Operative Document to which it is a
party or that would materially and adversely affect the condition
(financial or otherwise) or operations of the Master Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other
Operative Documents to which the Master Servicer is a party.
(f) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Master Servicer makes no such representation or warranty),
that are necessary or advisable in connection with the execution and
delivery by the Master Servicer of the Operative Documents to which it
is a party, have been duly taken, given or obtained, as the case may
be, are in full force and effect on the date hereof, are not subject to
any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may 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
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the Master Servicer of its obligations under this Agreement and such of
the other Operative Documents to which it is a party.
(g) 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.
(h) 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 statement
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.
(i) The Servicing Fee is a "current (normal) servicing fee
rate" as that term is used in Statement of Financial Accounting
Standards No. 65 issued by the Financial Accounting Standards Board.
Neither the Master Servicer nor any affiliate thereof will report on
any financial statements any part of the Servicing Fee as an adjustment
to the sales price of the Mortgage Loans.
(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 4.1.
It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive delivery of the Mortgage Loans to the
Indenture Trustee.
Upon discovery by the Master Servicer, the Sponsor, the Insurer or the
Indenture Trustee of a breach of any of the representations and warranties set
forth in this Section 3.2 which materially and adversely affects the interests
of the Class A Noteholders or of the Insurer, the party discovering such breach
shall give prompt written
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notice to the other parties. Within 60 days of its discovery or its receipt of
notice of breach, the Master Servicer shall cure such breach in all material
respects; provided, however, that if the Master Servicer can demonstrate to the
reasonable satisfaction of the Insurer that it is diligently pursuing remedial
action, then the cure period may be extended with the written approval of the
Insurer.
Section 3.3. Representations and Warranties of the Sponsor with Respect
to the Mortgage Loans; Retransfer of Certain Mortgage Loans.
(a) The Sponsor makes the following representations and warranties as
to the Mortgage Loans on which the Issuer relies in accepting the Mortgage Loans
and on which the Insurer relies in issuing the Policies. Such representations
and warranties speak as of the Closing Date, but shall survive the sale,
transfer, and assignment of the Mortgage Loans to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture:
(i) All of the original or certified documentation set forth
in Section 2.1 (including all material documents related thereto) with
respect to each Mortgage Loan has been or will be delivered to the
Indenture Trustee on the Closing Date. All such documentation is true
and accurate in all material respects. Each of the documents and
instruments specified to be included therein has been duly executed and
in due and proper form, and each such document or instrument is in a
form generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans
for sale to prudent investors in the secondary market that invest in
mortgage loans such as the Mortgage Loans.
(ii) Each Mortgage Loan is being serviced by the Master
Servicer or a Person controlling, controlled by or under common control
with the Master Servicer and qualified to service mortgage loans.
(iii) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage or Qualified Overcollateralization
Mortgage, this Agreement constitutes a valid transfer and assignment to
the Trust of all right, title and interest of the Sponsor in and to the
related Cut-Off Date Principal Balances with respect to the applicable
Mortgage Loans, all monies due or to become due with respect thereto
(excluding payments in respect of accrued interest due prior to the
related Cut-Off Date), and all proceeds of such related Cut-Off Date
Principal Balances with respect to the Mortgage Loans and such funds as
are from time to time deposited in the Principal and Interest Account
(excluding any investment earnings thereon) and all other property
specified in the definition of "Mortgage Loan" as being part of the
corpus of the Trust directly or indirectly conveyed to the Trust by the
Sponsor, and, with respect to HELOC Loans upon payment for the
Additional Balances, will constitute a valid transfer and assignment to
the Indenture Trustee of all right, title and interest of the Sponsor
in and to the Additional Balances, all monies due or to become due with
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respect thereto, and all proceeds of such Additional Balances and all
other property specified in the definition of "Mortgage Loan" relating
to the Additional Balances. However, if this Agreement is not deemed to
be a valid transfer and assignment to the Indenture Trustee of such
right, title and interest, this Agreement shall in any event constitute
a grant of a security interest (as defined in the UCC as in effect in
New York) in such property to the Indenture Trustee on behalf of the
Trust. If this Agreement constitutes the grant of a security interest
to the Trust in such property, and if the Indenture Trustee maintains
possession of the Mortgage File for each Mortgage Loan, the Trust shall
have a first priority perfected security interest in such property,
subject to the effect of Section 9-306 of the UCC with respect to
collections on the Mortgage Loans that are deposited in the Principal
and Interest Account.
(iv) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage or Qualified Overcollateralization
Mortgage and as of the date any Additional Balance is created, the
information set forth in the Schedule of Mortgage Loans for such
Mortgage Loans is true and correct in all material respects.
(v) As of the Closing Date, no more than 1.00% of the related
Cut-Off Date Pool Balance of the Mortgage Loans is secured by Mortgaged
Properties located within any single zip code area, and none of the
Mortgage Loans consist of Date-of- Payment Loans.
(vi) The Mortgages and the Underlying Mortgage Notes have not
been assigned or pledged, and the Sponsor is the sole owner and holder
of the Mortgages and the Underlying Mortgage Notes free and clear of
any and all liens, claims, encumbrances, participation interests,
equities, pledges, charges or security interests of any nature, and has
full right and authority, under all governmental and regulatory bodies
having jurisdiction over the Class A Noteholder of the applicable
Mortgage Loan, to sell, assign or transfer the same.
(vii) As of the Closing Date with respect to the Initial
Mortgage Loans, and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage, there is no valid offset, defense or
counterclaim of any obligor under any Underlying Mortgage Note or
Mortgage. Neither the operation of any of the terms of any Underlying
Mortgage Note or any Mortgage nor the exercise of any right thereunder
will render either the Underlying Mortgage Note or the Mortgage
unenforceable, in whole or in part, nor subject to any right of
rescission, set-off, claim, counterclaim or defense, including, without
limitation, the defense of usury and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto.
(viii) No Minimum Monthly Payment is more than 59 days
Delinquent (measured on a contractual basis); and with respect to the
Initial
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<PAGE> 45
Mortgage Loans, no more than 0.10% (by Cut-Off Date Pool Balance) were
30-59 days Delinquent (measured on a contractual basis).
(ix) As of the related Cut-Off Date with respect to the
Mortgage Loans and the applicable Transfer Date with respect to any
Qualified Replacement Mortgage, each Underlying Mortgage Note and each
Mortgage Loan is an enforceable obligation of the related Mortgagor,
except as the enforceability thereof may be limited by the bankruptcy,
insolvency or similar laws affecting creditors' rights generally.
(x) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cut-Off Date for the
HELOC Loans is approximately 264 months, and for the HLTV Loans is
approximately 235 months. With respect to each HELOC Loan, on each date
that the Loan Rates have been adjusted, interest rate adjustments on
the Mortgage Loans were made in compliance with the related Mortgage
and Underlying Mortgage Note and applicable law. With respect to each
HELOC Loan, over the term of each Initial Mortgage Loan, the Loan Rate
may not exceed the related Loan Rate Cap, if any. With respect to each
HELOC Loan, the Loan Rate Caps for the Initial Mortgage Loans range
between 16.00% and 24.00%. With respect to each HELOC Loan, the Initial
Mortgage Loans' margins range between 0.0% and 7.50% and the weighted
average margin is approximately 16.00% as of the Cut-Off Date for the
Initial Mortgage Loans. The Loan Rates on the HELOC Loans as of the
Cut-Off Date range between 8.50% and 16.00% and the weighted average
Loan Rate is approximately 8.50%; and the Loan Rates on the HLTV Loans
as of the Cut-Off Date range between 10.73% and 19.25% and the weighted
average Loan Rate is approximately 14.15%.
(xi) The Credit Limits on the HELOC Loans range between $7,741
and $285,000 with an average approximate of $31,172. The Principal
Balances on the HLTV Loans range between $9,936.76 and $99,916.38 with
an average of $36,621. As of the Cut-Off Date for the Initial Mortgage
Loans, no Initial Mortgage Loan had a Principal Balance in excess of
approximately $285,000 and the average Principal Balance of the Initial
Mortgage Loans is equal to approximately $32,080.
(xii) Except with respect to one loan, as of the Closing Date,
each Mortgage Loan being transferred to the Trust is a Mortgage.
(xiii) Each Mortgage Note evidencing an HLTV Mortgage is
comprised of one original promissory note and each such promissory note
constitutes an "instrument" for purposes of Section 9-105(1)(i) of the
UCC.
(xiv) Except with respect to one loan, as of the Closing Date,
each Mortgaged Property is improved by a single (one-to-four) family
residential dwelling, which may include manufactured homes,
condominiums and townhouses but shall not include cooperatives or
mobile home attached to a
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<PAGE> 46
foundation or property which constitutes other than real property under
applicable state law.
(xv) No HELOC Loan had a Combined Loan-to-Value Ratio in
excess of 125.00%, and no HLTV Loan had a combined Loan-to-Value Ratio
in excess of 125.00%.
(xvi) As of the Closing Date with respect to the Mortgage
Loans (except for one such Loan) and the applicable Transfer Date with
respect to any Qualified Replacement Mortgage or Qualified
Overcollateralization Mortgage, each Mortgage is either a valid and
subsisting first or second lien of record on the Mortgaged Property
(subject in the case of any Second Mortgage Loan only to a Senior Lien
on such Mortgaged Property) and subject in all cases to the exceptions
to title set forth in the title insurance policy or title search, with
respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular
mortgage lending activities, and except for liens for (i) real estate
taxes and special assessments not yet delinquent, (ii) income taxes,
(iii) any covenants, conditions and restrictions, rights of way,
easements, and other matters of public record and such other exceptions
to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage.
(xvii) Immediately prior to the transfer and assignment herein
contemplated, the Sponsor held good and indefeasible title to, and was
the sole owner of, each Mortgage Loan conveyed by the Sponsor
(including its Cut-Off Date Pool Balance), all monies due or to become
due with respect thereto, and all proceeds of such Cut-Off Date Pool
Balances with respect to the Mortgage Loans is subject to no liens,
charges, mortgages, encumbrances or rights of others except liens which
will be released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated, the
Indenture Trustee will hold good and indefeasible title to, and be the
sole owner of, each Mortgage Loan subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be
released simultaneously with such transfer and assignment.
(xviii) There is no delinquent tax or assessment lien or
mechanic's lien on any Mortgaged Property, and each Mortgaged Property
is free of substantial damage and is in good repair.
(xix) Each Mortgage Loan at the time it was made complied in
all material respects with all applicable state and federal laws and
regulations, including, without limitation, the federal
Truth-in-Lending Act and other consumer protection laws, real estate
settlement procedure, usury, equal credit opportunity, disclosure and
recording laws.
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(xx) With respect to each First Mortgage Loan, and, to the
best of the Sponsor's knowledge, with respect to each Second Mortgage
Loan, a lender's title insurance policy, issued in standard California
Land Title Association form or American Land Title Association form, or
other form acceptable in a particular jurisdiction by a title insurance
company authorized to transact business in the state in which the
related Mortgaged Property is situated, was issued on the date of
origination of the Mortgage Loan and as of the Cut-Off Date and each
applicable Transfer Date with respect to the Qualified Replacement
Mortgage or Qualified Overcollateralization Mortgage, each such policy
is valid and remains in full force and effect, or a title search or
guaranty of title customary in the relevant jurisdiction was obtained
with respect to a Mortgage Loan as to which no title insurance policy
or binder was issued.
(xxi) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Qualified
Replacement Mortgage or Qualified Overcollateralization Mortgage, each
Underlying Mortgage Note is the legal, valid, binding and enforceable
obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether considered in a proceeding or
action in equity or at law), and all parties to each Mortgage Loan had
full legal capacity to execute all documents relating to such Mortgage
Loan and convey the estate therein purported to be conveyed.
(xxii) The terms of each Underlying Mortgage Note and each
Mortgage have not been impaired, cancelled, subordinated, rescinded,
altered or modified in any respect, and the related Mortgaged Property
has not been released from the lien of the related Mortgage, in whole
or in part and no instrument has been executed that would effect such
release, cancellation, subordination or rescission, except by a written
instrument which (if such instrument is secured by real property) has
been recorded, if necessary, to protect the interest of the Class A
Noteholders and which has been delivered to the Indenture Trustee. The
substance of any such alteration or modification is reflected on the
related Schedule of Mortgage Loans and has been approved by the primary
mortgage guaranty insurer, if any.
(xxiii) Except as otherwise required by law or the terms of
the Underlying Mortgage Note, pursuant to the statute under which the
related Mortgage Loan was made, the related Underlying Mortgage Note is
not and has not been secured by any collateral, pledged account or
other security except the lien of the corresponding Mortgage.
(xxiv) Each Mortgaged Property is located in the state
identified in the applicable Schedule of Mortgage Loans and consists of
one or more parcels of real property with a residential dwelling
erected thereon.
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<PAGE> 48
(xxv) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, flood, tornado
or other casualty, so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the
premises were intended.
(xxvi) With respect to each Second Mortgage Loan, either (A)
no consent for such Mortgage Loan was required by the holder of the
related Senior Lien prior to the making of such Mortgage Loan or (B)
such consent has been obtained and is contained in the related Mortgage
File.
(xxvii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by Indenture Trustee's sale and (B)
otherwise by judicial foreclosure. There is no homestead or other
exemption available which materially interferes with the right to sell
the related Mortgaged Property at a Indenture Trustee's sale or the
right to foreclose the related Mortgage.
(xxviii) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to a Qualified
Replacement Mortgage or Qualified Overcollateralization Mortgage, there
is no default, breach, violation or event of acceleration existing
under any Mortgage or the related Underlying Mortgage 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 Sponsor has not waived any default,
breach, violation or event of acceleration.
(xxix) To the best knowledge of the Sponsor, all parties to
the Underlying Mortgage Note and the Mortgage had legal capacity to
execute the Underlying Mortgage Note and the Mortgage and each
Underlying Mortgage Note and Mortgage have been duly and properly
executed by such parties.
(xxx) No selection procedures reasonably believed by the
Sponsor to be adverse to the interests of the Class A Noteholders or
the Insurer was utilized in selecting the Mortgage Loans.
(xxxi) Except with respect to one Mortgage Loan, as of the
Closing Date, no Mortgagor has been released, in whole or in part,
except in connection with an assumption agreement which has been
approved by the applicable title insurer (to the extent required by
such title insurer) and which is part of the Mortgage File delivered to
the Indenture Trustee.
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(xxxii) At the time of origination of each Mortgage Loan that
is not a first mortgage loan, the related prior lien was not more than
30 days delinquent.
(xxxiii) All required inspections, licenses and certificates
with respect to the use and occupancy of all occupied portions of all
property securing the Mortgages have been made, obtained or issued, as
applicable.
(xxxiv) No more than 89.93% of the Initial Mortgage Loans are
second mortgage loans.
(xxxv) With respect to each Mortgage Loan that is not a first
mortgage loan, the related prior lien does not provide for negative
amortization.
(xxxvi) With respect to each HELOC Loan that is not a first
mortgage loan, the maturity date of the Mortgage Loan is prior to the
maturity date of the related prior lien if such prior lien provides for
a balloon payment; and with respect to each HLTV Loan, if the Senior
Mortgage Loan provides for a balloon payment and has a "recast"
feature, then the recast date of such Senior Mortgage Loan must be at
least 36 months after the origination of each HLTV Loan which is a
Junior Mortgage Loan.
(xxxvii) Each Mortgage Loan is secured by a property having an
appraised value of less than $1,900,000.
(xxxviii) Each Mortgage Note bears a current fixed Loan Rate
as of the Cut-Off Date of at least 10.73% per annum.
(xxxix) With respect to each HELOC Loan, the improvements upon
each Mortgaged Property are covered by a valid and existing hazard
insurance policy with a carrier generally acceptable to the Master
Servicer that provides for fire and extended coverage representing
coverage not less than (a) the Credit Limit of such HELOC Loan or (b)
the maximum insurable value of the Mortgaged Property.
(xl) With respect to any HELOC Loan which is a senior lien,
the Sponsor has caused and will cause to be performed any and all acts
required to be performed to preserve the rights and remedies of the
Master Servicer and the Indenture Trustee in any Insurance Policies
applicable to any Mortgage Loans, without limitation, 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 Indenture Trustee.
(xli) The proceeds of each HLTV Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been
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complied with. All costs, fees and expenses incurred in making or
closing or recording such HLTV Loans were paid.
(xlii) Except as specified in paragraph (viii), above, there
is no default, breach, violation or event of acceleration existing
under any Mortgage or the related Underlying Mortgage 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, break, violation
or event of acceleration. and neither the Master Servicer nor the
related Originator has waived any such default, breach, violation or
event of acceleration.
(xliii) To the best of the Sponsor's knowledge, each Mortgage
Loan was underwritten in all material respects in accordance with the
credit underwriting guidelines of the related Originator as set forth
in the related Originator's underwriting guidelines, as in effect on
the date of origination or acquisition.
(xliv) As of the Closing Date, the Transferor has received no
notice of default of any First Mortgage Loan secured by any Mortgaged
Property which has not been cured by a party other than the Transferor.
(xlv) At the Cut-Off Date, no Mortgagor had been identified on
the records of the Transferor as being the subject of a current
bankruptcy proceeding. and
(xlvi) No more than % of the Principal Balance of the HLTV
Pool represents Mortgage Loans with respect to which the related
Mortgagor had a FICO Score of less than 620 at the time of origination.
(xlvii) Each Mortgage Loan conforms and all such Mortgage
Loans in the aggregate conform, in all material respect to the
description thereof set forth the Registration Statement.
(xlviii) The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the description
thereof set forth in the Prospectus and the Prospectus Supplement.
(xlix) ______% of Mortgage Loan shall have a three year
interest only Draw Period and _____% of Mortgage Loan shall have a five
year interest only Draw Period.
(l) Each party which had any interest in a Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise (including the
Sponsor), is (or, during the period in which such party held and
disposed of such interest, was) in substantial compliance with any and
all applicable licensing requirements of the law of the state wherein
the property securing the Mortgage Loan is located;
(li) The documents instruments and agreements submitted by
each Mortgagor for loan underwriting were not falsified and contain no
untrue
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statement of a material fact and do not omit to state a material fact
required to be stated therein or necessary to make the information and
the statements contained therein not misleading;
(lii) Except as previously disclosed in writing to the Trustee
and the Insurer, with respect to each Mortgage Loan, there is only one
originally executed Underlying Mortgage Note not stamped as a
duplicate.
(b) The Sponsor makes the following representations and warranties as
to the HLTV Loans on which the Issuer relies in accepting the HLTV Loans and on
which the Insurer relies in issuing the Policies. Such representations and
warranties speak as of the Closing Date, but shall survive the sale, transfer,
and assignment of the HLTV Loans to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture:
(i) The information with respect to each HLTV Loan set forth
in the related HLTV Loan Schedule is true and correct as of the Cut-Off
Date.
(ii) All of the original or certified documentation required
to be delivered on the Closing Date to the Indenture Trustee, with
respect to each HLTV Loan has been or will be delivered to the
Indenture Trustee. 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 HLTV Loans for sale to prudent
investors in the secondary market that invest in mortgage loans similar
to the HLTV Loans.
(iii) Each HLTV Loan is a valid and existing lien of record on
the Mortgaged Property.
(iv) Immediately prior to the transfer and assignment herein
contemplated, the Sponsor held good and indefeasible title to, and was
the sole owner of, each HLTV Loan conveyed by the Sponsor subject to no
liens, charges, mortgages, encumbrances or rights of others except
liens which will be released simultaneously with such transfer and
assignment and immediately upon receipt of each HLTV Loan, the
Indenture Trustee will hold good and indefeasible title to, and will be
the sole owner of each HLTV Loan, free and clear of any liens, charges,
mortgages, encumbrances, or rights of others except liens which will be
released immediately prior to such transfer or assignment.
(v) As of the related Cut-Off Date, no HLTV Loan is thirty
(30) or more days Delinquent, except for those loans the Buyer reviews
during due diligence and agrees to purchase with knowledge of
delinquency; there is no valid and enforceable offset, defense or
counterclaim to any Mortgage Note, including the obligation of the
related Mortgagor to pay the unpaid principal of or interest on such
Mortgage Note or the defense of usury, nor will the operation of any of
the terms of such Mortgage Note, or the exercise of any right
thereunder, render
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either the Mortgage Note 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.
(vi) There is no delinquent tax or assessment lien or
mechanic's lien, or claim for work, labor, or material on any Mortgaged
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 (viii) below; there is
no proceeding pending or threatened or currently occurring for the
total or partial condemnation of any Mortgaged Property; each Mortgaged
Property is free of substantial damage and is in good repair, except
for those items specifically mentioned in the appraisal, or any
applicable appraisal review of any mortgaged property; each Mortgaged
Property is undamaged by waste, fire, earthquake or earth movement,
flood, tornado or other casualty, so as to affect adversely the value
of the Mortgaged Property as security for the HLTV Loan or the use for
which the premises were intended.
(vii) Each HLTV 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, the Real Estate Settlement Procedures Act, and
other consumer protection laws, usury, equal credit opportunity,
disclosure and recording laws. Each HLTV Loan is a Qualifying HLTV Loan
and is a Non-REMICable Mortgage Loan.
(viii) With respect to each HLTV Loan, a title policy, if any,
or evidence of a title search, in either case from a title company
authorized to transact business in the state in which the related
Mortgaged Property is situated, insuring or reflecting the mortgagee's
interest under the related HLTV Loan as the holder of a valid first or
second mortgage lien of record on the real property described in the
related Mortgage.
(ix) Each Mortgaged Property is improved by a one- to four
family residential dwelling, which may include, condominiums and
townhouses but shall not include cooperatives; the improvements upon
each Mortgaged Property are covered by a valid and existing hazard
insurance policy with a generally acceptable carrier that provides for
fire and extended coverage representing coverage not less than the
least of (A) the outstanding principal balance of the related HLTV Loan
(together, in the case of a junior HLTV Loan, with the outstanding
principal balance of any 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 Mortgaged Property.
(x) Each Mortgaged Property for an HLTV Loan is not required
to have a flood insurance policy maintained with respect to it.
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<PAGE> 53
(xi) Each Mortgage 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). The maker of such Mortgage and Note had
the legal capacity to execute such Mortgage and Mortgage Note at the
time such Mortgage and Mortgage Note were executed.
(xii) With respect to any Senior Lien, Seller has caused and
will cause to be performed any and all acts required to be performed to
preserve the rights and remedies of the Master Servicer in any
Insurance Policies applicable to any HLTV Loans delivered by Seller,
including 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 Buyer and its assignees
in care of the Master Servicer.
(xiii) Interest on each Mortgage Note is calculated in
accordance with the actuarial method; the terms of each Mortgage 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 Indenture Trustee and which
has been included in the related Mortgage File to be delivered to the
Indenture Trustee. The substance of any such alteration or modification
is reflected on the related HLTV Loan Schedule and has been approved by
the primary mortgage guaranty insurer, if any.
(xiv) Except as otherwise required by law or pursuant to the
statute under which the related HLTV Loan was made, the related
Mortgage Note will not be secured by any collateral, pledged account or
other security except the lien of the corresponding Mortgage.
(xv) No HLTV Loan will be originated under a buydown plan; no
HLTV Loan provides for negative amortization, has a shared appreciation
feature, or other contingent interest feature; and as of the related
Cut-Off Date, no HLTV Loan had a Combined Loan-to-Value-Ratio in excess
of the maximum for the related product type as set forth in the
relevant Originator's applicable guidelines.
(xvi) Any advances made after the date of origination of an
HLTV Loan but prior to the Cut-Off Date, have been consolidated with
the outstanding principal amount secured by the related Mortgage, and
the secured principal amount, as consolidated, bears a single interest
rate and single repayment term reflected on the related HLTV Loan
Schedule. No Mortgage Note has been modified, except as reflected on
the related HLTV Loan Schedule, and evidence of any modification is in
the related Mortgage File and has been supplied to the Indenture
Trustee. The consolidated principal amount does not exceed the original
principal amount of the related HLTV Loan. No Mortgage Note permits or
obligates the Master Servicer, any Sub-Servicer or the relevant
Originator or its
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assignees to make future advances to the related Mortgagor at the
option of the Mortgagor.
(xvii) Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow
funds therefor have been complied with, subject to any escrow hold-back
for improvements pending completion. All costs, fees and expenses
incurred in making, closing or recording the HLTV Loans were paid.
(xviii) All of the improvements which were included for the
purposes of determining the Appraised Value of any Mortgaged Property
lie wholly within the boundaries and building restriction lines of such
Mortgaged Property and no improvements on adjoining properties encroach
upon such Mortgaged Properties and, if a title insurance policy exists
with respect to such Mortgaged Property, are stated in the title
insurance policy and affirmatively insured; no improvement located on
or being part of any Mortgaged 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 Mortgaged 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.
(xix) With respect to each Mortgage on an HLTV Loan
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 Indenture Trustee or its
assignees under the deed of trust, except in connection with a
trustee's sale after default by the related Mortgagor.
(xx) With respect to each junior HLTV Loan, either (A) no
consent for such HLTV Loan was required by the holder of the related
Senior Lien prior to the making of such HLTV Loan or (B) such consent
has been obtained and is contained in the related Mortgage File.
(xxi) Each Mortgage on an HLTV Loan contains a provision for
the acceleration of the payment of the unpaid principal balance of the
related HLTV Loan in the event the related Mortgaged Property is sold
without the prior consent of the Mortgagee thereunder; each Mortgage
contains customary and enforceable provisions which render the rights
and remedies of the holder thereof adequate for the realization against
the related Mortgaged Property of the benefits of the security,
including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. There is
no homestead or other exemption available to a Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's
sale or the right to foreclose on the Mortgaged Property.
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(xxii) No instrument of release or waiver has been executed in
connection with any HLTV 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 included in the related Mortgage File delivered
to the Indenture Trustee.
(xxiii) If a senior HLTV Loan provides for a balloon payment
and has a "recast" feature, then the recast date of such senior HLTV
Loan must be at least 36 months after the maturity date of each HLTV
Loan which is a junior HLTV Loan.
(xxiv) Each HLTV Loan has been originated in accordance with
all required provisions of the relevant Originator's applicable
guidelines; an appraisal was performed with respect to each HLTV Loan
in compliance with the applicable requirements set forth in such
applicable guidelines.
(xxv) The Sponsor has no actual knowledge that there exist on
any Mortgaged 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.
(xxvi) No mortgage reconveyance, release, satisfaction or
trustee fees have been collected by the Sponsor or any Originator or
paid by any Mortgagor. In addition, if there is, in Buyer's reasonable
judgment, a documentation problem that would make reconveyance of
satisfaction difficult, cumbersome or expensive to the Buyer, then the
Sponsor shall at the Indenture Trustee's request complete the
reconveyance of satisfaction of the Mortgage, including the recordation
of the necessary documentation, at the Sponsor's sole cost and expense.
(xxvii) The HLTV Loan is not in default, and all Monthly
Payments due prior to the related Cut-Off Date and all taxes,
governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments or ground rents have been paid.
The Sponsor has not advanced funds, or induced or solicited any advance
of funds by a party other than the Mortgagor directly or indirectly,
for the payment of any amount required by the HLTV Loan. The collection
practices used by each entity which has serviced the HLTV Loan have
been in all respects legal, proper, prudent and customary in the
mortgage servicing business. With respect to escrow deposits and
payments in those instances where such were required, there exist no
deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made and no escrow deposits or
payments or other charges or payments have been capitalized under any
Mortgage or the related Mortgage Note.
(xxviii) Each original Mortgage was recorded or is in the
process of being recorded, and all subsequent Assignments of the
original Mortgage have been
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recorded in the appropriate jurisdictions wherein such recordation is
necessary to perfect the lien thereof.
(xxix) Each Mortgaged Property is located in the state
identified in the HLTV Loan Schedule delivered to the Indenture Trustee
and consists of one or more parcels of real property with a residential
dwelling erected thereon.
(xxx) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, flood, tornado
or other casualty, so as to affect adversely the value of the Mortgaged
Property as security for the HLTV Loan or the use for which the
premises were intended.
(xxxi) 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 Sponsor has not waived any
default, breach, violation or event of acceleration.
(xxxii) The proceeds of each HLTV Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder.
(xxxiii) There is no obligation on the part of the Sponsor or
any Originator to make payments in addition to those made by the
Mortgagor.
(xxxiv) There is no HLTV Loan with an "open" escrow for
deferred maintenance. All escrows must be released.
(xxxv) No error, omission, misrepresentation, negligence,
fraud or similar occurrence with respect to an HLTV Loan has taken
place on the part of any person, including the Mortgagor, or any party
involved in the origination of the HLTV Loan or in the application of
any insurance in relation to such HLTV Loan.
(xxxvi) On the Closing Date, with respect to the HTLV Mortgage
Loans, ____% or more (by aggregate principal balance) of the Mortgage
Loans do not constitute "real estate mortgages" for the purpose of
Treasury Regulations Section 301.7701. For this purpose a Mortgage Loan
does not constitute a "real estate mortgage" if:
(a) The Mortgage Loan is not secured by an interest in real
property, or
(b) The Mortgage Loan is not an "obligation principally
secured by an interest in real property." For this purpose an
"obligation is principally secured
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by an interest in real property" if it satisfies either test set out in
paragraph (1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally secured by
an interest in real property if the fair market value of the
interest in real property securing the obligation
(A) was at least equal to 80 percent of the adjusted
issue price of the obligation at the time the
obligation was originated (or, if later, the time the
obligation was significantly modified); or
(B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of
the real property interest must be first reduced by the amount
of any lien on the real property interest that is senior to
the obligation being tested, and must be further reduced by a
proportionate amount of any lien that is in parity with the
obligation being tested, in each case before the percentages
set forth in (1)(A) and (1)(B) are determined. The adjusted
issue price of an obligation is its issue price plus the
amount of accrued original issue discount, if any, as of the
date of determination.
(2) Alternative test. An obligation is principally secured by an
interest in real property if substantially all of the proceeds
of the obligation were used to acquire or to improve or
protect an interest in real property that, at the origination
date, is the only security for the obligation. For purposes of
this test, loan guarantees made by the United States or any
state (or any political subdivision, agency, or
instrumentality of the United States or of any state), or
other third party credit enhancement are not viewed as
additional security for a loan. An obligation is not
considered to be secured by property other than real property
solely because the obligor is personally liable on the
obligation. For this purpose only, substantially all of the
proceeds of the obligations means 66-2/3% or more of the gross
proceeds.
(xxxvii) None of the HLTV Loans have been originated through a
home improvement contractor.
(xxxviii) None of the HLTV Loans is a retailment installment
contract for goods or services and none of the HLTV Loans made for
property improvement purposes was for goods and services which
constitute either a "consumer credit contract" or a "purchase money
loan" as such terms are defined in 16 C.F.R. Section 433.1.
(xxxix) None of the Mortgage Notes constitutes "chattel paper"
as such term is defined in Section 9-105(b) of the Uniform Commercial
Code.
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(xl) The related Mortgage File for each Mortgage Loan contains
a title document with respect to such Mortgage Loan reflecting that
title to the related Mortgaged Property is vested at least 50% in the
Mortgagor under such Mortgage Loan.
(c) Upon the discovery by the Master Servicer, the Sponsor, the Insurer
or the Indenture Trustee of a breach of any of the representations and
warranties made in respect of any Mortgage Loan which materially and adversely
affects the interests of the Class A Noteholders of the related Class or of the
Insurer in such Mortgage Loan, the party discovering such breach shall give
prompt written notice to the other parties. The Master Servicer shall promptly
notify the Sponsor of such breach and request that the Sponsor cure such breach
or take the actions described in Section 3.4(b) hereof within the time periods
required thereby, and the Sponsor shall cure such breach or take such actions;
provided, however, that the cure for any breach of a representation and warranty
relating to the characteristics of the Mortgage Loans in the aggregate shall be
a reassignment of, or substitution for, only those Mortgage Loans necessary to
cause such characteristics to be in compliance with the related representation
and warranty. Upon accepting such transfer and making any required deposit into
the Principal and Interest Account or substitution of a Qualified Replacement
Mortgage, as the case may be, the Sponsor shall be entitled to receive an
instrument of assignment or transfer from the Indenture Trustee to the same
extent as set forth in Section 2.2 with respect to the transfer of Mortgage
Loans under that Section.
It is understood and agreed that the obligation of the Sponsor to
accept a transfer of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit in the Principal and Interest
Account or to substitute an Qualified Replacement Mortgage, as the case may be,
shall constitute the sole remedy against the Sponsor respecting such breach
available to Class A Noteholders of the related Class A Notes, the Indenture
Trustee on behalf of the Class A Noteholders of the related Class A Notes.
Section 3.4. Covenants of Sponsor to Take Certain Actions with Respect
to the Mortgage Loans In Certain Situations. (a) With the provisos and
limitations as to remedies set forth in this Section 3.4, upon the discovery by
Sponsor, the Master Servicer, the Sponsor, the Insurer, any Sub-Servicer or the
Indenture Trustee that the representations and warranties set forth in Section
3.3 of this Agreement were untrue in any material respect as of the Closing Date
and such breaches of the representations and warranties materially and adversely
affect the interests of the Class A Noteholders of the related Class or of the
Insurer, the party discovering such breach shall give prompt written notice to
the other parties.
The Sponsor acknowledges that a breach of any representation or
warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan, (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Mortgaged Property or (z) set
forth in clause (viii) of Section 3.3 above constitutes breach of a
representation or warranty which "materially and adversely affects the interests
of the Class A Noteholders or of the Insurer" in such Mortgage Loan.
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(b) Upon the earliest to occur of the Sponsor's discovery, its receipt
of notice of breach from any one of the other parties hereto or from the Insurer
or such time as a breach of any representation and warranty materially and
adversely affects the interests of the Class A Noteholders or of the Insurer as
set forth above, the Sponsor hereby covenants and warrants that it shall
promptly cure such breach in all material respects or it shall (or shall cause
an affiliate of the Sponsor to), subject to the further requirements of this
paragraph, on the second Remittance Date next succeeding such discovery, receipt
of notice or such other time (i) substitute in lieu of each Mortgage Loan which
has given rise to the requirement for action by the Sponsor a Qualified
Replacement Mortgage and deliver the Substitution Amount applicable thereto,
together with the aggregate amount of all Servicing Advances theretofore made
with respect to such Mortgage Loan, to the Master Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Mortgage Loan from the
Trust at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Principal and Interest Account. It is understood and agreed that the obligation
of the Sponsor to cure the defect, or substitute for, or purchase any Mortgage
Loan as to which a representation or warranty is untrue in any material respect
and has not been remedied shall constitute the sole remedy available to the
Class A Noteholders, the Indenture Trustee or the Insurer, except as otherwise
provided in the Insurance Agreement.
(c) In the event that any Qualified Replacement Mortgage is delivered
by the Sponsor to the Trust pursuant to Section 2.2, Section 3.3 or Section 3.4
hereof or any Qualified Overcollateralization Mortgage is delivered by the
Sponsor to the Trust, the Sponsor shall be obligated to take the actions
described in Section 3.4(b) with respect to such Qualified Replacement Mortgage
or Qualified Overcollateralization Mortgage upon the discovery by any of the
Class A Noteholders, the Master Servicer, the Sponsor, the Insurer, or the
Indenture Trustee that the representations and warranties set forth in Section
3.3 above are untrue in any material respect on the date such Qualified
Replacement Mortgage or Qualified Overcollateralization Mortgage is conveyed to
the Trust such that the interests of the Class A Noteholders of the related
Class or the Insurer in the related Qualified Replacement Mortgage or Qualified
Overcollateralization Mortgage are materially and adversely affected; provided,
however, that for the purposes of this subsection (c) the representations and
warranties set forth in Section 3.3 above referring to items "as of the Cut-Off
Date" shall be deemed to refer to such items as of the date such Qualified
Replacement Mortgage or Qualified Overcollateralization Mortgage is conveyed to
the Trust.
(d) It is understood and agreed that the covenants set forth in this
Section 3.4 shall survive the pledge of the respective Mortgage Loans (including
Qualified Replacement Mortgage Loans) to the Indenture Trustee on behalf of the
Trust.
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ARTICLE IV
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 4.1. Master Servicer and Sub-Servicers.
(a) Advanta Mortgage Corp. USA agrees to act as the Master Servicer and
to perform all servicing duties under this Agreement subject to the terms
hereof.
(b) The Master Servicer shall service and administer the Mortgage Loans
on behalf of the Indenture Trustee and the Insurer and shall have full power and
authority, acting alone or through one or more Sub-Servicers, to do any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Master Servicer, in its own name or the name of a Sub-Servicer, may, and is
hereby authorized and empowered by the Indenture Trustee to, execute and
deliver, on behalf of itself, the Class A Noteholders, the Insurer and the
Indenture Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, the insurance
policies and accounts related thereto and the properties subject to the
Mortgages in accordance with the terms of this Agreement. Upon the execution and
delivery of this Agreement, and from time to time as may be required thereafter,
the Indenture Trustee shall furnish the Master Servicer or its Sub-Servicers
with any powers of attorney and such other documents as may be necessary or
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties hereunder.
In servicing and administering the Mortgage Loans, the Master Servicer
shall employ procedures consistent with Accepted Servicing Practices and in a
manner consistent with recovery under any insurance policy required to be
maintained by the Master Servicer pursuant to this Agreement.
Costs incurred by the Master Servicer in effectuating the timely
payment of taxes and assessments on the property securing an Underlying Mortgage
Note and foreclosure costs may be added by the Master Servicer to the amount
owing under such Underlying Mortgage Note where the terms of such an Underlying
Mortgage Note so permit; provided, however, that the addition of any such cost
shall not be taken into account for purposes of calculating the principal amount
of the Underlying Mortgage Note and the Mortgage Loan secured by the Underlying
Mortgage Note or distributions to be made to Class A Noteholders. Such costs
shall be recoverable by the Master Servicer pursuant to Section 4.9 and 4.13.
(c) Without limiting the generality of the foregoing, the Master
Servicer shall continue, and is hereby authorized and empowered by the Indenture
Trustee, to execute and deliver, on behalf of itself, the Class A Noteholders,
the Insurer and the Indenture Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with
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respect to the Mortgage Loans and with respect to the related Properties,
including consenting to the placement of a lien senior to that of any Mortgage
on the related Mortgaged Property; provided, that,
(i) such Mortgage succeeded to a first lien position after the
related Mortgage Loan was conveyed to the Trust and, immediately
following the placement of such senior lien, such Mortgage is in a
second lien position and the outstanding principal amount of the
mortgage loan secured by such subsequent senior lien is no greater than
the outstanding principal amount of the senior mortgage loan secured by
the Mortgaged Property as of the date the related Mortgage Loan was
originated; or
(ii) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the related Cut-Off Date and the new senior
lien secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount and interest rate of the
replacement first mortgage loan immediately following such refinancing
is not greater than the outstanding principal amount and interest rate
of such existing first mortgage loan at the date of origination of such
Mortgage Loan.
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Master Servicer
may consent to the placing of liens senior to that of a Mortgage on the related
Mortgaged Property only if the Combined Loan-to-Value Ratio is less than or
equal to the original Combined Loan-to-Value Ratio; provided, however, the
Master Servicer may consent to the placing of a senior lien (subject to the 5%
and 3% limitations described in Section 2.2(d) above with respect to the HELOC
Pool and the HLTV Pool, respectively) if the Combined Loan-to-Value Ratios of
any such Mortgage Loan will not increase to greater than 100%; provided,
further, that the Master Servicer may only approve modifications if the related
Mortgagor is not then delinquent (and has not been delinquent during the prior
12 months), the current characteristics of the related Mortgagor are consistent
with the Accepted Servicing Practices and the Master Servicer receives verbal
verification of employment of the related Mortgagor.
At the written direction of the related Originator, the Master Servicer
may also, without prior approval from the Rating Agencies or the Insurer,
increase the Credit Limits on HELOC Loans provided that (i) new appraisals are
obtained and the Combined Loan-to-Value Ratios of any such HELOC Loans after
giving effect to such increase are less than or equal to the Combined
Loan-to-Value Ratios of the HELOC Loans as of the Cut-Off Date, (ii) such
increases are consistent with the Accepted Servicing Practices, (iii) the
related Mortgagor is not then delinquent (and has not been delinquent during the
prior 12 months) and has made timely payments and (iv) the Master Servicer
receives verbal verification of employment of the related Mortgagor. In
addition, the Master Servicer, at the written direction of the Originator, may
increase the Credit Limits on HELOC Loans having aggregate balances of up to 5%
of the HELOC Pool Balance, without obtaining new appraisals provided that (i)
the increase in the Credit Limit does not cause the Combined Loan-to-Value
Ratios of the HELOC Loans to exceed 100%, (ii)
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the increase is consistent with Accepted Servicing Practices, (iii) the related
Mortgagor is not then delinquent (and has not been delinquent during the prior
12 months) and (iv) the Master Servicer receives verbal verification of
employment of the related Mortgagor.
Furthermore, the Master Servicer or the related Originator may, without
prior approval from the Rating Agencies and the Insurer solicit Mortgagors for a
reduction in Loan Rates of no more than 0.50%; provided that the Master Servicer
can only reduce such Loan Rates on up to 5% of the Mortgage Loans in either Pool
by the related Pool Balance. Any such solicitations shall not result in a
reduction in the weighted average Loan Rate of the Mortgage Loans in the related
pool by more than 2.5 basis points taking into account any such prior
reductions.
Subject to the above limitations, the Master Servicer may agree to
changes in the terms of a Mortgage Loan at the request of the Mortgagor;
provided, that such changes (i) do not materially and adversely affect the
interests of Class A Noteholders or the Insurer and (ii) are consistent with
Accepted Servicing Practices.
(d) The relationship of the Master Servicer (and of any successor to
the Master Servicer as servicer under this Agreement) to the Indenture Trustee
under this Agreement is intended by the parties to be that of an independent
contractor and not that of a joint venturer, partner or agent.
In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer may
(with the consent of the Insurer), to the extent permitted by applicable law,
terminate the existing subservicer arrangements with any subservicer or assume
the terminated Master Servicer's rights under such subservicing arrangements
which termination or assumption will not violate the terms of such arrangements.
(e) The Master Servicer may, and is hereby authorized to, perform any
of its servicing responsibilities with respect to all or certain of the Mortgage
Loans through a Sub-Servicer as it may from time to time designate, but no such
designation of a Sub-Servicer shall serve to release the Master Servicer from
any of its obligations under this Agreement. Such Sub-Servicer shall have all
the rights and powers of the Master Servicer with respect to such Mortgage Loans
under this Agreement.
(f) Without limiting the generality of the foregoing, but subject to
Sections 4.13 and 4.14, the Master Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Indenture Trustee to execute and deliver, and may
be authorized and empowered by the Indenture Trustee, to execute and deliver, on
behalf of itself, the Class A Noteholders and the Indenture Trustee or any of
them, (i) any and all instruments of satisfaction or cancellation or of partial
or full release or discharge and all other comparable instruments with respect
to the Mortgage Loans and with respect to the Properties, (ii) and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
owner of any Mortgaged Property on behalf of the Indenture Trustee, and (iii) to
hold title to any Mortgaged Property upon such foreclosure or deed in
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lieu of foreclosure on behalf of the Indenture Trustee; provided, however, that
Section 4.14(a) shall constitute a power of attorney from the Indenture Trustee
to the Master Servicer to execute an instrument of satisfaction (or assignment
of mortgage without recourse) with respect to any Mortgage Loan paid in full (or
with respect to which payment in full has been escrowed). Subject to Sections
4.13 and 4.14, the Indenture Trustee shall furnish the Master Servicer and any
Sub-Servicer with any powers of attorney and other documents as the Master
Servicer or such Sub-Servicer shall reasonably request to enable the Master
Servicer and such Sub-Servicer to carry out their respective servicing and
administrative duties hereunder.
(g) The Master Servicer shall give prompt notice to the Indenture
Trustee of any action, of which the Master Servicer has actual knowledge, to (i)
assert a claim against the Trust or (ii) assert jurisdiction over the Trust.
(h) Servicing Advances incurred by the Master Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Mortgaged Property shall be recoverable by the Master
Servicer or such Sub-Servicer to the extent described in Section 4.9 and in
Section 8.6(b)(ix) of the Indenture.
Section 4.2. Collection of Certain Mortgage Loan Payments. (a) In
accordance with Accepted Servicing Practices and subject to the limitations set
forth in Sections 2.2 and 4.1, the Master Servicer may in its discretion (i)
waive any assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or about to be in default because of a Mortgagor's
financial condition, arrange with the Mortgagor a schedule for the payment of
delinquent payments due on the related Mortgage Loan; provided, however, the
Master Servicer shall not reschedule the payment of delinquent payments more
than one time in any twelve consecutive months with respect to any Mortgagor nor
extend the maturity of any Mortgage Loan beyond the Payment Date in October 2021
(with respect to the HELOC Loans) or October 2023 (with respect to the HLTV
Pool); (iii) modify payments of monthly principal and interest on any Mortgage
Loan becoming subject to the terms of the Civil Relief Act, as amended, in
accordance with the Master Servicer's general policies of the comparable
mortgage loans subject to such Act; or (iv) extend the maturity date of any
HELOC Loan in connection with the extension of the related Draw Period
(provided, however, that in no event may any such maturity date be extended to a
date which is more than 12 months after the original maturity date without the
Insurer's approval or to a date which is later than the Payment Date occurring
in October 2021 in the case of a HELOC Loan or October 2023 in the case of an
HLTV Loan).
(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
Underlying Mortgage Note.
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Section 4.3. Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers. The Master Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution which is
acceptable to the Insurer in compliance with the laws of each state necessary to
enable it to perform its obligations under such Sub-Servicing Agreement. The
Master Servicer shall give notice to the Insurer and the Rating Agencies of the
appointment of any Sub-Servicer and shall furnish to the Insurer and the Rating
Agencies a copy of the Sub-Servicing Agreement. For purposes of this Agreement,
the Master Servicer shall be deemed to have received payments on Mortgage Loans
when any Sub-Servicer has received such payments. Any such Sub-Servicing
Agreement shall be consistent with and not violate the provisions of this
Agreement.
Section 4.4. Successor Sub-Servicers. The Master Servicer may terminate
any Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement and to either directly service the related Mortgage
Loans itself or enter into a Sub-Servicing Agreement with a successor
Sub-Servicer that qualifies under Section 4.3.
Section 4.5. Liability of Master Servicer
(a) The Master Servicer shall not be relieved of its obligations under
this Agreement notwithstanding any Sub-Servicing Agreement or any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a Sub-Servicer or otherwise, and the Master Servicer shall
be obligated to the same extent and under the same terms and conditions as if it
alone were servicing and administering the Mortgage Loans. The Master Servicer
shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Master Servicer by such Sub-Servicer and nothing
contained in such Sub-Servicing Agreement shall be deemed to limit or modify
this Agreement. The Trust shall not indemnify the Master Servicer for any losses
due to the Master Servicer's or any Sub-Servicer's negligence.
(b) The Master Servicer shall defend, indemnify and hold harmless the
Indenture Trustee (including, for purposes of this Section 4.5(b), its officers,
directors, employees and agents), the Owner Trustee (including for purposes of
this Section 4.5(b), its officers, directors, employees and agents), the
Noteholders, Advanta Holding Trust and the Issuer from and against any and all
claims, damages, liabilities, losses, costs and expenses (including the
reasonable fees and expenses of counsel) to the extent that such claims,
damages, liabilities, losses, costs or expenses arose out of, or were imposed
upon the Indenture Trustee, the Owner Trustee, the Noteholders, Advanta Holding
Trust or the Issuer in connection with or by reason of, (i) any failure by the
Master Servicer to perform its duties under this Agreement or any errors or
omissions of the Master Servicer related to such duties, including the making of
any inaccurate representations or warranties hereunder; or (ii) in the case of
the Indenture Trustee or the Owner Trustee, the performance of its duties
hereunder or under the other Operative Documents, except to the extent that such
claim, damage, liability, loss, cost or expense resulted from the Indenture
Trustee's or the Owner Trustee's gross negligence or willful misconduct. The
provisions of this Section 4.5(b) shall run directly to and be enforceable by
each injured
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party subject to the limitations hereof, and the indemnification provided by the
Master Servicer to the Indenture Trustee, the Owner Trustee, the Noteholders,
Advanta Holding Trust and the Issuer pursuant to this Section 4.5(b) shall
survive the payment in full of the Notes, the termination of the Indenture and
the resignation or removal of the Indenture Trustee or the Owner Trustee. The
Master Servicer shall pay any amounts owing pursuant to this Section 4.5(b)
directly to the indemnified Person, and such amounts shall not be deposited in
either the Principal and Interest Account or the Note Account. Indemnification
under this Section 4.5(b) shall include reasonable fees and expenses of counsel
and expenses of litigation reasonably incurred. If the Master Servicer has made
any indemnity payments to the Indenture Trustee, the Owner Trustee, the
Noteholders, Advanta Holding Trust or the Issuer pursuant to this Section 4.5(b)
and such party thereafter collects any of such amounts from others, such party
will promptly repay such amounts collected to the Master Servicer, without
interest.
Section 4.6. No Contractual Relationship Between Sub-Servicer and
Indenture Trustee or the Class A Noteholders. Any Sub-Servicing Agreement and
any other transactions or services relating to the Mortgage Loans involving a
Sub-Servicer shall be deemed to be between the Sub-Servicer and the Master
Servicer alone and the Insurer, the Indenture Trustee and the Class A
Noteholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to any Sub-Servicer
except as set forth in Section 4.7.
Section 4.7. Assumption or Termination of Sub-Servicing Agreement by
Indenture Trustee. In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Master
Servicer hereunder by the Indenture Trustee pursuant to the Sale and Servicing
Agreement, it is understood and agreed that the Master Servicer's rights and
obligations under any Sub-Servicing Agreement then in force between the Master
Servicer and a Sub-Servicer may be assumed or terminated by the Indenture
Trustee at its option.
The Master Servicer shall, upon request of the Indenture Trustee, but
at the expense of the Master Servicer, deliver to the assuming party documents
and records relating to each Sub-Servicing Agreement and an accounting of
amounts collected and held by it and otherwise use its best reasonable efforts
to effect the orderly and efficient transfer of the Sub-Servicing Agreements to
the assuming party.
Section 4.8. Principal and Interest Account.
(a) The Master Servicer and/or each Sub-Servicer, as applicable, shall
establish in the name of the Trust for the benefit of the Class A Noteholders
and the Insurer and maintain at one or more Designated Depository Institutions
the Principal and Interest Account, which may be separate accounts with respect
to each Pool, or a single account with sub-accounts.
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
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Interest Account on a daily basis (but no later than the second Business Day
after receipt).
On the Closing Date, the Sponsor shall cause the Master Servicer to
deposit to the Principal and Interest Account all receipts related to the
related Mortgage Loans received after the Cut-Off Date or related Replacement
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 (as defined in the Indenture). The Principal and Interest
Account shall be held in trust in the name of the Trust and for the benefit of
the Class A Noteholders and the Insurer. Any investment earnings on funds held
in the Principal and Interest Account shall be for the account of the Master
Servicer and may only be withdrawn from the Principal and Interest Account by
the Master Servicer immediately following the remittance of the Monthly
Remittance Amounts by the Master Servicer. Any references herein to amounts on
deposit in the Principal and Interest Account shall refer to amounts net of such
investment earnings. The Master Servicer shall deposit the amount of any
investment losses immediately into the Principal and Interest Account as
realized.
(c) Subject to Subsection (e) below, the Master Servicer shall deposit
to the Principal and Interest Account all principal and interest collections on
the Mortgage Loans received on or after the Cut-Off Date, including any
Prepayments and Net Liquidation Proceeds, all Loan Purchase Prices and
Substitution Amounts received or paid by the Master Servicer with respect to the
Mortgage Loans and other recoveries or amounts related to the Mortgage Loans
received by the Master Servicer, together with any amounts which are
reimbursable from the Principal and Interest Account, but net of (i) the
Servicing Fee with respect to each Mortgage Loan and other servicing
compensation to the Master Servicer as permitted by Section 4.15 hereof, (ii)
principal (including Prepayments) collected on the related Mortgage Loans prior
to the Cut-Off Date, (iii) interest accruing on the related Mortgage Loans prior
to the Cut-Off Date and (iv) Net Liquidation Proceeds to the extent such Net
Liquidation Proceeds exceed the Principal Balance of the related Mortgage Loan.
(d) (i) The Master Servicer may make withdrawals from the Principal and
Interest Account only for the following purposes:
(A) to effect the timely remittance to the Indenture Trustee of
the Monthly Remittance Amount for each Pool due on the
Remittance Date.
(B) to pay to itself from any funds in the Principal and Interest
Account with respect to the related Pool any accrued and
unpaid Servicing Fees with respect to such Pool and reimburse
itself pursuant to Section 4.9 hereof for unreimbursed
Servicing Advances and Servicing Advances which have been
deemed 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 or XII of the Indenture.
(ii) On the tenth day of each month, the Master Servicer shall send to
the Indenture Trustee a report, in the form of a computer tape, detailing the
aggregate payments on the Mortgage Loans in each Pool during the prior
Remittance Period. Such tape shall be in the form and have the specifications as
may be agreed to between the Master Servicer and the Indenture Trustee from time
to time.
(iii) On each Remittance Date the Master Servicer shall remit to the
Indenture Trustee by wire transfer, or otherwise make funds available in
immediately available funds, the Interest Remittance Amount and the Principal
Remittance Amount for each Pool.
(e) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are satisfactory to the Insurer, Moody's and Standard & Poor's,
then the requirement to maintain the Principal and Interest Account may be
waived by an instrument signed by the Insurer, Standard & Poor's and Moody's,
and the Master Servicer may be allowed to co-mingle with its general funds the
amounts otherwise required to be deposited to the Principal and Interest
Account, on such terms and subject to such conditions as the Insurer, Moody's
and Standard & Poor's may permit.
Section 4.9. Servicing Advances. The Master Servicer will pay all
"out-of-pocket" costs and expenses incurred in the performance of its servicing
obligations, including, but not limited to, the cost of (i) Preservation
Expenses, (ii) the cost of any enforcement or judicial proceedings, including
(a) foreclosures, and (b) other legal actions and costs associated herewith that
potentially affect the existence, validity, priority, enforceability or
collectibility of the Mortgage Loans, including collection agency fees and costs
of pursuing or obtaining personal judgments, garnishments, levies, attachment
and similar actions, (iii) the cost of the conservation, management,
liquidation, sale or other disposition or any Mortgaged Property acquired in
satisfaction of the related Mortgage Loan including reasonable fees paid to any
independent contractors in connection therewith, and (iv) advances to keep
senior liens current, unless with respect to any of the foregoing the Master
Servicer has determined that such advance would not be recoverable. 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
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realized upon the liquidation of the related Mortgage Loan, from Insurance
Proceeds, and (y) as provided in Section 8.6(c)(xi) of the Indenture.
Section 4.10. Purchase of Mortgage Loans. The Master Servicer may, but
is not obligated to, purchase for its own account any Mortgage Loan which
becomes Delinquent, in whole or in part, as to 90 days or more or any Mortgage
Loan as to which enforcement proceedings have been brought by the Master
Servicer or by any Sub-Servicer pursuant to Section 4.13. Any such Loan so
purchased shall be purchased by the Master Servicer on a Remittance Date at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Principal and Interest Account.
Section 4.11. Maintenance of Insurance. (a) (i) The Master Servicer
shall cause to be maintained with respect to each HELOC 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 HELOC Loan in an amount not
less than the least of (i) the Credit Limit of the HELOC Loan or (ii) the
maximum insurable value of the Mortgaged Property.
(ii) With respect to each HLTV Loan that was originated by an
Affiliated Originator or is a First Lien HLTV Loan originated by an
Unaffiliated Originator, the Master Servicer shall cause to be
maintained 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 on such HLTV Loan (as set forth above) in an
amount not less than the least of (i) the maximum insurable value of
the improvements securing such HLTV Loan from time to time, (ii) the
combined principal balance owing on such HLTV Loan and any mortgage
loan senior to such HLTV Loan (or, if such insurance has been force
placed by the Master Servicer, the principal balance owing on such HLTV
Loan only) and (iii) the minimum amount required to compensate for
damage or loss on a replacement cost basis; provided, however, that in
no event shall the Master Servicer be required to maintain coverage in
an amount greater than the 100% of the value of the related Mortgaged
Property. With respect to any HLTV Loan originated by an Unaffiliated
Originator, the Master Servicer shall not be required to cause to be
maintained a hazard insurance policy for any HLTV Loan which is secured
by a lien other than a first priority lien.
(b) If any Mortgage Loan at the time of origination relates to a HELOC
Property or is an HLTV Property originated by an Affiliated Originator or is a
First Lien HLTV Property originated by an Unaffiliated Originator 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
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behalf of the Trust of Insurance Proceeds relating to such Mortgage Loan of not
less than the least of (i) the outstanding Principal Balance of the Mortgage
Loan or (ii) the maximum amount of insurance that is available under the Flood
Disaster Protection Act of 1973. The Master Servicer shall indemnify the Trust
and the Insurer out of the Master Servicer's own funds for any loss to the Trust
and the Insurer resulting from the Master Servicer's failure to maintain the
insurance required by this Section; provided, however, that in no event shall
the Master Servicer be required to maintain a flood insurance policy in an
amount greater than 100% of the value of the related Mortgaged Property. The
Master Servicer shall not be required to cause to be maintained flood insurance
for any HLTV Loan secured by a lien other than a first priority lien that was
originated by an Unaffiliated Originator which, by virtue of its license
requirements, was not required to obtain flood insurance.
It is understood and agreed that such insurance shall be with insurers
approved by the Master Servicer and that no earthquake or other additional
insurance is to be required of any Mortgagor or to be maintained on property
acquired in respect of a defaulted loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. Any cost incurred by the Master Servicer in maintaining
any such insurance shall be added to the amount owing under the Mortgage Loan
where the terms of the Mortgage Loan so permit; provided, however, that the
addition of any such cost shall not be taken into account for purposes of
calculating the principal amount of the Underlying Mortgage Notes or the
distributions to be made to the Class A Noteholders. Such costs shall be
recoverable by the Master Servicer pursuant to Section 4.9.
(c) In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended coverage on
all of the Mortgage Loans as set forth above, then, to the extent such policy
names the Master Servicer as loss payee and provides coverage in an amount equal
to the aggregate unpaid principal balance on the Mortgage Loans without
co-insurance, and otherwise complies with the requirements of this Section 4.11,
the Master Servicer shall be deemed conclusively to have satisfied its
obligations with respect to fire and hazard insurance coverage under this
Section 4.11, it being understood and agreed that such blanket policy may
contain a deductible clause, in which case the Master Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the preceding paragraphs of this Section 4.11,
and there shall have been a loss which would have been covered by such policy,
deposit in the Principal and Interest Account from the Master Servicer's own
funds the difference, if any, between the amount that would have been payable
under a policy complying with the preceding paragraphs of this Section 4.11 and
the amount paid under such blanket policy. Upon the request of the Indenture
Trustee or the Insurer, the Master Servicer shall cause to be delivered to the
Indenture Trustee or the Insurer, a certified true copy of such policy.
Section 4.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements. (a) Except as provided in Section 4.14(c), when a Mortgaged Property
securing a HELOC Loan 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
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conveyance, exercise its rights to accelerate the maturity of the related HELOC
Loan under any "due-on-sale" clause contained in the related Mortgage or Credit
Line Agreement; provided, however, that the Master Servicer shall not exercise
any such right if (i) the "due-on-sale" clause, in the reasonable belief of the
Master Servicer, is not enforceable under applicable law or (ii) the Master
Servicer reasonably believes that to permit an assumption of the Mortgage Loan
would not materially and adversely affect the interest of the Class A
Noteholders or of the Insurer. In such event, the Master Servicer shall enter
into an assumption and modification agreement (the terms of which will be
consistent with Section 2.2(d) above) with the person to whom such property has
been or is about to be conveyed, pursuant to which such person becomes liable
under the Underlying Mortgage Notes and, unless prohibited by applicable law or
this Agreement or any of the agreements, guaranties or assignments relating to
the Mortgage Loans contained in the Mortgage Files, the Mortgagor remains liable
thereon. If the foregoing is not permitted under applicable law, the Master
Servicer is authorized to enter into a substitution of liability agreement with
such person, pursuant to which the original Mortgagor is released from liability
and such person is substituted as Mortgagor and becomes liable under the Credit
Line Agreement; provided, however, that to the extent any such substitution of
liability agreement would be delivered by the Master Servicer outside of its
usual procedures for mortgage loans held in its own portfolio the Master
Servicer shall, prior to executing and delivering such agreement, obtain the
prior written consent of the Insurer. The Mortgage Loan, as assumed, shall
conform in all respects to the requirements, representations and warranties of
this Agreement. The Master Servicer shall notify the Indenture Trustee that any
such assumption or substitution agreement has been completed by forwarding to
the Indenture Trustee the original copy of such assumption or substitution
agreement, which copy shall be added by the Indenture Trustee to the related
Mortgage File and which shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. The Master Servicer shall be responsible for
recording any such assumption or substitution agreements. In connection with any
such assumption or substitution agreement, the required monthly payment on the
related Mortgage Loan shall not be changed but shall remain as in effect
immediately prior to the assumption or substitution, the stated maturity or
outstanding principal amount of such Mortgage Loan shall not be changed nor
shall any required monthly payments of principal or interest be deferred or
forgiven. Any fee collected by the Master Servicer or the Sub-Servicer for
consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Master Servicer as additional
servicing compensation.
(b) When a Mortgaged Property securing an HLTV Loan has been or is
about to be conveyed by the Mortgagor, the Master Servicer shall determine in
accordance with the Accepted Servicing Practices either to: (i) exercise its
rights to accelerate the maturity of the HLTV Loan under any "due-on-sale"
clause contained in the related Mortgage or Underlying Mortgage Note or (ii)
permit the Mortgagor to secure the Underlying Mortgage Note with another
property or permit the HLTV Loan to be unsecured for a period, which may be up
to the remaining term of the HLTV Loan.
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Notwithstanding anything in this Section 4.12 or any other
provision of this Agreement, the Master Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reason of
any assumption of a Mortgage Loan by operation of law or any assumption which
the Master Servicer may be restricted by law from preventing, for any reason
whatsoever.
Section 4.13. Realization Upon Defaulted Mortgage Loans (a).
The Master Servicer shall foreclose upon or otherwise comparably effect the
ownership on behalf of the Trust of the Mortgaged Properties relating to
defaulted HELOC Loans as to which no satisfactory arrangements can be made for
collection of Delinquent payments and which the Master Servicer has not
purchased pursuant to Section 4.10. The Master Servicer shall foreclose upon or
otherwise comparably effect the ownership on behalf of the Trust of the
Mortgaged Properties relating to defaulted HLTV Loans if the Master Servicer
determines that the potential net recovery justifies foreclosure. If the Master
Servicer determines not to bring or to terminate foreclosure proceedings, it
will determine in accordance with the Accepted Servicing Practices whether or
not to seek a judgement against the Mortgagor. In connection with such
foreclosure or other conversion, the Master Servicer shall exercise such of the
rights and powers vested in it hereunder, and use the same degree of care and
skill in their exercise or use, as prudent mortgage lenders would exercise or
use under the circumstances in the conduct of their own affairs, including, but
not limited to, advancing funds for the payment of taxes, amounts due with
respect to Senior Liens, and insurance premiums. Any amounts so advanced shall
constitute "Servicing Advances" within the meaning of Section 4.9 hereof.
Notwithstanding the generality of the foregoing provisions,
the Master Servicer shall manage, conserve, protect and operate each REO
Property for the Class A Noteholders solely for the purpose of its prompt
disposition and sale. Pursuant to its efforts to sell such REO Property, the
Master Servicer shall either itself or through an agent selected by the Master
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the Class A
Noteholders, rent the same, or any part thereof, as the Master Servicer deems to
be in the best interest of the Class A Noteholders for the period prior to the
sale of such REO Property. The Master Servicer shall take into account the
existence of any hazardous substances, hazardous wastes or solid wastes, as such
terms are defined in the Comprehensive Environmental Response Compensation and
Liability Act, the Resource Conservation and Recovery Act of 1976, or other
federal, state or local environmental legislation, on a Mortgaged Property in
determining whether to foreclose upon or otherwise comparably convert the Class
A Noteholdership of such Mortgaged Property.
(b) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through Indenture
Trustee's sale, foreclosure sale or otherwise, all amounts it expects to recover
from or on account of such defaulted Mortgage Loan, whereupon such Mortgage Loan
shall become a "Charged-off Loan" and shall promptly deliver to the Insurer its
customary liquidation report (each, a "Liquidation Report") with respect to such
Mortgage Loan. Any net recoveries from a Charged-off Loan shall constitute
property of the Trust.
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Section 4.14. Indenture Trustee to Cooperate; Release of
Mortgage Files. (a) Upon the payment in full of the Principal Balance of
any Mortgage Loan (including the repurchase of any Mortgage Loan or any
liquidation of such Mortgage Loan through foreclosure or otherwise), or the
receipt by the Master Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Master Servicer shall
deliver to the Indenture Trustee a Master Servicer's Trust Receipt. Upon receipt
of such Master Servicer's Trust Receipt, the Indenture Trustee shall promptly
release the related Mortgage File, in trust to (i) the Master Servicer, (ii) an
escrow agent or (iii) any employee, agent or attorney of the Indenture Trustee,
in each case pending its release by the Master Servicer, such escrow agent or
such employee, agent or attorney of the Indenture Trustee, as the case may be.
Upon any such payment in full, or the receipt of such notification that such
funds have been placed in escrow, the Master Servicer is authorized to give, as
attorney-in-fact for the Indenture Trustee and the mortgagee under the Mortgage
which secured the Underlying Mortgage Note, an instrument of satisfaction (or
assignment of Mortgage without recourse) regarding the Mortgaged Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account. In lieu of executing any such satisfaction or assignment, as
the case may be, the Master Servicer may prepare and submit to the Indenture
Trustee, a satisfaction (or assignment without recourse, if requested by the
Person or Persons entitled thereto) in form for execution by the Indenture
Trustee with all requisite information completed by the Master Servicer; in such
event, the Indenture Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related Mortgage
File, as aforesaid.
(b) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy, the Indenture Trustee shall (except in the case of the payment
or liquidation pursuant to which the related Mortgage File is released to an
escrow agent or an employee, agent or attorney of the Indenture Trustee), upon
request of the Master Servicer and delivery to the Indenture Trustee of a Master
Servicer's Trust Receipt in the form of Exhibit F hereto, release the related
Mortgage File to the Master Servicer and shall execute such documents as shall
be necessary to the prosecution of any such proceedings, including, without
limitation, an assignment without recourse of the related Mortgage to the Master
Servicer; provided, that there shall not be released and unreturned at any one
time more than 300 Mortgage Files. The Indenture Trustee shall complete in the
name of the Indenture Trustee any endorsement in blank on any Underlying
Mortgage Note prior to releasing such Underlying Mortgage Note to the Master
Servicer. Such receipt shall obligate the Master Servicer to return the Mortgage
File to the Indenture Trustee when the need therefor by the Master Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of the liquidation information, in physical or electronic form, a copy
of the Master Servicer's Trust Receipt shall be released by the Indenture
Trustee to the Master Servicer.
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(c) Subject to the provisions of Section 2.2(d) above, the
Master Servicer shall have the right to approve applications of Mortgagors for
consent to (i) partial releases of Mortgages (with the consent of the Insurer),
(ii) alterations to Mortgaged Properties and (iii) removal, demolition or
division of Mortgaged Properties. With respect to HELOC Loans, no application
for approval shall be considered by the Master Servicer unless: (x) the
provisions of the related Underlying Mortgage 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 Insurer) and the Mortgagor's debt-to-income ratio after any
release does not exceed the maximum Combined Loan-to-Value Ratio and
debt-to-income ratio specified as the then-current maximum levels under the
related Originator's underwriting guidelines for a similar credit grade borrower
and (z) the lien priority of the related Mortgage is not adversely affected. The
Master Servicer shall also have the right (such right to be exercised in an
manner consistent with the Master Servicer's normal servicing practices and
consistent with such guidelines as may be approved by the Rating Agencies and
the Insurer) to permit a borrower who is selling his principal residence and
purchasing a new residence to substitute the new Mortgaged Property as
collateral for the related Mortgage Loan so long as the Combined Loan-to-Value
Ratio is no greater and the occupancy and property type remain the same. In any
such event, however, the Master Servicer will generally require the borrower to
make a partial pre-payment in reduction of the principal amount of the Loan to
the extent that the borrower receives proceeds from the sale of the prior
residence that will not be applied to the purchase of the new residence. Upon
receipt by the Indenture Trustee and the Insurer of an Officer's Certificate
executed on behalf of the Master Servicer setting forth the action proposed to
be taken in respect of a particular Mortgage Loan and certifying that the
criteria set forth in the immediately preceding sentence have been satisfied,
the Indenture Trustee shall execute and deliver to the Master Servicer the
consent or partial release so requested by the Master Servicer. A proposed form
of consent or partial release, as the case may be, shall accompany any Officer's
Certificate delivered by the Master Servicer pursuant to this paragraph.
(d) No costs associated with the procedures described in this
Section 4.14 shall be an expense of the Trust.
(e) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given by
the Insurer, Moody's and Standard & Poor's pursuant to Section 2.1(k) hereof.
(f) Each Master Servicer's Trust Receipt may be delivered to
the Indenture Trustee (i) via mail or courier, (ii) via facsimile or (iii) by
such other means, including, without limitation, electronic or computer readable
medium, as the Master Servicer and the Indenture Trustee shall mutually agree.
The Indenture Trustee shall promptly release the related Mortgage File(s) within
seven (7) Business Days of receipt of a properly completed Master Servicer's
Trust Receipt pursuant to clauses (i), (ii) or (iii) above or such shorter
period as may be agreed upon by the Master Servicer and the Indenture Trustee.
Receipt of a Master Servicer's Trust Receipt pursuant to clauses (i), (ii) or
(iii) above shall be authorization to the Indenture Trustee to release such
Mortgage
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Files, provided the Indenture Trustee has determined that such Master Servicer's
Trust Receipt has been executed, with respect to clauses (i) or (ii) above, or
approved, with respect to clause (iii) above, by an Authorized Officer of the
Master Servicer or any Sub-servicer, and so long as the Indenture Trustee
complies with its duties and obligations under this Agreement. If the Indenture
Trustee is unable to release the Mortgage Files within the time frames
previously specified, the Indenture Trustee shall immediately notify the Master
Servicer or any Sub-servicer indicating the reason for such delay, but in no
event shall such notification be later than seven Business Days after receipt of
a Master Servicer's Trust Receipt. If the Master Servicer is required to pay
penalties or damages due solely to the Indenture Trustee's negligent failure to
release the related Mortgage File or the Indenture Trustee's negligent failure
to execute and release documents in a timely manner, the Indenture Trustee shall
be liable for such penalties or damages.
(g) On each day that the Master Servicer remits to the
Indenture Trustee Master Servicer's Trust Receipts pursuant to clauses (ii) or
(iii) above, the Master Servicer or any Sub-servicer shall also submit to the
Indenture Trustee a summary of the total amount of such Master Servicer's Trust
Receipts requested on such day by the same method as described in such clauses
(ii) or (iii) above.
Section 4.15. Servicing Compensation. As compensation for its
activities hereunder, the Master Servicer shall be entitled to retain the amount
of the Servicing Fee with respect to each Mortgage Loan pursuant to the
provisions of this Agreement. Additional servicing compensation in the form of
prepayment charges, Termination Fees, release fees, bad check charges,
assumption fees, late payment charges, or any other servicing-related fees, Net
Liquidation Proceeds not required to be deposited in the Principal and Interest
Account pursuant to Section 4.8(c) and similar items may, to the extent
collected from Mortgagors, be retained by the Master Servicer.
Section 4.16. Annual Statement as to Compliance. The Master
Servicer, at its own expense, will deliver to the Indenture Trustee, Insurer,
Standard & Poor's and Moody's, on or before the fifteenth of April of each year,
commencing in 1999, an Officer's Certificate stating, as to each signer thereof,
that (i) a review of the activities of the Master Servicer during such preceding
calendar year and of performance under this Agreement has been made under such
officers' supervision, and (ii) to the best of such officers' knowledge, based
on such review, the Master Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officers and
the nature and status thereof including the steps being taken by the Master
Servicer to remedy such defaults.
Section 4.17. Annual Independent Certified Public Accountants'
Reports. On or before the fifteenth of April of each year, commencing in 1999,
the Master Servicer, at its own expense, shall cause to be delivered to the
Indenture Trustee, the Insurer, Standard & Poor's and Moody's a letter or
letters of a firm of independent, nationally recognized certified public
accountants reasonably acceptable to the Insurer stating that such firm has,
with respect to the Master Servicer's overall servicing
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operations (i) performed applicable tests in accordance substantially in
compliance with the testing procedures as set forth in Appendix 3 of the Audit
Guide for Audits of HUD Approved Nonsupervised Mortgagees or (ii) examined such
operations substantially in compliance with the requirements of the Uniform
Single Attestation Program for Mortgage Bankers, and in either case stating such
firm's conclusions relating thereto.
Section 4.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans. The Master Servicer shall provide to the Indenture
Trustee, the Insurer, the FDIC and the supervisory agents and examiners of each
of the foregoing access to the documentation regarding the Mortgage Loans
required by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Master Servicer designated by it.
Upon any change in the format of the computer tape maintained
by the Master Servicer in respect of the Mortgage Loans, the Master Servicer
shall deliver a copy of such computer tape to the Indenture Trustee and in
addition shall provide a copy of such computer tape to the Indenture Trustee and
the Insurer at such other times as the Indenture Trustee or the Insurer may
reasonably request.
Section 4.19. Assignment of Agreement. The Master Servicer may
not assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Indenture Trustee and
Insurer, which such consent shall not be unreasonably withheld; provided,
however, that any assignee must meet the eligibility requirements set forth in
Section 5.1(g) hereof for a successor servicer. Notice of any such assignment
shall be given by the Master Servicer to the Indenture Trustee, the Insurer and
Moody's.
ARTICLE V
SERVICING TERMINATION
Section 5.1. Events of Servicing Termination. (a) If any one
of the following events ("Event of Servicing Termination") shall occur and be
continuing:
(i) The Master Servicer shall fail to deliver to the Indenture
Trustee any proceeds or required payment, which failure continues
unremedied for three Business Days following written notice to an
Authorized Officer of the Master Servicer from the Indenture Trustee or
from the Insurer or Class A Noteholders evidencing Percentage Interests
aggregating not less than 25%.
(ii) The Master Servicer shall (I) apply for or consent to the
appointment of a receiver, Indenture Trustee, liquidator or custodian
or similar entity with respect to itself or its property, (II) admit in
writing its inability to pay its debts generally as they become due,
(III) make a general assignment for the benefit of creditors, (IV) be
adjudicated a bankrupt or insolvent, (V) commence a voluntary case
under the federal bankruptcy laws of the United States of America
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or file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the
material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or (VI) take corporate action
for the purpose of effecting any of the foregoing.
(iii) If without the application, approval or consent of the
Master Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of
the Master Servicer an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a Indenture Trustee, receiver, liquidator or custodian
or similar entity with respect to the Master Servicer or of all or any
substantial part of its assets, or other like relief in respect thereof
under any bankruptcy or insolvency law, and, if such proceeding is
being contested by the Master Servicer in good faith, the same shall
(A) result in the entry of an order for relief or any such adjudication
or appointment or (B) continue undismissed or pending and unstayed for
any period of seventy-five (75) consecutive days; or
(iv) The Master Servicer shall fail to cure any breach of any
of its representations and warranties set forth in Section 3.2 or
perform any covenants hereunder, which failure materially and adversely
affects the interests of the Class A Noteholders or Insurer for a
period of 30 days after the Master Servicer's discovery or receipt of
notice thereof from the Indenture Trustee, the Insurer, or Class A
Noteholders evidencing Percentage Interests aggregating not less than
25%; provided, however, that if the Master Servicer can demonstrate to
the reasonable satisfaction of the Insurer that it is diligently
pursuing remedial action, then the cure period may be extended with the
written consent of the Insurer.
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Master Servicer, either the
Indenture Trustee, the Insurer or the Class A Noteholders evidencing Percentage
Interests aggregating not less than 51% in each case with the consent of the
Insurer, or the Insurer, by notice then given in writing to the Master Servicer
(and to the Indenture Trustee if given by the Insurer of the Class A
Noteholders) may terminate all of the rights and obligations of the Master
Servicer as servicer under this Agreement. Any such notice to the Master
Servicer shall also be given to each Rating Agency and the Insurer. On and after
the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer under this Agreement, whether with respect to the
Notes or the Mortgage Loans or otherwise, shall pass to and be vested in the
Indenture Trustee pursuant to and under this Section 5.1 and, without
limitation, the Indenture Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of each Mortgage
Loan
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and related documents, or otherwise. The Master Servicer agrees to cooperate
with the Indenture Trustee in effecting the termination of the responsibilities
and rights of the Master Servicer hereunder, including, without limitation, the
transfer to the Indenture Trustee for the administration by it of all cash
amounts that shall at the time be held by the Master Servicer and to be
deposited by it in the Note Account, or that have been deposited by the Master
Servicer in the Note Account or thereafter received by the Master Servicer with
respect to the Mortgage Loans. All reasonable costs and expenses (including
attorneys' fees) incurred in connection with amending this Agreement to reflect
such succession as Master Servicer pursuant to this Section 5.1 shall be paid by
the predecessor Master Servicer (or if the predecessor Master Servicer is the
Indenture Trustee, the initial Master Servicer) upon presentation of reasonable
documentation of such costs and expenses.
Nothing herein shall relieve the Master Servicer from using its best
efforts to perform its respective obligations in a timely manner in accordance
with the terms of this Agreement and the Master Servicer shall provide the
Indenture Trustee, the Sponsor, the Insurer and the Noteholders with an
Officer's Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations. The
Master Servicer shall immediately notify the Indenture Trustee and the Insurer
in writing of any Events of Servicing Termination.
(b) In addition to the foregoing, the Insurer may remove the Master
Servicer upon the occurrence of an "Insurance Agreement Event of Servicing
Termination" under the Insurance Agreement.
(c) The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except by mutual written consent of the Sponsor, the
Master Servicer, the Insurer and the Indenture Trustee or upon determination
that its duties hereunder are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
carried on by it, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer at the
date of this Agreement. Any such determination permitting the resignation of the
Master Servicer shall be evidenced by an opinion of counsel to such effect which
shall be delivered to the Indenture Trustee and the Insurer.
(d) No removal or resignation of the Master Servicer shall become
effective until the Indenture Trustee or a successor servicer acceptable to the
Insurer shall have assumed the Master Servicer's responsibilities and
obligations in accordance with this Section.
(e) Upon removal or resignation of the Master Servicer, the Master
Servicer also shall promptly deliver or cause to be delivered to a successor
servicer or the Indenture Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Master Servicer has
maintained for the Mortgage Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Master Servicer's possession.
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(f) Any collections received by the Master Servicer after removal or
resignation shall be endorsed by it to the Indenture Trustee and remitted
directly and immediately to the Indenture Trustee or the successor Master
Servicer.
(g) Upon removal or resignation of the Master Servicer, the Indenture
Trustee (x) may solicit bids for a successor servicer as described below, and
(y) pending the appointment of a successor Master Servicer as a result of
soliciting such bids, shall serve as Master Servicer. The Indenture Trustee
shall, if it is unable to obtain a qualifying bid and is prevented by law from
acting as Master Servicer, appoint, or petition a court of competent
jurisdiction to appoint, any housing and home finance institution, bank or
mortgage servicing institution which has shareholders' equity of not less than
$5,000,000, as determined in accordance with generally accepted accounting
principles, and acceptable to the Insurer as the successor to the Master
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer hereunder. The compensation of any
successor servicer (including, without limitation, the Indenture Trustee) so
appointed shall be the aggregate Servicing Fees, together with the other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in Sections 4.8 and 4.15; provided, however, that if the
Indenture Trustee acts as successor Master Servicer then the Sponsor agrees to
pay to the Indenture Trustee at such time that the Indenture Trustee becomes
such successor Master Servicer a fee of twenty-five dollars ($25.00) for each
Mortgage Loan then included in the Trust Estate. The Indenture Trustee shall be
obligated to serve as successor Master Servicer whether or not the $25.00 fee
described in the preceding sentence is paid by the Sponsor, but shall in any
event be entitled to receive, and to enforce payment of, such fee from the
Originator.
(h) In the event the Indenture Trustee solicits bids as provided above,
the Indenture Trustee shall solicit, by public announcement, bids from housing
and home finance institutions, banks and mortgage servicing institutions meeting
the qualifications set forth above. Such public announcement shall specify that
the successor Master Servicer shall be entitled to the full amount of the
aggregate Servicing Fees as servicing compensation, together with the other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in Sections 4.8 and 4.15. Within thirty days after any
such public announcement, the Indenture Trustee shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest satisfactory bid. The
Indenture Trustee shall deduct from any sum received by the Indenture Trustee
from the successor to the Master Servicer in respect of such sale, transfer and
assignment all costs and expenses of any public announcement and of any sale,
transfer and assignment of the servicing rights and responsibilities hereunder.
After such deductions, the remainder of such sum shall be paid by the Indenture
Trustee to the Master Servicer at the time of such sale, transfer and assignment
to the Master Servicer's successor.
(i) The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Master Servicer agrees to cooperate with the Indenture Trustee
and any successor Master Servicer in effecting the termination of the Master
Servicer's servicing
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responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor Master Servicer, as applicable, all documents and
records reasonably requested by it to enable it to assume the Master Servicer's
functions hereunder and shall promptly also transfer to the Indenture Trustee or
such successor Master Servicer, as applicable, all amounts which then have been
or should have been deposited in the Principal and Interest Account by the
Master Servicer or which are thereafter received with respect to the Mortgage
Loans. Neither the Indenture Trustee nor any other successor Master Servicer
shall be held liable by reason of any failure to make, or any delay in making,
any distribution hereunder or any portion thereof caused by (i) the failure of
the Master Servicer to deliver, or any delay in delivering, cash, documents or
records to it, or (ii) restrictions imposed by any regulatory authority having
jurisdiction over the Master Servicer.
(j) The Master Servicer which is being removed or is resigning shall
give notice to the Mortgagors and to Moody's and Standard & Poor's of the
transfer of the servicing to the successor.
(k) The Indenture Trustee shall give notice to the Insurer, Moody's and
Standard & Poor's and to the Class A Noteholders of the occurrence of any event
specified in Section 5.1(a) of which the Indenture Trustee has actual knowledge.
(l) The Indenture Trustee or any other successor Master Servicer, upon
assuming the duties of Master Servicer hereunder, shall immediately make all
Servicing Advances which the Master Servicer has theretofore failed to pay with
respect to the Mortgage Loans; provided, however, that if the Indenture Trustee
is acting as successor Master Servicer, the Indenture Trustee shall only be
required to make Servicing Advances if, in the Trustee's reasonable good faith
judgment, such Servicing Advances will ultimately be recoverable from the
related Mortgage Loans.
Section 5.2. Inspections by Insurer; Errors and Omissions
Insurance. (a) At any reasonable time and from time to time upon reasonable
notice, the Insurer, the Indenture Trustee, or any agents or representatives
thereof may inspect the Master Servicer's servicing operations and discuss the
servicing operations of the Master Servicer with any of its officers or
directors.
(b) The Master Servicer agrees to maintain errors and
omissions coverage and a fidelity bond, each at least to the extent generally
maintained by prudent mortgage loan servicers having servicing portfolios of a
similar size.
Section 5.3. Merger, Conversion, Consolidation or Succession
to Business of Master Servicer. Any corporation into which the Master Servicer
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer shall be a party, or any corporation succeeding to all or
substantially all of the business of the Master Servicer, shall be the successor
of the Master Servicer hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto provided that such
corporation meets the qualifications set forth in Section 5.1(f).
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Section 5.4. Notification to Noteholders. Upon any termination
or appointment of a successor to the Master Servicer pursuant to this Article V,
the Indenture Trustee shall give prompt written notice thereof to the
Noteholders at their respective addresses appearing in the Note Register, the
Insurer and each Rating Agency.
Section 5.5. Notices of Material Events. The Master Servicer
shall give prompt notice to the Insurer, the Indenture Trustee, Moody's and S&P
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
Operative Document or would constitute a material breach of a representation,
warranty or covenant under any Operative Document.
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against any
Originator, 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 of such
Originator's, the Sponsor's, the Master Servicer's or AMHC's ability to perform
its obligations under any Operative Document.
(c) The commencement of any proceedings by or against any
Originator, 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 such Originator, 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 Originator's, the Sponsor's, the Master
Servicer's or the AMHC's business that such Originator, the Sponsor, the Master
Servicer or AMHC is to cease and desist, or to undertake any practice, program,
procedure or policy employed by such Originator, 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 such
Originator's, the Sponsor's, the Master Servicer's or AMHC's business or its
ability to perform under the Operative Documents or materially adversely affect
the financial affairs of such Originator, the Sponsor, the Master Servicer or
AMHC.
ARTICLE VI
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
Section 6.1. Administrative Duties with Respect to the
Indenture. The Master Servicer shall perform all its duties and the duties of
the Issuer under the
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Indenture. In addition, the Master Servicer shall consult with the Owner Trustee
as the Master Servicer deems appropriate regarding the duties of the Issuer
under the Indenture. The Master Servicer shall monitor the performance of the
Issuer and shall advise the Owner Trustee when action is necessary to comply
with the Issuer's duties under the Indenture. The Master Servicer shall prepare
for execution by the Issuer or shall cause the preparation by other appropriate
Persons of all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer to prepare, file or deliver
pursuant to the Indenture. In furtherance of the foregoing, the Master Servicer
shall take all necessary action that is the duty of the Issuer to take pursuant
to the Indenture.
(a) Duties with Respect to the Issuer.
(i) In addition to the duties of the Master Servicer set forth
in this Agreement or any of the Documents, the Master Servicer shall
perform such calculations and shall prepare for execution by the Issuer
or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to
this Agreement or any of the Operative Documents or under state and
federal tax and securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is the duty of the
Issuer to take pursuant to this Agreement or any of the Operative
Documents. In accordance with the directions of the Issuer or the Owner
Trustee, the Master Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Mortgage
Loans (including the Operative Documents) as are not covered by any of
the foregoing provisions and as are expressly requested by the Issuer
or the Owner Trustee and are reasonably within the capability of the
Master Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Operative Documents to the contrary, the Master Servicer shall be
responsible for promptly notifying the Owner Trustee and the Indenture
Trustee in the event that any withholding tax is imposed on the
Issuer's payments (or allocations of income) with respect to the
Certificateholders' interest in the Trust as contemplated by this
Agreement. Any such notice shall be in writing and specify the amount
of any withholding tax required to be withheld by the Owner Trustee or
the Indenture Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the
Operative Documents to the contrary, the Master Servicer shall be
responsible for performance of the duties of the Issuer or the Sponsor
set forth in Section 5.1(a), (b), (c) and (d) of the Trust Agreement
with respect to, among other things, accounting and reports with
respect to the Certificateholders' interest in the Trust.
(iv) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Master Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any
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such transactions or dealings shall be in accordance with any
directions received from the Issuer (with the consent of the Insurer)
and shall be, in the Master Servicer's opinion, no less favorable to
the Issuer or the Insurer in any material respect.
(b) Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Master Servicer are non-ministerial, the Master
Servicer shall not take any action pursuant to this Article VI unless within a
reasonable time before the taking of such action, the Master Servicer shall have
notified the Owner Trustee and the Insurer of the proposed action and the Owner
Trustee and the Insurer shall have consented thereto or provided an alternative
direction. For the purpose of the preceding sentence, "non-ministerial matters"
shall include:
(i) the amendment of or any supplement to the Indenture.
(ii) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Mortgage Loans).
(iii) the amendment, change or modification of this Agreement
or any of the Operative Documents.
(iv) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of Successor Servicers or the consent to
the assignment by the Note Registrar, Paying Agent or Indenture Trustee
of its obligations under the Indenture; and
(v) the removal of the Indenture Trustee.
(c) Exceptions. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Operative
Documents, the Master Servicer, in its capacity hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Noteholders to the
Originator under the Operative Documents, (2) sell the Trust Property pursuant
to Section 12.1 of the Indenture, (3) take any other action that the Issuer
directs the Master Servicer not to take on its behalf (unless the Insurer so
directs) or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
(d) Responsibility. The Indenture Trustee or any successor
Master Servicer shall not be responsible for any obligations or duties of the
Master Servicer under Section 6.1.
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Section 6.2. Records. The Master Servicer shall maintain
appropriate books of account and records relating to services performed under
this Agreement, which books of account and records shall be accessible for
inspection by the Issuer and the Indenture Trustee at any time during normal
business hours.
Section 6.3. Additional Information to be Furnished to the
Issuer. The Master Servicer shall furnish to the Issuer, the Indenture Trustee
and the Insurer from time to time such additional information regarding the
Mortgage Loans as the Issuer, the Indenture Trustee and the Insurer shall
reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Compliance Certificates and Opinions. Upon any
application or request by the Sponsor, the Insurer or the Class A Noteholders to
the Indenture Trustee to take any action under any provision of this Agreement,
the Sponsor, the Insurer or the Class A Noteholders, as the case may be, shall
furnish to the Indenture Trustee a certificate stating that all conditions
precedent, if any, provided for in this Agreement relating to the proposed
action have been complied with, except that in the case of any such application
or request as to which the furnishing of any documents is specifically required
by any provision of this Agreement relating to such particular application or
request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto.
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 7.2. Form of Documents Delivered to the Indenture
Trustee. In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate of an Authorized Officer of the Indenture
Trustee may be based, insofar as it relates to legal matters, upon an opinion of
counsel, unless such
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Authorized Officer knows, or in the exercise of reasonable care should know,
that the opinion is erroneous. Any such certificate of an Authorized Officer of
the Indenture Trustee or any opinion of counsel may be based, insofar as it
relates to factual matter upon a certificate or opinion of, or representations
by, one or more Authorized Officers of the Sponsor or of the Master Servicer,
stating that the information with respect to such factual matters is in the
possession of the Sponsor or of the Master Servicer, unless such Authorized
Officer or counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may also be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
Authorized Officer of the Indenture Trustee, stating that the information with
respect to such matters is in the possession of the Indenture Trustee, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous. Any opinion of counsel may be based on the written opinion of other
counsel, in which event such opinion of counsel shall be accompanied by a copy
of such other counsel's opinion and shall include a statement to the effect that
such counsel believes that such counsel and the Indenture Trustee may reasonably
rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
Section 7.3. Acts of Class A Noteholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by the Class A Noteholders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Class A Noteholders in person or by an agent duly appointed
in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Indenture Trustee and the Insurer has consented thereto, and, where it is hereby
expressly required, to the Sponsor. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "act" of the Class A Noteholders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Indenture Trustee and the Trust, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of the Class A Notes shall be proved by the
Register.
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(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by any Class A Noteholder shall bind the Holder
of every Class A Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Indenture Trustee or the Trust in reliance thereon,
whether or not notation of such action is made upon such Class A Notes.
Section 7.4. Notices, etc. to Indenture Trustee. Any request,
demand, authorization, direction, notice, consent, waiver or act of the Class A
Noteholders or other documents provided or permitted by this Agreement to be
made upon, given or furnished to, or filed with the Indenture Trustee by any
Owner, the Insurer or by the Sponsor shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with and received
by the Indenture Trustee at its Corporate Trust Office as set forth in the
Indenture.
Section 7.5. Notices and Reports to Class A Noteholders;
Waiver of Notices. Where this Agreement provides for notice to Class A
Noteholders of any event or the mailing of any report to Class A Noteholders,
such notice or report shall be sufficiently given (unless otherwise herein
expressly provided) if mailed, first-class postage prepaid, to each Owner
affected by such event or to whom such report is required to be mailed, at the
address of such Owner as it appears on the Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice or the mailing of such report. In any case where a notice or report to
Class A Noteholders is mailed in the manner provided above, neither the failure
to mail such notice or report nor any defect in any notice or report so mailed
to any particular Owner shall affect the sufficiency of such notice or report
with respect to other Class A Noteholders, and any notice or report which is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given or provided.
Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Class A Noteholders shall be filed with the
Indenture Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Class A Noteholders when such notice
is required to be given pursuant to any provision of this Agreement, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency
that rated any Class A Notes, failure to give such notice shall not affect any
other rights or obligations created hereunder.
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Section 7.6. Rules by Indenture Trustee. The Indenture Trustee
may make reasonable rules for any meeting of Class A Noteholders.
Section 7.7. Successors and Assigns. All covenants and
agreements in this Agreement by any party hereto shall bind its successors and
assigns, whether so expressed or not.
Section 7.8. Severability. In case any provision in this
Agreement or in the Class A Notes shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 7.9. Benefits of Agreement. Nothing in this Agreement
or in the Class A Notes, expressed or implied, shall give to any Person, other
than the Class A Noteholders, the Insurer and the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
Section 7.10. Legal Holidays. In any case where the date of
any Payment Date, any other date on which any distribution to any Holder is
proposed to be paid, or any date on which a notice is required to be sent to any
Person pursuant to the terms of this Agreement shall not be a Business Day, then
(notwithstanding any other provision of the Class A Notes or this Agreement)
payment or mailing need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made or mailed on
the nominal date of any such Payment Date, or such other date for the payment of
any distribution to any Owner or the mailing of such notice, as the case may be,
and no interest shall accrue for the period from and after any such nominal
date, provided such payment is made in full on such next succeeding Business
Day.
Section 7.11. Governing Law. In view of the fact that Class A
Noteholders are expected to reside in many states and outside the United States
and the desire to establish with certainty that this Agreement will be governed
by and construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Class A Note shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
Section 7.12. Counterparts. This instrument may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 7.13. Usury. The amount of interest payable or paid on
any Class A Note under the terms of this Agreement shall be limited to an amount
which shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the State of New York or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event
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any payment of interest on any Class A Note exceeds the Highest Lawful Rate, the
Trust stipulates that such excess amount will be deemed to have been paid to the
Owner of such Class A Note inadvertently in error by the Indenture Trustee
acting on behalf of the Trust and the Owner receiving such excess payment shall
promptly, upon discovery of such error or upon notice thereof from the Indenture
Trustee on behalf of the Trust, refund the amount of such excess or, at the
option of such Owner, apply the excess to the payment of principal of such Class
A Note, if any, remaining unpaid in any event, the Indenture Trustee shall not
be responsible for any repayment of such excess payments. In addition, all sums
paid or agreed to be paid to the Indenture Trustee for the benefit of Class A
Noteholders of Class A Notes for the use, forbearance or detention of money
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Class A Notes.
Section 7.14. Amendment. (a) The Indenture Trustee, the
Sponsor and the Master Servicer, may at any time and from time to time, with the
prior written approval of the Insurer but without the giving of notice to or the
receipt of the consent of the Class A Noteholders, amend this Agreement, and the
Indenture Trustee shall consent to such amendment, for the purpose of (i) curing
any ambiguity, or correcting or supplementing any provision hereof which may be
inconsistent with any other provision hereof, or to add provisions hereto which
are not inconsistent with the provisions hereof, or (ii) complying with the
requirements of the Code and the regulations proposed or promulgated thereunder;
provided, however, that any such action shall not, as evidenced by an opinion of
counsel delivered to the Indenture Trustee, materially and adversely affect the
interests of any Owner (without its written consent).
(b) The Indenture Trustee, the Sponsor and the Master Servicer
may, at any time and from time to time, with the prior written approval of the
Insurer but without the giving of notice to or the receipt of the consent of the
Class A Noteholders, amend this Agreement, and the Indenture Trustee shall
consent to such amendment, for the purpose of changing the definition of
"Specified Overcollateralization Amount" (as defined in the Insurance
Agreement); provided, however, that no such change shall affect the weighted
average life of the Class A Notes (assuming an appropriate prepayment speed as
determined by the Underwriter as evidenced in writing) by more than five
percent, as determined by the Underwriter.
(c) This Agreement may also be amended by the Indenture
Trustee, the Sponsor, and the Master Servicer at any time and from time to time,
with the prior written approval of the Insurer and not less than a majority of
the Percentage Interest represented by the Class A Notes then Outstanding, for
the purpose of adding any provisions or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Class A Noteholders hereunder; provided, however, that no such amendment
shall (a) change in any manner the amount of, or change the timing of, payments
which are required to be distributed to any Owner without the consent of the
Owner of such Class A Notes or (b) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such amendments,
without the consent of all Class A Noteholders then Outstanding.
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<PAGE> 88
(d) The Insurer, the Class A Noteholders, Moody's and Standard
& Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
Section 7.15. The Insurer. The Insurer is a third-party
beneficiary of this Agreement. Any right conferred to the Insurer shall be
suspended during any period in which the Insurer is in default in its payment
obligations under the Policy except with respect to amendments to this Agreement
pursuant to Section 11.14. During any period of suspension the Insurer's rights
hereunder shall vest in the Class A Noteholders of the Class A Notes and shall
be exercisable by the Class A Noteholders of at least a majority in Percentage
Interest of the Class A Notes then Outstanding. At such time as the Class A
Notes are no longer Outstanding hereunder and the Insurer has been reimbursed
for all payments made pursuant to the Policy to which it is entitled hereunder,
the Insurer's rights hereunder shall terminate. Except at such time as an
Insurer Default has occurred and is continuing, the Insurer shall be deemed the
100% Holder of the Class A Notes for purposes of all voting rights, consents,
directions, notices and waivers hereunder.
Section 7.16. Notices. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
The Indenture Trustee: Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92614
Attention: ADVANTA HOME
EQUITY LOAN TRUST 1998-B
Tel: (949) 253-7575
Fax: (949) 253-7577
The Sponsor: Advanta Mortgage Conduit
Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Senior Vice President,
Loan Service
Tel: (619) 674-3356
Fax: (619) 674-3666
with a copy addressed to the attention of the
General Counsel at the same address.
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<PAGE> 89
The Master Servicer: Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Senior Vice President, Loan Service
Tel: (619) 674-3356
Fax: (619) 674-3666
The Insurer: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management - SF
Tel.: (800) 765-6272
Fax: (914) 765-3810
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring Department
Standard & Poor's: Standard & Poor's Ratings Group
26 Broadway, 10th Floor
New York, New York 10004
Attention: Mortgage Surveillance Group
The Trust: Advanta Revolving Home Equity Loan
Trust 1998-B
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Section 7.17. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation,
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representation, warranty or covenant made or undertaking by the Issuer under
this Agreement or any related documents.
[Signature Page Follows]
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<PAGE> 91
IN WITNESS WHEREOF, the parties hereto 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.
By:
----------------------------------------
Name:
Title:
ADVANTA MORTGAGE CORP. USA
By:
----------------------------------------
Name:
Title:
ADVANTA HOME EQUITY LOAN TRUST 1998-B,
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
By:
----------------------------------------
Name:
Title:
ADVANTA HOLDING TRUST
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
By:
----------------------------------------
Name:
Title:
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
not in its individual capacity but solely as Indenture Trustee
By:
----------------------------------------
Name:
Title:
[Signature Page of Sale and Servicing Agreement]
<PAGE> 92
SCHEDULE I
SCHEDULE OF MORTGAGE LOANS
S-1
<PAGE> 93
EXHIBIT A
FORM OF CONTENTS OF MORTGAGE LOAN FILE
FOR HELOC LOANS:
(a) The original Credit Line Agreement, or a certified copy
thereof, bearing all intervening endorsements, endorsed either (i) "Pay to the
order of Bankers Trust Company of California, N.A., as custodian or trustee
under the applicable custody or trust agreement, without recourse" or (ii) "Pay
to the order of Bankers Trust Company of California, N.A., as custodian or
trustee under the applicable custody or trust agreement, without recourse,
Advanta as Master Servicer," or (iii) "Pay to the order of Bankers Trust Company
of California, N.A., as custodian or trustee" by [Seller, signature, name,
title] and signed in the name of the previous owner by an authorized offer (in
the event that the Mortgage Loan was acquired by the previous owner in a merger
the signature must be in the following form: "[the previous owner], successor by
merger to [name of predecessor]", in the event that the Mortgage Loan was
acquired or originated while doing business under another name, the signature
must be in the following form: "[the previous owner], formerly known as
[previous name]" or (iv) "Pay to the order of Bankers Trust Company, without
recourse". The original Credit Line Agreement should be accompanied by any rider
made in connection with the origination of the related Mortgage Loan.
(b) The original of any guaranty executed in connection with
the Credit Line Agreement (if any).
(c) The original Mortgage with evidence of recording thereon
or copies certified by the related recording office or if the original Mortgage
has not yet been returned from the recording office, a certified copy of the
Mortgage.
(d) The originals of any assumption, modification,
consolidation or extension agreements.
(e) If required, the original Assignment of Mortgage of each
Mortgage Loan to "Bankers Trust Company of California, N.A., as custodian or
trustee", "Bankers Trust Company of California, N.A. as trustee or custodian on
behalf of the Advanta Conduit" or "Bankers Trust Company, as trustee". In the
event that the Mortgage Loan was acquired by the previous owner in a merger, the
Assignment of Mortgage must be the "(previous owner), successor by merger to
(names of predecessor)"; and in the event that the Mortgage Loan was acquired or
originated by the previous owner while doing business under another name, the
Assignment of Mortgage must be by the "(previous owner), formerly known as
(previous name)."
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(f) The originals of all intervening Assignments of Mortgage,
showing a complete chain of assignment from origination to the related Seller,
including warehousing assignments, with evidence of recording thereon (or, if an
original intervening assignment has not been returned from the recording office,
a certified copy thereof.
FOR HLTV LOANS:
1. Collateral File
(a) the original Mortgage Note endorsed by [Seller, signature, name, title]
as follows: For value received, pay to the order of "Bankers Trust
Company of California, N.A. as Custodian or Trustee", without recourse
with all intervening endorsements showing a complete chain of title
from the original lender to [Seller];
(b) the original Mortgage or Deed of Trust, with evidence of recording
thereon, or, until the original Mortgage or Deed of Trust has been
received from the applicable public recording office, a copy of the
Mortgage or Deed of Trust certified by [Seller] to be a true and
complete copy of the original Mortgage or Deed of Trust submitted for
recording;
(c) the Note riders signed as required;
(d) a copy of the original unrecorded assignment of the Mortgage or Deed of
Trust from [Seller] to "Bankers Trust Company of California, N.A. as
Custodian or Trustee";
(e) documentation of all intervening mortgage assignments with evidence of
recording thereon, sufficient to show a complete chain of assignment
from the originator of the Mortgage Loan to [Seller];
(f) any and all assumption, modification, written assurance or substitution
agreements, where the terms or provisions of a Mortgage or Note have
been modified or such Mortgage or Note have been assumed;
(g) a title search (or a title policy, if any);
2. Servicing File (using the Advanta Stacking Order as of July 1, 1995)
(a) any primary credit insurance policy or certificate of insurance, if
applicable;
(b) all required hazard and flood insurance policies with respect to the
Mortgage Property;
(c) any guaranty(ies), surety agreement(s), and/or survey(s);
A-2
<PAGE> 95
(d) any appraisals on the Mortgaged Property;
(e) the completed loan application signed by the Mortgagor;
(f) the signed or certified Mortgage Loan settlement sheet;
(g) all employment, deposit and mortgage verifications, credit reports and
reports and any other document relied upon in making the Mortgage Loan;
(h) any Truth-In-Lending RESPA and ECOA related documents required by law;
(i) all records, ledger cards and other documents relating to the Mortgage
Loan;
(j) Copies of all applicable transfer notifications, i.e., borrower
insurance, flood, hazard;
(k) the original unrecorded assignment of the Mortgage or Deed of Trust
from the Buyer to Bankers Trust Company of California, N.A, as
Custodian or Trustee.
A-3
<PAGE> 96
EXHIBIT B
FORM OF UNDERLYING MORTGAGE NOTES
[Attached]
B-1
<PAGE> 97
EXHIBIT C
FORM OF CERTIFICATE REGARDING PREPAID LOANS
I, James L. Shreero, Senior Vice-President of Advanta Mortgage
Conduit Services, Inc., a Delaware corporation, as sponsor (the "Sponsor"),
hereby certify that between the "Cut-Off Date" (as defined in the Sale and
Servicing Agreement, dated as of June 1, 1998, among the Sponsor, Advanta
Mortgage Corp. USA, a Delaware corporation, as Master Servicer, Advanta
Revolving Home Equity Loan Trust 1998-A, as Issuer, and Bankers Trust Company of
California, N.A., a national banking association, as Indenture Trustee), and the
date hereof, the following schedule of "Mortgage Loans" (each as defined in the
Sale and Servicing Agreement) has been prepaid in full.
Dated:
-------------------------
-----------------------------------
James L. Shreero, Senior Vice-President
C-1
<PAGE> 98
EXHIBIT D
FORM OF TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
Bankers Trust Company of California, N.A., a national banking
association, in its capacity as indenture trustee (the "Indenture Trustee")
under that certain Sale and Servicing Agreement, dated as of June 1, 1998 (the
"Sale and Servicing Agreement"), by and among Advanta Mortgage Conduit Services,
Inc., a Delaware corporation, as Sponsor (the "Sponsor"), Advanta Mortgage Corp.
USA, a Delaware corporation, as Master Servicer, Advanta Revolving Home Equity
Loan Trust 1998-A, as Issuer, and the Indenture Trustee, hereby acknowledges
receipt of the items delivered to it by the Sponsor with respect to the Initial
Mortgage Loans.
The Schedule of Initial Mortgage Loans is attached to this
Receipt.
The Indenture Trustee hereby additionally acknowledges that it
shall review such items as required by Section 2.2(a) of the Sale and Servicing
Agreement and shall otherwise comply with Section 2.2(b) of the Sale and
Servicing Agreement as required thereby.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Indenture Trustee
By:
--------------------------------
Name:
Title:
Dated: June , 1998
---
D-1
<PAGE> 99
EXHIBIT E
FORM OF CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of Bankers
Trust Company of California, N.A., a national banking association, acting in its
capacity as indenture trustee (the "Indenture Trustee") of a certain pool of
mortgage loans (the "Pool") heretofore conveyed in trust to the Indenture
Trustee, pursuant to that certain Sale and Servicing Agreement, dated as of June
1, 1998 (the "Sale and Servicing Agreement"), by and among Advanta Mortgage
Conduit Services, Inc., a Delaware corporation, as Sponsor (the "Sponsor"),
Advanta Mortgage Corp. USA, a Delaware corporation, as Master Servicer, Advanta
Revolving Home Equity Loan Trust 1998-A, as Issuer, and the Indenture Trustee;
and
WHEREAS, the Indenture Trustee is required, pursuant to
Section 2.2(a) of the Sale and Servicing Agreement, to review the Files relating
to the Pool within a specified period following the Closing Day and Subsequent
Transfer Date and to notify the Sponsor promptly of any defects with respect to
the Pool, and the Sponsor is required to remedy such defects or take certain
other action, all as set forth in Section 2.2(b) of the Sale and Servicing
Agreement; and
WHEREAS, Section 2.2(a) of the Sale and Servicing Agreement
requires the Indenture Trustee to deliver this Certification upon the
satisfaction of certain conditions set forth therein;
NOW, THEREFORE, the Indenture Trustee has determined that as
to each Mortgage Loan listed in the Schedule of Mortgage Loans (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
Pool Certification as not covered by such Pool Certification), (i) all documents
required to be delivered to it pursuant to this Agreement are in its possession
and (ii) such documents have been reviewed by it and on their face appear to
relate to such Mortgage Loan. The Indenture Trustee makes no certification
hereby, however, with respect to any intervening assignments or assumption and
modification agreements.
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.
By:
-------------------------------
Name:
Title:
Date:
------------------------
E-1
<PAGE> 100
EXHIBIT F
FORM OF MASTER SERVICER'S TRUST RECEIPT
To: Bankers Trust Company of California, N.A.
Three Park Plaza, 16th Floor
Irvine, California 92714
Attn: Corporate Trust
Date: _________________
In connection with the administration of the mortgage loans
held by you as Indenture Trustee under that certain Sale and Servicing Agreement
dated as of June 1, 1998 by and among Advanta Mortgage Conduit Services, Inc., a
Delaware corporation, as Sponsor, Advanta Mortgage Corp. USA, a Delaware
corporation, as Master Servicer, Advanta Revolving Home Equity Loan Trust
1998-A, as Issuer, and you (the "Agreement"), the Master Servicer hereby
requests a release of the File held by you as Indenture Trustee with respect to
the following described Mortgage Loan for the reason indicated below:
Mortgagor's Name:
Loan No.:
Reason for requesting file:
_______ 1. Mortgage Loan paid in full.
(The Master Servicer hereby certifies that all amounts
received in connection with the loan have been or will
be credited to the Certificate Account (whichever is
applicable) pursuant to the Agreement.)
_______ 2. Mortgage Loan purchased pursuant to Section 3.3, 3.4, 2.2(b)
or 4.10(b) of the Agreement.
(The Master Servicer hereby certifies that the Loan
Purchase Price has been or will be paid to the
Certificate Account pursuant to the Agreement.)
F-1
<PAGE> 101
_______ 3. Mortgage Loan substituted.
(The Master Servicer hereby certifies that a Qualified
Replacement Mortgage has been or will be assigned and
delivered to you along with the related File pursuant
to the Agreement.)
_______ 4. The Mortgage Loan is being foreclosed.
_______ 5. Other. (Describe)
The undersigned acknowledges that the above File will be held
by the undersigned in accordance with the provisions of the Agreement and will
be returned to you, except if the Mortgage Loan has been paid in full, or
purchased or substituted for by a Qualified Replacement Mortgage (in which case
the File will be retained by us permanently) and except if the Mortgage Loan is
being foreclosed (in which case the File will be returned when no longer
required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed
to them in the Agreement.
ADVANTA MORTGAGE CORP. USA
By:______________________________
Name:
Title:
F-2
<PAGE> 1
EXHIBIT 4.4
<PAGE> 2
[MBIA LOGO]
NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: Advanta Home Equity Loan Trust 1998-B POLICY NUMBER: 27655
$67,500,000 Advanta Home Equity Loan Asset Backed Notes,
Series 1998-B
Class A-1 Notes, Variable Interest Rate
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Note Guaranty Insurance
Policy (this "Policy"), hereby unconditionally and irrevocably guarantees to
any Owner that an amount equal to each full and complete Insured Payment will
be received from the Insurer by Bankers Trust Company of California, N.A. or
its successors, as Indenture Trustee for the Owners (the "Indenture Trustee"),
on behalf of the Owners, for distribution by the Indenture Trustee to each
Owner of each Owner's proportionate share of the Insured Payment. The Insurer's
obligations hereunder with respect to a particular Insured Payment shall be
discharged to the extent funds equal to the applicable Insured Payment are
received by the Indenture Trustee, whether or not such funds are properly
applied by the Indenture Trustee. Insured Payments shall be made only at the
time set forth in this Policy and no accelerated Insured Payments shall be made
regardless of any acceleration of the Obligations, unless such acceleration is
at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust or the Indenture
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of
such a preference payment, (ii) an opinion of counsel satisfactory to the
Insurer that such order is final and not subject to appeal, (iii) an assignment
in such form as is reasonably required by the Insurer, irrevocably assigning to
the Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon New York City time on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or Indenture Trustee in bankruptcy named in the final order of the
court exercising jurisdiction on behalf of the Owner and not to any Owner
directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no later than
12:00 noon New York City time on the later of the Payment Date on which the
related amounts are due or the third Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer or any successor fiscal agent
1
<PAGE> 3
[MBIA LOGO]
appointed by the Insurer (the "Fiscal Agent") of a Notice (as described below);
provided that if such Notice is received after 12:00 noon New York City time on
such Business Day, it will be deemed to be received on the following Business
Day. If any such Notice received by the Fiscal Agent is not in proper form or is
otherwise insufficient for the purpose of making claim hereunder it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Indenture Trustee and the Indenture Trustee may submit an
amended Notice.
Insured Payments due hereunder unless otherwise stated herein will be
disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the Owners
by wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts, any
amount held by the Indenture Trustee for the payment of such Insured Payment
and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit or cause to be deposited, sufficient funds to
make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated to
the rights of each Owner to receive payments under the Obligations to the
extent of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Indenture, dated as of September 1, 1998, among the
Advanta Home Equity Loan Trust 1998-B and the Indenture Trustee, as Indenture
Trustee, without regard to any amendment or supplement thereto unless such
amendment or supplement has been approved by the Insurer.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which the Insurer or banking institutions in the State of New York or in
the city in which the principal corporate trust office of the Indenture Trustee
is located, are authorized or obligated by law or executive order to be closed.
"Deficiency Amount" means, with respect to the Obligations (a) for any
Payment Date, any shortfalls in the Total Available Funds to pay the sum of (i)
the Class A-1 Interest Distribution Amount (excluding any Class A-1 Net Funds
Cap Carry-Forward Amounts, any Prepayment Interest Shortfalls and any Relief
Act Shortfalls), and (ii) the HELOC Pool Overcollateralization Deficit and (b)
on the Class A-1 Final Scheduled Payment Date, any shortfall in the Total
Available Funds to pay the outstanding Class A-1 Principal Balance.
"Insured Payment" means (i) as of any Payment Date, any Deficiency Amount
and (ii) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed in
writing by facsimile substantially in the form of Exhibit A attached hereto,
the original of which is
2
<PAGE> 4
[MBIA LOGO]
subsequently delivered by registered or certified mail, from the Indenture
Trustee specifying the Insured Payment which shall be due and owing on the
applicable Payment Date.
"Owner" means each Holder (as defined in the Agreement) (other than the
Indenture Trustee, the Originators or the Master Servicer) who, on the
applicable Payment Date, is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner on
the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.) as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Total Available Funds" means, with respect to the Obligations and any
Payment Date, the sum of (i) the Available Funds then available in the Note
Account, reduced by the amounts paid pursuant to Section 8.6(c)(i) and (ii) of
the Indenture; (ii) the Crossover Amount, if any, available from the HLTV Pool
related to the Class A-2 Notes pursuant to the cross-collateralization
provisions of the Trust; and (iii) amounts available from the Reserve Account
with respect to the Obligations on such Payment Date.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Agreement as of the date of execution
of this Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency or such
other address as the Fiscal Agent shall specify to the Indenture Trustee in
writing.
This Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this Policy
is not refundable for any reason including payment, or provision being made for
payment, prior to maturity of the Obligations.
3
<PAGE> 5
[MBIA LOGO]
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed and
attested this 30th day of September 1998.
MBIA INSURANCE CORPORATION
By /s/ Richard Weill
-----------------------------
Title President
----------------------------
Attest:
By /s/
----------------------------
Assistant Secretary
4
<PAGE> 6
[MBIA Logo]
EXHIBIT A
TO NOTE GUARANTY INSURANCE POLICY
NUMBER: 27655
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER: 27655
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF INDENTURE TRUSTEE], as
Indenture Trustee (the "Indenture Trustee"), hereby certifies to State Street
Bank and Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation
(the "Insurer"), with reference to Note Guaranty Insurance Policy Number: 27655
(the "Policy") issued by the Insurer in respect of the Advanta Home Equity Loan
Trust 1998-B $67,500,000 Advanta Home Equity Loan Asset Backed Notes, Series
1998-B, Class A-1 Notes Variable Interest Rate (the "Obligations"), that:
(i) the Indenture Trustee is the Indenture Trustee under the
Indenture, dated as of September 1, 1998, among the Advanta Home
Equity Loan Trust 1998-B and the Indenture Trustee, as Indenture
Trustee for the Owners;
(ii) the amount due under clause (a) of the definition of Deficiency
Amount for the Payment Date occurring on (the
"Applicable Payment Date") is $ ;
(iii) the amount due under clause (b) of the definition of Deficiency
Amount for the Applicable Payment Date is $ ;
(v) the sum of the amounts listed in paragraphs (ii) and (iii) above
is $ (the "Deficiency Amount");
(vi) the amount of previously distributed payments on the Obligations
that is recoverable and sought to be recovered as a voidable
preference by a Indenture
<PAGE> 7
[MBIA LOGO]
Trustee in bankruptcy pursuant to the Bankruptcy Code in accordance
with a final nonappealable order of a court having competent
jurisdiction is $ (the "Preference Amount");
(vii) the total Insured Payment due is $ , which amount equals the
sum of the Deficiency Amount and the Preference Amount;
(viii) the Indenture Trustee is making a claim under and pursuant to
the terms of the Policy for the dollar amount of the Insured Payment
set forth in (v) above to be applied to the payment of the Deficiency
Amount for the Applicable Payment Date in accordance with the
Agreement and for the dollar amount of the Insured Payment set forth
in (vi) above to be applied to the payment of any Preference Amount;
and
(ix) the Indenture Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy: [INDENTURE TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined herein
shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company
Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purposes Of
Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A Civil
Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The Claim
For Each Such Violation.
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice under the Policy as of the day of , .
[NAME OF INDENTURE TRUSTEE]
as Indenture Trustee
By ________________________
Title _____________________
2
<PAGE> 8
[MBIA logo]
NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: Advanta Home Equity Loan Trust 1998-B POLICY NUMBER: 27656
$40,000,000 Advanta Home Equity Loan Asset Backed Notes,
Series 1998-B
Class A-2 Notes 6.55% Interest Rate
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment
of the premium and subject to the terms of this Note Guaranty Insurance Policy
(this "Policy"), hereby unconditionally and irrevocably guarantees to any Owner
that an amount equal to each full and complete Insured Payment will be received
from the Insurer by Bankers Trust Company of California, N.A. or its successors,
as Indenture Trustee for the Owners (the "Indenture Trustee"), on behalf of the
Owners, for distribution by the Indenture Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations hereunder
with respect to a particular Insured Payment shall be discharged to the extent
funds equal to the applicable Insured Payment are received by the Indenture
Trustee, whether or not such funds are properly applied by the Indenture
Trustee. Insured Payments shall be made only at the time set forth in this
Policy and no accelerated Insured Payments shall be made regardless of any
acceleration of the Obligations, unless such acceleration is at the sole option
of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust or the Indenture
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Payment that is a Preference Amount on the
Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of
such a preference payment, (ii) an opinion of counsel satisfactory to the
Insurer that such order is final and not subject to appeal, (iii) an assignment
in such form as is reasonably required by the Insurer, irrevocably assigning to
the Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon New York City time on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or Indenture Trustee in bankruptcy named in the final order of the
court exercising jurisdiction on behalf of the Owner and not to any Owner
directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
1
<PAGE> 9
[MBIA LOGO]
The Insurer will pay any other amount payable hereunder no later than
12:00 noon New York City time on the later of the Payment Date on which the
related amounts are due or the third Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer or any successor fiscal agent appointed by the
Insurer (the "Fiscal Agent") of a Notice (as described below); provided that if
such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any
such Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim hereunder it shall be deemed not
to have been received by the Fiscal Agent for purposes of this paragraph, and
the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Indenture Trustee and the Indenture Trustee may submit an amended Notice.
Insured Payments due hereunder unless otherwise stated herein will be
disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the Owners
by wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts, any
amount held by the Indenture Trustee for the payment of such Insured Payment
and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit or cause to be deposited, sufficient funds
to make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated to
the rights of each Owner to receive payments under the Obligations to the
extent of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Indenture, dated as of September 1, 1998, among the
Advanta Home Equity Loan Trust 1998-B and the Indenture Trustee, as Indenture
Trustee, without regard to any amendment or supplement thereto unless such
amendment or supplement has been approved by the Insurer.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which the Insurer or banking institutions in the State of New York or in
the city in which the principal corporate trust office of the Indenture Trustee
is located, are authorized or obligated by law or executive order to be closed.
"Deficiency Amount" means, with respect to the Obligations and for any
Payment Date, any shortfalls in the Total Available Funds to pay the sum of (i)
Class A-2 Interest Distribution Amount (excluding any Prepayment Interest
Shortfalls and any Relief Act Shortfalls), and (ii) the HTLV Pool
Overcollateralization Deficit.
2
<PAGE> 10
[MBIA Logo]
"Insured Payment" means (i) as of any Payment Date, any Deficiency Amount
and (ii) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed in
writing by facsimile substantially in the form of Exhibit A attached hereto,
the original of which is subsequently delivered by registered or certified
mail, from the Indenture Trustee specifying the Insured Payment which shall be
due and owing on the applicable Payment Date.
"Owner" means each Holder (as defined in the Agreement) (other than the
Indenture Trustee, the Originators or the Master Servicer) who, on the
applicable Payment Date, is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner on
the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Total Available Funds" means, with respect to the Obligations and any
Payment Date, the sum of (i) the Available Funds then available in the Note
Account, reduced by the amounts paid pursuant to Section 8.6(c)(i) and (ii) of
the Indenture; (ii) the Crossover Amount, if any, available from the HELOC Pool
related to the Class A-1 Notes pursuant to the cross-collateralization
provisions of the Trust; and (iii) amounts available from the Reserve Account
with respect to the Obligations on such Payment Date.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Agreement as of the date of execution
of this Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway,
New York, New York 10006 Attention: Municipal Registrar and Paying Agency or
such other address as the Fiscal Agent shall specify to the Indenture Trustee
in writing.
This Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by this Policy is not covered by the Property/
Casualty Insurance Security Fund specified in Article 76 of the New York
Insurance Law.
3
<PAGE> 11
[MBIA LOGO]
This Policy is not cancelable for any reason. The premium on this Policy
is not refundable for any reason including payment, or provision being made for
payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed and
attested this 30th day of September, 1998.
MBIA INSURANCE CORPORATION
By /s/ Richard Weill
---------------------------
Title President
---------------------------
Attest:
By /s/
---------------------------
Assistant Secretary
4
<PAGE> 12
[MBIA Logo]
EXHIBIT A
TO NOTE GUARANTY INSURANCE POLICY
NUMBER: 27656
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER: 27656
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF INDENTURE TRUSTEE], as
Indenture Trustee (the "Indenture Trustee"), hereby certifies to State Street
Bank and Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance
Corporation (the "Insurer"), with reference to Note Guaranty Insurance Policy
Number: 27656 (the "Policy") issued by the Insurer in respect of the Advanta
Home Equity Loan Trust 1998-B $40,000,000 Advanta Home Equity Loan Asset Backed
Notes, Series 1998-B Class A-2 Notes 6.55% Interest Rate (the "Obligations"),
that:
(i) the Indenture Trustee is the Indenture Trustee under the
Indenture dated as of September 1, 1998 among Advanta Home Equity Loan
Trust 1998-B, and the Indenture Trustee, as Indenture Trustee for the
Owners;
(ii) the amount due under clause the definition of Deficiency
Amount for the Payment Date occurring on (the "Applicable
Payment Date") is $ ; (the "Deficiency Amount");
(iii) the amount of previously distributed payments on the
Obligations that is recoverable and sought to be recovered as a
voidable preference by a Indenture Trustee in bankruptcy pursuant to
the Bankruptcy Code in accordance with a final nonappealable order of
a court having competent jurisdiction is $ (the "Preference
Amount");
(iv) the total Insured Payment due is $ , which amount
equals the sum of the Deficiency Amount and the Preference Amount;
<PAGE> 13
[MBIA LOGO]
(v) the Indenture Trustee is making a claim under and pursuant
to the terms of the Policy for the dollar amount of the Insured Payment
set forth in (iii) above to be applied to the payment of the Deficiency
Amount for the Applicable Payment Date in accordance with the Agreement
and for the dollar amount of the Insured Payment set forth in (iv)
above to be applied to the payment of any Preference Amount; and
(vi) the Indenture Trustee directs that payment of the Insured
Payment be made to the following account by bank wire transfer of
federal or other immediately available funds in accordance with the
terms of the Policy: [INDENTURE TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined herein
shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With intent To Defraud Any Insurance Company
Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A
Civil Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The
Claim For Each Such Violation.
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice under the Policy as of the day of , .
[NAME OF INDENTURE TRUSTEE], as
Indenture Trustee
By
--------------------------------------
Title
-----------------------------------
2
<PAGE> 1
EXHIBIT 8.1
<PAGE> 2
September 30, 1998
To the Addressees Listed
on Schedule I hereto
Re: Advanta Home Equity Loan Trust 1998-B
Home Equity Loan Asset-Backed Notes
Series 1998-B
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the
issuance and delivery of certain asset-backed notes denominated Advanta Home
Equity Loan Trust 1998-B, Home Equity Loan Asset-Backed Notes, Series 1998-B,
Class A-1 and Class A-2 (the "Class A Notes") pursuant to an Indenture dated as
of September 1, 1998 (the "Indenture) between Advanta Home Equity Loan Trust
1998-B (the "Trust") and Bankers Trust Company of California N.A., as Indenture
Trustee (the "Indenture Trustee").
As special tax counsel, we have examined such documents as we
deemed appropriate for the purposes of rendering the opinions set forth below,
including the following: (a) Prospectus dated September 15, 1998 and Prospectus
Supplement dated September 25, 1998 (together the "Prospectus") with respect to
the Class A Notes, and (b) an executed copy of the Indenture and the exhibits
attached thereto.
We have examined the question of whether the issuance by the
Trust of the Class A Notes will be treated as indebtedness by the Trust for
federal income tax purposes. Our analysis is based on provisions of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated
thereunder as in effect on the date hereof and on existing judicial and
administrative interpretations thereof. These authorities are subject to change
and to differing interpretations, which could apply retroactively. The opinion
of special tax counsel is not binding on the courts or the Internal Revenue
Service ("IRS").
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather than
the form of the transaction or the manner in which the instruments are labeled.
The IRS and the courts have set forth various factors to be taken into account
in determining whether or not a transaction constitutes the issuance of
indebtedness for federal income tax purposes, which we have reviewed as they
apply to this transaction.
<PAGE> 3
September 30, 1998
Page 2
Based or the foregoing, and such legal and factual
investigations as we have deemed appropriate, we are of the opinion that for
federal income tax purposes the Notes will be treated as indebtedness because
(i) the characteristics of the transaction strongly indicate that in economic
substance, the Notes are indebtedness, and (ii) the parties have stated
unambiguously their intention to treat the Notes as indebtedness for tax
purposes. Further, the trust will not be treated as an association taxable as a
corporation (or a publicly traded partnership) or a taxable mortgage pool.
Terms capitalized herein and not otherwise shall have their
respective meanings as forth in the Sale and Servicing Agreement.
We express no opinion on any matter not discussed in this
letter. The opinion letter is rendered as of the Closing Date, at the request of
the Sponsor, for the sole benefit of each addressees hereof, and no other person
or entity is entitled to rely hereon without our prior written consent. Copies
of this opinion letter may not be furnished to any other person or entry, nor
may any portion of this opinion letter be quoted, circulated or referred to in
any other document, without our prior written consent.
Very truly yours,
/s/ DEWEY BALLANTINE LLP
<PAGE> 4
SCHEDULE I
<TABLE>
<S> <C>
Bear Stearns & Co. Inc. MBIA Insurance Corporation
245 Park Avenue 113 King Street
New York, New York 10167 New York, New York 10504
Advanta Mortgage Corp. USA Moody's Investors Service, Inc.
16875 West Bernardo Drive 99 Church Street
San Diego, California 92127 New York, New York 10007
Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, California 92127
Bankers Trust Company
of California N.A.
as Trustee
Three Park Plaza, 16th Floor
Irvine, California 92714
Standard & Poor's Ratings Group,
a division of The McGraw-Hill Companies
25 Broadway
New York, New York 10004
Advanta Home Equity Loan Trust 1998-B
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
</TABLE>
<PAGE> 1
EXHIBIT 10.1
<PAGE> 2
Exhibit 10.1
PURCHASE AGREEMENT
Between
ADVANTA NATIONAL BANK
and
ADVANTA FINANCE CORP.
as the Originators
and
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
as Purchaser
Dated as of September 1, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I Definitions....................................................................................1
ARTICLE II Procedures for Purchases of Mortgage Loans; Conditions Precedent; Settlements................5
Section 2.01. Purchase and Sale...............................................................5
Section 2.02. Delivery of Documents; Purchase of Mortgage Loans...............................6
Section 2.03. Survival of Representations.....................................................7
Section 2.04. Proceeds of Mortgage Loans......................................................7
Section 2.05. Defective Mortgage Loans........................................................7
ARTICLE III Protective Security Interest.................................................................7
ARTICLE IV Representations and Warranties................................................................8
Section 4.01. Representations and Warranties of Originators...................................8
Section 4.02. Representations and Warranties Regarding Mortgage Loans........................10
Section 4.03. Representations and Warranties of Purchaser....................................10
Section 4.04. Remedies for Breach of Representations and Warranties; Repurchase
Obligation.....................................................................11
ARTICLE V Covenants and Warranties of Originators.......................................................12
Section 5.01. Affirmative Covenants..........................................................12
Section 5.02. Negative Covenants.............................................................13
ARTICLE VI Sale of Mortgage Loans by Purchaser..........................................................13
ARTICLE VII Additional Remedies.........................................................................15
ARTICLE VIII Term.......................................................................................15
ARTICLE IX Exclusive Benefit of Parties; Assignment.....................................................15
ARTICLE X Amendment; Waivers............................................................................15
ARTICLE XI Execution in Counterparts....................................................................16
ARTICLE XII Effect of Invalidity of Provisions..........................................................16
ARTICLE XIII Governing Law..............................................................................16
ARTICLE XIV Notices.....................................................................................16
ARTICLE XV Entire Agreement.............................................................................16
ARTICLE XVI Indemnities.................................................................................17
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XVII RESPA Obligations..........................................................................18
ARTICLE XVIII Survival..................................................................................18
ARTICLE XIX Consent to Service..........................................................................18
ARTICLE XX Submission to Jurisdiction; Waiver of Trial by Jury..........................................19
ARTICLE XXI Construction................................................................................19
ARTICLE XXII Further Assurances.........................................................................19
</TABLE>
SCHEDULES AND EXHIBITS
Schedule I Schedule Of HELOC Mortgage Loans
Schedule II Schedule Of HLTV Mortgage Loans
Exhibit A HELOC Mortgage Loan Representations And Warranties
Exhibit B HLTV Mortgage Loan Representations And Warranties
ii
<PAGE> 5
THIS PURCHASE AGREEMENT (this "Agreement") is made as of
September 1, 1998 between Advanta National Bank, a national banking association
("ANB"), and Advanta Finance Corp., a Nevada corporation ("AFC"), on one hand,
and Advanta Mortgage Conduit Services, Inc. ("Purchaser"), on the other hand.
ANB and AFC are sometimes individually referred to herein as an "Originator" and
sometimes collectively referred to herein as the "Originators."
WHEREAS, the Originators desire to sell to Purchaser, and
Purchaser desires to purchase from the Originators, the Mortgage Loans (as
defined below), all in accordance with the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
promises herein made and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Capitalized terms not defined herein shall have the meanings
set forth in the Sale and Servicing Agreement or, if not defined therein, the
Indenture. As used in this Agreement, the following terms shall have the
following meanings:
"Additional Balance": With respect to any HELOC Mortgage Loan
as of any date of determination, the aggregate amount of all Draws by the
related Mortgagor subsequent to the Cut-Off Date.
"Assignee": With respect to any Person, any immediate or
mediate assignee, pledgee or other transferee of such Person.
"Assignment of Mortgage": With respect to each Mortgage Loan,
any assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the jurisdiction in which the
related Mortgaged Property is located to reflect the recordation of the pledge
of the Mortgage Loan to the Indenture Trustee for the benefit of the
Noteholders.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York or
in the city in which the principal corporate trust office of the Indenture
Trustee is located are authorized or obligated by law or executive order to be
closed.
"Certificates": The trust certificates evidencing the
beneficial ownership interests in Holding, substantially in the form of Exhibit
A to the Holding Trust Agreement.
<PAGE> 6
"Charged-off Loan": Any Mortgage Loan that either (i) has been
Delinquent for a period of 180 consecutive days (irrespective of any grace
periods) or (ii) has become a Liquidated Loan, whichever shall occur first.
"Class A Noteholder" or "Noteholder": A Person in whose name a
Class A Note is registered in the Note Register.
"Class A Notes": The Class A-1 Notes and the Class A-2 Notes.
"Class A-1 Note": Any note executed and authenticated by the
Indenture Trustee substantially in the form set forth in Exhibit A to the
Indenture.
"Class A-2 Note": Any note executed and authenticated by the
Indenture Trustee substantially in the form set forth in Exhibit B to the
Indenture.
"Closing Date": September 30, 1998.
"Credit Line Agreement": With respect to any HELOC Mortgage
Loan, the related home equity line of credit agreement, security instrument and
promissory note executed by the related Mortgagor and any amendment or
modification thereof.
"Cut-Off Date": With respect to each Mortgage Loan (other than
a Qualified Replacement Mortgage), the opening of business on September 1, 1998.
[With respect to each Qualified Replacement Mortgage, the related Replacement
Cut-Off Date.]
"Cut-Off Date Principal Balance": With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the related Cut-Off Date.
"Draw": With respect to any HELOC Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the Cut-Off Date in accordance with the
related Credit Line Agreement.
"Event of Termination": As defined in Article VII hereof.
"HELOC Mortgage": The mortgage, deed of trust or other
instrument creating a first or junior lien on an estate in fee simple interest
in real property securing a Credit Line Agreement.
"HELOC Mortgage Loan": A Mortgage Loan which is an
adjustable-rate home equity revolving credit line secured by a first or junior
mortgage or deed of trust on Mortgaged Property.
"HLTV Mortgage": The note evidencing a HLTV Mortgage or the
Credit Line Agreement pursuant to which a HELOC Mortgage is issued.
"HLTV Mortgage Loan": A Mortgage Loan which is a fixed-rate
closed-end high-loan-to-value junior Mortgage Loan under the Mortgage Notes.
2
<PAGE> 7
"Holding": Advanta Holding Trust, a Delaware business trust.
"Holding Trust Agreement": The trust agreement dated as of
September 1, 1998 between the Sponsor and Wilmington Trust Company, as owner
trustee, relating to the formation of Holding.
"Indenture": The Indenture dated as of September 1, 1998
between the Trust and the Indenture Trustee.
"Indenture Trustee": Bankers Trust Company of California, N.A.
or any successor Indenture Trustee appointed in accordance with the Indenture
that has accepted such appointment in accordance with the Indenture.
"Liquidated Loan": A Mortgage Loan with respect to which (i)
the related Mortgage Property has been acquired, liquidated or foreclosed upon
or (ii) the Master Servicer, in its reasonable good faith business judgment, has
determined that all Liquidation Proceeds that it expects to recover have been so
recovered (exclusive of the possibility of any deficiency judgment). A Mortgage
Loan which is purchased from the Trust pursuant to Section 3.3, 3.4, 3.6(b) or
4.10 of the Sale and Servicing Agreement is not a "Liquidated Loan."
"Loan Rate": As defined in the Sale and Servicing Agreement.
"Losses": Any and all out-of-pocket losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and disbursements)
directly incurred by any person specified in this Agreement, resulting from
transactions entered into under this Agreement (other than liability for taxes).
Losses must be accounted for and presented for reimbursement documented in
reasonable detail and within a reasonable time.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, and its permitted successors and assigns.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing an underlying Mortgage Note.
"Mortgage File": For each Mortgage Loan, the relevant items
listed in Exhibit A to the Sale and Servicing Agreement.
"Mortgage Loans": The mortgage loans identified in the
Mortgage Loan Schedules attached hereto, together with any Qualified Replacement
Mortgages substituted therefor in accordance with this Agreement [or the Sale
and Servicing Agreement]. The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Mortgaged Property which is REO Property prior to such Mortgaged Property's
disposition by the Trust. Any mortgage loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred and assigned
by an Originator to Purchaser, by Purchaser to
3
<PAGE> 8
Holding and by Holding to the Trust, in fact was not so transferred and assigned
for any reason whatsoever shall nevertheless be considered a "Mortgage Loan" for
all purposes of this Agreement.
"Mortgage Loan Schedules": Together, the schedule of HELOC
Mortgage Loans attached hereto as Schedule I and the schedule of HLTV Mortgage
Loans attached hereto as Schedule II.
"Mortgage Note": The promissory note and/or other
documentation evidencing the indebtedness of a Mortgagor under a HLTV Mortgage
Loan.
"Mortgaged Property": The underlying property securing a
Mortgage Loan.
"Mortgagor": In the case of a HELOC Mortgage Loan, the obligor
on the related Credit Line Agreement, and in the case of a HLTV Mortgage Loan,
the obligor on the related Mortgage Note.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Indenture Trustee.
"Payment Date": Any date on which the Indenture Trustee is
required to make distributions to the Class A Noteholders, which shall be the
25th day of each month, commencing in the month following the Closing Day or, if
such day is not a Business Day, then on the succeeding Business Day.
"Principal Balance": As to any Mortgage Loan, other than a
Charged-off Loan, and as of any date, the related Cut-Off Date Principal
Balance, plus (i) any Additional Balance in respect of such Mortgage Loan, minus
(ii) all collections credited as principal against the Principal Balance of such
Mortgage Loan in accordance with the related Credit Line Agreement or related
Mortgage Note prior to such date. For purposes of this definition, a Charged-off
Loan shall be deemed to have a Principal Balance of zero as of the first day of
the Remittance Period following the Remittance Period in which such Mortgage
Loan becomes a Charged-off Loan and at all times thereafter.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 2.2(b), 3.3 or 3.4 of the Sale and Servicing
Agreement, which (i) bears a variable rate of interest in the case of a HELOC
Mortgage Loan or a fixed rate of interest in the case of a HLTV Mortgage Loan,
(ii) has a Loan Rate at least equal to the Loan Rate of the Mortgage Loan being
replaced, (which, in the case of a HELOC Mortgage Loan, 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 relevant
Originator's credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than the Payment Date occurring in October
2021 in the case of a HELOC Mortgage Loan or October 2023 in the case of a HLTV
Mortgage
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Loan, (vi) has a Combined Loan-to-Value Ratio as of the Cut-Off Date no higher
than the Combined Loan-to-Value Ratio of the replaced Mortgage Loan at such
time, (vii) has a Principal Balance as of the related Replacement Cut-Off Date
equal to or less than the Principal Balance of the replaced Mortgage Loan as of
such Replacement Cut-Off Date, (viii) is in the same lien position or better.
"Remittance Period": As to any Payment Date, the calendar
month preceding the month of such Payment Date.
"REO Property": A Mortgaged Property acquired by the Master
Servicer or any Sub-Servicer on behalf of the Trust through foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Sale and Servicing Agreement": The Sale and Servicing
Agreement dated as of September 1, 1998 among the Sponsor, Holding, the Trust,
the Master Servicer and the Indenture Trustee.
"Sponsor": Advanta Mortgage Conduit Services, Inc.
"Trust": Advanta Home Equity Loan Trust 1998-B, a Delaware
business trust.
"Trust Agreement": The trust agreement dated as of September
1, 1998 among the Sponsor, Holding and Wilmington Trust Company, as owner
trustee, relating to the formation of the Trust.
ARTICLE II
Procedures for Purchases of Mortgage Loans;
Conditions Precedent; Settlements
Section 2.01 Purchase and Sale. The Originators hereby agree
to sell, assign, transfer, convey and set over to Purchaser, and Purchaser
hereby agrees to purchase and acquire from the Originators, without recourse
(subject to the Originators' obligations herein), on the Closing Date, all of
the Originators' respective right, title and interest in and to (a) each
Mortgage Loan, including its Principal Balance as of the Cut-Off Date and all
collections in respect of such Mortgage Loan received on or after the Cut-Off
Date (excluding any payments of accrued interest due prior to the Cut-Off Date);
(b) each Mortgaged Property that is acquired by foreclosure or deed in lieu of
foreclosure; (c) all rights under any hazard insurance policies covering a
Mortgaged Property; (d) all proceeds with respect to the foregoing; and (e) the
Mortgage File and other documents relating to the foregoing. As full
consideration for the Originators' sale, transfer, assignment and conveyance to
Purchaser of all of their respective right, title and
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interest in and to the Mortgage Loans and other properties specified above, on
the Closing Date, Purchaser shall (x) pay to or upon the order of the
Originators that amount in immediately available funds equal to the Originators'
pro rata share of the proceeds of the sale of the Notes, net of any underwriting
discounts and other transaction costs (including the items described in Section
9.01 hereof), and (y) direct the issuance of the Certificates to or upon the
order of the Originators, all in such relative proportions as the Originators
shall jointly determine on or before the Closing Date.
Section 2.02 Delivery of Documents; Purchase of Mortgage
Loans. Prior to the purchase of the Mortgage Loans:
(a) Each Originator shall have delivered to Purchaser or any
agent appointed by Purchaser the Mortgage File for each of the Mortgage Loans.
(b) Purchaser shall have received copies of the Mortgage Loan
Schedules.
(c) Purchaser shall have received copies of the resolutions of
the Board of Directors of each Originator, certified by its Secretary, approving
this Agreement.
(d) Purchaser shall have received copies of the articles of
incorporation, articles of association or charter of each Originator.
(e) Purchaser shall have received from each Originator (i) a
certificate of the Secretary or Assistant Secretary of such Originator
certifying the names and signatures of the officers authorized on its behalf to
execute this Agreement and any other documents to be delivered by it hereunder
and (ii) a copy of such Originator's by-laws.
(f) Purchaser shall have received an opinion of counsel to
each Originator as to the due authorization, execution and delivery by such
Originator of this Agreement and as to the validity and enforceability of the
transfers contemplated hereunder and addressing such other matters as Purchaser
may reasonably request.
(g) Each Originator shall have instructed the applicable
debtor, trustee, paying agent, authenticating agent, transfer agent, registrar,
predecessor in interest, owner (if any of the Mortgage Loans are in the form of
a security agreement) or servicer, if any, in respect of the related Mortgage
Loans to reflect on their books and records the transfer of such Mortgage Loans
to Purchaser, as owner or secured party (if any of the Mortgage Loans are in the
form of a security agreement).
(h) Purchaser shall have received the most recent available
standard servicing or lien reports in summary form, if any, with respect to all
of the mortgages in each Originator's portfolio similar to the HELOC Mortgage
Loans or the HLTV Mortgage Loans, as applicable.
(i) Purchaser shall be permitted to perform its standard loan
review of each Mortgage Loan to be purchased.
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(j) UCC-1 financing statements duly executed by each
Originator as debtor shall have been filed naming Purchaser as secured party and
the Indenture Trustee on behalf of the Trust as assignee.
Section 2.03.Survival of Representations. The terms and
conditions of the purchase and sale of each Mortgage Loan shall be as set forth
in this Agreement. Each Originator will be deemed on the Closing Date to have
made to Purchaser the representations and warranties set forth in Article IV
hereof, and such representations and warranties of such Originator shall be true
and correct on and as of the Closing Date. In addition, such Originator will be
deemed to have reaffirmed the representations and warranties contained in
Article IV hereof on the date of disposition of the Mortgage Loans by Purchaser
pursuant to the Sale and Servicing Agreement.
Section 2.04.Proceeds of Mortgage Loans. The sale, assignment,
transfer and conveyance hereby of all of the Originators respective right, title
and interest in and to each Mortgage Loan shall include all proceeds, products
and profits derived therefrom, including all scheduled payments of principal of
and interest on such Mortgage Loan and other amounts due or payable or to become
due or payable in respect thereof and proceeds thereof, including all monies,
goods and other tangible or intangible property received upon the liquidation or
sale thereof, except any payments in respect of accrued interest due prior to
the Cut-Off Date.
Section 2.05. Defective Mortgage Loans. If any Mortgage Loan
sold by an Originator hereunder is re-transferred to Purchaser pursuant to
Section 2.2(b) of the Sale and Servicing Agreement, the Originator shall, at
Purchaser's option, either (a) repurchase such Mortgage Loan at the Loan
Purchase Price therefor or (b) substitute in lieu thereof a Qualified
Replacement Mortgage (provided that the Originator has any such loans available
for sale at the time) and deliver to or upon the order of Purchaser the related
Substitution Amount, all in accordance with and subject to the applicable terms
and conditions of the Sale and Servicing Agreement.
ARTICLE III
Protective Security Interest
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans (including the related Mortgage Files and the
other rights and properties described in Section 2.01 hereof) by the Originators
to Purchaser as contemplated by this Agreement be construed as a sale of the
Mortgage Loans by the Originators to Purchaser. It is, further, not the intent
of the parties that such conveyance be deemed a pledge of the Mortgage Loans by
the Originators to Purchaser or any assignee or other transferee of Purchaser,
including, but not limited to, the Indenture Trustee, to secure a debt or other
obligation of the Originators. However, in the event and to the extent that,
notwithstanding the intent of the parties hereto, any or all of the Mortgage
Loans (including the related Mortgage Files and the other rights and properties
described in Section 2.01 hereof) are held to be property of either or both of
the Originators, then (i) this Agreement shall also be deemed to be a security
agreement within the meaning of
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Article 9 of the New York Uniform Commercial Code; (ii) the conveyance provided
for herein shall be deemed to be a grant by the Originators to Purchaser of a
first priority security interest in all of the Originators' right, title and
interest in and to the Mortgage Loans (including the related Mortgage Files and
the other rights and properties described in Section 2.01 hereof) and all
amounts payable to the holder of the Mortgage Loans and/or such rights or
properties in accordance with the terms thereof and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, instruments,
securities or other property, including all amounts from time to time held or
invested in the Note Account, the Reserve Account or the Principal and Interest
Account, whether in the form of cash, instruments, securities or other property;
(iii) the possession by Purchaser or any of its Assignees or their respective
agents of items of property that constitute instruments, money, negotiable
documents or chattel paper shall be deemed to be "possession by the secured
party" for purposes of perfecting the security interest pursuant to Section
9-305 of the New York Uniform Commercial Code; (iv) notifications to persons
holding such property, and acknowledgments, receipts or confirmations from
persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of Purchaser for the purpose of perfecting
such security interest under applicable law; and (v) the obligations secured by
the first priority security interest described in clause (iii) above shall be
deemed to include any and all obligations of Purchaser or any of its Assignees
(including the Issuer) to pay the principal of and interest on the Notes to the
Noteholders and to pay the fees, expenses and other amounts required to be paid
to the Master Servicer, the Indenture Trustee, the Owner Trustee, the Note
Insurer and the Certificateholders, all in accordance with and otherwise subject
to the Operative Documents (including the Indenture). Any assignment of the
interest of Purchaser under any provision hereof shall also be deemed to be an
assignment of any security interest created hereby. Each of the Originators and
Purchaser shall, to the extent consistent with this Agreement, take such actions
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
would be maintained as such throughout the terms of this Agreement and the
Indenture. Each of the Originators also covenants not to pledge, assign or grant
any security interest to any third party in any Mortgage Loan conveyed to
Purchaser hereunder.
ARTICLE IV
Representations and Warranties
Section 4.01.Representations and Warranties of Originators.
Each of the Originators represents, warrants and covenants to Purchaser as of
the Closing Date that:
(a) Such Originator is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is duly
authorized and qualified to transact any and all business contemplated by this
Agreement to be conducted by such Originator in any state in which a Mortgaged
Property is located to the
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extent necessary to ensure the enforceability of each Mortgage Loan in
accordance with the terms of this Agreement.
(b) Such Originator has the full corporate power and authority
to originate the Mortgage Loans conveyed by it hereunder and to execute, deliver
and perform, and to enter into and consummate the transactions contemplated by,
this Agreement; the execution, delivery and performance of this Agreement by
such Originator has been duly authorized by all necessary corporate action on
the part of such Originator; and this Agreement, assuming the due authorization,
execution and delivery thereof by Purchaser, constitutes a legal, valid and
binding obligation of such Originator, enforceable against such Originator in
accordance with its respective terms, except to the extent that (i) the
enforceability thereof may be limited by federal or state bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(c) The execution and delivery of this Agreement by such
Originator, the consummation by such Originator of the transactions herein
contemplated, and the fulfillment by such Originator of or compliance by such
Originator with the terms hereof will not (i) result in a breach of any term or
provision of the charter or by-laws of such Originator or (ii) conflict with,
result in a breach, violation or acceleration of, or result in a default under,
the terms of any other material agreement or instrument to which such Originator
is a party or by which it may be bound, or any statute, order or regulation
applicable to such Originator of any court, regulatory body, administrative
agency or governmental body having jurisdiction over such Originator, which
breach, violation, default or non-compliance would have a material adverse
effect on the business, operations, financial condition, properties or assets of
such Originator taken as a whole or the ability of such Originator to perform
its obligations under this Agreement; and such Originator is not a party to,
bound by, or in breach or violation of any material indenture or other material
agreement or instrument, or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or governmental
body having jurisdiction over it, which materially and adversely affects or, to
such Originator's knowledge, would in the future reasonably be expected to
materially and adversely affect, the ability of such Originator to perform its
obligations under this Agreement or the business, operations, financial
condition, properties or assets of such Originator taken as a whole.
(d) Such Originator is, and currently intends to remain, in
good standing and qualified to do business in each jurisdiction where failure to
be so qualified or licensed would have a material adverse effect on (i) the
business, operations, financial condition, properties or assets of such
Originator taken as a whole or (ii) the enforceability of any Mortgage Loan in
accordance with the terms of this Agreement.
(e) There is no litigation pending or, to such Originator's
actual knowledge, overtly threatened against such Originator that would
materially and adversely affect the execution, delivery or enforceability of
this Agreement or the ability
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of such Originator to perform any of its other obligations hereunder in
accordance with the terms hereof.
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by such Originator of, or compliance by such Originator with, this
Agreement or the consummation of the transactions contemplated hereby, or if any
such consent, approval, authorization or order is required, such Originator has
obtained the same.
(g) Such Originator has caused to be performed any and all
acts required to preserve the rights and remedies of Purchaser in any insurance
policies of such Originator applicable to the Mortgage Loans conveyed by such
Originator hereunder.
Section 4.02.Representations and Warranties Regarding Mortgage
Loans. Each Originator represents and warrants to Purchaser as of the Closing
Date that, with respect to each HELOC Mortgage Loan conveyed by such Originator
hereunder, each representation and warranty set forth in Exhibit A hereto is
true and correct. Each Originator further represents and warrants to Purchaser
as of the Closing Date that, with respect to each HLTV Mortgage Loan conveyed by
such Originator hereunder, each representation and warranty set forth in Exhibit
B hereto is true and correct.
Section 4.03. Representations and Warranties of Purchaser.
Purchaser hereby makes the following representations and warranties, each of
which representations and warranties (i) is material and being relied upon by
the Originators and (ii) is true in all respects as of the date of this
Agreement:
(a) Purchaser has been duly organized and is validly existing
as a corporation under the laws of the State of Delaware.
(b) Purchaser has the requisite power and authority and legal
right to execute and deliver, engage in the transactions contemplated by, and
perform and observe the terms and conditions of, this Agreement to be performed
by it.
(c) This Agreement has been duly authorized and executed by
Purchaser, is valid, binding and enforceable against Purchaser in accordance
with its terms, and the execution, delivery and performance by Purchaser of this
Agreement does not conflict with any material term or provision of any other
agreement to which Purchaser is a party or any term or provision of the
Certificate of Incorporation or the By-laws of Purchaser, or any law, rule,
regulation, order, judgment, writ, injunction or decree applicable to Purchaser
of any court, regulatory body, administrative agency or governmental body having
jurisdiction over Purchaser.
(d) No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or court is
required under applicable law in connection with the execution and delivery by
Purchaser of this Agreement.
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(e) To the best knowledge of Purchaser, there is no action,
proceeding or investigation pending or threatened against Purchaser before any
court, administrative agency or other tribunal (i) asserting the invalidity of
this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, or (iii) which is likely to
materially and adversely affect the performance by Purchaser of its obligations
under, or the validity or enforceability of, this Agreement.
(f) Each purchase of the Mortgage Loans hereunder shall
constitute a representation by Purchaser to Originator that Purchaser
understands, and that Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of,
its investment in the relevant Mortgage Loans.
Section 4.04.Remedies for Breach of Representations and
Warranties; Repurchase Obligation. It is understood and agreed that the
representations and warranties set forth in Sections 4.01 and 4.02 shall survive
each sale of the Mortgage Loans to Purchaser and shall inure to the benefit of
Purchaser and its Assignees notwithstanding any restrictive or qualified
endorsement on any related Mortgage Note or Assignment of Mortgage or the
examination or failure to examine any Mortgage File. With respect to the
representations and warranties contained in Sections 4.01 and 4.02 which are
made to the best of an Originator's knowledge or to the actual knowledge of an
Originator, if it is discovered by such Originator or Purchaser that the
substance of such representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related Mortgage Loan or
Purchaser's interest therein, then notwithstanding such Originator's lack of
knowledge with respect to the inaccuracy at the time the representation or
warranty was made, such Originator shall repurchase the related Mortgage Loan in
accordance with this Section 4.04 as if the applicable representation or
warranty was breached, subject to the terms and conditions of the Sale and
Servicing Agreement. Upon discovery by an Originator or Purchaser of a breach of
any of the foregoing representations and warranties which materially and
adversely affects the value of any Mortgage Loan or Purchaser's interest
therein, the party discovering such breach shall give prompt written notice to
the others.
Within 60 days of the earlier of either discovery by or notice
to an Originator of any breach of a representation or warranty by such
Originator which materially and adversely affects the value of any Mortgage Loan
or Purchaser's interest therein, such Originator shall use its best efforts
promptly to cure such breach in all material respects and, if such breach cannot
be cured or is not cured or is not being diligently pursued as evidenced by a
notice acceptable to Purchaser, as evidenced by Purchaser's agreement thereto,
at the end of such 60-day period, Originator shall, at Purchaser's option,
either (a) repurchase such Mortgage Loan at the Loan Purchase Price therefor or
(b) substitute in lieu thereof a Qualified Replacement Mortgage (provided that
the Originator has any such loans available for sale at the time) and deliver to
or upon the order of Purchaser the related Substitution Amount, all in
accordance with and subject to the applicable terms and conditions of the Sale
and Servicing Agreement.
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At the time of repurchase or substitution, Purchaser and such
Originator shall arrange for the assignment to such Originator of such Mortgage
Loan and the delivery to such Originator of the related Mortgage File.
Each Originator shall indemnify and hold harmless Purchaser
from and against any losses, damages, penalties, fines, forfeitures, reasonable
and necessary legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach by such Originator of the
representations and warranties contained in this Article IV (notwithstanding any
limitation in such representation and warranty as to such Originator's
knowledge). It is understood and agreed that the obligations of each Originator
set forth in this Section 4.04 either to cure or to repurchase or substitute a
defective Mortgage Loan and to indemnify and hold harmless Purchaser as provided
in this Section 4.04 constitute the sole remedies of Purchaser respecting a
breach by such Originator of the foregoing representations and warranties.
Any cause of action against an Originator relating to or
arising out of the breach by such Originator of any representations and
warranties made in Sections 4.01 and 4.02 shall accrue as to any Mortgage Loan
upon (i) discovery of such breach by Purchaser or notice thereof by the
Originator to Purchaser, (ii) failure by the Originator to cure such breach or
to repurchase or substitute such Mortgage Loan as specified above, and (iii)
demand upon the Originator by Purchaser for compliance with the relevant
provisions of this Agreement.
ARTICLE V
Covenants and Warranties of Originators
So long as this Agreement remains in effect or any Originator
has obligations hereunder, each Originator hereby covenants and agrees with
Purchaser as follows:
Section 5.01 Affirmative Covenants.
(a) Such Originator shall do all things necessary to remain
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and to maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted except
where failure to maintain such authority would not have a material adverse
effect on the ability of such Originator to conduct its business or to perform
its obligations under this Agreement.
(b) At all times during this Agreement, such Originator shall
possess sufficient net capital and liquid assets (or ability to access the same)
to satisfy its obligations as they become due in the normal course of business.
(c) Such Originator shall permit Purchaser or its accountants,
attorneys or other agents access to all of the books and records relating to the
Mortgage
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Loans purchased and retained by Purchaser for inspection and copying during
normal business hours at all places where such Originator conducts business.
Section 5.02. Negative Covenants
(a) Such Originator shall not assign or attempt to assign this
Agreement or any rights hereunder, without first obtaining the specific written
consent of Purchaser.
(b) Such Originator shall not amend its articles of
incorporation, articles of association or charter or its by-laws if such
amendment shall have or is likely to have an adverse effect upon Purchaser or
its interests under this Agreement, without the prior written consent of
Purchaser.
(c) Such Originator shall not (i) dissolve or terminate its
existence or (ii) transfer any assets to any affiliate except in the ordinary
course of its business or as otherwise expressly permitted or contemplated
hereby.
(d) Such Originator will not commit any act in violation of
applicable laws or regulations promulgated pursuant thereto that relate to the
Mortgage Loans or that materially and adversely affect the operations or
financial conditions of such Originator.
ARTICLE VI
Sale of Mortgage Loans by Purchaser
It is the intent of the parties hereto that (i) immediately
after the sale of the Mortgage Loans by the Originators to Purchaser as provided
herein, pursuant to the Sale and Servicing Agreement, Purchaser will sell,
assign, transfer, convey and set over to Holding all of Purchaser's right, title
and interest in and to the Mortgage Loans (including the other rights and
properties conveyed to it hereunder), (ii) immediately after the sale of the
Mortgage Loans by Purchaser to Holding, pursuant to the Sale and Servicing
Agreement, Holding will sell, assign, transfer, convey and set over to the Trust
all of Holding's right, title and interest in and to the Mortgage Loans, and
(iii) immediately after the sale of the Mortgage Loans by Holding to the Trust
as described above, pursuant to the Indenture, the Trust will Grant to the
Indenture Trustee all of the Trust's right, title and interest in and to the
Mortgage Loans.
With respect to each such sale or other transfer, each
Originator hereby agrees:
(a) to cooperate fully with Purchaser, Holding and the Trust
with respect to all reasonable requests and due diligence procedures, including
participating in meetings with rating agencies, insurers and such other parties
as Purchaser shall designate and participating in meetings with Holding and the
Trust and providing information reasonably requested by Holding and the Trust;
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(b) to execute all other necessary documents to effect the
transactions contemplated therein;
(c) to affirm the representations and warranties set forth
herein regarding such Originator and the Mortgage Loans as of the date of the
transfer to Holding and/or the Trust;
(d) to deliver to Purchaser for inclusion in any prospectus or
other offering material such publicly available information regarding such
Originator, its financial condition and the mortgage loan delinquency,
foreclosure and loss experience of its portfolio as is customarily set forth in
a prospectus supplement with respect to a comparable mortgage pool, the
underwriting of mortgage loans, the servicer, the servicing and collection of
mortgage loans, lending activities and loan sales of the servicer, regulatory
matters and delinquency and loss experience and any additional information
reasonably requested by Purchaser, or as is otherwise reasonably requested by
Purchaser and which such Originator is capable of providing without unreasonable
effort or expense, and to indemnify Purchaser and its Assignees for material
misstatements or omissions contained in such information;
(e) to deliver to Purchaser, and to any Person designated by
Purchaser, such legal documents and in-house opinions of counsel as are
customarily delivered by originators and reasonably determined by Purchaser to
be necessary in connection with the transactions contemplated by the Sale and
Servicing Agreement, it being understood that the cost of any opinions of
outside special counsel that may be required shall be the responsibility of such
Originator; and
(f) to cooperate fully with Purchaser and its Assignees with
respect to the preparation of Mortgage Loan documents and other documents and
with respect to servicing requirements reasonably requested by the rating
agencies and insurers.
ARTICLE VII
Additional Remedies
Upon the occurrence of an Event of Default under the Indenture
due to an act or omission of an Originator, Purchaser and any of its Assignees
shall have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of each
applicable jurisdiction and other applicable laws, which rights shall be
cumulative. Without limiting the foregoing, the occurrence of any such Event of
Default shall not deny to Purchaser or its Assignees any remedy to which
Purchaser or its Assignees may be otherwise appropriately entitled, whether by
statute or applicable law, at law or in equity.
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ARTICLE VIII
Term
This Agreement shall terminate on the date of termination of
the Trust as set forth in Article IX of the Trust Agreement.
ARTICLE IX
Exclusive Benefit of Parties; Assignment
This Agreement is for the exclusive benefit of the parties
hereto and their respective successors and assigns and shall not be deemed to
give any legal or equitable right to any other person except Holding, the Trust,
the Indenture Trustee, the Noteholders and the Insurer. Neither this Agreement
nor any rights hereunder may be assigned by any party hereto without the prior
written consent of the others except to Holding, the Trust and the Indenture
Trustee.
ARTICLE X
Amendment; Waivers
This Agreement may be amended from time to time only by
written agreement of the Originators and Purchaser with the prior written
consent of the Insurer, which consent shall not be unreasonably withheld. Any
forbearance, failure, or delay by a party in exercising any right, power, or
remedy hereunder shall not be deemed to be a waiver thereof, and any single or
partial exercise by a party of any right, power or remedy hereunder shall not
preclude the further exercise thereof. Every right, power and remedy of a party
shall continue in full force and effect until specifically waived by it in
writing. No right, power or remedy shall be exclusive, and each such right,
power or remedy shall be cumulative and in addition to any other right, power or
remedy, whether conferred hereby or hereafter available at law or in equity or
by statute or otherwise.
ARTICLE XI
Execution in Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument. Signatures may be exchanged by
facsimile, and each party hereto agrees to be bound by its own facsimile
signature and to accept the facsimile signature of the other party.
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<PAGE> 20
ARTICLE XII
Effect of Invalidity of Provisions
In case any one or more of the provisions contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall in no way be affected, prejudiced or disturbed thereby.
ARTICLE XIII
Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its rules
regarding conflict of laws.
ARTICLE XIV
Notices
Any notices, consents, directions, demands and other
communications given under this Agreement (unless otherwise specified herein)
shall be in writing and shall be deemed to have been duly given when personally
delivered at or telecopied to the respective addresses or facsimile numbers, as
the case may be, set forth on the signature page hereof for the Originators and
Purchaser, or to such other address or facsimile number as either party shall
give notice to the other party pursuant to this Article XIV. Notices, consents,
and other communications may also be effected by first class mail, postage
prepaid sent to the foregoing addresses and will be effective upon receipt by
the intended recipient.
ARTICLE XV
Entire Agreement
This Agreement, including the Exhibits and Schedules hereto,
contains the entire agreement of the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements between
them, whether oral or written, of any nature whatsoever with respect to the
subject matter hereof.
ARTICLE XVI
Indemnities
Without limiting any other rights which Purchaser or each
Originator may have hereunder or under applicable law, and in addition to any
other indemnity provided hereunder, each Originator hereby agrees to indemnify
Purchaser and its respective
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<PAGE> 21
officers, directors, agents and employees (each, an "Indemnified Party") from
and against any and all Losses incurred by any of them relating to or resulting
from:
(a) Any representation or warranty made by such Originator (or
any officers, employees or agents of such Originator) under or in connection
with this Agreement, any periodic report required to be furnished thereunder or
any other information or document delivered by such Originator pursuant hereto,
which shall have been false or incorrect in any material respect when made or
deemed made;
(b) The failure by such Originator to (i) comply with any
applicable law, rule or regulation with respect to any purchase and sale
hereunder or (ii) perform or observe any material obligation or covenant
hereunder; or (c) The failure by such Originator (if so requested by Purchaser)
to execute and properly file, or any delay in executing and properly filing,
financing statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to the
Mortgage Loans.
Promptly after receipt by an Indemnified Party under this
Article XVI of notice of the commencement of any action or other proceeding,
such Indemnified Party will, if a claim in respect thereof is to be made against
the indemnifying party under this Article XVI, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability that it may have to
any Indemnified Party otherwise than under this Article XVI. In case any such
action is brought against any Indemnified Party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the Indemnified Party promptly after receiving the aforesaid notice
from such Indemnified Party, to assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that if the
defendants in any such action include both the Indemnified Party and the
indemnifying party and the Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it and/or other Indemnified
Parties that are different from or additional to those available to the
indemnifying party, the Indemnified Party shall have the right to elect separate
counsel to assert such legal defenses and to otherwise participate in the
defense of such action on behalf of such Indemnified Party. Upon receipt of
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense of such action and approval by the Indemnified Party of
counsel, the indemnifying party will not be liable for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof, unless (i) the Indemnified Party shall have employed separate
counsel in connection with the assertion of legal defenses in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel representing the Indemnified Parties under this Article XVI who
are parties to such action), (ii) the indemnifying party shall not have employed
counsel satisfactory to the Indemnified Party to represent the Indemnified Party
within a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the
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<PAGE> 22
employment of counsel for the Indemnified Party at the expense of the
indemnifying party; and except that, if clause (i) or (iii) is applicable, such
liability shall only be in respect of the counsel referred to in such clause (i)
or (iii).
ARTICLE XVII
RESPA Obligations
Each Originator agrees to discharge, on Purchaser's behalf,
all obligations, including all disclosure obligations, which Purchaser may have
under the Real Estate Settlement Procedures Act of 1974, as amended, in
connection with Purchaser's purchase from such Originator of the Mortgage Loans.
Purchaser agrees to provide the Originator with such information as is
reasonably necessary for the Originator to discharge such obligations and hereby
appoints the Originator as its agent in its name for the purposes of, and only
for the purposes of, performing such obligations. Each Originator hereby agrees
to indemnify Purchaser and its respective officers, directors, agents and
employees from any Losses suffered by any such party in connection with the
Originator's obligations under this provision.
ARTICLE XVIII
Survival
All indemnities and undertakings of Originator and Purchaser
hereunder shall survive the termination of this Agreement.
ARTICLE XIX
Consent to Service
Each party irrevocably consents to the service of process by
registered or certified mail, postage prepaid, to it at its address given
pursuant to Article XIV hereof.
ARTICLE XX
Submission to Jurisdiction; Waiver of Trial by Jury
With respect to any claim arising out of this Agreement each
party irrevocably submits to the exclusive jurisdiction of the courts of the
State of New York and the United States District Court located in the Borough of
Manhattan, City of New York, and each party irrevocably waives any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum and further
irrevocably waives the right to object, with respect to such claim, suit, action
or proceeding brought in any such court, that such court does not have
jurisdiction over such
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<PAGE> 23
party, provided that service of process is made as set forth in Article XIX
hereof or by any other lawful means. To the extent permitted by applicable law,
Purchaser and the Originators each irrevocably waive all right of trial by jury
in any action, proceeding or counterclaim arising out of or in connection with
this Agreement or any matter arising hereunder.
ARTICLE XXI
Construction
The headings in this Agreement are for convenience only and
are not intended to influence its construction. References to Articles,
Sections, Schedules and Exhibits in this Agreement are to the Articles, Sections
of and Schedules and Exhibits to this Agreement. The Schedules and Exhibits are
hereby incorporated into and form a part of this Agreement. As used in this
Agreement, any form of the word "include" shall be deemed to be followed by the
words "without limitation," the words "and" and "or" are used in the conjunctive
or disjunctive as the sense and circumstances may require, the singular includes
the plural and vice-versa, and terms such as "herein," "hereof," "hereby" and
"hereunder" refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context clearly indicates otherwise.
Unless otherwise stated in this Agreement, in the computation of a period of
time from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means "to but
excluding."
ARTICLE XXII
Further Assurances
Each party hereto agrees to execute, acknowledge and deliver
to the others such reasonable and appropriate additional documents, instruments
or agreements as any of the other parties may be necessary or appropriate to
effectuate the purposes of this Agreement.
[Signature Page Follows]
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused their names
to be signed hereto by their respective officers thereunto duly authorized, all
as of the date first written above.
ADVANTA MORTGAGE CONDUIT
SERVICES INC., as Purchaser
By:
--------------------------------------
Name:
Title:
ADVANTA NATIONAL BANK,
as an Originator
By:
--------------------------------------
Name:
Title:
ADVANTA FINANCE CORP.,
as Originator
By:
--------------------------------------
Name:
Title:
<PAGE> 25
SCHEDULE I
SCHEDULE OF HELOC MORTGAGE LOANS
I-1
<PAGE> 26
SCHEDULE II
SCHEDULE OF HLTV MORTGAGE LOANS
II-1
<PAGE> 27
EXHIBIT A
HELOC MORTGAGE LOAN
REPRESENTATIONS AND WARRANTIES
Each Originator represents, warrants and covenants to
Purchaser that as of the Closing Day with respect to the HELOC Mortgage Loans:
(i) All of the original or certified documentation set forth
in Section 2.1 of the Sale and Servicing Agreement (including all material
documents related thereto) with respect to each HELOC Mortgage Loan has been or
will be delivered to Purchaser on the Closing Day. All such documentation is
true and accurate in all material respects. Each of the documents and
instruments specified to be included therein has been duly executed and in due
and proper form, and each such document or instrument is in a form generally
acceptable to prudent mortgage lenders that regularly originate or purchase
mortgage loans comparable to the HELOC Mortgage Loans for sale to prudent
investors in the secondary market that invest in mortgage loans such as the
HELOC Mortgage Loans;
(ii) As of the Closing Day with respect to the HELOC Mortgage
Loans and the applicable Transfer Date with respect to any Qualified Replacement
Mortgage and as of the date any Additional Balance is created, the information
set forth in the HELOC Mortgage Loan Schedule for such HELOC Mortgage Loans is
true and correct in all material respects;
(iii) As of the Closing Day, no more than [______%] of the
related Cut-Off Date Pool Balance of the Mortgage Loans is secured by Mortgaged
Properties located within any single zip code area. None of the HELOC Mortgage
Loans consists of Date-of-Payment Loans;
(iv) The HELOC Mortgages and Credit Line Agreements have not
been assigned or pledged, and Originator is the sole owner and holder of the
HELOC Mortgages and Credit Line Agreements free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority, under all
governmental and regulatory bodies having jurisdiction over the Class A
Noteholder of the applicable HELOC Mortgage Loan, to sell, assign or transfer
the same;
(v) As of the Closing Day with respect to the HELOC Mortgage
Loans and the applicable Transfer Date with respect to any Qualified Replacement
Mortgage, there is no valid offset, defense or counterclaim of any obligor under
any Credit Line Agreement or HELOC Mortgage. Neither the operation of any of the
terms of each Credit Line Agreement and each HELOC Mortgage nor the exercise of
any right thereunder will render either the Credit Line Agreement or the HELOC
Mortgage unenforceable, in whole or in part, nor subject to any right of
rescission, set-off, claim, counterclaim or defense, including, without
limitation, the defense of usury and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;
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(vi) No Minimum Monthly Payment is more than 59 days
delinquent (measured on a contractual basis); and with respect to the HELOC
Mortgage Loans no more than [____%] (by Initial Cut-Off Date Pool Balance) were
30-59 days delinquent (measured on a contractual basis);
(vii) As of the related Cut-Off Date with respect to the
Mortgage Loans and the applicable Transfer Date with respect to any Qualified
Replacement Mortgage, each Credit Line Agreement and each HELOC Mortgage Loan is
an enforceable obligation of the related Mortgagor, except as the enforceability
thereof may be limited by the bankruptcy, insolvency or similar laws affecting
creditors' rights generally;
(viii) The weighted average remaining term to maturity of the
HELOC Mortgage Loans on a contractual basis as of the Initial Cut-Off Date for
the Mortgage Loans is approximately [____] months. On each date that the Loan
Rates have been adjusted, interest rate adjustments on the HELOC Mortgage Loans
were made in compliance with the related HELOC Mortgage and Credit Line
Agreement and applicable law. Over the term of each HELOC Mortgage Loan, the
Loan Rate may not exceed the related Loan Rate Cap, if any. The Loan Rate Caps
for the HELOC Mortgage Loans range between [______% and _____%]. The HELOC
Mortgage Loans' margins range between [______% and ____%] and the weighted
average margin is approximately [______%] as of the related Cut-Off Date for the
HELOC Mortgage Loans. The Loan Rates on such HELOC Mortgage Loans range between
[_____% and _____%] and the weighted average Loan Rate is approximately
[_____%];
(ix) The Credit Limits on the HELOC Mortgage Loans range
between [$_______ and $_______] with an average of [_______]. As of the Cut-Off
Date for the HELOC Mortgage Loans, no HELOC Mortgage Loan had a principal
balance in excess of approximately [$_______] and the average principal balance
of the HELOC Mortgage Loans is equal to approximately [$_______;]
(x) Each HELOC Mortgage Loan being transferred to the Trust is
a HELOC Mortgage;
(xi) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include condominiums and
townhouses but shall not include cooperatives or mobile homes attached to a
foundation, or otherwise, or constitutes other than real property under
applicable state law;
(xii) No HELOC Mortgage Loan had a Combined Loan-to-Value
Ratio in excess of 125%;
(xiii) As of the Closing Day, each HELOC Mortgage is either a
valid and subsisting first or junior lien of record on the Mortgaged Property
[(subject in the case of any junior Mortgage Loan only to a Senior Lien on such
Mortgaged Property)] and subject in all cases to the exceptions to title set
forth in the title insurance policy, with respect to the related HELOC Mortgage
Loan, which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and
A-2
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except for liens for (i) real estate taxes and special assessments not yet
delinquent, (ii) income taxes, (iii) any covenants, conditions and restrictions,
rights of way, easements, and other matters of public record and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such HELOC Mortgage;
(xiv) Immediately prior to the transfer and assignment herein
contemplated, Originator held good and indefeasible title to, and was the sole
owner of, each HELOC Mortgage Loan conveyed by Originator (including its Cut-Off
Date Pool Balance), all monies due or to become due with respect thereto, and
all proceeds of such Cut-Off Date Pool Balances with respect thereto, free of
any liens, charges, mortgages, encumbrances or rights of others except liens
which will be released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated, Purchaser will
hold good and indefeasible title to, and be the sole owner of, each HELOC
Mortgage Loan, free of any liens, charges, mortgages, encumbrances or rights of
others except liens which will be released simultaneously with such transfer and
assignment;
(xv) There is no delinquent tax or assessment, lien or
mechanic's lien on any Mortgaged Property, and each Mortgaged Property is free
of substantial damage and is in good repair;
(xvi) Each HELOC 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;
(xvii) With respect to each First Mortgage Loan, and, to the
best of Originator's knowledge, with respect to each junior Mortgage Loan, a
lender's title insurance policy issued in standard California Land Title
Association form or American Land Title Association form or other form
acceptable in a particular jurisdiction by a title insurance company authorized
to transact business in the state in which the related Mortgaged Property is
situated, was issued on the date of origination of the HELOC Mortgage Loan and
as of the Cut-Off Date, each such policy is valid and remains in full force and
effect, or a title search or guaranty of title customary in the relevant
jurisdiction was obtained with respect to a HELOC Mortgage Loan as to which no
title insurance policy or binder was issued.
(xviii) As of the Closing Day, each Credit Line Agreement is
the legal, valid, binding and enforceable obligation of the maker thereof and is
enforceable in accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law), and all parties to each HELOC Mortgage Loan had full legal capacity to
execute all documents relating to such HELOC Mortgage Loan and convey the estate
therein purported to be conveyed;
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(xix) The terms of each Credit Line Agreement and each HELOC
Mortgage have not been impaired, altered or modified in any respect, except by a
written instrument which has been recorded, if necessary, to protect the
interest of Purchaser. The substance of any such alteration or modification is
reflected on the related HELOC Schedule of Mortgage Loans and has been approved
by the primary mortgage guaranty insurer, if any;
(xx) Except as otherwise required by law, pursuant to the
statute under which the related HELOC Mortgage Loan was made, the related Credit
Line Agreement is not and has not been secured by any collateral, pledged
account or other security except the lien of the corresponding HELOC Mortgage;
(xxi) Each Mortgaged Property is located in the state
identified in the HELOC Schedule of Mortgage Loans and consists of one or more
parcels of real property with a residential dwelling erected thereon;
(xxii) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is undamaged by
waste, fire, earthquake or earth movement, flood, tornado or other casualty, so
as to affect adversely the value of the Mortgaged Property as security for the
HELOC Mortgage Loan or the use for which the premises were intended;
(xxiii) With respect to each junior Mortgage Loan, either (A)
consent for such HELOC Mortgage Loan was not required by the holder of the
related Senior Lien prior to the making of such HELOC Mortgage Loan or (B) such
consent has been obtained and is contained in the related Mortgage File;
(xxiv) Each HELOC Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a HELOC Mortgage designated as a deed
of trust, by Indenture Trustee's sale and (B) otherwise by judicial foreclosure.
There is no homestead or other exemption available which materially interferes
with the right to sell the related Mortgaged Property at a Indenture Trustee's
sale or the right to foreclose the related HELOC Mortgage;
(xxv) As of the Closing Day, there is no default, breach,
violation or event of acceleration existing under any HELOC Mortgage or the
related Credit Line Agreement and no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration; and the Sponsor has not
waived any default, breach, violation or event of acceleration;
(xxvi) To the best knowledge of Originator, all parties to the
Credit Line Agreement and the HELOC Mortgage had legal capacity to execute the
Credit Line Agreement and the HELOC Mortgage and each Credit Line Agreement and
HELOC Mortgage have been duly and properly executed by such parties;
A-4
<PAGE> 31
(xxvii) No selection procedures reasonably believed by
Originator to be adverse to the interests of Purchaser was utilized in selecting
the HELOC Mortgage Loans;
(xxviii) No Mortgagor has been released, in whole or in part,
except in connection with an assumption agreement which has been approved by the
applicable title insurer (to the extent required by such title insurer) and
which is part of the HELOC Mortgage File delivered to Purchaser;
(xxix) With respect to each HELOC Mortgage Loan that is not a
first mortgage loan, the related prior lien requires equal monthly payments. At
the time of origination of each HELOC Mortgage Loan that is not a first mortgage
loan, the related prior lien was not more than 30 days delinquent;
(xxx) All required inspections, licenses and certificates with
respect to the use and occupancy of all occupied portions of all property
securing the HELOC Mortgages have been made, obtained or issued, as applicable;
(xxxi) No more than _____% of the HELOC Mortgage Loans are
junior mortgage loans;
(xxxii) With respect to each HELOC Mortgage Loan that is not a
first mortgage loan, the related prior lien does not provide for negative
amortization;
(xxxiii) With respect to each HELOC Mortgage Loan that is not
a first mortgage loan, the maturity date of the HELOC Mortgage Loan is prior to
the maturity date of the related prior lien if such prior lien provides for a
balloon payment; and
(xxxiv) Each HELOC Mortgage Loan is secured by a property
having an appraised value of less than $1,500,000.
A-5
<PAGE> 32
EXHIBIT B
HLTV MORTGAGE LOAN
REPRESENTATIONS AND WARRANTIES
Each Originator represents, warrants and covenants to
Purchaser that as of the Closing Day with respect to the HLTV Mortgage Loans:
(xxxv) The information with respect to each HLTV Loan set
forth in the related HLTV Loan Schedule is true and correct as of the
Cut-Off Date.
(xxxvi) All of the original or certified documentation
required to be delivered on the Closing Date to the Indenture Trustee,
with respect to each HLTV Loan has been or will be delivered to the
Indenture Trustee. 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 HLTV Loans for sale to prudent
investors in the secondary market that invest in mortgage loans similar
to the HLTV Loans.
(xxxvii) Each HLTV Loan is a valid and existing lien of record
on the Mortgaged Property.
(xxxviii) Immediately prior to the transfer and assignment
herein contemplated, the Sponsor held good and indefeasible title to,
and was the sole owner of, each HLTV Loan conveyed by the Sponsor
subject to no liens, charges, mortgages, encumbrances or rights of
others except liens which will be released simultaneously with such
transfer and assignment and immediately upon receipt of each HLTV Loan,
the Indenture Trustee will hold good and indefeasible title to, and
will be the sole owner of each HLTV Loan, free and clear of any liens,
charges, mortgages, encumbrances, or rights of others except liens
which will be released immediately prior to such transfer or
assignment.
(xxxix) As of the related Cut-Off Date, no HLTV Loan is thirty
(30) or more days Delinquent, except for those loans the Buyer reviews
during due diligence and agrees to purchase with knowledge of
delinquency; there is no valid and enforceable offset, defense or
counterclaim to any Mortgage Note, including the obligation of the
related Mortgagor to pay the unpaid principal of or interest on such
Mortgage Note or the defense of usury, nor will the operation of any of
the terms of such Mortgage Note, or the exercise of any right
thereunder, render either the Mortgage Note 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.
(xl) There is no delinquent tax or assessment lien or
mechanic's lien, or claim for work, labor, or material on any Mortgaged
Property which is or may be a lien prior to, or equal with, the lien of
the related Mortgage except those which are insured
B-1
<PAGE> 33
against by any title insurance policy referred to in paragraph (viii)
below; there is no proceeding pending or threatened or currently
occurring for the total or partial condemnation of any Mortgaged
Property; each Mortgaged Property is free of substantial damage and is
in good repair, except for those items specifically mentioned in the
appraisal, or any applicable appraisal review of any mortgaged
property; each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as
to affect adversely the value of the Mortgaged Property as security for
the HLTV Loan or the use for which the premises were intended.
(xli) Each HLTV 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, the Real Estate Settlement Procedures Act, and
other consumer protection laws, usury, equal credit opportunity,
disclosure and recording laws. Each HLTV Loan is a Qualifying HLTV Loan
and is a Non-REMICable Mortgage Loan.
(xlii) With respect to each HLTV Loan, a title policy, if any,
or evidence of a title search, in either case from a title company
authorized to transact business in the state in which the related
Mortgaged Property is situated, insuring or reflecting the mortgagee's
interest under the related HLTV Loan as the holder of a valid first or
second mortgage lien of record on the real property described in the
related Mortgage.
(xliii) Each Mortgaged Property is improved by a one- to four
family residential dwelling, which may include, condominiums and
townhouses but shall not include cooperatives; the improvements upon
each Mortgaged Property are covered by a valid and existing hazard
insurance policy with a generally acceptable carrier that provides for
fire and extended coverage representing coverage not less than the
least of (A) the outstanding principal balance of the related HLTV Loan
(together, in the case of a junior HLTV Loan, with the outstanding
principal balance of any 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 Mortgaged Property.
(xliv) Each Mortgaged Property for an HLTV Loan is not
required to have a flood insurance policy maintained with respect to
it.
(xlv) Each Mortgage 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). The maker of such Mortgage and Note had
the legal capacity to execute such Mortgage and Mortgage Note at the
time such Mortgage and Mortgage Note were executed.
(xlvi) With respect to any Senior Lien, Seller has caused and
will cause to be performed any and all acts required to be performed to
preserve the rights and remedies of the Master Servicer in any
Insurance Policies applicable to any HLTV Loans delivered by Seller,
including any necessary notifications of insurers, assignments of
policies or
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<PAGE> 34
interests therein, and establishments of co-insured, joint loss payee
and mortgagee rights in favor of the Buyer and its assignees in care of
the Master Servicer.
(xlvii) Interest on each Mortgage Note is calculated in
accordance with the actuarial method; the terms of each Mortgage 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 Indenture Trustee and which
has been included in the related Mortgage File to be delivered to the
Indenture Trustee. The substance of any such alteration or modification
is reflected on the related HLTV Loan Schedule and has been approved by
the primary mortgage guaranty insurer, if any.
(xlviii) Except as otherwise required by law or pursuant to
the statute under which the related HLTV Loan was made, the related
Mortgage Note will not be secured by any collateral, pledged account or
other security except the lien of the corresponding Mortgage.
(xlix) No HLTV Loan will be originated under a buydown plan;
no HLTV Loan provides for negative amortization, has a shared
appreciation feature, or other contingent interest feature; and as of
the related Cut-Off Date, no HLTV Loan had a Combined
Loan-to-Value-Ratio in excess of the maximum for the related product
type as set forth in the relevant Originator's applicable guidelines.
(l) Any advances made after the date of origination of an HLTV
Loan but prior to the Cut-Off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate
and single repayment term reflected on the related HLTV Loan Schedule.
No Mortgage Note has been modified, except as reflected on the related
HLTV Loan Schedule, and evidence of any modification is in the related
Mortgage File and has been supplied to the Indenture Trustee. The
consolidated principal amount does not exceed the original principal
amount of the related HLTV Loan. No Mortgage Note permits or obligates
the Master Servicer, any Sub-Servicer or the relevant Originator or its
assignees to make future advances to the related Mortgagor at the
option of the Mortgagor.
(li) Any and all requirements as to completion of any on-site
or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with, subject to any escrow hold-back for
improvements pending completion. All costs, fees and expenses incurred
in making, closing or recording the HLTV Loans were paid.
(lii) All of the improvements which were included for the
purposes of determining the Appraised Value of any Mortgaged Property
lie wholly within the boundaries and building restriction lines of such
Mortgaged Property and no improvements on adjoining properties encroach
upon such Mortgaged Properties and, if a title insurance policy exists
with respect to such Mortgaged Property, are stated in the title
insurance policy and affirmatively insured; no improvement located on
or being part of any Mortgaged 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
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<PAGE> 35
occupied portions of each Mortgaged 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.
(liii) With respect to each Mortgage on an HLTV Loan
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 Indenture Trustee or its
assignees under the deed of trust, except in connection with a
trustee's sale after default by the related Mortgagor.
(liv) With respect to each junior HLTV Loan, either (A) no
consent for such HLTV Loan was required by the holder of the related
Senior Lien prior to the making of such HLTV Loan or (B) such consent
has been obtained and is contained in the related Mortgage File.
(lv) Each Mortgage on an HLTV Loan contains a provision for
the acceleration of the payment of the unpaid principal balance of the
related HLTV Loan in the event the related Mortgaged Property is sold
without the prior consent of the Mortgagee thereunder; each Mortgage
contains customary and enforceable provisions which render the rights
and remedies of the holder thereof adequate for the realization against
the related Mortgaged Property of the benefits of the security,
including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. There is
no homestead or other exemption available to a Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's
sale or the right to foreclose on the Mortgaged Property.
(lvi) No instrument of release or waiver has been executed in
connection with any HLTV 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 included in the related Mortgage File delivered
to the Indenture Trustee.
(lvii) If a senior HLTV Loan provides for a balloon payment
and has a "recast" feature, then the recast date of such senior HLTV
Loan must be at least 36 months after the maturity date of each HLTV
Loan which is a junior HLTV Loan.
(lviii) Each HLTV Loan has been originated in accordance with
all required provisions of the relevant Originator's applicable
guidelines; an appraisal was performed with respect to each HLTV Loan
in compliance with the applicable requirements set forth in such
applicable guidelines.
(lix) The Sponsor has no actual knowledge that there exist on
any Mortgaged Property any hazardous substances, hazardous wastes or
solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and
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<PAGE> 36
Liability Act, the Resource Conservation and Recovery Act of 1976, or
other federal, state or local environmental legislation.
(lx) No mortgage reconveyance, release, satisfaction or
trustee fees have been collected by the Sponsor or any Originator or
paid by any Mortgagor. In addition, if there is, in Buyer's reasonable
judgment, a documentation problem that would make reconveyance of
satisfaction difficult, cumbersome or expensive to the Buyer, then the
Sponsor shall at the Indenture Trustee's request complete the
reconveyance of satisfaction of the Mortgage, including the recordation
of the necessary documentation, at the Sponsor's sole cost and expense.
(lxi) The HLTV Loan is not in default, and all Monthly
Payments due prior to the related Cut-Off Date and all taxes,
governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments or ground rents have been paid.
The Sponsor has not advanced funds, or induced or solicited any advance
of funds by a party other than the Mortgagor directly or indirectly,
for the payment of any amount required by the HLTV Loan. The collection
practices used by each entity which has serviced the HLTV Loan have
been in all respects legal, proper, prudent and customary in the
mortgage servicing business. With respect to escrow deposits and
payments in those instances where such were required, there exist no
deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made and no escrow deposits or
payments or other charges or payments have been capitalized under any
Mortgage or the related Mortgage Note.
(lxii) Each original Mortgage was recorded or is in the
process of being recorded, and all subsequent Assignments of the
original Mortgage have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof.
(lxiii) Each Mortgaged Property is located in the state
identified in the HLTV Loan Schedule delivered to the Indenture Trustee
and consists of one or more parcels of real property with a residential
dwelling erected thereon.
(lxiv) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, flood, tornado
or other casualty, so as to affect adversely the value of the Mortgaged
Property as security for the HLTV Loan or the use for which the
premises were intended.
(lxv) 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 Sponsor has not waived any
default, breach, violation or event of acceleration.
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<PAGE> 37
(lxvi) The proceeds of each HLTV Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder.
(lxvii) There is no obligation on the part of the Sponsor or
any Originator to make payments in addition to those made by the
Mortgagor.
(lxviii) There is no HLTV Loan with an "open" escrow for
deferred maintenance. All escrows must be released. (lxix) No error,
omission, misrepresentation, negligence, fraud or similar occurrence
with respect to an HLTV Loan has taken place on the part of any person,
including the Mortgagor, or any party involved in the origination of
the HLTV Loan or in the application of any insurance in relation to
such HLTV Loan.
(lxx) On the Closing Date, with respect to the HTLV Mortgage
Loans, ____% or more (by aggregate principal balance) of the Mortgage
Loans do not constitute "real estate mortgages" for the purpose of
Treasury Regulations Section 301.7701. For this purpose a Mortgage Loan
does not constitute a "real estate mortgage" if:
(a) The Mortgage Loan is not secured by an interest in real
property, or
(b) The Mortgage Loan is not an "obligation principally
secured by an interest in real property." For this purpose an
"obligation is principally secured by an interest in real property" if
it satisfies either test set out in paragraph (1) or paragraph (2)
below.
(1) The 80-percent test. An obligation is principally secured by
an interest in real property if the fair market value of the
interest in real property securing the obligation
(A) was at least equal to 80 percent of the adjusted
issue price of the obligation at the time the
obligation was originated (or, if later, the time the
obligation was significantly modified); or
(B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of
the real property interest must be first reduced by the amount
of any lien on the real property interest that is senior to
the obligation being tested, and must be further reduced by a
proportionate amount of any lien that is in parity with the
obligation being tested, in each case before the percentages
set forth in (1)(A) and (1)(B) are determined. The adjusted
issue price of an obligation is its issue price plus the
amount of accrued original issue discount, if any, as of the
date of determination.
(2) Alternative test. An obligation is principally secured by an
interest in real property if substantially all of the proceeds
of the obligation were used to acquire or to improve or
protect an interest in real property that, at the origination
date, is the only security for the obligation. For purposes of
this test, loan guarantees made by the United States or any
state (or any political subdivision, agency, or
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<PAGE> 38
instrumentality of the United States or of any state), or
other third party credit enhancement are not viewed as
additional security for a loan. An obligation is not
considered to be secured by property other than real property
solely because the obligor is personally liable on the
obligation. For this purpose only, substantially all of the
proceeds of the obligations means 66-2/3% or more of the gross
proceeds.
(lxxi) None of the HLTV Loans have been originated through a
home improvement contractor.
(lxxii) None of the HLTV Loans is a retailment installment
contract for goods or services and none of the HLTV Loans made for
property improvement purposes was for goods and services which
constitute either a "consumer credit contract" or a "purchase money
loan" as such terms are defined in 16 C.F.R. Section 433.1.
(lxxiii) None of the Mortgage Notes constitutes "chattel
paper" as such term is defined in Section 9-105(b) of the Uniform
Commercial Code.
(lxxiv) The related Mortgage File for each Mortgage Loan
contains a title document with respect to such Mortgage Loan reflecting
that title to the related Mortgaged Property is vested at least 50% in
the Mortgagor under such Mortgage Loan.
B-7
<PAGE> 1
EXHIBIT 10.2
<PAGE> 2
EXECUTION COPY
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MBIA INSURANCE CORPORATION,
as Certificate Insurer
ADVANTA NATIONAL BANK USA
as Originator
ADVANTA FINANCE CORP.,
as Originator
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
as Sponsor
and
BEAR STEARNS & CO. INC.
as Underwriter
INDEMNIFICATION AGREEMENT
Advanta Home Equity Loan Trust 1998-B
$107,500,000 Advanta Home Equity Loan Asset Backed Notes, Series 1998-B
Class A-1 Note, Variable Interest Rate
Class A-2 Notes 6.55% Interest Rate
Dated as of September 25, 1998
- ----------------------------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
PAGE
Section 1. Definitions................................................ 1
Section 2. Representations and Warranties of the Insurer.............. 3
Section 3. Agreements, Representations and Warranties of
the Underwriter............................................ 4
Section 4. Agreements, Representations and Warranties of
the Originators............................................ 4
Section 5. Agreements, Representations and Warranties of the Sponsor.. 5
Section 6. Indemnification............................................ 6
Section 7. Insurer Undertaking........................................ 7
Section 8. Notice To Be Given Insurer................................. 7
Section 9. Notice To Be Given to the Underwriter...................... 8
Section 10. Notice To Be Given the Originators......................... 9
Section 11. Notice To Be Given the Sponsor............................. 10
Section 12. Contribution............................................... 10
Section 13. Notices.................................................... 12
Section 14. Governing Law, Etc......................................... 12
Section 15. Underwriting Agreement; Indenture.......................... 13
Section 16. Limitations................................................ 13
Section 17. Counterparts............................................... 13
<PAGE> 4
INDEMNIFICATION AGREEMENT
THIS AGREEMENT, dated as of September 25, 1998 is by and among MBIA
INSURANCE CORPORATION (the "Certificate Insurer"), as the Insurer under the Note
Guaranty Insurance Policies (the "Policies") issued in connection with the Class
A Notes described below, ADVANTA NATIONAL BANK USA and ADVANTA FINANCE CORP.
(collectively, the "Originators"), ADVANTA MORTGAGE CONDUIT SERVICES, INC. (the
"Sponsor") and BEAR STEARNS & CO. INC. as the Underwriter.
Section 1. Definitions As used in this Agreement, the following terms
shall have the respective meanings stated herein, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.
Capitalized terms used in this Agreement but not otherwise defined herein will
have the meanings ascribed to such terms in the Indenture (as described below).
"Act" means the Securities Act of 1933, as amended, together with all
related rules and regulations.
"Agreement" means this Indemnification Agreement by and among the Insurer,
the Originators, the Sponsor and the Underwriter.
"Class A Notes" means the Advanta Home Equity Loan Trust 1998-B
$107,500,000 Advanta Home Equity Loan Asset Backed Notes, Series 1998-B Class
A-1 Notes, Variable Interest Rate, Class A-2 Notes 6.55% Interest Rate issued
pursuant to the Indenture.
"Holding Trust Agreement" means the Trust Agreement between the Sponsor
and the Owner Trustee, dated as of September 1, 1998.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 6 below, as the context requires.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 6 below, as the context requires.
"Indenture" means the Indenture dated as of September 1, 1998 by and among
the Advanta Home Equity Loan Trust 1998-B and the Trustee.
"Insurance Agreement" means the Insurance Agreement, dated as of September
1, 1998, by and among the Originators, the Master Servicer, the Sponsor,
Wilmington Trust Company, as Owner Trustee, Bankers Trust Company of
California, N.A., as Indenture Trustee and the Insurer.
"Insurer Party" means the Insurer and its respective parents, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
<PAGE> 5
"Losses" means (i) any actual out-of-pocket loss paid by the party entitled
to indemnification or contribution hereunder and (ii) any actual out-of-pocket
costs and expenses paid by such party, including reasonable fees and expenses of
its counsel, to the extent not paid, satisfied or reimbursed from funds provided
by any other Person (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person).
"Master Servicer" means Advanta Mortgage Corp. USA, as Master Servicer.
"Originator Party" means the Originators, each of their parents,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or any "controlling person" (as such term is used in the Act) of any of
the foregoing.
"Person" means any individual, partnership, joint venture, corporation,
trust or unincorporated organization or any government or agency or political
subdivision thereof.
"Prospectus" means the form of final Prospectus included in the
Registration Statement on each date that the Registration Statement and any
post effective amendment or amendments thereto became effective.
"Prospectus Supplement" means the form of final Prospectus Supplement
dated September 25, 1998.
"Purchase Agreement" means the Purchase Agreement dated September 1, 1998,
between the Sponsor and the Originators.
"Registration Statement" means the registration statement on Form S-3 of
the Sponsor relating to the Class A Notes.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of September 1, 1998, among the Sponsor, the Master Servicer, the
Issuer and the Indenture Trustee as the same may be amended or supplemented
from time to time in accordance with the terms thereof.
"Sponsor Party" means the Sponsor, each of its parents, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
"Trustee" means Bankers Trust Company of California, N.A., or any
successor thereto.
"Trust Agreement" means the Trust Agreement dated as of September 1, 1998
between the Sponsor, Holding Trust and the Owner Trustee.
"Underwriter Party" means the Underwriter and its parents, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Act) of any of the foregoing.
"Underwriter" means Bear Stearns & Co., Inc.
2
<PAGE> 6
"Underwriting Agreement" means the Underwriting Agreement by and between
the Sponsor and the Underwriter, dated September 25, 1998.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE INSURER. The Insurer
represents and warrants to the Underwriter, the Sponsor and the Originators as
follows:
(a) Organization and Licensing. The Insurer is a duly incorporated and
existing New York stock insurance company licensed to do business in the
State of New York.
(b) Corporate Power. The Insurer has the corporate power and authority
to issue the Policies and to execute and deliver this Agreement and the
Insurance Agreement and to perform all of its obligations hereunder and
thereunder.
(c) Authorization, Approvals. The issuance of the Policies and the
execution, delivery and performance of this Agreement and the Insurance
Agreement have been duly authorized by all necessary corporate proceedings.
No further approvals or filings of any kind, including, without limitation,
any further approvals of or further filings with any governmental agency or
other governmental authority, or any approval of the Insurer's board of
directors or stockholders, are necessary for the Policies, this Agreement
and the Insurance Agreement to constitute the legal, valid and binding
obligations of the Insurer.
(d) Enforceability. The Policies, when issued, and this Agreement and
the Insurance Agreement will each constitute a legal, valid and binding
obligation of the Insurer, enforceable in accordance with its terms,
subject to applicable laws affecting the enforceability of creditors'
rights generally.
(e) Financial Information. The consolidated financial statements of
the Insurer as of December 31, 1997 and December 31, 1996 and for the three
years ended December 31, 1997 incorporated by reference in the Prospectus
Supplement (the "Insurer Audited Financial Statements"), 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
consolidated financial statements of the Insurer and its subsidiaries for
the six months ended June 30, 1998 incorporated by reference in the
Prospectus Supplement (the "Insurer Unaudited Financial Statements")
present fairly 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 general accepted accounting principles applied in a manner
consistent with the accounting principles used in preparing the Insurer
Audited Financial Statements, and, since June 30, 1998 there has been no
material change in such financial condition of the Insurer which would
materially and adversely affect its ability to perform its obligations
under the Policies.
(f) Insurer Information. The information in the Prospectus Supplement
as of the date hereof under the caption "The Insurer and the Policies" (the
"Insurer Information") is true and correct in all material respects and
does not contain any untrue
3
<PAGE> 7
statement of a fact that is material to the Insurer's ability to perform
its obligations under the Policies.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would materially and adversely affect its condition
(financial or otherwise) or operations or which would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Policies or the Insurance Agreement.
SECTION 3. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER.
The Underwriter represents and warrants to and agrees with the Originators, the
Sponsor and the Insurer that the statements in the Prospectus Supplement made in
reliance upon and in conformity with written information relating to the
Underwriter furnished to the Originators specifically for use in the preparation
of the Prospectus Supplement, and acknowledged in writing (referred to herein as
the "Underwriter Information"), are true and correct in all material respects.
SECTION 4. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE ORIGINATORS.
The Originators represents and warrants to and agrees with the Insurer, the
Sponsor and the Underwriter as follows:
(a) Registration Statement. The information in the Registration
Statement, the Prospectus and the Prospectus Supplement, other than the
Insurer Information, is true and correct in all material respects and does
not contain any untrue statement of a fact that is material or omit to
state a fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Organization. Each of the Originators is duly incorporated and
existing under the laws of the State of Delaware and is in good standing as
a foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it, makes such qualification
necessary.
(c) Corporate Power. Each of the Originators has the corporate power
and authority to execute and deliver this Agreement, the Underwriting
Agreement, the Indenture, the Purchase Agreement and the Insurance
Agreement and to perform all of its obligations hereunder and thereunder.
(d) Authorization; Approvals. The execution, delivery and performance
of this Agreement, the Underwriting Agreement, the Indenture, the Purchase
Agreement and the Insurance Agreement by each of the Originators have been
duly authorized by all necessary corporate proceedings. No further
approvals or filings of any kind, including, without limitation, any
further approvals of or further filing with any governmental agency or
other governmental authority, or any approval of the Originators' board of
directors or stockholders, are necessary for this Agreement, the
Underwriting Agreement, the Indenture, the Purchase Agreement and the
Insurance Agreement to constitute the legal, valid and binding obligations
of the Originators.
4
<PAGE> 8
(e) Enforceability. This Agreement, the Indenture, the Underwriting
Agreement, the Purchase Agreement and the Insurance Agreement will each
constitute a legal, valid and binding obligation of the Originators, each
enforceable in accordance with its terms, subject, as to the enforcement of
remedies, to bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy, insolvency or reorganization of
the Originators and to general principles of equity.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Originators' knowledge,
threatened against it at law or in equity or before any court, governmental
agency, board or commission or any arbitrator which, if decided adversely,
would materially and adversely affect its condition (financial or
otherwise) or operations of it or would materially and adversely affect its
ability to perform its obligations under this Agreement, the Underwriting
Agreement, the Indenture, the Purchase Agreement or the Insurance
Agreement.
SECTION 5. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. The
Sponsor represents and warrants to and agrees with the Insurer, the Originators
and the Underwriter as follows:
(a) Registration Statement. The information in the Registration
Statement, the Prospectus and the Prospectus Supplement, other than the
Insurer Information, is true and correct in all material respects and does
not contain any untrue statement of a fact that is material or omit to
state a fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Organization. The Sponsor is duly incorporated and existing under
the laws of the State of Delaware and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business, or
the properties owned or leased by it, makes such qualification necessary.
(c) Corporate Power. The Sponsor has the corporate power and authority
to execute and deliver this Agreement, the Underwriting Agreement, the
Purchase Agreement, the Trust Agreement, the Holding Trust Agreement, the
Sale and Servicing Agreement and the Insurance Agreement and to perform all
of its obligations hereunder and thereunder.
(d) Authorization; Approvals. The execution, delivery and performance
of this Agreement, the Underwriting Agreement, the Trust Agreement, the
Holding Trust Agreement, the Purchase Agreement, the Sale and Servicing
Agreement and the Insurance Agreement by the Sponsor have been duly
authorized by all necessary corporate proceedings. No further approvals or
filings of any kind, including, without limitation, any further approvals
of or further filing with any governmental agency or other governmental
authority, or any approval of the Sponsor's board of directors or
stockholders, are necessary for this Agreement, the Underwriting Agreement,
the Sale and Servicing Agreement, the Purchase Agreement the Trust
Agreement, the Holding
5
<PAGE> 9
Trust Agreement, and the Insurance Agreement to constitute the legal, valid and
binding obligations of the Sponsor.
(e) Enforceability. This Agreement, the Sale and Servicing Agreement, the
Trust Agreement, the Holding Trust Agreement, the Underwriting Agreement, the
Purchase Agreement and the Insurance Agreement will each constitute a legal,
valid and binding obligation of the Sponsor, each enforceable in accordance
with its terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of the
bankruptcy, insolvency or reorganization of the Sponsor and to general
principles of equity.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Sponsor's knowledge, threatened
against it at law or in equity or before any court, governmental agency, board
or commission or any arbitrator which, if decided adversely, would materially
and adversely affect its condition (financial or otherwise) or operations of it
or would materially and adversely affect its ability to perform its obligations
under this Agreement, the Underwriting Agreement, the Sale and Servicing
Agreement, the Trust Agreement, the Holding Trust Agreement, the Purchase
Agreement or the Insurance Agreement.
SECTION 6. INDEMNIFICATION.
(a) The Insurer hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Originator Party, each Sponsor Party and the Underwriter Party against any and
all Losses incurred by them with respect to the offer and sale of any of the
Class A Notes and resulting from the Insurer's breach of any of its
representations and warranties set forth in Section 2 of this Agreement.
(b) The Underwriter hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Class A Notes and resulting from the Underwriter's
breach of any of its representations and warranties set forth in Section 3 of
this Agreement.
(c) The Originators hereby agree, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Class A Notes and resulting from the Originator's
breach of any of its representations and warranties set forth in Section 4 of
this Agreement.
(d) The Sponsor hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Class A Notes and resulting from the Sponsor's
breach of any of its representations and warranties set forth in Section 5 of
this Agreement.
6
<PAGE> 10
(e) Upon the incurrence of any Losses entitled to indemnification
hereunder, the Indemnifying Party shall reimburse the Indemnified Party
promptly upon establishment by the Indemnified Party to the Indemnifying
Party of the Losses incurred.
SECTION 7. INSURER UNDERTAKING. The Insurer hereby agrees that, for so
long as the Underwriter is required under the Act to deliver a Prospectus
Supplement in connection with the sale of any of the Class A Notes, the Insurer
will furnish to the Underwriter, the Sponsor or the Originators, or both, upon
written request of such party or parties and at the expense of the Underwriter,
the Sponsor or the Originators, as the case may be, copies of the Insurer's most
recent financial statements (annual or interim, as the case may be) prepared in
accordance with generally accepted accounting principles (subject, as to interim
statements, to normal year-end adjustments) within a reasonable time after they
are available.
SECTION 8. NOTICE TO BE GIVEN INSURER. Except as provided in Section 10
below with respect to contribution, the indemnification provided herein by the
Insurer shall be the exclusive remedy of each Underwriter Party, Sponsor Party
or Originator Party for the Losses resulting from the Insurer's breach of a
representation, warranty or agreement hereunder; provided, however, that each
Underwriter Party, Sponsor Party or Originator Party shall be entitled to pursue
any other remedy at law or in equity for any such breach so long as the damages
sought to be recovered shall not exceed the Losses incurred thereby resulting
from such breach. In the event that any action or regulatory proceeding shall be
commenced or claim asserted which may entitle each Underwriter Party, Sponsor
Party or Originator Party to be indemnified under this Agreement, such party
shall give the Insurer written or telegraphic notice of such action or claim
reasonably promptly after receipt of written notice thereof. The Insurer shall
be entitled to participate in the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, each
Originator Party, each Sponsor Party or each Underwriter Party, as the case may
be. The Indemnified Party will have the right to employ its own counsel in any
such action in addition to counsel for the Insurer, but the fees and expenses of
such counsel will be at the expense of such Indemnified Party unless (a) the
employment of counsel by the Indemnified Party at its expense has been
authorized in writing by the Insurer, (b) the Insurer has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action or (c) the named parties to
any such action include the Insurer on the one hand and, on the other hand, the
Indemnified Party, and such 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 Insurer (in which case, if such
Indemnified Party notifies the Insurer in writing that it elects to employ
separate counsel at the expense of the Insurer, the Insurer shall not have the
right to assume the defense of such action or proceeding on such Indemnified
Party's behalf), in each of which cases the reasonable fees and expenses of
counsel (including local counsel) will be at the expense of the Insurer, and all
such fees and expenses will be reimbursed promptly as they are incurred but, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, the Insurer shall not be liable for the fees and expense of more
than one counsel for all Originators Parties, more than one counsel for the
Sponsor Parties and more than one counsel for all Underwriter Parties. The
Underwriter Parties, the Sponsor Parties and Originators Parties shall cooperate
with the Insurer Parties in resolving any event which would give rise to an
indemnity obligation pursuant to Section 5(a) hereof in the most efficient
manner. No settlement
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of any such claim or action shall be entered into without the consent of each
Originator Party, each Sponsor Party or each Underwriter Party, as the case may
be, who is subject to such claim or action, on the one hand, and each Insurer
Party who is subject to such claim or action, on the other hand; provided,
however, that the consent of such Originator Party, such Sponsor Party or such
Underwriter Party, as applicable, shall not be required if such settlement fully
discharges, with prejudice against the plaintiff, the claim or action against
such Originator Party, such Sponsor Party or Underwriter Party. Any failure by a
Originator Party, Sponsor Party or Underwriter Party, as the case may be, to
comply with the provisions of this Section shall relieve the Insurer of
liability only if such failure is materially prejudicial to any legal pleadings,
grounds, defenses or remedies in respect thereof or the Insurer's financial
liability hereunder, and then only to the extent of such prejudice.
SECTION 9. NOTICE TO BE GIVEN TO THE UNDERWRITER. Except as provided below
in Section 10 with respect to contribution, the indemnification provided herein
by the Underwriter shall be the exclusive remedy of any Insurer Party for the
Losses resulting from the Underwriter's breach of a representation, warranty or
agreement hereunder; provided, however, that each Insurer Party shall be
entitled to pursue any other remedy at law or in equity for any such breach so
long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle a Insurer
Party to be indemnified under this Agreement, such party shall give the
Underwriter written or telegraphic notice of such action or claim reasonably
promptly after receipt of written notice thereof. The Underwriter shall be
entitled to participate in the defense of any such action or claim in reasonable
cooperation with, and with the reasonable cooperation of, the Insurer Party. The
Indemnified Party will have the right to employ its own counsel in any such
action in addition to counsel for the Underwriter, but the fees and expenses of
such counsel will be at the expense of such Indemnified Party unless (a) the
employment of counsel by the Indemnified Party at its expense has been
authorized in writing by the Underwriter, (b) the Underwriter has not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action or (c) the named
parties to any such action include the Underwriter on the one hand and, on the
other hand, the Indemnified Party, and such 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 Underwriter (in
which case, if such Indemnified Party notifies the Underwriter in writing that
it elects to employ separate counsel at the expense of the Underwriter, the
Underwriter shall not have the right to assume the defense of such action or
proceeding on such Indemnified Party's behalf), in each of which cases the
reasonable fees and expenses of counsel will be at the expense of the
Underwriter, and all such fees and expenses will be reimbursed promptly as they
are incurred but, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, the Underwriter shall not be
liable for the fees and expenses of more than one counsel for all Insurer
Parties. The Insurer Party shall cooperate with each Underwriter Party, each
Sponsor Party and each Originator Party in resolving any event which would give
rise to an indemnification obligation pursuant to Section 5(b) hereof in the
most efficient manner. No settlement of any such claim or action shall be
entered into without the consent of each Insurer Party who is subject to such
claim or action, on the one hand, and each Underwriter Party who is subject to
such claim or action, on the other hand; provided, however, that the consent of
such Insurer Party shall not be required if such
8
<PAGE> 12
settlement fully discharges, with prejudice against the plaintiff, the claim or
action against such Insurer Party. Any failure by a Insurer Party to comply with
the provisions of this Section shall relieve the Underwriter of liability only
if such failure is materially prejudicial to any legal pleadings, grounds,
defenses or remedies in respect thereof or the Underwriter's liability
hereunder, and then only to the extent of such prejudice.
SECTION 10. NOTICE TO BE GIVEN THE ORIGINATORS. Except as provided below
in Section 10 with respect to contribution, the indemnification provided herein
by the Originators shall be the exclusive remedy of any Insurer Party for the
Losses resulting from the Originators' breach of a representation, warranty or
agreement hereunder; provided, however, that the Insurer Party shall be
entitled to pursue any other remedy at law or in equity for any such breach so
long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle a Insurer
Party to be indemnified under this Agreement, such party shall give the
Originators written or telegraphic notice of such action or claim reasonably
promptly after receipt of written notice thereof. The Originators shall be
entitled to participate in the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Insurer Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to counsel for the Originators, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party unless (a) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Originators, (b) the Originators
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action or (c)
the named parties to any such action include the Originators, on the one hand,
and, on the other hand, the Indemnified Party, and such 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 Originators (in which case, if such Indemnified Party notifies the
Originators in writing that it elects to employ separate counsel at the expense
of the Originators, the Originators shall not have the right to assume the
defense of such action or proceeding on such Indemnified Party's behalf), in
each of which cases the reasonable fees and expenses of counsel will be at the
expense of the Originators, and all such fees and expenses will be reimbursed
promptly as they are incurred but, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, the Originators
shall not be liable for the fees and expenses of more than one counsel for all
Insurer Parties. The Insurer Party shall cooperate with each Originator Party,
each Sponsor Party and each Underwriter Party in resolving any event which
would give rise to an indemnification obligation pursuant to Section 5(c)
hereof in the most efficient manner. No settlement of any such claim or action
shall be entered into without the consent of each Insurer Party who is subject
to such claim or action, on the one hand, and the Originator Party, on the
other hand; provided, however, that the consent of such Insurer Party shall not
be required if such settlement fully discharges, with prejudice against the
plaintiff, the claim or action against such Insurer Party. Any failure by a
Insurer Party to comply with the provisions of this Section shall relieve the
Originator of liability only if such failure is materially prejudicial to any
legal pleadings, grounds, defenses or remedies in respect thereof or the
Originator's liability hereunder, and then only to the extent of such prejudice.
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<PAGE> 13
SECTION 11. NOTICE TO BE GIVEN THE SPONSOR. Except as provided below in
Section 10 with respect to contribution, the indemnification provided herein by
the Sponsor shall be the exclusive remedy of any Insurer Party for the Losses
resulting from the Sponsor' breach of a representation, warranty or agreement
hereunder, provided, however, that the Insurer Party shall be entitled to
pursue any other remedy at law or in equity for any such breach so long as the
damages sought to be recovered shall not exceed the Losses incurred thereby
resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle a Insurer
Party to be indemnified under this Agreement, such party shall give the Sponsor
written or telegraphic notice of such action or claim reasonably promptly after
receipt of written notice thereof. The Sponsor shall be entitled to participate
in the defense of any such action or claim in reasonable cooperation with, and
with the reasonable cooperation of, the Insurer Party. The Indemnified Party
will have the right to employ its own counsel in any such action in addition to
counsel for the Sponsor, but the fees and expenses of such counsel will be at
the expense of such Indemnified Party unless (a) the employment of counsel by
the Indemnified Party at its expense has been authorized in writing by the
Sponsor, (b) the Sponsor has not in fact employed counsel to assume the defense
of such action within a reasonable time after receiving notice of the
commencement of the action or (c) the named parties to any such action include
the Sponsor, on the one hand, and, on the other hand, the Indemnified Party,
and such 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 Sponsor (in which case, if such
Indemnified Party notifies the Sponsor in writing that it elects to employ
separate counsel at the expense of the Sponsor, the Sponsor shall not have the
right to assume the defense of such action or proceeding on such Indemnified
Party's behalf), in each of which cases the reasonable fees and expenses of
counsel will be at the expense of the Sponsor, and all such fees and expenses
will be reimbursed promptly as they are incurred but, in connection with any
one action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, the
Sponsor shall not be liable for the fees and expenses of more than one counsel
for all Insurer Parties. The Insurer Party shall cooperate with each Originator
Party, each Sponsor Party and each Underwriter Party in resolving any event
which would give rise to an indemnification obligation pursuant to Section 5(c)
hereof in the most efficient manner. No settlement of any such claim or action
shall be entered into without the consent of each Insurer Party who is subject
to such claim or action, on the one hand, and the Sponsor Party, on the other
hand; provided, however, that the consent of such Insurer Party shall not be
required if such settlement fully discharges, with prejudice against the
plaintiff, the claim or action against such Insurer Party. Any failure by a
Insurer Party to comply with the provisions of this Section shall relieve the
Sponsor of liability only if such failure is materially prejudicial to any
legal pleadings, grounds, defenses or remedies in respect thereof or the
Sponsor's liability hereunder, and then only to the extent of such prejudice.
SECTION 12. CONTRIBUTION.
(a) To provide for just and equitable contribution if the
indemnification provided by the Insurer is determined to be unavailable
for any Underwriter Party, Sponsor Party or Originator Party (other than
pursuant to Section 6 or 8 of this Agreement), the Insurer shall
contribute to the aggregate costs of liabilities arising from any breach
of a representation or warranty set forth in this Agreement on the basis
of the
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relative fault of all Underwriter Parties, all Originator Parties, all Sponsor
Parties and all Insurer Parties, respectively.
(b) To provide for just and equitable contribution if the indemnification
provided by the Originator is determined to be unavailable for any Insurer
Party (other than pursuant to Section 6 or 10 of this Agreement), the
Originator shall contribute to the aggregate costs of liabilities arising from
any breach of a representation or warranty set forth in this Agreement on the
basis of the relative fault of all Underwriter Parties, all Originators
Parties, all Sponsor Parties and all Insurer Parties.
(c) To provide for just and equitable contribution if the indemnification
provided by the Underwriter is determined to be unavailable for any Insurer
Party (other than pursuant to Section 6 or 9 of this Agreement), the
Underwriter shall contribute to the aggregate costs of liabilities arising from
any breach of a representation or warranty set forth in this Agreement on the
basis of the relative fault of all Underwriter Parties, all Originator Parties,
all Sponsor Parties and all Insurer Parties.
(d) To provide for just and equitable contribution if the indemnification
provided by the Sponsor is determined to be unavailable for any Insurer Party
(other than pursuant to Section 6 or 11 of this Agreement), the Underwriter
shall contribute to the aggregate costs of liabilities arising from any breach
of a representation or warranty set forth in this Agreement on the basis of the
relative fault of all Underwriter Parties, all Originator Parties, all Sponsor
Parties and all Insurer Parties.
(e) The relative fault of each Indemnifying Party, on the one hand, and
of each Indemnified Party, on the other hand, shall be determined by reference
to, among other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth in Section 2, 3 or 4 of this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the Parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
(f) The Parties agree that the Insurer shall be solely responsible for
the Insurer Information and for the Insurer Financial Statements, that the
Underwriter shall be solely responsible for the Underwriter Information
provided by the Underwriter in writing for use in the Prospectus Supplement and
that the Sponsor and the Originators shall be responsible for all other
information in the Registration Statement and the Prospectus Supplement.
(g) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(h) The indemnity and contribution agreements contained in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter Party, any Originator
Party, Sponsor Party or
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any Insurer Party, (ii) the issuance of any Class A Notes or the Policies
or (iii) any termination of this Agreement.
(i) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to
contribution promptly upon establishment by the party entitled to
contribution to the contributor of the Losses incurred.
SECTION 13. NOTICES. All notices and other communications provided for
under this Agreement shall be addressed to the address set forth below as to
each party or at such other address as shall be designated by a party in a
written notice to the other party.
If to the Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: General Counsel
If to the Originators: Advanta National Bank U.S.A.
P.O. Box 844
Welsh & McKean Road
Spring House, P.A. 19477
Attention: General Counsel
Advanta Finance Corp.,
16875 West Bernardo Drive
San Diego, CA 92127
Attention: General Counsel
If to the Underwriter: Bear, Stearns & Co. Inc.
4th Floor
245 Park Avenue
New York, NY 10167
Attention: Asset Backed Securities Group
If to the Sponsor: Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: Vice President - Structured Finance
SECTION 14. GOVERNING LAW, ETC. This Agreement shall be deemed to be a
contract under the laws of the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its conflicts of laws provisions. This Agreement may not be assigned by any
party without the express written consent of each other party. Amendments of
this Agreement shall be in writing signed by each party. This Agreement shall
not be effective until executed by each of the Insurer, the Originators and the
Underwriter.
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SECTION 15. UNDERWRITING AGREEMENT; INDENTURE. This Agreement in no way
limits or otherwise affects the indemnification obligations of the Originators
under (a) the Underwriting Agreement, (b) the Indenture or (c) the Purchase
Agreement.
SECTION 16. LIMITATIONS. Nothing in this Agreement shall be construed as
a representation or undertaking by the Insurer concerning maintenance of the
rating currently assigned to its claims-paying ability by Moody's Investors
Service, Inc. ("Moody's") and/or Standard & Poor's Ratings Group, a division of
The McGraw Hill Companies, Inc. ("S&P") or any other rating agency
(collectively, the "Rating Agencies").
SECTION 17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
[Remainder of page intentionally left blank]
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<PAGE> 17
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized,
all as of the date first above written.
MBIA INSURANCE CORPORATION,
as Insurer
By
------------------------------------
Title
---------------------------------
ADVANTA NATIONAL BANK USA,
as Originator
By
------------------------------------
Title
---------------------------------
ADVANTA FINANCE CORP.,
as Originator
By
------------------------------------
Title
---------------------------------
BEAR STEARNS & CO. INC.,
as Underwriter
By
------------------------------------
Title
---------------------------------
Advanta Home Equity Loan 1998-B
Indemnification Agreement
Signature Page
<PAGE> 18
ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Sponsor
By ___________________________
Title_________________________
Advanta Home Equity Loan 1998-B
Indemnification Agreement
Signature Page
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Advanta Mortgage Corp. relating to Advanta Home Equity Loan Trust 1998-B, of
our report dated February 3, 1998, on our audits of the consolidated financial
statements of MBIA Insurance Corporation and Subsidiaries as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997. We also consent to the reference to our firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
New York, New York
October 2, 1998
